One of the things that Big Mike has always recommended is to trade with no indicators, or as few as possible. In the Elusive Price Action thread this is discussed.
In my search for success in this business I have realized that method takes a back seat to ones mental strengths and weaknesses. I don't doubt that for a minute. I think the mental aspect of trading is even harder to work on than the method, so I continue to do that.
In my effort to eliminate indicators from my charts i had heard of Wyckoff and VSA which comes from Wyckoff, but found VSA complicated. I've recently finished an 8 week online seminar about trading the Wyckoff way. The root of the methodology is to read the market by it's own actions. To do this we look at market structure, volume, the spread or range of the bars and the close of the bars. One of the things I like about the guy that taught the course is that he is not totally anti indicator, but recommends making it a secondary aspect in ones trading and suggests trying to keep them at a minimum. I hope its okay to mention his name here. If not i can remove it. Its Gary Dayton and his website is Trading Psychology One interesting thing about Gary is that he is a Psychologist, so dealing with the mental side of trading is something he is very familiar with. What better combo than method and mental?
Anyway, I did not see any threads on Wyckoff, so any discussion ,feedback etc. is of interest to me. I'm no expert, but if you have questions or want to see some charts let me know and I will do my best to answer. Oh, one last thing. I think Wyckoff was a heavy user, no, not drugs, but of Point and Figure charts which was not part of the seminar. This was okay with me and it may be a modified or simplified Wyckoff approach which is okay with me. I'm not certain that it is modified or simplified, that is only an assumption because PnF is not discussed.
By the way, I have not gone into any explanations of terminology etc. regarding Wyckoff. There are bar patters such as Up Thrusts, Tests, as well as terms such as Background, Structure, Signs of Strength and Signs of weakness. There is a term in structure called Shortening of the Thrust. This would be equivalent to a wedge pattern, but these patterns are not referred to in Wyckoff. There are also things that you will see in the charts where one might say, "hey, that's a 123 pattern or a 2B buy". Yes, I agree. I think many methods overlap and show the same thing by a different name. Its the how or why it is happening that is important to me and not what you call it.
If you have specific questions about terms etc. feel free to ask and I will do my best to answer.
David
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DB Phoenix hasn't been in TL's forum for a couple years, but his posts and threads are still there. I was in a chat room in TL for a few months with a guy who knew DB personally and was trained by DB. DB has not been in any forums for a while.
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Here are a few charts on CL that could have supported a long in CL. I show a daily, a 120 minute and a 5 minute.
I'm not an expert. This is just my take on things and is in order to help me to improve and learn, so I can do it real time at some point, so if I have something wrong or not accurate just let me know.
David
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This is on of my examples of where trading what you think and not what you see can hurt you. Just because X, Y or Z takes place does not mean A,B or C will happen. The attached charts are of a practice trade i took. I was sure this thing was going south. The problem is I was only looking at one or two things to give me that conclusion and not the abundance of information telling me other wise. In the course I took Market Structure was enforced a number of times, but bad habits die hard. I post this to remind myself and hopefully to drill into my head to look and see what is taking place not what I think is taking place because of one sign. This stems from the fear of missing out and I think that fear of missing out causes me to jump the gun and not see the true story.
David
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The question was rhetorical, not really looking for a a response. I would agree that if you have a method that is mechanical and works then that may be the best thing going. Many on this forum feel that you can not be totally mechanical over the long term and be profitable. I don't know what is true. If you have such a method I would be happy to see screen shots and details of it. If not, then there is no reason to post such an answer on the Wyckoff thread. Know what I mean?
David
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To show that the same thing happens in other markets, actually its probably all markets, but I'll play it safe for now. :-) Here are some bond charts of it coming into support.
David
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I found interesting threads on VSA here: part 1 and part 2. In each theread you can find attached pdf file with thread summary. Very usefull if you are going on vacation with ebook reader
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I read about volume spread analysis recently for stock markets. I have been wondering how much is forex similar or different? Basically is there such a thing as market makers 'accumulating' or 'distributing' a currency, is there ever a …
Here is some analysis with on ISRG. If there are any stock players out there. There are indications for strength coming in, but nothing is confirmed yet. If we do get a HH and and break of the down trend line then I think there could be a nice move. Just my opinion not advice.
The comment "shortening of the Thrust" is a Wyckoff term. I don't know why. Some may call it a Bullish Wedge. Some call this pattern Accumulation. Interesting if that were the case. If you want to read something on accumulation here is a good blog with a link to the Accumulation post. KEWLTECH: Issue 002 - Accumulation
Only indicator he uses is the MACD and I find he stuff educational.
I posted the ISRG charts because it is not after the fact. It will be interesting to see how things play out. My opinion is that it breaks to the upside, but we wait and see.
David
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David R told me about this forum and persons interested in Wyckoff trading. I am a devoted student of the Wyckoff Method.
The Wyckoff Method has been around for over 100 years. Wyckoff was a broker and a trader in the early part of the 1900s. He was a keen observer of some of the greatest traders of his day and learned to read their activities in the charts. He wrote the first day trader's manual in 1910 -- Studies in Tape Reading -- under the pen name Rollo Tape. He also published the Magazine of Wall Street, wrote two trading/investing courses, and established an educational company which continues today. The Method is all about reading the market by its own actions.
VSA was coined by Tom Williams, a British gentleman who learned the Wyckoff Method in the 1970s and has computerized many of it's principles.
