## Wednesday, April 8, 2009

### Fibonacci sequence and Elliot Wave Theory

I just read an interesting article about the Fibonacci sequence and Elliot Wave Theory.  These are some very interesting subjects.  They may pertain to sports betting.

Here is a quote from Wikipedia:  "Elliott argued that because humans are themselves rhythmical, their activities and decisions could be predicted in rhythms, too. Critics argue that the Elliott wave principle is pseudoscientific and contradicts the efficient market hypothesis."

Now I couldn't agree more with Elliot's premise that human beings are rhythmical.  In fact that is basis of a lot of my observations and research so far.  That indicates to me that there may be some useful information in Elliots Wave Principle techniques.  Also, the criticism that it contradicts the efficient market hypothesis is easily discarded when applied to NBA betting.  I don't think anyone else is researching this so no one else takes it into account.  the efficient market hypothesis implies that everyone knows the information available and can take advantage of it.

I've been reading about fractals in the Black Swan and have a limited knowledge of them.  Essentially, Elliots Wave theory finds graphs of stock market prices to be fractal in nature and similar patterns can be observed on any timescale.

Applying what I learned in the Black Swan, scoring in the NBA is from mediocristan.  A player may score 1000 points in a season.  That would correspond to roughly 12 points a game for an 82 game season.  However, he will not play in all 82 games, score 1000 points in one night, and score 0 the rest of the season.

Same applies to all statistics.  Cumulative totals increase fairly linearly.

Another quote from Wikipedia:
"Elliott Wave analysts (or "Elliotticians") hold that it is not necessary to look at a price chart to judge where a market is in its wave pattern. Each wave has its own "signature" which often reflects the psychology of the moment. Understanding how and why the waves develop is key to the application of the Wave Principle; that understanding includes recognizing the characteristics described below.[2]"

Interesting.  This material is really right up my alley.  It talks about how psychology affects behavior and motivation is a subset of psychology.