Trading The Wyckoff Way

[sharehunter 10]

I am at beginning to study point and figure chart. And now I am in trouble with three problem:

1/ In principle of drawing point and figure chart, I don’t find how to draw chart if there are a “gap” in price action.

2/ sometime, I see some number or character (not O or X) in point and figure chart, lease kindly tell me what is it?

3/ in Vertical count price objective principle, the price object count as formula as below:

I check an example there are 13 box but they use 14 box in formular, please kindly tell me why they do like thay

Many many thanks for your helps

[strohem 10]

#1/ In principle of drawing point and figure chart, I don’t find how to draw chart if there are a “gap” in price action.

 

Gaps are irrelevant in PnF chart construction.

 

Charting follows a flow of two simple rules. You have to first ask if you can complete/add another box in the column you are currently in, IN the same direction. If not, the next question is whether or not you can switch columns and reverse the chart in the opposite direction enough to complete the reversal (whatever the reversal amount is).

 

If you can’t add another box up or down, DO NOTHING. No action is recorded on the chart. Look at your chart and you will see it. You are only concerning yourself with the high or low of the price action for the period. HI and LO ONLY. Open and close values (or gaps) don’t matter.

 

#2/ sometime, I see some number or character (not O or X) in point and figure chart, lease kindly tell me what is it?

 

The numbers are “milestones” to indicate a point in time at which that particular box was filled. 1 through 9 represent the first nine months of the year, and A = October, B = November and C = December.

 

#3/ in Vertical count price objective principle, the price object count as formula as below:

 

I check an example there are 13 box but they use 14 box in formular, please kindly tell me why they do like thay

 

Not certain I’m following this question correctly – I’m missing the distinction between the “13” and “14” values you mention. Can you clarify? There seems to be something missing.

 

Also, the chart is highlighted with green and red columns to indicate the low and the reversal, then the yellow horizontal row. Did you do that or was it a part of the copy? The yellow level at 580 has “VU” in that row. Why?

 

Aside from that, the green column contains 13 boxes with box-values of 10. This chart is a 3-box reversal chart. Using the instructions you inserted, the formula looks like this:

 

13 (boxes in the first reversal) x 3 (box reversal) x 10 (points per box)… … 13 x 3 x 10 = 390. Add 390 to the lowest value in the decline (the red column).

 

260 + 390 = 650.

 

This is the same way Mike Burke of Investors Intelligence calculates his vertical counts. It can be calculated slightly differently, as well, but I hope that at least helps with your example.

 

 

What was that chart you showed us? Let me guess - it was an index... technology or internet index of some sort?? Whatever it was, it bottomed in September of ’99 at 260, then rallied to 640ish in July and August of 2000 (on the 650 price objective!). Its last print was at 510 in September (the “9” was the last timestamp, so it had not had any action in October or there would have been an “A” somewhere in the figures…).

 

Are you charting by hand at all? If not, you should.

 

Don’t forget to clarify question #3.

 

 

S

[Stock.Jock 10]

If your new to Point and Figure Charting I recommend that you take the free training at the PnF University.

[strohem 10]

If your new to Point and Figure Charting I recommend that you take the free training at the PnF University.

 

 

That's a very good source of educational information.

 

How long have you been following their work, Stock.Jock?

[motorway 10]

Also the VC column involves two box sizes

.05 and .10

 

Motorway

[strohem 10]

I completely missed those two bottom prices. But, I can't make it out... aren't they 5 and 10? 260, 265, 270, 280... ... ...

 

In any event, that would change the VC to 620 then. Mia culpa.

 

 

S

[motorway 10]

Yes 5 and 10

 

I get Objective of 560 ?

 

6 Boxes of 5

Then 7 Boxes of 10

 

= 100 pts x 3 = 300 add to the low 300 + 260 = 560

 

Motorway

[strohem 10]

Dammit man - I have to find my glasses. I was using values of 2 @ 5 and 11 @ 10...

 

Mea culpa - again... ... thanks for the catch.

 

 

I reckon this guy is going to be thoroughly conflicted because of me.:crap:

 

 

That security (I still wonder what it was - not the NDX, I'm sure) blew right by the lower price objectives in that bull market/mania.

 

 

 

 

S

[motorway 10]

It is Stock JMAT in LONDON (Johnson Matthey )

 

It is page 113 an example from

 

Complete Guide to P&F Charting

 

Henrich Weber & Kermit Zeig

 

I only see 13 Boxes in the marked column not 14 as is in the text...

 

I thought I recognized the format..

