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Wyckoff Trading Method
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Wyckoff Trading Method

  #211 (permalink)
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Hope no one stepped into this faked breakout where the high occured. It looked like a legitimate breakout, but ...

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ctmvas View Post
Hope no one stepped into this faked breakout where the high occured. It looked like a legitimate breakout, but ...


I wonder if this could be considered an Upthrust after distribution.
D

This link will discuss Accumulation and distribution and give a wyckoff schematic of Distribution and show what a upthrust after distribution looks like.
http://www.informedtrades.com/510407-accumulation-distribution-part-2-a.html

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Trade setup


There has been some question regarding wyckoff how one takes a trade. What is the entry location, the stop and the exit.

Attached are two charts that show a trade in the Mini Dow. No, I did not take this trade because I have a Day job, unfortunately, but if I were at home trading I would have. So, the set up is this: The market is in an uptrend and has been. The 15 minute chart shows us that as well. On the 15 minute chart I have drawn in the demand line. this can be drawn well in advance of price reaching it based on prior lows. There is also horizontal support. If 15 minutes is too large a time frame then one can move down to dial in entry. I show a 3 minute chart as well. Right at the demand line and the horizontal support you get a 2 bar reversal pattern. If one is aggressive you can enter at support before the bar closes and risk a small amount, just under the demand line. If you want some confirmation you wait for the bar to close. After the 2 bar reversal you enter. Risk is approx 10 tics. Exits can be how ever one likes. A fixed target, scale out, but expect some resistance at the opposite trend channel line of the down move. A first target could be a prior swing high. In hind site this when on to make new highs, but given the structure of the market and the low volume on the retracement the odds were in your favor. I hope this was useful.
David

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Trade setup

Here is another trade set up in the Mini Dow 15 min chart. As we all know patience is important in this business, I know because I lack patience, but that's another story, but this method really seems to need patience. You have to wait for things to unfold. I think that everything came together in this setup. It would have been nice to be on board. I was watching this before work, but whimped out.

Important factors that define the setup:

1. Daily resistance in the 12300 area rejected over night.
2. Shortening of the thrust as we approach resistance. This can also be described as declining momentum. Cant reach the Supply line (upper trend channel)
3. A lower high is put in place
4. A break of support on good volume.
5. A lower lower is put in place
6. A retracement on light volume up to resistance (horizontal and upper channel.
7. Reversal bar or (HUT) Hidden upthrust at resistance

I'm sure there are other things that could be included, but this would be enough to short at the 12200 area.

d

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Mini Dow Trade Set up

I have no way of proving it because I did not trade it, but I did see this setting up last night and thought we would see a down move today. Sometimes I feel like it is very clear, just glaring at you and giving you all the clues you need to take a trade. In this case it would be short.

There are two charts. Both are 15 minute charts. One is a broader view and the other is a close up of the distribution area, or what I'm calling distribution.

David

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6E

I saw this coming. The spread on bar 1 was narrow. I had a feeling the reversal was coming. The reversal occured on bar 2, everything looked good except the volume. So, I decided to let it go. Obviously I wished I would have gone with the trade.

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  #217 (permalink)
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I was searching for a discussion on the Wyckoff Trading Method, because I have some questions and Google gave me a link to this thread. So I'm looking for a Wyckoff type answer, not a VSA answer.


I have a question on some indicators that are used in the SMI training and I was wondering if there are common equivalent indicators that are available for the same results. The training provided by SMI stresses not to mix other trading techniques with Wyckoff's method, but it seems that they do it anyway by developing indicators of their own which are similar to indicators that are already developed by others and have given them SMI names.


For example here is a quote from one of Dr. Hank Pruden's articles saying that the On-Balanced-Volume indicator is like the Optimism/Pessimism Index.
Quoting 
The Law of Effort vs. Results – divergencies and disharmonies between volume and price often presage a change in the direction of the price trend. The Wyckoff “Optimism vs. Pessimism” index is an on-balanced-volume type indicator helpful for identifying accumulation vs. distribution and gauging effort.

So does anyone know of equivalent indicators that most traders can use for SMI indicators such as:


1. The Wyckoff Wave.
2. The Trend Barometer
3. The Pulse of the Market

Also would using the On-Balanced-Volume indicator as the author Joseph Granville recommends be the same as the way the Optimism/Pessimism Index would be used?

