Elliott Wave: The Best Of The Theory

Nehal_s143

Well-Known Member
#1
Hi

This logic seems to work perfectly for all index and stocks, experts plz can code this logic in afl

link

http:// www . investopedia . com/ university/advancedwave/elliottwave2.asp

http://www.investopedia.com/university/advancedwave/elliottwave2.asp

Starting with the End in Mind
======================
To begin with, the trader must have realistic expectations. Most new traders spend the majority of their time looking for a system that has an unrealistically high win/loss ratio. Those still seeking a system that consistently produces more than 50% winners in the long term haven't learned that surviving the market means knowing how to deal with losses. Such traders are looking for the Holy Grail, and it doesn't exist. (For more on this, read Losing To Win.)

It's worth remembering what well-known author and professional trader Perry Kaufman had to say after years of exhaustive testing of various trend-following systems, some of which were discussed in his book "Trading Systems And Methods" (1998): "You can expect six or seven out of 10 trend trades to be losses, some small some a little larger."

And yet, Kaufman says that trend-following systems are some of the best trading systems around. In other words, trend-following systems have more losers than winners, but professional traders who use them make money consistently.

Renowned technical analyst John Murphy echoes this sentiment when he states that veteran professional traders experience winning trades 40% of the time. Granted, it is possible to outperform this record over short-term periods, but expecting any system to do much better over the long haul is unrealistic.

This means that for any system to be profitable long-term, money management is key. If a trading system cannot be profitable with more losses than winners, find another system or spend more time on money management. In short, losses must be kept small and profits must be allowed to accumulate. Unfortunately, the majority of traders do just the opposite and end up going out of business.


Figure 1 – Chart of Dow Industrial Average ($INDU) five-minute intraday chart showing a short-term bear Elliott five-wave impulse pattern. On a one-minute chart, a further breakdown of smaller impulse and corrective waves could be observed. The colored bands are key areas of support, which are potential areas of reversal.

Applying this idea to trading Elliott, Figure 1 shows a five-minute chart of the Dow Industrial e-mini futures with a five-part impulse wave. Colored bands show the points of support (or resistance in an uptrend) and are where the trader looks to place a trade or adjust stops on current positions.

Programming Elliott to Trade
In the 500+ page manual for MTPredictor, author and creator of the program Steve Griffiths makes an interesting observation. He says there are basically three types of people when it comes to Elliott Wave.

1) Those who are new to the principle and still completely amazed at what it promises.

2) Those who are experienced but frustrated by their lack of success/consistency.

3) Those who have completely given up (sometimes after years of trying to make it work) and are frustrated by the whole experience.

To avoid falling into the third category, the modern trader needs to ask how Elliott Wave theory can be used to make money in today's markets. Is there a way of automating the analytical process using the complete theory, or is it possible to strip it down and isolate specific aspects of the principle to pick money-making trades? Becoming an expert but finding it impossible to make money is a waste of time.

As an Elliot Wave expert and a private trader with more than 17 years of experience, Griffiths asked himself the same questions. After spending years trying to make money on a consistent basis using alternate methods, he went back to Elliott Wave basics. He started with the premise that if Elliott Wave was to work in a program, he had to find setups that limited risk to a minimum that allowed profits to run. These setups had to be specific, identifiable and consistently profitable. If overall losses are greater than profits, what good are the longer-term forecasts for which Elliott Wave analysis is famous?

According to the theory, the strongest moves in a trend, whether up or down, are the impulse waves 1, 3 and 5. Of the three impulsive waves, the largest and most profitable is generally wave 3. Therefore, the ideal place to enter a trade is at the beginning of wave 3, which is the end of a corrective wave 2. Could the program be designed to hone in on these ABC corrective patterns (see Figure 2) that normally unfold in a wave 2 and provide the trader with a high-probability point of entry? Here is what Griffiths said in an October 2004 interview to discuss how the program came into being:

"In computer testing, we found that it was possible to enter with a minimum risk after an ABC had recently unfolded and the best were those that made up wave 2. By entering long trades very near significant support levels (and short traders near significant resistance levels), losses would be kept small if the trade turned out to be a loser. Winners had the potential to be very profitable indeed when the trader caught a wave 3 but the system had to be designed in such a way that the large gains were a bonus, not essential to the profitability of the system."