The book gives a good simple answer to the WHY of P&F

and what is distorting about time

 

However it mistakes a trading method with charting method

 

being just about three box reversal breakouts

 

Motorway

[sharehunter 10]

Hi Strohem

 

Thanks you a lot for you help. for the question 3, I know the way to calculate but don’t understand the way my book count number of box. There are only 13 box in chart but they use 14 box in formula

 

Book in this link ( page 112 & 113)

The Complete Guide to Point-And-Figure Charting The New Science of an Old Art.pdf - 4shared.com - document sharing - download

 

Hi Motoway!

 

Thanks you a lot. We should devide into two kind of box that is 5 box size and 10 box size but problem is my book said that there seven box 5 and seven box 10. Please take a look at my book and give me a helps

 

 

Thanks you !!

[motorway 10]

I only see 13 Boxes

 

 

To calculate the price objective on the upside, first add up the number of boxes comprising the

first up move after the bottom = 13

 

P&F is a REAL TIME CHART

 

KEY point

changing time frames changes everything

 

But changing scale in real time . Changes nothing. The events that make up history

stay in proportion...

 

The Fluctuations = Market Events = Unfolding Probabilities

 

"The new high on Tuesday is treated like the new-high on Thursday in p&f"

Because the reference point is the fluctuations and they are as they are

When We measure with a ruler and not a clock.

 

Real Time is something else it is not the tic toc of the clock..

 

From the Book-->

Why is discretization of price far superior to discretization of time?

Discretization means the division into small individual elements. In technical analysis

– other than point-and-figure – the information is sliced into individual elements

according to the time axis. The data or information is partitioned into weeks, days or

multiples of minutes, and hence the horizontal time-axis or time-line is equally spaced.

That is discretization of time.

 

But does time matter for a long or short position?

No, or only to a minimal extent. In point-and-figure the data is divided according to

price; that is discretization of price. Does price matter? You bet! Point-and-figure has

an advantage over other technical analysis methods through this fundamental

difference in discretization of the information.

 

Think of it. It does really not matter if the Dow moves to 10,000 over 1 or 4 weeks.

What matters is that it does move to 10,000. Does it matter if your favourite stock

moves to a new high on a Tuesday or a Thursday? In bar-charts, yes, because it alters

trend lines. In p&f it does not, and hence especially avoids fuzziness of such trend

lines.

The new high on Tuesday is treated like the new-high on Thursday in p&f, and

a year with little price move action takes little room on a chart and a year like 1987 or

2001 with a lot of movement takes considerably more room; and that is what we

believe is the correct representation of a market.

 

Like in a history book where the era

of the Neanderthals should occupy fewer pages than the 20th Century. In the bar-chart

world, the 20th Century would be described in the same number of pages as 100 years

of our ancestors fighting the sabre-tooth tigers and catching mammoths!

 

This is the start of understanding the why of P&F. Real Time , Broken Time , Market Time

INTRINSIC TIME....

 

Motorway

[sharehunter 10]

Hi Motoway

 

I got your point. may there are somethings wrong in that book

 

thanks you a lot

[motorway 10]

The Book is OK read

 

But is Not complete as in the title "COMPLETE"

 

it is basically three box reversal breakout method

 

What does it lack ( to be Complete ? )

 

 

esp ONE box reversal charting

 

The use of Time ----which is change in activity ( see Alexander Wheelan )

 

Use of natural trend lines besides the 45 degree lines ( which originate from One BOX Method that is both natural and 45 , Wyckoff used natural)

 

On Gaps you can use dots instead of X and O where there are no actual trades if you want to.. fell out of use...

 

http://www.mta.org/eweb/docs/Issues/08%20-%201980%20May.pdf

 

some info here from page 39

 

Motorway

[Stock.Jock 10]

1. What trading platform or analysis program is best to work with PnF charts?

 

2. Can a 1 minute PnF chart be as useful as a 1 minute bar chart in doing day trading?

[motorway 10]

day trading

futures

 

Most seem to use

 

linnsoft

investor/rt

 

( you can do some neat things with this using volume as well )

 

course of sale is best

built off one min bars is better than 2 min ;-)

 

I have many charts from people who send me charts

involving futures

some use BOX size = to the bid increment

 

But I would start with a larger BOX size

 

What size ? the BOX sizes that "counting" the chart quantifies...

along with the diagonal lines and open spaces

 

You have then have an adaptive chart

drawn directly by the Composite Operator

By the Market ..By demand and supply.

 

No Oblivion or Distraction

NO tIME distortion

 

 

 

Motorway

[Stock.Jock 10]

Does anyone know where I can find some examples of how Wyckoff’s Five Steps are used? I'd like to see how each step is applied to making a trade decision with charts and an explaination of chart observations.

[PFtrader 10]

1. What trading platform or analysis program is best to work with PnF charts?

 

2. Can a 1 minute PnF chart be as useful as a 1 minute bar chart in doing day trading?

 

1.

I use the software Bull-Eye Broker. Best value in my opinion.

I have understood they are set to release a new version soon with real time charts etc

 

2.

