# Trading styles of Livermore/Wyckoff



## stargazer (15 April 2007)

Hi all

Could someone explain the different trading styles between

Livermore and Wyckoff

Cheers
SG


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## motorway (15 April 2007)

stargazer said:


> Hi all
> 
> Could someone explain the different trading styles between
> 
> ...




hello stargazer,

From My understanding of the Historical literature..

Wyckoff and Livermore met each other in 1917.
Livermore as the biggest operator of His day influenced Wyckoff.. Both as to what to do and not what to do.

Wyckoff over time developed a purely technical system
With a strong focus on Risk.

(The Wyckoff/SMI course)

He built a rigorous system built from first principles.

Livermore Was much more orientated by Fundamentals, Stuck to His hunches
and Did not in practice have a systematic approach to risk.. He would often
buck the trend... He would plunge ..

Livermore made and lost fortunes.. And blew up big..
Wyckoff Just made fortunes..

Wyckoff overtime went from a more fundamental approach (1900)
To a purely technical approach (1930) He realized that prices moved way to much than real fundamentals should allow and that the real fundamentals were only know by the very few and unfolded over time (trends).
And that all markets are manipulated (By everybody, large and small)

motorway


Richard D. Wyckoff was born in 1873, and at the age of 15 in 1888, became a stock runner. 
At the age of 25, He opened his own brokerage which gave him close contact with a number of the most important and influential traders on Wall Street . He studied the market operations and investing methods of Jay Gould,James Keene, Edward Wasserman, Jesse Livermore, J.P. Morgan, Andrew Carnegie, and  others, as He set about attempting *to develop his own approach to the market.* 

Wyckoff’s skills grew as he developed an  understanding of what  makes a market, or a stock, move. He was able to see the market from the views and actions of all it's participants. Big and small, losers and winners..Insiders and outsiders..

His method is based on three laws that govern  market behavior: The law of Supply and Demand, The law of Cause and Effect and The Law of Effort VS Result. 

Wyckoff's Method revolves around  "The Three laws" "The Five Steps" "The nine tests" "The rules of three" "The four phases" "The four qualties (spread/range, close , volume & position )"
"The eight buy or sell setups"

The Five Steps
Step 1: 
Determine the trend and the *position within that trend* of the general market. 
Step 2: 
Select those stocks that are in harmony with the market
Step 3: 
Select those stocks that have built a potential for a move
Step 4: 
Determine each stock’s readiness to move 
Step 5: 
Time commitments with  the turns in the general market 




> Richard Wyckoff became a celebrity name on Wall Street during the early decades of the twentieth century, an epoch many observers believe was truly a golden age for tape readers, chartists, and speculators.  Wyckoff earned a fortune from his Magazine of Wall Street, along with other publications and advisory services.  The accuracy and power of his analysis and predictions gained him a titan-like status in the eyes of his 200,000 subscribers--an incredibly large following even by today's standards.
> 
> (He in fact kept increasing the price of His "trend letter" to reduce the number of subscribers.... it did not work)
> 
> ...







> "Study your charts not with an eye to comparing the shapes of the formations. Rather study your charts or tape from the viewpoint of the behavior of the stock, the motives of those who are dominate in it, and the successes and failures of the buyers and sellers as they struggle for mastery on every move." " Not what Others are saying about markets, but what markets are saying about Others "
> 
> Richard D. Wyckoff




Wyckoff Method does this by looking at the How not just the what.
The How of The What on all time frames.


regards 
motorway


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## Garpal Gumnut (15 April 2007)

stargazer said:


> Hi all
> 
> Could someone explain the different trading styles between
> 
> ...




A good book on Wyckoff is "Charting the stock market  The Wyckoff Method "  by Jack Hutson.

I got it years ago with difficulty from a Melbourne supplier called Success Tools.

I did a quick search in ASF Store and couldn't find it. 

Perhaps Joe could source it for you.

Its not an easy read but instructive. Its very prescriptive and not an easy method to follow in real life.

I now mainly use it if I have difficulty sleeping, reading it along with Phillip Adams LNL 's tiresome lefty drone, on snooze, puts me out in under fifteen minutes.

Garpal


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## stargazer (16 April 2007)

Fascinating read 

Motorway 
thankyou very much for taking the time and effort for a very informative reply.

Garpal Gumnut
Thankyou for the lead on the book.

Cheers
SG


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## motorway (16 April 2007)

The Hutson Book

was a series of articles in Technical analysis of stocks and commodities.

It does have deficiencies.. It has three Authors... The middle section is  a bar by bar analysis by David Weis..
It does contain a form of the nine tests for example
But other aspects only lucky to get a mention..

Not much on effort/ result


For some background on David Weis

look here   http://www.amazon.com/Entries-Exits-Visits-Trading-Rooms/dp/0471678058

Search inside the book with " David Weis "  Some info on His Elliot Wave back ground and why He became a Wyckoff Practitioner..

All books can but be very sketchy compared to the Wyckoff Course material.

There are some articles around the web... And there_ are _some options in obtaining good material..

PM Me if You are interested.


Hank Pruden has a new book out 

He is a professor who teaches Wyckoff at Golden Gate University..

Getting Good reviews

"At long last, someone has taken the time and effort to bring the work and insight of Wyckoff to wider public attention -- and Hank Pruden has done so masterfully, with great clarity and eloquence. Hank has taken the best of Wyckoff's work, combining it with the essential aspects of trader discipline and psychology, to provide a highly readable and particularly useful guide to trading. MUST READING!" 

Jacob Bernstein

The Three Skills of Top Trading: Behavioral Systems Building, Pattern Recognition, and Mental State Management HANK PRUDEN

PART ONE Systems Building and Behavioral Finance. 

CHAPTER 1 Systems Building for the Three Skills of Top Trading. 

CHAPTER 2 Behavioral Finance. 

CHAPTER 3 The Life Cycle Model of Crowd Behavior. 

