Hi all
Could someone explain the different trading styles between
Livermore and Wyckoff
Cheers
SG
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)
The Wyckoff method has stood the test of time. Over 100 years of
continuous development and usage have proven the value of the Wyckoff
method for use with stocks, bonds, currencies, and commodities around
the globe. This accomplishment should come as no surprise because, as
explained in the previous section, The Wyckoff method reveals the
"real rules of the game."
"The passing of all nine Wyckoff tests determines the speculative line
of least resistance to the upside or downside."
Hank Pruden, The Three Skills of Top Traders
"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
Hi all
Could someone explain the different trading styles between
Livermore and Wyckoff
Cheers
SG
Hi all
Could someone explain the different trading styles between
Livermore and Wyckoff
Cheers
SG
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.
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
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 )
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
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
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.
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.
What is Tape Reading?
This question may be best answered by first deciding what it is not.
Tape Reading is not merely looking at the tape to determine how prices are running.
It is not reading the news and then buying or selling "if the stock acts right."
It is not trading on tips, opinions, or information.
It is not buying "because they look strong," or selling "because they look weak."
It is not trading on chart indications or by other mechanical methods.
It is not "buying on dips and selling on peaks."
Nor is it any of the hundred other foolish things practiced by the millions of people without method, planning or strategy.
It seems to us, based on our experience, that Tape Reading is the defined science of determining from the tape the immediate trend of prices. It is a method of forecasting, from what appears on the tape now in the moment, what is likely to appear in the immediate future. Its object is to determine whether stocks are being accumulated or distributed, marked up or down, or whether they are being neglected by the large investors.
The Tape Reader aims to make deductions from each succeeding transaction - every shift of the market kaleidoscope, to grasp a new situation, force it, lightning-like, through the weighing machine of the mind, and to reach a decision which can be acted upon with coolness and precision. It is gauging the momentary supply and demand in particular stocks and in the whole market, comparing the forces behind each and their relationship, each to the other and to all.
A trader is like the manager of a department store; into his office are submitted hundreds of reports of sales made by the various departments. He notes the general trend of business - whether demand is heavy or light throughout the store, but lends special attention to the products in which demand is abnormally strong or weak.
When he finds it difficult to keep his shelves full in a certain department or of a certain product, he instructs his buyers accordingly, and they increase their buying orders for that product; when certain products do not move he knows there is little demand (or a market) for them, therefore, he lowers his prices (seeking a market) to induce more purchases by his customers.
The Tape Reader, from his perch at the ticker, enjoys a bird's eye view of the whole field. When serious weakness develops in any quarter, he is quick to note the changes taking place, weigh them and act accordingly.
Another advantage in favour of the Tape Reader: The tape tells the news minutes, hours and days before the newspapers, and before it can become current gossip. Everything from a foreign war to the elimination of a dividend; from a Supreme Court decision to the ravages of the boll-weevil is reflected primarily upon the tape.
The insider who knows a dividend is to be jumped from 6 per cent to 10 per cent shows his hand on the tape when he starts to accumulate the stock, and the investor with 100 shares to sell makes his fractional impress upon its market price.
The market is like a slowly revolving wheel. Whether the wheel will continue to revolve in the same direction, stand still or reverse depends entirely upon the forces which come in contact with its hub and tread. Even when the contact is broken, and nothing remains to affect its course, the wheel retains a certain impulse from the most recent dominating force, and revolves until it comes to a standstill or is subjected to other influences.
Richard D Wyckoff
from Studies in Tape Reading 1908 & 1910
Sounds like something out of Livermores 1940 book
IT is is out of Wyckoff's first published in 1908
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
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.
Also in phase C, there's another selloff and a marginal break of the selling climax lows. If such a test is accompanied by lower volume than that during the selling climax, it could be a setup for a Wyckoff Spring, a bullish pattern detailed here in March 2001.
Following the spring (no. 8 on the chart) and those "signs of strength" in phases C and D, there's another selloff in phase D to the "last point of support" (LPS), after which this hypothetical example explodes higher.
