tag:blogger.com,1999:blog-7379187680933541899.post502481116099791672..comments2018-02-28T20:30:26.342-08:00Comments on The Fundamental Error of Elliott Wave Theory: “The Fundamental Error of Elliott Wave Theory”Orvin Fivehttp://www.blogger.com/profile/14398887080313593628noreply@blogger.comBlogger32125tag:blogger.com,1999:blog-7379187680933541899.post-87558707982042189352018-02-28T20:30:26.342-08:002018-02-28T20:30:26.342-08:00Why don't you try trading commodity futures, F...Why don't you try trading commodity futures, FX or the Stock market using the results provided by a reputable Elliot Wave Technician then make specific judgements. Your ethereal far fetched BS is worthless to someone that wants to make money (i.e. a living) trading Futures or other financial instruments. I do use EW counts provided by an outstanding EW Specialist who knows when to trade the wave patterns and when not to trade. This is the difference between trading impulse waves and not trading corrective waves such as B-Waves! <br /><br />Experience is the best teacher! Attempt to use EW in conjunction with other tools such as K-Wave and Hurst Models and find out what you are missing! Of course, it helps to understand how to trade the financial markets! You obviously have no clue about that!Anonymoushttps://www.blogger.com/profile/16920371131254017839noreply@blogger.comtag:blogger.com,1999:blog-7379187680933541899.post-56199332266553819992017-11-10T04:25:53.348-08:002017-11-10T04:25:53.348-08:00Such a nice blog,i never ever had seen earlier thi...Such a nice blog,i never ever had seen earlier this type of blogs which contain this type of information.. I really appreciate your effort thank you for sharing this information which really very-very good for the users as well as for mine..Shanayahttps://livetradr.com/noreply@blogger.comtag:blogger.com,1999:blog-7379187680933541899.post-46869507369900827002017-08-25T11:18:47.918-07:002017-08-25T11:18:47.918-07:00Of course Elliot Wave AND also Fibonacci DONT Work...Of course Elliot Wave AND also Fibonacci DONT Work they have ONLY made their Creators/Authors RICH try #MULTIDIAGONALS the ONLY Predictive ToolMULTIDIAGONALShttps://www.blogger.com/profile/16676069220718722974noreply@blogger.comtag:blogger.com,1999:blog-7379187680933541899.post-85286173764082985882017-04-30T19:28:18.084-07:002017-04-30T19:28:18.084-07:00What a sad world you live in.What a sad world you live in.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7379187680933541899.post-71573680007132279382013-08-08T10:55:28.479-07:002013-08-08T10:55:28.479-07:00Thanks for reading.Thanks for reading.Orvin Fivehttps://www.blogger.com/profile/14398887080313593628noreply@blogger.comtag:blogger.com,1999:blog-7379187680933541899.post-2492309024467716272013-08-08T10:54:54.566-07:002013-08-08T10:54:54.566-07:00This comment has been removed by the author.Orvin Fivehttps://www.blogger.com/profile/14398887080313593628noreply@blogger.comtag:blogger.com,1999:blog-7379187680933541899.post-57725172608920631242013-08-08T03:14:57.071-07:002013-08-08T03:14:57.071-07:00great lesson to those wavers trying to rationalize...great lesson to those wavers trying to rationalize every wild move in the market/Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7379187680933541899.post-36088696947685801212012-06-24T16:37:51.806-07:002012-06-24T16:37:51.806-07:00This is the best critique of EWT I've ever rea...This is the best critique of EWT I've ever read!!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7379187680933541899.post-22164933558679218152010-11-27T05:50:38.520-08:002010-11-27T05:50:38.520-08:00Thank you for your considered reply to my comment ...Thank you for your considered reply to my comment (November 25, 2010 11:21 AM).<br /><br />I cannot disagree with anything you have said in your reply.<br /><br />Best of luck in your endeavors.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7379187680933541899.post-11599769263636732662010-11-25T22:25:41.352-08:002010-11-25T22:25:41.352-08:00Thanks for your comments. I think where you and I...Thanks for your comments. I think where you and I disagree is over the word "accounts". I would use the word "labels". So I consider that EWT "labels cycles" rather than "accounts for cycles". Such labeling is just a form of taxonomy (it's entirely retroactive) and therefore provides no information about the future. It's no better than if you decided to give the names "Bob", "Bill", and "Yolanda" to a series of prior trends on a chart. You wouldn't know what the next wave looks like, even if you held a roster of names and expected "Beatrice" to be next. But I would go further, and