Reading the Market Bar-By-Bar:

Transcription

1 Reading the Market Bar-By-Bar: Applying Classic Wyckoff Method Trading Tactics Dr. Gary Dayton

2 Charts All charts used in this presentation were created with TradeStation TradeStation Technologies, Inc.

3 What We Will Cover A little background on Wyckoff Basic Principles: What I look for in applying the Wyckoff Method Detailed applications Advanced methods Detailed applications What it takes to get good Resources

4 Richard D. Wyckoff

5 Basic Principles: What I Look For Assess Supply & Demand and lack of Supply & lack of Demand Study the interactions of price and volume with trend lines, especially horizontal lines of support and resistance Look for stopping volume and climactic action Compare the effort of buying or selling with the result Watch for Ease of Movement & confirming retracements Watch for a Shortening of the Trust Look for failure to follow through Each bar tells a story: Consider its range, whether it is an up, down, or level bar, and the position of the close.

6 Overview The study of responses is one of the most valuable in the Tape Reader s education. It is an almost unerring guide to the technical position of the market. - Rollo Tape* * Note: Rollo Tape was a pen name of Richard Wyckoff

7 Overview

8 Overview

9 Drawing Lines I am constantly drawing lines as the market unfolds. They help tell the story of the chart. - David Weis

10 Drawing Lines

11 Drawing Lines

12 Climactic Action Whenever you see high volume suddenly appear on your chart, stick a wad of peanut butter on it and mark it. You may not know what it means right away, but that volume is important. - Robert G. Evans

13 Climactic Action

14 Climactic Action

15 Climactic Action

16 Shortening of the Thrust Indicates a change of behavior in the market Less and less progress made in direction of recent trend Supply exerts itself in an up market Demand comes in as market moves down Leads to a pullback or a change in trend

17 Shortening of the Thrust

18 Shortening of the Thrust

19 Shortening of the Thrust

20 Shortening of the Thrust

21 Failure to Follow-Through If you traded only springs and upthrusts you could do well. - David Weis

22 Failure to Follow-Through: UpThrust

23 Failure to Follow-Through: UpThrust

24 Failure to Follow-Through: UpThrust

25 UpThrust & Test

26 Failure to Follow-Through: Spring

27 Failure to Follow-Through: Spring

28 Failure to Follow-Through: Spring

29 Effort vs. Result A Bull Market occurs when there has been a substantial transfer of stock from Weak Holders to Strong Holders, generally at a loss to Weak Holders. A Bear Market occurs when there has been a substantial transfer of stock from Strong Holders to Weak Holders, generally at a profit to the Strong Holders. - Tom Williams

30 Effort vs. Result

31 Effort vs. Result

32 Effort vs. Result

33 Effort vs. Result

34 Effort vs. Result

35 Effort vs. Result

36 Effort vs. Result

37 Effort vs. Result

38 Advanced Methods Always think in waves. - Richard D. Wyckoff

39 Advanced Methods The most important thing to know about the market is the trend But you must always be on the lookout for a change in this immediate trend This is how you detect the change: In an up trend, when the selling waves begin to increase in time and distance, or the buying waves shorten. Either or both will be an indication of a change in the immediate trend. Apply the same reasoning to a down trend. - Richard D. Wyckoff

40 Advanced Methods

41 Advanced Methods

42 Advanced Methods

43 Advanced Methods

44 Setups: Afternoon of Fed Twist

45 Anticipating the Downdraft

46 Longer-Term Anticipation

47 Developing Trading Skills: The Psychology of Expertise Deliberate Practice Specific, measurable goals related to skill development Example: I will identify 70% of all springs occurring in the last 12 months of 5-minute data for XYZ market. Do it mindfully Track progress

48 Resources TradingPsychologyEdge.com Chart Reading Mastery Video Course Weis Wave Deep Practice RichardWyckoff.org Jack Hutson, Ed. (1998). Charting the Market: The Wyckoff Method. Rollo Tape. (1910). Studies in Tape Reading. David Weis. (In Press). Trades About to Happen: A Modern Adaptation of the Wyckoff Method. Richard Wyckoff. (1930). Wall Street Ventures & Adventures Through Forty Years. Richard Wyckoff. ( ). A Course of Instruction in Stock Market Science & Technique. Richard Wyckoff. (1932). A Course of Instruction in Tape Reading & Active Trading. Tom Williams. (1993). The Undeclared Secrets that Drive the Stock Market.

49 Thank You!