Plotting Elliott Waves

[kazzer]

I have just finished reading "Adaptive Analysis For Australia Stocks" by Nick Radge and found it to be a great read, especially for a beginner.

In this book, Nick begins his discussion on Elliott waves by talking about Market Swings. He says there are two ways to view these swings:

1. View the price swings across multiple charts with each chart representing a different time frame e.g. daily, weekly, monthly etc.

2. Watch for price swings that travel certain distances in relation to others on the same chart and time frame.

He then talks about using his computer to only show price swings that are greater than 20%. Unless I have misunderstood, this appears to be a great way to take the guess work out of counting waves when applying Elliott Wave Theory.

Let me explain myself. When i first read through the chapters on Elliott Waves, and forgot about Nick's discussion on observing price swings based on the size, I thought it would be almost impossible to identify a wave. e.g. Say we are at the end of wave 2. How would we know that the next wave is wave 3 or the first (i) of five impulsive waves (i, ii, iii, iv, v), that make up wave 3? By observing larger swings, we can identify one set of Elliott Waves. We can then observe smaller swings to identify the micro waves that make up the larger Elliot Waves. I hope I am explaining myself ok.

In light of this, I would like to know if there is any software out there that allows you to show swings based on their size. Nick, if you're reading this, what software were/are you using to do this? Can this be done in AmiBroker?

 

[tech/a]

Yes most can do it with ZigZag.

Note that this is an approximation of possible wave counts.
There is much software around which has in build algorithms to plot Elliott.
I use AGET myself but Dynamic trader is also well respected.

Take the time to at least learn the basics of plotting Waves.

 

[kazzer]

Take the time to at least learn the basics of plotting Waves.

Is any information out there that explains the mechanics of plotting waves manually? I would at least like to understand how to plot them by hand before using the software.

 

[arco]

Is this what you are looking for

http://www.elliottwave.com/club/members/tutorial/default.htm

rgds - arco

 

[tech/a]

Is this what you are looking for

http://www.elliottwave.com/club/members/tutorial/default.htm

rgds - arco

Arco's suggestion will get you started.

 

[-Bevo-]

Can this be done in AmiBroker?

I just ordered Nicks book the other day, I'd be interested to know also if this can be done with Amibroker as I use it also, I have looked around and found nothing so far.

 

[OzWaveGuy]

After having gone thru the learning process myself over several years - some thoughts you may want to consider:

1. Learn to count the waves yourself - whilst some charting packages will do it for you, they have been designed with their own rules in mind and there are always several counts to consider. I personally don't use software to identify waves

2. The more you memorize the better - there are 3 basic types of corrections each with a multitude of sub-structures. Corrections tend to be the hardest to work out.

3. Throughout your learning process (it never stops btw) make sure you can account of all waves. I see a lot of analysis that's been done by amateurs and professionals alike that miss out waves counts when there's an obvious reason there should be consideration for a particular structure on the chart. If you can't account for it then something's wrong.

4. Read, Read and Read and learn to get the counts right in realtime by yourself. There's nothing better that looking at a 1 or 5 minute chart and mapping out in advance the most likely route the market will move into over the next few mins to few hrs. When you get it wrong, you can get out immediately. If you are day trading, then you'll want to know when to get out and take profits quickly and I find EW useful in this regard as you can use it to determine the wave ending points (with other indicators as well)

5. As for books, Elliottwave Wave Principle is very good, but the best book is by Glen Neely as he goes into a lot of detail which makes a lot of sense. It's tough going though.

6. Whilst EW looks easy to start with (hey, what's hard about 5-3?), it actually isn't. Predicting the future and putting money on it is always hard enough, so you'll need a good trading plan that's suits your style of trading. The market is moving at all degrees of trend at the same time - so having several charts at different time scales is required.

Cheers

 

[OzWaveGuy]

Is any information out there that explains the mechanics of plotting waves manually? I would at least like to understand how to plot them by hand before using the software.

Glenn Neely's 'Mastering Elliott Wave' goes into the detail of counting waves, knowing where to start a count, rules and parameters you should use etc

 

[Nick Radge]

kazzer,
I have the ZigZag indicator for Amibroker - I actually have a few versions. Drop me a PM.

