elliott wave and fibonacci

Hi All

I must admit I'm agnostic when it comes to tech analysis... Common sense would suggest that it's only a step removed from astrology in predicting share price movements...but then some people seem to be able to make it work...perhaps if enough traders believe a technique it becomes self fulfilling in the market?

I read an article yesterday predicting a 6400 top for the 5th wave based on elliott wave theory...

I've got a couple of TA books on my reading stack at home...but can someone give me the readers digest version on EW and Fibonacci (yes I know about the sequence and the italian mathematician) and whether they are techniques which work for people?

Cheers
N.
Cheers
N.

 

Hi Nigel,

I have only been learning for a year so I am certainly no expert but I have found that some shares follow the fibonnaci lines beautifully while others don't. I like to put them on my charts and if they have a nice fit with resistance/support lines, I take more notice of them.

I don't know anything about Elliott wave but am learning about the Gann method. Any guy who can make more than 50 million on the stock market in the early 1900s must be doing something right

 

Different techniques work very well for traders who are using all sort of tools including EW, Fibo, or even astrology
Below info is taken from the IFTA (International Federation of Technical Analysts) Constitution as at Oct 2005.

Principles and Policies

.......The Federation asserts that the technical analysis of stocks, commodities, bonds, currencies, etc, price movement and the supply-demand relationships underlying them can make a vital contribution to the process of decision making involved in effort to preserve and enhance the investor's capital.
The Federation makes this assertion on a number of grounds, including the following considerations :

Technical analysis deals with the generally undisputed fact that the market price of a stock, commodity, currency, etc, does not necessarily, nor indeed usually, at any given time coincide with its intrinsic value, which itself is often a matter of controversy.
In dealing with the frequently very elastic differential between market price and underlying value, TA and fundamental analysis, insofar as they relate to specific common stocks, commodities, currencies, etc, and to all financial markets the world over, can properly be regarded as complementary, and in fact, interdependent.

In a broader perspective, TA concerns itself also with supply-demand relationships affecting the equity, commodities, currency, etc, markets as a whole and with potential future shift in these relationships that may be instrumental in shaping future price movements. In pursuit of this concern, it extends to examination of flow of funds.
Moreover, the tendency of price trends to persist and of investors' behavioral patterns to recur enables the technical analyst to recognize and anticipate potentially favorable or unfavorable investment environments.

Indeed, the recognition of extremes in investor psychology is one of the technical analysts' unique contributions to the field of investment techniques.

The Federation asserts, in sum, that the TA of stocks, commodities, currencies, etc, price movements, and the supply-demand relationship underlying them, is a valid, indeed an indispensable, element in the formulation of a 'reasonable basis' for investment decisions.
IFTA - International Federation of Technical Analysts - IFTA Home

If you would like to learn more about EW you may consider below link.
http://www.elitetrader.com/vb/attachment.php?s=&postid=803273

PS - What is common sense to you may not necessary be for other people.

 

".....but am learning about the Gann method. Any guy who can make more than 50 million on the stock market in the early 1900s must be doing something right"

Hmmmmmmm
The supporters of Gann proclaim him to be the most masterful trader of all time, a treader with almost supernatural insight into the market, who left a complex trading system for those who can interpret it....
Those who know anything at all about Gann know that he could barely support his family and he certainly could not support them through trading.

The Gann supporters claim that he left an estate of over $ US 50 million....
The truth is his estate was valued at the time of his death at $ US 100 000.
W.D. Gann is one of the great myths of the market

 

I do use TA on the stocks that my margin lender has done FA on and I mostly stick to the 75% LVR stocks.

History says that most stocks increase in price as the ex dividend date is aproaching and fall when it is ex day by the amount of the dividend, sometimes including the franking credit. So far using that history I have got it right 75% of the time where 55% is considered an acceptable average. The other 45% you either make like a Dr and burry your mistakes or hold them as an investment because the FA says they are good.

 

Yes Tropo I read that too...from an interview with his son or grandson I think.

Cheers
N

 

Gann was not a great trader, he was a great promoter. This is a field that contains the most outrageous fraudsters in the whole shonky biz. Gann has useful market insights mixed in amongst the garbage it must be said though.

Elliot.. well I think the best thing I can say about this is 'unescessary'. Anything that gives you a consistent framework to measure your results is admirable and a step in the right direction. Elliot is far too discretionary for my tastes though.

But whatever works. Stats cut like a hot knife through butter, if you can demonstrate consistent profits with acceptable risk then it's not really a debate any more. I'm not interested in your 5th of a 5th, I'm interested in your trade results and record keeping.

My latest theory which I'm working on is .. 'Market goes up, Market goes down'. It's a simple theory, yet profound.

 

I find that on some stocks, the fibonaci jumps in almost exactly at the 62% mark - its amazing to watch.
It would partly be due to the fact that traders are looking for it to happen , so it does.
Two good examples are stocks I have bought recently - PEM and KZL.
If you check their charts, you will see that from the start to end of their wave 3 movement - then sell off to complete wave 4 - they both went down very close to 61.8% of the rise they had in wave 3. Then they have bounced off that mark very nicely - and continue their upward run.

From my calcs , wave 3 started at around 2.15 , ended at around 5.80 - so 3.65 up.
Wave 4 down to 3.54 (so 2.26 diff) - which ends up being a 61.9 % retracement - right on the FIB.

Anyway, I bought back in after two green candles confirmed what I thought, at 3.73. Current price is 4.50 , so its looking fairly good. One of the better trades I have done recently - the last 6 months have been disappointing but we are learning !!

 

Perky,

Do not worry about last 6 months.
Learn from your mistakes and keep on trading !!!!!!!!!!!!!!!!.
After all those years I am still learning, almost every day...

PS - I would not play alone with EW or Fibo....
I am using Fibo very often as a support to other tools.
Happy Trading !

 

Thanks Tropo,
As usual your advice is sound. We have learnt from our mistakes- the trades are smaller, and we use a number of different indicators to buy (including fib , rsi and volume indicators etc) . Added to this, we have now got more "insurance" - i.e GSLO's in place for everything and get reset to new points as prices go higher (its worth the .3% that CMC charges) depending on new resistance levels.
We also have a bigger mix of stocks, with mostly blue chips and a few zinc stocks again as this appears to be rising (just sold off our nickel stock SMY as to me it appeared overpriced , for a nice profit).
We have also applied for the Platinum IPO, will be interesting to see how much BT allows us to purchase and then how it goes !!