Trading The Wyckoff Way

[Niko 10]

A few questions for the experts. I'm looking to learn. What do you guys generally look for as signs of accumulation prior to a move up?

 

Price having already climaxed to the down side?

 

Price forming a range?

 

In this range do you expect the moves up to take a longer period of time than the moves down or vice versa?

 

Do you expect the moves up or down to be 'messy' in one direction, clean in another?

 

Volume rising on the up move, falling on the down?

 

Highs of the range taken out, but not the lows, or vice versa?

 

If you can give any justification as to why you expect this, that would be great too.

 

Seeker, my advise is:

 

1. Read the course

2. Post your doubts about the course

3. Come to the chat if you are daytrading and watch price in real time

4. When you start seeing something in the price waves, define a setup and build a system around that.

5. Write a plan

6. Backtest it

7. Forward test it

8. Fix all the bugs you will find in your system

9. You are ready to go:)

 

This will take between a year or less depending on your persistence and discipline, but if you do the whole thing you will be a good trader.

 

The Wyckoff community will be there to support you!

[Niko 10]

May I ask what book you are talking about? DB you have written one yourself?

 

DB has a book, it is great as it makes clear a lot of procedure that is not in the original W course, but I suggest you read the course first.

[DbPhoenix 42]

Dear DBPhoenix. Yes I have read the course. It takes a lot of work though to understand fully, and I am still so far from understaing it all, so I have lots of questions.

 

Sometimes it helps me if I ask a question as above, and then the answer will help me gain a new understanding of the course.

 

I realise not evey case will be the same, and things can't just be classified as one thing or the other so easily, but it would be nice to have some general idea of what you look for, re the questions I asked.

 

Sections 7-10 ought to tell you pretty much everything you need to know. If there's something in particular that confuses you, just copy and paste the passage or section here.

 

But it might save time if you were to say why you're particularly interested in accumulation?

[Guest Muir]

Does anyone know what hobbies Wyckoff had? Did he ever get bored of trading? What was his library like (outside of trading books)?

 

Women.

 

"Last week in the New York Supreme Court the action for separation brought by Richard D. Wyckoff against Mrs. Cecelia G. Wyckoff, publisher of Magazine of Wall Street was withdrawn.

 

Max D. Steur, lawyer for Mrs. Wyckoff, said: "This marks the end of all litigations between Mr. and Mrs. Wyckoff."

 

Mr. Wyckoff had contended (TIME, Dec. 10) that Mrs. Wyckoff had gradually cajoled him out of ownership of the Magazine of Wall Street which he founded in 1907 as the Ticker Magazine. This apparently was not the case. Mr. Wyckoff turned the management..."

 

 

 

Read more: The Press: THE PRESS: Wyckoff Suit Withdrawn - TIME

 

Richard Wyckoff - Wikipedia, the free encyclopedia

"Wyckoff married three times: first in 1892 to Elsie Suydam; second to Cecelia G. Shear, and third to Alma Weiss. Wyckoff charged in 1928 that his second wife, Cecelia G. Wyckoff, whom the media dubbed a Prima Donna of Wall Street, had wrested control of the Magazine of Wall Street from Mr. Wyckoff by "cajolery." The media celebrated separation ended in an agreement where he received half a million dollars of the magazine company's bonds."

[Seeker 11]

Sections 7-10 ought to tell you pretty much everything you need to know. If there's something in particular that confuses you, just copy and paste the passage or section here.

 

But it might save time if you were to say why you're particularly interested in accumulation?

 

I understand 'typical' price movement. Areas of support and resistance and pricing moving between the two. It's not always easy to trade, but I get it. Sometimes ranging sometimes breaking out and so on, and forming a new range. So I am happy with this, and mostly happy with price movement when it behaves like this. But then every so often a move seems (to me!) to come from nowhere. Price is marked up rapidly and I couldn't see a reason why. I can't understand why the rapid mark up, and I can't spot signs prior to the rapid mark up. I have read Wyckoff but the examples there are not enough for me. Perhaps I'm not intelligent enough to derive from those examples a good understanding. I have tried, and still try. Hence my questions. Perhaps I just need to see more examples of this taking place.

 

Although Wyckoff writes quite nicely, there is a lot that seems left out. And the old examples, I can't dissect on my own charts. I can't SEE what he is writing about for myself.

[DbPhoenix 42]

A general tutorial from me, though, isn't going to do you any more good than what W goes into in Sections 7-10. I certainly can't do a better job. Is there a particular stock that you're interested in? Something in particular in your stock scans that prompted your question in the first place?

