DbPhoenix

The argument goes that bankruptcy for GM and Chrysler means bankruptcy for suppliers, dealers, etc. But if GM and Chrysler aren't making cars, the suppliers, dealers, etc are going to go bankrupt anyway. It's largely PR, the govt not wanting to be seen as abandoning large numbers of workers. But the govt is essentially powerless, as with the housing and banking issues.

While I appreciate the effort, you've combined a variety of not necessarily compatible elements into a stew that may not be the best first course. First, "preliminary demand" is not a Wyckoff term. As you point out, it came later. And even if it were a W term, demand would not show along the supply line. Second, W suggested that a retracement of less than 50% suggested strength (in an uptrend) and of more than 50%, weakness. However, this does not necessarily apply to intraday trading (nor necessarily to interday trading, either). Just this past week, we have seen 100% retracements turn on a dime and go right back to where they started, then make yet another trip. This particular nugget is insufficient for plotting a trading strategy. Third, "secondary test" is not a W term. I believe you mean "secondary reaction". This occurs after the technical rally, which occurs after the selling climax. Therefore, the secondary reaction is the first pullback after the selling climax at around 0945, not a half hour later. Additionally, you're mixing his approach to daytrading with his approach to interday trading. He relied on P&F for the former and took quick profits. And though he may have traded differently had vertical intraday charts been available, we can't assume that. On the other hand, we can apply the principles he used for vertical charts to intraday trading since we do have them available. If we didn't, we'd all be using P&F charts and we'd all be scalping. Fourth, he suggested that the distance to the potential profit be at least three times the distance to the stop, but he also incorporated the notion that the probability of the profit actually being reached should be considerably higher than the probability of the stop being tripped. This carries with it far more importance than simply calculating a r:r ratio and initiating the trade. Fifth, the "targets" that W proposed were determined by P&F charts, not vertical charts. But he also reminded the trader that the profit potential depended entirely on what the trader wanted out of the trade; there was no self-limiting cap on what he could expect. It would take many dozens of posts to sort out what Wyckoff said or wrote from what others say he said or wrote. There is a great deal out there that is "based on" Wyckoff but which has little relation to the contents of his original course. Much of it is just plain lazy, saying, for example, that Wyckoff moved to Phoenix in the 30s (after his death, presumably) to open the Stock Market Institute. Much of it is also manufactured, for one reason or another. I suggest, therefore, that you listen to Wyckoff's original voice. You will get to know him in a way that is not possible via a translator, even if that translator is me. The core of his approach lies in the stickies at the top of this forum. Elaborations can be found elsewhere in the forum in other threads. I also suggest that you reread the 20-post arc preceding and relating to the chart which Head analyzed. This isn't about lines and points and calculations and patterns. It's about traders trading. Once you understand what traders are doing to push price higher or pull it lower, you'll become a better Wyckoff trader than most.

While it's always possible that we're wrong in our analyses, I'm unfamiliar with some of what you propose here. What is "preliminary demand"? What is "Wyckoff's only retracement level"? Why would one expect a reaction to occur there? Why have you designated the secondary test so late? Why multiply by a factor of three? Why use a vertical chart to do so? Why determine a profit target (I'm assuming that you would exit at the target)?

May as well... Follow the bouncing ball: Trendline broken. Price finds support at last swing low. Go long. Price finds resistance at last swing high. Go short. Price finds support at last swing low. Go long. Price finds resistance at last swing high. Go short. Price finds support at last swing low. Go long. Price finds resistance at last swing high. Go short. Price makes higher low. Cover. Price fails to make new high. Go short. Or do nothing at all subsequent to the trendline break and go short at the drop below 1.53. All you need is a chart.

I have to agree. The rules mean nothing unless someone is willing to explain the terminology, and no one can be expected to read thousands of posts elsewhere in order to decipher it all (and any references to the "elsewhere" will be deleted). To start, what do the highlighted terms mean? The Intraday Trade Rules! Perfect Trade – Summary (Intraday Trade) (In Trading Decision Chart) 1. Prime Trading PPF trade through to Prime Trading Breach. 2. Verify Histogram is in Prime but not yet oscillating. (In Strength Chart) 3. Confirm Histogram is in Same Direction on Strength Chart, next slowest chart. (This is for see the overall strength) (In Entry Chart) 4. ERG Oscillation in Prime. 5. Look for PF Bar or Bars 6. Look for Confirmed Price Failure Bar. 7. Enter at the open of the Execution Bar (this is the bar immediately following the Confirmation Bar). (Exit Position) 8. Exit Position Condition. a. Any ERG or Histogram Oscillation in Prime, and PPF exit immediately. b. Any ERG or Histogram Oscillation not in Prime, and PPF exit immediately. c. Any ERG or Histogram Oscillation in Prime, and a Breach, Breach or Match PPF, you may exit on PF Bar sequence or Adjust Stop to Previous like Oscillation until Stopped Out, a Divergent/Convergent oscillation is created or a failed oscillation is created. And so on.

