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Simplifying the Elliott Wave Theory

The wave theory was propagated by Ralph Nelson Elliott. He is known as the father of the Wave Theory. Today, it is referred to as the Elliott Wave Principle. He was born in 1871 in Marysville, Kansas. He enjoyed a really long working life in accounting as well as business practices of several companies. At the age of 58, he unfortunately was relegated to the home thanks to an illness. Needing to keep himself occupied, he turned to studying the patterns of the stock market.

Elliott scrutinized annual, monthly, weekly as well as daily, hourly and half-hourly charts of the numerous indexes and went through around 75 years worth of stock market behavior. By the year 1934, he gained enough of confidence in his theory that he made a presentation to Charles J. Collins of Investment Counsel, Inc. in Detroit. And the rest is history.

The Elliott Wave Principle is quite simply an in-depth description of how a number of groups of people tend to behave. It works on the understanding that mass psychology tends to move between pessimism and optimism and then return forming quite a natural sequence. This helps form a specific and measurable pattern.

The most popular of places to implement the Elliott Wave Principle is at the financial markets. Financial markets are the one place where investor psychology is constantly changing and therefore one is able to form a pattern in price movements. Once you are able to recognize these patterns in prices and understand their forms of repetition, you will be able to invest in the right manner.
 
What the Elliott Wave Principle does is measure investor-based psychology which forms the actual fuelling engine of the financial markets. Every time people are optimistic on an issue, the bidding price goes up. When people are optimistic about the future of a given issue, they bid the price up.

The Elliott Wave Principle can be understood as an exercise dealing in probability. A person who practices the principles of Elliott Wave will be able to recognize the structure of markets and be able to anticipate when the next move is likely to be based depending on current positions that are within those structures. Once you understand the wave patterns you will be able to predict what the market is going to do next as well as not do. When you use the Elliott Wave principle, you find the highest probable moves while assuming the most minimal of risks.
 

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Modern Portfolio Theory – Basics

MPT is based on the behavior of the investor. The investor may make decision based on the expected return and the riskiness of returns. The higher the level of fluctuations, the higher is the risk. Therefore an investor may not prefer a share having higher level of fluctuations price.  He may prefer a share even with a lower return, if the risk is low. To reduce the risk, an investor may invest in different securities. Loss, if any, in one security will be offset by gain in another.  Portfolio means holding number of securities at a time by an investor. MPT is based upon its analysis on risk and return. When two varieties of securities have got equal risk, an investor may decide in favor of a security which is expected to yield higher return. If such two varieties of securities are expected to yield equal return, an investor may prefer a security having lesser risk. 

Now, to reduce risk, one may invest in more than one security, but one must also limit the diversification. This is because; again risk may be higher when the diversification is very high.  One may also think of holding all variety of securities. Such holdings will be called as market portfolio. The market portfolio is associated with the market risk. This market risk cannot be eliminated through diversification. Overall changes in the market price will have its own effect on a given security. The effect may change the degree of riskiness of a security. This is nothing but sensitivity of one security with reference to the changes in riskiness of other securities in the market.  This is known as the beta co-efficient of the security. That means, the return on a security depends on the risk measured by this beta.  The risk of investment in each security in terms of variations may be calculated in terms of percentage and then one security may be compared with the other. Such comparison may help the investor to decide how much he has to invest and in which security.

The expected return on each security may be arrived by means of weighted average. The comparison of estimation of risk and return of each security will place an investor in a better position to decide the purchase of each quantum of security, or not to make a purchase etc. The important point is that inspite of all such efforts regarding diversified investment one cannot reduce the risk to zero. The reality is that one has to accept the margin of market risk or non-diversifiable risk. The selected number of securities from the different industries is sufficient to analyze a market portfolio. The non-diversifiable risk or market risk may involve with risk associated with the fluctuations in the market index itself. The diversification will not eliminate the market risk. The non-diversifiable risk is also called as unavoidable risk and such risks cannot be diversified, because the entire market will be affected by one factor for e.g., common fiscal policy.

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Fuzzy Set Theory Background

Fuzzy Set Theory (FST) was formalised by Prof. Lofti Zadeh at the University of California in 1965. The significance of fuzzy variables is that they facilitate gradual transition betweenstates and consequently, possess a natural capability to express and deal withobservation and measurement uncertainties.

