The Wyckoff Method

motorway · 8 March 2008

Very good contribution ..

It is about identifying the principles

whether it is on Tim's 3 min chart
or a daily chart.....

The difference between the trading of the two
is seen in terms of aggressiveness , frequency , and magnitude .

Not a difference in principles..

eg Tim might buy in a Selling climax after a clear Preliminary Support
nomore would be wise to wait for at least a clear LPS

It is the SC that ends the down trend

The trader identifies a cause large enough for the effect ( the move ) they want to capture...

The terms used may seem familiar but strange

A LPS ( last point of support ) is what it signifies... The last point of support
it is not support "NOW" but the last point where demand was seen to overcome supply....... Important aspects of a LPS is the depth , duration and of course always the volume......

Remember what Wyckoff teaches in step one of the Wyckoff method. Knowing the position of the price in the trend is as important as knowing the direction of the trend.

All up trends and down trends are the result of a series of trusts in the direction of the trend separated by corrections. Some individual issues that are in harmony with the market from the stand point of the direction in which their trends are pointed will make relatively larger thrusts and experience relatively smaller corrections than the market as a whole.

These are the issues that are most likely to have the best potential to produce a profitable trade. Relative strength or weakness can be measured as soon as the first thrust in a trend has been completed. This will likely be even before the trend channel has been clearly defined.

http://www.wyckoffstockmarketinstitute.com/wyckoff_step2.htm

Traders respond to input based on the model of the market they have
built for themselves. A positive response grounded in Wyckoff's
theory of the Composite Operator will have distinctly different--and I
would argue, consistently more profitable--outcomes than will a
negative response to input based on the theory of Contrary Opinion.
Understand and work with the Composite Operator--rather than against
the Public.

Pruden

I would add rather than against or with the public

nomore's chart is a tool to track this Composite Operator ..

High Volume should always be noted

it is effort and some result will follow......

So would Wyckoff Method agree that MCR is in the bottom of a progressively higher peaking and higher support level cycle that could see my predictions come good? and is the path of least resistance upward with a spiking nickel price?

Here is a start the bottom chart is the XAO
The Volume is of MCR.......

It is a Study of Responses
Is the large volume bar telling in anyway ?
when seen in some context .

What was the CO doing on that day when the XAO went down !

or is there some simple explanation for that volume ( I am only looking at the chart )

The CO ( or CM ) is they, is professional money , it is those who know.. But it also Mr Market. It has away of making people buy at tops and sell at bottoms

Fear Greed and Boredom....

Because it is a comparative study I have used a log scale

motorway

Timmy · 9 March 2008

nomore4s said:
Okay I thought I'd post up this chart of CEY that I've been using to get a better understanding of some of the Wyckoff princples involved in the accumulation and mark up phases.

Also remember just because you can identify a trading range with a SC, AR, ST etc doesn't mean it's accumulation - it could also be distribution or even nothing. It's about the character and substance of the TR not the "pattern".

The possible buy zones ... are only buy zone areas where you would be looking at getting into the stock after you have identified acc going on and have established some support and resistance zones.
The interaction between price and vol also provide alot of insight to this TR. Where does the vol come in and what is the effect that vol has?

Hi nomore4s ... the quotes above from your post are the specific points that will be going in my notes - really great stuff thank-you.

Re your sig ... when I read it a little while ago I thought ... that's a very Wyckoff perspective ... very nicely put.

Edit: Just thinking some more about your post and chart so wanted to add: your perspectives are so different to mine, and the chart is so different; its a stock not a future, day chart not intra-day ... but the principles are instantly recognisable ,and when you put the chart and post in these terms the chart becomes 'just another chart', not a futures contract, not a stock, not a currency pair, not a commodity ... not anything but something to buy and sell ... if I think in those terms, that's very,very powerful going forward...

nomore4s · 9 March 2008

Timmy said:
Re your sig ... when I read it a little while ago I thought ... that's a very Wyckoff perspective ... very nicely put.

Thanks Timmy.

My sig was actually stolen from one of MW posts : but it just struck very true for some of my early trades.

motorway · 10 March 2008

OK

Chart marked with some Wyckoff Principles

IF SC is a selling Climax

was there Preliminary support PS ?

ND = No Demand

AR = Automatic rally... reasonable duration and thrust

Now do We have a successful Secondary Test ST ?

