Category: Elliot Explained

What is Elliott Wave Theory

Ralph Nelson Elliott developed the Elliott Wave Theory in the late 1920s early 30s. He discovered that stock markets, thought to behave in a somewhat chaotic manner, in fact traded in repetitive cycles. He found that the upward and downward swings in financial markets, the mass psychology, always showed up in the same repetitive patterns, which were then divided further into patterns he called “waves”. Elliott argued that because humans are themselves rhythmical, their activities and decisions could be predicted in rhythms, too.

In the financial markets we know that “every action creates an equal and opposite reaction” as a price movement up or down must be followed by a contrary movement. Price action is divided into trends and corrections or sideways movements. Trends show the main direction of prices while corrections move against the trend. Elliott labeled these “impulsive” and “corrective” waves.

R. N. Elliott’s analysis of the mathematical properties of waves and patterns eventually led him to conclude that “The Fibonacci Summation Series is the basis of The Wave Principle.” Numbers from the Fibonacci sequence surface repeatedly in Elliott wave structures.

To read more about Elliot Wave Theory, check out the Wiki page

What am I talking about in my forecasts?

All my forecasts start with ” Elliott shows that market…”.

Who is this Elliott and why is he talking? In fact this is just my shorthand of saying that these are the results from the program I use for forecasting. I use Elliott Wave International program called Refined Elliott Trader (RET).  The program uses Elliott Wave method of pattern recognition and forecasting of financial markets. RET is a highly complex software package based on sophisticated pattern recognition and probability algorithms. This program is currently available only for professionals.

I have used RET since 2003. I have forecasted stocks and commodity futures. I find futures forecasting more meaningful as I am dealing only with handful of different commodities, rather than hundreds of stocks. The forecasts that I am providing here, free of charge, are predicting market movement for next weeks to months. For my own trading I also use much shorter term forecasting from days to even hours. The beauty of Elliott Wave method is that the same patterns work in large scale and small. Next week I will share little more about the method behind the RET program I use.

For more info on the RET program click here.

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