The Elliott Wave Analysis Thread

[tech/a]

On a few threads people have shown an interest in explaining and learning the basics of Elliott Wave Analysis.

I dont profess to be an expert in E/W. I do have a practical knowledge,but am hopeful that those above my knowledge of experise will also contribute to the community.

personally I have seen enough and have traded enough with Elliott to consider it and other styles similar to be of great advantage to the trader.
I also understand how it can appear complex and contradictory. I'm hopeful that this thread will help those with an interest in this form of analysis understand how to apply it.

To roughly gauge interest I have included a poll.It helps those involved see wether their time and effort is of interest to others.

 

[nomore4s]

I'm definately keen to learn more Tech. As you know I have previously asked for your help on wave counts, will be good to have a thread to post questions as they come up.

 

[wavepicker]

Glad to help wherever I can tech. I have doing this for almost 10yrs and still learning every day!!

Like everything, this requires work and effort if it's to be used to it's fullest potential and even then it's hard enough. If I can give any advice to anyone, it's that newbies place too much emphasis on wavecounts. That is only part of the puzzle. Of utmost importance and the key IMO is the the patterns. Knowing the type and most probable EW pattern you are dealing with can help you tremendously as to what type of pattern is most likely to follow and more importantly when.

For starters though distinguishing between impulsions, corrections. Once you have the patterns sorted the numbering routines can be made much easier.




Cheers

 

[nizar]

Very happy to learn and thanks tech, wave, for taking the time.

 

[tech/a]

Will just start with some very basics. Over time I'm sure this will be built upon by myself and others.

Elliott analysis believes price action moves in Impulsive and corrective waves.
Impulsive or bullish moves move in sets of 5 waves.
Within sets of waves right down to minute waves these 5 wave patterns occure.So there becomes 5 wave patterns within larger degree or timeframe patterns.These are generally labelled 1 through 5
At the end of a pattern will be any number of different types of corrective patterns.
But for the case of simplicity the most common and easiest to follow and trade are 3 or 5 wave corrective moves.These are labelled ABC for the 3 wave move or 1 through 5 for corrective 5 waves.The END of a 5 wave corrective move is then labelled A,B or C.

This will become clearer as time and discussion goes on.
Dont get hung up on correct counts,there are basic rules.

Wave 1
Must be able to subdivide into 5 waves.
If 3 waves then probably still in the corrective pattern.

Wave 2
Wave 2 should not exceed beginning of wave 1
3 waves down a completed zigzag.
5 waves down a wave A of a 3 wave Zigzag.

Wave 3
Wave 3 must have a full 5 internal waves.
Wave 3 Cannot be the shortest wave.

Wave 4
Wave 4 cannot enter the price zone of wave 1
See Wave 2 comments.

Wave 5
Wave 5 must have 5 internal waves.


These are the VERY basics we can build on from here.
Chart below gives some very basic idea of Waves ---its the XJO.
Software is Advanced get and the algorithm used in wave counts is not always correct this will be explained latter.

Waves Many thanks your input will be much appreciated.

 

[nomore4s]

I have only just begun to look at EW and am not currently using it in my trading due to my very raw understanding of it. To tell the truth my interest in EW was only raised maybe a month ago due to reading Nick Radges book and I haven't had alot of time to research too much about EW outside of Nicks book due to being busy with work. I know I'm only beginner and need to do alot more research & study to get a better understanding.

The main thing I'm having trouble with is identifying the count early enough to trade off of and am still experimenting with how best to use ew in my trading (maybe some of what wavepicker posted earlier applies here). What I've started doing is keeping track of a few stocks I've identified a count in and running paper trades I suppose you would call them on the waves and how best I could use them in a trade.

Have posted a chart of TAM which I found what looks to be a begining of a wave count, wave 2 maynot be complete yet as 13.5c is a 50% retracement of wave 1. I'm not sure if it can be applied to or the accuracy over this short of a time frame but......
Feel free to pick it apart or add comments.
Thanks for any feed back. (Not sure if this is what you had in mind for the thread Tech but having a few "live trades/charts" may help people?)

