Wyckoff, The Law of Supply and Demand, and Auction Markets

[DbPhoenix 42]

Wyckoff, The Law of Supply and Demand, and Auction Markets

 

 

Much nonsense has been circulated about trading over the past seventy years or so, the bulk of it since the internet made possible discount brokers, affordable charting software, real-time streaming data, chat rooms, trading rooms, trading websites, blogs, and so forth, all of which offered fertile ground to a literally endless assortment of books, DVDs, courses, seminars, "alert" services, mentors, counselors, trading software, indicators and so on, all designed to separate the beginner or struggling trader or otherwise low-hanging fruit from his money.

 

There is, however, only one essential, one lynchpin, one fundament when it comes to understanding the auction market: supply and demand and the Law thereof. Everything else – support, resistance, trend, price movement, volume – stems from the balances and imbalances between supply and demand, selling pressure and buying pressure, sellers and buyers, yet struggling traders are generally incapable of accurately assessing the state of these imbalances, i.e., determining who's in charge at any given moment or interval (some are capable but can't implement what they know, but that's another subject).

 

Trading price hinges on the ability to assess the state of these imbalances not only in the abstract but in every moment of the trading session. If one does not thoroughly understand just what it is that he's looking at, he will be lost. When trading price, the trader knows at all times who's in charge, who's dominant, who's holding the good cards. If he doesn't know this, he's just guessing, and that's not the route to consistent profits, no matter what you read on message boards.

 

Why bother? Because once you learn how to trade price, your edge* will never fail. You will understand trend and how to play it under all circumstances, including its endings and reversals. You will also learn how to distinguish between trending and ranging, the latter including "chop" which is a collection of micro-trends which generate tons of commissions and very little if any profit.

*the knowledge you gain through your research and testing that a particular market behavior offers a level of predictability that provides a consistently profitable outcome over time (from Douglas)

Edited July 13, 2016 by DbPhoenix