New cutting-edge research challenges traditional Elliott wave forecasting methods. It will no doubt cause waves of dissent, but detractors had better do their homework and have the stats to back it up.
It all began as a project in the late 1980s that was supposed to take just six weeks. But in the final analysis, it became a lifetime undertaking that would eventually need more than 20 years to come full circle, according to computer programmer Richard Swannell. During the past 14 years, the project evolved into an obsession that consumed the majority of his professional life.
Although only Swannell himself can say if it has all been worth the sacrifice, there is no doubt about the impact his findings will have on the Elliott wave community of traders, analysts and researchers. His results challenge the essence of accepted Elliott wave forecasting techniques commonly used today.
JOG BECOMES A MARATHON
Euphemistically titled the Elliott Research Project, the goal was simple: find a way of incorporating complex Elliott wave pattern rules into a computer program to streamline the forecasting process, develop forecast probabilities, then use the results to trade with increased confidence.
The problem was that each time Swannell thought he had completed his task, reality forced him back to the drawing board.
After completing each stage of the research and writing the software code, Swannell used the system to trade. Unfortunately, while acceptable, his results were not impressive, and even though he made significant changes with each version of the software, his success rate did not improve much from the previous attempts. Each time he was forced to re-examine the intricacies of Elliott wave rules, how the program was interpreting them and what was missing. Swannell even wrote a free e-book outlining his earlier research called Elite Trader’s Secrets.
RESEARCH PIONEER
First introduced to the world in the 1930s by Ralph Nelson Elliott, his revolutionary theory postulated that all markets moved in waves that could be identified, numbered and used to make forecasts. By following his carefully constructed, albeit complicated rules, market direction—with regards to both price and time—could be generated and employed to anticipate price direction. Nearly 80 years and thousands of articles and books later, this form of market analysis still engages many and is the source of a continuous stream of heated discussions and debates.
But the major problem with Elliott’s brainchild has continued to daunt practitioners since inception. And that is the sometimes subjective way in which his complex set of rules can be interpreted. Some practitioners find a first and second alternate for each forecast. It’s like the weather...