PART TWO Pattern Recognition and Discretionary Trading. 

CHAPTER 4 Wyckoff: The Man, the Method, the Mystique. 

CHAPTER 5 The Basic Elements of Charting for the Wyckoff Method. 

CHAPTER 6 The Wyckoff Method of Technical Analysis and Speculation. 

CHAPTER 7 Anatomy of a Trade. 

PART THREE Mental State Management. 

CHAPTER 8 Trader Psychology and Mental Discipline. 

CHAPTER 9 The Composite Man. 

CHAPTER 10 Putting It All Together: Ten Principles for a Trader to Live. 


SMI course contains 5 units of study
takes 9mths to work through

So all books can only be in a sense introductions and/or very condensed.


motorway


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## >Apocalypto< (16 April 2007)

stargazer said:


> Hi all
> 
> Could someone explain the different trading styles between
> 
> ...




Hi,

I don't know to much about Wyckoff.

But I know a little about Livermore, He did not use charts that much at all.
Thought they where confusing with all there averages! - From How to trade in stocks - Livermore)

He used a system which is known as the Livermore market key. He had a mathematical formula for working out what he called pivotal points not sure if any one apart from him knows what formula he used.

From what i have read he would read / see the prices coming in off the tape and divide them and work out patterns in the numbers, strengh or weakness.

He kept running price records on a book from his records he could work out the pivotal price for a long or short. He was a excellent tape reader.

He also believed in stacking winers so he would test the market and add to it as it went in his favor.

Also from his works that i have read he was a very strong range follower and break out trader. One of the best things I read him say is: There are only a few profitable times in a year to make money from a market.(from How to trade in stocks, Livermore) So I can guess he would wait and then buy and hold for some time, consistently adding to his winner.

But one very weak point of Livermore he had little self control and did not follow his rules with devastating effects!

I value him much more over a lot of other great trades cuz he could come back even when he was in over 1 million dollars debt at one stage.

I my opinion he was a true market genius in the top 3 of all time. 

Another funny point, I think Gann also lent him cash when he went broke once as well.


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## motorway (16 April 2007)

Wyckoff thought highly of Livermore..



> Livermore has made and can make more millions out of small bank accounts than any operator since Jim Keene.
> Keene rarely ventured the bulk of His fortune in a single play, but Livermore does not hesitate to do so. Supreme confidence in His own judgement, and His ability to come back lead Him to take risks that would appall most operators.





Pruden in the 1970s read and was captivated by reminiscences of a stock operator... He wished someone had built a systematic method from the insights with in it..

When He found Wyckoff he found that someone had and more.

In 1908 Wyckoff wrote the first complete technical approach to mkts
coining words that became common usage ( eg point of resistance )


livermore Did not use charts
His market Key is a type of Point and Figure chart in tabular form
( like a 6 box reversal chart )


But that book is much after the fact
And was an attempt to attract money into a type of managed fund he hoped to earn fees from running ( he was broke I think for the eight time )

Much more to Livermore than that book..

IF you bet that big with that much risk
You either become famous or you disappear without a trace
double or nothing..



motorway


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## rowes (16 April 2007)

Garpal Gumnut said:


> A good book on Wyckoff is "Charting the stock market  The Wyckoff Method "  by Jack Hutson.
> 
> I got it years ago with difficulty from a Melbourne supplier called Success Tools.
> 
> ...




you can get the book from Amazon (united states) delivered for approx 33$AUS


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## >Apocalypto< (16 April 2007)

> But that book is much after the fact
> And was an attempt to attract money into a type of managed fund he hoped to earn fees from running ( he was broke I think for the eight time )




Motorway,

What book are you talking about? the Smitten version? Where did you get that info from?

I read the 1940 original by Livermore. How to trade in stocks.
(his son Jesse Jnr told him to think about righting a book about how he thought people should trade stocks.)

It is amazing how many of his teachings are common place trading now!

Also read Reminiscences of a Stock Operator.

He shot himself after fourth time he was declared bankrupt, just after his book was published. From what I have read he was in deep depression at this point.


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## motorway (16 April 2007)

I have seen those statements made in various places

One source is.
Jesse Livermore Speculator King By paul Sanoff

Here is the true story of a man once blamed for causing the 1929 crash, a man blamed for every market break from 1917 to 1940. Here are his trials and triumphs, told with empathy and forthrightness. Here is one of the most legendary figures ever to haunt the annals of the stock market-Livermore brought startlingly to life. 
1967 (paper). 136pp 

( This book paints a very different picture from the smitten material )


There were two versions of the 1940 book
I have read the one with the Family crest on it..



When Smitten published His books the originals seem to no longer be available


motorway


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## motorway (16 April 2007)

> My principle method is to study the effect of present and probable future conditions on the earning power of the various companies.........Anticipation of coming events is the whole thing....... to study the effects of future business conditions say six months or a year out




Jesse Livermore



> No Man can succeed.......unless He acquires a fundamental knowledge of economics .. with conditions of every sort. The financial position of a company, it's past history, production, as well as the state of the industry in which it is engaged , and the general economic situation




Jesse Livermore




Some quotes from Jesse Livermore
around the time of Reminisces..

Come as a surprise to some maybe

 He was a formidable Tape reader..

Some chapters in Reminisces are Very Good 

Ch XV11

For example... That is very Wyckoff  a number of good themes in that chapter

motorway


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## motorway (17 April 2007)

Trade_It said:


> Hi,
> 
> I don't know to much about Wyckoff.
> 
> ...







