# The Elliott Wave Principle

Freinds,

This has been my first post in quite a while. The reason I have not been posting lately is because I have gotten deep into Elliott wave analysis and have been devoting a lot of my time towards studying it.

It is much more deep and complex than the babypips school goes into and incorporating this analysis into my current system has really improved my trading.

So I am left with a problem…

I cannot find anyone out there whom uses or applies the principle in their trading. I do not need to be convinced of its validity however, that is evident once you understand the principle.

Do any of you babypipers have an interest in discussing the EWP? If so, reply to this thread or PM me on yahoo messenger. I keep wave counts on all the majors on at least the 1 hour and above. I also keep count on the DJI, Gold, Oil, S&P futures and Silver. I don’t trade them all, but ive become addicted to wave counting - what can I say?

I am looking forward to any responses, I would be thrilled to exchange and critique each others counts.

Happy Pipping.

PS. I am not looking for responses talking about how the EWP is bogus or only works on stocks, yada yada yada… Thanks!

Good to hear from you again,

Maybe you can teach them.

I can see how it would get quite involved, since it can be open to interpretation. It’s not always too easy to see, which is why I never got into them.

Perhaps you can give tips based on what you’ve learned in your studies.

Vulcan,

I certainly would not consider myself knowledgeable enough to teach the wave principle yet; however, would be more than happy to kick off a healthy constructive conversation where others, myself included can benefit.

Yes, you are right that the count is up to interpretation. In fact there can be several perfectly acceptable counts at any one time without breaking any known Elliott rules. This is where two important aspects of the wave principle come into play.

1. Wave personality: each wave has its own distinct signature, or personality. For example - wave 4 is usually a sideways correction, wave 3 is usually the longest, wave 2 usually retraces .618 of wave 1, ect.

2. The charts will correct you: This aspect may seem self explanatory; however, it is important to note here, that only with the wave principle, will you know exactly when your wrong. Example: Wave 4 can never enter the territory of wave 1, so here, all that is saying is that if your counting a wave as wave 4, it cannot enter the price range of 1, so if it does, your count is wrong and needs to be reworked.

Here are the basic Elliott Rules: (I am assuming you have already read what babypips.com has provided in the school.)

1. Wave 2 never moves beyond the start of wave 1.
2. Wave 3 is never the shortest wave.
3. Wave 4 never enters the price territory of wave 1.

Those are the rules, there are many guidelines.

There are many books written on this, so it would be difficult to explain the principle in its entirety here, so I will stop my post here and leave it open to questions and further discussion.

To help kick off the discussion, I will attach my latest count of the EURUSD hourly. Please feel free to comment on my count, I want constructive criticism.

If anyone would like to know what resource I have been studying to compile my wave knowledge here is the book (Admin, didn’t know if you would allow the listing of a book, if its not acceptable, please let me know, thanks):

Elliott Wave Principle: Key to Market Behavior (Wiley Trading Advantage) by A. J. Frost, Robert R., Jr. Prechter, and Charles J. Collins (Paperback - Jan 16, 2001)

Happy pipping to all - sorry for the long post.

So not one of you is interested in the Wave principle enough to participate in the discussion?

… sigh …

I understand. It is a hard concept to grasp, just as trading is. Its one of those things that takes many hours of study and work to master (if mastery is even a possibility.)

I’ll make this reply in an attempt to keep the thread around for another day or so and not be buried, then I am sure it will pull up when anyone searches the wave principle.

I would be very interested in discussing the system. I havent been around the forums long enough to really have the opinions I think you are searching for. However I will read anything I can get my hands on, so at the very least I can be a sounding board. Maybe in the discussion people will become more involved. I think the reason I didn’t get more involved with EW was because I was too overwhelmed at everything else I was reading. I’m certainly open to learning:) Raven

I just wanted to post my latest wave counts on the EURUSD. They are somewhat revised from what I posted in my original count. I have included a daily, 4 hour and a 1 hour.

