This is intended to be a personal trading journal. I intend to write my thoughts and paper trades in here as I develop and refine my system. I am entirely focused on Richard Wyckoff’s trading techniques, starting with his original trading course, using some of the material SMI has developed after Wyckoff’s death and using some of the material that David Weis has developed. I will spell this out more in future posts with links to all material.
looking forward to your journal!
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For those that want to have a quick overview of the Wyckoff Method Good Introduction
For the TLDR of even the intro - the Wyckoff Method is a set of discretionary techniques that enable the student to observe the imbalances in supply or demand.
I have spent a lot of time reading and digesting the Wyckoff Method. Wyckoff wrote a two part course in sometime around 1930. The first section is over 400 pages and addresses how to trade stocks using a daily chart and use point and figure charts to project price moves. The second part is just under 100 pages addresses “tape reading and active trading”. I’ve already read most of the primary VSA material. I have read Wyckoff material by Hank Pruden and David Weis. I’m sure I’m missing a few but my version of Wyckoff is some sort of child of these combined works. I took what made sense to me and tried to remove the rest.
So my version - there are three things I use to analyze the market.
Structure
Bar Analysis
Volume
I use, supply and demand lines, trend channels, reverse trend channels and horizontal support and resistance lines to show market structure.
I use the high, low, close and spread of the bar to understand market behavior. The position of the close, the height of the bar, the relationship to other bars and bar groupings all tell part of the story.
Volume indicates how much fuel is in the tank. “The market unfolds in waves in buying and selling”(David Weis). If we use the “Weis Wave” we can see when there is a change in supply and demand and find high probability turning points in the market.
Confluence of price structure, bar analysis and volume make for high probability trades. I’ll go through this all in more detail so I have a record of everything as it evolves. I’m not a professional trader and don’t take anything you might read as trading advice. Do your own homework but feel free to play along.
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When I look at this chart we see a down move that started in early December and took nearly a month to complete. We can see that it ended in climactic action with lots of volume coming out on the last move down. Sellers were excited but the smart money sat these levels accumulating. Sellers were waiting for the next move down and price moved higher before ranging sideways for two weeks. Once price broke out, buyers were in full control and the market gave less and less ground on each leg up. We finally broke through the trend channel and accelerated higher. We are right back in the range from before the down move started.
Look at the amount of buying on the last wave up. Look at how the angle of the steepest demand lin is nearly vertical. This is not a sustainable up move as we have gone parabolic. I’m watching the demand line and the support level we just busted through. I would expect a break of these lines leads at least to a movedown to the top of the trand channel. Extremely wide range bars often get tested so a move back down to 1.3100 isn’t out of the question.
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The last buying wave to come in is the most demand that we have seen since the down move started. This may indicate a change in behavior. The last bar of that up move shows climatic action, so a least a short-term down correction is likely. If there is a pullback and low volume test of 0.6700 area, I will look for a long trade. There is still room on the downside, I’ll just have to watch whether more supply shows up.
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Sellers have been in control of this pair for several months. You can see the trend tiring and rounding over. We saw the biggest up move and the most demand come in in early to mid January. This was a change in behavior. Notice the angle of decent on that up move in relation to the next down wave (sluggish and choppy). At the end of January we saw a second wave of demand come in while sellers tried to hold the 1.035 level.
You can see a small two bar “no supply” push down. We gapped down but no sellers came in and we closed on our highs. I got long when this bar came back above the green fork.
I’ve moved my stop to just below the swing low after the breakout and have a target at the median line of the fork.
so u don t use vol, u just use weis wave? i have bought the indi a while back, displays also the vol of each wave in numbers but i ended up not using it.cool stuff. how do u know it s accumulation and not distribution using weis wave?
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I used to look at both waves and the volume on individual bars but I struggled. Especially on intraday timeframes, it’s hard to tell what is high volume etc because volume trends throughout the day. I find that I can see more clearly using the Weis Wave on multiple time frames. Instead of looking for a “no supply” bar, I look for a “no supply wave”. Generally, the spread of the bar, the quality of a move, the grouping of closes and the angle of ascent tell me more than I was getting from the volume on individual bars.
