Trading The Wyckoff Way

[zeon 10]

The decline in the number of new highs, however, does suggest that the market is being driven higher by large-cap stocks, and the advance may not be a broad one.

 

The story's pretty much the same with the NYSE.

 

There was an article in TheStreet that mentioned a similar thing: small-caps aren't participating. Next to that, they note that the volume has been below average since the January lows...

[zeon 10]

Recognizing it in real time is one thing, actually trading yet another...

[gassah 10]

W:

 

"The most valuable feature of Figure Charts, however, is their horizontal formations, which, in many cases, forecast the approximate number of points a stock, or a group, or the average should move.

 

It is in these horizontal formations, or congestion areas, on the figure chart that we find the greatest aid:

1. in determining how far a stock should go
   
2. when it meets opposition, viz., when it has about reached the end of its move; and with the help of the vertical chart
   
3. determining the trend, and
   
4. when a stock is on the springboard"
   

[zeon 10]

W:

 

"The most valuable feature of Figure Charts, however, is their horizontal formations, which, in many cases, forecast the approximate number of points a stock, or a group, or the average should move."

 

Yes... but where can I read how the exact calculation is made?

[BlowFish 10]

http://www.amazon.com/Definitive-Guide-Point-Figure/dp/1897597630 is my favourite book on P&F fwiw. It's pretty comprehensive.

[gassah 10]

The .pdf will get you started. There's too much material to post here. Stockcharts.com does Wyckoff-style point and figure but you need to be careful with the settings:

 

http://tinyurl.com/5k5hej

The Figure Chart.pdf

[gassah 10]

Keep in mind the PnF targets are just a "watch, look and listen" area. I use them to make sure a stock I'm interested in has enough of a count to supply a minimum 20-25% move as an IT trader. Once the stock begins trending I look for supply or demand in the target region.

 

A definite exit for me is the appearance of a climax at an overbought or oversold position (channel lines), combined with the meeting or exceeding of a PnF target. As has been mentioned before it is sometimes difficult to distinguish preliminary support/supply from a climax. If a target has not been reached then I'll give it the benefit of the doubt and conclude that it hasn't climaxed yet.

[DbPhoenix 42]

and conclude that it hasn't climaxed yet.

 

Okay, that's enough of that.

[gassah 10]

Okay, that's enough of that.

 

Climaxing all the time is the best part of W.

[gassah 10]

GBPUSD 30m spring?

 

[gassah 10]

A couple of composite MP views of where the spring found support.

[DbPhoenix 42]

A couple of composite MP views of where the spring found support.

 

The "spring", however, appears to have created the profile. If you were using the profile to find support, what would the profile look like prior to the test's having occurred?

[gassah 10]

The "spring", however, appears to have created the profile. If you were using the profile to find support, what would the profile look like prior to the test's having occurred?

 

I should have kept the borders on. I stopped the profile at the rally before the spring.

[Tannism 10]

Is this the type of consolidation area where one might look for being on the springboard in either direction?

[DbPhoenix 42]

I'd say no. The balance of volume appears to push price higher. However, the price has advanced 40% from the bottom and this is the third of these consolidations. If you're trading one lot, consider moving your stop up below this TR.

 

You do know you entered 4pts too late, don't you?

[Tannism 10]

You do know you entered 4pts too late, don't you?

 

Still don't care for PnF?

[DbPhoenix 42]

Nope. I don't see the point (no pun intended).

[zeon 10]

Richard Wyckoff was a pioneer of technical analysis. While Dow contributed the theory that price moves in a series of trends and reactions, and Schabacker classified those movements into chart patterns, developed gap theory, and stressed the role of trader behavior in the development of patterns and support/resistance, Wyckoff contributed the study of the relationship between volume and price movement to detect imbalances between supply and demand, which in turn provided clues to direction and potential turning points. By also studying the dynamics of consolidations or horizontal movements, he was able to offer a complete market cycle of accumulation, mark-up, distribution, and mark-down, which was in large part the result of shifts in ownership between retail traders and professional money.

 

Db - not sure where to ask - but how much do you follow Dow, Schabacker and Wyckoff? I mean if DOW theory are the fundamentals to build upon, than why is Wyckoff making fun of it in his articles?

 

I've just come across this piece of text. I thought you said somewhere sometime that the confirmation (or lack of) confirmation from the averages is an important principle.

 

But Wyckoff writes: "the so-called DOW method is as modern as an ice-wagon, and just as cumbersome. It is as clear as mud." and later "it is of no use in actual trading compared with modern ways of judging the market known to many people".... "People who for the first time become attracted to the Dow theory have been known to grin like a boy who was picked up a horsehoe; but the longer they study it, the less they are inclined to grin."

[DbPhoenix 42]

Db - not sure where to ask - but how much do you follow Dow, Schabacker and Wyckoff? I mean if DOW theory are the fundamentals to build upon, than why is Wyckoff making fun of it in his articles?

 

What charting program are you currently using?

[zeon 10]

What charting program are you currently using?

 

 

I still have Sierra installed, if that's what your asking. Although to be honest I quite like Bigcharts for saving my EOD annotations. But I don't see how that relates to my previous question?

[DbPhoenix 42]

I still have Sierra installed

 

And how much time do you spend replaying charts in the evenings and on weekends?

[zeon 10]

And how much time do you spend replaying charts in the evenings and on weekends?

 

Not as much as I spend time behind the screen during the market open hours.

I also spend considerable time going over the things posted in your blog for a second or third time and reading books Wyckoff wrote (as you can see from my latest post).

[DbPhoenix 42]

Not as much as I spend time behind the screen during the market open hours.

 

All right, let me put it another way. How many days do you replay in the evenings and on weekends?

[zeon 10]

All right, let me put it another way. How many days do you replay in the evenings and on weekends?

 

For every 5 hours I watch the market "live" I replay 2 days, which takes me about 30-45 minutes per day. I pay more attention to the open (replay slow) and fast forward (replay accelerated several times) when price is around lunchtime because it's usually drifting anyway.

[DbPhoenix 42]

For every 5 hours I watch the market "live" I replay 2 days, which takes me about 30-45 minutes per day. I pay more attention to the open (replay slow) and fast forward (replay accelerated several times) when price is around lunchtime because it's usually drifting anyway.

 

And do you believe that going through an entire day in 30 minutes is telling you everything you need to know and understand regarding the movement of price and volume and the relationship between the two over the course of the trading session?