Monday, July 9, 2012

Brown, Mastering Elliott Wave Principle

Mastering Elliott Wave Principle: Elementary Concepts, Wave Patterns, and Practice Exercises (Bloomberg/Wiley, 2012) is the first of a two-book project designed to teach Constance Brown’s unique method of analyzing charts and projecting future price movement. Although the focus is on wave patterns, Brown also incorporates insights from Gann, Fibonacci levels, and oscillators in her work.

Despite the fact that she refers to this book as elementary, I would categorize it as an intermediate-level text, best read by those who have at least a passing acquaintance, however flawed, of Elliott waves. Or by those who have tried to use waves in their trading and have come up short. For them it’s time for some serious remedial education.

The three central chapters of Mastering Elliott Wave Principle deal with patterns that describe trending market movement, patterns that describe corrective market movement, and diagonal triangles (wedges). Bookending these chapters is one that introduces the reader to balance and proportion in market price data and a summary chapter with study flash cards for patterns, rules and guidelines, and practice and final exams.

The book is interactive in the sense that the author regularly challenges the reader to perform certain learning tasks and then points out where he might have gone astray. For instance, “Draw a box to show the complete unit we call wave (3). Are there five waves inside the box? NO? Fix it! You will have to start over.” (p. 34)

The only way to read this book is to be engaged and to take the mini-quizzes scattered throughout the central chapters. By proceeding conscientiously the reader should begin to understand both the basic concepts and some of the subtleties of the Elliott Wave Principle.

Where is the reader by the time he has successfully completed the final exam? He is not yet ready to do his own wave interpretations with any reasonable probability of success. He is a critic, not a creator: he “will have the skill to understand others’ charts and recognize when the application of another’s wave interpretation violates the basic tenets of the Wave Principle.” (p. 103) In his quest for proficiency the reader will have to wait for the companion book, Advanced Elliott Wave Analysis: Complex Patterns, Intermarket Relationships, and Global Cash Flow Analysis.

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