even strip away the meaning of the word "cycles": EWT is a method of labeling "cycles of price" rather than cycles of "human psychology". The reason for this is that the waves EWT seeks to label don't only reflect psychology. They also reflect countless other phenomena that are entirely independent of human emotion. The word "price" is the only one that adequately describes this confluence of factors. Thus, EWT labels "price cycles" retroactively, providing no useful information. This is evident from the numerous disagreements between EWT theorists about how these retroactive labels should be applied. Of course, there will always be a sufficiently diverse pool of differing EWT predictions to allow for one of them to be "correct" in retrospect. Those who were "incorrect" inevitably "blame themselves" for misapplying EWT, rather than questioning the essential mistake of the underlying theory itself. Thanks for your compliment on the writing.Orvin Fivehttps://www.blogger.com/profile/14398887080313593628noreply@blogger.comtag:blogger.com,1999:blog-7379187680933541899.post-81416442987556925782010-11-25T11:21:54.092-08:002010-11-25T11:21:54.092-08:00Stumbled across your well written blog post.
I fu...Stumbled across your well written blog post.<br /><br />I fully agree with JB's post in that EW accounts for cycles of human psychology as a primary indicator as opposed to being a clinically mathematical formula.<br /><br />As a successful day trader, Using EW does not benefit me in any way. Ultimately, I make money through observing the movement of live price to predict it's likely future path, i.e pattern recognition.<br /><br />For me, anything beyond simplicity adds complication and increases risk of failure.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7379187680933541899.post-37699571149945640472010-08-22T20:24:15.370-07:002010-08-22T20:24:15.370-07:00Try to imagine the stock market NOT EXHIBITING pat...Try to imagine the stock market NOT EXHIBITING patterns that can be mapped to some power law distributions retroactively. It's impossible (unless the market were constantly gapping randomly---i.e. not exhibiting any semblance of continuity). In retrospect, certain particular mappings are going to show scale independence---this fact is obvious because the stock market neither moves in a straight line, nor exhibits invariant repeating patterns (i.e. patterns that could be modeled using Fourier series). Because the only independent dimension is price (time being trivial), a stock chart MUST EXHIBIT these patterns. Nothing about this observation implies that future patterns are predictable based on past patterns. And nothing about this observation contradicts the underlying argument of The Fundamental Error of Elliott Wave Theory. In particular, as patterns become more "crude"---i.e. during major moves such as crashes---the likelihood of retroactively showing analogous patterns to other "crude" phenomena increases to the point of certainty. <br /><br />Ironically, these particular examples of natural patterns (earthquakes, epileptic seizures etc.) are especially illustrative, because they SUPPORT rather than refute the argument of The Fundamental Error of Elliott Wave Theory. Unlike planetary orbits or the shapes of electron wave orbitals, these phenomena are notoriously unpredictable outside of extremely static laboratory conditions. And the reason for this is that not all of the input variables influencing any particular case are known and/or can be quantified/modeled in a manner that would allow for sufficiently robust predictions of what is going to happen in the future during the event itself. In retrospect, of course, a function can always be found that maps out the pattern. Here I must repeat---the point of The Fundamental Error of Elliott Wave Theory is that, throughout history, "mysterious" natural patterns became predictable once their major, underlying inputs were discovered, quantified, and then plugged into a unified, robust model. No analogy to this process can be contructed for the stock market, for the reasons I explain in The Fundamental Error of Elliott Wave Theory. You must reread it. <br /><br />I cannot comment on the relevance to The Fundamental Error of Elliott Wave Theory of the number of EWT newsletter editors or subscribers.Orvin Fivehttps://www.blogger.com/profile/14398887080313593628noreply@blogger.comtag:blogger.com,1999:blog-7379187680933541899.post-25123303937468901092010-08-21T09:49:49.825-07:002010-08-21T09:49:49.825-07:00Orin, The Elliott Wave Theory has passed the test...Orin, The Elliott Wave Theory has passed the test of time and the test of money. More people are willing to pay good money every month for the predictions of 20 editors on all of the world's markets. For 32 years they have been predicting markets and now they are the largest service.