Stocks & Commodities V. 29:13 (34-38): Reducing The Subjectivity Of Elliott Waves by Ian Copsey

Reducing The Subjectivity Of Elliott Waves by Ian Copsey

Is the identification of Elliott waves too subjective? This method can reduce the subjectivity and improve your ability to forecast.

The Elliott wave theory appeals to some and not to others, that goes without saying. Some adhere to it strictly, while others play it by ear, not staying too close to the rules and just keeping an eye out for five-wave moves. If you have wondered if there’s something just a little bit off about the strategy, you may be right. It may be Ralph Elliott made a misjudgment in the impulsive wave structure.

Through some work I was doing with the theory, I became aware of a “special wave A” move that Elliottician Robert Prechter noted in 1986 (Figure 1). A diagonal triangle wave development, which is normally associated with an extended wave 5, was occasionally seen in a wave A position. What I was facing, however, was a five-wave move that developed in a similar manner to a diagonal triangle, in which waves (i), (iii), and (v) all developed in three waves, not five. From this we could infer that any individual five-wave move could only develop in a wave A position or a wave C position. In the next higher degree, this Abc sequence formed one section of a larger five-wave sequence all constructed of three-waves.

What I found was that everything fell flat if I applied a Fibonacci relationship to the standard count that would treat these as an example of an extending wave. When I used the three-wave structure for waves (i), (iii), and (v), however, the wave relationships turned out to be perfect. Adjusting the structure this way, I found projections and retracements began to be consistently accurate.