Elliott Wave Principle: Key To Market Behavior

Elliott Wave Theory should be viewed as little more than a technical anaysis oddity. Elliott Wave interpretation of market price behavior is extremely subjective. If you survey six experienced pracitioners as the correct Elliott Wave "count" for a given period of market price behavior, you're likely to get six different responses. In practice, what looks like a particular Elliott Wave pattern usually evolves into something else. Further, there's an internal logic to Elliott Wave analysis that regularly breaks down -- If X occurs then Y must occur by definition. The market simply doesn't work that way.

In my opinion the best use of the Elliott Wave Principle is to provide a language to describe past stock market price behavior. If you use it for predictive purposes you're going to wrong as often as right.

Many buyers of this book are making the purchase in conjunction with a subscription to Elliott Wave International, which is run by one of the books co-writers. As a member you'll regularly read the organization's own interpretation of these Elliott Wave patterns. Their track record -- at least for major stock markets -- is abysmal.

If you're going to use Elliott Wave Theory in your market analysis, make it a minor consideration at most. Classical tehcnical analaysis methods are far more reliable.

It is a shell game in wave labels. Multiple layers of permutations leaving you in utter confusion. Book is an enticement to newsletter subscription and the fear mongering of the world is ending soon. There is no time constraint for so call waves. It can be a day, weeks, months, years and decades as specified by the authors. So what he wrote in 2009 has still not materialized in 2016 but he said he is still right and just be patient.
He keeps correcting his labels so at any one time he seems correct. He is wrong 99% of the time and his comments rank bottom of the barrel in the past 30 years. The stock market is always on the edge of armageddon according to his waves. He has a knack of matching currents events months later to fit his waves that seems like a no brainer. If you want someone to agree with you just to hold cash, double short the stock indices without stop this is the book for you. You get a free copy of this book with your subscription.

This book is required reading for levels 1 thru 3 of the Chartered Market Technicians (CMT) program because it covers all the basics of the Elliott Wave Principle even though the book was written in 1978. Bob Prechter has devoted the major part of his professional life to the study of Elliott Wave theory and application so therefore imminently qualified to write this book with Charles J. Collins.

So why did I give this book 3 stars? In my opinion, Prechter makes the subject more complicated than it has to be. At the very least, he runs the risk of alienating neophytes who will be overwhelmed with his descriptions and analysis and wonder how in the world they will ever make sense of markets from an Elliott Wave perspective. The challenge is that Elliott Wave is highly subjective which is why very few experts ever agree on wave counts and forecasts. Even Prechter himself, who is extremely generous of his time with anyone who shows a genuine interest in the subject, has enjoyed periods of great success punctuated by times when he was very wrong. For example, he warned subscribers in August and September 1987 that a top was forming in the Dow saving those who listened from getting caught in the big October drop. But then he wrote a brilliant but highly bearish article in December 2003 entitled A Developing Depression for Technical Analysis of Stocks & Commodities magazine which talked at length about the challenges US stock markets faced that in retrospect was the early stages of the 2003-2007 cyclical bull market.

I have come to the conclusion that while the behavioral observations of founder Ralph Nelson Elliott in the 1920s and beyond were brilliant, few since have truly mastered his brainchild due to the highly complex and subjective nature of applying it to markets. The trick is in focusing on the wave patterns that have a high probability of unfolding as dictated by Elliott Wave and not trying to trade all the messy corrective patterns.

One day, someone will write a definitive guide that takes a computerized approach to EW and develop specific probabilities of wave outcomes with different stocks and futures so that traders will quickly be able to isolate high probability EW patterns to make money. Richard Swannell of Elliottician.com devoted his life to such a goal and did develop a series of very interesting computer programs to trade but the jury is still out on how effective and reliable his last iteration is. Unfortunately, he passed away at an early age so someone else will have to take over and write the book.

This is the classic book on Elliott Wave Theory. As such I would recommend it for everyone to read. One doesn't have to go hardcore Elliott, but just the psychological descriptions of market mood are important. If you want you can then go hardcore and label every minute swing if you want to. I don't know the value of that latter approach, but that is not material. Elliott will always be a judgmental, discretionary trading method and it is hard to make quantitative tests of its success rate - unfortunately.

