Trading The Wyckoff Way

[FulcrumTrader 10]

Usually you will see Commercials directional trade core positions by SELLING into a rising market (in a small range of price) and BUYING into a descending market (in a small range of price). Equities players (funds, institutions) will though at times, while hedging in futures, SELL into descending price action as the market is trading through key pricing levels.

[DugDug 10]

I have always thought the words manipulation, strong hands, weak hands etc; confuse.

Also dont confuse the ideas of strong holders with those in different time frames, or those with smaller risk tolerances, more frequency trading methods, smaller stops etc; What is noise for some people is key information and profitable for others. The really big money ignores the noise as they have to. Also some large trend trading funds, and index funds sell weakness and buy strength. Plus not all professionals make money - then you get into the whole idea of smart v dumb money.....Thats the market!

When ever using such words and concepts you also need to define other parameters as well, related to exactly what you are trying to understand. People like George Soros approach the market from the point of view that it is always wrong, while others believe the market is always right - depending on what you are trying to achieve.

There is plenty of good discussion threads here.

(sorry if this is more confusing - the point is that this is a discussion that will always change depending on the persons discussing it and how they view the markets)

[dla133 10]

Thanks for the replies,

 

I suppose what I am getting down to really is how can you determine if you are really on the same side as the market movers or you are the Patsy (Using poker terminology) being bought from or sold to?

 

Kind Regards

[jonbig04 10]

So I suppose what I am really asking is how do you know who is really moving the market, is it weak or strong holders.

Kind Regards

Lee

 

This is just my opinion, but who cares?

 

I've never really bought into the whole "smart money" thing. Not because I think it's invalid, but because I don't really see the reason for it. To me, the law of supply and demand that you mention and it's manifestation through the movement of price is all we need to focus on.

 

Once again though, just my opinion.

 

EDIT: just wanted to clarify, I'm not saying it's not and interesting or valid subject I just don't think it's possible to know whether the "smart" or "stupid" people are the ones buying and selling. To me the law of supply and demand and price's movement take care of all that for us. They sum up everyone's hopes, dreams and intentions so we don't have to worry about them.

Edited March 31, 2010 by jonbig04

[dla133 10]

If we forget about strong and weak holders. Can the price be manipulated so that traders are stoped out because all the stop orders are known? For example if the current price is 73 and there are a lot of traders with a stop order at 69. Can the market price be dropped so that the stops are hit. So many times I see price droped like in a shakeout which catches a lot of traders out just before the price then starts to move up. Its almost like somone is sat there, who can see all the orders and is manipulating the price to their advantage. Maybe I have been watching too many programmes like the X files and Fringe!

[wjrusnak 10]

So I suppose what I am really asking is how do you know who is really moving the market, is it weak or strong holders.

 

For clarity I refer to weak holders as the general public who lose money and strong holders as the professionals who make money.

 

Kind Regards

Lee

 

I've had this discussion numerous times and have some advice for you. First, you're complicating this with theories. What you see on a live chart are thousands of transactions, occurring at the identical, increasing, or decreasing prices in respect to the last transaction, over time. You even know how many transactions have occurred via volume. Nothing more and nothing less. Now you're attempting to guess who's causing those transactions. Well I will admit to you that I don't know who is buying or selling. Honestly. Is it another guy like me? A girl? A rich guy? A hedge fund manager in charge of billions? Does it really matter? The point is that the majority moves the price and you want to speculate which way the majority of traders will move price next. Here's the kicker: in that majority are small guys, weak hands, strong hands, billionaires, etc. The answer to your question is everyone. Everyone moves the market and everyone generally splits into two categories: people who think the price is cheap and will buy and people who think the price is expensive and will sell.

 

The biggest fallacy in this strong/weak hand theory is the assumption that all the losers are the general public and all the winners are these sharks with billions of dollars at their hands. A big player selling needs a big player buying and one of them needs to be wrong and one of them needs to be right.

 

In conclusion, stay simple and go with what you can see, which in this case is the last price (on whatever time frame you choose) and the volume (some even choose not to look at this). If you notice that 1000 contracts (or shares) were exchanged during a particular time frame, know that someone bought 1000 and someone sold 1000. Maybe he/she was planning to jack the price up to spook someone else from selling... or maybe he/she/they were planning to snag some stop-losses... or maybe....

 

Stick to a set of rules and trade and theorize about the players later.