Using defined software such as Aget may not be the best way to start. Doing it by hand and eyeballing the counts will be a better learning process over the longer term. The zigzag indicator just helps to organize swings into similar degree.

Nick

 

[kazzer]

Is this what you are looking for

http://www.elliottwave.com/club/members/tutorial/default.htm

rgds - arco

Thanks for all your replies. I finally got around to reading through the tutorials available at the above URL. After reading throught it all, I can't help but feel overwhelmed with all the rules and guidelines that make up the Elliott Wave Principle.

I was OK with the 3 rules and 5 guidelines discussed in Nick Radge's "Adaptive Analysis". However, all the patterns described in the above tutorial (e.g. Extensions, Truncations, Diagonals, Triangles, Double Threes, Triple Threes, Flats, Expanded Flats etc) was just a bit too much for me to take in. I can't see how I can take all these patterns and guidelines into consideration when counting waves. And a lot of it seems quite subjective to me. The tutorials seem to suggest that all price actions (since the beginning of the Stock Market) can be accounted for using Elliott Wave Principle.

My original reason for creating this thread was to find out if it was possible to distinguish between waves from different degrees. However, after through the book, I seem to get the impression that one is supposed to do that by looking at the shape of the waves. This is probably not an approach I am comfortable with. It just seems too subjective to me.

I am now starting to wander if Elliott Wave Principle is the right approach for me. I know there are various ways to make money on the Stock Market and the general recommendation seems to be to find an approach that you are comfortable with. I have previously read books by Stan Weinstein and Daryl Guppy. I think I would be more comfortable with a more mechanical approach such as Guppy's MMA or Darvas Box. Having said that, I am not giving up on EW yet. I don't want to write it off until I find answers to all my questions and have convinced myself that EW will just not work for me.

For those of you who do use a tool (such as ZigZag) to plot your waves, do you only use it to plot waves from one degree? What do you do if you want to then plot the waves from bigger (or smaller) degrees? Do you vary the swing size?

 

[kazzer]

Here is a classic example in CEY using a 10% swing:

Ask these questions:
1. What do you see from the September highs?
2. Are all the rules of EW met?
3. If yes, what pattern should follow?
4. How long should that take and how far should it carry prices?
5. What should then follow?
6. At what level is the next expected pattern invalidated?

Since I am learning, I might as well have a go at this:

1. The September highs seem like the start of Wave 1 in a Bull Market.
2. I believe so. Wave 2 did not retrace above Wave 1. Wave 3 is the longest Wave and Wave 4 did not retrace into Wave 1 territory.
3. I would expect the price to start moving up to form Wave C.
4. I am not sure how long it would take, but based on the guidelines, Wave C should be about the same length as Wave A. So, it should carry prices to some point just below $4.80, which also coincides with the 61.8% Fibonacci retracement of Wave 3.
5. Once Wave C ends, I would think that prices will start to decline and Wave 1 of the next set of Impulse waves will start to form.
6. I am not sure. I can't seem to recall any rules for corrective waves. One of the guidelines is about Wave A being about the same size as Wave C. I guess if that isn't met, the pattern will be invalidated. Based on the topics discussed in the above tutorials, if Waves D and E follows Wave C and a triangle is formed, then i would think that we're looking at a Wave 4. So, the Wave C that i was expecting, is in fact a Wave C of a smaller degree. This is an area of EW that I don't seem to understand too well. It just isn't clear cut.

From here you would look at the larger patterns to see where this one stood within the bigger fractal. It builds on itself or invalidates itself.

How would you proceed with looking a the larger pattern? Would you adjust your swing size for CEY to 20% (or larger) instead of 10%?

 

[OzWaveGuy]

Thanks for all your replies. I finally got around to reading through the tutorials available at the above URL. After reading throught it all, I can't help but feel overwhelmed with all the rules and guidelines that make up the Elliott Wave Principle.

