brownsfan019

It's fine; esp. since it's free to customers.

Also - I know nothing of the author so do your homework before purchasing anything if you visit his site (which is currently not up). Great article and easy to see on your own screens.

I thought this was a great article combining candles and volume for our Wyckoff friends. In particular, the author is focusing on doji's which is interesting to me. It makes sense in the context of the article and would be worthwhile taking a look at on your charts. Just make sure to look for the parameters set forth: .

Follow The Smart $$: Let Candles & Volume Guide The Way January 2009 By Todd Krueger Compared to the common bar chart, candlestick charts are visually more capable of revealing the psychology and sentiment behind a price movement. This occurs as a result of the techniques used to create the candlestick. Each candle clearly shows the relationship of the open versus the close price. For example, when the close is higher than the open, a hollow body is displayed (to make the charts easier to see, hollow candles are replaced by green bodied candles for this article), when the close is lower than the open, a filled in, or solid body is assigned (these will appear as red bodies in this article). To show the overall range of the bar, the high and low are displayed with a line that emerges from the body of the candle, these are known as the upper and lower shadows. It is the interrelationship between the size and position of the body, large or small, and the size and position of the upper and lower shadows, long or short, that create various candle patterns. For this article, I focus on one popular pattern called the doji. But first, let’s talk about Western methodology. WYCKOFF’S WORK Nearly a century ago while Japanese candlestick charts remained a closely guarded secret in Asia, an American trader by the name of Richard D. Wyckoff began to publish his methods of detecting supply and demand imbalances in the market. In his 1909 book, Wall Street Ventures and Adventures through Forty Years, Wyckoff introduced his discovery that it was possible to measure the force of buying and selling pressures in any freely traded market. Wyckoff’s research revealed that a trained chart reader could determine, with a high degree of accuracy, the cause behind price movement, whether it was to buy without moving the price up (accumulation), or to mark the price up/down or even to discourage buying or selling by the mass public (the herd). A BIG FOOTPRINT Wyckoff’s lifetime of research proved that future price moves were foreshadowed on the price chart because the “composite man” or “smart money” must leave its trading footprint on a price chart due to the sheer size of its trading volume. It is the supply and demand imbalances created by smart money that is the cause of price movement. Their activity is measured with four simple variables: Price movement (high, low and closing price). Trading volume. The relationship between price movement and volume. The time it takes for the price movement to run its course. PUTTING IT TOGETHER Imagine if you will that Wyckoff and the Japanese rice traders had lived in today’s society where global information is easily shared. By sharing his research with the rice traders, Wyckoff would have discovered that he was leaving out an important piece of the puzzle in his analysis: the relationship of the opening price to the closing price and its relationship to the overall trading range. Because he only looked at the high, low and close on a bar chart, his already good analysis could have been greatly improved by adapting his analysis to the candlestick chart. This enhanced view of the market would have further identified and refined the true sentiment and psychology of the smart money, which Wyckoff was measuring. Also, imagine the true amazement that the rice traders would have experienced when they learned how to apply Wyckoff‘s volume analysis techniques that identify supply and demand imbalances from the smart money. It is debatable whether these early rice traders even incorporated volume into their candlestick analysis, but even if they had, it would not have been as accurate or revealing as the techniques applied by Wyckoff in his analysis of the price and volume relationship. When these two East and West methodologies are combined, a powerful synergy is formed. Each methodology contributes precisely what the other lacks. This new combined methodology is known as Wyckoff candle volume analysis (WCVA). VOLUME AND CANDLES IN ACTION For this article, I apply WCVA on a one-bar reversal pattern known as the doji. This is a candlestick pattern that occurs when the opening and closing prices are the same or very close to each other. The shadows can be either long or short, and there can be various types of doji bars. But for the following examples it is not important to distinguish the type of formation, it is only important to be able to recognize what it looks like on a chart (see Figure 1). This formation is said to represent market indecision because the market opens, trades throughout the charted period, then closes at or near the opening price. It represents a battle between bulls and bears that neither won. It is widely believed that it represents a better reversal pattern at the top of the market than at the bottom, although you will learn that this is not correct under the proper circumstances. By applying WCVA, you will learn how to distinguish when there is no indecision in a doji formation. At the bottom of a market, a Wyckoff technician is looking for tests of supply in the market. A test occurs when the price is marked down to see if greater volume comes in at the lower price. If it does, this signifies supply is in the market. This supply must be removed before the market can begin any substantial up move. However, if the market is marked down and no sellers emerge at these lower prices, the price will come back up to close off the low, volume is lower relative to the prior candles. With no