This shows the trading range the pair is currently in after the extended move up. Notice the quality of the move down on all the bars highlighted with arrows. These bars show what David Weis would call “ease of movement”. Compare that with some of the grinding up moves.
In Wyckoff’s original course there were no springs and upthrusts. He references only one pattern, the hinge. We can see a hinge forming on this timeframe. Price is coiling between a supply and demand line. Wyckoff expected a strong move out of the center of the hinge.
Given that overbought, exhausted look of the higher timeframe and the ease of movement downward within this trading range, I’m looking for a short coming out of the hinge formation.
I’m out of this trade with nearly 150 pips. I know I struggle taking profit when I see a strong up move like this that I’m in. We are running into a pretty logical resistance area and we are showing the biggest buying wave anywhere on the chart by a pretty large factor.
This may be the fuel me need to move higher but a correct to test is likely.
We didn’t get a strong move out of the hinge but we leaked out to the downside. We had our first two closes back in the trend channel and our steep demand line has been broken. We also had the highest selling wave anywhere on the chart.
I have orders in to go short but if if we break back above the trend channel I’ll re-evaluate. We are currently in a tight trading range and could continue to drift sideways. If price moves back to the middle of the range, I may look for an upthrust to enter.
I got short prematurely here. I was looking for a classic upthrust. This is when price moves strongly above a clearly defined trading range, then reverses back in the range. Aggressive longs will buy these breakouts. When price starts moving in the other direction, they get trapped. If sellers can push price through the other side of the range, a lot of these traders will sell their long positions, adding more fuel to the fire.
There was a ton of selling during the last down wave but very little progress. The current up move looks strong, with good easy of movement. If there is no follow through then it’s more likely there is a supply imbalance and we are going down.
“Successful tape reading is a study of Force; it requires ability to judge which side has the greatest pulling power and one must have the courage to go with that side. There are critical points which occur in each swing, just as in the life of a business or individual. At these junctures it seems as though a feather’s weight on either side would determine the immediate trend. Anyone who can spot these points has much to win and little to lose.” (Studies In Tape Reading, R.D. Wyckoff p. 95 - borrowed from David Weis)
Springs and upthrusts are my favorite entries in this method because the risk to reward is so good. You don’t want to have to pay a lot to find out you are wrong.
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highest vol of the day closing well off the highs, but like u said u need the confirmation of the upthrust closing back in the range. that is usually markin the end of distribution. climactic vol, bearish react, start of the range (distribution possible) and again selling of the highs with vol increase confirms so far, if this candle closes inside the range i d consider sellin(not to be takin as trading advice, just my opinion)
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Still not sure its ready to go. I’ve moved my stop to 1.3310.
well, it s getting late, volume starts to die off after 16 gmt, asia usually offers a retracement, or in this case some absorbtion of longs if there are still people trying to buy UC, but i doubt that, they ussually do the fake break after they ve finished accumulating or distributing in this case. since tommorow is NFP, we might see it move then. but my money is on short for now unless something changes volume wise.
from a 5m stand point for example, i would ve preffred that high vol to be at the top, the probabilities are way higher when 1hr and 5 or 15m show same thing regarding vol, but even so we see an increase, and then the high vol, but the result is still bearish candles on lower vol. i don t think it s gonna move till tomm nfp but who knows, if wasn t so close to asia i would ve considered takin a short, 10 pips stop above the high to allow for some small fakes and wait for the news tomm, but i won t trade it till monday or maybe tomm after the nfp an oportunity will present itself using the news as catalyst. cheers
I exited my short at breakeven last night. I’m having issues with thinkorswim right now so no charts.
I’ve limited myself to 5 forex pairs. My main trading chart is the 3 hour but I start my analysis of each pair off the weekly. The five pairs are:
USD/JPY
AUD/USD
USD/CAD
GBP/USD
AUD/NZD
I picked these five because they are somewhat uncorrelated (as best I could manage) and “look good” to me - meaning I can draw lines that make sense and seem to be respected. Here are my weekly charts
