Elliott Wave Theory’s effectiveness is often contested by varied sections of finance analysts and gurus. A theory that is primarily based on behavioural psychology, it makes its financial predictions by analysis the “mood” of the people in the form of waves. These waves are known as impulsive or corrective waves.
As the name suggests, the impulsive waves move in the direction of the market trend while the corrective wave moves in the opposite direction.
According to the Elliott Wave Theory, market predictions can be made simply by observing the patterns of these waves and seeing how they work. But the question that people often ask is, Does Elliott Wave Theory Work?
As already mentioned, some people discredit Elliott wave. However, most of them might not have used this theory at a professional level and might not have a deep understanding of it. If you have only tried it a few times and did not succeed in making the right predictions, you might want to try again!
Developing a good understanding of this theory requires a lot of time and effort. You need to spend a reasonable amount of time in learning the various aspects of this theory and then applying it to real-life trading. Once you start using it regularly and with more attentiveness, you will start noticing the amazing results you get from it.
The various time frames given in this theory ranging from the one for centuries to the one for minutes are all equally interesting and accurate to look at.
Once you analyze all these time frames, you can easily use them to guide your decisions as a trader. If you do a simple count of the Elliott waves, you can be assured that you will not invest in a losing trade.
If you are someone who invests in stocks after listening to finance gurus on news channels or YouTube channels, you might have experienced some setbacks at times. However, you can prevent this by running a fundamental analysis of the Elliott wave.
Some of the major finance companies and hedge funds use Elliott waves often to ensure they are on the right track. The 2007 market crash and other downturns in the currency, as well as the bond markets, are predicted using Elliott Wave Theory. You can make use of this theory to go deeper into the market analysis by applying some sophisticated algorithms.
A right combination of Elliott wave theory and Fibonacci numbers can help you make some amazing predictions. Moreover, some classical technical patterns such as cup and handle, bull flags, head, and shoulders, etc. are derived from some of the common correctional wave counts of the Elliott Wave Theory.
A lot of people complain of Elliott Wave Theory being too subjective or speculative. But what they miss is the fact that proper implementation of all the guidelines and rules can give accurate results. The rules need to be seen as something sacred and must be applied with the utmost care. That way, Elliott Wave Theory would work!