Prospective buyers should also know that this book wasn't written in 2001 as stated by the store. However, that should not be the cause of any worry.

I have written several short reviews on trading books. The best way is to compare the score on the books I've read. Many reviews on the store.com are just glorious 5 star reviews. I use all five categories; sorry but everything isn't "great". Books rated 1 or 2 I would not recommend buying. Books rated 4 are good solid books. Books rated 5 are very good. Naturally all in my humble opinion.

If it is possible to predict what any financial market will do way in advance or even an hour from now, this might be the book to get you on your journey of discovering what it is. Predicated on the hypothesis that there are only 13 possible patterns for any financial market to unfold in, within any given time frame, this is both an intrigueing art and science.I myself am a professional stock investor and I was awed by Prechters knowledge. I went so far as to have him and his services be the first affliliate on my YAHOO BOARD called: [...] said, this book is so in depth and intense, it caused me to have to re-read many of the pages several times. Not the easiest read. My only complaint is he gave us "too" much detail!

This is the first place to start, to "understand" wave theory. I ended the book with the eagerness of feeling "Wow, if I can just decipher not all of the Elliot patterns, but just one that is forming that signals a huge market reversal, and if I can do it just one time, all the reading and research will be worth it." DEFINITELY WILL REQUIRE SERIOUS STUDY TO UNDERSTAND! To understand what your options are about what to "do" with your money, buy his other book "Conquor the Crash." Better yet, get them both. Once I read his book, I was hooked on spending my remaining years searching and uncovering all I can about E.W. theory. It's addicting! -) I would love to hear from anyone who has read his book or any of the fascinating Elliot material out there. We should form a club on Elliot Wave theory! Edited review:

09/15/08-This book is nonsense. I got all excited at learning wave theory and realized it just confuses you more. If you put 10 people in a room each counting waves, you'd get 10 different opinions. I do think most trends have 5 waves as prechter says. But...what about the ones that have 7 waves, or 3? Or just 2, up, down and then flat for a year! My advice is that after 5 waves just get out and take the money. The odds of more waves coming make it worth waiting for a reversal not a continuation. I retract my original comments. Do not waste your money on this book. Just learn how to count waves on your own and use your own waves. I now give it one star. On top of it I hear his newsletter was about the worst performer in the country that Hulbert Digest tracks! My name is Marc Vinson, and if you need further clarification, email me at:[email protected] I now trade professionally and this book hindered me for a long time. I kept seeing what either wasnt there...or what was unimportant to place a trade! I threw years away studying this nonsense. Let me save you the time.

Before I took a serious look at Elliot Wave technical analysis, I was of the (common I believe) opinion that it didn't work, wasn't specific enough, and was a couple of steps down from Voodoo in my list of `sound trading methods to think about using'. All that changed when I took a serious look at Elliott Wave International and specifically the book Elliott Wave Principle (EWP) by Frost and Prechter.

I would consider this book the definitive guide to the theory, history, and practical application of Elliott Wave (EW) to trading. If you are only going to read one book about the subject, this should be it. Now I'm not saying EW is perfect, but that it is a lot more sound, robust and well-defined than the general "here say" would have you believe, and this book covers the whole thing from history to application.

I found the book to be relatively easy to read, but very hard to get my head around without practical application. Imagine a chess Grandmaster writing a book on how to play really good chess. They could describe the rules of the game, the guidelines and overarching principles, and specific examples of good play, but chess is a complex game and it would be difficult to really get a feel for the whole thing without actual play.

Exactly the same can be said for EWP. The book goes into extreme detail about why 5 progressive followed by 3 regressive waves is the most efficient way for a market to move, and sets out an amazingly detailed and complete list of rules (rarely if ever broken) and guidelines (often fuzzy, but useful all the same) for the identification and application of wave theory as well as a nomenclature for identifying the complete range of cycles from the tiniest ticks to the secular movements that take decades to complete.

I guarantee you will have to read sections of this book more than once to get the underlying meaning, and also have to practice the application of the theory in real time before you really `get it', but I believe it is well worth the effort - even if you ultimately don't end up using the methods, there are many traders who do, and so this is a self-fulfilling technique that works because people use it, and people use it because it works.