Edited March 7, 2013 by DbPhoenix

[Niko 10]

Db,

 

You mentioned today in the chat that gold was something you hang on to, how do you tell the difference between an instrument that is good for daytrading from one that is good for EOD?

[DbPhoenix 42]

Well, you can daytrade it. I just don't see why one would want to when the potential is so much greater. Oil, for example, has a limit both up and down, so there's no percentage in B&H. Gold, however, has potential for substantial trends.

 

A large part of this, of course, has to do with chart reading and whether or not one knows how to do it. I used to be naive enough to believe that beginning traders wanted to know and to understand how to read charts. Charts, after all, were the stories. You want to know what's going on with a stock (or whatever)? Then learn how to read the story. That's one reason why I was so pleased when the LOC made the Wyckoff course available (I'd been given a copy a number of years earlier). I assumed that beginners would flock to it like ducks on a June bug.

 

That did not, however, turn out to be the case. I learned instead that few, make that very few, beginners had any interest at all in the chart. They had no interest in why price moved here or there or even had any idea how to tell up from down. They were interested only in red and green lights and candles and arrows and bars and the quickest way to those piles of moolah promised by the guys who sold them that course or DVD or software or subscription or whatever. And here it is almost twenty years later and it's only gotten worse, primarily because of forex.

 

*sigh*

 

But if one understands basic chart reading, he'll see the need for treating each available opportunity differently. Airlines have to be treated differently from utilities. Banks have to be treated differently from semiconductor makers. The ES has to be treated differently from the NQ. Gold has to be treated differently from oil. And all of this brings one back to the central question of what one wants from his trading.

[Seeker 11]

A general tutorial from me, though, isn't going to do you any more good than what W goes into in Sections 7-10. I certainly can't do a better job. Is there a particular stock that you're interested in? Something in particular in your stock scans that prompted your question in the first place?

 

Not just one instrument DBPhoenix. Lots, over a large time. I'm very puzzled.

 

For example, consider Barclays bank. From August until October 2011, it seemed to be in a weird sort of range (the prior move down to this area coincided with some news about Bob Diamond, and Libor fines).

 

It then after some time made a decent move up and perhaps mid feb 2012 to April 2012 it seemed again in a sort of range at the top of a swing before heading back down to the first range I mentioned above. Was this accumulation and distribution? If it was, how could one spot this before it has broken?

 

It then made a substantial move up rom August 2012, and looks to me like it has been 'marked up' in Sep 6th-Sep14th, again in January and February 12th 2013 (which now looks like a possible climax).

[DbPhoenix 42]

Okay, here's your chart.

 

Now. What is accumulation supposed to accomplish?

[Seeker 11]

Okay, here's your chart.

 

Now. What is accumulation supposed to accomplish?

 

I would say that accumulation is supposed to accomplish the purchase of shares over a period of time at a 'good' average price, i.e. without the price rising too quickly before the line has been accumulated, and at a price that it is believed the stock can move up from without too much opposition, with possibly some eventual destination for the price where the line will be sold.

[DbPhoenix 42]

And if the stock is to move up without too much opposition, one would have to accumulate quite a lot of the float, correct?

 

What is the float of this stock?

[Seeker 11]

And if the stock is to move up without too much opposition, one would have to accumulate quite a lot of the float, correct?

 

What is the float of this stock?

 

Do you mean the free float? About 11bn. I am not sure know how much of the float they would need to accumulate for it to move up without too much opposition. Presumably a price range has already been selected that is favourable towards an up move prior to accumulation? (I ask as a question because I'm not sure).

 

But yes, they should need to accumulate a decent amount of stock.

[DbPhoenix 42]

What is the average daily volume?

[Seeker 11]

What is the average daily volume?

50-60m (I don't know the figures for the times that I focused on, but Barclays was in the UK news a lot during the first time period I mentioned, so perhaps somewhat higher at that time).

[DbPhoenix 42]

So how many days would it take for someone to accumulate 80% of the float?

[Seeker 11]

So how many days would it take for someone to accumulate 80% of the float?

 

I'd expect that to take over a year. I can't give an accurate answer to it, but even with a volume of 50-60m per day, the accumulator isn't going to be that entire volume.

 

Why is holding 80% of the float important?