Figure 2 – End-of-day chart of iShares Japan on quick breakout from an ABC corrective pattern buy signal.

This became Griffiths' goal: to design a computer program for his personal use that could search for ABC patterns that made up a wave 2 ending at or near significant support or resistance areas with a minimum risk/reward of 2:1. He could then choose only those that met specific risk/reward ratios according to his written trading plan. A more aggressive approach would be to take every trade generated by the program. A more conservative style allowed him to choose trades with a minimum risk/reward of 2.5 or 3:1.

After the first version of the program was completed four years ago, Griffiths realized that the application he had developed had commercial potential since there had to be others like him who were frustrated with the lack of success using Elliott but knew that it was based on sound technical and crowd behavior principles.


Figure 3 – An intraday trade on the Dow e-minis futures (YM) showing a very profitable trade.

Figure 3 shows the program in action. It is a chart of the five-minute Dow (YM) e-mini futures trade with the proprietary colored bands of significant support/resistance. These are generated with the use of automatic Fibonacci price clusters of varying degree and from multiple pivots that tell the trader where the highest probability of pauses and reversals should occur. As you can see, the trade was very profitable having moved well past the ‘two to three times' profit area (blue band) to end the day at a new multi-period low resulting in a profit of approximately 12 times the initial risk (ignoring slippage and commission) at the lower projected profit target. While this is not a typical trade, it demonstrates what can happen when the trader catches a strong wave-3 move.




For the sake of those unfamiliar with the program, MTPredictor includes a record of all trades the program has called (with a minimum risk/reward ratio of 2:1) since July 26, 2004. Since real money was not used and commissions and slippage not included, the trade results are hypothetical. It is not unusual to see more losses than wins, but what is important is the comparison of the number of points or dollars that were won to those that were lost. This is the acid test of whether a money management system is working.

For those who are interested, a software review of the program, "Software Review: MTPredictor Real-Time 4.0", was published in the September 2004 issue of The Technical Analyst.
 
#2
Hi

This logic seems to work perfectly for all index and stocks, experts plz can code this logic in afl

link

http:// www . investopedia . com/ university/advancedwave/elliottwave2.asp

http://www.investopedia.com/university/advancedwave/elliottwave2.asp

Starting with the End in Mind
======================
To begin with, the trader must have realistic expectations. Most new traders spend the majority of their time looking for a system that has an unrealistically high win/loss ratio. Those still seeking a system that consistently produces more than 50% winners in the long term haven't learned that surviving the market means knowing how to deal with losses. Such traders are looking for the Holy Grail, and it doesn't exist. (For more on this, read Losing To Win.)

It's worth remembering what well-known author and professional trader Perry Kaufman had to say after years of exhaustive testing of various trend-following systems, some of which were discussed in his book "Trading Systems And Methods" (1998): "You can expect six or seven out of 10 trend trades to be losses, some small some a little larger."

And yet, Kaufman says that trend-following systems are some of the best trading systems around. In other words, trend-following systems have more losers than winners, but professional traders who use them make money consistently.

Renowned technical analyst John Murphy echoes this sentiment when he states that veteran professional traders experience winning trades 40% of the time. Granted, it is possible to outperform this record over short-term periods, but expecting any system to do much better over the long haul is unrealistic.

This means that for any system to be profitable long-term, money management is key. If a trading system cannot be profitable with more losses than winners, find another system or spend more time on money management. In short, losses must be kept small and profits must be allowed to accumulate. Unfortunately, the majority of traders do just the opposite and end up going out of business.


Figure 1 Chart of Dow Industrial Average ($INDU) five-minute intraday chart showing a short-term bear Elliott five-wave impulse pattern. On a one-minute chart, a further breakdown of smaller impulse and corrective waves could be observed. The colored bands are key areas of support, which are potential areas of reversal.

Applying this idea to trading Elliott, Figure 1 shows a five-minute chart of the Dow Industrial e-mini futures with a five-part impulse wave. Colored bands show the points of support (or resistance in an uptrend) and are where the trader looks to place a trade or adjust stops on current positions.