Done. Given that this thread was for some reason resurrected from last November, the current interest appears to lie in importing an ongoing "debate" from ET. Nobody cares.

I found this post on "Re: Volume Observation" interesting and have nominated it accordingly for "Topic Of The Month February, 2009"

The discussion had mostly to do with the emotional components of a trade. The setup itself is a no-brainer, and it has a high probability of success. But whether or not one takes it, where he places his stop, how quickly he moves to BE, whether or not he tries again after a stopout and where and how and so forth all have largely to do with issues that are emotional, not technical (see Stage Two). But discussing all of this in hindsight is pretty much useless, unless it is done immediately after the event or unless one selects a day in the past at random and simtrades it via replay. It's common for traders to test setups by testing only the setup and not considering pace and activity. When they then take the setup for real and it just sits, they begin to get real nervous, even to the point of exiting what turns out to be a perfectly good trade.

Wow! Now that's pretty cool. Hope you enjoy it.

In re the conversation in the chatroom yesterday re where the market is likely to go... Geithner's first test is a disaster In his initial public pronouncement on the government's financial bailout plans, the best the new Treasury secretary can offer is an uninspiring rehash. By Jon Markman MSN Money You know that awful feeling when you're the new guy and you've been working on a project for three months, and you've made no progress, and then the boss gives you a deadline? First you ask for one more day, but when the time finally comes that you've got to deliver, you've still got nothin', so you talk fast, use a lot of jargon, promise more details soon and hope no one notices you've got squat. It's happened to all of us, but few have failed their first assignment on such an epic scale as Tim Geithner, the new Treasury secretary. On Tuesday afternoon, he delivered the most remarkable "dog ate my homework" excuse in the history of the U.S. financial markets, making it more plain than ever that the government simply has no idea how to end the financial crisis or how to reassure the world that everything will be all right anyway. The big idea was a vaguely described public-private partnership to acquire soured loans from banks that real-money investors have already said they would buy only if offered full guarantees against loss -- and even then only with a gun at their heads. "His speech was totally uninspiring. There was nothing new, no change," said Stan Shipley, a senior analyst at ISI Group in New York. Said David Kotok of Cumberland Advisors: "The proposal was nothing more than a promise to deliver a proposal. People are getting tired of this." Best and brightest come up empty The lack of a detailed plan is important not just for investors but also for the average worker, mom and student because it means there really is no easy way out of the global economic crisis. It means we have assigned the job of fixing the banking system to the smartest guy the government could find and surrounded him with every possible resource, and given him plenty of time to think, and still he came up with bupkis. That is scary to people, as well it should be. No one is going to cry crocodile tears for 30-year-old investment bankers who have lost their million-dollar jobs, but the impact on all Americans will be harsh and long-lasting. Once the government truly socializes the banking system's losses by taking on the ruined loans, there will be little credit left for all the things that were so much fun in the past two decades. It will be hard to persuade banks to lend their precious money to dads for unproductive assets like leisure boats or even to real-estate investors for new apartment buildings, or to farmers for new tractors. Salaries and living standards will come down, as instead of borrowing and spending we will have to develop a culture of saving and waiting. Eventually, we will innovate and grow our way out of this hole, but it will take patience and time. Politicians don't want to tell us this, so they have planned a final $800 billion-plus party paid for with taxpayer appropriation and borrowing. But eventually, when that money is spent, there will be no other choice but to admit our mistakes and buckle down for a world with less credit and lower asset values. Call it a depression, a prolonged recession or a flat spot in the road, but it will likely lead to a string of one-term presidencies and the relegation of the name Tim Geithner to trivia contests. Created from, and vanished into, thin air That's part of the reason investors, who had shown remarkable restraint and hope in recent days as they awaited Geithner's plan, responded in the only way they knew how, which was with a giant raspberry: Shares of big companies were flung to their biggest losses in three months as a shiver of despair ripped through trading floors. There was a slight lag of disbelief that the Treasury secretary had offered nothing but a rehash, a repackaging and renaming of old ideas, before markets tumbled with a great collective sigh in the afternoon, wiping out 10% of the total market value of major banks in four hours. Though it may have seemed to casual observers that Geithner had offered a set of decisive options with a $1 trillion price tag, people in the investment industry realized all his ideas have already been tried and failed or have little support outside Washington intellectual circles. "Geithner showed that not only does the emperor have no clothes, but he has nothing else either," said Satyajit Das, a global banking expert working in Australia. "He showed that the government has exhausted its ability to use monetary policy and has no new ideas to use alternative strategies, so-called quantitative easing, to relieve credit stresses either." The problem, of course, is that there really is no neat, easy way to clean up the mess left behind by a multidecade orgy of credit. Investors have suspected that, but now it's finally sinking in as true. Starting in the mid-1990s, mathematicians came up with incredible new ways to create money from thin air. Banks turned the theories into loans, dupes at ratings agencies blessed them as risk-free, and salesmen chopped them up and sold them to gullible investors. These cheap, easy-to-get loans allowed people around the United States to buy much more home than they could really afford, as well as second homes, furniture, snowmobiles and the like, allowed businesses to expand much more than they could really afford and allowed governments to extend a lot more benefits to citizens than they could really afford. In essence, the new loan theory financed a false prosperity that went on for so long that people came to think of it as normal. The underlying engine for all this credit growth was escalating home prices, and when that stopped, the tower of credit came crashing down, leaving homeowners without the ability to pay their loans and banks holding the bag. The roughly $5 trillion in losses that financial institutions have on their books now are directly a result of this incredible error of judgment made when government regulators failed to rein in investment banks who competed with each other to make those loans and reward themselves richly in the process. Realistic experts -- at least the ones without political agendas -- all agree that the only way to seriously deal with this colossal blunder is for the government to force banks to admit they screwed up and write the value of these loans down to zero. That would wipe out the assets of most major banks, making their equity worth nothing and their bonds worth little. They would be forced into bankruptcy, a process that would allow them to be recapitalized over time and then, later, re-privatized. Waiting is hardest -- and best Nationalization would not be the end of the world, but it is a concept that is so anathema to Americans that it seemingly cannot be said in polite company. So instead we have this long, dragged-out Kabuki theater in which the banks have essentially been nationalized in everything but name, and yet no one will admit it to the American people. And the cost of this denial is another trillion-dollar program that will do nothing, most experts agree, except buy time until nationalization must be done later. Government officials and economists hold up the example of the "lost decade" in Japan -- a post-credit bubble era in which banks were allowed to cling to life but never regained enough strength to lend and help grow the economy -- as an example of what they wish to avoid. The mantra in Washington is that policymakers won't make that mistake again. Yet New York private fund manager Craig Drill, who has studied the lost decade for years, says the situation we face today is really no different. "Three years from now, people will decide that Japanese policymakers weren't so stupid after all," he said. "We're going to discover that there really was no solution, no way to snap your fingers and make it all better. The only solution is time."