Traditional variables, which may be referred to as crisp variables do not have this capability. Although the definition of states by crisp sets is mathematically correct, in manycases, it is unrealistic in the face of unavoidable measurement errors. A measurement that falls into a close neighbourhood of each precisely defined border between states of a crisp variable is taken as evidential support for only one of the states, in spite of the inevitable uncertainty involved in decision. The uncertainty reaches its maximum at each border, where any measurement should be regarded as equal evidence for the two states on either side of the border. When dealing with crisp variables, the uncertainty is ignored; the measurement is regarded as evidence for one of the states, the one that includes the border point by virtue of anarbitrary mathematical definition.

Bivalent set theory can be somewhat limiting if we wish to describe a ‘humanistic’ problem mathematically (Zadeh (1987)). For example, Figure 6.2 illustrates bivalent sets tocharacterise the temperature of a room. The limiting feature of bivalent sets is that they are mutually exclusive – it is not possible to have a membership of more than one set. It is not accurate to define a transition from a quantity such as ‘warm’ to ‘hot’. In the real world a smooth (unnoticeable) drift from ‘warm’ to ‘hot’ would occur. The natural phenomenon can be describedmore accurately by FST.

Figure 6.3 shows how the same information can be quantified using fuzzy sets to describe this natural drift. A set, A, with points or objects in some relevant universe, X, is defined as these elements of x that satisfy the membership propertydefined for A. In traditional ‘crisp’ sets theory each element
of x either is or is not an element of A. Elements in a fuzzy set (denoted by –, eg A) can have a continuum of degrees of membership ranging from complete membership to complete non- membership (Zadeh (1987)). /~(x) gives the degree of membership for each element x e X. #(x) is defined on [0,1]. A

membership of 0 means that the value does not belong to the set under consideration. A
membership of 1 would mean full representation of the set under consideration. A membership
somewhere between these two limits indicates the degree of membership. The manner in which
values are assigned to a membership is not fixed and may be established according to the
preference of the person conducting the investigation.

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The theory of running

How to get in touch with your breath? It is still debatable weather the phenomenon like getting one’s breath back really exists. A report by Toy Shepherd says that 20 students took an arduous exercise on the treadmill. Students were enquired by some research workers in the 1-minute break. 18 students’ breath improved and 14 students’ legs relieved. You will go through the stage of getting your breath back and experience it.

You will understand how to run through all kinds of weathers. There are 2 factors you should watch out-heat and moisture} These 2 elements will slow your space, so in August, do not run as in April. Summer-heat and moisture make you uncomfortable. You should try to go for a run early at morning or at sunset.

Summer-heat becomes not so hard since you have been used to the hot weather after running some. But it takes about a week to be adapted to running in the hot absolutely. As for a rainy day, you never have to stop running so long as you follow the suggestion in Chapter 13.

Relaxing exercises are necessary. Do not make a suddenly stop after you finish your running. Spend some time in calming down yourself which involves taking a simple walk or stretching exercises you usually do before running. Doing some stretching exercises is good for the health. Your muscles are warm and soft at that time and it is easy to stretch yourself. Try to calm down your body within 8 to 10 minutes in order to excrete the metabolic wastes from the muscles. Your pulse when you pause should be 20 times no more than that when you do not exercise.

Some runners take a cold bath to alleviate muscle pain especially after a long-distance run. Inflammation and ache can be relieved by taking a cold bath for it can cool down your whole body, not just small scale, immediately. If you can not stand the cold bath, put an ice pack to your painful joint to soothe the injury.

Don’t have meals long after a long run or hard workout. The research indicates that it is the easiest for muscles to rebuild glycogen (stored glucose) within half an hour after exercise. If you eat soon after your workout, you can minimize muscle stiffness and soreness. A good rule of thumb for post-run food is a ratio of 1 gram of protein to 3 grams of carbohydrates and a peanut butter and jelly sandwich or a smoothie made with fruit and yogurt is a good choice. Make sure that you’re hydrating properly after running, especially in the summer months. Plain water is fine for re-hydrating after your run. While some runners prefer recovery drinks, such as chocolate milk in place of a post-run snack.

How to protect your feet? You’d better run on a softer field but not a hard one, a playground with track is a better choice. Foot bath with hot water has many advantages as it is beneficial to both your morning exercise the next day and fatigue alleviation and you’d better at least take it after running and before sleep.

