I was talking to slagle on this thread a few posts back about the stockTA website and how when every indicator there says VERY BEARISH and you say look at the elliot waves - well I have done some reading since then and I am still trying to learn Moo - thanks for putting me on it - I am gonna read a lot more on these - so this is just trying to pry some logic from the chaos in front of me right now. I have some comments in bold - would appreciate your insight:
elliottwave.com
It's deceptive – a construct that is simple and easy to understand, but because of the inherent uncertainty, it demands rigorous and disciplined application.
Bob Prechter: Well, the rules of chess are simple, but winning the game is not so easy.
Yet I can get a chess program called crafy for FREE crafty-chess.com that can beat practically every human player in the entire world of 6 billion - so the software running on a 100 dollar PC can do better than every human brain on the planet - and if I want to spend a little bit of money - like 100 bucks - I can get a chess engine fritz that can beat garry kasparov - the best chess player on the planet
So the essence of the task is to order the probabilities correctly. How is this accomplished on an ongoing basis?
Bob Prechter: The first thing you have to do is eliminate the impossible by applying the rules of wave analysis. At any market juncture, there are certain events that are impossible. Remaining may be a formidable list of possible interpretations. However, each possible interpretation must then be judged according to its adherence to the guidelines of the Wave Principle, including alternation, channeling, Fibonacci relationships, relative sizes of waves, typical targeting methods based on wave form, and volume and breadth, if appropriate.
Ok I mentioned this to slagle a few posts back - the stockta site showed every indicator bearish or very bearish and I asked how do we know when to listen to MACD versus fibonacci - etc etc - where is the empirical evidence to back certain indicators holding more weight at certain times - where is the science?
The interpretation that (1) satisfies the most guidelines and (2) does so the most satisfactorily is the one that must be considered to be indicating the most likely path of the market. The next most satisfactory interpretation indicates the next most probable path, and so on. These are sometimes referred to as preferred and alternate interpretations.
The analyst must then monitor the market closely to determine if and when any one of the less probable interpretations becomes the most probable due to the elimination or decline in probability of other interpretations.
This sounds complicated.
Bob Prechter: Not really. Often, the best interpretation is so clearly superior that an investment decision is easy. Similarly, sometimes, the top two or three interpretations have the same implications regarding market behavior, also making an investment decision easy. At other times, interpretations with different implications carry nearly equal weight, dictating a "stand aside" posture. In the latter case, sooner or later the scales always tip in favor of one particular conclusion.
I am going to read more MOO, but is there anything you can direct me too more quickly on this stuff on any evidence for when certain indicators should be weighted certain ways or is that still regulated to the magic parts of the brain that no computer can emulate? Is elliot wave and indicator weighting still like art or music - for I will certainly agree no computer can create a mona lisa or bach symphony yet - but I think they will be able too equal the creative side of the brain in the future Thanks |