On Friday, the S&P futures (ES) dipped below the 1251.50 level where it had twice earlier found support (A & B). When support is broken, we expect price to continue lower. The first indication that price would not follow through to the downside was the high volume and mid-range close on the bar labled 1. All this volume and the close well off the low suggested some buying coming into the market. On bar 2, we see an inability on the part of sellers to take price lower. Instead, it closes firmly on its highs and (most importantly) closes back above the 1251.50 support. The market rallies higher. Despite the early morning drop, buyers were in control.
At bar 3, we again see the market drop back down to the 1251.50 level (now for the fourth time) and immediately bounce off that level on a good increase in volume and a firm close -- buying. The market closes firmly for the day.
This pattern of dipping below support, rejecting lower prices and then rallying back above support is known as a spring. It is one of my favorite trades to the long side.
The corrective nature of the reaction from the 1258.50 high to the low at bar 1 and the buying evident around the support level of 1251.50 give us favorable odds for higher prices above last Wednesday's high of 1258.50. Watch the Naz futures, though. It failed to make a new high on Wednesday. If it continues to lag, it will put a drag on the S&Ps.
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The S&Ps rallied strongly in the US morning session as a response to the spring. New highs were put in, as anticipated. This is a typical result of a good spring.
The Naz futures also rallied strongly, but fell off harder in the afternoon, dragging the S&Ps down. Wyckoff wrote about comparative strength and weakness in the stocks he followed. It was one of the key factors he used in reading the market by its own actions. We are fortunate to have highly correlated indices that also show signs of comparative strength and weakness.
There was some volume that came in near the end of the day, indicating some supply in the market. I would anticipate a sideways market tomorrow, at least for the morning session. Shorting around the 1272.50 level or above and buying around the 1264.50 level, or perhaps a little lower to test the gap area. If the supply seen in today's afternoon session dries up, we may see higher prices tomorrow afternoon? Again, the Naz futures will be important to watch. The FOMC minutes release tomorrow can make the day somewhat of a wild card.
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Soybeans have had a nice move. Some weakness appearing. There was a larger retracement in Nov. than there had been before. Steeper accent could be climactic. Not sure. The last two days are called effort vs. result where the bar makes a new high closing strong. The expectation would be follow through. Today was a down day on increased volume. May see weakness on beans. We will see.
The S&Ps had a little farther to come down in the US session. They were unable to hold yesterday's low, which meant a testing of the gap as the next logical level down.
I like to use different time frames to look at the market. Here, in this chart, the 120-minute chart of the ES (day session data only) shows the most recent leg or the month-long uptrend nicely along with key support levels. Good support came in at the 1258.50 level. Although some people use floor trader pivots, fibonacci numbers and other factors, I find the obvious levels that all traders can see to work the best for me.
There is no weakness in this chart at this time.
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In Wyckoff there are periods of accumulation and distribution. Prices are marked up and marked down. In the attached chart I show a shematic of Distribution as defined by Wyckoff. The shematic is with in a 10 min chart of CL. Of course a schematic is just a representation of reality, but there is a definate similarity.
David
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I can't do justice to the 120 ES chart like Dr Gary, but here is my chart of the Day session 120 min chart. Could see another move higher, but thats a guess.
D
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Intuitive Surgical broke the down trend line on increased vol. A few lack luster days and then today was a Test. It has also make a HH, so we will see how it plays out.
David
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David - good analysis on the S&Ps and also on ISRG. If I were trading ISRG, I would now let it prove to me that it is ready rally. I would look for a good, strong rally, then a weak reaction to enter. But that is just my opinion, and we all know what opinions are worth.
Rassi - Boy, do I agree with you! It took me a long time to recongize how valuable your statement is - and even now, I can forget. Valuable observation!
What do you all think of the market at this juncture? We have been in a range here the last 4-5 days. The weekend is a good time to reflect on where the market has been, what it has been doing, and where it is likely to go.
I like to prepare for the coming week. Preparation is a conerstone to good trading, in my judgement. If we can think through ahead of time what the market might do, we will see it when it happens and have the confidence to pull the trigger at the right time. At least that has been my experience.
Wyckoff was a firm believer that we can read the market by its own actions. Although he was keenly interersted in what large traders or "smart money/professional trades/market operators" were doing, in the end, he also understood that you can read it all in the price bars and volume. So, to that end, here are the charts of the four major markets. What do you see? Let's take this apart and have a game plan for early next week.
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I hate it when I have an opinion because it has not served me well. Even if you want to call it a bias, it can cloud your decisions. When I started to look at the indexes I felt unclear and could not really come to a conclusion either way. In some respects that may be best. I then told myself that its just analysis and you need to allow for any outcome. Obviously the market is uptrending so we consider that continues, but I will say based on what I see in the charts there appears to be a fair amount of weakness. Before the holidays there was a fair amount of volume, but the closes were not very strong. I highlited those days in yellow. During a good part of December the market continued higher, but on very light volume. Now we can justify it any way you want and say its because of the holidays and everyone is on vacation, but that would be a fundamental reason and I prefer to look at things technically. My opinion or bias is not as strong in some of the indexes, but in most I come to the conclusion that they are weak and the NQ is more glaring to me than the others, but the TF is fairly glaring as well.
I hope Dr. Gary responds because he can confirm or prove wrong my bias. If anyone can, please do so.
Earlier today i was watching a recording of LBR on some webinar she did. She uses Wyckoff concepts in her trading and one thing she said rang a bell. This is somthin Dr Gary taught as well and that is you will usually see an uptrend end with a buying climax of some kind and a down trend end with a selling climax. Speed or mementum of the move pics up as well as volume. So, even though I said I think there is weakness in the indexes I am not saying they are done moving higher. I don't believe we have seen a climax yet. I don't know, but I don't think so.:-)
David
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When I firsr read your comment I wasn't really sure what you were getting at, but not that I've looked at the indexes per Dr Gary's charts I think I do. I think it makes good sense too.