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The Theory of Limitations

The Theory of Constraints

 

The theory of thinking was propagated by Eliyahu Goldratt in one of his book The Goal as “the theory of constraints.” Having read and gone through several times, I will try to pen down the way I have understood. It is one of the finest concepts.

 

This theory states that between you and anything you want to accomplish in life there is a constraint, limiting factor or an impediment that determines how fast you get to where you want to go.

 

For example, if you are driving down a freeway and traffic construction is narrowing all the vehicles into a single lane, this bottleneck or choke up point becomes the constraint for the person who drives his vehicle & also determines how fast you will negotiate to get to your destination. The speed at which you pass through this bottleneck will largely determine the speed of your entire journey.

 

In accomplishing any major accomplishments, there is always a constraint or a bottleneck which determines how well you negotiate & get through as well. Your job is to identify it accurately and then focus all of your energies on alleviating that key constraint. Your ability to remove this bottleneck or deal with this limiting factor can help you to move ahead faster than perhaps any other steps you can take.

 

The 80 /20 rule applies to the constraints between you and your goals. This rule clearly states that 80 percent of your constraints lie within yourself. Only 20 percent of your constraints will be outside of yourself, contained in other people, situations. To put it in other words, it is you personally who is usually the major roadblock that is setting the pace at which you achieve any goal that you set for yourself.

 

For most of us, this is extremely hard to accept. But successful people are more concerned with what is right rather than who is right. Successful people are more concerned with the truth of the situation and what they can do to solve the problems, than they are with protecting their egos.

 

Thus, most of the obstacles which you face while achieving your goals are mental. They are psychological and emotional in character. They are within yourself rather than within the situation around you. And it is with these mental obstacles that you must begin if you want to achieve everything that is possible for you.

 

The author of this write up is Iyer Subramanian. Presently, attached to Employers’ Federation of India.  

My name is Iyer Subramanian. My qualifications are as under. Bachelor of Arts, Diploma in Personnel Management and Industrial Relations, Diploma in Labor Laws & Labor Welfare, Diploma in HRM, Diploma in Training & Development. I have around 25 years of experience in HR and write for Express Hospitality, Hospitalitybiz, Business Manager regularly on HR.

The Theory of Aging

Aging is described as the process of growing old. Physically, aging is marked by the reduction in the ability of cells to function normally or to produce new body cells at an optimal rate.

Causes of Aging

Aging is caused primarily by a decline in the production of human growth hormone “HGH”

Medical research shows that HGH levels start to decline by 14% each decade starting from the age of 20.

By the time the person reaches the age of 65, there remains only little or practically no HGH.

The result of this is shown with the following conditions

Lack of Vitality
Decrease in Sexual functions
Fragile bones
Sagging and wrinkled skin
Potbelly
Poor memory
Poor eyesight
Difficulty in concentration
Weak immunity e.t.c

How to reverse Aging

Clinical evidence have shown that aging can be reversed if we can adequately increase growth hormones.

How then do we increase our growth hormones?

How to reverse aging.

It has been confirmed that aging is reversible by simply increasing the growth hormones in the body.

How do you do this?

Edmark has provided a lifelong solution to the menace of aging with the introduction of an award winner all purpose product called Bio ELIXIR.

In a process called Synergy or Stacking, which simply refer to the packing of the right nutrients in the right proportions and delivering them at the right time to where it is needed in the body,

Bio Elixir stimulates the pituitary gland to release its own HGH the natural way.

It has been confirmed that this product has ability to turn our biological clock back by 20 years, meaning a reintroduction of about 28% of HGH back into the body within one to two months of its usage.

This same action therefore enhances the repair of damaged tissues, and brings about the following

New Vigour
General health and well-being
Enhancement of good looks and body beauty 
Improve sexual performance

Therapeutic Benefits of Bio Elixir

Bio Elixir is made 100% from natural ingredients of excellent quality soy protein extracts. It is not a hormone, steroid or a drug, it contain no pituitary extract, no mammalian brain and no hormones.

It is therefore completely safe to consume, with zero side effects.

It is also known to have an ability to target health problem areas, supply the needed nutrient thereby terminating the problem.