[dla133 10]

Thanks for your reply. The reason I like this forum so much is that you get people out there who can clear away the fog and put you back on the straight and narrow. Your right, I should stop worrying about who is doing the buying and selling and just concentrate on what I see and believe.

[srag&birdie2 10]

Interestingly, Wyckoff was very concerned about manipulation and studied it carefully. He saw large stock manipulators running up the market to unload their holdings and selling down the market in order to cover shorts and buy at favorable prices. This is seen nearly every day still in the markets. If you read the original Wykcoff material, you will see this in spades. He was always tracking who was doing what to whom.

[dla133 10]

Hi,

 

How did Wyckoff track and determine who was doing what to who?

 

Kind Regards

Lee

[srag&birdie2 10]

Read the orignal course. Also Studies in Tape Reading, and the course in Tape Reading. Then you will learn first hand how did Wyckoff tracked and detmined who was doing what to who (sic) (much better to say who was doing what to whom.

[Guest da Vinci Like]

If we forget about strong and weak holders. Can the price be manipulated so that traders are stoped out because all the stop orders are known? For example if the current price is 73 and there are a lot of traders with a stop order at 69. Can the market price be dropped so that the stops are hit. So many times I see price droped like in a shakeout which catches a lot of traders out just before the price then starts to move up. Its almost like somone is sat there, who can see all the orders and is manipulating the price to their advantage. Maybe I have been watching too many programmes like the X files and Fringe!

 

Hi Lee,

 

A while back I was following a software package with the initials TG. I followed their theories and even read a book they had. It seams you are using the same terminology they did. Knowing now what I did not know then, I'd have to say it was all just great marketing. Everyone loves a conspiracy. It simplifies things. No need to worry about your own actions because it’s someone else’s fault. IMHO conspiracies are for people who do not believe they can control their own lives. These marketing people take advantage of that to sell what they need to sell. I guess that’s a conspiracy too. LOL.

 

There was some value in what they were saying as regards to volume.

 

The simple fact is that "smart" people buy at the low and sell to the latecomers at the high. Then they can buy back what they sold at the high form the "dumb" money that bought at the high. It does not seam like a deep conspiracy to me.

 

Stop runs are some of my favorite things. They provide a great trade location. Its no secret where the stops are (2 points below low/high in ES), you just need to know where the buying or selling pressure is so you can get out of your position BEFOR your stop is hit. Then just get back in at a better price, as those "evil" stop runners can’t push prices any further.

 

If you day trade you can keep your pulse on the market by reading the order flow. That can give you an edge over the "dumb" money.

 

Good luck.

Art

[FulcrumTrader 10]

Today in the "ES" we had a very good example of the physics behind "supply & demand" events during intraday trading..........

 

Images | ChartHub.com

 

At the lows in the ES today the market had just neutralized the very last significant LONG inventory which had still been held in the market. As that last supply of available LONG inventory was getting used up, as an exit by those who had sold the new highs on the day, we had a nice bounce off the 1066.25's. You can also see how the SHORT covering accelerated after all that supply was used up.....after a proper Order Flow Transition occurs in the Cumulative Delta indicator we go LONG with this type of "supply & demand" event.

 

The market dynamics are suddenly shifted with a market suddenly vacant of remaining held LONG inventory (all known resting LONG inventory of significant quantity bailed in the ES......no more LONG holders that can be used for additional LONG covering into Equities SELL program activity). It is just so interesting to watch how right as the last available LONG inventory goes to neutral how the Equities SELL program activity shuts down (happens frequently.....why I love to track the Cumulative Delta). There are very key patterns/events in the tracking of the "supply & demand" game which can provide you with very timely and actionable trade entry information.

Edited April 28, 2012 by DbPhoenix

[forrestang 10]

Back in town, and here are my thoughts for today. You can see there are several ranges that may come into play for the day.

 

Many other levels of interest, but these highlighted appear to be the clear ranges IMO.

 

Not shown here but above pulled from daily is 90-92.

 

Edited April 5, 2010 by forrestang

[forrestang 10]

Back in town, and here are my thoughts for today. You can see there are several ranges that may come into play for the day.

 

Howdy.

 

Recap of Yesterday:

A bit of a tricky open IMO, as market didn't open at any of the range extremes I was watching. Although the market clearly respected the areas we were watching through out the day.

