Mastering The Wyckoff Method of Technical Analysis Introduction:
-----------------------------------------------------------
In the time period of April in 2021 Bitcoin reached its local high of roughly US $65,000 per coin, shortly after when May came along many social channels quickly lit up with the now infamous “Wyckoff Distribution Schematic” (This was one popular video that described it here: www.youtube.com), and shortly after BTC came crashing down back to the $30,000 region playing this schematic almost perfectly. I myself was trading Bitcoin using the Wyckoff Method at this time, and I was introduced to a plethora of new traders and investors trying to understand the complicated Wyckoff method, but the fact of the matter was, many were sharing or educating others in incorrect ways to use this method. From this day I took more of an interest in educating others in the Wyckoff Method, and below I am going to pick apart, introduce and help you master some of the key concepts used in this method of analysis.
Bitcoins Chart March-May 2021
Read more about the Crash in 2021:
www.aljazeera.com
Who is “Wyckoff”?:
-----------------------------------------------------------
Richard Demille Wyckoff (November 2, 1873 – March 7, 1934) was considered one of the five “titans” of technical analysis, along with Dow, Gann, Elliott and Merrill. At age 15, he took a job as a stock runner for a New York brokerage. Afterwards, while still in his 20s, he became the head of his own firm. He also founded and, for nearly two decades wrote, and edited The Magazine of Wall Street, which, at one point, had more than 200,000 subscribers.
Wyckoff was an avid student of the markets, as well as an active tape reader and trader. He observed the market activities and campaigns of the legendary stock operators of his time, including JP Morgan and Jesse Livermore. From his observations and interviews with those big-time traders, Wyckoff codified the best practices of Livermore and others into laws, principles and techniques of trading methodology, money management and mental discipline.
Wyckoff's research claimed many common characteristics among the greatest winning stocks and market campaigners of the time. Wyckoff also has techniques he believed offered advantages when markets were rising or falling (bullish and bearish). Wyckoff offered a detailed analysis of the "trading range", a posited ideal price bracket for buying or selling a stock. One tool that Wyckoff provides is the concept of the Composite Operator , another is Volume based analysis .
Who is the Composite Operator / The Composite Man?:
-----------------------------------------------------------
“…all the fluctuations in the market and in all the various stocks should be studied as if they were the result of one man’s operations. Let us call him the Composite Man, who, in theory, sits behind the scenes and manipulates the stocks to your disadvantage if you do not understand the game as he plays it; and to your great profit if you do understand it.” (The Richard D. Wyckoff Course in Stock Market Science and Technique, section 9, p. 1-2)
Based on his years of observations of the market activities of large operators, Wyckoff taught that:
The Composite Man carefully plans, executes and concludes his campaigns.
-The Composite Man attracts the public to buy a stock (financial asset) in which he has already accumulated a sizable line of shares by making many transactions involving a large number of shares, in effect advertising his stock by creating the appearance of a “broad market.”
-One must study individual stock charts with the purpose of judging the behaviour of the stock and the motives of those large operators who dominate it.
-With study and practice, one can acquire the ability to interpret the motives behind the action that a chart portrays. Wyckoff and his associates believed that if one could understand the market behaviour of the Composite Man, one could identify many trading and investment opportunities early enough to profit from them.
Above excerpt from: school.stockcharts.com
Many traders and investors who follow the Wyckoff Method treat the Composite man as a real entity, for Cryptocurrency holders this might be seen as a whale who controls the price. Wyckoff himself did not find it necessary to define a importance between the Composite man being an imaginary being, a creation of one's own mind or a real entity, but defined an importance towards “Thinking” like the Composite Man, by thinking like a “Large Operator” we change our Psychology.
But what does this mean?
In the book titled, “The Compound Effect” by Darren Hardy (Founder of Success Magazine) there is a section titled “Find Your Fight” in Chapter 3, in this section Darren describes how hate is often as strong as a motivating force as love, but why is this relevant?
