Junk mail brought in a real gem regarding Elliott Wave. Take a read:
Just think how your trading profits would improve if what we say is true. Well stop dreaming, because…IT IS! We have collected statistical evidence that proves the Elliott Wave Analyzer 3 can accurately forecast market movement. This is the first time the Elliott Wave Principle has been “field tested” on real market data and not simply theoretical precepts. Thus the Elliott Wave Analyzer 3 truly takes the Wave Principle to a new level of dependability. These discoveries have phenomenal implications. You can capitalize on these discoveries immediately. Just imagine: You are sitting in front of your computer testing the results of the Elliott Wave Analyzer 3. You notice that 84.9% of the projections have come true when tracking the accuracy of particular Elliott Waves. This is not the first time. These findings have remained consistent while analyzing close to 5,000 random projections of 33 stocks of the S&P. What a powerfull tool and it could be yours. One day, traders all around the world will look back on this discovery and marvel at how it changed the face of trading forever. Why wait till then? Think of all the money you could be making before the masses catch on to this legendary forecasting tool. You NOW have the opportunity to own the Elliott Wave Analyzer 3 and test these results for yourself. It is as easy as that. We are convinced that you will be addicted to the Elliott Wave Analyzer once you have tasted the success of trading with 84.9% accuracy. You may have never heard of Elliott Wave Theory before. That’s fine. Even with limited knowledge of Elliott Wave Theory you can still read and understand the forecasts predicted by the Elliott Wave Analyzer 3. We have designed the software to appeal to traders with a range of skills and levels of understanding. Both beginners and long time traders love it. We confidently believe the Elliott Wave Analyzer 3 WILL be recognized as the world’s most accurate market forecasting tool for analyzing stocks, indexes, futures and commodities. Give it a try and share your excitement with us! What are you waiting for? Purchase the Elliott Wave Analyzer 3 NOW and start using the power of 84.9% accuracy in your trading today.
Don’t believe the hype of 84.9% accuracy. Why?:
Why the 84.9% Accuracy Claim Is Meaningless
The marketing language in that letter is a masterclass in how to sell the prediction illusion. Every sentence is designed to trigger the desire to be right, to have the winning system, to know in advance what the market will do. “84.9% accuracy.” “5,000 random projections.” “Field tested.” These are the statistical credentials that make the claim sound scientific. They are not.
The first problem is that accuracy without magnitude is meaningless. As Van Tharp demonstrated with his 90% win rate example, a system can be right 84.9% of the time and still lose money if the 15.1% of losing trades are large enough to wipe out the gains from the winners. The marketing never mentions average win size versus average loss size. It focuses exclusively on win rate because win rate is what triggers the emotional response the seller is looking for. A trend following system that wins 40% of the time but makes three times as much on winners as it loses on losers outperforms an 84.9% win rate system with poor payoff ratios every time. The number that matters is not how often you are right but how much you make when you are right versus how much you lose when you are wrong. More on this at the being right page.
The second problem is what “accuracy” means in Elliott Wave analysis. Elliott Wave counts are subjective. Different practitioners counting the same chart will produce different wave counts. When the count is wrong, the next count is adjusted to fit the new data, and the original count is quietly forgotten. This is not falsifiable analysis. It is post-hoc rationalization dressed as methodology. The 84.9% figure relies on the practitioner’s ability to define which projections “came true” and which did not, using a framework flexible enough to make almost any interpretation defensible in hindsight. That is not field testing. That is confirmation bias in a lab coat.
The entire premise of Elliott Wave as a trading tool, that counting wave patterns will tell you when to buy and sell, contradicts what forty years of systematic trend following has demonstrated about how markets actually work. Price does not move in predictable wave sequences that can be counted in advance to generate reliable entries and exits. Price moves in trends, which can be followed, and in noise, which cannot be predicted. A reactive system that identifies and follows sustained price trends does not require a wave count. It requires rules. For the rules that define a complete systematic approach, see the TurtleTrader rules. For more on why prediction-based technical analysis fails where reactive approaches succeed, see the entry and indicators page and the broader trend following framework.
Frequently Asked Questions
What is wrong with Elliott Wave’s 84.9% accuracy claim?
Two things. First, accuracy without magnitude is meaningless. If the 15.1% of losing trades are large enough, the system still loses money despite winning most of the time. Second, Elliott Wave counts are subjective and adjustable after the fact, making the claim of measured accuracy difficult to verify independently. When different practitioners produce different counts for the same chart, and when counts are revised when they fail, the methodology is not being tested objectively.
Why is win rate alone an insufficient measure of a trading system?
Because profitability depends on both win rate and the average win to loss ratio. A system that wins 85% of the time but makes small gains and takes large losses will be unprofitable. A system that wins 40% of the time but makes large gains and takes small losses will be highly profitable. The only number that matters is whether average wins multiplied by win rate exceed average losses multiplied by loss rate over a large enough sample.
What is the core problem with prediction-based technical analysis like Elliott Wave?
It asks the trader to count patterns and then forecast where price will go next. Markets are not reliably predictable from pattern counting. Trend following does not predict. It reacts to what price is actually doing, using rules that define entries and exits based on current price movement rather than a forecast of future movement. The reactive approach has a 40-year documented track record. Prediction-based approaches do not.
Trend Following Systems
Want to learn more and start trading trend following systems? Start here.