 

[chops_a_must]

Since reading Adaptive Analysis I have become curious about EW.

I'm always interested in learning new things. And I also read a lot. So... I'm wondering a couple of things...

Firstly, is it necessary to know in depth the theory in order to apply it?

Secondly, if so, what are the best books on EW to read up on the theory/ conceptual side of it? And;

Thirdly, what is the best book for EW application?

Wave, Tech... Maggie... your thoughts would be much appreciated.

Cheers,
Chops.

P.S. Had thought about making a thread like this Tech, but did not get around to it... 'Tis much appreciated.

 

[It's Snake Pliskin]

Nice thread.

I believe using it on illiquid stocks is pointless. Those trading the little illiquid stocks may want to look at other methodolgies.

From here over to the experts unless I have something to add by way of questions.

 

[theasxgorilla]

Some questions for the contributors:

1. Who actually trades using Elliott Wave?

2. If you trade using EW, what proportion of your analysis involves EW? ie. is it core to your technical analysis, or is it a bolt-on extra, applied after some other trend identification method brings something to your attention?

3. What time-frame do you trade in?

4. What proportion of winners to losers do you have?

5. What is your average winning trade and average losing trade size?

6. What is your risk per trade?

7. What is the opportunity factor of your system? ie. how often does your analysis provide you with a trade?

Since a method of analysis is not a trading system per se, and in the case of EW is often only relevant for the ´setup ´ of a trading opportunity, I think it ´s important for people contemplating EW to get the ´reality check ´of an applied system.

 

[Porper]

1. Who actually trades using Elliott Wave?

I don't think there are that many of us who trade using Elliot Wave.My personal view is that it doesn't work if you soley trade this one method.

2. If you trade using EW, what proportion of your analysis involves EW? ie. is it core to your technical analysis, or is it a bolt-on extra, applied after some other trend identification method brings something to your attention?

The first thing I look for is a wave count, but try not to force a count on all charts.If there is no easily recognisable count, forget it, look at something else or another form of Technical analysis.

There are high and low probability counts depending on resistance points etc.Also a potential wave 5 is a higher probability set up than the start of a wave 1 for example.It is swings and roundabouts though, trading a wave 5 won't usually have a potential profit target of a wave 3.

3. What time-frame do you trade in?

I personally look for trades lasting a few weeks at most but any time frame can be used.From what I have learn't and I am no expert is that the shorter time frames tend to be the most lucrative.

4. What proportion of winners to losers do you have?

I have tight stops so I only win just under 50% of the time.Seems bad on the face of it but it is all relative, ie. tight stops low win percentage, large stops higher win percentage but win/loss ratio won't be as good.

5. What is your average winning trade and average losing trade size?

I am not sure this is related to using Elliot wave but more part of money management.

A losing trade should really be a fixed percentage of your total funds, so this can be whatever you want it to be.
A winning trade is not fixed because we can only set possible reversal points using Elliot Wave, waves can extend and extend.

6. What is your risk per trade?

See above.

7. What is the opportunity factor of your system? ie. how often does your analysis provide you with a trade?

This depends on how much effort you put in I suppose.

I only trade the ASX stocks and out of well over 2000 stocks there are too many with potential patterns to wade through.Most people will use a scan first to filter stocks out and then have rules, eg.weekly and daily momentum must be up etc.

There are some knowledgeable traders using EW. who post here.If Nick Radge notices this thread he would one to add some real expertise.

 

[wavepicker]

1. Who actually trades using Elliott Wave?

I would say there are very few people who have put in the time and dedication to learn the Wave Theory and apply it properly. Most will say it doesn’t work, because they don’t get it., but usually it’s not the method that has failed them but their own mindset. It’s certainly not for everyone, but it does work me and nothing else I have looked at has come close. ( and I have looked at much)
It definitely has flaws and shortcomings, but it is predictive, and when used with other predictive concepts/methodologies one can have a very powerful combination in their arsenal.