A person who is in love may do crazy things, but so will a person who is consumed by hate, as both are powerfully motivating forces. By creating a “Enemy” (Someone to hate) our mindset changes to a defensive manner, we are now in “Battle” with our Enemy. Here is a quote from the book, which is one of my favourites:
“Contrary to social correctness, it can be good to hate. Hate disease, hate injustice, hate ignorance, hate complacency, and so on. Sometimes identifying an enemy lights your fire.Some of my greatest motivation, determination, and dogged persistence came when I had an enemy to fight. In history, the most transformation stories and political revolutions came about as a result of fighting an enemy. David had Goliath, America had the British. Luke had Darth Vader…”
And as traders; we have The Composite Man…
A great article on the Composite Man can be located here for further education:
www.wyckoffanalytics.com
Wyckoff's "Five Step Approach":
-----------------------------------------------------------
The Wyckoff Method involves a five-step approach to stock selection and trade entry, which can be summarized as follows:
1. Determine the present position and probable future trend of the market.
Determine what the current characteristics of the price structure and Supply & Demand are, (are we in a Uptrend, Downtrend or Sideways) by getting a general idea of the Price Structure, Sentiment & Supply and Demand we can determine if we want to be in a long or short trade, or no trade at all, and what the probable future direction of the market may be. Refer to Section “Market Phases & Cycles” below to understand this further.
2. Select stocks in harmony with the trend. In an uptrend, select stocks that are stronger than the market.
By selecting assets moving with the Primary Trend, we are increasing chances of success. (For example, if the dominant asset in Crypto, Bitcoin is on a strong uptrend is it fair to assume that you are going to have more success trying to long other Cryptocurrencies which are highly “correlated” and likely to follow in that direction. Financial Assets that “decorrelate” and show stronger increases during uptrends and smaller decreases on pull backs may be showing signs of being stronger then the market as a whole (long position), for shorts we are looking for Assets that are showing weakness and stronger decreases then the market as a whole.
3. Select stocks with a “cause” that equals or exceeds your minimum objective.
Every action, has a reaction, every cause, has an effect, this statement basically means that if you are going to enter the market and take a position, look for assets that have a rational and reasonable cause for you to reach your target objective. A great example is using Price Target Measurements when trading Chart Patterns, each Chart Pattern is the cause, and the Price Target is the effect. If there is a Cause, but no Effect, then it is a potential sign of weakness. Please see “Wyckoff Laws” below for more information.
4. Determine the stocks' readiness to move.
Use a pre determined system to determine how close assets are to entering the Mark Up or Mark Down Phases. Find the right system to see when a asset is about to Uptrend or Downtrend. Use the 9 Buying & Selling tests, aswell as the Wyckoff Schematics explained below to understand this concept further.
5. Time your commitment with a turn in the stock market index.
Financial Markets are highly correlated, this means that we want to be timing our investments and trades with the Leading Market Assets or Index’s (A Index is basically a grouping of the Top Stocks or Companies in that Industry, for example, SP500, AU200). Why do we want to time? Lets use Bitcoin as a example. Sometimes Bitcoin is almost correlated to 80-90% of the Stock Market, that means the price moves almost in sync, so by watching the price movements and analyzing the Stock Market we can also get clues on the direction of the asset we are trading. If Bitcoin is moving up, but the Stock Market is heading down, and the correlation is HIGH, we can assume that the upside move may not be likely to continue.
Market Phases & Cycles:
-----------------------------------------------------------
According to Wyckoff, the market can be understood and anticipated through detailed analysis of supply and demand, An idealized schematic of how he conceptualized the large interests' preparation for and execution of bull and bear markets is depicted in the figure above. The time to enter long orders is towards the end of the preparation for a price markup or bull market (accumulation of large lines of stock), while the time to initiate short positions is at the end of the preparation for price markdown. Also note the different Phases of the Market.
Before we continue below, please click on the image below for my basic introduction to Market Phases & Cycles, which is an important topic to have an understanding of before continuing onto Wyckoff Schematics. This is also relevant to understand Cause & Effect mentioned below. Notice how each Cause has an Effect!
To simplify the concept - Markets move in cyclical patterns, with a full cycle usually having Accumulation > Reaccumulation > Distribution >Redistribution, there can also be Micro trends within the cycle. Uptrends (HH, HL), Downtrends (LL, LH) and Sideways movements form the price structures which make up the Phases of the market, which in turn create the Cycles.
Three Laws of Wyckoff
-----------------------------------------------------------
Wyckoff Analysis is fundamentally based off the Three Laws of Wyckoff, which can be found and recognized across many different types of Analysis, the Laws help give insight to our analysis and choice of buying/selling.
1. Supply vs. Demand
---------------------------------
Wyckoff states when demand is greater than supply, prices rise, and when supply is greater than demand, prices fall.