> Successful tape reading is a study of force; it requires ability to judge which side has the greatest pulling power and one must have the courage to go with that side. There are critical points which occur in each swing, just as in the life of a business or of an individual. At these junctures it seems as though a feather's weight on either side would determine the immediate critical trend. *Any one who can spot these points has much to win and little to lose, for he can always play with a stop placed close behind the turning point or "point of resistance". *. This study of ‘responses’ to stimulation or outside influences on stocks is one of the most valuable in the Tape Reader's education. It is an almost unerring guide to the technical position of the market. Of course, all responses are not so clearly defined.
> It is a matter of indifference to the Tape Reader as to who or what produces these tests, or critical periods. They constantly appear and disappear; he must make his diagnosis and act accordingly. If a stock is being manipulated higher, the movement will seldom be continued unless other stocks follow and support the advance. Barring certain specific developments affecting a stock, the other issues should be watched to see whether large operators are unloading on the strong spots. Should a stock fail to break on bad news, it means that insiders have anticipated the decline and stand ready to buy.




Sounds like something out of Livermores 1940 book

IT is is out of Wyckoff's first published in 1908



> What is Tape Reading?
> 
> This question may be best answered by first deciding what it is not.
> 
> ...




_markets make opinions_ .. That is why there is oversold and overbought
peril and opportunity..

Wyckoff advises Us to be in harmony with the trend , But to identify the forces of accumulation and distribution and the *pivotal points *where the other side starts to enter..

These are the Buying and selling climaxes

From these seeds in 1908 flowered the Wyckoff/ SMI course and much that is known today as Technical Analysis..



motorway


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## RichKid (17 April 2007)

motorway said:


> Sounds like something out of Livermores 1940 book
> 
> IT is is out of Wyckoff's first published in 1908
> 
> ...




Motorway, I've just come across some of your posts on ASF. 

Being a recent student of the markets I have to say that I'm very glad to have you for company. Your posts are concise and very educational. Thank you for sharing your knowledge and experience. 

I have an interest is Wyckoff's work as well but I'm a long way from your level of understanding. 

I was looking for some pointers on the best work on or by Wyckoff for study, you seem to have give some great pointers in this thread and elsewhere, time to hit the bookshops! If there are any online resources you recommend maybe you can post them in a new Wyckoff thread or in this thread. I would be interested to hear about how you came to practice Wyckoff's methods.


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## RichKid (17 April 2007)

Here's a link to a description of a 'Wyckoff Spring' (the image and commentary shown in the link is included in this post), I'm no expert so I hope this is correct, it looks ok: http://bigpicture.typepad.com/comments/2004/05/wyckoff_spring.html



> Using this chart as a guide, here's a simplified overview of Wyckoff's methodology:
> Wyckoff's World Chart: Source: San Francisco Technical Securities Analysts Association.......
> ....
> Phase A is characterized by a prolonged decline to "preliminary support" (PS on the chart), which provides temporary relief before the "selling climax" (SC). That climax is accompanied by sharply expanding volume as weak holders bail out in a panic. The climax is followed by an "automatic rally" (AR), suggesting the selling has been exhausted, and then a "secondary test" (ST) of the climax lows, during which volume is diminished. Phase B contains basing action characterized by a series of rallies and secondary tests. The "creek" on the chart basically refers to a trendline connecting peaks of said rallies. A "jump across the creek" is a "sign of strength" (SOS) that provides evidence a bottom has occurred and buyers are emerging. These "jumps" occur in phases C and D on the chart.
> ...


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## Garpal Gumnut (17 April 2007)

RichKid said:


> Here's a link to a description of a 'Wyckoff Spring' (the image and commentary shown in the link is included in this post), I'm no expert so I hope this is correct, it looks ok: http://bigpicture.typepad.com/comments/2004/05/wyckoff_spring.html




Thanks for the Wyckoff info.
A stock I bought recently fulfils some of Wyckoff's ideas.
Here is the chart
KIL
Garpal


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## It's Snake Pliskin (18 April 2007)

From my studies of wyckoff one will only get a partial education in it if one does not do the EXPENSIVE course. Anything less would be doing injustice to the way. Material is hard to get in a complete manner. 
The course anwers all the questions one has when studying the partial material. Missing the nuances will see FAILURE.


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## motorway (19 April 2007)

Well If anyone is interested in discussing stocks from a wyckoff Viewpoint
I think it would be worthwhile.. It has been said that 90% of TA is derived from Wyckoff.. The full course is available Something that has been going for
That long on zero hype.. Has certainly stood the test of time.

The best is not always of today.. The best has often been defined and had it's golden age in the past...  The  full course itself still is  a living thing
It is a course as in a real course ,5 units of study with exams and I think life time support.. Said to take 9 mths of steady application..  cost I believe USD $850... 

However It is OK to start somewhere. There is reasonable amount of material to look at and work with  outside of obtaining the course..Which maybe end up leading one to acquire the course in any case.

motorway



> This is a method of judging the stock market by its own action.
> 
> It is intended for investors as well as for traders.
> 
> ...





And way back in 1908
*
Any one who can spot these points has much to win and little to lose, for he can always play with a stop placed close behind the turning point or "point of resistance"*


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## tech/a (19 April 2007)

Motorway.

Thanks again.

Interesting that Wyckoff speaks also of waves.
The combination and proficiency in BOTH Wyckoff methods and Elliot would seem advantageous.
The course I am taking.
There is some great software now days which can help the practitioner.
However a good understanding is definately required in bothe fields for best application.

Well thats my view.

Mind you both can stand alone as trading methods.
Joint application makes sence to me.


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## Bronte (19 April 2007)

motorway said:


> And way back in 1908*
> Any one who can spot these points has much to win and little to lose, for he can always play with a stop placed close behind the turning point or "point of resistance"*



 Nice quote & a very interesting thread...ty


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## motorway (21 April 2007)

Richard Wyckoff made the distinction between mechanical identification of patterns  and the objective identification of supply and demand that might or might not make or produce a certain pattern.

The Father of the former is Richard Schabacker. He studied charts looking for patterns that would tend to lead to the
same result. eg Head and shoulders etc. We look out for examples of idealized models. We look at the artifacts left behind as the price activity unfolds.