2. If you trade using EW, what proportion of your analysis involves EW? i.e. is it core to your technical analysis, or is it a bolt-on extra, applied after some other trend identification method brings something to your attention?

The primary objective of any trader should be to be able to trade from a bar chart and volume first, such as recognizing the pattern of the trend(read the market, what IS the market currently doing?-not what I am hoping or expecting it to do. Later other concepts can be bolted on,.
Personally It is core to my technical analysis because using EW is in essence looking at the pattern of the trend i.e. impulsive, corrective, distribution, blowoff etc
I have found using EW in isolation can be effective, however using other predictive methods(mainly time based) to add confluence and reduce alternate wave counts and resolve ambiguities

3. What time-frame do you trade in?

From 15 min charts to weekly charts depending on what instrument is being traded and timeframe. FX markets are very liquid and minutia all the way down to 15 min charts can be apparent. The bigger pictured needs to be determined first

4. What proportion of winners to losers do you have?

When using EW in isolation and I am in the zone and undisturbed about 60%.

5. What is your average winning trade and average losing trade size?

Same answer as porper

6. What is your risk per trade?

Same answer as porper

7. What is the opportunity factor of your system? ie. how often does your analysis provide you with a trade?

This depends on the market being traded, and how well one sees the waves.(most people don’t see them)

I would say clear cut EW patterns are there approximately 40% of the time

 

[>Apocalypto<]

Tech,

Thanks for starting this thread. I have developed a interest in Wave, I am totally amazed with it's complexity, one trader I speak with told me it can be a 15 year learning curve to fully understand it. WOW

Will be reading with interest to all the member contributions.

 

[tech/a]

ASX great questions!!

Some questions for the contributors:

1. Who actually trades using Elliott Wave?

2. If you trade using EW, what proportion of your analysis involves EW? ie. is it core to your technical analysis, or is it a bolt-on extra, applied after some other trend identification method brings something to your attention?

As a stand alone platform I have only done a few trades---intend to do a LOT more and as we go along this will be come clearer/why. I have however for over 12 mths used Elliott as the Primary tool to tell me WHERE I AM in taking and in lots of cases closing a trade.This is a powerful tool in my view. Taking a bullish trade when your clearly in a corrective move is low positive outcome expectancy.
Advanced Get has basically 6 trading STAND ALONE recommended platforms.
(1) Getting on and trading Wave 3s both long and short.
(2) Joining a wave 3 trade long or short.
(3) Trading The end of Wave 5 long or short.

These make perfect sence to me for the best stand alone Elliott trading platforms. How you do this is shown by the Elliott people or you can design your own.

3. What time-frame do you trade in?

My timeframe will be shorter around 1-4 weeks. but any timeframe can be traded using Elliott.

4. What proportion of winners to losers do you have?

Of the 4 trades I have completed 3 from 4. From experimental trades 50% roughly but I will say that approx 25% of those that failed I didnt strictly adhere to the "Canned" rules from GET. I am in contact with people who use E/W exclusively and they report (un substantiated) 70-80% hit rate. R/R of approx 2

5. What is your average winning trade and average losing trade size?

Porper nailed the answer to this.I'm looking to trade about 60% profit on capital each year as a minimum. if I cant do this I'm better off just trading my longer term methodology.My personal view is to use larger position sizes (relative to risk factors) with a higher than average (50/50) win loss rate.

6. What is your risk per trade?

Determined by Capital and entry points. One thing I have learned is you can and should wait for the trade to come to you---don't pre empt it both entry and exits.

7. What is the opportunity factor of your system? ie. how often does your analysis provide you with a trade?

There are countless setups. However this is an important factor (universe you wish to trade).This is taking up a lot of time now and will in the near future.Rather than looking at the whole market its my intention to look only at the strongest,in otherwords I am setting up folders with stocks that I will select by OTHER methods to include in my trading universes and run the analysis on those.