When sellers outweigh the buyers, the market is dominated by Supply, a large supply of an asset to sell, means greater selling pressure and a higher probability of a decrease in price. A sign of Demand (Buying Pressure) is a shortage of Supply, in a Cryptocurrencies case it would mean that the demand of buyers on exchanges outweighs the supply available for purchase on exchanges. As the amount up for purchase quickly falls to a low number the greed of participants drives them to want to pay higher prices for an asset.
When buyers outweigh sellers, the latter occurs with a higher probability of increase in prices. A sign of Supply (Selling Pressure) is a shortage of Demand, in a Cryptocurrencies case it would mean that the demand of buyers on exchanges under weighs the supply available, institutional investors and funds hold majority share of the SUPPLY and with no interest in buying from the retail participants we see investors (sometimes impatient or fearful) become sellers in anticipation of there being no increase in price in the short term (relative to their perspective).
Using this secondary chart below, we can clearly see the "Demand (Green)" and "Supply (Red)" areas of Siacoin SC.
We can see that both the Demand & Supply areas are respected and have strong reactions, and with patience we will see if the dominating factor on Siacoin right now is Supply or Demand, but considering some of the points I will go into below so far its looking like it is shifting into the favour of demand currently with a visit to the 0.5 (50%) of the Trading Range. Take note of the small abbreviations at the start of the TR (Trading Range) for now - see Wyckoff Schematics section later.
Other ways to analyze Supply & Demand in Cryptocurrencies are more literal - for example you can literally go onto the Blockchain and see the wallets of coins, how many each holds, what % of the Supply is owned by Siacoin itself, the amount of wallet holders, I will not go into this type of analysis in a detailed manner as it is not my expertise.
2. Effort vs. Result
---------------------------------
Wyckoff states that every effort should lead to a result in the financial markets.
Here is a example of a “Effort Vs Result” in a Trading Range (Parallel Channel) using Volume & Price Analysis (Please Click the Image, for Further Educational Idea)
This statement is applied to our charts by using data on Trading Volume. When we see abnormally large trading volume at key areas on the chart, we can usually expect a continued move in that direction, if the Effort produces no result though, that abnormally large trading volume can give us a sign that the participants betting on the market to move in that direction have not gathered enough momentum to do so (Marked in Light Blue), which leads to them being trapped (Marked in Dark Blue) and then a reverse in the opposite direction in price (Marked in Purple).
Effort Vs Result can also be interpreted in a number of ways, lets analyse the above Siacoin SC chart using this concept:
In the first image, the Trading Range is created, once at the lower range, volume decreased (this was not just a singular occurrence, with the whole Crypto market having similar low volume and "choppiness" but within this low volume area we can see there was two larger red volume bars, these two bars showed us a increase in sellers in this area, (An effort) but no Result (further Decrease on the next candles) this gives us a sign that the sellers may not be the dominant force now (A “Divergence) leading us to test the previous dominant force area above as supply.
This then led us to test the upper Trading Range, where the exactly same thing happened in the opposite.
In the 3rd image, we can finally see that the effort of the buyers is now leading to zero result, the trading range is starting to drag out and the volume of sellers is dropping off, in a REAL breakout the volume should continue to increase with the prices. We can see below that never happens here. As the images progress the Supply is obviously Dominant.
This leads us to the current chart, where we can see that now the sellers are losing momentum and the buyers have just stepped in. (See the volume?)
In the current trading range on SC (Siacoin) we can see quite a lot of abnormally large green bars at the upper range, this shows us that even though a large amount of buyers did in fact come into play here, the upper ranges dominant force was the Supply, and prices then headed towards the lower range.We are now in the process of “Testing” that lower range for Demand. So far the circled Red Bars (in the First chart, the original chart of this post) show us the sellers may be trapped locally.
3. Cause vs. Effect
---------------------------------
Wyckoff states that every cause in the market leads to a proportional effect.
The market has phases, such as Accumulation, Reaccumulation, Distribution and Redistribution. Each phase should have a "Effect" to match the cause, Accumulation has a Markup, aswell as Reaccumulation, And Distribution and Redistribution are followed by a Mark Down. The phase is the cause, the mark up is the effect.
Click on this link for a quick infographic on the Market Phases (Consider each phase as a Cause) which then should have an Effect (Mark Up or Mark Down Phase), this creates the “Market Cycle” and all markets move in cycles: ibb.co
This is similar to how a Bull Flag has a target measurement (Mark Up) and a Bear Flag has a target measurement for the downside (Mark Down). For more information on Flag Patterns click the below image, notice on the bottom right picture how the Flag has a measurement which is represented by a extended line, the previous line and the Flag is the Cause, the extended line pointing upwards is the Effect in this case:
In this case, if we see a breakout to the upside of this current trading range on SC Siacoin (the Cause) we can assume the Effect will be a strong breakout above the range leading to Mark Up Phase, otherwise the Cause has no Effect, in this situation meaning the range might fail and break downwards.