It is a drink that is completely rich in nutrients and minerals, which includes, Arginine, Ornithine, Glutamic acid, Leucine, Lysine, Vitamin B5 e.t.c

Other benefits include

Wrinkle, acne, and stretch marks removal
Increase memory retention
Sharper vision
Hair re-growth
Faster wound healing 
Stronger bones
Better Kidney functions
Greater Cardiac output
Re-growth of heart, liver, spleen, kidneys and other organs that shrink with age
 Mood elevation e.t.c

No doubt, Bio Elixir is a product no one should do without.

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DC New Years Eve Theory

Have you heard the theory about DC New Years Eve? The DC (standing for “death coming”) New Years Eve Theory was thought up by Theodore Preston. His theory is that on New Years Eve in the year 2012 will be the last day of the world. Since 1997, he has written 12 books about the topic, five of which have been on the top-seller list in the past eight years.

His theory is based on years of research, science, and the Bible. His idol is Nostradamus. He has read every book that the man wrote, at least three times, since he was eight years old and claims that every single prediction and prophecy have been proven truthful since the books were written. Preston says that although the dates in Nostradamus’s prophecies are not exactly on-point, that can be explained through the simple science of time and the Earth and Sun. He explains why the end of days will not be December 20, 2012 as predicted by Nostradamus and jokingly says that it is okay to make plans for things to do on New Years Eve in 2012. Preston goes on to explain how there are not exactly 365 days in every year, and how there are NOT exactly 24 hours in a day. These are all just very close measurements, but they are not precise. This is why we have leap year. He talks about how the seasons have changed over time and how they are about to overlap and cross over each other; he also breaks down the theory of Global Warming, describing how it is nothing more than a crock of crap cooked up by the government to scare people.

Although Preston is certain that DC New Years Eve is inevitable, he is still not sure about how the world will end. He is torn between science and the Bible. There is a lot of evidence pointing to floods coming, but the Bible says that the world would not end that way. He suggests that man will destruct himself with war, turmoil, and nuclear energy. His new book explaining his theories, How We Die, will be on bookshelves on December 20, 2012.

 

Game Theory Cutting A Cake

Game Theory is a set of strategic models where hypothetical situations are simulated. The people who are part of the game will have to act in these situations and arrive at situations by making choices. The choice that one of the players makes is dependant on the choice the other players make. This makes Game Theory interesting and easily arrive at solutions in given conditions and situations.

It is one the techniques that managers of firms under imperfect markets like duopoly, oligopoly, monopolistic competition, etc use to arrive at the optimum price of a product along with the supply and demand interactions.

Game Theory was developed in the 40s in connection with war strategies. Now it is being used by managers to arrive at an optimal price and output for products. As Managers today deal with a higher number of ever changing scenarios, they need to plan ahead for unexpected situations.

There are a number of games in Game Theory. Some of the most popular are Prisoner’s Dilemma. We shall discuss about game called Cutting a Cake.

Cutting a Cake:

In this game, two persons A and B are given a cake and they will have to share the cake and they shall receive a fair share in the cake.
Here the problem is that if A is asked to cut the cake, there is a chance that he reserves the bigger piece for himself and give B the smaller piece.
Same is the case with B. If B is asked to cut the cake, he will do exactly as A. So, the best solution to this problem is given as the person who is not cutting the cake will reserve the right to choose first.
Here, the person will choose the bigger piece available and leave the smaller piece to the one who had cut the cake.
So, the person cutting the cake will cut the cake in such a way that either of them will get the maximum possible portion of the cake.

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Efficient Market Theory

 Here at Hypo Venture Capital we are committed to offering our clients access to the latest and broadest range of financial services and products on the market. We know that choosing the right strategy, the right investment and the right product is no easy task in this day and age! Whether its advice, investments or financial planning we are here to answer all your questions and facilitate all your financial needs.

A branch of economic thought known as ‘efficient market theory’ hypothesizes that the stock market is almost perfectly efficient in the sense that asset values are almost perfectly priced when factoring in all known information. Taking this theory to the extreme would mean that a monkey randomly choosing stocks would do no better or worse on average than a Wall Street guru.

Many people subscribe to this theory. Their main reasoning is that there are so many knowledgeable people that actively invest in stocks (think head fund managers, mutual fund managers, private equity guys, etc.) that all stocks are accurately valued. The only way to make more money in the stock market, or any aasset class for that matter, is to take on more risk. Otherwise, it’s futile to attempt to try to pick stocks since you won’t find any good deals (other people would have already found them and bid up the stock’s price).

