Practical use of Elliott Wave analysis

Boggo said:

Sorry Prof, not very clear on my part, trying to do about six things at once here.
The point I am trying to make is that there is a definite advantage in knowing where any tradeable instrument is in its cycle and I was using the IGO chart on another thread as an example of where you can get caught out by expecting the uptrend to just resume and repeat itself.
Cheers.

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hang on mate, you've lost me again

I thought you mentioned the 4th wave in IGO, I assumed you were talking about the dip at the end of last year before it run up to it's high in February?

OK, this was your statement in response to luke256.

professor_frink said:

My point was that by the time the market gets to the point where it would be labelled a wave 4, it's blindingly obvious that the market is in an uptrend and that in order for you to continue trading with the trend the next one you take should be long.

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My comment is that just because it is in an uptrend doesn't always mean that you just blindly jump on at the next upturn or breakout without first knowing where you are in the life of any entity.
In this case IGO is being used just as an example, you don't have to be familiar with IGO, the pattern principle is the same.

professor_frink said:

EW used in this context is a fairly pointless exercise.

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I disagree, EW is a very valuable asset, in this case it would have made you think twice about just buying at some point.
The "some point" is also an area of interest, do you know that the W.4 is possibly finished and you buy on the pivot turn or do you wait for confirmation on the breakout.
Where would you enter (re-enter) this last up leg, ie. where would "the next one you take" be taken by you ?
Cheers

(click to expand)
(the yellow box is plotted by the software as its expected minimum W.5 based on the current pattern)

tech/a said:

Kennas.

Your doing a good job controlling your skepticism.

Boggo has come close in his labelling.(Hope you dont mind Boggo)
A GET's is a little closer I think.
You are correct that after todays trading wave 4 is confirmed and wave 5 now appears.
It cannot be said that we have an end to wave 5 yet. It is still dynamic until we see a corrective move to end.
Aggressive traders could see this pivot reversal on low volume as a turning point

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Always controlled Tech.

That chart looks more logical, yes. Must be the time selected?

Although my charts look like boggo's.

Still no entry and exit based on EW though.

I do see that some are using it in conjunction with other TA.

Can EW be traded in isolation with no other basic TA factors to consider. Like S&R?

kennas said:

Can EW be traded in isolation with no other basic TA factors to consider. Like S&R?

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Difficult to do so in the current market kennas, mainly because of the gaps that can occur between days and weeks at the moment, a lot of setups get stopped out with one bad night in Japan or the Middle East.

Continuous markets such as forex and futures still seem to be tradeable as before.

A few years ago when the market was more consistent it was easy to use especially on the top 200 as they were consistent.

Hit and run breakouts have been much better for me this year but EW is definitely a big help with these too in examples as described in relation to IGO and the indices which tech/a could not have predicted so accurately without EW.

Is anyone aware of any (successful?) hedge funds that use Elliott Wave to take trading decisions? If they don't exist, or they're not relatively common, why not? I'm just having trouble with the application of it in real time. I can see that it seems possible to give charts a nice wave count historically, but anecdotally the number of times I see changes to the count that invalidates earlier counts makes me wonder if it is information or just noise. So back to my original question, if it has information value, hedge funds will use it...

Alright I've some data taken from yahoo and know what they do now.

The reversal bar you've tagged as the W4, was the exact date I highlighted to you earlier about throwing a bid out for the ES. The day before that the dip was slowing up along with a run of down days, and was near a 20 day low within the context of an existing uptrend, it had taken an appropriate amount of time to get there, so I may have been long the close the day before and adding to it on the gap down on the 17th.

Half position scale out on the 3rd of December, and flat on the close of the 6th of January based on a trailing stop.

I know you are probably looking for something more concrete than that, but I've never been able to look at 1 single stock code and form a tradeable opinion on it. I have absolutely no intention of trying to acquire clean data on an entire sector of companies to run anything more in depth for a theoretical exercise on a forum. Sorry.

Just on some of your other points:

Boggo said:

OK, this was your statement in response to luke256.



My comment is that just because it is in an uptrend doesn't always mean that you just blindly jump on at the next upturn or breakout without first knowing where you are in the life of any entity.