I would consider myself a complete beginner in this technique, but I know enough to know that EWP contains most of what I'll ever need or want to know about Elliott Waves.

Without doubt, Elliott Wave principle is more hocus pocus perveyed as fact. I studied and tested this "principle" outlined in this book, my results concluded that Elliott wave is a waste of time and energy. I was going to simply bin this book, but thought better of it and donated it to my local charity shop. After 7 years of studying forex trading and finally landing upon a successful methodology, i can clearly see that Elliott wave is worse than flipping a coin, plus it is dangerous to new comers and will likely blow their accounts and possibly turn them away from trading for good. 0/5

This could be a good "beginner's" guide to trading but if you rely on this for trading - I guarantee that eventually you WILL lose. There is no such thing as a "good" - let alone "excellent" or "realistic" guides to trading. Remember, you are trading against multi-million dollar computers and continually back tested algorithms used by multi-billion (even trillion) dollar corporations that will eat your tiny investment for a snack. This is like a 12 year old boxing against a world champion. You don't have a chance - unless you are very, very, very lucky. How's YOUR luck been?

This is THE book that reintroduced Elliott Wave analysis in the early 1980s. In 1987 its author made a famous call predicting the stock market crash of that year. The book is worth having for its historical importance. However, most of what is written in the book is still valid. So I would say that this book is still the best introduction to Elliott Waves in 2010.

There are many problems with Elliott Wave, the author of this book has been called a perma-bear predicting crashes that never materialised. Having said this, I do have great respect for Elliott Waves because they seem to have some predictive power, at least in certain situations. This book provides the best book coverage of the theory.

UPDATE 2013. And since my original review, Prechter has been a bear most of the time. He really seems like a one-leg pony. He is so very quick to tell the market high time after time. Eventually, he will of course be correct. However, if you believed the author's newsletters you would have lost money the last two years.

Still, the book is worth five stars. I do not buy into all the different details, but I do by into the idea that there are different stages in the stock market driven by psychology. There are some good descriptions in the book. At times the market also seems to follow Elliott Waves but not all the time.

To bad that Prechter has devoted his life to reinterpreting Elliott as opposed to developing a theory of psychology in the stock market. I remember his promotional material back in the 1980s. He claimed to be a Mensa members with an IQ over 150 and some kind of wunderkid. Quite pathetic.

I was first attracted to EW because it gave credence to market psychology and group behavior which I recognize as important, but now that I've researched EW a bit and seen it in practice, there are very few stocks it seems to work on and I think you're better off buying a Ouija Board or a deck of Tarot cards. The problem with EW is it comes across sounding legitimate when it's just based on superstition and that can sucker people in to losing a lot of money.

If you want to learn elliott wave principle, this is the book for you. It's quite a dry read but going through it once and using it to refer back to while trading is well worth it. It also works well if you have trouble sleeping since this book will knock you out in minutes after reading a few pages. Despite it's dry content, it is extremely useful and has helped pave the way for a good trading career. This is a must read for any market technician.

When I first opened this book, I had already read numerous books on Technical Analysis, including candlesticks, momentum oscillators, volume indicators and basic chart patterns. It became obvious to me that the Elliott Wave Principle lies at the heart of why certain chart patterns work only a certain percentage of the time; for what one is seeing in chart patterns is the formation of robust fractals, or Elliott Waves. Chart patterns are the blunt tool and Elliott Waves, the knife - at least in a probabalistic sense, as no method provides perfect accuracy.

This book is not for the mentally lazy, which included me when I first started reading it. In fact, it took me several months just to get through it, understand it and then apply it in real time chart reading. I still keep going back to it as a reference. However, if you have an obsessive desire to understand the financial markets, you will make it through the book and be rewarded with a perspective that VERY few have on the financial markets and, therefore, the psychology of crowds.

I would suggest The Wave Principle of Human Social Behaviour (also by Prechter) before reading the highly technical Elliott Wave Principle. Your want to learn the details of the Elliott Wave Principle will then be fully primed.