It looks like we are starting to get to the end of the move down. I am running out of numbers as you can see… once every extention hits wave V, we should be looking at a consolidation or reversal…

Let me know what you think.

I’m interested in Elliot Wave Theory although I don’t actually apply it to trades I make. My friend is really interested in it for trading options… he’s big into EWT, Gann angles, Fibonacci… all the tough stuff. The problem I see with EWT though is that if you ask 20 different “experts”, they’ll all draw you 20 different sets of waves and subwaves. It depends on what timeframe you’re looking at as well.

Once you study the EWP in detail, you will realize that time frames don’t actually mean nearly as much as when you are trading through traditional indicators. The waves are fractal, in order to complete wave [V] for example, you must first complete waves (V), V [5], (5), 5, [v], (v), and v. And yes, they are there.

This is not something that you can simply download an indicator for. It can take years of study and practice to master. “To the beginning student, the Theory’s complexity, multiple pattern variations, ‘alternate count’ possibilities and apparent subjectivity seem almost insurmountable and appear to nullify the Theory’s validity.” - Glenn Neely.

There are many “x-students” out there adding to the controversy because they werent sucessful, which was of course because they did not take the time to learn the seemingly endless array of specifics.

Yet - I am certainly no master, I have only been deeply studying the subject for a couple of months now. I could be wrong in the end I suppose; but, that’s part of my reason for initiating the discussion. To seek the truth.

Robert R. Pretcher, Jr. set an all time record in the US trading championship by returning 444.4% in a monitored real-money options account in the four month contest period. In December 1989, FNN, now CNBC named him “Guru of the Decade.” Mr. Pretcher is the president of Elliott Wave International, can you guess what system he used in the trading championship?

Happy pipping.

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Hi GBLilleyUSMC,

Just wondering how you are doing with the elliot wave theory, i’ve always tried to see elliot waves but never was too successful at it, perhaps i should delve deeper into it, but before that i’d like to ask how you’re going at it

Hi,
In the pic is thata valid EW?

untitled.bmp (561 KB)

I am at the point where I can easily count waves in hindsight. In fact it is a very subjective way of looking at the markets. To be honest, its not how I make my pips. However, there is no debating its power if you can become skilled enough. I am certainly still a student of the wave principle, just not to the point where I can rely on it only.

EWT is one of those things that takes years to master. I will just continue to make pips the way I have been and continue to study EWT until I can stand on my own two feet with it alone.

Don’t know why, but your image will not pull up.

What currency pair and time frame is that?

From looking at what I can see, the count that you have labeled there is a possible count; however, I would make my primary count ABC where you have 123 because the moves look corrective and rangebound.

If your count is correct, we should make a lower low with wave 5. Also, the point at which you will know whether or not you are wrong is when price reaches the bottom of wave 1. Wave 4 cannot enter the price territory of wave 1 or wave 2.

Tell me which pair that is and what timeframe and I would be glad to give you more details about what I think.

its the EURUSD daily chart.
are you saying it reversed, i thought the wave comes first then the corrective ABC comes along…
Thanks.

An ABC corrective wave is not necessarily all that will come after a 5 wave count. Corrections are the hardest part to count and they can be quite complex.

Sometimes you need to read the wave personality. Look at the way the market is behaving. Its not rocket science to see that the moves are corrective and not impulsive.

We can have an ABC, an ABCDE, an ABCXABC, an ABC(W)XABC(Y)XABC(Z).
There can also be corrections inside of corrections.

I have uploaded an image of my EURUSD Daily count before and after we continued correcting. It was a simple triangle before, now it looks to be more complex. Either way it goes, were still missing wave 5 to the downside.

If you are truly interested in the Wave Principle, I would suggest that you get a copy of “Elliott Wave Principle” by A.J. Frost and Robert R. Pretcher Jr. read it from cover to cover, then keep it on your desk as a reference.