Volume is falling and lower than the SC
The thrust is shortening SOT

Also The B% ( inductive analysis ) is tending to confirm..

Buy support , Sell resistance
Support is "buying pressure" overcoming selling pressure

Trading range ..

Volume while falling is still high..

TEST RESPONSE TEST RESPONSE....

motorway

motorway · 12 March 2008

Last Bar shows DEMAND

remember

Support is "buying pressure" overcoming selling pressure

Support is NOT any of the lines .. They are only frames ( justified though)

http://wyckoffstockmarketinstitute.com/chart-series-points_interest.htm

Different index

But I have marked the four waves
and the commentary is applicable

The only waves Wyckoff Practitioners are interested in
are the Buying and selling ones..

They don't have to do anything..
We measure

DEMAND & SUPPLY
CAUSE & EFFECT
EFFORT vs RESULT

Effort and result ...........The ease of movement changed in the last bar.

read the comment of effort and result in the
5 pages of the SMI course ( just reverse the example )

Downhill is starting to become Uphill
line of least resistance

But the Wave is still to be completed...

Secondary test is still in play

motorway

josjes · 12 March 2008

motorway said:
Downhill is starting to become Uphill
line of least resistance

But the Wave is still to be completed...

Secondary test is still in play

motorway

Meaning that we still have another wave down that will test and break the 11 March bottom ?

motorway · 12 March 2008

Meaning that we still have another wave down that will test and break the 11 March bottom ?

No.. ( though there might )

It has not started to go up..
The "thrusts" are still down
and there are only corrective moves up SO FAR

That is why We need to see a successful "secondary test"

All we can say for sure is that the ease of movement is not so easy now.
And demand met supply in that last bar..

There was support.........

The wave down is not completed as in the sense used in the article in the link.

Any move up will reveal more "points of interest" and reveal "character"

I will try and keep the chart updated

Each move is a test and a response. see ?

motorway

josjes · 12 March 2008

motorway said:
No.. ( though there might )

That is why We need to see a successful "secondary test"

So what consitutes a succesful "secondary test". What I am trying to get is if we can know what this secondary test in advance then we can take appropriate action.

Cheers.

motorway · 12 March 2008

josjes said:
So what consitutes a succesful "secondary test". What I am trying to get is if we can know what this secondary test in advance then we can take appropriate action.

Cheers.

The Secondary Test should have less selling then on the selling climax, We should see decreased price weakness, a narrowing of the spread and most importantly decreased volume. A Secondary Test confirms that the down move has been stopped.

( It is not only the bar but the entire thrust down..compare No-3 to No-4 )

Now ... If this is a ST ... It is then the question of stopped for what purpose.

This is Cause and Effect

Three possibilities

motorway

Timmy · 12 March 2008

motorway said:
The Secondary Test should have less selling then on the selling climax, We should see decreased price weakness, a narrowing of the spread and most importantly decreased volume. A Secondary Test confirms that the down move has been stopped.

( It is not only the bar but the entire thrust down..compare No-3 to No-4 )

Now ... If this is a ST ... It is then the question of stopped for what purpose.

This is Cause and Effect

Three possibilities

motorway

Hi all,

This description of the Secondary test is very useful, almost like a checklist of what to be on the lookout for.
So the decreased price weakness is reflected in less price weakness (shortening of the thrust for example), check
narrowing of the spread (looking across a number of bars, not individually), check
decreased volume, check.

One of the things I grapple with is not just applying a checklist but keeping front of mind what it all means. Having a checklist-type approach works for me, but I also must constantly and consciously remind myself of why these checklist items are important. This may not be relevant to others, in which case please allow me to talk to myself for a few moments, but watching out for these indications of lessening of price weakness, reduced volume on the ST down leg, and so on shows me that either the selling is lessening in intensity, or buying is increasing in intensity, or both are occuring. I have to remind myself of this because it is changes in the level of supply and demand and buying and selling that is important, not the actual checklist items themselves.

For example, I may see a bar or two that have wide spreads, for example, and this might raise questions in my mind about the validity of the ST, is it actually happening, doubts etc. But maybe the wide spreads are on low volume, and maybe the close on each bar is strong or at least not too weak - these are signs that the push down in price on these bars may well be transitory, there is still good demand - and this is what I am looking for, not the actual checklist items themselves.