David
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Rassi, I have an idea of what you mean but can you clarify? I think maybe you mean that when price does not respond to a level, then it could be ready for a strong reversal, for example? Just taking a stab at what you mean...
Rassi will correct me if I'm wrong, but what I believe he means is that with Wyckoff, you expect certain things to happen. For example, if you are in an uptrend and price is trading in a channel, you expect it to find buyers at the lower channel line which is the demand line and sellers at the upper channel line or the supply line. If price is unable to get to the supply line that would be a change in behavior and something to take note of. It isn't doing what it has been doing which is trading between the lower and upper channel line, so its not doing what would be expected. I hope that makes sense.
David
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I often find myself able to make both a bullish and a bearish case. When this occurs, I simply note the levels at which price would break down or hold, and then be patient as the market unfolds.
In this chart we are seeing non-confirmation at the highs, which indicates weakness. But, the trend is up and we also see the Naz as a relative strength leader. So, it is crosscurrent for now. On the intraday charts, a lower high and lower low has been put in (except Naz, which may put in a lower high today). Until we make higher highs (again?), odds favor sideways to down, in my judgement.
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Update to ISRG. We finally got a little volume to the upside after making the HH and breaking the down trend line. I drew in what I believe to be resistance areas, but also target areas as well, assuming it continues to move higher.
David
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I put these charts in the Ellusive price Action thread, but sine this thread is open to all i thought I'd post the same pics here. The first two are from Monday and the last one is from today.
David
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I use both VSA and Wyckoff in my analysis and the way I see it is that VSA is a specialization on the volume/spread part of the Wyckoff Method. So in all there is much more to the Wyckoff Method. The back side of VSA is that it is almost always taught with no emphasis at all on the rest of the Wyckoff part of it. Meaning Wyckoff Schematics and different credentials for the different phases of the markets, the so called tests and so on. This leaves the student/trader very much in the same position as with other indicators because he or she does not have the original framework to use it effectively. Previously myself included. It was not until I seriously got to know about the Wyckoff Method through Hank Prudens and Jim Fortes work it all started to fall into place. Personally, with the new understanding of where and why things happens it caused a paradigm shift in my perception of market structure. Powerful when used with proper use of S/R and Trend lines. A very interesting part of it, is that one can use the same schematics in all time frames. Making it very useful for the day trader. A note is that based on the understanding of the different schematics one can often trade on price action alone. And if putting volume into it again, using it as confirmation. My experience is that the schematics automatically keeps you in an overview mode, helping one from getting the tunnel vision.
As a starter for those interested I would recommend reading the articles in this zip archive which I have uploaded myself. High value. I started using it right after reading these articles. Starting with Jim Fortes "Anatomy of a Trading Range" and Prudens "Wyckoff Schematics: Visual templates for market timing decisions". Note: there is an error in the illustration "Schematic #2" on page 3 in the article "Wyckoff Schematics: Visual templates....". It shows an accumulation schematic where it should be a distribution schematic. The right "Schematic #2" distribution illustration is illustrated on page 6 in "Anatomy of a Trading Range".
For further serious study I would recommend the book "The Three Skills of Top Trading" by Hank Pruden. The middle part of it is exclusively on the Wyckoff Method. Another book to be released is the "Trades About to Happen - A Modern Adaptation of the Wyckoff Method" by David H. Weis. Have read that Weis is considered by some to be the foremost expert on Wyckoff today. It should have been released in the beginning of Dec. 2010, but have been delayed.
Hope this will be of help and inspiration.
By the way, looking forward to check out the Elusive Price Action thread.
Laurus
“If you wish to see the truth, then hold no opinions for or against anything.” - Hsin Hsin Ming
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One Wyckoff principle is the concept of driving up through and overcoming supply, often referred to as a "sign of strength." Take a look at the NVida chart. It is a weekly basis.
You can see that this stock was hard-hit by the bear market of 2008. It spent that entire year in a downtrend. By the second quarter of 2009, however, it broke the downtrend channel and rose higher. By the fall of last year, it was clear NVDA was making a higher low.
Some fundamental news surfaced, and NVDA has risen dramatically over the past week and one-half. If may look like the train has left the station and it's too late to get on board, but the odds favor more upside.
We are seeing a push up through supply - the supply that formed the resistance during the first quarter of 2010 (boxed on the chart).
Tom Williams, who developed VSA, talks extensively about the Wycoff principle of demand overcoming known supply areas. We see it by urgent buying on wide range bars and huge volume. Whatever supply exists from short sellers at resistance or trapped longs looking to get out (and yes, there are many longs who bought in that area and held on all through the down move of 2010) is absorbed by the heavy buying. We can see this in the very high volume in the last two bars.
So, how do you trade this? At some point, there will be a pullback. If that pullback shows only light supply, then an entry can be considered.
The second chart is a tick chart of the past few days in the S&P e-minis (ES), including today. See any similarity between the weekly NVDA and this intraday chart? Although they look a bit different, it's the same principle.
Bob Evans owned the Wyckoff Associates organization set up by Wyckoff to educate the public about the nature of the stock market. Evans was a great Wyckoff educator. I've listened to many, many of the weekly tapes he produced from the late 1940s through the 1960s. On those tapes, he would often tell "homey" stories to help traders better understand the Wyckoff Method. One of those stories is known as the "Creek" story, or "Jumping Across the Creek."
The story is about a Boy Scout hiking in the woods. He comes to a creek and finds it is too wide to cross. Still wanting to get to his destination on the other side of the creek, he follows it downstream, looking for a place where it narrows so that he can jump across. Finally, he reaches a spot where he thinks he can jump it. He backs up a bit, gets a running start, and successfully jumps across the creek.