Geithner's first test is a disaster In his initial public pronouncement on the government's financial bailout plans, the best the new Treasury secretary can offer is an uninspiring rehash. By Jon Markman MSN Money You know that awful feeling when you're the new guy and you've been working on a project for three months, and you've made no progress, and then the boss gives you a deadline? First you ask for one more day, but when the time finally comes that you've got to deliver, you've still got nothin', so you talk fast, use a lot of jargon, promise more details soon and hope no one notices you've got squat. It's happened to all of us, but few have failed their first assignment on such an epic scale as Tim Geithner, the new Treasury secretary. On Tuesday afternoon, he delivered the most remarkable "dog ate my homework" excuse in the history of the U.S. financial markets, making it more plain than ever that the government simply has no idea how to end the financial crisis or how to reassure the world that everything will be all right anyway. The big idea was a vaguely described public-private partnership to acquire soured loans from banks that real-money investors have already said they would buy only if offered full guarantees against loss -- and even then only with a gun at their heads. "His speech was totally uninspiring. There was nothing new, no change," said Stan Shipley, a senior analyst at ISI Group in New York. Said David Kotok of Cumberland Advisors: "The proposal was nothing more than a promise to deliver a proposal. People are getting tired of this." Best and brightest come up empty The lack of a detailed plan is important not just for investors but also for the average worker, mom and student because it means there really is no easy way out of the global economic crisis. It means we have assigned the job of fixing the banking system to the smartest guy the government could find and surrounded him with every possible resource, and given him plenty of time to think, and still he came up with bupkis. That is scary to people, as well it should be. No one is going to cry crocodile tears for 30-year-old investment bankers who have lost their million-dollar jobs, but the impact on all Americans will be harsh and long-lasting. Once the government truly socializes the banking system's losses by taking on the ruined loans, there will be little credit left for all the things that were so much fun in the past two decades. It will be hard to persuade banks to lend their precious money to dads for unproductive assets like leisure boats or even to real-estate investors for new apartment buildings, or to farmers for new tractors. Salaries and living standards will come down, as instead of borrowing and spending we will have to develop a culture of saving and waiting. Eventually, we will innovate and grow our way out of this hole, but it will take patience and time. Politicians don't want to tell us this, so they have planned a final $800 billion-plus party paid for with taxpayer appropriation and borrowing. But eventually, when that money is spent, there will be no other choice but to admit our mistakes and buckle down for a world with less credit and lower asset values. Call it a depression, a prolonged recession or a flat spot in the road, but it will likely lead to a string of one-term presidencies and the relegation of the name Tim Geithner to trivia contests. Created from, and vanished into, thin air That's part of the reason investors, who had shown remarkable restraint and hope in recent days as they awaited Geithner's plan, responded in the only way they knew how, which was with a giant raspberry: Shares of big companies were flung to their biggest losses in three months as a shiver of despair ripped through trading floors. There was a slight lag of disbelief that the Treasury secretary had offered nothing but a rehash, a repackaging and renaming of old ideas, before markets tumbled with a great collective sigh in the afternoon, wiping out 10% of the total market value of major banks in four hours. Though it may have seemed to casual observers that Geithner had offered a set of decisive options with a $1 trillion price tag, people in the investment industry realized all his ideas have already been tried and failed or have little support outside Washington intellectual circles. "Geithner showed that not only does the emperor have no clothes, but he has nothing else either," said Satyajit Das, a global banking expert working in Australia. "He showed that the government has exhausted its ability to use monetary policy and has no new ideas to use alternative strategies, so-called quantitative easing, to relieve credit stresses either." The problem, of course, is that there really is no neat, easy way to clean up the mess left behind by a multidecade orgy of credit. Investors have suspected that, but now it's finally sinking in as true. Starting in the mid-1990s, mathematicians came up with incredible new ways to create money from thin air. Banks turned the theories into loans, dupes at ratings agencies blessed them as risk-free, and salesmen chopped them up and sold them to gullible investors. These cheap, easy-to-get loans allowed people around the United States to buy much more home than they could really afford, as well as second homes, furniture, snowmobiles and the like, allowed businesses to expand much more than they could really afford and allowed governments to extend a lot more benefits to citizens than they could really afford. In essence, the new loan theory financed a false prosperity that went on for so long that people came to think of it as normal. The underlying engine for all this credit growth was escalating home prices, and when that stopped, the tower of credit came crashing down, leaving homeowners without the ability to pay their loans and banks holding the bag. The roughly $5 trillion in losses that financial institutions have on their books now are directly a result of this incredible error of judgment made when government regulators failed to rein in investment banks who competed with each other to make those loans and reward themselves richly in the process. Realistic experts -- at least the ones without political agendas -- all agree that the only way to seriously deal with this colossal blunder is for the government to force banks to admit they screwed up and write the value of these loans down to zero. That would wipe out the assets of most major banks, making their equity worth nothing and their bonds worth little. They would be forced into bankruptcy, a process that would allow them to be recapitalized over time and then, later, re-privatized. Waiting is hardest -- and best Nationalization would not be the end of the world, but it is a concept that is so anathema to Americans that it seemingly cannot be said in polite company. So instead we have this long, dragged-out Kabuki theater in which the banks have essentially been nationalized in everything but name, and yet no one will admit it to the American people. And the cost of this denial is another trillion-dollar program that will do nothing, most experts agree, except buy time until nationalization must be done later. Government officials and economists hold up the example of the "lost decade" in Japan -- a post-credit bubble era in which banks were allowed to cling to life but never regained enough strength to lend and help grow the economy -- as an example of what they wish to avoid. The mantra in Washington is that policymakers won't make that mistake again. Yet New York private fund manager Craig Drill, who has studied the lost decade for years, says the situation we face today is really no different. "Three years from now, people will decide that Japanese policymakers weren't so stupid after all," he said. "We're going to discover that there really was no solution, no way to snap your fingers and make it all better. The only solution is time."

