Here's my advice: View the Elliott Wave Principle as your road map to the market -- and your investment idea as a trip.
You start the trip with a specific plan in mind, but conditions along the way may force you to alter course. As I mentioned earlier, alternate Elliott wave counts are simply side roads that sometimes end up being the best path.
Elliott's highly specific rules keep the number of valid wave-pattern interpretations to a minimum. Usually, you would consider the "preferred count" to be the one that satisfies all three of Elliott's rules and the largest number of guidelines. Your top "alternate" is the one that satisfies the next largest number of guidelines, and so on.
Some of the best stories about global positioning systems (GPS) are the weird detours they sometimes recommend.
A while back, while on a family trip through Great Smoky Mountains National Park, I decided to use my GPS to drive around the park's western boundary to see the wildlife. My old-fashioned map made it look like it would take the better part of the day. But my GPS said the trip would only be about 20 miles long. Little did I know -- until I got there -- that the road from the GPS was only the remnant of an old wagon trail. I had to backtrack and take the path my paper map had originally suggested.
Sometimes, the old-fashioned way of doing things is still the best way.
When Ralph Nelson Elliott discovered the Wave Principle nearly 70 years ago, he explained how social (or crowd) behavior trends and reverses in recognizable patterns. You can learn to identify these patterns as they unfold in the financial markets, and use them to help anticipate where prices will go next. Elliott Wave International has developed a free comprehensive online course -- The Elliott Wave Tutorial: 10 Lessons on the Wave Principle -- which describes these patterns and explains how they relate to one another.
To use the Wave Principle as you analyze the markets, you need a basic understanding of the Elliott method -- the rules and guidelines, the literal shape of individual waves, even when the larger trend may turn.
To get you started, we've included an excerpt from the free Elliott Wave Tutorial, adapted from Elliott Wave Principle by Frost and Prechter, and a short video clip from the live presentation, Tips from a Pro.
How do you know what "your" forex market will do tomorrow?
You don't. We don't. Nobody does. All anyone can do is guess. But some guesses are more "educated" than others.
In a recent interview, Elliott Wave International's Senior Currency Strategist, Jim Martens, explained why for the past almost 30 years his favorite method to "guess" at the market's trend has been Elliott wave analysis:
"Markets are doing what they are supposed to be doing: inflicting the most pain on the most number of people. Markets fool the most number of people at the most unexpected moments, but by tracking Elliott wave patterns, sentiment (and the news) you can prepare yourself.
"What separates Elliott wave fans from the rest of the public is that the public has no basis for determining when the trend may be over."
Let's take a look at a recent example: namely, price action in EURUSD on April 5-7.