Obviouosly people either love this book (and this concept) or they hate it. I happen to love it and believe that the wave principle answers many questions about market behavior, mass social psychology and even world history. To me, the book does as much in constructing the tapestry of human history as it does in expaining stock market movements.
Anyone expecting to use this book to day-trade and get rich quick is likely to be dissappointed - no one but true experts should be day trading anyway and even many "experts" should probably find other lines of work.
What this book will do is begin to provide an understanding of markets as a function of human nature as well as to provide a very good long term perspective of all of human history. This book provides insight to explain everything from minor stock market corrections to protracted economic depressions to major world wars and even, believe it or not, the dark ages.
Many are critical of Prechter's (obviously wrong) bearish opinion through the 1990s, and rightfully so. On the other hand, if his hypothesis is correct (and I think it is) that we are approaching the end of a bull market that started in 1789, then calling the end of that bull market correctly within even ten years is a spectacular feat. (Yes, I said a bull market that started in "Seventeen Eighty-Nine". Read the book and begin to understand why the USA was born through revolution at the end of the 1700s.)
Let me also point out that Prechter was about the only voice calling for a tremendous bull market starting in 1982. At that time, the mainstream media was pronouncing equities "dead" and you could hardly give away a share of stock free with a bowl of soup. Now that everyone and their brother wants to own stock, of course anyone with a bearish opinion is treated as an outcast.
I think people who have such a low opinion of this book either have minds that are way too closed or, frankly, do not have the ability to understand it. (While I don't think the book is extremely difficult, it is not exactly a first grade reader either.)
Anyone who is in the stock market or considering being in it should consider this book obligatory reading. As unpopular as this viewpoint may be now, we are heading for a very serious bear market and anyone who removes most (or all) of their funds from the stock market will look back ten years from now and be very glad they did.
Prechter's Elliott Wave International has a web site at elliottwave.com which I highly recommend. The site provides additional information which may make a stronger case for the validity and importance of this information than I have here.

A fellow reviewer of this book said "Obviously people either love this book or they hate it." I disagree. I love and hate this book at the same time. People with different backgrounds and perspectives will view this book differently. I would like to offer my opinions here to those like me, and to others too.

I consider myself a "serious beginner". I read my very first book on stock market in last March and bought my first stock in last May. I became interested in Elliott Wave Theory (EWT) in last August, one week before I gave up my academic career and started trading as full time pursuit. Currently I make a living by trading S&P index with the guidance of EWT.

Ralph Nelson Elliott is one of the greatest observers in human history. I believe that his achievement should be equal to those of the greatest ones such as Newton and Darwin. But I doubt that he will be ever widely recognized simply because the subjects he and his theory have been observing are actually the judges, i.e., we human beings.

EWT had been forgotten by the majority of trading, investing society for decades. Mr. Frost and Mr. Prechter and their book were the main reason that EWT became widely appreciated. I love the concise, old fashion way of writing of this book. All the rules and guidelines of EWT are presented clearly and demonstrated precisely with very well chosen examples. This book is a must have for any Elliott Wave student. I have studied three different editions of this book for five times. I studied some sections and pages more than ten times. This is the book one needs to read over and over again. However, this is a textbook, not a trading manual. Many of the wave counts in the examples are full of hindsight and not practically useful. And many of the situations in the examples aren't tradable. To have a feel of actual application of EWT, one certainly needs some extra practice.

What I dislike about this book is that the authors blended their own opinions into EWT. There's nothing wrong with that if the contributions were meaningful. The reality is that they were often wrong and misleading.

I have heard claims such as "if it didn't fit in Elliott Wave, you counted it wrong", from EWT loyalists. The authors had the same superstitious belief throughout the book. From my limited experiences, I see incompletes, failures and arguable patterns everywhere from hourly charts to weekly charts. Even if this belief is true, it's based on hindsight, and doesn't do any good to what EWT is supposed to do, i.e. to forecast and to make money. This belief will create a mindset which leads to a fatal psychological state. One consequence is over trading. When over trading, you win you will be damned and you lose you will be damned. If you are a trader trading with your livelihood on the line, you know what I mean. I was puzzled by the superstitious concept for weeks until I read Elliott's description of triangle in his classic Natural's Law. He said "......the triangle falls outside the wave phenomenon, as herein discussed, and should be IGNORED." This is enlightening. The moral is that EWT isn't a school exam, in which every question has an answer.