Cracking Under Pressure Whether it is trading or playing sports, when the pressure is on, many of us crack under the strain. Consider the Olympic performances of Sarah Hughes and Michelle Kwan in the 2002 Winter Olympics. Michelle tried to meet high expectations of winning the Gold Medal and made several mistakes in her performance. Sarah, on the other hand, went into her performance with fewer expectations and a carefree attitude. She said, "I really thought there was no way in the world I would win. Realistically, there was this little window, but I didn't think I would win. I went out and just skated." By taking this carefree attitude, she skated freely and without worry. This stance allowed her to react to the moment, express her creativity, and win the Gold Medal. It's like saying, "I didn't worry about how much money I would make, I just traded." It's also similar to something Andy Bushak, a trader with Advanced GET, said in his Innerworth Master Interview about successful traders on the floor of the Chicago Mercantile Exchange. "They don't have too many rules for themselves. They keep it simple, do a little bit of homework, and simply react to market conditions." In other words, they just trade. Successful traders make trades in a carefree manner. They don't put pressure on themselves to succeed. They don't believe they need to be right, and they don't need to predict the future behavior of the market. Instead, they objectively observe market conditions, react to them, and let the market take them where it wants them to go. Successful traders are "in the zone" as Mark Douglas claims. In his book, Trading in the Zone, Douglas notes that seasoned traders do not doubt or second-guess themselves. They freely enter and exit trades without worrying about the consequences. This carefree approach to trading allows them to see trading opportunities more easily and allows them to take advantage of these opportunities when they arise. How does one enter the zone? It takes intense concentration and focus, and it's difficult to maintain this stance when the pressure is on you to perform. Mark Douglas suggests removing some of the pressure by thinking in terms of probabilities and carefully managing risk. You may not win on any single trade, but after a series of trades, you will have enough winners to make a profit in the long run. Remembering this and having confidence that your trading strategies, or edges, will ensure you make money in the long run will help you stay in the zone. It's also important to manage your risk. Specifically, determine your risk on a given trade before making it, and risk only a small amount of trading capital on a single trade. Doing so will take some of the pressure off, allowing you to be more open to see the opportunities that the market offers. Be open-minded. Remember that the market is always right. It's your job as a trader to see what the market is doing, rather than imposing your will or expectations onto it. Flow with the market. Move with the market. React to the market. Let the market tell you where it wants you to go. By taking the pressure off of yourself, you will feel more free and open. You will be able to identify trading opportunities, quickly react, and take home the profits. --Innerworth

