posted on 04 March 2017
from Elliott Wave International
How to breach limitations of conventional market forecasting
Wayne Gorman, the head of our Educational Resources department, explains - based on his 30-year experience as a Wall Street risk manager, trader and analyst - how Elliott waves help you get "ahead of the game."
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[Editor's note: The text version of the video is below.]
Alexandra Lienhard: Today on ElliottWave TV, I'm talking with Wayne Gorman, the head of Elliott Wave International's educational resources department. Now Wayne, over the course of your career you've taught thousands of investors and traders how to forecast using the Elliott Wave Principle. So I'm curious, in your experience have you found the Wave Principle to be more useful to investors or to traders or both?
Wayne Gorman: I would say-- well first Alex, it's great to be here. I would say that it's good for both. Using Elliott wave, you can forecast and trade on a short term basis or a long term basis as an investor. So it's useful for all time frames except maybe the very shortest time frames.
AL: And what's the best way to get started learning the Elliott Wave Principle? When you're teaching a new group of students, where do you start?
WG: Yeah, that's a great question. The first thing that pops into my mind is to read Elliott Wave Principle by Frost and Prechter, that's how I started. I started back in 1985. And you can't just read that book once. You may have to read it several times, especially chapters 1 through 4. I myself I recall reading it at least three times before it finally jelled. And even after that, I had to constantly refer back to it. And in addition to that, of course, I would say there was a number of online courses that focused in on specific patterns or guidelines, so that's helpful. When I started learning it I didn't have the benefit of a whole library of online courses. I had the book and there was one seminar. It was a series of tapes-- they were converted to DVDS. The 10-DVD set. But today we have an enormous amount of resources that you can use, and then you just have to practice. And of course, the best thing is to practice labeling charts where you can compare your labels to an analyst-- another analyst who's using a Elliott wave for the sake of comparison. And that's how you really get started.
AL: Now you mentioned seminars and online courses, and you've taught thousands of people all over the world in seminars, online courses, and one on one consultations, as well. So I'm curious, in your experience, what's the biggest error that you see investors and traders who are newer to the Wave Principle make?
WG: I would say the biggest error is not sticking with the Wave Principle itself. It's very difficult to extricate yourself from the old ways of thinking using economic fundamentals. And it's hard to stay away from being influenced by the news and so on. You really have to divorce yourself from these conventional methods and just stick to Elliott Wave. It takes quite a while, and it's very tempting to-- when you see a piece of news or some type of statement that somebody makes-- it's tempting to fall back on the old ways of doing things. So it's a matter of discipline. Sticking to the model. You really have to ask yourself, do you really believe in this? Because you must believe in this. You cannot go halfway.
AL: In addition to forecasting using the Wave Principle, you have quite an extensive history of using the Wave Principle to trade both for the companies you worked for and for your personal accounts. So Wayne, simply put, why is the Wave Principle so effective?
WG: Well. I would say the main-- well, one of the key advantages is that it helps you to identify turning points well before the fundamentals have turned. In other words, the way the process works is that social mood-- which is reflected in the stock market-- social mood is the first thing that reacts, and what happens is the economic fundamentals follow. So you can be way ahead of the game if you use Elliott wave because Elliott wave will tell you, will show you when social mood has changed. Because the fundamentals will continue to move in the same direction, even though mood has changed and maybe the stock market has changed. And you can anticipate that if you just rely on the economic fundamentals, you'll be staying the wrong way for quite some time until they finally turn. So I think it's that, and the fact that it's not a gimmick. It's not a black box thing. It's well rooted in sociology and psychology. There's a lot to it, a lot behind it, when you really analyze the psychological and sociological aspects of how people in mass. Mass psychology-- how people react. You know, crowd behavior, and how crowd behavior works. And a lot of people just are not aware of that. So again, the big advantage is spotting these turn turning points way in advance of when the fundamentals turn.
AL: Thanks for talking today, Wayne, and offering these insights.
WG: Thanks very much, Alex. It was a pleasure to be here.
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