Richard Wyckoff begins with a set of principles which He identifies at work and then responds to them with appropriate action in real time.

A principle is more than a pattern.  It is a statement that is always true. 

Wyckoff articulated three primary principles or laws:

1) The Law of Supply and Demand:

Markets go up when demand exceeds supply. They go down when supply exceeds demand. They form a trading range when the two are in a _certain_equilibrium.

(So this is always a starting point what are prices actually DOING)


Hence there are three types of active trends not just two.
Also a fourth state of nothingness.

2) The Law of Cause and Effect

The effect realised by a cause will be in direct proportion to that cause. To get an important move
(the effect), there must be a significant cause.

The cause as a potential is generated in an *active* trading range.

3) The Law of Effort and Result

What is important is not only price but also the character of the volume that is producing price. When volume and price are in harmony, there will be a continuity. When they diverge there will be a change.

These laws operate on all time frames. There is an interaction between time frames..


Wyckoff from these three laws developed a set of further principles for identifying how a market moves, how it terminates its trends and the appropriate trading strategies for the various phases and stages of market activity.


An extremely important observation Wyckoff makes is  that markets move in waves. The magnitude of these waves their action in time and price determines the nature and character of the underlying trends.

(character, behaviour, change of behaviour, movement, ease of movement)

It is critical to always determine the trend of the timeframe we are
trading and it's context within the trends of the other time frames.
And in the context of the trends of the market, sectors and other stocks..

This must be determined in an objective manner...
directly From the price and volume activity .

Step 1: 
Determine the trend and the position within that trend.

This step involves the use of certain trendlines
Both by their Use and by their reverse use.

Some of the things measured are the angle at which the trend is moving, the amount of progress being made on each drive up and drive down called the thrust and the  measurement of the comparative strength, weakness and the adequacy of each correction.
Also  position as defined by the Wyckoff concepts of overbought and oversold. (and He is Not talking about ANY oscillator like a RSI etc..)

At the heart of Wyckoff's method is the concept of Action and Test. Action and Response. If we see an Action We look to the response for the secondary test. A failed test a poor response Then a trade is doubtful. We look and wait for successful tests for positve responses..

We look for the line of least resistance to define itself and become obvious..
Such that after our entry 







> our real example explodes higher.




Wyckoff stated in the quote above  that When We Judge that We should be making a long position We are looking esp at the down waves of activity


> When you are looking for an opportunity to buy, watch for the DOWN  waves in the market and in your stock.




By recognising That markets move in waves a Greater amount of insight is possible. We proceed from principles that are always correct in their application.. When We are clear We act, When We are not clear We wait ..

motorway


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## blig (22 April 2007)

Hi 

I've studied Wyckoff for years. 

I can only improve on "motorways" excellent posts in a few areas. Motorways description of the Wyckoff method cannot be improved upon.

Wyckoff and Livermore had very similar characters. Both lived for the ladies and drinking. Both made and lost fortunes. Livermores losses are well documented. Wyckoff lost his by signing away his "Magazine of Wall Street" business to his nubile young secretary (I used to have the web link to the story in Time Life archives circa 1930's sorry lost them). The "Magazine of Wall Street" was on sold to Dow Jones and was morphed into Barrons. At this point Wyckoff started "Wyckoff and Associates" which marketed the wyckoff course. This course now forms the core of the 2nd Unit of the SMI course, in particular, chapter 7 formed the core of the original method. Both Livermore and Wyckoff used a judgemental approach to the market bound within a core philosophy as opposed to the mechanical methods promulgated at the time by Richard Schabacker (who is incedentally John Magee's grandfather). Both Wyckoff and Livermore understood and described how securities were marketed to the public in the secondary market (absolutely nothing has changed today...nothing). Both Wyckoff and Livermore marketed how to speculate courses, with differing success. 

It is necessary to read both Sarnoff's book and Smittens book on Livermore to get a flavour for the man, both come from different points of view.

Thanks to a prodigous memory Livermore used to work off raw numbers only (in the same way Gary Smith does), whereas Wyckoff worked off charts hand drawn by his office staff. Livermore placed greater emphasis on macro economic factors, Wycoff worked purely off his interpretation of market action. Livermore thought in terms of price levels and price reactions at certain price levels, Wyckoff thought in terms of the character of price action. Livermore bought breakouts and sold breakdowns, Wyckoff bought dips and sold into price rises (in effect Livermore demanded service, Wycoff provided service, a very important point of difference). Livermore was attracted by action/momentum in a security, Wyckoff was attracted to movement in a sleepy security. Livermore was a bottom up analyst as long as macro conditions held, Wyckoff was purely a top down analyst.

Some thoughts...
Its interesting to note the sudden interest in the Wyckoff method in this market wave, it was not evident during the tech boom. Its even more interesting to note that most people who talk about Wyckoff on forums only talk about price/volume as if that is the Wyckoff method. PV considerations form only about 15-20% of the analysis/work. The Wyckoff course has been substantially improved by subsequent owners of "Wyckoff and Associates/SMI" through constant refinement. Only 2-5% of people who start the Wyckoff course will ever be successful. Why? Because it takes a lot of work and analysis on a daily basis even with automation. It does work, but its hard work and expensive in both time and money. Thousand dollar software systems claiming to work on Wyckoff principles are novel but ultimately a waste of time. Wyckoff devotees on the web are no different from Gann, Mechanical systems gurus or Elliott fans, in so much that some are blinded by thier fanatical beliefs. Seek out those who know, but can see the big picture.
For those interested in investigating further:
www.ltg-trading.com/
There are other resources out there, but part of the reason people are attracted to Wyckoff is because of its do it yourself application, so if you find them, good luck on your journey...

Cheers
Bagwan


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## motorway (23 April 2007)

Hi blig... Welcome ..



> Wyckoff lost his by signing away his "Magazine of Wall Street" business to his nubile young secretary




The "nubile young secretary"  Became /Was His Wife .. 

