Elliott Waves are market patterns discovered by R. N. Elliott in the 1930s.
One of the best books on Elliott Waves Theory (“Elliott Wave Principle: Key to Market Behavior”) co-authored by a famous market analyst Robert Prechter (Jr). He has also established a market forecasting firm that uses Elliott Waves Analysis.
The theory looks very attractive, but it is questionable whether it has real predictive power. The problem is, that due to fractal nature of the markets, a developing patterns can eventually turn out to be a part of the bigger pattern, which changes the anticipated market direction.
On the other hand, R. Prechter used Elliott Waves signals in trading and won the U.S Trading Championship. He did it on purpose to prove the point that the theory works.
But many others didn’t find the theory useful for reliable predictions. E.g. Courtney Smith, who has been profitable each year in his 20+ years trading career, in his book “How to make a living trading foreign exchange: a guaranteed income for life” (our review) admits that he has been studying Elliott Waves Analysis for month and tried many trades based on it but failed to build a profitable trading system.
The truth could be in between. So, Robert C. Miner in his book “High Probability Trading Strategies: Entry to Exit Tactics for the Forex, Futures, and Stock Markets” shows how he is using Elliott Waves Analysis for only recognizing whether markets are in trending or corrective phase. Which is already very important information.