The Elliott Wave Principle And Hurst Envelope Analysis Support Chart Patterns

By: Bret Freak
Still wondering whether chart patterns are a valid form of analysis to trade the forex market? Well, just recently I have realized that both Elliott Wave, and. Hurst Envelope analysis support the validity of chart patterns, and even go as far to explaining why they occur! What’s interesting is the fact that both Elliott Wave & Hurst Envelope analysis are two very different analysis techniques, yet both explain exactly why these patterns continue to repeat time and time again.

Here is a quote from the Elliott Wave Principle on chart patterns:

“The Elliott Wave Principle not only supports the validity of chart analysis, but it can help the technician decide which formations are most likely of real significance” It goes onto explaining how chart patterns relate to Elliott Wave analysis and how you can use it in your trading.

And here is a quote from James Hurst’s book entitled: “Profit Magic of Stock Transaction Timing”

“If the “X” motivation concept is valid, it must be able to explain the existence and, reoccurrences of common chart patterns and, why they impart information to the investor.” And:

“The second purpose of the chapter is to show you how the price motion model can be used to resolve chart patterns. Such patterns can be used to determine which way and when price motion will go at pattern termination.”

Although the above may sound very confusing to those who haven’t read Hurst’s book, it’s still an interesting fact that the validity of chart patterns have been confirmed and supported by two very different market timing techniques. Now this brings us to another question: Can both Elliott Wave and Hurst Envelope analysis be somehow combined together to take chart analysis to a new level? Perhaps.

It’s not however my aim here to go into any details on how this may be achieved, but rather, allow those interested to follow up on this interesting idea themselves, and give those who are unsure if chart patterns are really a valid form of trading analysis, some confidence in their value in trading the forex market.

A Parting Comment:

Before you go out and buy a copy of Hurst’s book “Profit Magic of Stock Transaction Timing” I would like to warn you in advance that the content presented in this book can be at times hard to understand. And on top of this, the market timing technique Hurst presents in that book can be very time consuming. Since it involves manually drawing in “Envelopes” around price action. It is still however an interesting read, especially for those who are interested in how Hurst’s timing technique can be used to add accuracy to chart pattern recognition.

I believe the Majority of traders would be content on using the Elliott Wave Principle to further analyze chart patterns. Since it is more widely known than Hurst’s Envelope technique, and has more extensive information and education available on it than Hurst’s technique.

Conclusion

By understanding the Elliott Wave Principle, and Hurst Envelope analysis, you are able to take chart pattern recognition to a new level of accuracy, and therefore profitability. So, if you are the type of person who is interested in trading chart patterns more successfully you may be interested in doing some further research into Hurst Envelope analysis, and the Elliott Wave Principle.