1926 was already  a year where Wyckoff was winding down His activities.
He had felt His Health deteriorating...In May He transferred control Of The Magazine..But retained a significant Bond holding.. This was Also No doubt  involving His Divorce as a factor.... He also planned His retirement from the advisory and broking activities... In June 1926 he suffered a near fatal bursting of the artery of the heart..  Another breakdown in health in 1927 and a stroke in 1928.


He did regain His health and it is at that time He founded Wyckoff & Associates.. Which became SMI... The first full edition of His course was made available in 1931  ... Also at that time He founded the magazine, Stock market technique ...

Immediately He was at work revising His course... Which was completed after His death in 1934... And made available in 1937 By Robert Evans . Who ran SMI for a significant period of time producing numerous lectures on the method himself.

Maybe Without His breakdown there would have been No Course No SMI..



> Wyckoff worked off charts




He started with the tape... Saw charts as an aid to memory
He then transferred the method of tape reading to one of  being chart based and centred..

The number of active stocks exploded through the 1900s-1930s
Whole sectors of activity that did not exist came into being..




> Wyckoff was purely a top down analyst.




He wanted the best stock in the best group in the best sector in the best market.. Best being what would move the "soonest and the furthest"

So a lot  of the analysis is  top down...

The Position sheet produces a top down view but from the bottom up.
Analysis of individual stocks is combined to give a particular market view in contrast to an index ..



> Its even more interesting to note that most people who talk about Wyckoff on forums only talk about price/volume as if that is the Wyckoff method. PV considerations form only about 15-20% of the analysis/work.




Yes... Shows how effective that part is even on it's own.



> Wyckoff bought dips and sold into price rises




Breakout was a valid entry .. But only under certain conditions and the least favoured.. Wyckoff expected to already have defined the trend before the breakout occurred.. He wanted low risk, high return positions by buying near the exhaustion points of the preceding waves .. When the stock was on the "springboard".




> Its interesting to note the sudden interest in the Wyckoff method in this market wave, it was not evident during the tech boom.




I probably might never have heard of Wyckoff or His method except for the Internet... And only because I was always looking for knowledge..

SMI does not even have a website.. You almost have to stumble across it.
The course has not been Hyped or marketed very much

Tom Williams and tradeguider has changed this... Internet forums have changed this... People are interested because they see something familiar ( A lot of What makes up the TA they Know ) But from a fresh and compelling completeness.. And With much promise...

Wyckoff method seems to me to have almost been a secret method



> It does work, but its hard work and expensive in both time and money.




To be in the 10% who can and do.. I would expect takes time and effort and understanding... People pay 1000's for moving average black boxes systems. Or even more for certain courses ..

There is a lot of spin and hype and marketing..

I have found finding out about Wyckoff.. Hard Work.
Big difference.. The old Saw- why would you tell if it worked. My experience not many tell... 

But the Internet is changing that.. 

I don't really think it is expensive... Anyone can do the course But it is what We bring to it ... What We are ourselves that maybe makes it work..

But to even be introduced to a little Wyckoff Will have the serious student of markets with much to ponder and  be stimulated By imo..

A student of markets
motorway


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## motorway (25 April 2007)

> User:Jccoppola
> From Wikipedia, the free encyclopedia
> Jump to: navigation, search
> James Philip Coppola III ("J.C.") (born June 8, 1968) student of the markets, and well read in the classics of Wall Street. Little has changed, ever, in the speculative nature of “campaigns” that take place on Wall Street. The simple truth is human nature and its influence on price, run fairly constant through a boom and bust cycle when financial market history is rigorously studied. Mr. Coppola has done such significant research, and early in his career, Mr. Coppola was influenced by the writings and teachings of Richard D. Wyckoff -- trader extraordinaire and investor educator in the early to mid 1900's. Mr. Wyckoff's teachings are well summarized in The Anatomy of a Trading Range, by Jim Forte [1].
> ...





"The simple truth is human nature and its influence on price, run fairly constant through a boom and bust cycle when financial market history is rigorously studied."

Boom bust cycle operates on all time frames

Boom bust cycle produces even the individual bars on a bar chart..

There are useful trends (that is ones that can be identified and profited from) because ..

markets are not random ... They are not random because they are 
" manipulated " 
They are manipulated By Demand and Supply which spring from information of some kind (even if its only the fact of a certain price movement having occurred). The existence of Information , it's ownership, dispersal, contingency and timing.

Both information and Manipulation are broad concepts.
The choice of  limit or market orders is a form of manipulation.
Waiting to buy or sell when something happens is manipulation.
Price movement itself is manipulation... Manipulation is another way of saying 
Non random..
By choosing to buy sell or hold. Everyone Big or small, informed or uninformed
is manipulating  price in some way.

Above are the links  to the two mentioned papers..

Both of these I think were students of Hank Pruden ..

Here is a third paper By Pruden Himself

http://www.hankpruden.com/MTWyckoffSchematics.pdf

The line of least resistance is the immediate trend
They arise from a certain technical position
And at their ends produce a certain technical position.

A certain information ( oversold ) builds them
A certain information ( overbought ) exhausts them
price and esp volume activity disperses the information.

Wyckoff judges a stock from it's own action.
Not the artifacts produced by a stocks action.