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
This is a method of judging the stock market by its own action.
It is intended for investors as well as for traders.
It has been planned and prepared for those who desire to safeguard
their investment capital against, and to make money from, the
fluctuations in the prices of stocks dealt in on the New York Stock
Exchange or any other organized exchange.
It is applicable as well to bonds, preferred stocks and the leading
commodity markets.
Anyone who buys or sells a stock, a bond, or a commodity for profit
is speculating if he employs intelligent foresight.
If he does not, he is gambling.
Your purpose should be to become an intelligent, scientific and
successful investor and trader.
This Method is for those who have had either little or no experience
operating in the stock market, or for those who have had much
experience but who have never been shown the real rules of the game.
Out of the very limited number who really understand the inner
workings of the stock market, practically no one has been willing to
show the public the real inside. I believe it is time for someone to
step forward and do this and so I am here offering the cream of what I have learned in forty years of active experience in Wall Street.
By the methods herein explained, I have made a great deal of money for myself and my clients and subscribers who numbered in excess of 200,000. By
making this available to those who desire to learn the business of trading and investing in stocks -- for it is a business just like law, medicine or any
other -- I hope to be of still greater service, not only to my former patrons, but to others who have not had an opportunity to invest under favorable conditions.
You can learn from this how to develop independent judgment, so that you need never ask anyone’s opinion or listen to anyone’s tips, or take anybody’s advice. You can so train your judgment that you will know just what to do and when to do it. When you are in doubt you will do nothing.
I do not claim that you can be invariably right. No one could. What I aim to do is to show you how to be right in the majority of instances. This will require close study and self-training on your part.
I will teach you how to read the market from your daily newspaper; from the tape of the stock ticker; from your charts, or any or all combined.
I will teach you to plan your stock market campaigns just as a general plans his battles.
I, therefore, claim that:
You need never read anything on the financial page of your newspaper except the table of stock prices and volumes.
You need pay no attention to the news, earnings, dividend rates or statements of corporations.
You need never study the financial or the business situation.
You need not understand railroad or industrial statistics, the money market, the crop situation, the bank statements, foreign trade or the political situation.
You can absolutely ignore all the thousands of tips, rumors, reports and especially the so-called inside information that flood Wall Street.
You can discard all of these completely, and finally.
UNLESS YOU DO THIS YOU WILL BE UNABLE TO GET THE BEST RESULTS FROM YOUR MARKET OPERATIONS.
Whenever you study the tape or a chart, consider what you see there
as an expression of the forces that lift and depress prices. Study
your charts not with an eye to comparing the shapes of the
formations, but from the viewpoint of the behavior of the stock; the
motives of those who are dominant in it; and the successes and
failures of the buyers and sellers as they struggle for mastery on
every move.
Every upward or downward swing in the market, whether it amounts to
many points, only a few points, or fractions of a point, consists of
numerous buying and selling waves. These have a certain duration;
they run just so long as they can attract a following. When this
following is exhausted for the time being, that wave comes to an end
and a contrary wave sets in. The latter may attract more of a
following than the former. By studying the relationships between
these upward and downward waves, their duration, speed and extent,
and comparing them with each other, we are able to judge the
relative strength of the bulls and the bears as the price movement
progresses.
When you are looking for an opportunity to buy, watch for the DOWN
waves in the market and in your stock. After you have bought, you
sit through a number of small, medium and good-sized waves, until
finally you observe that it is about flood tide in that stock. Then
watch for an especially strong up-wave and give your broker an order
to sell your stock at the market.
The waves of the market furnish a clear insight into changes in
supply and demand. By learning to judge all sizes of market waves,
you will gradually learn to spot the time when a rising market or a
rally, and the time when a declining market or a reaction, has
halted and is about to reverse. THESE ARE THE TURNING POINTS.
Richard D. Wyckoff
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"
our real example explodes higher.
When you are looking for an opportunity to buy, watch for the DOWN waves in the market and in your stock.
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