Elliott Wave - Revision history

Rhody Trader at 17:52, 1 August 2005

Rhody Trader — Mon, 01 Aug 2005 17:52:22 GMT

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		+	{{Glossary\|A theory of price movement cycles which claims that markets follow a pattern of five waves up and three waves down.}}
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	==History==		==History==
	Elliot Wave theory was initiated in the 1930s by ''Ralph Nelson Elliot''. His basic theory was that crowd behaviour, the basis for market activity, tends to operate in recognisable phases, and as such, price movements can be anticipated to some degree.		Elliot Wave theory was initiated in the 1930s by ''Ralph Nelson Elliot''. His basic theory was that crowd behaviour, the basis for market activity, tends to operate in recognisable phases, and as such, price movements can be anticipated to some degree.

Rhody Trader: /* See also */

Rhody Trader — Fri, 15 Jul 2005 11:15:30 GMT

Rhody Trader: /* See also */

Rhody Trader — Fri, 15 Jul 2005 11:14:56 GMT

Rhody Trader: /* See also */

Rhody Trader — Fri, 15 Jul 2005 11:14:42 GMT

frugi: /* Application */

frugi — Tue, 05 Jul 2005 14:33:22 GMT

Application

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	There are two distinct parts to each wave: the numbered phase, and the lettered phase.		There are two distinct parts to each wave: the numbered phase, and the lettered phase.

-	In the numbered phase, Waves 1, 3 and 5 are called "impulse" waves - minor upwards moves in an otherwise bullish trend. Waves 2 and 4 are the smaller, less powerful "corrective" waves.	+	In the numbered phase, Waves 1, 3 and 5 are called "impulse" waves - minor upwards moves in an otherwise bullish trend. Waves 2 and 4 are the smaller, less powerful "corrective" waves. Greater [[volume]] on impulses than corrections helps confirm the pattern.

-	In the lettered phase, waves A and C are the stronger impulse waves down, with Wave B â€“ the bull wave â€“ now the weaker move.	+	In the lettered phase, waves A and C are the stronger impulse waves down, with Wave B â€“ the bull wave â€“ now the weaker move.

	===Waves within waves===		===Waves within waves===

frugi at 14:31, 5 July 2005

frugi — Tue, 05 Jul 2005 14:31:35 GMT

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	A simpler approach is to add the basic 5-3 wave pattern into your tool box and if it confirms what your methodology indicates (e.g you are thinking of closing a long, you notice that the price has traced a clear five waves up and so EW gives extra confirmation that an exit might be prudent).		A simpler approach is to add the basic 5-3 wave pattern into your tool box and if it confirms what your methodology indicates (e.g you are thinking of closing a long, you notice that the price has traced a clear five waves up and so EW gives extra confirmation that an exit might be prudent).
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		+	==Advantages==
		+
		+	*Can be vaguely useful when taken in conjunction with other signal criteria.

	==Disadvantages==		==Disadvantages==

-	*No theoretical basis	+	*No theoretical basis.
-	*Extremely subjective.	+	*Extremely subjective. A pattern can easily be force fitted.
	*Waves much easier to label with hindsight.		*Waves much easier to label with hindsight.

frugi: /* External links */

frugi — Tue, 05 Jul 2005 14:30:18 GMT

External links

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	The fact that Robert Prechter - probably the biggest name in Elliott Wave practice - was woefully incorrect in his public stock market predictions during the 1990s was a hit to the technique's credibility as well.		The fact that Robert Prechter - probably the biggest name in Elliott Wave practice - was woefully incorrect in his public stock market predictions during the 1990s was a hit to the technique's credibility as well.

-	==External links==	+	==See also==
-	[www.elliotwave.com Elliotwave]<br>	+	[http://www.elliotwave.com Elliotwave]<br>
-	[www.wavechart.com Wavechart]	+	[http://www.wavechart.com Wavechart]

frugi: /* External links */

frugi — Tue, 05 Jul 2005 14:29:29 GMT

External links

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	==External links==		==External links==
-	[www.elliotwave.com]<br>	+	[www.elliotwave.com Elliotwave]<br>
-	[www.wavechart.com]	+	[www.wavechart.com Wavechart]

frugi: /* Cycles */

frugi — Tue, 05 Jul 2005 14:28:43 GMT

Cycles

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	===Cycles===		===Cycles===

-	Elliot believed that there were many cycles of both impulse and corrective waves, and he named each cycle to fit in with his theory that the waves were based around the [[Fibonacci]] series of numbers â€“ 1, 2, 3, 5, 8, 13 etc. The names are:	+	''Elliot'' believed that there were many cycles of both impulse and corrective waves, and he named each cycle to fit in with his theory that the waves were based around the [[Fibonacci]] series of numbers â€“ 1, 2, 3, 5, 8, 13 etc. The names are:

	#Grand supercycle		#Grand supercycle
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	#Sub-minuette		#Sub-minuette

-	Elliot provided several varieties of the main wave, and placed particular relevance on the Fibonacci value of 0.618, as the most common level for a retracement to occur.	+	''Elliot'' provided several varieties of the main wave, and placed particular relevance on the Fibonacci value of 0.618, as the most common level for a retracement to occur.
	Of course, the examples shown are perfect definitions of Elliot Wave theory. In the real world, things tend not to be quite so clear. The price action shown in the chart below is taken from the NASDAQ Composite Index, during the later part of 2003. The waves are still there, but somewhat harder to spot to the untrained eye.		Of course, the examples shown are perfect definitions of Elliot Wave theory. In the real world, things tend not to be quite so clear. The price action shown in the chart below is taken from the NASDAQ Composite Index, during the later part of 2003. The waves are still there, but somewhat harder to spot to the untrained eye.

-	CHART 3	+	[[image:elliot_wave3.jpg]]
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		+	<small>NB: Wave 1 continues down of the bottom left of the chart so that it's start is lower then the low of wave 2.</small>

	===Trading strategy===		===Trading strategy===

frugi: /* Application */

frugi — Tue, 05 Jul 2005 14:27:20 GMT

Application

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	It is somewhat easier to grasp the concept of Elliot Wave if we demonstrate the theory in pictures, rather than words. The basic format is shown below.		It is somewhat easier to grasp the concept of Elliot Wave if we demonstrate the theory in pictures, rather than words. The basic format is shown below.

-	CHART 1	+	[[image:elliot_wave1.jpg]]
-		+

	There are two distinct parts to each wave: the numbered phase, and the lettered phase.		There are two distinct parts to each wave: the numbered phase, and the lettered phase.
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	[[image:elliot_wave2.jpg]]		[[image:elliot_wave2.jpg]]
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	We can see that Waves 1 through 5, and Waves A through C - as shown in the first chart - form part of an overall impulse Wave 3, as shown the second chart above.		We can see that Waves 1 through 5, and Waves A through C - as shown in the first chart - form part of an overall impulse Wave 3, as shown the second chart above.

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	[http://www.wavechart.com Wavechart]		[http://www.wavechart.com Wavechart]

-	[[Category:Technical Analysis]]	+	[[Category:Technical methods]]

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	[http://www.wavechart.com Wavechart]		[http://www.wavechart.com Wavechart]

-	[[Category:Technical analysis]]	+	[[Category:Technical Analysis]]

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	[http://www.elliotwave.com Elliotwave]<br>		[http://www.elliotwave.com Elliotwave]<br>
	[http://www.wavechart.com Wavechart]		[http://www.wavechart.com Wavechart]
		+
		+	[[Category:Technical analysis]]