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Personally I don't like waiting for price to confirm my opinion before entering. R:R gets skewed against me and it can lead to buying just before price rolls back over again. When there is confirmation of my trading idea via the price in whatever I'm trading, then I'm profiting off it, not still planning my entry. If I'm going to be wrong on a trade, I want a fairly tight stop and I want to know as quickly as possible so I can have capital deployed elsewhere.

Boggo said:

I disagree, EW is a very valuable asset, in this case it would have made you think twice about just buying at some point.

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You mean like my well timed ES long last Monday morning(the 14th)

Whilst we are looking at Elliot Wave, anyone interested can have a look at the the way people were talking about the market last July in the XAO analysis thread. Our market bottomed in May, over a month later, most people were calling for new lows. It wasn't until the start of September where you highlighted that "the goalposts have moved"

That's over 70 trading days out and nearly 400 points from the low print. IMO EW is a tool just like any other and prone to the random gremlins that put us all on the wrong side of the market at certain points in time.

Kennas

I dont think anyone here would attempt to use or want to use ANY form of analysis in isolation. Ive already made it clear why and how I apply Elliott to any trade.

I'm sure Luke and Boggo are very similar.

To Profs question specifically.

We can only analyse a chart at any given point of time.
The analysis will be proven correct or in correct.
It gives us a point at which to start or reject a trade.
Ive put Elliott in Training mode so I can work through this in very simplistic form ---Im not going to look at every wave and its structure as it suffices to simply understand that until Proven otherwise a count will evolve.
So if you had been short you would have been stopped with a new high.
Your analysis would have then been similar to that which I am now presenting I have no choice but to do this in hind site as its already passed.
The analysis still stands at the time.




Prof the analysis as you will see altered and as such when I looked at the daily I made it clear I thought then in the post as I'm trying to make it clear now.
The 2 charts are vastly different in count because one is weekly and the other daily.

Wave counts are to be used in my view as a guide to where we are in a chart and in conjunction with other analysis.

So going forward we have this.
It did in fact reach the 50% level.
You / I would be reluctant to place long term long trades from here in.



Which brings us to today.



Now I like everyone here likes as close to possible to R/T analysis and application.
PEN is one we are following and the XJO in daily as well.
Is that enough or is it still not coming a little clearer?
Is this helpful?

professor_frink said:

IMO EW is a tool just like any other and prone to the random gremlins that put us all on the wrong side of the market at certain points in time.

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Yep, most definitely. Unfortunately it is difficult to grasp, requires a lot of effort to "see" what it is telling you and can be very frustrating sometimes.

Most of the critics seem to reach a similiar level of familiarity with it (a little bit of knowledge is dangerous) and then quietly give up or otherwise they put more effort into being critics than they have trying to understand it.

Below is an experiment where I put money on the line and stuck to the EW W.2 setup that came up in MTPredictor.
I was slow to enter, got in at 0.245 and stayed put until I got out at 0.40 when the low took out the low of the W.4 of the fifth wave (Robert Miner - Dynamic Trading procedure).

It was painful to endure because it was so erratic after W.2, I remembered Nick Radge's comment that "the market always closes gaps" during W.4 closing the W.3 gap, I backed my stop off to allow for that (it actually closed the gap perfectly).
I would have had an ulcer if I had the house riding on it but it worked eventually and erratically.

It was was a worthwhile and profitable experiment and MNC has got my interest now again... Why ?

I have highlighted the entry and exit.
(click to expand)

Prof

Found this






Then if you have a look at posts 8326/27 and 30 the goal posts moved in a few days.

Anyway the whole Idea is to help those interested in using Elliott in their analysis.
So will watch those charts posted and will comment.
I will also include other analysis as it supports the Elliott component.

In my opinion, EW is a con.

Don't need it, will never need it.

Same with fibonacci levels.

Btw, I do subscribe to T/A, but not this voodoo

the phantom said:

In my opinion, EW is a con.

Don't need it, will never need it.

Same with fibonacci levels.

Btw, I do subscribe to T/A, but not this voodoo

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Yes I was exactly the same.

Then I took the time to understand it and get my head around the moving wave counts,actually understood how and why.

Its been an valuable technical tool ever since.
For many they will remain as I was and you are.
But a few will find it valuable.

tech/a said:

Prof

Found this

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Then if you have a look at posts 8326/27 and 30 the goal posts moved in a few days.