Those who know more than You
can not help reveal that knowledge
by their own buying or selling
and the subsequent action of the stock

NO moving averages etc

Only the four qualities 

Price, volume, range/spread, close and position.... also activity

motorway


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## motorway (25 April 2007)

> Proof that these rules and methods are correct is also found in their adaptation to other forms of trading, chief among which is the detection of accumulation and distribution at certain important turning points in the market. I have used this method successfully in forecasting the market for these principal swings and find it to be a much more comfortable way of following the market, because it is not so confining.
> 
> Preparation for a long advance or decline, as well as for the intermediate movements are numerous, is clearly apparent to those who understand the art of Tape Reading. In judging the market by its own action, it is unimportant whether you are endeavouring to forecast the next small half hourly swing or the trend for the next two or three weeks. *The same indications as to price, volume, activity, support and pressure, are exhibited in the preparation for both. The same elements will be found in a drop of water as in the ocean, and vice versa. A study of the stock market means a study in the forces above and below the present level of prices. Each movement has its period of preparation, execution and termination, and the most substantial of movements are those that make long preparation. Without this preparation and gathering of force, a movement is not likely to be sustained.*
> On the other hand, the greater the preparation, the greater the probable extent of the swing. Preparation for the principal movements in the market will very often occupy several months. This may be preceded by a decline, in which large operators accumulate their stocks. They may even precipitate this decline in order to pave the way for such accumulation.
> ...






Markets are  in a constant  process of building Trading Ranges, and then leaving them. Markets do this continually . Richard D. Wyckoff was called the master of the trading range.

Trading ranges are occurring on all time frames...
building a "cause" having "effect"..





> The same elements will be found in a drop of water as in the ocean, and vice versa.




Today The term fractal is applied to this observation.

Wyckoff uses the words prediction and forecast

in the sense of anticpation..

When a Man is on tip toes We anticipate That He will descend..
We can not predict exactly when .. But We know that it is a given . A forced move..



> When a market is in the midst of a big move, no one can tell how long or how far it will run. But when prices are stationary, we know that from this point there will be a pronounced swing in one direction or another. There are ways of anticipating the direction of this swing.
> Richard Wyckoff ,1909




The line of least resistance is a forced move...

motorway


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## Chorlton (25 April 2007)

motorway said:


> The Hutson Book
> 
> 
> 
> ...






Hello Motorway,

Have you read the above book by Hank Pruden??

Just interested in getting it but would welcome any comments about it beforehand.....

Kind Regards,

Chorlton


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## Garpal Gumnut (25 April 2007)

Chorlton said:


> Hello Motorway,
> 
> Have you read the above book by Hank Pruden??
> 
> ...




Wyckoff was an interesting but complex bloke who had a simple system that served him well.

See above for picking the bottom, creek, spring etc., its not rocket science, any TA course would cover this using different nomenclature.

He believed in wave theory. Google wave theory and thats covered.

He also used sector averages e,g banks  added their prices and charted them and then compared his picks vs the average.

He lived well and flew high and crashed. He would probably have a DSS Case Manager if he lived in Australia today. Or he may have worked for Macquarie as they live live by different rules.

His ideas make intuitive sense, but they are not complicated.

If you want to run a course on anything, incl Wyckoff, make it complicated to give the punters value for money.

Garpal


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## motorway (25 April 2007)

My understanding is that Hank Pruden did the SMI-Wyckoff course
in the 1970's... He also new Robert Evans ..

From comments from around the web I have seen ... Those reading the book consider it a  good resource... I have seen it compared favourably to Unit 1 of the course itself regarding the content.

I have also seen comments stating that it draws on the material he has previously published before ..

I don't think it hits our shores till June... It is available on Amazon
for  just under $50 USD... It is Hardcover. At this stage I have seen No where where We can "look inside" .

Hank Pruden has been teaching Wyckoff for a significant period of time and set up the faculty at Golden gate University..

Seeing it is is a proper book .. With His background.. I would expect it to be good both in content and layout..

However I have not read any part of it Myself.

I would expect it to be a better more rounded introduction then the 

Hutson book.. which was a series of magazine articles from three authors assembled into a book...

With Prudens book I have also seen some pleasantly surprised at the amount of material The book does contain.

I can not really verify anything for sure

For comparison with the SMI course

Unit 1 is a general overview
basic principles basic tools
buying selling tests
types of charts and their uses in Wyckoff method
accumulation distribution ,trends etc

unit 2

Is The three volume text of Richard Wyckoff himself a
massive amount of material

unit 3

Are the basic Lectures
That are a condensed review
of much of the material from units 1&2

unit 4

Is  about putting theory into practice
Judging technical positions
selecting the best stocks for any phase of mkt activity etc

unit 5

Is a final review

motorway


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## Garpal Gumnut (25 April 2007)

motorway said:


> unit 5
> 
> Is a final review
> 
> motorway




Dear Motorway,

With respect to you and Pruden,

The situation is similar to that of James Joyce when he wrote Finnegans Wake, he said he would keep the "Professors" going for 150 years. 

Livermore and Wyckoff were larrikin investors/tapereaders, not academics.

Pruden has heaps of theory and is useful, but, if you want to be the biggest Lothario on the block you have to put the book down and ask the first girl on the floor for a dance.

Practice makes perfect.

Garpal


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## wayneL (25 April 2007)

Garpal Gumnut said:


> If you want to run a course on anything, incl Wyckoff, make it complicated to give the punters value for money.
> 
> Garpal



Most punters don't want complicated IMO. They want the one SECRET that will make them a millionaire by next week.

That's where the sales are. IMO


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## motorway (25 April 2007)

Garpal Gumnut said:


> Wyckoff was an interesting but complex bloke who had a simple system that served him well.
> 
> See above for picking the bottom, creek, spring etc. , its not rocket science , any TA course would cover this using different nomenclature.
> 
> ...





Hi Garpal..

His ideas are simple.. And much echoes His Methodology today
Of the publicly available material most of it seems to be only some basic principles from unit 1

There are a zillion indicators that attempt 
to judge the character of action
but mainly deal with instead appearances

Wyckoff is about judging the character and not just appearance.

All men who wear suits are not businessmen
All those who wear tracksuits are not great athletes
All those holding a microphone are not great singers.

for example all breakouts are not equal

It is the character that determines these things

If We can not judge character then We have to jump on just appearance .

Tom Williams did the course in the 1960s... 
has taken the principle of effort and result and 
Tradeguider has resulted

It is interesting to hear who has done that course..
Or developed methods from it..