Since a method of analysis is not a trading system per se, and in the case of EW is often only relevant for the ´setup´ of a trading opportunity, I think it´s important for people contemplating EW to get the ´reality check´of an applied system.

This is not so it is can be and should be in many cases used as a complete trading methodology. I dont intend to explain those methodologies presented by GET but happy to run a few as a demo. You'd need the software to understand and apply fully. I have invested the $$s and the time others may not think this is for them. Sure you can design and develope a trading method or methods traded PURELY with Elliott.
Radge does and if you join his Chartist you can learn his methodology. He runs a number of portfolios with daily updates,he doesnt use Get and or their Canned methods (that I'm aware of).

Trade it.
15 yrs you'd be a slow learner---but agree with waves---some will never get it.

 

[wavepicker]

Nice thread.

I believe using it on illiquid stocks is pointless. Those trading the little illiquid stocks may want to look at other methodolgies.

From here over to the experts unless I have something to add by way of questions.

Snake you are dead right about EW and illiquid stocks. EW is a representation of mass social mood. Therefore where the crowds emotions are best represented is in very liquid markets. I rarely trade stocks using EW alone, in fact I rarely trade stocks. There is way too much white noise in individual illiquid stocks

The best representations of EW therefore are seen in the following:

-Indexes
-Currencies
-Commodities

etc

Sure there are setups in the more liquid stocks, if fact there can be many setups and opportunities, but more often than not you will be hard pressed to find them and you will really have to know what your doing. There can be too much ambiguities and subjections if this is done using EW in isolation and one really needs to use other methods to quantify the price action. If you are trying to force a count on a stock that simply isn’t there then you are asking for trouble IMO, it has to rally stand out and have the right proportions, otherwise move on and find something else that does

Cheers

 

[tech/a]

Waves.

Very important points.
I agree with your list but would add Liquid Stocks.

 

[wavepicker]

Since reading Adaptive Analysis I have become curious about EW.

I'm always interested in learning new things. And I also read a lot. So... I'm wondering a couple of things...

Firstly, is it necessary to know in depth the theory in order to apply it?

Secondly, if so, what are the best books on EW to read up on the theory/ conceptual side of it? And;

Thirdly, what is the best book for EW application?

Wave, Tech... Maggie... your thoughts would be much appreciated.

Cheers,
Chops.

P.S. Had thought about making a thread like this Tech, but did not get around to it... 'Tis much appreciated.

1: Certainly NOT, one can just look for very basic 12345 Impulsions and abc Corrections and most do. But learning the theory more in depth can increase your analysis skills and you maybe able to see more pportunities/probabilities in which to take a trade. Like anything it really depends what you want from it

2: The best book I have come across and the original is Elliott Wave Principle Key to Market Behaviour by Frost and Prechter. That is a starting point and a great orientation regarding EW analysis. For application(and this really depends on your trading style and objectives) I like a book by Steven W Poser called Applying Elliott Wave Theory Profitably. There are many, many books out there however.

There is something I must mention here, there are multiple schools of Elliott:

The 2 most that are well known are:-

-The Prechter Style which is an extension form the original works of RN Elliott
This is what most Elliotticians follow

-The Neely School. This is a completely different approach developed by Glen Neely. He has written a book called “Mastering Elliott Wave” teaching it. This approach has concepts that all but remove any subjectivists/ambiguities from the Prechter approach. It is truly the most objective form of EW Analysis. However it is very, very difficult to master it, many more rules and guidelines compared to the traditional approach but much more accurate if done correctly. I believe Glenn Neely is doing some free seminars in all the capital cities soon. I don’t know anyone who has mastered this approach in this country. Zoran Gayer(from Adelaide) was the best but he passed away a few years ago.