----

Motorway - you say here that a ST confimrs down move has stopped, and ask 'stopped for what purpose' ....

Let me have a go at this. Hope I am on the right track. I think I see 6 possibilitites, so I know I am on the wrong track somewhere !

Price stops falling because demand and buying has increased
OR
supply and selling has decreased
OR
Both.

Price has stopped falling so it can now go :
Up
Sideways (probably most likely at least for some time as accumulation continues).
or down after a pause (probably the least likely given this is an ST).

CFD · 13 March 2008

Timmy I think you have 2x3 there rather than 6.
3 reasons for it stopping and 3 possible outcomes.
If prices fall looking for demand, the question is did they find it? If yes then prices could trend back up. If no (the fall stopped due to no supply) then the fall is likely to continue when volume returns. If it's your 3rd reason for stopping (both) then a sideways move could be on.

I wonder what the real answer will be

motorway · 13 March 2008

The advisability of having even a news feed in the room, is a subject for discussion. The conclusion is that ‘news’ is ‘news’; the recording of what has already taken place, no more, no less. It announces the cause for the effect that has already been more or less felt in the market. On the other hand the tape tells the present and future of the market. Money is made in Tape Reading by anticipating what is coming - not by waiting till it happens and going with the crowd.

The effect of news is an entirely different proposition. Considerable light is thrown on the technical strength or weakness of the market and special stocks by their action in the face of important news. For the moment it seems to us that a news feed might be admitted to the sanctum, provided its whisperings are given only the weight to which they are entitled.

RDW 1908

Did We have some news ? Was it good ?

Do downtrends end with good or bad news ?

There was very little "good Buying" in the small rally from the low..
That Bar closed in the middle on highish volume---> Supply

There was demand emerging in the previous down bar that broke below the "point of support" and set up a shakeout ( how many would have gone short there , but where was resistance ?)

There is no successful Secondary test completed yet

Tomorrow could be very revealing...

Stopping is not the same as Starting

It can stop.. to consolidate the down move, back and fill, build more cause
and continue on down..

The positive is the lower volume in this last bar

The three reasons ?

Accumulation.........Not proved
re-distribution
nothing

People can just lose interest in a stock ( no sponsorship )
But with this being the XAO... nothing is not a real option...

Now If the DOW falls 300 pts tonight
and headlines are all doom

And the XAO spikes down but meets demand ...Then that would be a real successful test..

If prices fall looking for demand, the question is did they find it?

Yes , but in the shakeout bar...( the fact it seemed to break a support line produced the high volume )

If yes then prices could trend back up

we got the "good news" Supply withdrew and demand ( short covering ? ) chased....

But then the demand that was there was overcome by an almost continuous
flow of supply...With only "buying pressure" matching the selling near the close

( see the little P&F ....it is 2pt 2 rev chart..
No reversals on the way up, why ?
But all the way down the move was tested )

then the fall is likely to continue when volume returns

We are at a critical point and no doubt follow US lead
But it is then when the volume comes in that will reveal..

The Selling Climax marked is only a SC if it is proved by a secondary Test..

Test Response Test Response

Building cause..

discussion

motorway

motorway · 18 March 2008

http://www.wyckoffstockmarketinstitute.com/wyckoff_step4.htm

In each case, the primary trading position represents a last point of support following a sign of strength if an up move is anticipated, or a last point of supply following a sign of weakness if a down move is anticipated.

Demand and Supply , supply and demand ( all there is )

Waves of Buying and selling.........

Price moves in waves
A wave begins when the preceding wave finishes ( simple )
They last as long as they gather a following ( obvious )
when the following comes to an end
the next wave ( a contrary wave ) begins

4 down waves still

Thrust on the fourth wave
is still less

Still not much "new ground" achieved

Last bar small range higher volume close near the middle
What is the context ?

This wave is running into opposition

BUT (That is all )

In each case, the primary trading position represents a last point of support following a sign of strength if an up move is anticipated, or a last point of supply following a sign of weakness if a down move is anticipated.

motorway

motorway · 19 March 2008

4 down waves still

Thrust on the fourth wave
is still less

Still not much "new ground" achieved

Last bar small range higher volume close near the middle
What is the context ?

And What do we see on a much smaller magnitude ?