supply present at the current price level, the price should rise. The “doji test” bar must exhibit the following parameters to be valid: 1. It must have a low that is lower than the previous candle’s low. 2. It has to display lower volume than at least several of the prior candles. The lower the volume, the stronger the indication of no supply being present. Let’s take a look at the first of two examples that are defined as “doji test” bars. Figure 1 is a 15-minute chart of the E-mini S&P. Notice the nice downtrend in the near background. Looking left on the chart, five candles prior to the highlighted doji, the high was 1,234.25. Then the market dropped 17.25 points in 75 minutes to the low on the doji of 1,217. This sets up the ideal conditions for this formation to occur. Remember what I wrote earlier, the test candle makes a new recent low, and if there is reduced volume, it shows that no supply is present. FEW INTERESTED SELLERS You can see that this doji is making a new low on the chart, and the volume is lower than all of the previous candles. By standard candlestick analysis measures, one would come to the conclusion that this bar represents indecision on the part of the market participants. However, when viewed from a WCVA perspective, it is clear that no indecision exists here. The chart shows that there are few interested sellers at this lower price and the price comes back to close near the open. Within the next four hours of trading this market jumped more than 25 points. With this formation, it is important to understand that the smart money, which represents a large percentage of the overall trading volume, is not selling as lower price levels are explored. This is clearly evident and is shown by the reduction in total volume. If the smart money is not selling, retail traders need to be aware of this. This will prevent them from selling at market bottoms and allow them the opportunity to establish a long trade into the path of least resistance. Figure 2 shows a daily chart of Ryder stock. Again, in the near background is a nice downtrend. Because of the size of the chart, it may be hard to see the price scale, but just 10 candles prior to the highlighted candle, the high price was $61.19 per share. The low of this doji test was $54.95, which represents more than a 10 percent drop in the value of the stock in just 10 trading days. Once again, notice how the volume gets lower as the doji candle tests for supply but does not find an increase in interested sellers at these lower price levels. If there are no sellers, the price should increase. The price of this stock rose nearly 19 percent in the next nine trading days, as there were no sellers present to stop it from increasing in value. In fact, you can see from the gap-up opening the next day at $57 that the specialists marked the stock up as there were no sellers of size on their books. The price closed on the very high of the day at $59.08 demonstrating the built-in demand that this WCVA formation represents. WANING DEMAND AT TOPS Now let’s look at a doji at the top of a market. This formation is called “doji demand drying up.” At the top of a market, a Wyckoff technician is looking for signs that demand is waning. A lack of demand occurs when the price is marked up to see if there are willing buyers at these higher price levels, but as the price moves up, trading volume decreases. This is a telling sign that there is no interest in higher prices from the smart money. With no professional buying interest at the current price level, the price should fall. The “doji demand drying up” must exhibit the following parameters to be valid: 1. This candle’s close must be higher than the previous candle’s close. 2. It has to display lower volume than at least several of the prior candles. The lower the volume, the stronger the indication that demand has dried up. Figure 3 is a daily chart of the big S&P contract. Preceding the doji marked on the chart, you can see that the market has been in an uptrend for the past 23 trading days. As the market moves up to the highest reached in the last month and a half, the amount of interested buyers is drying up. We know this because the volume is reduced relative to the previous candles, even though the S&P is making a new recent high—strong markets don’t behave this way. This occurs at the top of the market, and when we apply WCVA, the “doji demand drying up” indicates that at least this phase of the up move is either close to or at the end. The close of the doji candle occurred at 1,425.8. Only five trading days later, the market closed at 1,373.4, a drop of more than 50 points. With this formation, it is important to understand that the smart money is not interested in supporting higher prices. This is evidenced by the reduction in overall volume. If the smart money is not interested in higher prices; retail traders can take this knowledge and refrain from buying at market tops, as well as allow them to establish a short trade into the path of least resistance. FOLLOW THE SMART MONEY By understanding these straightforward examples, you should now be capable of identifying these formations when they occur on your charts at home. I only had the space to review one candle formation in this article, but the analysis applies to every type of candle pattern. Wyckoff candle volume analysis works in all markets and timeframes, and precisely reveals the true psychology and sentiment of the smart money. By trading in harmony with the smart money, we truly trade in the path of least resistance and increase the probabilities of success. This knowledge will empower the individual trader and help prevent buying market tops and selling market bottoms for all who apply these techniques. Todd Krueger is a professional trader, creator of Wyckoff Candle Volume Analysis and is the founding president of Traders Code LLC, which provides trading tools and education for traders at all levels of expertise. For more information, please visit TradersCode.com. Reach Krueger at todd@traderscode.com.