I use EOD data, which is perfectly good enough for my mid- to long term trading.

 

For daytrading I suppose you will want to use 1 minute or even tick.

[Stock.Jock 10]

I see that Amibroker has code to plot PnF charts, but the codes don't adapt to plot the Wyckoff way. There must be something different in the programming code logic between the Wyckoff way and other PnF; because Bull's Eye Broker can do it, but Amibroker can't. At least with Amibroker, the user can customize the code.

[ondrej237 10]

And if you want to judge acceptance vs. rejection or if you want to learn how to spot a climactic activity in real time, then I would recommend you to open a fast chart instead of watching 5 or 1 minute bars together with volume bars. Don't be afraid of 1 tick chart (you must zoom out so the chart displays several thousand ticks).

 

I've been watching (or trying to watch) 5s chart last couple of weeks. The tick chart is almost impossible to watch for me, since I can see only 25 minutes of activity even if I zoom out.

 

As regarding the 5s chart, I'm still not able to recognize when the buying pressure is stronger than the selling pressure and vice versa. It doesn't seem to me that there could be some recognizable "pattern" of price-volume relationship at the S/R zones. I can see only occasional increase or decline in volume - nothing what would give me hints whether the price is going to sit at that level or reverse in another direction. How can I for example judge acceptance vs. rejection?

[forrestang 10]

I can see only occasional increase or decline in volume - nothing what would give me hints whether the price is going to sit at that level or reverse in another direction. How can I for example judge acceptance vs. rejection?

 

Do you see the difference between these two scenarios?

[ondrej237 10]

Do you see the difference between these two scenarios?

 

I hope so. Given the angles of the upwaves and the lighter volume during the test, I would say that the first scenario represents rejection and the second one acceptance.

 

However, it seems to me that this behavior is easier to recognize on 1m charts. When I watch tick charts or 5s charts I don't see anything like this. Just, as I said, occasional increase or decrease in volume irrespective of the price behavior.

 

I don't know, maybe I need much more screen time to be able to see this in real time on faster charts.

[forrestang 10]

I hope so. Given the angles of the upwaves and the lighter volume during the test, I would say that the first scenario represents rejection and the second one acceptance.

 

However, it seems to me that this behavior is easier to recognize on 1m charts. When I watch tick charts or 5s charts I don't see anything like this. Just, as I said, occasional increase or decrease in volume irrespective of the price behavior.

 

I don't know, maybe I need much more screen time to be able to see this in real time on faster charts.

 

I think 1minute charts are fine. I actually have a post in here somewhere about using the 1minute instead of the 5 sec. It appears on the 1minute the same as a 5sec.

[nttrading 10]

Some of these things that are being spoke about here are valid. You need to compare your observations over large periods of back data to see if there is any validity to them. It all comes down to probabilities and managing the trade once you are in it. R:R is very important. You need to know the high probability setups. 60% or greater. You can still make money with setups that are far less as well. It comes down to trade management . Stoploss and your risk. Example: If your R:R is 1:1 and your system is less than 50% probability then you are sure to loose right? Also if you don't stick to a solid method over long periods of time and let the percentages work you will end up with differnet results. These may or may not be favorable to the trader. Even with running backtesting there is no guarantee of future performance only a certain probability that it will work. The professional pit traders over the last few years seem to be learning that the hard way.

[Head2k 10]

Ondrej,

I didn't mean you should watch only the 1 tick or 5s chart. But I think you should watch a fast chart in addition to the 1 min chart. The fast chart then gives you additional information and it also serves for observing behavior on the test where you are looking for entry.

For example, If you watch only a 1m chart then the whole test can be shown as one bar. I think it is more useful to look inside of this bar. If you look inside, then you can possibly see a sharp rejection or quick double bottom. Or you can find a slow round or flat bottom or whatever.

In other words, while 1m chart can show you behavior on larger scale (the DB as a whole), the fast chart can show you behavior on the test and can serve for defining triggers.

Last but not least, volume is largely useless in fast charts. You need to focus on pace instead. That is on how fast price is rejected.

[cunparis 10]

Ondrej,

For example, If you watch only a 1m chart then the whole test can be shown as one bar. I think it is more useful to look inside of this bar. If you look inside, then you can possibly see a sharp rejection or quick double bottom. Or you can find a slow round or flat bottom or whatever.

In other words, while 1m chart can show you behavior on larger scale (the DB as a whole), the fast chart can show you behavior on the test and can serve for defining triggers.

 

I find this perspective really interesting. I recently started focusing on 30min bars and I use 1min bars to pinpoint entries and my trading improved. What you say about 1min & looking inside with 5 second is how I feel about 30 min & 1min. Just goes to show how the markets are fractal and how everyone has to find what works for them. Thanks for sharing.