A Post from a Beginner and my response

Hi Juan,

I came across your blogspot, and heard your interview at traderinterviews.com. I was quite impressed at your work and that you are willing to teach people. Believe me man, people like you are very scare, who learn and share what they learn.

Now for me I am a starter. Have learned quite a lot in the past 3 months. I came across the Elliot wave market theory, and am studying it. I'm looking at trading stocks but not options (as this is quite complicated for me as of now, would do it in the future). Are your DVDs explaining the options only or do they focus strategies for longing and shorting too.

I would also like to subscribe to your blogspot, please let me know of how to do it, and at what cost can I get the DVD's for .

Regards,

Ghaffar Ahmed


Hi Ghaffar. Thanks for your comments. I suppose there is a typo and you meant that "people like me are very scarce", which by the webster dictionary means

deficient in quantity or number compared with the demand : not plentiful or abundant

The truth is that few people are willing to teach what they know unless they have the heart of a teacher. To me what I am doing is the fulfillment of a lifetime desire to make a contribution to the world. The internet has provided me with the opportunity to use one of my most underused skills, the vocation for teaching. Ironically, I believe that those who charge for teaching are telling us that their trading is not that good, otherwise, why would they spent time creating a business instead of trading. I trade, I run my pathology business and teach. That is how I am happy.

Be aware, though, that there are strings attached. Although I don't expect to profit from sharing my knowledge, I DO expect people to continue the chain by paying it forward.

About the Elliott wave:

I have been trading the Elliott wave since I read Robert Prechter's book "at the crest of the tidal wave". The Elliott wave attracts scientists like me (I have veterinary pathologist by training), because we like to think of the universe as having an order. If it is true that biology is not mathematics, we can still model some processes mathematically. As a pathologist, I am very interested in morphometry and pattern recognition. I use image analysis routinely in my work. So you see, it makes perfect sense that there would be patterns in the markets too. After all, we are measuring human emotions, and that can be plotted in charts. As long as you have a sufficiently large population, there is a level of predictability and the Elliott wave taps into that.

The Elliott wave theory has serious flaws, and you have to be very mindful of them. The ambiguity of the corrective markets is probably the strongest. A market can correct in several ways, and that sometimes creates unpredictability.

f you want to trade the Elliott wave, here is what you do.

A. Learn to recognize the 7 most common patterns:

1. Impulsive.
2. Zigzag.
3. Flat.
4. Contracting Triangle.
5. Double Three.
6. Double ZigZag.
7. Ending Diagonal

The remaining pattern, such as the expanding triangle and the leading diagonal are rare.

B. Learn to recognize the historical pattern on any stock you intend to trade on. This means to go to the beginning of the stock IPO. You'll recognize one of the patterns above. This will allow you to forecast the most recent, incomplete pattern.

C. Don't rely on any software. Many of the softwares do not obey Elliott's basic tenets, so what you are trading is not really the Elliott wave. However, if you truly learn to recognize the patterns, you can use good software like the Refined Elliott Trader by Elliottician.com to accelerate the analysis and confirm your suspicions. If you want to really DO the work, and profit from it, you are going to have to learn forecasting yourself. This may take years.


D. Understand the market trends. Since the late 90's, the mayor indices have been following a corrective pattern (FLAT for the DOW, ZIGZAG for the Nasdaq and D3 for the S&P500 (in my estimation). Unfortunately, there is a lot of ambiguities in the corrective patterns, and therefore they are quite hard to forecast. That was easy back in the 90's, though. Realize that you need to avoid corrections and stick with impulsive patterns.


E. Learn my approach. I DO have my own approach searching for recognizable and reliable forecast patterns: Zigzags and impulses. For that I use simple, traditional T.A. Techniques and visual inspection of dozens of preselected charts using the "Slide show" facility that comes with Telechart. I then select 5-10 charts, and then evaluate for Zigzags using the Refined elliott trader. It is really up to me to accept or reject the software counts. One of my DVD's describe my approach using Telechart. The use of the Refined Elliott Trader software is optional. If you learn to recognize the patterns, the RET is not that important.

You may start with my approach. Read plenty of books about the Elliott wave, try to do the counts yourself. Eventually, you could invest is software like RET (Elliottician.com) but these things are expensive, and not always reliable. Elliottician offers a system of recognizing zigzag patterns when they are at the end of the "B" wave, which are really not distinguishable from the end of a wave "2" of an impulse.

I suggest you also visit my Basic Option trading website, and post questions there. I'd be delighted to make that site more active. There you'll see many examples of my strategy. You should consider ordering my DVD about the Elliott wave.


http://stockofthedayii.blogspot.com/

If you are just starting with stocks, it is really premature for you to think of the PCCRC, but you should really consider trading with options. For example, you could reduce your risk by buying protective puts during periods of uncertainty, such as just before earnings. We could discuss this in my Basic option trading Strategies. Eventually, you could trade calls or vertical spreads, once you are more comfortable with the Elliott wave. Eventually, and this is far down the line, once you are clear about options, you could consider learning my PCCRC strategies, that require no forecasting at all, just reacting to the markets moves.

I look forward to hearing more from you.