Understanding Elliott wave theory can be frustrating and confusing for many people. It seems so simple on paper but so difficult in application. But let me ask you a question. How would it feel to truly understand why the market does what it does?

For example, have you ever been watching the news and seen an update that was sure to be bad news for the market so you decide to short? Then the market goes up 100 points and you’re left holding the bag on your short position losing money?

Maybe you saw an incredible earnings report on a stock you own only to see it drop 10% over the next couple weeks. Or you could’ve seen the talking heads say inflation is going up which is bad for tech only to see the NASDAQ skyrocket? Wouldn’t be nice to have the upper hand and know why the market does that?

This is what you get by understanding Elliott wave theory.

Rules To Understanding Elliott Wave Theory

We are going to have to do some Bruce Lee stuff here. Forget what you think you know. Are you ready?

“Empty your cup so that it may be filled; become devoid to gain totality.”

Bruce Lee

First and foremost, the news doesn’t drive the market. Do not forget that and say it over and over again. This is the first step to freedom and the cure for the instances I gave above where the market does exactly the opposite of what the news would have you believe.

Why would it ever make sense when the TV shows can’t explain this so they say something “bad news is good news for the market”. Um…what? News is simply a catalyst. This means it allows the inevitable to happen but doesn’t dictate direction. The faster you can come to this realization the better off you will be.

Second, price action and sentiment do drive the market. What does that mean? It means fear and greed. It means FOMO and OH NO. The market makes people emotional and this changes their reactions from fundamentally based to emotionally based.

It’s why rallies can continue to extend beyond expectations because of the FOMO and crashes can go down lightning fast because of fear. Elliott was able to give us a basic understanding of this and then was able to measure it to give us predictable results.

Can you imagine? Predictable results? Yes. Over and over again

How Elliott Wave Analysis Gives Us Predictable Results

To be able to accurately break down a chart and put the waves in the correct count is as much an art as it is a science. You have to be creative. You must be able to think outside the box and most importantly you must be able to adjust and continue to learn.

I’m not here to tell you it’s easy. It’s not. It takes years of practice and study to be able to understand market moves and how they fit together. (Luckily I can do it for you)

However, when you get to the point that you are truly understanding Elliott wave theory, magic happens right before your eyes. In my big picture video (which I made in July 2021) we see how Elliott wave theory has been able to forecast the market accurately for over a century. It had us ready for the COVID crash in 2020, it forecasted the rise to 4800 and this fall down to 4100 and it continues to do so accurately and astoundingly.

While not perfect as no indicator or technical analysis is, it is far and away the best indicator for understanding the market directions and levels. I will be perfectly honest the micro counts can have their issues as they can get messy at times, but in the big picture there is nothing close.

There are plenty of opponents that will tell you that Elliott wave theory “doesn’t work.” This is a common default for many people that fail to try to understand things. They may say it’s voodoo or magic but I say it’s DNA.

Herding The People

At our core humans are animals that live in herds. We have the same instincts and characteristics as the animals in the Serengeti, just for different things. Watching Zebra’s cling together as a group for safety is the same thing we do when we are in tough neighborhoods or feeling threatened.

It’s no different in the stock market. People see the herd driving price up and they dive in because of FOMO. They see the herd fleeing the market and they sell everything out of fear.

We all have different roles. The leaders buy the bottoms first and sell the tops first starting the stampede. The speculators guess when they see big moves that the top or bottom is in, but really they are guessing. Then the followers join in the run pushing price further followed by the sacrificial lambs that are last to the party.

Understanding Elliott wave theory means being one of the leaders. Being a person that understands where we should bottom and top and moving our money first to get the most value.

This advantage cannot be understated. The leader in the herd has 10x more value than the follower. Being the last zebra there when the lions arrive is not where you want to be.

As you can see understanding Elliott wave theory can give you a big edge in the market. Knowing the general topping and bottoming levels is a huge advantage to maximize your value in investing. While it takes time and effort to learn the payoff is incredible. If you are interested in learning more about Elliott Wave theory from me personally you can check out our Membership Plans area.