- Hardcover: 254 pages
- Publisher: New Classics Library; 10th edition (2005)
- Language: English
- ISBN-10: 0932750753
- ISBN-13: 978-0932750754
- Package Dimensions: 9.4 x 6.4 x 0.9 inches
- Shipping Weight: 1.2 pounds (View shipping rates and policies)
- Average Customer Review: 146 customer reviews
- Amazon Best Sellers Rank: #450,860 in Books (See Top 100 in Books)
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Elliott Wave Principle: Key To Market Behavior Hardcover – 2005
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Elliot waves and the simplicity of the system makes it so anyone can understand a stock and how it moves. The Fibonacci system works with the Elliot wave to better understand and predict movements. I found the Elliot wave to be described quite well and how it works, but lacking information on Fibonacci system and how to utilize it best. I found after reading this book, studying Fibonacci sequence on the computer i understood the procedure of how to apply it which i was lacking.
I guess i found the Fibonacci to be more theoretically discussed and less practically discussed is my only critic!
I had to eventually get this book and see what the Elliott Wave Principle after watching some of the best traders I have seen on social media say this is a major component of what they do. For me this book was to broad and scattered for me to really grasp the concept of how to trade the wave patttern inside a trading system with risk management and proper position sizing on the right time frame.
This is more of a broad overview and guide of the principles of the Elliott Wave theory and not a how to manual. I do think it is a great place to start but there has to be better books out their on how to apply this to trading it in the real world.
The first thing that you learn from Elliott Wave International is that their technique only provides context for the current price developments, that you cannot use it to trigger buy/sell signals, which is left to classical technical analysis and the same risk and money management methods that you may already employ. The method is supposed to bring up the more likely scenarios of future price patterns, provided that your former pattern interpretation is solid and stable.
Elliott Wave International will also tell you that their technique often gives way to multiple interpretations of the ongoing pattern. In quite a number of instances though, that uncertainty extends to more than one year in the past! As of the end of January 2018 their analysts still cannot stabilize the Elliott interpretation for Silver, and have been moving through various counting schemes for long periods, at times not being able to utter an opinion for months because of multiple possible interpretations. As we speak they have an Elliott wave blank in counting the July 2016-January 2017 price chart for Silver, because the January-2017-to-present period still has an uncertain, hypothetical interpretation that may change (once more) the history of the counting, back to July 2016 (don't mind what was before).
The method also proclaims that waves have a fractal behavior (i.e. one degree wave can be decomposed in a sequence of lower degree waves that follow the same rules and guidelines that apply for any degree wave). If that were the case, then one has to wonder, what prevents the Elliott Wave International experts from stabilizing the interpretation of the 2016 Silver patterns? 18 months, still not enough time to analyze the minuette degree waves?
Again we are talking about a system that cannot issue higher probability suggestions for the future unless the interpretation of past patterns is clear and stable.
What value can one put on this technique while knowing that it might offer no certainty of interpretation for months and months into the past? How could one derive any benefits from it when the pattern interpretation of the past - back to mid 2016 for Silver in this example, may change (or continue to change) according to what will happen in the near future, 18 months later?
It is nothing but a vicious circle that can and does occur for long time intervals, rendering the technique useless if not downright harmful. Just be aware of this major drawback.
Your subjective pattern interpretation might work only when there is a crystal clear, stable interpretation of the past. Some securities will offer that at times. On the other hand, dealing with the numerous rules and guidelines of the method, as well as with its forever unclear "exceptions", cannot but dramatically increase the probability of misinterpretation. The fact that the experts cannot make sense of the method for such a long time in the case of Silver, is telling. You have to ask yourself how you might compare to those that are in the business of counting waves for 30 years or more (not that they are more useful than your own tricks in the Silver example).
The method has the ability to create multiple failures of interpretation, in series, for long periods. That will certainly be more costly than using other methods. It is one of the reasons why the EWI experts will recommend relying as heavily on Commitment of Traders, Daily Sentiment Index etc indicators, as guides relevant to correctly identifying zones of wave pattern extremes. Nonetheless these additions will not prevent the long term interpretation "blackouts" described above.
The basics of the Elliot Wave Principle involves counting the peaks and troughs of waves exhibited in a time series chart of market data. After a number of peaks and troughs have been counted and categorized, a complete cycle is assumed, then the cycle starts again.
This could be a good indicator of whether a current trend will continue but like I mentioned in the first paragraph of this review, it might look good on paper but when new money is brought into the system, it all changes.