When it’s time to cancel your subscription for a trading room

I was not born a professional trader. I used to struggle in trading like many of you still struggle. I used to read every single new book about trading. I would find a solid trading strategy in a highly reviewed book and it looked simple, clear and reasonable. I tried to follow that promising strategy and after a brief period of success I would get super excited and full of hope that I finally turned the corner. …

I am starting a new set of articles based on my letters sent to followers. Almost every day I get questions from people who tried the classic Elliott Wave theory but got walked away. Most often they complain about vague rules and high degree of subjectivity when you try to apply those rules in practice.

Question: “ Is the “subjectivity” completely removed by the Harmonic Elliot Wave system? Is it clear and completely rule based?”.

No, I would lie to you if I said that. First, your ability to correctly recognize patterns depends on your experience and skills. You should not only learn and remember them but you have to keep applying that knowledge by recognizing patterns in real trading to automate that skill. However, even an experienced analyst makes mistake from time to time. Sometimes I overlook some clear pattern. Sometimes I try to find a pattern where it does not exist. In many cases two experienced analysts see two or even different scenarios. Let me explain you why that happens. The real problem is not that the rules are vague or numerous. …

This is the final part 3 of the article “The classic Elliott Wave theory is dead — Long Live the Modified and Better Elliott Wave theory!”.

Part 1. Why the classic Elliott Wave theory is useless in trading.

Part 2. What is the Harmonic Elliott Wave and how it is different from the classic version of the Wave Principle.

In the previous two parts of this article I explained what an amazing discovery made R.N.Elliott when he noted that markets not only follow similar patterns but those patterns are also subdivided into fractals, similar patterns of smaller size.

The main challenge for Elliott was to identify the most common features of that repeating pattern in order to propose formal rules that would define that pattern and make possible to use that discovery in practical trading and investing. His method was to break down that pattern into major components, waves, label them and check if those waves follow specific relationship to each other. It may sound simple but it is always a challenge to describe a natural phenomenon in a pain language of formal rules. …

Part 2. What is the Harmonic Elliott Wave and how it is different from the classic version of the Wave Principle.

In the first part of this article I noted that the major discovery made by R.N.Elliott in 1930’s was a phenomenon of repeating patters regularly played out by financial markets. More than eighty years ago he studied self made charts of the US Industrials stock index and discovered that any major trend either up or down had a similar structure that could be subdivided into five distinctive segments or “waves” (see the chart below).

The waves 1, 3 and 5 drive the price in direction of the main trend. In up trend each of those waves drive price to higher highs. In a down trend each of those waves push price to lower lows. And waves 2 and 4 are temporary countertrend pullbacks. You can read more details about this pattern in the first part of this article. …

Part 1. Why the classic Elliott Wave theory is useless in trading

In 1930s Ralph Nelson Elliott made a great discovery that dramatically changed the way how traders and portfolio managers make investment decisions. After reviewing numerous self-made price charts of stocks and commodities he noticed several repeatable patterns drawn by price of assets. He noted that major rallies and declines of price for different assets did not happen in a straight line fashion. Every move up is followed by a pullback down. …

Are you one of those thousands of amateurs who want to quit their jobs to trade for a living? Let me ask you why. Why that idea is so appealing and resonate with you?

Let me guess. Most likely you think “independence”. That means no more stupid boss and no more boring tasks assigned by some selfish asshole who makes five times more for doing nothing. The idea of getting rid of a guy who makes your life miserable can’t be wrong!

Then you may say “more money”. In fact you look not for the money per se but for due acknowledgement of your efforts. …

The more we become proficient in some skills the less efforts we should pay to accomplish a familiar task. That is confirmed by fMRI studies described by Quinet ( 2003 ). Researchers compared overall activity in brains of college students at the time when they first approached some unfamiliar math problems with the same students after they got familiar with the task. As the students developed some skills in solving those math problems they started to do it quickly and effortlessly. They achieved some efficiency in solving that problem and active region in their brains decreased. …

Mind a storm to be prepared for a storm

When a novice trader Joe buys a stock and the very next morning it falls hard by 3% before open, Joe immediately feels uncertain about prospects of that trade. When he bought the stock yesterday he was certain it was a great deal because he followed a call made by a trusted expert. He had been following that trader for weeks before he decided he could trust him. …