I started in trading some ten years ago trying to trade the news, which was crazy, listened to way too much clutter, and then got into trading patterns like flags and pennants, resistance, and support levels, etc. I learned some of the patterns info from an online site, called trendfund.
That led me to read every major book on trading and I have them in my library. I still use them as a resource on patterns that are not Elliott wave (but everything is related). It was at that point with the recurring patterns that I thought, “There must be more to this” and I read “The Elliott Wave Principle” by Prechter and Frost, found the Elliott Wave International site, and went with them for awhile.
But I found their analysis somewhat lacking. They tend to give you an analysis that says the market is either going to go up or down and I can’t trade from that. Or they simply got the count wrong or introduced counts that I simply knew were wrong because they broke some basic rules. I was disillusioned.
For a year or so, I followed a professional trader named Dave Landry, who doesn’t follow Elliott wave, but trades in a similar manner. I can’t speak highly enough about Dave and his focus on discipline. However, I knew from that experience that following Elliott wave was more precise, because I could see it underlying his system. I learned a lot from Dave.
But I returned to Elliott wave and determined that I would learn it inside out. That’s when I really spent the time in the market proving to myself that it works, but that you have to be meticulous in your analysis (and you have to completely cut out the clutter!). I’m now at the point where I see some of the concepts introduced on top of Elliott’s original work to be erroneous. His pure system is the one that’s simply the way the market moves and I haven’t found it to deviate from that system.
More recently, I’ve found the power of cycles only augments the EW system, as EW is poor in the area of timing. EW is about price; cycles about timing. As far as I’m concerned, the combination is the Holy Grail. However, you have to be disciplined and not stray from your system.
The Bottom Line
So what does this all mean to how I look at the markets now?
I have not been able to disprove Elliott Wave analysis. I have not seen it fail when done properly. When a setup or prediction has failed, it has always been the analyst, not the Elliott Wave Principle, in my experience. When I have lost money, it’s been from overtrading or not having the patience to wait for the setup. Or, not putting in the appropriate stop. Or not sticking to a system.
You should know your entry point and exit point. You should use fibonacci relationships religiously. You should practice good money management. And you should be definite about the trade. In other words, determine a count and go with it (know in a pattern when you’re wrong and put a stop at that point).
So I would rather give you an indication of where the market is headed with a point at which I’m wrong, rather than tell you that “it’s going here, but wait a minute, it also could go here.” I don’t think that does anyone any good.