This is similar in a way to Effort vs Result explained earlier, For every Effort, there should be a Result, for every Cause, there should be an effect.
Wyckoff Schematics
-----------------------------------------------------------
A trading range (Sideways Movement, Zig Zag) shows us an equilibrium between buyers and sellers, and the Wyckoff Theory & Schematics give us clues to which probable direction the price may head out of the horizontal moving price structure.
Each Trading Range can be an important Phase in the larger Market Cycle, giving us potential clues and hints within the overall trend.
The Wyckoff Schematics help us identify the different between Accumulation and Distribution Trading Ranges (Or Reaccumulation or Redistribution) - In a Trading Range the price Zig Zags up and down until eventually a breakout occurs, using the Wyckoff Accumulation Schematic we can see there are some clues in the similarities of the chart and the schematic that tell us Siacoin may be ready to at least test of the upper bounds of the Trading Range.
It is important to note that most Trading Ranges start with obvious characteristics, which we will delve into further below, the first characteristics of the Trading Range (TR) help us identify that we are now moving in a sideways trend:
When paired with the Wyckoff 9 Buying and Selling Tests - the Wyckoff Schematics are a great tool to help measure potential entries, exits, risk and to read the price movement in general.
There are four types: Accumulation , Reaccumulation , Distribution & Redistribution.
And each Trading Range is Analysed in 5 key phases:
By splitting our Schematics into 5 key phases, the characteristics become easier to recognize and identify.Remember this when moving forward in this section.
Phase A: The trading range (TR) is created (example above)
Phase B: The Supply & Demand of the TR is tested
Phase C: Deviation outside TR or Final point before reversal
Phase D: The new trend begins
Phase E: The trend continues
In phase D & E, the obvious “Change of Trend” is evident, refer to this infographic below and you can see how a trend contains Higher Highs, Higher Lows (HH, HL) or Lower Lows, Lower Highs (LL, LH); we will come back to this soon:
1. Accumulation :
---------------------------------
In accumulation, the shares purchased outnumber those sold.
There are roughly 9 characteristics of an Accumulation Range:
1. PS (Preliminary Support) the first Support area that was lost, creating the upper bound of the TR.
2. SC (Selling Climax) the climactic action that is bought up quickly creating the lower bound of the TR. It is a strong example of Effort vs Result usually, with abnormally large selling volume, but no further downside.
3. AR (Automatic Rally) a low volume, quick reaction visiting the other side of the TR, usually indicating short covering.
4. ST (Secondary Test) a secondary test of the initial Demand Area created by the SC.
5. Spring (Fake Out) & Test or LPS (Last point of Support). Spring is usually a great example of Effort vs Result. Spring is then confirmed by a test of Support. LPS (Last Point of Support) occurs when price revisits the recent Demand (Support) area, usually a former Resistance. The term may be used in a plural manner, with multiple LPS forming the Higher Lows that make up the basis of a market trend.
6. JAC (Jump Across the Creek) the Creek is an imaginary line created by the previous downtrend (similar to a Moving Average), we want to see the price “Jump” across the creek.
7. LPS (Last Point of Support) occurs when price revisits the recent Demand (Support) area, usually a former Resistance. The term may be used in a plural manner, with multiple LPS forming the Higher Lows that make up the basis of a market trend.
8. SOS (Sign of Strength) is an abnormally large volume signature upwards price movement which confirms the Spring or LPS.
9. BU/LPS (Back Up / Last Point of Support) occurs when price revisits the recent Demand (Support) area, usually a former Resistance. The term may be used in a plural manner.The SOS & LPS together form the Basis of a Uptrend, see this image for reference: ibb.co . The final LPS before leaving the Trading Range should start the Uptrend.The LPS can sometimes move to the 50% of the Trading Range.
We should then enter the Mark Up phase as described at the start of this article. Remember; Accumulation is the Cause, Markup is the Effect.
Examples & Links :
Accumulation Schematic #1:
school.stockcharts.com
In this schematic, the Spring is located in the end of the TR, showing trapped sellers.
Accumulation Schematic #2:
school.stockcharts.com
In this schematic, there is no Spring action, instead the price starts moving upwards from the LPS Area (Last Point of Support), the Spring (in this case, ST) is located at the middle of the TR, showing trapped buyers.