<br /> Not always right, of course, but people trading real money on every market will pay for the next forecast. Prechtor is not telling anyone they will get rich quick, so the endless supply of fools argument is out.<br /><br /> The stock market follows the mathematics of many other natural phenomena. The math of stock market crashes similar the the math of earthquakes, epileptic seizures, hydrodynamic turbulence, acoustics of material failure etc. Dr. Sornette has predicted several crashes. <br /> Dr. Eugene Stanley studied 200 million market transactions and found scale independent patterns to eight degrees of trend and rare events happening at all degrees of trend that correspond to power law distributions and phase transitions that are observed in many natural systems.<br /> So check out these studies, read some more Elliott Wave material and write a new article.<br /><br />http://docs.google.com/viewer?a=v&q=cache:DWsTpUgGBagJ:web.sg.ethz.ch/wps/pdf/CCSS-09-005.pdf+Black+Swans+Dragons+kings+Prediction+of+Crises+and+Risk+Management&hl=en&pid=bl&srcid=ADGEESis-_EIHl-cIwX5RRKCKKbju-2DI3_VUZ-PukL19oMD-bJhOtGNDBc-ZOlWjnKCiftHo9Z8wrU7-E7MN9rSxyX0Ilo_WR3mFYBCE7rLouZRd0Qwjr0xm2V-TAF6qOd4FQAaPIbt&sig=AHIEtbQlotOnndLIsBn3gAVeWf8mFe40TwUnknownhttps://www.blogger.com/profile/12578235880502561179noreply@blogger.comtag:blogger.com,1999:blog-7379187680933541899.post-27286474124633092792010-08-08T13:38:05.506-07:002010-08-08T13:38:05.506-07:00The only form of fundamentals that I believe truly...The only form of fundamentals that I believe truly works is "inside information," and that's illegal :)<br /><br />Earnings and stock price are not directly correlated, aside from noise in the signal momentarily generated by "news."<br /><br />I write algos at the one-minute scale and work with people who write algos at the sub-one-minute scale. From the results I can say that TA can work without a doubt. However, no TA will work *forever*.<br /><br />I wonder if your thoughts regarding EWT could be supported or detracted from with a study wherein a closed set of people are given a commodity to trade while simultaneously recording their 'social mood' using some sort of standarized model. Prechter ought to fund such a study.<br /><br />-sAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-7379187680933541899.post-45036635545228201622010-08-05T11:21:12.259-07:002010-08-05T11:21:12.259-07:00Thanks for your post. The Fundamental Error of El...Thanks for your post. The Fundamental Error of Elliot Wave Theory is meant to demonstrate that the most essential assumption of EWT ("stock patterns are analogous to natural patterns") is flawed. The fact that a person can introduce errors of any arbitrary size (i.e. variability in both wave count and size) does nothing to refute this underlying logical flaw of EWT. It is as if one were to defend astrology by pointing out that several different astrologers have different predictions. It does not matter how many different branches one wants to add to a tree, if the underlying trunk does not stand because it isn't planted firmly in the ground...Orvin Fivehttps://www.blogger.com/profile/14398887080313593628noreply@blogger.comtag:blogger.com,1999:blog-7379187680933541899.post-6978924499603236662010-08-05T11:12:08.545-07:002010-08-05T11:12:08.545-07:00I learned the variability of EWT the hard way by t...I learned the variability of EWT the hard way by taking a bearish blog as being fairly accurate and trading accordingly. However, another EWT site that I briefly subscribed too indicated that their software algorithms that follow EW rules would produce 49 different counts. Which one is right? Who knows. I now look at EW counts that currently conform to my trend model to only determine what my potential risk/reward is for a particular trade.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7379187680933541899.post-68247820133554053152010-07-20T04:31:02.567-07:002010-07-20T04:31:02.567-07:00Re. Pod's comment:
"OK, so ralph elliott...Re. Pod's comment:<br /><br />"OK, so ralph elliott and bob prechter have constructed an emprical "model" of stock market behavior while lacking any insight into the independant variables.."<br /><br />The whole point of the Fundamental Error of Elliott Wave Theory is that WE ALREADY HAVE an insight into the major "independent variables" (the most major two being future earnings and the future relative value of the currency in which those earnings will be denominated)---this is what makes the stock market different from astronomy and other sciences. The "gaping hole" you've identified is actually the main point of the essay, so please reread.Orvin Fivehttps://www.blogger.com/profile/14398887080313593628noreply@blogger.comtag:blogger.com,1999:blog-7379187680933541899.post-75221340440928743052010-04-22T10:49:10.981-07:002010-04-22T10:49:10.981-07:00You are completely wrongYou are completely wrongUnknownhttps://www.blogger.com/profile/17879156628346962956noreply@blogger.comtag:blogger.com,1999:blog-7379187680933541899.post-18312328833878075392010-04-22T00:34:07.188-07:002010-04-22T00:34:07.188-07:00one question i NEVER seem to find answers to in al...one question i NEVER seem to find answers to in all videos and articles i've read about the Elliot wave theory is... HOW DO I IDENTIFY THE ORIGIN OF THE WAVES??? I mean... how do i draw or count the waves? where do i start from? how do i know where to start from? i've seen several examples on charts but no one ever seems to explain why they chose theirs points as the origin of the 1st wave.<br /><br />So could someone please explain this to me? i know quite a bit about the Elliot wave theory now, but all that knowledge is USELESS cos i still can't apply anything i've learned.<br /><br />so a little help PLEASEKhemehttp://khemesforexblog.wordpress.com/noreply@blogger.comtag:blogger.com,1999:blog-7379187680933541899.post-19344271000774072642009-11-29T12:41:15.811-08:002009-11-29T12:41:15.811-08:00Yes, it is possible. Gimme a break. Science is alw...Yes, it is possible. Gimme a break. Science is always knocking down walls like the one you propose is there for human behavior.<br /><br />My thinking is that one can consider human behavior in terms of how charts wave in overlapping logarithmic (or other similar) curves from a high from important news to a low from the selloff. Just apply the chart to each object in space; that is, one's reaction to that object is chartable, and you have human behavior. People gather their idea of what that object is about, that is, their own reaction to it and any concepts that, Venn Diagram-like, intersect the object, involve the object and thus one's reaction to the object, and store the object (often as a single cell, such as a famous person) in their brain to use when needed.<br /><br />Elliott wave theory is wrong because it tries to standardize things too simply, with counting and other highly subjective approaches.<br /><br />ha-patternha-patternhttp://www.forexfactory.com/member.php?u=81332noreply@blogger.comtag:blogger.com,1999:blog-7379187680933541899.post-21907453941333567112009-11-13T07:07:53.283-08:002009-11-13T07:07:53.283-08:00Orin - you leave a gaping hole in your argument up...Orin - you leave a gaping hole in your argument up-front by observing that early astromers built empirical models of how celestial bodies "act" without any knowledge of the underlying independant variables. OK, so ralph elliott and bob prechter have constructed an emprical "model" of stock market behavior while lacking any insight into the independant variables. this is no different than the early astronomers. what's more, prechter's assertion is that markets do not "react" to earnings or whatever, rather they foretell earnings because they reflect underlying mood which in turn drives economic activity.<br />i think the stronger case to make against elliot is that it is not terribly useful or predictive, i.e. the model construct is empirically sound but you'll be wrong as often as right in using it to predictpodnoreply@blogger.comtag:blogger.com,1999:blog-7379187680933541899.post-31952867565729843692009-10-29T20:48:04.853-07:002009-10-29T20:48:04.853-07:00Orvin...brilliant read...well written. I've be...Orvin...brilliant read...well written. I've been trading the market for about 4 1/2 years with all the ups and downs trying to find the "Holy Grail" for trading along with buying tons of books on techinical analysis etc etc etc. Found EW a few months ago and jumped on that band wagon for awhile and while waiting for the BIG WAVE C down...missed most of this recent Rally. So EW does not work in my opinion. But what caught my attention in one of your posts was a statement you made:.."Pattern Recognition.." Would you mind explaining that? Thanks. Tom in NCGrail Traderhttps://www.blogger.com/profile/04289371776453444200noreply@blogger.comtag:blogger.com,1999:blog-7379187680933541899.post-5005384670010091642009-09-11T09:30:55.600-07:002009-09-11T09:30:55.600-07:00Thank you for this post. I think you've done ...Thank you for this post. I think you've done a good job of criticising the naive form of EWT. More deeply, I think you're missing the real points:<br /><br />1. EWT has quite devastating criticisms of other models, most particularly any model based upon fundamental valuations.