In Evans's story, the creek represents supply. Our Boy Scout is unable to surmount the creek because supply is just too great at the early points. In the market, the supply line curves and twists as drawn in blue (free-hand) on the chart. Because the jump across the creek takes a lot of effort (a running start on the part of our Scout), we will see that effort in the volume and the range of the price bars. This is another Wyckoff principle - effort vs result. Here we see a lot of effort (in the volume in NVDA and in the momentum oscillator in ES) and the result is positive - both charts show higher prices.
Clearly, supply has been overcome. We have a sign of strength in the market. Although Wyckoff would buy on a breakout, it was his least favored location. Better to buy on a pullback. So, back to Evans ...
After the Boy Scout has jumped across the creek, he notices that he is a bit tired after all that effort. So, before moving on to his destination, he decides to take a short break. So, he goes Back to the Edge of the Creek, takes off his boots, and dips his feet into the cool waters of the creek.
We often (not always) get a pullback to the old resistance area (creek). As in the ES chart (green arrow), look for narrowing price bar ranges and an overall lack of supply. This is a typical market sequence and confirmation that the Jump has been successful. It is confirmation because price returns to the known supply area and supply does not materialize. It is a good location for a trade.
Although both the ES and the NVDA charts show the same principles, the patterns and "look" of the charts are different. What is most important are the principles highlighted. Learn these and other Wyckoff principles. They will serve you well.
Disclosure: Please note that I currently hold shares of NVDA in my personal account.
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Hello Gary Surprise to know that you are in the forum.
Thank you very much for your input. Makes one tread more carefully when one knows there is an expert observing ; )
Edit: When reading through the posts again more slowly I realized that I have overlooked that you are also the author of six previous posts in this thread. Kind of embarrassing . Sorry about that one. The more proper expression would then be; thank you very much for your inputs.
By the way, I have attended many of your "price/volume-bar by bar" webinars included taking your Wyckoff Upthrust course and would warmly recommend others to take your courses also. I very much appreciate your style of teaching about the subject.
Laurus
“If you wish to see the truth, then hold no opinions for or against anything.” - Hsin Hsin Ming
Good to see you here, too! (Got your message - thanks, I wasn't sure who Laurus was ).
I spend most of the time on my own site, of course, but I am always interested in any constructive discussions about the Wyckoff Method. Big Mike has created a great site here with a philosophy I resonate with, so i am quite willing to share what I know and eager to learn from others.
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Fridays are typically range-bound days in the S&Ps (ES), but not yesterday. Instead, we had a trend day - i.e., a day that opens at one extreme, trades persistently in one direction, and closes on the other extreme. Consistent with the overall trend of the market, Friday traded from low to high.
We often get clues that a trend day is about to occur. One clue was Thursday's trading - Thursday traded as an inside day where the overall range on the day was small. We often (not always) see breakouts and trending conditions after an inside day.
Another clue was that after a small gap down opening, the market didn't trade more than a point lower, and then broke out of it's opening range to the upside. After the break of the opening range, overall market volume began to pick up and fueled higher prices all day, another important clue.
The market ran into resistance at Wednesday's highs, but held gains and absorbed the existing supply around that area.
As we discussed earlier (post 38), after a break through of supply (Jump Across a Creek), the market will often (not always) come back to test the resistance area for additional supply. We see this same pattern with a different look here. Finding no supply, it rallies higher and closes on its highs and new highs for the year.
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Dr.Gary has shown the concept of Jumping Across the Creek as well as the set up known as the Wyckoff Spring. Here is another known as the Upthrust. The Spring and the Upthrust are both taught in Dr. Gary's chart reading course, which I have taken. I am not associated with Dr. Gary or his website, but found the course to be an eye opener for me because I learned concepts which helped me to get some insight as to what the market is doing or not doing and it is determined by what we see in the chart and not what an indicator is telling us. Big Mike has been preaching indicator free trading for a long time.
The charts show a broad view as well as a close up view. It's not as simple as just looking for a bar that closes on the low as shown in the chart. I wish it were, but I think there is enough evidence in the chart to indicate a short would be a reasonable trade. If I'm wrong, I hope Gary lets me know.
David
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Okay, here is a potential Upthrust (before the fact) in the 6E that took place on Friday. I'm not sure if this is a good set up or not because the down trend line was broken, so that could be a bullish sign. On the other hand, there are signs of weakness as well, so Its tough to say. I would like to see the support broken on the 15 minute, right chart and then test that support as resistance before taking a short trade.
David, what i find difficult in this approach is that you need to second-guess if the volume you see and the shape of a bar at any one point is bullish or bearish enough to infer that one side is in control momentarily and is more likely to win the battle. I must admit all ingredients are there to make a discretionary call. On the other hand, someone with just enough knowledge seeing that price was on the verge to make a similar top and hit some resistance could just as well place a short order right at the top resistance line and hope price would fall down without over rationalization which is the danger you face. If you know where volume is more likely to kick in, don't you think you should rather make an educated guess for the most likely direction and pray and minimize the thinking process. I tell you this as this is the danger and the pitfall of this VSA/Wyckoff approach. If the idea of trading with less indicators is to simplify the decision process then i think this approach is everything but simple. Is it changing four quarters for one dollar ?
