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Scott & Group:
Wow, what a post! One of the best I've seen in a long while relative
to theories and concepts. You just saved some poor souls a lot of
time and money. It would be great to see similiar posts on other
technical tools.
Chas
-----Original Message-----
From: Scot Billington <scot.billington@xxxxxxxxxxxxx>
To: realtraders@xxxxxxxxxxx <realtraders@xxxxxxxxxxx>
Date: Friday, November 17, 2000 1:17 PM
Subject: Re: [RT] Elliott Wave
>Those of you who are beginning or contemplating studying EW you my find my
>experience helpful.
>
>I worked as an analyst using primarily EW for seven years. My job roughly
>ten hours a day was to study EW and apply the counts to various markets.
>During this period I would claim that I developed an above average to
>excellent ability to apply an EW count and alternates to a market within
the
>rules laid out in Prechter's book.
>
>In my opinion while these counts did sometimes produce Nostradomus-like
>market 'calls', they were not useful in making trading decisions. They
were
>closer to a neat magic trick than a trading tool. The major problem I have
>with EW is who said the original premise is valid in the first place. Mr.
>Elliott made some grandiose claims and offered up an interesting theory
that
>makes some sense under the heading of mass behavior. This theory can not
be
>tested due to its subjectivity. I must choose between time frames, close
>only or bar charts, continuous, Gann, or individual charts. If I am using
a
>bar chart, I must decide what makes a wave. Due to this subjectivity,
there
>is no way to test Elliott's original premise that the markets move in five
>and three wave patterns. Nor is there any way to test if the patterns of
>the market must fit into the 13 (I think) different possible patterns laid
>out. So, basically, we have a gentleman making a claim that can not be
>verified or refuted.
>
>Certainly, some moves have ended on five waves, but they have to end on
>something. And a move of more than one wave must end in an odd number by
>definition. A five wave move with and extension can be five, nine,
>thirteen, seventeen etc. waves. Every other odd number. Therefore, half
>the moves must end in a five wave pattern. Even if EW is not valid, I am
>going to be 'correct' with my five wave count 50% of the time. The
method
>allows moves to end on three waves with its irregulars or by the larger
>pattern being A-B-C. Therefore, I can end on three or five with and
>extension in any of the waves of either. That covers all the bases.
>
>Undoubtedly, there are those who have claimed to have made money trading
the
>EW. I would contend that while they made money (if indeed they did), they
>may not know WHY they made money. EW may only generate random entry
>signals, but they may use strong exit strategies and sound money
management.
>By using strong exit techniques and good money management, one can take a
>random entry and make handsome profits. Even if they use EW to make their
>exit decisions, it is not necessarily the EW count that makes those
>strategies strong. Each part of the method needs to be tested
>independently, to show its effect. EW can not be tested in any way.
>Therefore, we can not know if it is or is not valid.
>
>(A good example of someone who makes a ton of money, but does not know why
>is a hypothetical profitable floor trader. Let's say he makes $2 million a
>year using method X. Wow, method X must be great. But the floor trader
>trades 2000 contracts per day 200 days per year. He also has the floor
>advantage of buying at the bid and selling at the offer. The spread is 1
>tic each tic is worth $20, so he makes $10 per contract vs. the value which
>is between the bid and the asked. $10*2000*200=$4,000,000. So, his edge
>over the market is not in method X; it is in the b/a spread.)
>
>Its is my opinion that a beginner should look elsewhere for a trading
>method. If they are completely intent on trying EW, I would suggest that
>they find a mentor who has used EW to successfully make profits in the
>market not to write a book, although those are not necessarily mutually
>exclusive. Furthermore, I would take a hard look at the mentor's profits
to
>see if they are being generated by something other than the EW counts.
>
>A note of caution. EW does allow one to make some remarkable market
>predictions whether these occur randomly or not. The method contends that
>it has figured out the secrets not only of the markets but of existence.
>These predictions give one a feeling of omniscience and a surge of power;
>therefore, this method of trading is appealing to those with a narcissistic
>personality style. This personality style is marked by extremely grandiose
>statements, which Mr. Elliott certainly made about his 'discovery'. Mr
>Prechter has exhibited traits of this personality style as well. The narc.
>style puts a lot of its self-worth on the idea of being 'right' and may not
>take opposing views or questions very well. This style is generally not
>conducive to long-term (>10 years) successful trading. If you decide to
try
>to study under someone, do not believe the hype.
>
>If you have any questions, feel free to e-mail me personally.
>
>Scot Billington
>
>----- Original Message -----
>From: <Sonnysark@xxxxxxx>
>To: <realtraders@xxxxxxxxxxx>
>Sent: Friday, November 17, 2000 10:39 AM
>Subject: Re: [RT] Elliott Wave
>
>
>> Thanks Earl...good information. -Sonny-
>>
>>
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>
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