Just so the thread gets off to a good start, those who push commercial interests are discouraged. Those who make no sense and have no creds are, for the most part, ignored, and they die from lack of food. But those who are straight-shooters and answer questions clearly and sincerely are welcome and are even encouraged. In any case, the atmosphere that pervades that "other" site won't be found here. If I may, though, I suggest that you start at the beginning and not ask members to endure threads elsewhere that have an unbearable noise to signal ratio. You may be able to cover the gist of what you do and what you look at in only a few posts.

Lewtz: Given our discussion of whether or not to take the following trade, you should probably think about it now or this evening, while it's still fresh in your mind.

Though I may have unintentionally slipped, I've tried to limit my discussion of the TICKQ to my blog and to the chat room. Even though Wyckoff was always mindful of market breadth, he didn't follow the TICKQ because it wasn't available to him. Therefore, any discussion of it here would be way off topic. Way. If you're interested in this sort of divergence, I suggest you hang out in the chat room since explaining something that moves is easier if one is watching it move.

The two of you already made it. I suggest using the Volume thread for that.

Thanks to you both. Anyone who takes the time to make his way thru this 20-post arc will learn a great deal.

So going back to the Wyckoff quoted in the original post ("Some people regard a stock [or the market] in this [springboard] position only when it breaks through an old line of resistance or support into a higher or lower field. I claim that the beginning of the springboard move is at the bottom of a range of accumulation, or in the upper levels of a range of distribution."), where might one enter, and what would be the risks involved in each possibility?

Very nice. We aren't going to go over this wave by wave. But even if one is using only demand lines, there are messages being sent. You have answered this to some extent, coming at it from a different direction. But what new, if anything, does the behavior of price, at or near these lines, tell you, keeping in mind that you're not even sure you have a hinge until around 1030? What about these points in particular?

Though various observers may quibble over the characterizations of motives of buyers and sellers, you're in the correct groove. And while all this may seem extraordinarily complex, what may take pages to explain in text may take less than a minute of mental analysis, sometimes only seconds. But to get from A to Z, one must first go through B, C, etc. Granted you may be learning far more about playing hinges than you wanted to know, and you're free to stop at any time and let others take it from here, if anyone is interested in doing so. But there is a process to go through if one is to understand what is happening and how to profit from it. I could in one post explain what's going on in this hinge and how to enter at just the right time and trade the correct direction, and you'd learn exactly how to play this hinge. But so what? You can't play this hinge. It's gone. And there'll never be another quite like it. You can, however, get behind the hinge and learn why price is doing what it's doing. Knowing that, you can then play any hinge you find. So, having wrung volume dry, let's put that aside for the time being and look at price alone. First, let's trace the progress of the balance of buying and selling pressures as they are manifested by the trades that traders are completing, i.e., the prices paid, converting the bars to waves: Once these have been plotted, we can eliminate the bars entirely (or one could have used a line chart in the first place): What conclusions -- or at least tentative conclusions -- can you now draw from these movements regarding the ebb and flow of buying and selling pressures? Again, if you're done with it, anyone else is welcome to jump in.