 

Thoughts for today:

Not changing much for today. Only difference is the activity that happened at the top. This area is a clear range IMO now, so notice the changes. Will be observing the level I had yesterday as simply more of a midpoint that formed that larger range.

[forrestang 10]

Howdy.

 

Recap of Yesterday:

Here is what happened yesterday. Yesterday was a bit tricky IMO due to the early chop we started with. Even though the early chop DID occur in a predefined range and may have been somewhat orderly. I was shaken out of my early long as I was aggressive to move stop to BE due to the lack of initial follow through and was stoped to the tic, before moving well out to my targets.

 

Thoughts for today:

Nothing changing, save for the fact that I will watch yesterday's high for possible resistance as shown on the chart. Other areas and ranges are shown as well.

Edited April 7, 2010 by forrestang

[matinthehat 10]

Trying to keep things as simple as possible. ES levels for tomorrow.

[forrestang 10]

Good Morning!

 

Recap of Yesterday:

As usual, shown are the levels that we had in place for yesterday and how the market moved with them. Things worked out ok, although we did somewhat create a bit of a new range that shifted the one slightly down.

 

By that I mean take a look at the big range up top, purple arrow. Now note the red box, this is how that range up top seems to have shifted slightly. But other than that, all levels and ranges still worked out well. I may not have explained that well

 

Thoughts for Today:

Minor changes. Although the ranges I had yesterday I will leave in place. That transposing I spoke of above is taken care of by midpoints shown by the dotted blue lines. But it all should be clear on the chart.

 

Also, since I am creating this prior to the open, not the range that is being created prior to the open shown by that little red box at the right edge of the chart. We will see how that plays out. Might be too early to call, but let's see if conditions set up for a buy opportunity, particularly if we open at bottom of that box. Inverse for the top of the box. Possibly we may just break out of the box in the direction of the BO. Although anything can happen:confused:

Edited April 8, 2010 by forrestang

[misa 10]

Dear Sir ,

 

My question is how can we apply the Wychoff Method on a trend in a V shape , where is no trading range for distribution ?

[forrestang 10]

Good Morning.

 

Recap of Yesterday:

After opening within the range we discussed premarket, we broke down and found good support around 60s. From there strong move upwards with various pauses. We then consolidated in the 77-86 area, with chop up to the midpoint at highest. Overnight activity shows a move right up to the upper edge of that range.

 

Thoughts for today:

I am not changing anything at the moment, there is a immediate level above at 92 that is not seen on my chart.

[forrestang 10]

I am not changing anything at the moment, there is a immediate level above at 92 that is not seen on my chart.

 

Recap of Friday:

After finally breaking out, we went right up to that level and stopped on a level picked off of the daily:cool:

 

The rest is on the chart.

 

Thoughts for Today:

I am not changing anything atm, note that I will be watching the AH high put in place, and possible areas with 2008 and 2020 above pulled from daily.

[forrestang 10]

Recap of Yesterday:

Not a clear day for me and a few others I spoke with yesterday. No trades, the day didn't really setup the way I'd like. No real triggers for me at the extremes.

 

Thoughts for Today:

I have adjusted this upper region we are in now. Other ranges are marked. Note the little range being created premarket.

[forrestang 10]

Recap for Yesterday:

Yesterday seemed to produce a REALLY orderly market! Two major moves throughout the day.

 

Thoughts for Today:

My tic data doesn't really go back far enough to see prior intraday moves. For now I am watching this 2010 area, and also 2020-2021 above. Everything else is the same.

Edited April 14, 2010 by forrestang

[Head2k 10]

My tic data doesn't really go back far enough to see prior intraday moves. For now I am watching this 2010 area, and also 2020-2021 above. Everything else is the same.

 

As you can see in the attachement, we are in a range from 2008 now. This range can be devided into halves, and ~2018 is the midpoint of the upper half. ~1997 and ~2040 seem more important, though.

[forrestang 10]

Recap of Yesterday:

Pretty straightforward day IMO. That level shown with the dotted blue line was a level that wasn't necessarily reacted on to the tic, but activity a point higher at 2010 was obvious during trading. We also rallied right up to anticipated resistance after breaking out of this range we created.

 

Thoughts for Today:

Made a few changes in the ranges, nothing major. I will be watching the AH activity as well.

[wjrusnak 10]

 

Up and Up and Up...

 

Anyway, I would be looking to short around 2030 or 2038, depending on where we open. Otherwise it seems likely that another long could be possible on a pull back to say 2023 or 2017.