<br /><br />2. EWT is not a strong theory in the classical sense of the word theory. It's more of a philosophy or aesthetic sensibility. At any time t, different people using the same "theory" can have different interpretations of the past and also contrary expectations of future price action. <br /><br />3. The slippery part of (2) is caused by the infinite number of different possible ratios in an infinite number series.<br /><br />On the good side, an EWT purist is able to ignore the reams of seemingly more rigorous but practically useless blather that clogs the neurons of other types of analysis. The only reason an EWT user would look at these is to choose between two or more possible EWT interpretations.<br /><br />EWT also takes a very long view of data series. The recent debacle in the markets was caused by the failure of other analysts to do the same, and worse, to eliminate outlying data points.<br /><br />So... finally, all EWT really does is give a trader the guts to make a trade with a firm idea of when they'll cut their loss or take their profit. Even if the interpetation is totally random, the mental conviction to cut the loss short and let the profit run; and, to eventually take the profit is why this technique works a lot better than a fundamentalist who will buy the "cheap" stock at a 9 P/E and then double down on it a a 6 P/E only to see it go to a 5 P/E.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7379187680933541899.post-87864545225316053112009-08-29T16:42:29.867-07:002009-08-29T16:42:29.867-07:00Thanks for your comments. Informally and practic...Thanks for your comments. Informally and practically, I agree with you that technical analysis is useless. But I should point out that your specific argument (i.e. any “valid” model becomes instantly invalidated as all traders follow it) is not enough to logically disprove technical analysis. This is necessarily true because not all traders are trading at the same time or trading in the same way. This must mean that at any given time “t”, only some percentage of traders are ever going to be aware of and therefore acting on any particular pattern. The salesmen of EWT and other Technical Analysis tools will therefore tell you: “All patterns are not created equal---only a small group of elite market technicians (such as ourselves) are able to see through all the noise. The herd will never follow our pattern recognition because it is too complicated/sophisticated for them.” Your argument against technical analysis based on patterns instantly being invalidated is susceptible to the above attack because the statement “Traders ARE the market” is too abortive—it doesn’t recognize the complete chain of causes and effects. What I mean is that traders don’t make decisions in a vacuum (and certainly not all of them base their decisions on technical factors only). Instead, they act as emotional/intellectual filters through which billions of outside factors influence stock prices. What I have demonstrated in The Fundamental Error of Elliott Wave Theory is that it is impossible to find a model that (1) incorporates these mathematically uncorrelated outside factors simultaneously and (2) somehow is able to filter out the influence(s) of these factors from a perpetually valid (alleged) behavioral model both in the past and FUTURE, as EWT theorists claim about their wave counting. Again—I agree with you about technical analysis in practice, though.Orvin Fivehttps://www.blogger.com/profile/14398887080313593628noreply@blogger.comtag:blogger.com,1999:blog-7379187680933541899.post-27935743165784322512009-08-27T13:10:34.218-07:002009-08-27T13:10:34.218-07:00The behavior of the stockmarket depends on the kno...The behavior of the stockmarket depends on the knowledge traders have of it.<br /><br />Traders ARE the stockmarket.<br /><br />Simply said, as soon as there is an "valid" model available, it will become "invalid" immediately because all traders will act according to the valid model (we all want to become rich, don't we?). And by doing so, the behavior of the stockmarket changes, making the valid model invalid.<br /><br />There currently is no mathematical technique that is suited for modelling the stockmarket.<br /><br />EWT, or any technique that Technical Analysts use, or chaos theory (non-linear diff equations)for that matter are useless in this respect.Anonymousnoreply@blogger.com