I was OK with the 3 rules and 5 guidelines discussed in Nick Radge's "Adaptive Analysis". However, all the patterns described in the above tutorial (e.g. Extensions, Truncations, Diagonals, Triangles, Double Threes, Triple Threes, Flats, Expanded Flats etc) was just a bit too much for me to take in. I can't see how I can take all these patterns and guidelines into consideration when counting waves. And a lot of it seems quite subjective to me. The tutorials seem to suggest that all price actions (since the beginning of the Stock Market) can be accounted for using Elliott Wave Principle.

My original reason for creating this thread was to find out if it was possible to distinguish between waves from different degrees. However, after through the book, I seem to get the impression that one is supposed to do that by looking at the shape of the waves. This is probably not an approach I am comfortable with. It just seems too subjective to me.

I am now starting to wander if Elliott Wave Principle is the right approach for me. I know there are various ways to make money on the Stock Market and the general recommendation seems to be to find an approach that you are comfortable with. I have previously read books by Stan Weinstein and Daryl Guppy. I think I would be more comfortable with a more mechanical approach such as Guppy's MMA or Darvas Box. Having said that, I am not giving up on EW yet. I don't want to write it off until I find answers to all my questions and have convinced myself that EW will just not work for me.

For those of you who do use a tool (such as ZigZag) to plot your waves, do you only use it to plot waves from one degree? What do you do if you want to then plot the waves from bigger (or smaller) degrees? Do you vary the swing size?

It will take practice.

Stick to markets like indexes where Waves are usually much easier to identify. Indivudal stocks aren't always the best vehicle to analyze with EW if you're just starting out.

Don't get too hung up on the many different types of corrections. If you can work an impulse pattern enough to identify when a correction will start - then your on your way.

Oh, and Expanded flat corrections will always catch many folks out due to the last leg being 5 waves so watch out for them <-- I've been burnt on the wrong side of these in the past.

 

[Scorpio8]

I am very new to trading and after studying several books and trading systems, came across Elliot Wave theory, which looks easier than it seems to be from your joint reviews.

I have found a software package that is based totally on EW analysis and wonder if any of you have used it: MTPredictor

I am thinking of buying the software but would be interested in your views on it?

 

[-Bevo-]

That is a expensive bit of software for someone very new to trading, I have never used that software and therefore cannot comment on it. If I was starting out I wouldn't be to overly concerned with EW to begin with, stick to the basic trendlines/channels, support and resistance, fib retracements, triangles/wedges, moving averages etc keep it very simple, some of my analysis is no more than a line chart with a trend line, and look at a charting program such as Amibroker for a fraction of the price, I don't have much experience with EW but from what I have seen I don't think I would use it as a stand alone form of analysis.

 

[Boggo]

I am very new to trading and after studying several books and trading systems, came across Elliot Wave theory, which looks easier than it seems to be from your joint reviews.

I have found a software package that is based totally on EW analysis and wonder if any of you have used it: MTPredictor

I am thinking of buying the software but would be interested in your views on it?

Des, I use MTPredictor and cannot speak highly enough of the software and the people behind it.

Having said that, I do agree with Bevo, if you are starting out and learning the basics, and if you do not fully understand the processes then it is just becomes another black box.

The processes I refer to are...
Basic pattern recognition - When you glance at a chart what do you see.

Elliott and Fibonacci rules - If there is a pattern, where is the price in that pattern and where should it go to.
(Just as a quick example, have a look at the daily chart of FMG for the last week of June, is it a breakout, a Wave 5 or both. When most were buying in on the breakout there were many sellers including Ziggy)

Money management and Risk/Reward - A $2 calculator is all you need to manage this provided that you have a plan and fully understand the concept, ie, how much am I prepared to lose on a trade, your entry and stop loss points then determine how many shares you will buy (or sell).

Do not get hung up on the minor technicalities, as an example I have seen some good setups getting binned because an intraday high or low of W4 overlapped W1 by a bees thing but then closed outside W1.
If in doubt change your chart to a line chart for a sec and see if it still overlaps.

I find that Robert Miner's book and other documents that he has produced are easy to read, practical and just cut to the chase.

Basic rules from Robert Miner...