3. Re: Books on application: There are many out there, look for the EWI library they have some good ones. Another good one is Dynamic Trading by Robert Miner but I find it more tailored around his software but it can also be used in isolation

I have a some good info which briefly explains it what you are after . It’s very good. Send me a PM and I will arrange to send it to you

 

[Kauri]

Hi kauri,

Your charts are generated by Dynamic Trader is that correct?? What version are you using and how do you rate rate Dynamic Trader in terms of Elliott Wave Analysis and all the other routines available on Dynamic trader?

Cheers

DT software...EOD version...
As far as E/W analysis goes strictly speaking it has none, unlike Get it does not attempt to place counts-waves.. it is a whiteboard where you manually do your own counts and place the zig zag.. then instead of using labourious manual Fib exp/rets. the software can at the click of a button place likely Fib based EOW zones either as coloured boxes or labelled lines... the Fib No's used are user selectable. I pesonally don't use the search/scan function but it is there and finds 1 or 2 bar based trend reversal/continuation patterns.
With the EOD version it is possible to show intraday data... I have MetaTrader4 (Free app.) running, using an added in expert advisor which continuosly writes their free data for FX pairs, Gold, Indexes to my hard disk. Using the ASCI app in DT this data is read and updated at 1 min intervals into DT EOD, which suits me as I don't trade at less than 1 Hr intervals. All at a cost of about 1/3 the price of Get.

 

[wavepicker]

DT software...EOD version...
As far as E/W analysis goes strictly speaking it has none, unlike Get it does not attempt to place counts-waves.. it is a whiteboard where you manually do your own counts and place the zig zag.. then instead of using labourious manual Fib exp/rets. the software can at the click of a button place likely Fib based EOW zones either as coloured boxes or labelled lines... the Fib No's used are user selectable. I pesonally don't use the search/scan function but it is there and finds 1 or 2 bar based trend reversal/continuation patterns.
With the EOD version it is possible to show intraday data... I have MetaTrader4 (Free app.) running, using an added in expert advisor which continuosly writes their free data for FX pairs, Gold, Indexes to my hard disk. Using the ASCI app in DT this data is read and updated at 1 min intervals into DT EOD, which suits me as I don't trade at less than 1 Hr intervals. All at a cost of about 1/3 the price of Get.

Thanks for that Kauri appreciate it. Do you use any of the built in time projection routines(in DT) with your EW analysis such as Fib time extensions etc?? If so do you find them useful.? I assume you are using DT4 EOD.

Cheers

 

[Kauri]

Thanks for that Kauri appreciate it. Do you use any of the built in time projection routines(in DT) with your EW analysis such as Fib time extensions etc?? If so do you find them useful.? I assume you are using DT4 EOD.

Cheers

Waves..
Still using EOD4...although 5 is available. When I am happy that I can drive 4 ok I will update to 5...probably 4-6 weeks time.. sorry (4x1.618=6.47).. 4-6.47 weeks
Tried out the time component but in my experience on the top end of the ASX equities it seems to have little relevance.. I find that using waves alongside the shape,range and volume characteristics of the price bars suits my trading style. Haven't done much in the way of time projections with FX etc.. will look at that soon but will probably not incorporate it.. not saying it doesn't work, it obviously does for many people,..just that it doesn't tie in with my trading style.

 

[Porper]

Thanks for that Kauri appreciate it. Do you use any of the built in time projection routines(in DT) with your EW analysis such as Fib time extensions etc?? If so do you find them useful.? I assume you are using DT4 EOD.

Cheers

Just to add to what kauri has said regards Dynamic Trader.

I bought DT 5 a couple of weeks ago so I am still learning the basics of it, but I do use the time cycle ratios a lot which I find very helpful with finding potential turning points and end of waves.It can do static counts which I wouldn't use, but it will measure between two points in time and project from any point on the chart using fib ratios.

Theory is the more projections made measuring past swings that project to the same or similar date, the more chance of a reversal happening.

As Kauri said you make your own E.W counts although it will add various lines/swing points to a chart which more or less mirror the E.W count anyway.

I use the scans as well, very good for filtering stocks, getting rid of a lot of the no hopers.