Elliott defined "Half Moon" and "AB base" patterns in his classic Natural's Law. The authors of this book considered that "Half Moon" was not a separate pattern but merely a descriptive phrase. The authors of this book didn't agree "AB base" either and implied that Elliott was too old and confused to give right judgment. They claimed "The authors have never seen an "AB base", and it cannot exist. Its invention by Elliott merely goes to show that for all his meticulous study and profound discovery, he displayed a typical analyst's weakness in......" This is outrageous. And this is where my hatred for this book is from.

Half Moon deserves to be a separate pattern for four reasons. First of all, Elliott said so! Secondly, Half Moon has well defined structures. It is a five wave pattern in which wave 5 significantly bigger than wave 3 and wave 3 significantly bigger than wave 1. Wave 1 and wave 3 can be zigzags in some cases. Thirdly, Half Moon starts from a zigzag and ends at a zigzag. There may be another five wave pattern following the last zigzag, may not, depending on where the Half Moon is at in the pattern one degree higher. If Half Moon isn't a separate pattern, it will violate EWT's rule "five wave pattern in a correction phase will be followed by another five wave pattern". Fourthly, Half Moon happens in market often and is extremely profitable or destructive. I learned Half Moon pattern the hard way in January. At 11:00 am EST on January 4th I called market bottom and reversed my SPX positions prematurely. I lost more than 50 % in a day.

I wonder why the authors of this book had never seen AB Base. I see AB Base everywhere in market. AB Base has unique structure in which motive waves of one degree lesser are actually zigzag and corrective waves of one degree lesser are five wave. AB Base pattern isn't very frequent. But its variations are so common they occupied really high percentage in history. AB Base definitely deserves to be a separate pattern. AB Base has so well defined structure it offers great certainty and trading opportunities. For example, with no doubt I opened March OEX 615 calls at 12:45 pm EST on March 20th for the price of $0.50. The calls expired three hours later at $5.38. The return was 980%. One of the authors of this book, Mr. Prechter rose to guru status and fell hard back in 80s and 90s. If Mr. Prechter was humble enough and studied AB Base carefully before completely denied it, he might recognize the market pattern in late 80s not later than November 1990 and found its analog in history. This way he would at least have a strong alternative wave count and forecast which pointed to the actual market direction in 90s and therefore avoid the catastrophe in his career and decade long humiliation.

There are more improper and arguable comments in the book. I may be wrong though. As I mentioned above that my experience and knowledge are limited.

Five plus stars for the introduction to EWT and zero star for the disrespect and arrogance. Final rating 3 stars.

then you will understand Elliot Wave principles. The stock markets are said to be nonlinear, dynamic systems. Chaos theory is the mathematics of studying such nonlinear, dynamic systems. Does this mean that chaoticians can predict when stocks will rise and fall? Not quite; however, chaoticians have determined that the market prices are highly random, but with a trend. The stock market is accepted as a self-similar system in the sense that the individual parts are related to the whole. Another self-similar system in the area of mathematics are fractals. Could the stock market be associated with a fractal? Why not? In the market price action, if one looks at the market monthly, weekly, daily, and intra day bar charts, the structure has a similar appearance. However, just like a fractal, the stock market has sensitive dependence on initial conditions. This factor is what makes dynamic market systems so difficult to predict. Because we cannot accurately describe the current situation with the detail necessary, we cannot accurately predict the state of the system at a future time. Stock market success can be predicted by chaoticians. Short-term investing, such as intra day exchanges are a waste of time. Short-term traders will fail over time due to nothing more than the cost of trading. However, over time, long-term price action is not random. Traders can succeed trading from daily or weekly charts if they follow the trends. ***A system can be random in the short-term and deterministic in the long term***.
Manus J. Donahue III
An Introduction to Chaos Theory and Fractal Geometry
Elias Yoseph, Virginia