Anyway the whole Idea is to help those interested in using Elliott in their analysis.
So will watch those charts posted and will comment.
I will also include other analysis as it supports the Elliott component.

Click to expand...

tech in that post where you highlighted that there was "now a possibility that there will be an alternate wave count toward 4600", the market was already above 4500, it had been rallying for a couple of weeks and was almost there already.

The posts 8330 you highlighted was the one I was referring to in my earlier post, it was early September when those posts were made.

tech/a said:

To Profs question specifically.

We can only analyse a chart at any given point of time.
The analysis will be proven correct or in correct.
It gives us a point at which to start or reject a trade.
Ive put Elliott in Training mode so I can work through this in very simplistic form ---Im not going to look at every wave and its structure as it suffices to simply understand that until Proven otherwise a count will evolve.
So if you had been short you would have been stopped with a new high.
Your analysis would have then been similar to that which I am now presenting I have no choice but to do this in hind site as its already passed.
The analysis still stands at the time.




Prof the analysis as you will see altered and as such when I looked at the daily I made it clear I thought then in the post as I'm trying to make it clear now.
The 2 charts are vastly different in count because one is weekly and the other daily.

Wave counts are to be used in my view as a guide to where we are in a chart and in conjunction with other analysis.

So going forward we have this.
It did in fact reach the 50% level.
You / I would be reluctant to place long term long trades from here in.



Which brings us to today.



Now I like everyone here likes as close to possible to R/T analysis and application.
PEN is one we are following and the XJO in daily as well.
Is that enough or is it still not coming a little clearer?
Is this helpful?

Click to expand...

Actually I'm getting more confused. You just said that you would have been stopped out with a new high, but with the quotes I highlighted earlier, you flipped in the space of 2 days. I've highlighted them below on a chart so that it's perfectly clear.



This was what I was after an explanation of. You went from saying that the next move down was likely to be a "MONTE", then flipped your position to long 2 days later.

Now I know that any single trade is essentially a coin flip and will ultimately be proven right or wrong as time goes by and price develops. What is the trigger for a wave count changing so suddenly though?

IMO it's these kinds of flip flops that give this type of analysis such a bad name, as there is very rarely an alternate scenario posted in real time. All us non EW users have to go on is the absolute way in which practitioners speak about the wave counts at the time. Is it any wonder there are so many people skeptical about it's practical use?

To bring things back on topic and make it a little more relevant, in regards to the index count you've got now, perhaps you could post alternate counts, or price levels that would see you flip to a long trade(I'm gathering you are short based on your last post in the XAO analysis thread).

FWIW currently I'm expecting new highs on the S&P500 over the next 12 months(my main trading instrument), so I guess that considering you are calling the XAO in a wave 5 down, that pretty well places us largely on the opposite sides of the market for the next little while, barring some kind of localised financial crisis that doesn't impact the rest of the world.

The only thing I can see impacting my opinion at this stage is a rapid oil price spike, so provided we don't see $150 oil in the next 6 months then I'll generally be playing the long side of the market a lot more than the short side.

the phantom said:

In my opinion, EW is a con.

Don't need it, will never need it.

Same with fibonacci levels.

Btw, I do subscribe to T/A, but not this voodoo

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Hi.
Your opinion is noted!

However the people who use it are looking possibly for "pattern position" to identify if the market or stock, is in a trend or correction.
If the trader is trading a position (long) and does not "buy and hold", the two benefical trades are Wave 3 and 5, in a 5 wave pattern.(GENERALLY)
There is one key guideline for (trend and correction), and just three patterns to identify trend and correction.
Fibonacci levels are then use to predict the exit area( OR TARGET).

Bob Miner and Carolyn Boroden supply this infomation. but it is best to buy both BOOKS as a package to get the most from it.
Miner uses DTOSC as his indicator over two time frames, and Boroden utilises Fibonnaci, while she shows CCI being used "In the ideal set up".
Cheers.

Now I know that any single trade is essentially a coin flip and will ultimately be proven right or wrong as time goes by and price develops. What is the trigger for a wave count changing so suddenly though?

