Quote from ammo:
would like to have wycoff explained also,noticed in your previous paragraph no notice of larger timeframes,
As I relax on the holiday today, thought I would check in. Hope anyone else celebrating this T-day also had a good one.
So, as I said I am not a trader of the Wyckoff method. But I read some of his writings, and came to appreciate the simplicity of much of his basic beliefs.
He has three basic laws: supply and demand, cause and effect, and effort v. result.
Anyone can read about these; but of these the most useful to me has been effort v. result. Effort is the volume. Result is the resulting movement in price. When there is a large effort, a healthy reaction is a large result. When effort increases, yet result decreases (as compared with the last few minutes, for example, or on a larger daily time frame, the last few days), then a reversal of at least a small nature is almost imminent.
For example, 15:44 EST on Wednesday. We hit previous resistance, and as we do so for two minutes there are 24K contracts traded, yet there is only a 3 tick rise in price from open to close of those two minutes. When 14K contracts trade in 1 minute, and price and in that one minute moves up net 1 tick, then this is huge effort, and little result. Pushing, pushing, pushing, with little to show for it. The key is context though, as it's near an area of prior resistance. It this was a breakout of consolidation, then we may expect another wave of pushing (volume), whereas in the case mentioned here we were already moving up for some time from the low, and finally here got exhausted.
Also, the concept that volume is like "pressure" or "participation" is a pivotal concept for me. There are certain places we expect to see volume appear, such as a break out of consolidation. But price can plug along just fine without an overall increase in volume. In fact, sometimes volume will decrease, and then surge again. So, if price goes up, demand was higher, and if it goes down, supply was higher. Volume is only pressure. If there is little resistance to an up move, for example, then volume can plug along up just fine without tons of volume to push it, because there's not much to push against.
Anyway, that's some of the things that I have taken away from it. I am not a Wyckoff trader, and have never taken a course or fully read his works, so the above is not really representative of what he's all about. But in trying to find my own way in trading, I have borrowed these ideas from him and others and have tried to develop it into a belief system that works for me.