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I hear you loud and clear. I'm not saying this is simple or easy. I'm also not a big VSA fan because VSA has a lot more designations and I get lost in all the naming of each bar and from what I understand VSA comes from wyckoff. I think the main thing about what I learned regarding wyckoff is market structure. Another way of putting it would be the posture of the market. Structure, as I'm sure you know, is more than just HH and HL, but is there the same momentum or effort behind each swing. I don't know if Background is a VSA or wyckoff term, but looking at what happened in the past as opposed to looking at the most current 15 bars can give clues. The charts i posted was an example of what an Upthrust is. They happen all the time, but it doesn't mean its a setup. Structure and background play a big role. I've attached a couple more charts. One is a daily and another 15 min with additional detail. The daily shows horizontal resistance and Trend line resistance at the level of interest. It also shows a weak rally as well as weak closes on the up move. The 15 min shows the up swings decreasing in length and the down swings increasing. Combine that with increased volume on the upthrust bar and it tells a good story.
If you look at the ES chart Dr. Gary posted recently you will see an upthrust at the resistance level. What is different? Market structure (in an uptrend) other signs of strength such as Jumping across the creek. The context is different than my example.
The idea is to try and read the market by its own action instead of the action of indicators. I'm not saying its a holly grail and I'm not saying its easy. I haven't even begun to trade it yet, but I hope to. I also post the before the fact stuff to see if I'm making correct calls, or at lease correct enough to profit from them. Gold worked out so far and so has ISRG, so there must be something to the madness.
I'm not anti indicator and will probably use one or at the most 2 to help with the method, but they will be secondary tools. I hope this makes sense. Its late and I need to go to bed.
David
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Hello David. I am leaning more to that this should be seen as a Buying Climax, and not a UpThrust, before Reaccumulation. With the 1.3275 area as final support before moving higher would be my guess. The bottom range area from 1.2875 to 1.3040 looks like a relatively longer time Accumulation area with rising bottoms which might also suggest a relatively bigger "cause" and that the up move is therefore not finished yet. At least I think we would have a retest of higher prices. Note that I do not know how to use Point and Figure charts yet, so the latter regarding "cause" (and "effect") would only be from my previous experience and personal judgement.
I took the liberty to reuse one of your charts for illustration and hope you do not mind. The ST, secondary test, in the illustration I see as not going higher because of previous strong resistance back on January 4th with the UpThrust and back.
Laurus
“If you wish to see the truth, then hold no opinions for or against anything.” - Hsin Hsin Ming
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This is a big, fatal mistake virtually all traders make - i.e., focusing on the current bar and its volume and trying to figure out whether it's bullish or bearish and should I take a position. I am not trying to attack here - we all do this. I am trying to say that that approach is truly just guessing and not the way to trade this (or any) method, and certainly not what Wyckoff intended. Current market action needs to be put in context. But -- and it is a huge but, our eyes are naturally pulled to the right edge of the chart and our minds immediately begin to make judgments about what the eyes see. And, please, do check this out for yourself -- see if you don't immediately go to the right edge when you first look at a chart.
We all need to set aside our natural instincts and first assess what the market has been doing and how it has been doing it (to paraphrase Jim Dalton). Wyckoff was a master at this and conveys it well in his writings. It is certainly not easy to do; there is no question about that. It is not about simplifying the decision making process, per se; it is about clarifying what you see. It takes a fair amount of seeing a lot of market action (experience), lots and lots of practice (very few do this), and a clear mind.
This reminds me of an experience I’ll use to try to illustrate this idea. In September, I did a presentation before a group of about 45 traders and showed them the attached chart. It is a 5-minute chart of the S&P e-minis (ES). I told them that in my judgment the best (day) trades on this chart were to sell short at F and H.
Several traders nearly jumped out of their chairs arguing that C was a "double top" and the "correct" place to take a short trade. After all, they argued, it was the high of the day! As we discussed it, though, it became clear they were focused on the right edge of the chart and saw only that price had reached resistance.
Certainly, there was supply that came in at bar A and on the bars marked B. And, yes, the market did turn at C. But I believe that taking a trade at C or the bar after C was little more than a guess. Seeing this real time, I truly would not have a strong sense of which way the market was going to turn. The market was going sideways. It was holding its gains from the day before - it certainly had not reacted much. Moreover, it was making higher lows for an hour and a-half. Going short here was at best a 50-50 guess, in my judgment.
But at F we have a totally different story. We see lower lows being made and a consistent breakdown of support levels. Volume comes in to the downside as the market falls on increased range. Sellers were now in control. The downside swing has lengthened, and the rally up to F goes into a resistance area and shows no interest on the part of buyers in either the volume or the ranges of the bars as price also approaches the downtrend line. Now we have a clear context. This is the place to make the trade. You can make a similar assessment at H.
So, the point here is not that Wyckoff is simple or easy, or that thinking is somehow eliminated. Wyckoff -- like every sound trading method -- is difficult to master. More importantly, it is about looking clearly at the market background and structure first, and then using the right edge to trigger an entry. The Method is meant to give clarity to your trades so that when you do decide to go long or short, you are not making guesses, but basing your trades on a reasoned, logical, and clear-minded assessment of the overall market context as well as the immediate action.
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Thanks for commenting and you can reuse my charts anytime.
I was concerned that I may be way off on this one. :-) So the indications you put on your mark-up such as PSY and ST etc., are those then part of a new accumulation in a trading range, or is it part of a distribution? Or is there a distribution and then a reaccumulation? Can you point out areas on the chart that would help me to determine if its distribution or accum? Also, wasn't the daily a weak close with lighter volume. Does this come into play for you or not?
Do you still use market profile in your analysis of the markets? I want to start with price and volume as my guides to the market and was reading through your CL MP thread and thought it looked useful.
No problem with the question. Lately I haven't been looking at MP but I think it has value. As I continue to move forward I may look at a MP chart and compare it with other analysis, but I'm not real sure that I want to complicate things. Don't forget that MP is just another way of looking at the data, so its all there on a regular chart as well.
