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can be mastered in a few short hours. I warn you, this is not the case with the “Wave Principle”. Mastery of this technique will take a great deal of time and patience and judgement in its application. Furthermore, before one can apply the principle with sufficient confidence to make it a profitable experience, most conventional stock market theory will have to be placed in “suspense” in the recognition that the stock market offers no absolutes and there is no man alive who can predict with any useful, meaningful degree of accuracy where share prices will be one day hence, much less one year or more hence.

      The far-sighted investor who has recognised the basic weakness in the many analytical approaches to the stock market will find the “Wave Principle” intellectually appealing. He will recognise the fact that although the probabilities governing share price behaviour may be 100:1 in his favour, there is always that “1”. He will neither be intimidated nor dismayed by the emergence of the improbable as he watches the varying possibilities and probabilities unfold in the Wave Principle, and will incorporate the results in an investment strategy geared to his own personal requirements. He will not use the Wave Principle as a substitute for thought but will allow the theory to provide the information necessary to quantify the probability of risk or reward in the stock market at any given time.

      The Wave Principle will not be used to forecast or predict, but rather to establish targets of probable achievement within the context of broad market movements. The targets will not be absolute targets but will vary in accordance with the changing cyclical pattern of both the economy and the stock market. The Wave Principle will adjust itself to compensate for the unforeseen fundamental developments which are so often the nemesis of technical analysts, producing those treacherous “false signals”. The Wave Principle is the only stock market tool that has ever been devised to compensate for alterations in fundamental conditions.

      In many cases, investors have learned to distrust the information and opinions of popularly expressed stock market forecasts, for in the final analysis it has become nothing more than a matter of how long the forecaster will be right before he is ruefully wrong. The “Wave Principle” provides an entirely new approach to this problem. Conceptually, the words “right” or “wrong” should now be eliminated from the approach to stock market price movements. A study of the Wave Principle will train one to recognise the occurrence of the improbable and its frequency. On the odd occasion, the improbable and the losses that result are completely unavoidable. However, one will witness the self-adjusting mechanism of the Wave Principle realising that any losses that occur as a result of the improbable will be more than compensated for, provided the correct compensatory action is always taken.

      The Wave Principle will discipline its user to anticipate rather than follow. A return to the grass roots philosophy of “Buy Low and Sell High” will be the credo of the investor who studies the Wave Principle, allowing him to act independently of the emotionally driven stock market players who habitually buy too late and sell too late. The concept that one should “Buy High and Sell Higher” has long been refuted by the many studies of the academicians.

      In 1938 Financial World printed a series of articles written by R.N. Elliott entitled “The Wave Principle”. I have chosen these articles as offering the most suitable guide for studying Elliott’s theory. Of great interest should be the “Publishers’ Note” which states:

      “During the past seven or eight years. Publishers of financial magazines and organizations in the investment advisory field have been virtually flooded with ‘systems’ for which their proponents have claimed great accuracy in forecasting stock market movements. Some of them appeared to work for a while. It was immediately obvious that others had no value whatever. All have been looked upon by THE FINANCIAL WORLD with great scepticism. But after investigation of Mr. R.N. Elliott’s Wave Principle THE FINANCIAL WORLD became convinced that a series of articles on this subject would be interesting and instructive to its readers. To the individual reader is left the determination of the value of the Wave Principle as a working tool in market forecasting, but it is believed that it should prove at least a useful check upon conclusions based on economic considerations.”

      The Editors

      These articles comprise the appendix to this book and it is recommended that the student review the basic Elliott principles as outlined before commencing with the text. The object of my text is threefold. In reviewing the original work by Elliott one will find many “grey” areas which require further elucidation while several of the tenets will appear somewhat vague in terms of practical application. It will be the function of this work to focus on the various obscurities in an attempt to devise a workable format which in turn can be incorporated into an overall investment strategy. In addition, there are a few modifications to the theory which will be necessary in order to apply the method to share price movements on the London Stock Exchange. This will be accomplished by incorporating the work of several other analysts who have made observations on the Elliott Wave theory and have used it successfully. Finally, and probably most important, if one is to work with this tool and achieve maximum benefit one must adopt the correct conceptual approach and be sufficiently conversant with the rationale of the method so that one can act with confidence and consistency. For this purpose an entire chapter has been devoted to the empirical record of achievement by those who have used the Elliott Wave Principle in both London and Wall Street. In addition an extensive bibliography has been included for those who would like to undertake further investigation into the rationale behind the method.

      During the post-war era there has been a great deal of complacency in the securities industry. Because the business cycle and the stock market cycle have been in a major cyclical upward trend, offering only shallow corrections, there seem to be many people, even with the securities industry itself, who have blinded themselves to the historical precedents of share price behaviour. Up until 1973, the post-war procedures were working well for the newcomers while many of the old-timers had been annihilated by previous market catastrophes. With the advert of the cyclical collapse in share prices between 1973-4 many analysts discovered to their dismay that the rules of the post-war era were just as useless as those which had been discarded previously. To those who still say “times have changed”, that the old rules of the 1930’s and 1940’s no longer apply, and that any attempt to predict the future collapse of the economy and the stock market from the long term cyclical precedent is the height of folly, there is very little useful that can be said.

      For those, however, who are willing to approach the subject of stock market behaviour with an open mind, who have faith in the fundamental laws of economics and the consistency of human nature, who would like to avoid the pitfalls that have deluded the investment community for decades, who wish to learn how to read the message of the stock market in its entirety, for those investors and analysts the Wave Principle is resurrected, and the precept, explanations, experiences, and observations are disclosed, in the hope that their study will prove financially rewarding as well as the most fascinating method of stock market analysis that they have ever encountered.

      R. C. Beckman

      One: The Origins of the Wave Principle

      “More zeal and energy, more fanatical hope, and more intense anguish have been expended over the past century in efforts to ‘forecast’ the stock market than in almost any other single line of human action.”

      Richard Dana Skinner

      VERY LITTLE LITERATURE is currently available on the Elliott Wave Principle; Elliott died in 1948 and his monographs and “educational letters” have been out of print for decades. This factor alone will make this work all the more valuable to those interested in this highly intriguing theory of cyclical movements in the stock market.

      While it is difficult to obtain the original work carried out by R. N. Elliott, his background and emergence into the securities industry would appear to be even more obscure. The late A. Hamilton Bond, president of Bolton, Tremblay & Company, and probably the world’s principal exponent of Elliott’s work had very little information to provide about Elliott the man, and in fact was never closely associated with him. In 1953, Bolton decided to publish a small pamphlet on what he thought the Elliott Wave Principle was saying about the U.S. stock market at that time. This was the first widely

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