What eludes many practitioners is that the climax is not an event but a process. Hence the focus elsewhere on the climax "bar" (or the "hammer" or "shooting star") and the detection of "preliminary support" and so forth. This leads to an effort to label all these bars, which lengthens the glossary (unnecessarily) and gives the practitioner something else to memorize. But none of that is important or even relevant if one is attuned to the flow of price and the coincident flow of trading activity (volume). If one focuses more on the waves and less on the bars, it's not difficult to determine where buyers are coming in to support price, even if price is nowhere near the "bottom". In the major averages, for example, one can easily spot the rush of "smart" buyers to support the price in mid-September. Looking back on that, one can conclude that he was wrong in labeling that as a climax, that the "smart" money was wrong to step in at that level, that everything that one had thought was happening was not in fact happening and so on. But none of that would be quite true, and certainly not fair. No, it was not a climax, technically, but it sure as hell was climactic. And it's all part of the bottoming process, just as the inrushes of support on the rest of the way down have been part of the bottoming process. Therefore, all instances of trading activity increasing along with a push back against the wave -- or a "turning of the tide" -- indicate buyers supporting price at whatever level (if trading activity weren't increasing, this would indicate a withdrawal of selling interest, which is not quite the same battle). They may be "right" or they may be early, but none of that is pertinent to the fact that they are supporting price at that level, and at the moment that they are doing so, that's all that matters.