Susana, Nice entry parameters. Sounds like you got that part down really. The enhancement you mention in your initial post would come down to profit targets IMO. Which is also the most difficult aspect of trading IMO as well. I might have missed it, but did you discuss your exits? Entries are reversals and fairly straightforward, but how one exits a trade can be an entire discussion as well.

Good points Steve. Personally I have never found any value in a squawk service b/c it's never been explained to me in a way that I can use it to make money. It's that simple. If Ben were you put together a User Guide, that might help others that have the same view as me, which is the squawk is a tremendous distraction that adds no value. Again, that's b/c I've never seen or even read about a trader that uses it to make money. I've never seen it explained in a way that can provide value to my trading.

Nothing is perfect as others have said. Visually some sort of volatility bands, ie bollingers, can provide a visual aid. By no means are they bulletproof but provide a visual aid.

Here's why the YM is recommended for beginners: 1 pt = $5 1 pt on ES = $50 In other words, you can lose 10 pts on the YM and have lost the same as 1 pt on the ES. A 1 pt move on the ES (esp in recent memory) can be rather quick at times, meaning watching a 2-3 pt move flash before your eyes is not uncommon. Therefore, a 2-3 ES pt move = $100-$150 move. That same move on the YM would require 20-30 pts. While the YM can in fact move 20-30 pts quickly at times as well, it's much easier to hit the flatten button when you have a 10 pt 'cushion' vs a 4 tick / 1 pt on the ES. Basically, the YM gives beginners a little bigger 'oh sh*t' ability when compared to the ES. A 1 pt or 4 tick move on the ES is not much at all, esp during volatile times. That's why the YM is recommended over the ES to beginners. Has nothing to do w/ actual leverage numbers you are trying to calculate.

Pictures please!

Hopefully next big FF upgrade will address this.

So probably just a function of having too many windows/tabs open. Wonder if it helps at all to have all the tabs open in one window or not. Will have to test later.

I'd say I have about 4-6 FF windows open and in each of those probably 1-4 tabs. I usually notice when FF is considerably slower than IE (which I usually do not keep open w/ tabs). This computer has 2 gig of RAM.

Meaning what Sherlock? I could see one side saying a good trader can work a 30 second or 1 minute chart; but then you read that the big boys don't even bother w/ daytrading...

Interesting... Maybe it's just a design issue w/in FF then. I've tried what I could find via google to help the problem but the only way to keep mem usage low is to really have one FF window open w/ very little tabs open.

I am running Firefox 3.0.5 and at times, I can have some serious memory usage issues on FF. I can easily push mem usage over 200k and can get over 500k at times. Only way for me to fix this currently is to kill Firefox through Task Manager and reboot it. And that is a temp fix. I've read there could be memory leaks and/or add-on issues that could cause this. Here's my add-ons: I've done my best to keep the add-ons to a minimum and would like to keep those if possible. I've also done a few things listed here - http://www.detector-pro.com/2008/04/how-to-fix-firefox-memory-leak-problem.html The computer that I have this issue on is one where I will keep multiple FF windows open. This is my 'junk' computer and I keep windows open that I want to look at later sometimes. Maybe the fix is just close the windows and bookmark them or something but was hoping there was a way around this if possible.

