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Excellent observations.
As more traders make less "subjective" trading decisions and more
computer-generated mathematical trading decisions, eventually behavior-based
methods made famous by the 'ancients' will fall further from favor. Maybe
the next big trading behavior to discover will be to figure out what
algorithm the big traders have on their computers.
Thanks,
-Corey Saxe
----- Original Message -----
From: "Dan Harels" <harelsdb@xxxxxxxxxxx>
To: <metastock@xxxxxxxxxxxxx>
Sent: Thursday, January 17, 2002 10:34 PM
Subject: Re: Robert Prechter's Books
> If I am not mistaken, Mr. Pretcher is an Elliot Wave expert. I have seen
> Robert Minor's book "Dynamic Trading" recommended over Pretcher's work as
a
> practical guide to Elliot Wave. I have Minor's book and have found it
> valuable. I do not have direct experience with Pretcher's work. Copied
> below is a post from Scot Billington that appeared on the Real Trader's
list
> over a year ago. I thought it was good enough to save. It gives some
> interesting perspective on Pretcher and Elliot Wave theory.
>
> Dan
>
> Those of you who are beginning or contemplating studying EW you my find my
> experience helpful.
>
> I worked as an analyst using primarily EW for seven years. My job roughly
> ten hours a day was to study EW and apply the counts to various markets.
> During this period I would claim that I developed an above average to
> excellent ability to apply an EW count and alternates to a market within
the
> rules laid out in Prechter's book.
>
> In my opinion while these counts did sometimes produce Nostradomus-like
> market 'calls', they were not useful in making trading decisions. They
were
> closer to a neat magic trick than a trading tool. The major problem I
have
> with EW is who said the original premise is valid in the first place. Mr.
> Elliott made some grandiose claims and offered up an interesting theory
that
> makes some sense under the heading of mass behavior. This theory can not
be
> tested due to its subjectivity. I must choose between time frames, close
> only or bar charts, continuous, Gann, or individual charts. If I am using
a
> bar chart, I must decide what makes a wave. Due to this subjectivity,
there
> is no way to test Elliott's original premise that the markets move in five
> and three wave patterns. Nor is there any way to test if the patterns of
> the market must fit into the 13 (I think) different possible patterns laid
> out. So, basically, we have a gentleman making a claim that can not be
> verified or refuted.
>
> Certainly, some moves have ended on five waves, but they have to end on
> something. And a move of more than one wave must end in an odd number by
> definition. A five wave move with and extension can be five, nine,
> thirteen, seventeen etc. waves. Every other odd number. Therefore, half
> the moves must end in a five wave pattern. Even if EW is not valid, I am
> going to be 'correct' with my five wave count 50% of the time. The
method
> allows moves to end on three waves with its irregulars or by the larger
> pattern being A-B-C. Therefore, I can end on three or five with and
> extension in any of the waves of either. That covers all the bases.
>
> Undoubtedly, there are those who have claimed to have made money trading
the
> EW. I would contend that while they made money (if indeed they did), they
> may not know WHY they made money. EW may only generate random entry
> signals, but they may use strong exit strategies and sound money
management.
> By using strong exit techniques and good money management, one can take a
> random entry and make handsome profits. Even if they use EW to make their
> exit decisions, it is not necessarily the EW count that makes those
> strategies strong. Each part of the method needs to be tested
> independently, to show its effect. EW can not be tested in any way.
> Therefore, we can not know if it is or is not valid.
>
> (A good example of someone who makes a ton of money, but does not know why
> is a hypothetical profitable floor trader. Let's say he makes $2 million
a
> year using method X. Wow, method X must be great. But the floor trader
> trades 2000 contracts per day 200 days per year. He also has the floor
> advantage of buying at the bid and selling at the offer. The spread is 1
> tic each tic is worth $20, so he makes $10 per contract vs. the value
which
> is between the bid and the asked. $10*2000*200=$4,000,000. So, his edge
> over the market is not in method X; it is in the b/a spread.)
>
> Its is my opinion that a beginner should look elsewhere for a trading
> method. If they are completely intent on trying EW, I would suggest that
> they find a mentor who has used EW to successfully make profits in the
> market not to write a book, although those are not necessarily mutually
> exclusive. Furthermore, I would take a hard look at the mentor's profits
to
> see if they are being generated by something other than the EW counts.
>
> A note of caution. EW does allow one to make some remarkable market
> predictions whether these occur randomly or not. The method contends that
> it has figured out the secrets not only of the markets but of existence.
> These predictions give one a feeling of omniscience and a surge of power;
> therefore, this method of trading is appealing to those with a
narcissistic
> personality style. This personality style is marked by extremely
grandiose
> statements, which Mr. Elliott certainly made about his 'discovery'. Mr
> Prechter has exhibited traits of this personality style as well. The
narc.
> style puts a lot of its self-worth on the idea of being 'right' and may
not
> take opposing views or questions very well. This style is generally not
> conducive to long-term (>10 years) successful trading. If you decide to
try
> to study under someone, do not believe the hype.
>
> If you have any questions, feel free to e-mail me personally.
>
> Scot Billington
>
> >From: "Corey Saxe" <csaxe@xxxxxxx>
> >Reply-To: metastock@xxxxxxxxxxxxx
> >To: "MetaStock List" <metastock@xxxxxxxxxxxxx>
> >Subject: Robert Prechter's Books
> >Date: Thu, 17 Jan 2002 19:35:48 -0800
> >
> >I don't know anything about this guy but have seen some of his books for
> >sale.
> >Can anyone who has read some of his material give me their impression?
> >
> >Thanks,
> >-Corey Saxe
> >
> >
> >
>
>
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