The Elliott Wave Principle has become a dividing force among traders, with some wholeheartedly embracing the principles while others deem them impractale, imprecise, or worthless. Who is right and can someone really make money by counting five waves?
In general, the Elliott Wave Principle is one more tool you can use in your trading arsenal or one additional method to view the markets in a unique way. How you apply it is up to you, though some traders have been extraordinary successful applying the principles to their own trading.
Perhaps the Elliott Wave Principle is best in the statement “It is not about where the market is going, but about where the market is unlikely to go.” Moreover, it is a method that is useful for establishing a possible larger structure and then identifying low-risk, high probability trades that create edge over time. The Principle can be helpful for broadening your awareness of a market character and possible direction while providing you key areas to enter that allow for tight risk-control in the event that your analysis is wrong.
The principles of Elliott Wave that we reference today were ‘discovered’ by Ralph Elliott in the 1930s which were inspired by Charles Dow and others. Mr. Elliott described repetitive patterns in nature that translated into the Equity Market in terms of repetitive waves and the fractal nature of the Wave Principle. Most traders today are introduced to the Elliott Wave Principle through A.J. Frost and Robert Prechter’s The Elliott Wave Principle: Key to Market Behavior which is known as the resource for modern day traders.