Wyckoff developed simple methods that 
echo many methods of today but were used to judge character not appearance.


What did he devolpe
trend lines
relative strength
wave theory
four market phases ( some today say stages ) etc etc

But used to judge character not appearance

for example



> From a Reuters seminar on TA
> 
> "Trendlines are one of the simplest and most useful
> indicators in Technical Analysis. They also happen to be
> ...




A third also was the reverse use of trend lines
which require only one point to define

Also much oringinal methodology concerning bar and point and figure charts
and  their combination

de villiers and Wyckoff split over this point,

Wyckoff used both in a coordinated manner. 

And as blig said still being refined up to  today

And many others like John Bollinger and Richard Arms
heavily influenced

100 years and counting..

So anyone using a "simple trendline" is using in a way Wyckoff

But as any carpenter will tell you a straight edge is a powerful tool
IF you know when and where to place it.

A zillion indicators I don't think would do as well

motorway


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## motorway (29 August 2007)

http://www.traders.com/Reprints/PDF_reprints/HP_PRUDEN.PDF


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## RichKid (6 October 2007)

motorway said:


> http://www.traders.com/Reprints/PDF_reprints/HP_PRUDEN.PDF




thx for that motorway!


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## tech/a (7 October 2007)

Hmm point and figure is in Tradeguider I wondered why?


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## motorway (7 October 2007)

Just Lost a detailed reply




The short story

P&F is a chart that charts units of  return (trend continuation) Vs units of risk (trend reversal)
allows an objective technical position be given to every stock..

out of technical positions..........trends arise........

P&F is a graphic of this "work"

congestion zones are important 

page61 and 69 Nick Radge on why He uses EW

seek opportunities
define trends and positions in trends
prove disprove..

He could have been talking about Wyckoff P&F

charts are just tools
principles are what matter..

P&F charts

have trend constants
bullish bearish definitions

objective trend lines - best known 45degree (1 unit return for 1 unit of risk)

relative strength

every chart can be placed in a technical position by its position on a P&F chart

which being a square grid allows any mathematical relationship to be compared across all charts......

A P&F chart could just be a vertical column
reversals are significant

A number of reversals together produce "zones of congestion"

mathematical relationships.....




Not squaring of price and time (Gann)
But the squaring of return and risk...continuation and reversal.. volatility cycles 


P&F (cause and effect) + Bar chart (effort and result)

Two specialized tools
coordinated together

motorway


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## motorway (7 October 2007)

First Draft came back (magic )

So I post it as well 


Here is a hint

Point and figure

chart a trend continuation Vs a trend reversal

What do these represent?

trend continuation = reward
trend reversal = risk

How many units of reward for each unit of risk
such a chart is another tool to help reveal
The behaviour of those active in the stock..

(suddenly the hurdle of the 45 degree trend line might have a special relevance)

It is very easy to give an objective technical position to every stock in the universe......

Bullish bearish definitions
above below trend line
trending or ranging (but not through time)


Why are the most important part of the chart the "horizontal zones congestion"

support resistance etc

because clock time (and time is a tool of manipulation) is absent
all that you are left with are the swings of smart money...

A P&F chart could just be one vertical column
Every time it reverses column is for a reason.

The ratio of trend continuation  to trend reversal
is the trend constant

So We are dealing with volatility (again risk)


Because it is a square grid chart
all charts are directly comparable

on any criteria all charts can be classified as to a technical position

This can also incorporate relative strength


Now ALL charts are just tools
It is the principles that matter

But Wyckoff made special use of P&F as a special tool

In Nick Radges Book page 61 & 69 His reasons for using EW are similar Why a Wyckoff practitioner uses P&F .....defining opportunity, technical positions
and Prove or disprove (1 unit of return for 1 unit of risk etc)


motorway


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## tech/a (7 October 2007)

Motorway.
Thanks.
I think this is best seen graphically.
Here is the P&F and Bar chart comparisons for MGX over the same timeframe.
The congestion and the release into a trend and the risk reward can be seen clearly or clearer in the P&F.

Is there a prefered reversal amount or is it as I suspect more about the pattern?


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## motorway (7 October 2007)

Box Size

A study done on USA stock prices came to the conclusion that over time
the average USA stock price was between $40 and $60...

This was because of the use of splits and reverse splits to keep the share price looking "right"......

A stock much dearer was to seen to be too highly priced and a stock much lower was seen as having something wrong with it...

hence the historic use of a box size of $1...

approx 2% of the price and a natural filter that would keep one out of low priced stocks that if they were any good would be priced higher even if only through capital management .........

It would still pick up low priced stocks of extraordinary potential ..

Also short term traders used margin and sought points gain not %...So looked to higher priced stocks....

Stock prices were quoted in eights and there were half ,quarter and eighth point chats used as well...

So a box size of 2% of either the last price or mid point of anticipated move  is a good starting point...

looking at the bar chart and the size of the swings between support and Resistance ( The swings of smart money ) can be useful when looking at particulars........

You don't want to fit the chart to the instrument and make it look good
You want the chart to be a hurdle a "test" to judge the better opportunities.

Bolinger ( his Bands are very P&F ) suggests the box size should incorporate the square root of price in a formula for box size ( he quotes an old rule the square root rule.. The square roots of prices move proportionately in rallies across stocks making up an index )

The ultimate box size is a work in progress...................

I think the P&F charting in tradeguider is poor

I use log box size 2% to screen for opportunities , define trends and technical positions..scalable and meaningful comparisons stock to stock index group etc ) zoom in or out to different magnitudes ( related to time frames )
with multiples of 2%  ( eg down to .25% to even 32% with stocks below .10 )

You then can  determine a box size from support and resistance ( filter out everyone but the smart money ) with a certain fraction of those swings...