Just a heads up for anyone that may have missed the announcement about next round: If you haven't tried CG out yet, CLICK HERE to get started! It's free and kills some time between trades. Hope to see on the battle grounds!

Mima, If you want hand holding and a room to lean on, then maybe TI is for you. Personally after seeing their demo's before and the many discussion on elitetrader about it, you simply have a divergence trading system which can be found all over the internet for free. They will tell you that their indicator settings are 'magic' but it's anything but.

Ryan, It's not easy going through mental blocks and I've been there before. I didn't do any of the brain teasers that you mentioned, just hard work and focus eventually paid off. IMO it comes down to having faith in your system and being able to execute it like a robot, ie leave emotions at the door. Much easier said than done, I know. But until you can put your emotions in check, it will be difficult to trade. I've said before that I think it's actually easier to trade when you first start vs. getting your teeth kicked in a few times. After that beating, it's hard to get back up and do it again. And I think that's what happens to many traders - they start very ambitiously and ready to go, lose some money, realize this is not easy and watching $ go away hurts; therefore much harder to keep at it over time.

It did deadalus; however, some brokers revert back as quickly as possible and others keep it in place for awhile. While intraday margin is important to know, if you (and not directed at daedalus) are that concerned about it, be careful how much of that margin you use. It is fun to think of trading per $500 and when you have a good day thinking that you could have made 10x what you did... but you can also lose 10x as much on a losing day.

Difference? THOUSANDS OF DOLLARS. You can buy A LOT of trading books for a few hundred or even $1,000. You can get ONE course for $5000+. Not to mention that it takes a little more substance to get a publishing deal from a reputable house vs. setting up a website in 30 minutes & calling yourself a guru.

TI is selling a divergence trading system. Spend a little time on google and you'll find what they are doing easily. http://www.google.com/search?hl=en&q=divergence+trading&btnG=Google+Search&aq=f&oq=

Open ECry also has good intra-day margins listed here.

So you find an old thread. Then you copy a post of mine. Then you paste it here. And say nothing. That's plagerism!! I'm telling!! :doh:

trk - if you are new and looking for info, I'd suggest a few FREE websites and then start from there. http://www.traderslaboratory.com/forums/ http://www.elitetrader.com/vb/ http://www.cmegroup.com/education/index.html See what interests you and then maybe get some books. I attached a PDF to this post w/ some of my favorites. From there, you can decide what courses to consider paying for. Problem buying one right now is that you have no idea how/what you want to trade. If you buy a course that emphasizes lots of trades per day that may not suit you. Or maybe you are an action junkie that would be bored w/ a course that takes 1 trade per day. I know the temptation at first is to purchase the key to the ATM machine and you'll learn to adapt to it but you'll eventually find out that there is no key and there is no ATM machine just sitting there waiting for you. What you will eventually see is that this is incredibly hard and difficult work that many are not cut out for. You'll see that if someone was truly a good trader and making good money, there's no way they'd be selling it online for a few thousand dollars. Something that produces regular income is literally priceless. If it did as advertised firms like Goldman Sachs, Smith Barney, etc. would purchase it for MILLIONS AND MILLIONS. But it would of course be proven to make money. Which would be a serious problem for most of these vendors. Amazon.com trading book reco's (tiny url's).pdf

Here's my on event trading - it can be very profitable, if on the right side. There's 2 ways to look at event trading: 1) Construct a plan for event trading only. 2) Take trades that you normally would as they appear and if an event helps it, great. As for #1 it's rather easy - find out what events normally move markets, get a whole bunch of historical data and then do the leg work. Hakuna, if you are looking for a silver platter here, I think it's obvious by now that Steve has give some ideas to work with BUT THEN IT'S UP TO YOU TO WORK THEM. If you really want to take this further, start a new thread that specifically discusses event trading and then do some work on your end. Step 1 is to get a nice chunk of historical data. W/o that, you won't be able to put together any realistic hypothesis.