Identifying Order and Disorder in Chaotic Market with Elliott Wave
In this article, we will explain how to identify order and disorder in the chaotic market with Elliott Wave Analysis. As a trader, you will agree that scientific method can improve your profits. Whether you are using correlation, geometric patterns, or statistics, they are baesed on science. Even latency arbitrages are just a sort of computer science or engineering, one could dig deeper on how to fine-tune the algorithm, network and internet speed to beat others. If any trading strategy has persistent dynamics towards profitability, we can formulate or describe their working mechanism using known science and engineering principle. Hence, we can reproduce the same mechanism repeatedly for our trading. Most winning trading strategies are based on some sort of precise science and engineering. Profit will never come blindly or by just a chance.
Topic in this article is partly about chaos theory. As one knows, chaos theory as in nonlinear dynamics is a hard-core math topic. However, we will not touch the complex theory because this article is for average trader. The focus of this article is to provide some intuition over this hard science, chaos theory. Chaos theory reveals several characteristic for some dynamic system like stock or currency market. Here is the list of four important characteristics:
Highly sensitive to initial condition (i.e. Butterfly effect)
Fractals (i.e. self-similarity)
Firstly, scientist often uses the term butterfly effect. This term describes the situation in which a butterfly flapping its wings in New Mexico cause a hurricane in China. A different way to express this is that small changes in the initial condition can lead to drastic changes in the results. We can meet full of similar examples in our life. One example of butterfly effect is that the rejection of an art application lead to World War Two. This is probably the most widely known butterfly effect. In 1905, Adolf Hitler applied to the Academy of Fine Arts in Vienna. He was rejected twice. After his rejection, he was forced to live in the slums of the city and his anti-Semitism grew. He joined the German Army instead of fulfilling his dreams as an artist. World would been changed a lot if Academy of Fine Arts accepted him.
You can read everything about Identifying Order and Disorder in Chaotic Market with Elliott Wave from this original article.
Finally, one might ask if they can go beyond 4 triangles like or 5 triangles or 8 triangles to calculate the density. From my empirical study, it is rare to see anything above 4 triangles. In this point, my empirical study and R. N. Elliott observation agrees. That is why Elliott comes up with Elliott Wave 12345 pattern and not Elliott Wave 12345678 pattern.
We hope this is useful for your profitable trading. Elliott Wave Trend has the following automatic features:
Detect the density of geometric patterns (identifying order and disorder of financial market.)
Automatic Elliott Wave Counting for trading.
Manual Elliott Wave Counting for trading.
Automatic Wave Structure Score calculation.
Here is the links to our Elliott Wave Trend for MetaTrader 4 and MetaTrader 5.