[DbPhoenix 42]

Okay. At 50m/day, it would take 10 days to acc a half billion shares. It would take 20 days to accumulate a billion. That's less than 10% of the float. Is that enough to prevent large-scale selling when whoever is accumulating this stock tries to mark it up?

[Seeker 11]

It would take longer than 10 days though wouldn't it? There are other people buying, making up that daily volume.

 

As for the main question. Well I don't know. As I understand it there are limits on what % can be traded in a day. Not everyone is trading every day. If price is being marked up, some may want to join in long, others may be quite happy to keep their shares as price is rising, so they wouldn't sell into the martkup.

 

I'm sure you're trying to get me to realise something, but I'm not sure how we can know for sure what % it would take to mark it up. Is 10% enough? Not to prevent large scale selling, no. But it could still be marked up if there wasn't any large scale selling. At least to some extent.

[DbPhoenix 42]

All right, let's leave it at that for the time being. Remember, though, that these are not arithmetic problems and bars; they're traders. They have agendas. If you can't get into their heads and imagine what their agendas are and how they plan on going about bringing those agendas to fruition, then understanding accumulation will be the least of your worries.

 

Where does accumulation take place?

[Perrin 10]

I think that if someone has focus they have a chance to get good at trading. If they know their own weaknesses and strengths they have an opportunity. But as you say, people have to want to help themselves get there.

 

I still find it hard to believe that most people cannot see the wood for the trees.

 

I really would like to get better at this.

 

I have learnt a huge amount from you Db. If one reads through all your posts with a willingness to learn and think, and to help others - posting about your own trades is a good start and, I guess above all, being honest - then I'm sure that anyone can become whatever they want to.

 

Regarding 20 years later Db, I don't know because I've not been trading that long. Surely it cannot have gotten worse, though? I imagine that the people at the top of the tree are similar, just different faces perhaps.

[Guest Muir]

...I used to be naive enough to believe that beginning traders wanted to know and to understand how to read charts.... That's one reason why I was so pleased when the LOC made the Wyckoff course available (I'd been given a copy a number of years earlier). I assumed that beginners would flock to it like ducks on a June bug.

 

That did not, however, turn out to be the case. I learned instead that few, make that very few, beginners had any interest at all in the chart. They had no interest in why price moved here or there or even had any idea how to tell up from down. They were interested only in red and green lights and candles and arrows and bars and the quickest way to those piles of moolah promised by the guys who sold them that course or DVD or software or subscription or whatever. And here it is almost twenty years later and it's only gotten worse, primarily because of forex.

 

*sigh*

....

 

Then I am one of the very few: studied the course twice (volume studies section many times) read Studies in Tape Reading a dozen times at least, read every book in your recommended reading list(thanks for Mamis,) bought your e-book and another book from you on Amazon (there can't be that many Phoenix sellers with Magee's "Wall Street Main Street and you."

 

Read hundreds of posts and posted only once in 3 years.

 

I didn't know that you had read the course it before LOC released it (I remember someone here posted the PDF link and an LOC link in case they wanted further books)

 

Naively, I was afraid others would adopt Tape Reading, an unmerited fear, because very few take the time to sweat it out.

 

Look at Market Profile forum, they want a gimmick based on standard deviations of something that doesn't exist because it isn't even a Bell curve.

 

Anyways, I should have thanked you a long time ago and introduced myself.

[ramack 10]

Hi,

Just a quick question before I get too far into the Wyckoff material and find out it's not what I"m after or applicable to Fx. Is Wyckoff's method of "tape reading" useful for Fx? I'm looking to trade with a naked chart, ie, no indicators. Ideally being able to trade off the numbers in front of me, only opening a chart to refresh my memory of a pairs recent history. Basically looking at numerical price action only w/o charts. I came across this site and this thread while doing a web search.

Is this how you fellow Fx traders us the Wyckoff Way?

Thanks

Rich

[DbPhoenix 42]

I'm not a fan of forex, but then I'm nobody's mother. I suggest you read this post and decide for yourself.

[Niko 10]

 

But if one understands basic chart reading, he'll see the need for treating each available opportunity differently. Airlines have to be treated differently from utilities. Banks have to be treated differently from semiconductor makers. The ES has to be treated differently from the NQ. Gold has to be treated differently from oil. And all of this brings one back to the central question of what one wants from his trading.

 

I am still so far away from telling the difference in character of one instrument to another, :doh:.

 

I just see the same patterns now, but in different instruments, guess I will have to go back to the testing lab to see what I missed. Perhaps you have already told me and I have not realized it yet.