Example of Accumulation #1 Analysis (Click image, press play to see the result!):
Example of Accumulation #2 Analysis:
2. Reaccumulation :
---------------------------------
After Accumulation, comes Reaccumulation. Where after a extended upside move, a repeated sideways movement occurs which leads to another extended upside move.
ReAccumulation is known also as a Trend Continuation.
The characteristics are almost identical to Accumulation, except the previous price movement leading up to the trading range is upwards :
Here are the characteristics explained :
1. PS (Preliminary Supply) the first selling area creating the Trading Range.
2. BC (Buying Climax) the climactic action that is sold up quickly creating the upper bound of the TR. It is a strong example of Effort vs Result usually, with abnormally large buying volume, but no further upside.
3. Shakeout (Fake Out to the downside trapping sellers) (I have marked this as SC, to simplify the process as a Shakeout is quite similar in its characteristic.
4. AR (Automatic Rally) a low volume, quick reaction visiting the other side of the TR, usually indicating short covering.
5. ST Area (Secondary Test Area) a secondary test of the initial Demand Area created by the Shakeout.
6. Spring (Fake Out) or LPS (Last point of Support) A Spring occurs when price falls underneath the Trading Range, triggering stop losses and usually inducing investors to Panic Sell, (this is the most profitable area to buy). Spring is then confirmed by a test of Support. Spring is usually a great example of Effort vs Result. LPS (Last Point of Support) occurs when price revisits the recent Demand (Support) area, usually a former Resistance. The term may be used in a plural manner, with multiple LPS forming the Higher Lows that make up the basis of a market trend.
7. JAC (Jump Across the Creek) is when the price “Jumps” across the Trading Range, giving us a final clue before the breakout occurs. The “Creek” is an imaginary line formed from the projected path of the previous price swing highs, this can be used similar to a Moving Average.
8. SOS (Sign of Strength) is an abnormally large volume signature upwards price movement which confirms the Spring or LPS.
9. LPS (Last Point of Support) occurs when price revisits the recent Demand (Support) area, usually a former Resistance. The term may be used in a plural manner.The SOS & LPS together form the Basis of a Uptrend, see this image for reference: ibb.co . The final LPS before leaving the Trading Range should start the Uptrend.The LPS can sometimes move to the 50% of the Trading Range.
We should then enter the Mark Up phase as described at the start of this article. Reaccumulation = Cause, Mark Up = Effect
Examples & Links :
It is important to note that Reaccumulation can appear as Accumulation, in the image below we can see that MANAUSDT looked like Accumulation Schematic #2, yet was actually Reaccumulation due to the previous uptrend.
And in this example Reaccumulation looked exactly like Schematic #1 of Accumulation!
Reaccumulation Schematic #1:
ibb.co
In this schematic, the Spring is located at the end of the TR, showing trapped sellers.
Reaccumulation Schematic #2:
ibb.co
In this schematic, the ST (or Spring) is located at the middle of the TR, showing trapped buyers.
Traditional Reaccumulation Schematics:
ibb.co
(Credit: Roman Bogomazov / www.wyckoffanalytics.com)
Example of Traditional Reaccumulation #2 Analysis: (Press Play!):
3. Distribution :
---------------------------------
Above we learnt that in accumulation, the shares purchased outnumber those sold while, in distribution, the opposite is true. The shares sold outnumber those purchased.
In a Distribution Trading Range two of the key characteristics are the UTAD/UT (Upwards Thrust / Upwards Thrust & Distribution) above the Trading Range, and the SoW's Signs Of Weaknesses with strong volume at the bottom end of the range. The start of the trading range should be easily identified by a BC (Buying Climax). The extent of accumulation or distribution determines the cause that unfolds in the subsequent move out of the TR .
There are roughly 9 characteristics of an Distribution Range:
1. PS (Preliminary Supply) is the first selling area creating the Trading Range.
2. BC (Buying Climax) is the climactic action that is sold up quickly creating the upper bound of the TR. It is a strong example of Effort vs Result usually, with abnormally large buying volume, but no further upside.
3. AR (Automatic Rally) is a low volume, quick reaction visiting the other side of the TR, usually indicating long covering.
4. ST (Secondary Test) a secondary test of the initial Supply Area created by the BC.
5. SOW (Sign of Weakness) are strong moves to the lower bounds of the Trading Range (or Underneath) with strong volume signature.