We can all develop various patterns of historical records to see how a market did going all the way back to the first day that the stock market started collection historical records. Being able to predict what will happen based on what happened over the past century using such historical data is not what we need to be looking at. Sure human behavior and emotions could impact what happens in a single day, but it corrects itself with more reality over the weekend. The National Weather System forecasts and predicts our weather and storm activity in advance using historical data and patterns. How often do you see their predictions come true. At least they will say a 10%, 30%, 50%, 80% 100% chance something will happen in specific areas. That is what this book is missing, probability of being right using such patterns. I predict rain based on seeing the stars or not the night before. Obviously if it is so cloudy, I can't see one star, I will be pretty sure of rain today, but it does not mean I will be any more accurate than someone else who also uses the position of the moon. Remember the moon looks like a ball, so how about a crystal ball. If you want better advice follow some common sense books written by Graham and Buffett and Bogle. If you want to survive, invest in stocks with good long time companies for the long term and if you are not rich and investing for those old age days of retirement, invest in less risky investments not exposed to market volatility and collapse. Never invest any more than you can afford to lose. Folks like Buffett have so much money it is a game to them they enjoy playing like a gambler. If you are not super rich, you should not gamble with more than you can afford to lose. The book may be interesting, but don't get sucked into something unless you have the same or better mathematical and scientific skills of the author. How many billionaires do you know, most of the ones I know own or are CEOs of very successful businesses like Microsoft and Apple and Insurance companies and corporations tied into Military Projects. They all write books and give seminars to become richer or they would not write them. There are many authors providing good sound advice that makes sense. Judge Judy often says if it makes sense it is more likely to be true and if it don't make sense it is being made up with a lot of baloney. I do go back and look at historical data. I look at 1 quarter, 1 year, 5 years, and 10 years, and the big picture since the start to now. There is your 5 waves. Next look at the big percentage corrections or crashes versus time periods, and the years between the two positive peaks and between the two negative peaks, and lastly the time between the negative and positive peaks, so their are your 3 waves to consider in forecasting BS, no sense looking at the positive to negative peak since it is usually rather rapid during major corrections or crashes like many have been predicting since the end of 2013. Based on the overall real economic situations in the US and Globally and how governments are all locked into their markets by controlling the output numbers such as inflation and controlling bank interest rates using stimulus funds they don't have, it is only a matter of time before businesses collapse and they expect their government to bail them out again. Well, the government well is dry and I believe the governments all learned a lesson not to bail them out next time. In 1920, the better businesses survived and recuperated without any help from the government. In 2008-2013, the government bailed more manufacturers and financial companies that would have sunk. Did they learn anything, not really, other than the government will bail them out. Look at Ford, Chrysler-Jeep, GM, and foreign auto makers today. Ford was one company that did not accept a government handout and they are successful because they learned the hard way and are more customer oriented. Look at Chrysler and GM they have so many poorly designed cars with massive numbers of safety recalls that mostly are not taken care of. Hyundai, Honda, and Toyota are doing great. You want some advice on Buying a car, if you plan to keep the car past its warranty period, check with a non-dealer mechanic and ask them what maker and models they repair the most and the least. Guarantee you it is Chrysler, Jeep, and GM products.

Ever heard how Fibonacci mathematics is everywhere - in the shapes of our bodies, in art, in animals and in nature? Everyone knows that, but did you realise that Fibonacci mathematics is just as common in Financial Markets? That's not so strange when you think about it - since humans and nature have so much Fibonacci mathematics then it makes sense that it will show up in markets as well.
Question: does you favourtie Financial guru talk about Fibonacci mathematics very often? This one does - Prechter and Frost's book Elliott Wave Principle.
Their book is about a method of analysis invented by R.N. Elliott during the 1930s. Unlike most other methods of analysing financial markets this one is full of Fibonacci mathematics, and it makes markets seem as natural as a shower of rain or a summer breeze.
This is the book that shows the connection between great works of art, the chaos of life on earth and the strange moods of financial markets.
This book is not for everyone - you have to be ready to challenge the mainstream ideas about financial markets. It is like a gigantic puzzle that requires some patience before you see the big picture.
It is much recommended for people who think most of what they read about finance is complete garbage manufactured by people who want to sound important. It is also much recommended for people who enjoy finding out things that are a bit harder to understand than everyday things. It is also recommended for people who like to find out that we are all human, no matter how much we play with numbers, computers, regulations, media releases and dictionaries.

