Regardless of how new you may be to Elliott wave analysis, you know that it's relatively easy to follow professionally produced wave counts in market charts – such as the ones produced by Elliott Wave International's experts, for example. But if you've ever tried to do your own wave counts while trading, you know how big a challenge it can be.
Yes, we've all heard that waves patterns are fractal – i.e., self-repeating on all time frames. Yes, we all know that it's all about 5-wave impulses and 3-wave corrections, but counting them in real-time market charts is not always easy. Why? Because you can never know for sure what kind of Elliott wave structure you're dealing with until it's complete – and not even then sometimes.
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That's a sobering fact for many Elliott wave beginners. They often expect to count perfect five and three-wave structures in charts all the way down to milliseconds. But the truth is, you can't. The explanation veteran Elliotticians give is – "It's not a perfect world." For one, it has to do with the limitations of your data feed. But even if your data were perfect, some ambiguity with the real-time wave counts would still be present.
That means that sometimes (often?), you'll be left guessing if what you see is a 3-wave or a 5-wave structure. Which is OK if you're an individual trader. At moments like that, you just wait until the wave pattern clears up. Patience is a virtue, doubly so when it comes to trading.
But let's say you're a "market maker" at a large international bank, and you absolutely have to trade the market at any given moment. You must trade now – but for the life of you, you cannot see that perfect 5-wave structure within your ostensible wave 3.
That happens. OK, but can you see waves 1 and 2 clearly? Have the 3 Rules of Elliott and most of the guidelines been met? Then what you're most likely looking at is a 3rd wave. Should you assume that just because you can't see its internal structure perfectly, your entire count is bad? Some people might; others would go for it.
And what if you end up with a losing position? Well, it's not the end of the world; it happens to the best of us. Here's how Bob Prechter, Elliott Wave International's founder and CEO, put it in his classic 1986 report, "What a Trader Really Needs to Be Successful":
"...my observation, after eleven years in the business, is that the biggest obstacle to successful speculation is the failure merely even to recognize and accept the simple fact that losses are part of the game, and that they must be accommodated. The perfect trading system does not exist. Expecting, or even hoping for, perfection is a guarantee of failure."
Trading is tough, and don’t let anyone tell you otherwise. Don’t let them tell you all you need is a correct forecast, either. That is maybe 20% of your success, but you only realize that after you've traded for a while.
Don’t rely on "expert opinions" too much, either. Experts are people too, and if you rigidly follow their market views, you'll also make their mistakes. Instead, what you need is to establish your own set of trade confirmations. You need to trust nobody but yourself with your trading decisions. Only then can your mistakes become your own. And only then can you truly learn.
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