I made a "stealth" post to the Cajas thread regarding AMT. If anyone has any comments or suggestions or corrections to make, please make them here. Though it may seem otherwise, I tried to make the post as brief as possible, so I don't want to make it any longer than absolutely necessary. -------------------------------------------------- I read somewhere recently -- and can't remember where -- having to do with Market Profile, I believe -- that most experienced traders will avoid trying to catch the tops and bottoms and focus on "the middle", waiting for confirmations to enter and confirmations to exit. However, since "the middle" is by definition where most of the trading is going on and is largely non-directional, there is also a lot of whipsawing in the middle, and that generates a lot of losing trades. One can sometimes avoid this by widening the stops, but, since the market always teaches us to do what will lose the most money, this will turn out to be an unproductive tactic. The safest and generally most profitable trades are found at the extremes. Therefore, you wait for the extremes. Wyckoff used a combination of events to tell him when a wave was reaching its natural crest or trough: the selling/buying climaxes, the tests, higher lows/lower highs, and so on, all confirmed by what the volume was doing and by the effect the volume had on price (effort and result). As a result of this work and of his exploration of trading ranges, he developed the concepts of support and resistance along with their practical application. Auction Market Theory (AMT) takes these investigations into support and resistance further, an “organic” definition of support and resistance like Wyckoff’s, that is, determined by traders’ behavior, not by a calculation originating from one’s head or from a website somewhere. Determine whether you are trending or “balancing” (ranging, consolidating, seeking equilibrium, etc), determine the limits of the range (support and resistance), and you’re in business. The notion of support and resistance has been and is the missing piece for many market practitioners. One can try to hit what appear at the time to be the important swings again and again and be stopped out again and again, hoping all the while that once one hits the true turning point, all the effort will turn out to have been worthwhile and the P&L will change from red to black. But by waiting for the extremes, one avoids most or all of those losing trades, and, even more important, avoids trading counter-trend. These boxes -- which are simply a graphic variation of the Market Profile distribution curve, whether skewed or not, or of the VAP (Volume At Price) pattern -- are nothing more than a means of locating those extremes. What I've found more useful about them is that they are encapsulated by time, i.e., the price and volume ranges have a beginning and an end. This enables me to see at a glance where the important S&R are, or at least are likely to be. Without them, one ends up with line after line after line until the S/R plots become a parody of themselves. All of this can be very confusing to someone who’s learned to view the market in a different way, perhaps less so to someone who’s just starting since he has so much less to unlearn. But backing up to the basic tenets of AMT, as well as to the concepts developed by (and in some cases originated by) Wyckoff, one can perhaps find a solid footing and proceed from there. To begin with, in the market, price is often not the same as “value”. In fact, one could say that since the process of “price discovery” is a search for value, they match only by accident, and then perhaps for only an instant. Blink and you missed it. Add to this the fact that for all intents and purposes there is no such thing as “value” but rather the perception of value. After all, what is the “value” of, say, Microsoft or GE or that little stock your stylist told you about? This state of affairs may seem like a recipe for chaos, but it is in fact the basis for making a market, that is, reconciling the differences – sometimes extraordinarily wide differences – in perceptions of value. As Wyckoff put it, if a stock (or whatever) is thought to be below “value” and a trader or group of traders see a large potential for profit ahead, he/they will buy all they can at or near the current level, preferably on “reactions” (or pullbacks or retracements), so they don’t overpay. If the stock is above what they perceive to be value, they'll sell it (or short it), supporting the price on those pullbacks and unloading the stock on rallies until they are out (or as much out as they can be before the thing begins its downward slide). “This”, he writes, “is why these supporting levels and the levels of resistance (a phrase originated by me many years ago), are so important for you to watch.” When price then begins to lose momentum and move in a generally sideways direction, you’ve found “value” (if value hasn’t been found, then price won’t stop advancing or declining until it has). Value, then, becomes that area where most of the trades have been or are taking place, where most traders agree on price. Price shifts from a state of trending to a state of balancing (or consolidation or ranging), the only two states available to it. The trading opportunities come (a) when price is away from value and (b) when price decides to shed its skin and move on to some other value level (that is, there’s a change in demand). This is also where it gets tricky, partly because demand is ever-changing, partly because you’ve got multiple levels of support and resistance to deal with and partly because we trade in so many different intervals, from monthly to one-tick. If we all used daily charts exclusively, it would all be much simpler, though not necessarily easier. But that’s not the case, so we must remember always that a trend in one interval – say hourly – may be a consolidation in another, such as daily. The hourly may be balancing, but there are trends galore in the 5m chart. Or the 5s chart. Or the tick chart. Regardless of how one chooses to display these intervals – line, bar, dot, candle, histogram, etc – there are multiple trends and consolidations going on simultaneously in all possible intervals, even if they’re in the same timeframe, even if that timeframe is only one day (to describe this ebb and flow, Wyckoff used an ocean analogy: currents, waves, eddies, flows, tides). To sum up where we are so far, and keeping in mind that there is no universally-agreed-upon auction market theory, the following elements are, to me, basic, and are consistent with what I've learned from Wyckoff et al: 1) An auction market's structure is continuously evolving, being revalued; future price levels are not predictable 2) An auction market is in one of two conditions: balancing or trending. 3) Traders seek value; value is price over time; price is arrived at by negotiation between buyers and sellers. 4) Change in demand drives change in price. 5) One can expect to find support where the most substantial buying has occurred in the past and resistance where the most substantial selling has occurred. Now let’s translate all of this into a chart. I'm sure everyone has noticed that swing highs and lows and the previous days’ highs and lows and other /\ and \/ formations can serve as turning points and appear to act as resistance. However, this type of resistance stems from an inability to find a trade and is accompanied by low volume*. Price then reverts to an area where the trader finds it easier to close that trade. That's what provides that ballooning look to the volume pattern “A” in the following chart. "Resistance" in this sense, then, refers to resistance to a continuation of the move, whether up or down. *Volume may look “big” at the highs and lows, but the price points are vertical, not horizontal (as they would be in a consolidation), so the volume – or trading activity – at each price point is lessr than it would be if the same price were hit repeatedly (again, as it would be in a consolidation). Note that you may have more than one "zone of concentration" (this is how jargon gets started), as in the first balloon. Nearly all the volume is encompassed by the pink lines, but there is a heavier concentration within the blue lines because of where price spends the greater part of its time. The volume in the balloon “B”, however, is more evenly distributed throughout the zone, partly because price spends so much time in it and partly because it ranges fairly steadily within it. Instead of rushing to the limits and bouncing back toward the center, they linger at those limits, the sellers trying to push price lower, the buyers trying to push price higher. Thus there is more volume at these edges than in balloon “A”, but buyers eventually fail in their task as sellers do in theirs, and trading drifts back toward the center, providing, again, a relatively even distribution of volume throughout the range. Balloon “C” is similar to “A” but much thinner due to the fact that price has made only a single round trip to the bottom of the range. It lingered a bit in the middle, simultaneously creating that protrusion in the center of the volume pattern. But volume at each end is thinner than in “B”, thinnest at the bottom due to the \/ shape, giving the volume – if one is fanciful – something of a P shape. If price drops through one of these zones, those who bought within that zone are going to be miffed. Some of these people are going to try to sell if and when price re-approaches that zone. This is the basis of resistance. There's just too much old trading activity to work through in order for price to progress unless there is enough buying pressure to take care of all those people who want to sell what they have, then push price even higher (in which case those who sold may think they screwed up yet again and buy back what they just sold). However, those who bought or sold at the outer reaches of these zones will also be disappointed if they can't find buyers for whatever it is they just bought, not because there's too much volume but because there isn't enough. So how does one trade all this? First, you will have to monitor several intervals at the same time in order to (a) find out what interval you want to trade and (b) where price is within whatever range or ranges is/are in that interval. For example, if you’re most comfortable with a 5m interval, you’ll want to check a smaller interval or two to see what price is up to down there, but you’ll also want to look at larger intervals, such as the 15m or 60m or even the daily (I’m using time intervals here in order to keep this from becoming even longer than it will be, but the same approach applies whether you’re using range bars, volume bars, tick bars, candles, lines, etc). Second, locate the ranges. Box them or circle them or color them or in some other way highlight them. If you find a range that is wide enough for you to trade (that is, there are enough points from top to bottom to make a trade worthwhile), get “into” the range via a smaller interval in order to find a trend. Perhaps at some smaller interval, price is at the bottom of that range. That gives you a good possibility for a long (or it may be at the top of the range, giving you a good possibility for a short). At this point, you have three options: a reversal, a breakout, or a retracement. If, for example, price bounces off or launches itself off the bottom of the range (support), trade the reversal and go long. If instead it falls through support, short the breakout (or breakdown, if you prefer). If you don’t catch the breakout, or you prefer to wait in order to determine whether or not the breakout was “real”, prepare yourself to short whatever retracement there may be to what had been support and may now be resistance. A more boring alternative is that price is nowhere near the top or bottom of any range that you can find but rather drifting up and down, aimlessly. No change is occurring; therefore, there is no trade, or at least no compelling trade. Finding the midpoint of the range may be useful since price sometimes ricochets off the midpoint, or launches itself off the midpoint if it has settled there. Such actions represent change since price may be looking for a different value level. It may come to a screeching halt and reverse when it gets to one side or the other of the range and return to the midpoint, or it may launch itself through in breakout form and extend itself into the next range, if there is one, or create a new range above or below the previous range (in determining which, back off into larger intervals in order to determine whether or not price is in a range in one of those larger intervals). This isn’t all there is to it, of course, but there are more charts posted in this thread than in any other, and I hope that enough information and examples are provided in these posts to enable you to develop a consistently profitable strategy based on these principles.