Programming Elliott to Trade
In the 500+ page manual for MTPredictor, author and creator of the program Steve Griffiths makes an interesting observation. He says there are basically three types of people when it comes to Elliott Wave.

1) Those who are new to the principle and still completely amazed at what it promises.

2) Those who are experienced but frustrated by their lack of success/consistency.

3) Those who have completely given up (sometimes after years of trying to make it work) and are frustrated by the whole experience.

To avoid falling into the third category, the modern trader needs to ask how Elliott Wave theory can be used to make money in today's markets. Is there a way of automating the analytical process using the complete theory, or is it possible to strip it down and isolate specific aspects of the principle to pick money-making trades? Becoming an expert but finding it impossible to make money is a waste of time.

As an Elliot Wave expert and a private trader with more than 17 years of experience, Griffiths asked himself the same questions. After spending years trying to make money on a consistent basis using alternate methods, he went back to Elliott Wave basics. He started with the premise that if Elliott Wave was to work in a program, he had to find setups that limited risk to a minimum that allowed profits to run. These setups had to be specific, identifiable and consistently profitable. If overall losses are greater than profits, what good are the longer-term forecasts for which Elliott Wave analysis is famous?

According to the theory, the strongest moves in a trend, whether up or down, are the impulse waves 1, 3 and 5. Of the three impulsive waves, the largest and most profitable is generally wave 3. Therefore, the ideal place to enter a trade is at the beginning of wave 3, which is the end of a corrective wave 2. Could the program be designed to hone in on these ABC corrective patterns (see Figure 2) that normally unfold in a wave 2 and provide the trader with a high-probability point of entry? Here is what Griffiths said in an October 2004 interview to discuss how the program came into being:

"In computer testing, we found that it was possible to enter with a minimum risk after an ABC had recently unfolded and the best were those that made up wave 2. By entering long trades very near significant support levels (and short traders near significant resistance levels), losses would be kept small if the trade turned out to be a loser. Winners had the potential to be very profitable indeed when the trader caught a wave 3 but the system had to be designed in such a way that the large gains were a bonus, not essential to the profitability of the system."


Figure 2 End-of-day chart of iShares Japan on quick breakout from an ABC corrective pattern buy signal.

This became Griffiths' goal: to design a computer program for his personal use that could search for ABC patterns that made up a wave 2 ending at or near significant support or resistance areas with a minimum risk/reward of 2:1. He could then choose only those that met specific risk/reward ratios according to his written trading plan. A more aggressive approach would be to take every trade generated by the program. A more conservative style allowed him to choose trades with a minimum risk/reward of 2.5 or 3:1.

After the first version of the program was completed four years ago, Griffiths realized that the application he had developed had commercial potential since there had to be others like him who were frustrated with the lack of success using Elliott but knew that it was based on sound technical and crowd behavior principles.


Figure 3 An intraday trade on the Dow e-minis futures (YM) showing a very profitable trade.

Figure 3 shows the program in action. It is a chart of the five-minute Dow (YM) e-mini futures trade with the proprietary colored bands of significant support/resistance. These are generated with the use of automatic Fibonacci price clusters of varying degree and from multiple pivots that tell the trader where the highest probability of pauses and reversals should occur. As you can see, the trade was very profitable having moved well past the two to three times' profit area (blue band) to end the day at a new multi-period low resulting in a profit of approximately 12 times the initial risk (ignoring slippage and commission) at the lower projected profit target. While this is not a typical trade, it demonstrates what can happen when the trader catches a strong wave-3 move.




For the sake of those unfamiliar with the program, MTPredictor includes a record of all trades the program has called (with a minimum risk/reward ratio of 2:1) since July 26, 2004. Since real money was not used and commissions and slippage not included, the trade results are hypothetical. It is not unusual to see more losses than wins, but what is important is the comparison of the number of points or dollars that were won to those that were lost. This is the acid test of whether a money management system is working.

For those who are interested, a software review of the program, "Software Review: MTPredictor Real-Time 4.0", was published in the September 2004 issue of The Technical Analyst.
iam just curios about mtpredictor .are you buy it
 

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