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The continuation of the Wave 4 higher meant that it hadnt termianted so was still in the process of making Wave 4 GET labels the wave its currently in when it is at a point where a reversal from it would see it confirmed---consequently as it rises wave 4 just gets higher.If It wasnt labelled until aftet its confirmation that would be graphically easier to see but would appear hindsite---while its forming it will "Move" until it stops---
statement of the obvious.

IMO it's these kinds of flip flops that give this type of analysis such a bad name, as there is very rarely an alternate scenario posted in real time.

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Yes true.
Radge does on all his counts in his analysis of various stocks and instruments on his Private section.

I would say that practitioners (Like myself) give E/W a worse name than the principal. When youve looked at as many charts as I have and have seen time and again Elliott counts and principals met---I just had to make the time and effort to understand how I could apply it to my analysis in a way that meant---I was involved in it---not seeing it after it finished.---Which is too late to use---again obvious.
Frankly if I cant see an obvious count then I wont go looking to find one,it means that the instrument in question will not be trending and as such not worth trading.

All us non EW users have to go on is the absolute way in which practitioners speak about the wave counts at the time. Is it any wonder there are so many people skeptical about it's practical use?

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Yes understood.
{If Im meant to go forward how can I be going backward "As expected"??}

Probability in analysis (Wave counts) increase with corellated Analytical evidence.
(A high volume thrust away from a low or high for example.)
In future I at least will attempt to increase the analytical quality of the Chart in question with at least an alternative. PEN got me in the early days of analysing it as ith made a higher wave 5---as an example if you want to read the thread. I copped a heap at the time---mostly laughter and jest.--Few weeks later and more jest as price plummeted from 16c to 6c!!---At least I knew it was coming and was well out of the trade!

To bring things back on topic and make it a little more relevant, in regards to the index count you've got now, perhaps you could post alternate counts, or price levels that would see you flip to a long trade(I'm gathering you are short based on your last post in the XAO analysis thread).

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Will do and could do the S&P
I think I have the charty in my downloads--EOD.

tech/a said:

PEN got me in the early days of analysing it as ith made a higher wave 5---as an example if you want to read the thread. I copped a heap at the time---mostly laughter and jest.--Few weeks later and more jest as price plummeted from 16c to 6c!!---At least I knew it was coming and was well out of the trade!

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You knew an earth quake and tsunami was going to decimate Japan ... and you didn't warn anybody !! ....... Shame on you tech

He did say it would drop to 9.5c (without the quake)

So the 6c is a side-effect of the unforeseen event

But we'll never know what would have eventuated

barney said:

You knew an earth quake and tsunami was going to decimate Japan ... and you didn't warn anybody !! ....... Shame on you tech

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barney said:

You knew an earth quake and tsunami was going to decimate Japan ... and you didn't warn anybody !! ....... Shame on you tech

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No but I did know it was going to come off.

Further analysis to help (Hopefully --alternate counts)




PEN

Should mention that the PROFIT TAKING INDEX PTI is 15 for PEN indicating that a LOWER wave 5 than wave 3 is highly un likely.
Double bottoms are common so 6c might well be your best low estimate!

Its in red at the bottom of wave 3 I have written an explanation on the XAO thread.
(If interested).

tech/a said:

No but I did know it was going to come off.

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I agree tech ( I was only being cheeky as you know ) ....

After such a strong run up, and with so much open profit sitting on the table, the odds of a retrace were high.

I also had around 9.5 cents pegged as a previous high volume area of support ..... Black Swans are no respecter of person however!

For that reason I was curious as to whether EW counts would/should be reset in instances such as PEN, as the "ball game" is operating under a different set of fundamental rules ...... and for EW to be consistent, I assume the ground rules would need to be fairly constant to verify the analysis?

Any randomness added to a conceptual system will have a tendency to skew the results, and may not be a true reflection of broad based results ...... (just an observation ...no foundation in fact of course)

Really interesting thread - thanks tech/a (and others) for your input.

Regarding the XAO analysis... are you suggesting that if Wave 4 goes higher than Wave 1, "moving" wave count may actually renumber this as an ABC correction, and Wave 4 may actually be a Wave 1 (of a 5 wave impulse wave UP)?

I've recently borrowed a book on EW, but still learning to apply it to current charts.