At the cutting edge the "public" thinks in terms of points
and bid and offer have  certain fixed point values....

log charts have a different look and You must be careful with half way points
( They are not at the half  way point  )


relative strength charting should be log

log should be used for screening

eg how many stocks above below 45 degree trend,
how many are below trend but with a bullish definition,
how many are above/below trend and in zones of congestion of 5 columns width etc..

I can screen for those "technical positions" and pick candidates ahead or behind the trend and technical positions of the market..

As Wyckoff did ... picking the best candidates for every market phase..


The P&F chart Wyckoff called a cause and effect chart and a manipulation detector..It is also a trend performance measure 

cause = potential ( This potential I see as having three factors behind it )

Now potential is only potential

the bar chart is Wyckoff Effort ( Volume ) and result ( the price movement)

This is an actual  fact It is a potential in the process of being  or that has been realized...

Cause = potential ....leads to  effort that produces a result = relative out performance ... is the final effect

relative strength is a reality... ( an end and beginning)


All of this is a cycle that leads back to a state of new potential..

Charts are tools to observe the 

"three laws"
and apply the "five steps"


possibilities are great eg
mkt is breaking trend line on bullish definition from 5 columns of congestion

stocks in that market are in or out of harmony .. ahead or behind
in the same or different technical positions.......

and where is the *VOLUME* coming in and how ?

Coordinating  from the Bar chart and back again.....Always looking for Changes of behavior.....identifying the phases of the market cycles.

Underlying  this are principles

The charts are just tools
to help recognize and apply  







> the student must first learn and understand the motives, behavior patterns and the emotions of the people who go to make up the market.




The recent "correction" was an very good example of why understanding

these motives, behaviour patterns and emotions........
Of the value in determining these technical positions  ( That is what they really are ) and then looking for the change of behaviour and where the "Volume comes in" 






> It is difficult to over-emphasize the importance of studying the technical position, particularly when making a speculative commitment. Many people may say, What is a weak or a strong technical position? My reply is, in brief, that a stock is in a weak technical position on the bull side when it has been purchased and is held by a large number of outside speculators; when most of these are looking for a profit; when the price of the stock has advanced to a point where no further buying can be stimulated for the time being. It stands to reason that when buying power is exhausted a stock must decline, no matter how strong its finances, management or earning power.
> 
> On the other hand, a stock is in a weak technical position on the short side when the bears have exhausted their ammunition by selling all they can afford and when the buying power of investment and speculative purchasers is such that it resists the pressure of the bears; in other words, when demand overcomes supply. The weakness in such a position is found in the fact that all those who are short are potential bulls; they must, sooner or later, cover their commitments in order to close their trades.
> 
> ...



motorway


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## motorway (7 October 2007)

The Point and Figure Highlighter is used for searching for latest Point and Figure signal – either bullish or bearish.

The basic bullish signal is a double top breakout, when a column of Xs rises above the previous column of Xs, for example:



The basic bearish signal is a double bottom breakout, when a column of Os falls below the previous column of Os:



You may choose to define a bullish breakout as one that has broken above (or below) more than one previous column of Xs or Os.

The Point and Figure Highlighter allows you so search for these and multiple top and bottom patterns.

For more precise Point and Figure patterns, it is better to use the Point and Figure Pattern Highlighter 0 on page 

The Point and Figure Pattern Highlighter is used for searching for any Point and Figure patterns.  These are the same patterns which you can search for on charts using the Identify Patterns tool – see page .

*There is no restriction to which patterns you can search for provided you can write the simple formulas yourself.  Some have already been coded for you to show how easy it is.*
You may qualify your pattern search in three ways.  You may tick any or all of these Conditions:

·      And Current Risk-Reward Ratio (CRR) is between

o  This allows you to filter the results to ensure only those with a Current risk-reward ratio in the range you specify is highlighted

o  For more details on Current Risk Reward ratio please see 0 on page   

·      And Current 45 ° trend is

o  This allows you to specify whether the main 45 ° trend is Up or Down at the time. 

o  For more details on 45 ° trends please see 0 on page 

·      And the % to Target is within

o  This allows you to filter the results to ensure only those with a % to the target is in the range you specified

If these qualifying conditions are ticked, the resultant charts from the Highlighter will show the automatic 45 ° trends and Current Risk-reward 

It is possible to search for Point and Figure breakouts on Price as well as Relative Strength charts. 



·      Tick P&F Of Normalised RS against to change from a price Point and Figure to a Relative Strength Point and Figure, and

o  Click Search to select a Relative Strength file code 

Or

·      Leave Unticked to leave as a price Point and Figure 



Soon maybe have an esignal feed with this 

P&F should not have time distortion in it 
So No use making box size too small if using eod data

Here is a 1 box chart and a 3 box chart 
with a 4% log box......

Wyckoff always starts with a 1 box chart ( Here drawn in Wyckoff Style )

red is not stop
green is not go
strength is seen in weakness
weakness appears within strength
what needs to be emphasized is the flow trend and congestion...

motorway


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## Garpal Gumnut (19 November 2009)

I have started reading again after a lapse of many years 

"How To Trade In Stocks"
The Livermore Formula for Combining Time Element and Price.

by  JESSE L. LIVERMORE

It is a refreshing read and though my edition was printed in 1940 , it is as timely now as when Livermore traded.

I would recommend it to new and existing ASF members.

gg


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## ThingyMajiggy (6 January 2010)

I am just reading through Reminiscences of a Stock Operator about Livermore, how he used to trade in the "Bucket Shops" reading the tape, what would the equivalent be of this today? The DOM? Market depth? P&F chart on lowest tick increment?


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## MRC & Co (6 January 2010)

Charts/reading order flow off the price ladder (also known as DOM or order book).

Bit different these days.  He remembered price patterns (charts), not your traditional 'triangle mumbo jumbo out of TA textbooks', but specific patterns relating to specific markets, be that corn, cotton, or an individual stock etc, and tested the market with actual trading to work out active volumes (order flow).

Algos have unfortunately, changed the landscape and made order flow a lot more blurry......


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