This book is a must for anyone who believes that there is method to the stock market madness.I am a pharmacist with a scientific and mathematical background.This book explains the stock market in terms of elliott waves,in a similar way that writing is explainned by the alphabet.In essence it explains the relationship between the everyday variations and its relation to what is happenning today.It explains why the DOW is 10750 today and what the most likely scenario is for the next week,month,year.I like to get into it in a complicated way ,but it is not necessary to do so.Learning the alphabet(elliott wave pattern) is enough to allow anyone who can read and write to note whre the market is today and where it is likely to go.While the most obvious use is for stock market investing the education perhaps is even more important. The elliott wave theory says that all moves consist of 8 waves given symbols 1,2,3,4,5,a,b,c,.In a bull market 1,3,5 and b are moves upward and 2 4 a & c are downward moves.Therefore if you can workout which wave your stock is in you can predict its next move.Each 8 wave move is followed by another 8 wave move and every move is interelated.The dow appears to be in the start of wave a with a long and sharp decline in the near future. I have read the book twice and I need to read it again as it makes more sense each time.

I will avoid a long discussion about stock market efficiency and the efficacy of simple technical analysis, and point you in the direction of Malkiel's A Random Walk Down Wall Street. I would suggest further readings if you want to delve into the academic debate behind it.
That being said Prechters's book offers a basic guide into the fundamentals of Eliiot Wave analysis. The principles of the analysis are the belief that there is information to be gained from the price action of stocks (e.g. the implict information of transactions by traders) and that there is a natural flow to these price movements (e.g. stocks don't go up in one direction).
In incorporating price information, the belief is that stocks move in a 5-wave impulsive pattern, which can be either bullish (up) or bearish (down). A 5-wave move is followed by a 3-wave corrective pattern. Larger cycles are basically an aggregation of many 5- and 3-wave patterns. If believed to be true, the practical benefit of understanding waves and cycles is that investors can use this information to identify "where" they are in the cycle of a stock's movement.
The book follows the basics of identifying waves and cycles with some historical and matehmatical background information. This is where Pretcher ties the material in with nature. He believes that waves move in a natural way, which can be described by the Fibonacci sequence and Fibonacci ratios. He advocates using Fibonnaci ratios to forecast the distance (e.g. percent change) and timing of stock price movements. I found this material to be the most informative since it provided background reading on Fibonacci numbers which many technical traders employ in the various tools they use. Now I know what they are talking about.
The rest of the book can be skipped. It is primarily an application of Elliot Wave to various historical contexts. Of course, Pretcher draws on examples that fit nicely with the belief that Elliot Wave has strong predictive abilities. If I recall correctly, the author does close the book with his predictions for the stock market and did correctly predict a long-term bullish Wave 5 coming out of 1982-83.

Anyone who has read Prechter's many books over the years realizes that this book is his best...because of Frost in my opinion.

The macro principles and perspectives in this book are very insightful. Well worth the read...
--- Irrespective of whether or not you follow Elliot Wave techniques or not.

Summary from my full length review - The book that defines the Elliott Wave technical analysis method. The concepts presented in the book and the supposed confirmation of the principle by the example charts do not follow the principle of scientific method. Elliott Wave is not proved (nor disproved) to be useful for trading by the book although many people may be misled otherwise. I cannot recommend this book.

The Elliott Wave principle is dangerous to your financial health.
Its a convincing theory that works very well in hindsight. The problem is that it doesnt predict the market successfully. Worse still the patterns can be so convincing (but in hindsight plainly wrong) that you trade your bias rather than the markets price behaviour.
If you do read it apply the test of assuming the market makes a move up, down and sideways over the next 5 days. Then explain why it happened. Then ask yourself if there is any value in your current view.
These guys get it wrong all the time and have been predicting the big crash regularly since 1987.
Look instead for books by Van Tharp, William O'neil, Charles Le Beau and Alexander Elder.

