Elliott Wave Theory shouldn't be used for Forex

[wavetrader]

Market behaves very differently in corrective mode than in impulsive mode. For example, in the 'last' Super Cycle of US stocks from 1932, market behaviour in wave 4 (1966-1974) and in wave 5 (1974-1999) was very different.

And theoretically, in impulse, a 5 will be followed by a 3, then 5 then 3 then 5. While in corrective mode, a 5 can be followed by a 3 then 5 in a zig zag, then end.

Without knowing whether we're in impulse or correction, we can anticaple whether there will be a wave 5 or not.

So in case of forex, since IMHO, a certain currency won't be foreverly stronger than another, and so there shouldn't be any 'impulse' from a Cycle or SuperCycle perspective. Without impulse, then we'll only in correction all the time.


Another perspective is that, the currency pairs are relative. That means EUR/USD is EUR/USD because it's set to be EUR/USD. If EUR/USD is not EUR/USD but USD/EUR, will EWT be reversed to be 5 wave down, 3 wave up, 5 wave down, 3 wave up and ended with 5 wave down?



Finally, if stock market index is a way to track economy performance of a certain country, Forex can be viewed as the relative performance of 2 certain countries. With say, US economy follows EWT and say JP economy follows EWT, will the result of the comaprison of 2 economies, i.e. USD/YEN, follows EWT too? Why?

[Wallace]

"So in case of forex, since IMHO, a certain currency won't be foreverly stronger than another, and so there shouldn't be any 'impulse' from a Cycle or SuperCycle perspective. Without impulse, then we'll only in correction all the time."
Yes, essentially, as is the case with many commodities, though impulse waves still exist; also currencies can go into 'meltdown', vis the Rouble.

"Another perspective is that, the currency pairs are relative. That means EUR/USD is EUR/USD because it's set to be EUR/USD. If EUR/USD is not EUR/USD but USD/EUR, will EWT be reversed to be 5 wave down, 3 wave up, 5 wave down, 3 wave up and ended with 5 wave down?"
Yes, and many charting programs allow you to invert charts.

"Finally, if stock market index is a way to track economy performance of a certain country, Forex can be viewed as the relative performance of 2 certain countries. With say, US economy follows EWT and say JP economy follows EWT, will the result of the comaprison of 2 economies, i.e. USD/YEN, follows EWT too? Why?"
Neither the US economy nor currencies follow the EWT. Stock markets are thermometers of optimism and pessimism. Currencies are a substitute for goods/labour. To trade is to negotiate, currencies are negotiable.

All that the EWT is Wavetrader, is a measuring tool — a tape measure with ambiguous how-to-measure instructions. Wallace.

[Wallace]

Wavetrader, I just came across the econometric-wave site today, remembered your post and thought this article and the site might be of interest you. Wallace.

http://www.econometric-wave.com/articles/1/home.html.html

[szmatuafy]

"Our quantitative model which was derived from a pure rational econometric approach of a special kind of supplies and demands unexpectedly found the missing link between fundamental economic modelisation and these esoteric approaches that no one until today was able to justify without refering to weird explanations that are unacceptable from scientific point of view that's why academics, if they finally recognise the role of psychology in stock market, give to these methods no other justification than auto-realisation of pure fads."

I have never seen a longer sentence in English language in my life lol

[rwilliams]

Well you haven't seen the half-page Neo-Teutonic monstrosities I perpetrated in High-School, then...

:-)

R W

[bulldogFXR]

I don't want to oversimplify the issue... But if you look at it from a statistical point of view, you only need to be right 50% of the time to generate profits if you're losses are smaller than your gains. I realize we want to do better than an inherent 2:1 risk to reward, but that's all it takes. I don' t trade the EW, but I have a friend who does and he does fairly well with it in FX. I think the reason for this (not withstanding the inherent economic growth problem) is, it allows a systematic and consistant approach to the trading cycle itself... being consitant with your approach allows the law of averages to work in your favour.