I think starting with price and volume is a good idea and you have that in a bar chart or candlestick chart. Just add volume to the bottom. I hope I answered your question.
Thank you for the answer. I've noticed after looking at just a few MP charts that one can get a decent visual of what the mp distribution will look like by just looking at a bar chart. The highest volume peaks are usually about the same place as if one would box in the ranges on a bar chart.
The thing about distribution vs. reaccumulation is that we usually do not know from the patterns in the beginning, because they are usually the same. The first thing I noticed when price dropped from 1.3453 was the three wave movement on lower volume down to what I labeled as AR, which I perceived as a part of a correction.
Regarding the lower volume on Daily I saw this as a result from a ending/weaker up move to 1.3453 and then the following corrective down moves on lower volume on lower time frames. Both which is coherent with the beginning of reaccumulation/correctional move, but as stated above we usually never know in the beginning. We have to see or wait until higher volume with or against the previous larger move comes in. Regarding the early three wave correctional pattern mentioned and the higher volume showing towards ST, I thought the volume was at the wrong time and without the right patterns and levels to be final for a larger move in either direction.
Thanks,
Laurus
Edit: For convenience adding picture discussed, correcting text.
“If you wish to see the truth, then hold no opinions for or against anything.” - Hsin Hsin Ming
Here is a Daily of Gold. It seems to be on the move to the down side. Almost $50 since resistance at 1393. I believe is will continue to fall, but that is an opinion. Oops, better not have an opinion.
Okay, I'll go out on a limb. If it breaks the 1320 level I say that we could see 1200. Of course not over night. Just my opinion. I'd like to hear other thoughts.
From what I am able to see the higher volumes are coming in towards lows compared to tops, and are thinking accumulation, but as you mentioned there is strong resistance at 1.3500. For several technical reasons I believe. On the other hand at the moment I see there is not a strong follow up from last low at 1.3395. Early to say, but maybe we will have an UpThrust this time. That would be nice
Laurus
“If you wish to see the truth, then hold no opinions for or against anything.” - Hsin Hsin Ming
You are right David, but the main thing I got hung up in was the distribution pattern alternative as an illustration. In addition there was the increased volume comming in after the breakout today. I was looking for a satisfactory short trade setup, but it did not show up. After that I was not completely satisfied with the options for a possible long setup either.
Regarding the new highs today I think it is interesting as a lesson to observe the volume we saw coming in with the lows yesterday having the effect it had today.
By now I am going to take a step back and look for more clear price/volume patterns. It will be interesting to see how it will evolve and eventually how far.
Laurus
“If you wish to see the truth, then hold no opinions for or against anything.” - Hsin Hsin Ming
Nice example on MS. Sometimes, it helps to shift time frames. For example, stepping up to the weekly time frame in MS:
A - Early buying - strong up bars closing well. Because it occurs over a two-week period, it can be meaningful.
1 - Big volume and strong bar back up to the high area of the bars at A - this is clear strength coming into this market.
2 - Return to the lows of bar 1 and volume dries up. No selling down here. The next bar/week response was up.
3 & 4 - Some supply comes out but it stops on the very next bar (4). We now have a shelf of buying, which often is a strong sign of accumulation.
5 & 6 - Same as 3 & 4. The market is driven down, the high volume shows lots of activity. There is still supply here. But then it all stops at the 24 level.
7 & 8 - One more time! Note that this time on the drive down that the range narrows and the volume is low - no more supply at this level. The market is now ready to rally, and it does.
Shifting time frames like this will give you a different look and is helpful in understanding what the market is trying to do.
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thank you for your great response to the MS chart ... i have seen several videos from you and i am little honored to hear from you lol ..
i am studying wyckoff and vsa .. since 5 months now .. and i love this form of chart reading ... note i didnt say analysing .. as its more like reading in abook wich is unfolding bar by bar...
and yes shifting timeframes .. is a key feature in my trading plan.. thou
also the bar wich has broken thru the ice and with the next bar gaining grounds back above the ice on lower volume
is a shakeout .. right ? even thou the volume was that low .. means that no big effort was needed .. ie weak floating supply has been shaken out... correct ?
or a from of stocks exchanging from weak to strong holders..
thanks again and nice to see a big wyckoff mentor on this forum .. looking forward to see and learn more from you
within this accumulation phase we have several indicators that demand is getting stronger
1. Wide Spread Down Bar on Ultra High Volume , with no follow thru .. SOS (sign of strength)
2. a wide spread dwon bar on high volume closing of the low wich is follwed by an up bar SOS
a spring on high vloume .. all happens on the same area as the previous (1.) sos occured
on half of the volume back then .. wich acts as a secondary test.. SOS
3. Small spread down bar on high volume with the next bar beeing an upbar .. demand swamping supply
SOS , and this happens all within a form of absoprtion (TR) where at the end of the TR we have up bars
spreads widen and volume increases..
4. right before the end of the TR (absorbtion) we have a shakeout SOS
5. Breakout of Absorbtion TR .. is successfull SOS
now as we are running into a heavy supply area .. and we may enter phase C of accumulation where Smart money
is in testing phase of the quality of supply present .. we can either have 3 scenarios.. before the markup
1. we may see another form of absorbtion
2. we see a final shakout phase occure.. where we leave the accumulation TR to the downside.. ending with a spring .. or simmilar.. too shakeout the weakholders..