Read this book with an open mind and investigate the suggested patterns and you will be amazed what you see.

I remember looking at a 4 year chart of the sp500 after reading this book and trying to observe the "3s" and "5s" and was shocked to see them staring back at me.

It is hard going at first - especially the first couple of chapters, but take it slow and it will soon sink in - you won't regret that you spent the time to learn Elliot Wave Theory

Elliott Wave is the least practical approach to Technical Analysis I am aware of. There are so many exceptions to the rules that govern EW that one can never gain enough confidence in the signal to put money to work. They say that if you get 12 EW practitioners in a room you will get 13 different wave counts. Believe me, there's a lot of truth in that statement! I am amazed that people actually take EW seriously.

There are plenty of very useful books on Technical Analysis, although there aren't very many well written ones. I recommend any book by John Murphy, and also Trader Vic-Methods of a Wall Street Master which is a tremendous book that will teach you the most important thing to know; how to recognize the trend and when it changes.

Prechters view is markets peaked in wave 5 in year 2000.

Never called the bottom in 2002, and stated the

high of year 2000 would not be surpassed.

Well 7 years later the DOW has indeed surpassed the year 2000 high!

High of 2000 was ~12000, today it is ~13000 !!!

Listening to his advice would cost one dearly.

Not only missing out on the recent market rise, but also constantly

pushing one to take a bearish stance against the market during the

entire rise over the past 5 years, while the market was rising!

This is a slightly technical (you can skip to the good stuff) explanation of the hightly rated Elliott Wave Theory for predicting direction and breaks in the stock market. Even if you are not into stocks the book is a good read to show how mathematical theory applies in everyday life. While researching a lecture to be given to gifted students back in the 90's I found a book published in 1964 that laughed at the theory outlined here. The '64 book dedicated a small paragraph to the theory and tossed out the statement to the effect, if one believed this theory, the stock market would have to be at a certain incredible level in the early 90's. A quick check of the market confirmed that it was!

Elliott Waves theory is a big pile of GARBAGE
It has never worked and never will. It is garbage manufactured by people who want to sound smart.
Sure, after the fact, all of us can see 'patterns' and waves in charts. I'm yet to see this theory working for 'future events'. It has always worked for past events.
In an environment where any word from the fed can move the market a few hundred points, any TA is worthless. Whom ever came up with this theory never got into equation the fed intervention.
Btw, have you guys noticed how this useless theory in ALWAYS praised by the bears?

The book seems to offer evidence that the wave theory works, but it doesnt pass the test of contradicting evidence. The writers are basically saying that everything in nature seems to be working in a pattern of cycles. This theory is then presented as being the case with the stock market. If we can chart these cycles we will then be able to find what the stock markets next move will be in general and even in particular stocks. The problems with this are; If this theory were true we would be living in a universe governed by determinism. This cant be since there would be infinite cause and effect and there cant be two infinites. If determinism were true, there would be no free will, but as was shown above this is not the case. Events predicted by the elliot wave are coincidences and when money is at stake youre better off dealing in probabilities. The truth is that markets are governed by human psychology. Its far better to take the advice of the wise J. Paul Getty who wrote " To make money in the market buy when others are selling and sell when others are buying." Most trading books are very expensive and their advice in no way justifies their price. Get How to be rich by J.Paul Getty. This book offers very wise advice on making money in buisness, investments etc. and it doesnt cost an arm and a leg.

Follow theses 'principles' and you will loose at lot of money! It may look 'beautiful' to assign waves in hindsight but it is NO measure to predict the future markets of ANY market. And then, Elliottician miraculously always pretend to be right: if one wave count doesn't materialize, no problem, then the 'alternate' count will surely be right... Why not flip a coin? 13 years after this book has been published look at these wave counts: have the markets peaked in 2000? Well, ya, temporarily, but we haven't dropped to Dow Jones 200 ever since haven't we?

It may seen esoteric, but the patterns described by Elliott are actually the way that mass psychology and the markets tend to move. Thank your Mr. Frost and Mr. Prechter for making the theory so understandable. I have now been using it in the marketplace quite successfully.