In the 1920s Ralph Nelson Elliott started to work on the theory which bears his name – Elliot Wave theory and published it in the book He published his theory in the book called the The Wave Principle. Today many traders believe Elliot wave Forex trading is the best Forex trading strategy but is it and should you consider it?

Lets look at applying Elliot Wave theory in Forex trading in more detail. Firstly, we will look at the logic of Elliot wave theory and see if it really is, a trading method which can give you an edge in Forex trading.

The Logic of Elliot Wave Theory

The Wave Principle postulates that upward and downward swings in price action always showed up in the same repetitive patterns. He called these upward and downward swings "waves". Elliott, therefore postulated in his book "natures law" that the movement of financial markets could be predicted by observing, and identifying a repetitive pattern of waves.

You also get the Fibonacci number sequence thrown in as well which is a popular Forex trading method which also claims markets move to a universal law. Fibonacci numbers however were originally devised to solve a mathematical theory back in the 12^th century solve a problem to do with the copulation of rabbits and was never intended to be used to trade financial markets.

Flaws in Elliot Wave thinking and the Wave Theory

Well there is no scientific method for predicting any market because if there was there would be no market. Prices obviously don't move to science, as there made by humans and there are no certainties just probabilities. Sure, you can make money trading the odds but to say you predict the future is simply not true. Both Elliot Wave and the Fibonacci theory, claim this is possible but it's not and a market being cyclical is nothing to do with it being scientific.

Of course, Elliot is right in terms of all natural phenomena being cyclical but we know that anyway. For example, we know that at some time in our lives, we will die but do we know the exact date in advance and we know another earthquake will hit California one day but which day exactly? We don't know.

A Subjective Theory – Not Science

If you have a scientific theory it should work all the time – not just some of the time. An objective theory has a set of rules that will always work if its scientific - but this is not the case with Elliot Wave.

Despite the fact its supposed to predict the future, you have to make subjective judgements!

Like most predictive Forex theories, Elliott wave is able to show everything is explainable in hindsight but we can all be geniuses when we know all the closing prices. There are so many interpretations of the peaks, troughs or waves that every trader will see them differently and use different entry and exit levels for their trading signals so its not scientific at all.

Elliot Wave Theory – Why do Traders Believe it?

Traders like to think they can beat the market and predict Forex prices; Elliot Wave systems are sold heavily on this basis and there are always traders who think they can predict or beat the market when it should be pretty obvious to anyone that this is not possible. Of course, it Elliot Wave strategy has mystical overtones and this appeals, to the far out investment crowd and this is a big group of traders.

The myth around Elliot is promoted heavily by people who make money out of the fact they can build him up into a legendary trader and sell courses on the back of his name and being dead he can't answer some obvious questions like – If the theory is so good and predicts the future how come Elliot made no money with it?

Elliot Wave Forex Trading Final Words

If you want to trade Forex learn the basics, get some solid Forex trading training and learn to trade the odds and if you do this correctly you can make a lot of money. There is no trading system which can beat the market and never will be. So is Elliot Wave the best Forex trading strategy? Well you know our view already.

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