I have some ideas that might apply to those concepts; however, I don't have confirmation that they are the same as what Wyckoff teaches. For example I thought the The Trend Barometer is similar to the ADX, +DMI and -DMI parameters after I read the article ADX: The Trend Strength Indicator So if this is the answer, would using the ADX as the original author recommends in his book ADXcellence Power Trend Strategies by Charles Schaap be the same as using the Trend Barometer?

The concept of the Wyckoff Wave is similar to using market indicies such as the S&P500, but the Wyckoff Wave uses only 8 stocks. In my trading platform, TOS, I can make a chart with the percentage relationship between the S&P500 and the stock I'm analyzing. This seems similar to what the Wyckoff Wave is trying to accomplish, but again, I have no confirmation on that.

I'm still looking for something related to the The Pulse of the Market.

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StockJock View Post
I was searching for a discussion on the Wyckoff Trading Method, because I have some questions and Google gave me a link to this thread. So I'm looking for a Wyckoff type answer, not a VSA answer.


I have a question on some indicators that are used in the SMI training and I was wondering if there are common equivalent indicators that are available for the same results. The training provided by SMI stresses not to mix other trading techniques with Wyckoff's method, but it seems that they do it anyway by developing indicators of their own which are similar to indicators that are already developed by others and have given them SMI names.


For example here is a quote from one of Dr. Hank Pruden's articles saying that the On-Balanced-Volume indicator is like the Optimism/Pessimism Index. So does anyone know of equivalent indicators that most traders can use for SMI indicators such as:


1. The Wyckoff Wave.
2. The Trend Barometer
3. The Pulse of the Market

Also would using the On-Balanced-Volume indicator as the author Joseph Granville recommends be the same as the way the Optimism/Pessimism Index would be used?

I have some ideas that might apply to those concepts; however, I don't have confirmation that they are the same as what Wyckoff teaches. For example I thought the The Trend Barometer is similar to the ADX, +DMI and -DMI parameters after I read the article ADX: The Trend Strength Indicator So if this is the answer, would using the ADX as the original author recommends in his book ADXcellence Power Trend Strategies by Charles Schaap be the same as using the Trend Barometer?

The concept of the Wyckoff Wave is similar to using market indicies such as the S&P500, but the Wyckoff Wave uses only 8 stocks. In my trading platform, TOS, I can make a chart with the percentage relationship between the S&P500 and the stock I'm analyzing. This seems similar to what the Wyckoff Wave is trying to accomplish, but again, I have no confirmation on that.

I'm still looking for something related to the The Pulse of the Market.


StockJock,

I'm not aware of any indicators that replicate the ones you mention. I have seen that quote by Pruden before as well regard OBV.

The only study that I've done on Wyckoff is the Gary Dayton course regarding chart reading which is Wyckoff based. The only indicator he gave examples on in the course is the 3/10 oscillator that he uses with tick charts. He actually also watches the $TICKS.

You may not want a suggestion, but here is one anyway. If you want to use Wyckoff in trading it may be best to try an implement it in the form it was intended. In other words, without indicators. That's the main reason i looked into it. The idea is to read the market by its own actions via the structure, support and resistance, trend lines and volume to some extent.

Sorry i couldn't help with the indy's.

D

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David_R,

Thanks for your reply, but I think that someone who has taken the Wyckoff-SMI training might be able to answer this question. Your right, the way Wyckoff's method was originally intended was to trade without indicators; however, 1) he did say always follow the trend, 2) he did say trade in harmony with the market, 3) he did teach about supply and demand, and 4) he did teach the 9 buying and selling tests. These are all covered in the four items that I have listed. He doesn't call them indicators; however, when a trader has to analyze a specific trade using his method he would have to do the same thing manually (without indicators). Call them indicator or do the same thing without indicators, it appears these concept I've mentioned are included in his method.

I think that in some forums the discussions are on VSA and they call them Wyckoff's method. My understanding of all of this is that VSA is very good development from what Wyckoff taught, but I don't think Wyckoff taught it like Tom Williams teaches it. We even have an even newer intrepretation of Wyckoff's method taught by Todd Krueger who calls it WCVA (Wyckoff Candle Volume Analysis). If you look on the TradeGuider trading platform or the Hawkeye trading platform which claim to carry on the Wyckoff tradition; they both use indicators. If all we need is price and volume why do some traders pay several thousand dollars to use the TradeGuider or Hawkeye platform? A trader should only need a simple price and volume chart. Probably only Wyckoff, Livermore and some of the other's of their day could do all the calculations in their heads without indicators. Well, maybe when the say to use Wyckoff's method without indicators; they mean become such a good trader that you can do it all in your head.

