Elliot Wave...

[Jeffmet3]

Can someone explain the fascination with this?

You make graphs fit into the waves, and the experts are often wrong and then re-adjust on the timing of transition periods.

In addition, seeing that investor feelings towards the stock market correlates with it's performance appears to be pretty obvious.

This seems like the ultimate way of being results oriented, but a lot of big-time industry execs vouch for it, so I'm curious if anyone can explain why?

[DesertCat]

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This seems like the ultimate way of being results oriented, but a lot of big-time industry execs vouch for it, so I'm curious if anyone can explain why?

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Who vouches for it? Not any of the top long term investors that I am aware of.

Remember that when you see a technical analyst from a big brokerage/wall street firm, he's not employed because the firm believes in or uses his approach. He's there because technical analysis promotes excessive trading and commissions, that's why they like it. It's the same reason that Abby Joseph Cohen and her ilk have jobs, their predictions encourage clients to make sector rotations so their employers can rack up more commissions.

[kimchi]

I think the underlying assumption of Elliot Wave Theory is that social mood drives the economy rather than the other way around. (not particularily my opinion, so don't shoot the messenger).

I actually find the Elliot Wave Theory really interesting, although I wouldn't use it in my trading.

Robert Prechter writes some interesting financial editorial but, like the Wall Street Journal and MSNBC, it's more for entertainment (IMO) than useful information for traders.

Have a browse through Pete Kendall's Socio Times for more intertesting, albeit perhaps untradeable financial commentary. There's also an interesting video called History's Hidden Engine on their website that's well worth a watch.

I think the best way to use Elliot Wave is to monitor the up and down-wave counts; if only to ensure you trade with the trend and thus take lower-risk trades.

Using it for calling market turning points is probably not a profitable strategy.

[Jeffmet3]

[ QUOTE ]


Who vouches for it? Not any of the top long term investors that I am aware of.

Remember that when you see a technical analyst from a big brokerage/wall street firm, he's not employed because the firm believes in or uses his approach. He's there because technical analysis promotes excessive trading and commissions, that's why they like it. It's the same reason that Abby Joseph Cohen and her ilk have jobs, their predictions encourage clients to make sector rotations so their employers can rack up more commissions.

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all i have at home is what wikipedia gives me, but in some articles i remember reading others.

-Jordan Kotick, Global Head of Technical Strategy at Barclays Capital
-Paul Tudor Jones, the billionaire commodity trader,
-Robin Wilkin, Global Head of FX and Commodity Technical Strategy at JPMorgan Chase
-Robert Prechter

i personally am not impressed by it, but the firm i'm working for this summer seems to think it has some merit and i'm trying to understand why.

[Sniper]

Jeff,

In a nutshell, it has merit, for the simple reason that some people trade by it...

imo, Elliot wave falls into the category of analysis tools that, as a trader, you should know about, but not use as your primary tool in making market timing decisions.

At best, its just another tool in the toolbox.

There are a few books you can read, if you want to get a better understanding of it.

[PokerFox]

Digging up an old thread here because I was going to make one about Elliott Wave:

Do people actually believe this stuff? If it was even possible to time the market this way, everyone would be doing it and it would no longer be predictable in this matter.

Also to the person above, who trades by this? Do enough people do it to actually affect the market?

I guess it's not suprising that I don't believe in the Elliott Wave principle anyway, since I'm an EMH guy and I think timing the market in any form is impossible.

[kimchi]

[ QUOTE ]
Digging up an old thread here because I was going to make one about Elliott Wave:

Do people actually believe this stuff? If it was even possible to time the market this way, everyone would be doing it and it would no longer be predictable in this matter.

Also to the person above, who trades by this? Do enough people do it to actually affect the market?

I guess it's not suprising that I don't believe in the Elliott Wave principle anyway, since I'm an EMH guy and I think timing the market in any form is impossible.

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You don't need to solely look at it as timing the market, it's also about finding the path of least resistance. If you can identify an upwave, then you can look for opportunities to go long (such as during a pullback) which would provide a trade with reduced risk.

I've never looked seriously into Elliot Wave, Fibonacci sequences or other 'abstract' forms of TA. I'm sure they can be traded profitably, but then as Dr.Van Tharp pointed out in one of his books, you can trade profitably based on the results of a coin-flip provided you use good position sizing, risk management and exits.

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If it was even possible to time the market this way, everyone would be doing it and it would no longer be predictable in this matter.

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This isn't true. Richard Dennis (and I think Ed Seykota) have been quoted as saying that they could publish the rules to their trading methologies as a full page in the WSJ and people still wouldn't follow them.

There's a lot more to any trading methology than timing your entries and exits.