People who believe in this theory generally just invest in broad, index funds with low expense fees. They attempt to diversify to mitigate risk (hence the appeal of ETFs or index funds) and also attempt to lower transaction costs (again, the appeal of ETFs). By investing in ETFs and index fund, they also can just park their money in the long-run, which will limit their tax liability.

The market does a pretty good job at accurately pricing stocks, and on the whole, most investors probably can’t beat a random monkey choosing stocks. But efficient market theory can’t explain why some investors consistently beat the market, such as legendary investors like Warren Buffet and George Soros. It is also stretch to think the daily gyrations of the stock market are completely rational.

It is also difficult to explain the tech boom of 95-99 and subsequent crash in 2000-2002 through efficient market theory, since this was a pretty clear episode of excessive investor exuberance for tech stocks.

Also, while there is a lot of .smart money. in the market, this ‘smart money’ is often handicapped by large asset bases. Most of the best investors have asset bases of $ 250 million+ to deal with, so they cannot put much of their funds into the stocks that they necessarily think are the best buys.

For example, if a hedge fund manager who manages $ 500 million thinks a company with a market capitalization of $ 500 million is a great buy, he cannot put much of his asset base in their physically. If he invested all of it, he would have bought the company! That, plus with a sizeable infusion of money would have bid the stock.s price up way past its value.

Furthermore, as much smart money is out there, there is also a lot of dumb money too. Plenty of people don’t know what they.re doing, and they trade based on emotion, leading to bad investment decisions. It is for these reasons that while efficient market theory has its merits, it’s a huge stretch to believe that today’s financial markets are almost completely efficient.

Want to know more?

Hypo Venture Capital is an independent investment advisory firm which focuses on global equities and options markets. Our analytical tools, screening techniques, rigorous research methods and committed staff provide solid information to help our clients make the best possible investment decisions. All views, comments, statements and opinions are of the authors. For more information go to www.hypovc.com

Hypo Venture Capital is an independent investment advisory firm which focuses on global equities and options markets. Our analytical tools, screening techniques, rigorous research methods and committed staff provide solid information to help our clients make the best possible investment decisions. All views, comments, statements and opinions are of the authors. For more information go to www.hypovc.com

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Self Psychology Theory

Heinz Kohut developed the theory of Self Psychology at the Chicago Institute for Psychoanalysis. As it stands, Self Psychology explains psychopathology as developmental needs that have been interrupted or unmet. There are several concepts that are crucial aspects of this theory, including empathy, mirroring, idealizing and the tripolar self. Though Self Psychology asserts the Freudian concepts of drive and conflict, these concepts are understood as a completely separate framework.

Kohut first came to psychoanalysis by studying neurology and psychiatry; he loved the theories of analysis and immortalized Freud for his primitive concepts. In the 1960s, Heinz Kohut began to explore the boundaries of narcissism and called his findings the “psychology of the self.” In 1971, Kohut published his work, “The Analysis of the Self,” arguing the new theory as a more patient-based analytical strategy; if therapy was to be successful, the patient needed to address foremost the self.

Kohut established four developmental stages of the human self:

1. Nuclear — human babies are born with this; it is a biologically determined psychological identity. It takes no work; it is thrust upon each individual and begins the journey of the human self.

2. Virtual– the nuclear self meets this; it is the self as seen in the minds of the parents. The child has no control over the emergence of this self, as it is the one that is impressed on the child by its caregivers.

3. Cohesive — the point where the interaction of the previous selves leads the child to regulate and organize the activities of the ego, where along the way:

4. Grandiose – an identity that sees oneself as at the epicenter of everything; as Freud had often stated, children find themselves to be the center of the universe until reaching a certain age, where others emerge and settle comfortably within their world. This self is struggling on the verge of narcissistic rage.

Self Psychology theory has many real-world applications and has made grand strides in the way of psychoanalysis and therapy. Many supporters of the theory have pinpointed the relationship between Jung and Freud as an example of Self Psychology theory at work. Carl Jung idealized Freud, who saw Jung as an idealized version of himself. Jung had to assert himself as an individual, emerging as an independent theorist apart from Freud, conquering his personal self and proving the therapeutic nature behind this theory.

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