3. or maybe we see a form of pushing thru supply..
we see even thou we run into a heavy supply area .. the closes tend to cluster and price doesent gets rejected heavily .. looks to me that the supply area is of weak nature.. rather then strong..
will be interresting to see waht will happen next..
cheerz
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first off all charts are on Daily TF.. iam a longterm trader..
well on a larger view the SPG (distribution) is in an uptrend since somewaht april 09 .. so its not a re distribution
the SHLD had an immediate markdown phase in the background ... so the game starts again (->accumulation->markup->distribution->markdown->) so no re accu here too..
as for how to trade it.. well iam somewaht conservative .. and i want to see a breakout/breakdown of the accumulation/distribution TR .. and then i want to see a retest of that move.. with indicators of price action wich would confirm a succesfull retest..
on SPG for example i would want to see on daily TF on a upswing signs of weakness or no demand .. upthrusts
etc.. and if that occures .. i zoom in and look for a low risk setup on H4 .. with a SL set on daily TF... as i only want to get stopped out if iam wrong.. ..
on SHLD a breakout of the accumulation phase followed by a retest on daily .. wich forms a spring , shakeout or no selling pressure price action .. then zoom in H4 look for low risk setup.. and play that setup... btw.. if the breakout wouldn retest the former resistnce.. i would wait for a another reaction.. then look for a setup later
even if we didnt fall thru the ice/support on SPG .. i made an example on how i would trade it .. just a informative example...
cheerz
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Nice thread!
Just read "Wyckoff Schematics: Visual templates for market timing decisions" PDF and thought I'd do chart on CL from this morning.
Comments and suggestions would be most welcome!
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just a comment on the blues boxes . to me these are absorbtion ranges.. as we see to the end of the range
that the candles make higher lows and closes .. and volume increases.. so thats absorbtion going on there..
the rest of the chart sounds good to me ... also remember that climactic actions .. can and will occur over several bars..
keep it up and keep those nice charts coming ..
cheerz
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Here is a GC 30min chart, I stopped the data feed a little after 10:00 to annotate and post. This looks like accumulation after 3 big pushes down in the last few days. At a major support line and a measured moved
from the previous thrusts down seem to confirm. I will restart my datafeed after I post.
Thanks for the comments PrymeTyme. I think you are correct on the accumulation point, or is it a matter of NO supply? Maybe both?
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Thank you PrymeTyme. I appreciate the positive feedback.
Since markets mimic themselves I try to find different groupings of patterns, and within these groups again similar patterns. My thought behind it is to have a broad as possible repertoire of different kinds so that we can intuitively be more effective.
Laurus
“If you wish to see the truth, then hold no opinions for or against anything.” - Hsin Hsin Ming
Thanks Laurus!
I understand now why 2 lines for support can/should be drawn as the Shakeout/Spring are obvious now. I like the 'Creek' concept rather than a fixed line, I just hope I don't put the creek where I want it....
But that shouldn't matter as the rec is to enter much lower or higher than the 'creek' area. Confirmation should be seen once the creek is crossed.
Interesting stuff....I'm beginning to see these formations from the 1min to the 30min. Surely I can find a couple of entries a morning....
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Great Martied! Could you have us updated on the GC? Would be interesting to see how that pattern develops.
Regarding the Creek, together with resistance use the coming "Boy Scout checking out where it is safe to jump over the creek" analogy. The way I have understood it you have it in your CL 1min chart with the two tops before the shakeout, where we see it coming up again meeting resistance at the creek before actually having the JAC.
Laurus
“If you wish to see the truth, then hold no opinions for or against anything.” - Hsin Hsin Ming
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I think its interesting how the GBP/JPY and CL chart have similar patterns with the automatic rally and selling tests as well as JAC. One thing that would concern me is that CL seems to be trending down at least on a sub daily time frame, so looking for accumulation and a long may not be the best plan. I don't know. I really don't know. I was watching CL last night and though it was in an accumulation and would be popping this morning. Instead that area broke down and the support became resistance for a good trade. Not a trade I took, but just noticed later today. As always it seems seeing this stuff in hind sight is great, but trading it live may still be a challenge. Its making it difficult for me to come with a plan.
D
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David. The thing that helps me is to grade the significance of the different time frames and how big the formations are. I would not put too much emphasis on a 1 min time frame if I do not have formations on larger time frames as for example 240 or 60 min pointing in same direction. I consider my self a swing trader, so if I for example see a formation on 60min or higher, I watch for clear formations on the 1, 3 and 5 min for quicker entries, but with emphasis on having strength or weakness in background on higher time frame(s). Then I follow trend repeating this with same direction in mind.
Hope this helps
Laurus
“If you wish to see the truth, then hold no opinions for or against anything.” - Hsin Hsin Ming
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Thanks. I think this makes sense. Its like you were saying further back in the thread about 6E where I saw weakness and you felt it was an accumulation, or maybe more correctly a re-accumulation.
The Wychoff patterns of Accumulation/Distribution are reversal patterns and therefore you would be entering opposite the trend. With this in mind I see why the recs are to wait until the JAC is seen, then waiting for a backup to an LPS so as not to get caught in a breakdown of that pattern. That seems to be the key with trading these two patterns, waiting for confirmation.
Looks like I need to review Wychoff continuation patterns so I don't see an Accumulation/Distribution pattern everytime a hesitation occurs on an upmove or downmove . If anyone has some PDF's/links on Wychoff continuation patterns could you post or PM me? Thanks.
Glad to have found this thread! Thanks to David_R for starting it!
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I think there can be areas of re-accumulation in up trends and re-distribution in down trends, so they won't always be reversals. I think. I could be totally wrong about that. So, I think those re-accum and re-dist could be continuation, but it may not be referred to as such. Also, in an up trend or ranges in an uptrend you can trade the Spring. That is a wyckoff setup where price dips below an obvious support area and is rejected and closes back above. In and down trend or range bound area in a down trend you can trade Up thrusts or Hidden Upthrust. I will try and post some chart examples.