Forward Opportunities What was the last thing you traded? Look at its 1 year, 6 month, 1 month, and 3-5 day charts. Can you see all the opportunities where you could have made a profit? Should have gone long there, shorted here . . .. You're assessing "opportunity" based on price activity subsequent to the point at which you believe the opportunity existed, which means that you're working backward to identify that point of opportunity. While trading, these are the very opportunities a trader is aiming to spot. This and the desire to make trades will often drive the inexperienced trader to "see" opportunity where there is none, simply because the trader can easily envision the price pattern moving in any given direction. If his predisposition or any of his analysis makes him inclined to forecast a certain direction, he can quickly envision the movement of price in the direction that will yield profits. By envisioning such price pattern formations, it's often the case that the trader will mentally emulate what he has previously viewed on historical charts, and perhaps even had a desire to experience. And this psychology is made even more complex when the trader begins to find "evidence" in current price activity that supports his forecast/vision and ignores any information that contradicts it, thereby providing a false justification to make the trade. This type of thinking will cause a trader to make trades when no real opportunity exists. The fundamental problem is that the reason for action is based on a forecast/vision, and not on what has happened and what is happening right now. Given the fact that forecasts and visions are not realities and that historical and current activities are, decisions that are based on the proper interpretation of what has happened and is happening will be correct far more often. It's critical to avoid mentally creating opportunities and to know when to stay out of a trade. Looking at the charts again, try to identify forward-looking opportunities, where you consider only each price point and the price patterns before it. You'll find that it's now far more difficult to spot the winners, but those are the opportunities that you need to identify and then appropriately act on in order to be a successful trader. Any experienced and successful trader will agree that it's very important not to trade until there's a true opportunity. --Innerworth

Actually, I'm not sure what the topic is. Originally, it had to do with volume. Since FX doesn't have volume, the detour into FX appears to be off topic. So maybe it's a new topic. It seems that the current discussion would better take place elsewhere since those who follow this forum aren't going to have much interest in it (flojomojo tried, but couldn't get anybody to participate). Perhaps someplace in the FX Forum?