Frost and Prechter noted that the Wave Principle works best with index futures trading, and to a lesser extent, stocks. Their view was that since the Wave Principle measures mass psychology in the market, individual stocks (and some commodities) didn't always provide reliable wave patterns for trading. After some years of putting Elliott to practical use in trading, I think their view is still generally true, though the market landscape has changed in some significant respects since their book was written. For one, there are individual stocks today that trade in higher daily volumes than the entire Dow Jones Industrial Average in the 1970's. Futures market volume has also increased dramatically, with the CME reporting the highest contract volumes in its entire history being reached in 2001. Consequently, I've been able to trade stocks pretty successfully using Elliott, though I usually won't bother with those that don't trade at least a million shares daily, or offer little volatility, since this helps produce good, readable waves. In my experience, that, in combination with other technical indicators, and a look at the fundamentals work well with using Elliott to trade high volume stocks.

I know that some Elliotticians and technicians turn their noses up at fundamentals. In the case of individual stocks, a look at fundamentals is justified for a few different reasons. First, it's an insight not only into the thinking, but also the sentiments of fundamental analysts towards a stock. For instance, valuations are key in gauging the relative value of a stock, and a stock with a low earnings yield and high P/E is doomed to correct, no matter what the touts tell you. Secondly, it's consistent with Frost and Prechter's view that the circumstances of a particular stock are just as likely to be affected by individual factors as technical factors. Third, such information is so freely available nowadays, it's silly not to look at fundamental analyst estimates, even if your ultimate decision is contrarian. Martin Pring, one of my favorite technicians (and one of the best out there) recommends that a wise trader take a "weight of evidence approach" to trading. After all these years, it remains one of the best pieces of advice I've ever heard.

Conclusions
I'm sure to folks seeing this for the first time, the Wave Principle might appear somewhat complicated and difficult to follow. I've only provided the highlights of Elliott Wave Analysis in these pages. When I first came to trading and looked at numerous trading systems, none offered the consistently accurate record of forecasting and analysis as the Wave Principle. Robert Prechter, the leading exponent of Elliott Wave analysis today, proved it's effectiveness after winning a series of trading championships in the 1980's, where he was up against some of the market's foremost traders, earning an impressive 400% on this trades.

Some of the most stunningly accurate major market forecasts have been made by Elliotticians, including Elliott's own remarkable forecast of the end of a bear market decline in the Dow from 1933-1935, which he forecast to the exact day in a telegram to his publisher. Elliott also accurately forecast the bull market during World War II and its decline well ahead of the actual events. When one considers that in Elliott's day he was making charts and calculations by hand, without benefit of all the computerized toys we take for granted today, and that he was 67 years old when he embarked on his career as a forecaster, his discoveries and accomplishments are all the more impressive. A. Hamilton Bolton, a leading Elliottician during the 1950'-60's and founder of the Bank Credit Analyst advisory service (BCA Research today) forecast in 1960 the Dow would reach 1,000 in 1966 (it had been trading in the 500-600 range for most of that period). On February 9, 1966, the Dow reached an all time high of 995, having peaked at just over 1,000 intraday. In their 1978 book "Elliott Wave Principle, " written during the depths of the seemingly endless 1970's bear market, Robert Prechter and A. J. Frost predicted a vibrant bull market would begin in 1982. The forecast also called for the bull market to crash in 1987. As we know, the end of 1982 saw the rise, seemingly from out of nowhere, of a powerful 5-year bull market that peaked with the market crash of 1987. With an understanding of the principles of Elliott Wave Analysis, it becomes clear why such bold forecasts can be made.