4 waves down
Thrust shortening
NO new ground

Coiling

even some rising points of support...

tomorrow We will see the response

On this chart
the behavior changed..

motorway

josjes · 19 March 2008

motorway said:
And What do we see on a much smaller magnitude ?

4 waves down
Thrust shortening
NO new ground

Coiling

even some rising points of support...

tomorrow We will see the response

On this chart
the behavior changed..

motorway

How is the response today Motorway. Do we see a successful Second Test ?
Look forward to your latest analysis. Cheers.

motorway · 19 March 2008

josjes said:
How is the response today Motorway. Do we see a successful Second Test ?
Look forward to your latest analysis. Cheers.

We saw some "good buying" and (imo) a Sign of Strength..

Look at the 2x2 P&F

unlike the move at the left that was rejected

There is "work" at the top ( small congestion zone )
which did not produce weakness

( ie .. the profit taking was absorbed a little re-re accumulation zone )

Adjustment to the new price level
CONSOLIDATION

the last 5 columns are a "strong pattern"

Do we have a successful secondary test ?

too early to say on the daily chart

we need to see the red trend line negated..

However

There was volume off support
Demand did over come supply
There was an increase in volume and range
and the close was at the high of the bar.

imo we Need to see a rally into the middle of the larger trend channel
or support continue to hold

In each case, the primary trading position represents a last point of support following a sign of strength if an up move is anticipated, or a last point of supply following a sign of weakness if a down move is anticipated.

You have to define the size of the trends you want to ride..

and look for that Last Point of Support..
I see a Sign of Strength...

on the scale of the 2x2 there was a LPS already and a good move up

motorway

Broadway · 20 March 2008

Motorway,

In a down trend with a selling climax I imagine volume being made up of 4 groups,

1. people selling their longs in a panic
2. people shorting but coming late to the party
3. people entering longs for the immediate rally up - 'wait for the herd, expect one third' type traders
4. people entering longs for the eventual ride up once the full wyckoff corner has completed.

I always wonder how much of the mass of volume at a selling climax is group 4?

Because when I see a selling climax with seriously large volume, I wonder if the size of the volume allows us to label subsequent consolidation as a reversal, rather than a continuation?

Or to rephrase, can the level of volume at the SC be predictive of reversal?

thx.

motorway · 20 March 2008

1. people selling their longs in a panic
2. people shorting but coming late to the party
3. people entering longs for the immediate rally up - 'wait for the herd, expect one third' type traders
4. people entering longs for the eventual ride up once the full wyckoff corner has completed.

I always wonder how much of the mass of volume at a selling climax is group 4?

You start to see 4 even at preliminary support...
The wider the price spread the higher the volume in the SC

the more positive anticipation can be

But what really reveals is the strength and duration of the Automatic Rally

ie does the dead cat have any life ?

eg a small lateral move would be a negative sign

An Automatic rally that is able to make ground back and have some duration

Is cause for positive anticipation.... Because there is not just short covering
and weak longs...there is suggestion of some of your number 4

A SC is only a potential SC until proved by a AR and ST

A ST is only a ST until proved by a SOS

and a SOS needs a last point of support

such that then ( as you have put it ) the

full wyckoff corner has completed.

You are referring to the "character"" of the SC

The answer is I think yes.... It is always about the character

The probability is higher

and short term traders can take the a position in these individual waves

But until proved it is only potential

TEST RESPONSE TEST RESPONSE

motorway

motorway · 20 March 2008

Point and Figure
is a very instructive tool

imo It can almost teach you how to trade

I have used P&F for ages

even before i ever heard of Richard Wyckoff.

P&F is P&F
no matter what the scale ( ie. this chart could encompass days or decades )

Support and Resistance
is dynamic

The P&F chart reveals that S & R is not really above or below

But up ahead

the chart flows it meets obstacles
it congests
it speeds and slows

and when it dams up
it finds a new line of least resistance
or the wall collapses

Here is what is happening now
The flow has slowed and stopped
the flow ( No need to wonder imo why the term creek arose )
is meeting an obstacle here..

Support and Resistance always lie ahead
they are forces met..

We can see later what wins out here

It is not only congestion analysis
but also the speed...

motorway

motorway · 20 March 2008

We can see later what wins out here

Supply

the chart flows it meets obstacles
it congests
it speeds and slows

and when it dams up
it finds a new line of least resistance
or the wall collapses

motorway

The Wyckoff Method

motorway

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