Anyway, I'm going to take another guess at the common indicator equivalents to the SMI indicators and I would appreciate anyone else's input on this.

Quoting 
1. Optimism/Pessimism Index
Alternate: Either the On-Balanced-Volume (OBV) indicator or the Accumulation/Distribution (A/D) indicator

2. The Wyckoff Wave.
Alternate: The S&P 500

3. The Trend Barometer
Alternate: The Average Directional Index (ADX)

4. The Pulse of the Market
Alternate: The Relative Strength Index (RSI)



Last edited by StockJock; March 13th, 2011 at 12:22 AM.
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  #220 (permalink)
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StockJock View Post
I was searching for a discussion on the Wyckoff Trading Method, because I have some questions and Google gave me a link to this thread. So I'm looking for a Wyckoff type answer, not a VSA answer.


I have a question on some indicators that are used in the SMI training and I was wondering if there are common equivalent indicators that are available for the same results. The training provided by SMI stresses not to mix other trading techniques with Wyckoff's method, but it seems that they do it anyway by developing indicators of their own which are similar to indicators that are already developed by others and have given them SMI names.


For example here is a quote from one of Dr. Hank Pruden's articles saying that the On-Balanced-Volume indicator is like the Optimism/Pessimism Index. So does anyone know of equivalent indicators that most traders can use for SMI indicators such as:


1. The Wyckoff Wave.
2. The Trend Barometer
3. The Pulse of the Market

Also would using the On-Balanced-Volume indicator as the author Joseph Granville recommends be the same as the way the Optimism/Pessimism Index would be used?

I have some ideas that might apply to those concepts; however, I don't have confirmation that they are the same as what Wyckoff teaches. For example I thought the The Trend Barometer is similar to the ADX, +DMI and -DMI parameters after I read the article ADX: The Trend Strength Indicator So if this is the answer, would using the ADX as the original author recommends in his book ADXcellence Power Trend Strategies by Charles Schaap be the same as using the Trend Barometer?

The concept of the Wyckoff Wave is similar to using market indicies such as the S&P500, but the Wyckoff Wave uses only 8 stocks. In my trading platform, TOS, I can make a chart with the percentage relationship between the S&P500 and the stock I'm analyzing. This seems similar to what the Wyckoff Wave is trying to accomplish, but again, I have no confirmation on that.

I'm still looking for something related to the The Pulse of the Market.

SJ,

The O-P Index was developed by Bob Evans in the 1950s - early 60s. Evans owned Wyckoff Associates (the precursor to Wyckoff/SMI). He added much to the Wyckoff Course, including the spring concept, up thrust after distribution and several other refinements. Unit 3 of the current course is mostly Evans. Unit 2 is the original course that Wyckoff largely wrote.

OBV is not the same as the O-P Index. The concept is similar, which is what Hank probably meant, but the calulation is entirely different. O-P looks at the volume values of the waves and can be used with Wyckoff's Wave Chart as well as with a standard bar chart of any market index or individual market (e.g., you can calculate an O-P for an individual stock).

The Trend Barometer has nothing in comon with ADX or DMI. The components of the Trend Barometer are based on the O-P Index and use the O-P as primary data.

Wyckoff created the Wave Chart from a handful of leading stocks to track the intraday movement of the market. There were no data feeds or computers in his day. This was his way of making sense of the ticker-tape data. Wyckoff/SMI continues to publish a Wave Chart and their market index based on the Wave Chart, which they call the Wyckoff Wave.

The Pulse of the Market has nothing to do with the RSI. It is a daily publication produced (not sure if they still do) by Wyckoff/SMI that listed the Wave Chart, Wyckoff Wave, Trend Barometer, and a few other features.

Whether or not you (and by "you" please understand I am not picking on you; I mean anyone) use indicators is a personal choice. Many traders I know are very successful using indicators; others are very successful not using indicators. It truely is a personal choice. Make that choice based on experience. If the indicators add to your work, use them. If not, discard. I don't look at candlesticks, for example, because for me, they don't add anything to my trading. I do use the 3-10 oscillator and NYSE Ticks - both are useful additions for me. Again, these are decisions I have made based on my personal experience. Arguing about what camp is best: indicators or sans indicators is a political/ideological arguement - no one ever wins. Keep in mind that to a very large degree, trading is about finding what works for you and then making that your own. Every professional in every field does this; trading is no different.

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