Post 18 has a good example of a spring.
David
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yea iam also looking desperately , for some example shematics of .. RE-Acc and Re-Distribution ..
here is phrase ive found about it..
Where a Trading Range (TR) represents a reaccumulation (a TR within a continuing up-move), you will not have evidence of PS, SC, and ST. Instead, phase A will look more like phase A of the basic Wyckoff distribution schematic. Nonetheless, phase A still represents the area where the stopping of the previous trend occurs. Trading range phases B through E generally unfold in the same manner as within an initial base area of accumulation.
nevertheless .. as david said.. u can also trade in markups/downs.. .. as for example a retest of a breakout wich forms a spring is a nice setup .. in an upmove
or a retest of a breakdown .. forming an upthrust .. for down trends.. is also a legit setup.. to trade.
will post some examples .. about RE-Acc/Dist. .. and markup/down setups..
laters
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Here's a Daily of Gold. I had posted a while back about seeing weakness and the 1390 area being resistance. GC is at support and it could bounce, I don't really know, but it just seems to me there needs to be more down side. Weak rallys and big supply bars to the down side. Any comments are welcome.
By the way, it looks like we are on the ice. Just need to fall through...:-)
David, you are absolutely correct on the re-accumulation/re-distribution possibilities, something that I completely overlooked while looking at my charts. Thanks for the comment as I now see a glaring weakness in my analysis.
I'm reading and rereading the PDF 'Wychkoff Schematics' and at the same time looking for examples from 1min to the daily and I am amazed at the recurrence of these patterns.
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Looks like the GC accumulation pattern failed, or more likely it was not an accumulation pattern. I'm thinking that possibly that the springboard was too soon, that not enough time elapsed for proper accumulation to take place. Or as David_R pointed out it could be re-distribution since it is in a downtrend. Not sure to be honest. Guess I'll be working on my distribution/re-distribution concepts tonight....
Here is a 120 minute chart of Sugar. I've never traded sugar, but I feel a chart is a chart. The background is that it has been in an uptrend and the had a big down bar on very high volume. So the question is, what has been taking place while its been in this sideways range? Is it absorbing the supply that is contained in that big down bar, or is it part of the distribution process? I have not clue. Any opinions.
David
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Thanks a bunch for that. I saw the strong closes and assumed buying. I did not realize time played a role. I also viewed the rallies as having light volume, so it seemed like mixed info. It will be interesting to see the result.
As far as the selling climax or shake out goes, the term shakeout really is just that, isn't it. The big money want to shake off all the small traders before taking it higher. I guess this is where background really comes into play. Even though the shake out looks weak it is in the context of and uptrend and there as been no follow through.
David. Some trading psychology, but I think it fits well into the Wyckoff work we are doing.
As an addition to what I wrote about grading the significance of time frames, I think it is good to have analogies or clear pictures in ones mind as a way of strengthening or backing up ones analysis. For example when we are looking for long positions have our analysis given us a feeling of being fairly secure? Like, do you feel that you have high volume behind your back Supporting you in your long direction? Or the other way around, do you feel that you have high volume giving Resistance behind you guarding and making sure that price do not run off in wrong direction away from your short direction? I emphasize feeling because it tells me how well I live or use my analogy and as an alerter for how well I have done my analysis, or how clear a picture does the market actually give me. If one do not get the feeling of security after going over it one more time, the alert is simply to stay away. Another good thing about the analogies above is that they turn my attention away from "composite operators", "stop hunters" and so, instead they turn things into something positive by giving me a picture of something non human supporting me or backing up my line, and thereby bringing good energy into my trading.
Laurus
“If you wish to see the truth, then hold no opinions for or against anything.” - Hsin Hsin Ming
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Hello Martied. I only have the one picture you posted on the GC, but from this, because of the high activity at the lows with lower volume at next high volume peaks it looks bullish to me. Thinking supply is being removed. As you illustrated it with the long yellow arrow. When it has broken clearly out of range, or looks like it is about to, could you please post it again?
Thanks,
Laurus
“If you wish to see the truth, then hold no opinions for or against anything.” - Hsin Hsin Ming
@Laurus nice one on sugar , as the time thingy is also new to me .. great
thats cool .. as we learn and make steady progress on this awesome concept/method
i wrapped my head arround the re-acc/dist while at work.. and came to the conclusion
that we simply have to analyze each forming trading range from scratch ..
as there is no real crystal clear shematic ,like for accu. and ditribution..
Re-Accu./Dist. can have various shapes and sizes.. as the trading ranges nature..
like wedge, diamond, triangle.. etc...
so we simply have to analyze a forming TR , with our knowledge about effort vs. result, volume, price action,
demand coming in , supply swamping demand.. how price reacts on support/resistance , trendlines and chanels..
etc..
for example on an up trend .. and price starts to stall with or without climactic action , and a TR unfolds..
we have either a Distribution or a Re accumulation .. and if we cant analyze a clear distribution .. and we have signs of strenght coming in.. (demand) .. with several price qactions.. like springs.. and volume increases on upswings absorbtion , shakeouts .. wide spread up bars.. volume decraeses on down swings .. shortening of the thrusts price closeings cluster on down bars moves.. etc.. you name it
we then can assure that its a re accumulation..
its all about screentime..
as all your points sound valid to me .. and i have found some points to add to the conclusion that waht we see on sugar is likely Re-Accumulation
ok mates take care.
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. Sorry about that one. The more proper expression would then be; thank you very much for your inputs.
lol .. 