6. UT or UTAD (Upwards Thrust) in a UT (Upwards Thrust) a significant amount of buyers enter the market, “Buying the Breakout”, but their Effort, leads to no Result and this variation of a “Bull Trap” is the most significant characteristic of the Distribution TR. A UTAD (Upwards Thrust and Distribution) forms within the middle or end of the Trading Range; there is an obvious lack of Result vs Effort, with abnormally large buying volume signature, yet price fails to get back above this area again. It can look similar to a miniature Trading Range (Distribution).
7. UTAD or LPSY (Last Point of Supply) In Schematic #1 we have the UTAD at the end, in Schematic #2 we have it in the middle (simplified). If the /UT is found in the middle then we are looking for the LPSY to confirm the Resistance, when price revisits the initial Supply area created at the start of the Trading Range, and then successfully decreases from that area.
8. SOW (Sign of Weakness, Fall under the Ice) just like how in Accumulation we Jump Across the creek, in Distribution we do the latter and Fall Under the Ice. SOW (Sign of Weakness) are strong moves to the lower bounds of the Trading Range (or Underneath) with strong volume signature.
9. LPSY (Last Point of Supply) instead of revisiting the initial Supply area created at the start of the Trading Range, in LPSY (Last Point of Supply) revisits the recent Supply (Resistance) area, usually a former Support. The term may be used in a plural manner, with multiple LPSY forming the Lower Highs (LH’s) that make up the basis of a market trend.
We should then enter the Mark Down phase as described at the start of this article. Distribution is the Cause, and Mark Down is the Effect.
Examples & Links :
Distribution Schematic #1:
school.stockcharts.com
In this schematic, the UTAD is located at the end of the TR, showing trapped buyers.
Distribution Schematic #2:
school.stockcharts.com
In this schematic, the UTAD is located in the middle of the TR, showing trapped buyers.
Example of Distribution #1 Analysis (Press Play!):
Example of Distribution # 2 Analysis (Press Play!):
4. Redistribution :
---------------------------------
After Distribution, Comes Redistribution. Where after a extended down move, a repeated sideways movement occurs which leads to another extended downwards move.
Redistribution is also known as a Downtrend Continuation. Redistribution is said to be difficult to analyse, so my general advice is to treat Redistribution as a method to spot an additional Distribution Schematic after a Distribution Schematic and a Mark Down has already occurred previously recently on the chart (Similar to a Bear Flag Pattern after a Distribution).
The characteristics are almost identical to Distribution sometimes, except the previous price movement leading up to the trading range is upwards :
Here are the characteristics explained :
1. PS (Preliminary Support) the first Support area that was lost, creating the upper bound of the TR.
2. SC (Selling Climax) the climactic action that is bought up quickly creating the lower bound of the TR. It is a strong example of Effort vs Result usually, with abnormally large selling volume, but no further downside.
3. AR (Automatic Rally) is a low volume, quick reaction visiting the other side of the TR, usually indicating long covering + (UT/UA Upwards Thrust / Action) The Upwards Action or Upwards Thrust takes out the Supply above the AR area, before heading back down.
4. ST (Secondary Test) a secondary test of the initial Demand Area created by the SC.
5. UT or UTAD (Upwards Thrust, or Upwards Thrust And Distribution), in a UT (Upwards Thrust) a significant amount of buyers enter the market, “Buying the Breakout”, but their Effort, leads to no Result and this variation of a “Bull Trap” is the most significant characteristic of the Distribution TR. A UTAD is basically a UT (Upwards Thrust) with a Distribution also (miniature Bearish Trading Range) that usually forms within the middle or end of the TR.
6. LPSY + Test (Last Point of Supply) is when price revisits the initial Supply area created at the start of the Trading Range, and then successfully decreases from that area, the test confirmed by tapping the upper Supply Area before heading into the TR again.
7. SOW (Sign of Weakness) *sometimes* with a potential UTAD (Upwards Thrust and Distribution): Signs of Weakness are strong moves to the lower bounds of the Trading Range (or Underneath) with strong volume signature.
8. SOW (Sign of Weakness, Fall under the Ice) just like how in Accumulation we Jump Across the creek, in Distribution we do the latter and Fall Under the Ice.
9. LPSY (Last Point of Supply) instead of revisiting the initial Supply area created at the start of the Trading Range, in this LPSY we are visiting the Supply area created near the bottom of the Trading Range.
We should then enter the Mark Down phase as described at the start of this article. Redistribution is the Cause, Mark Down is the Effect.
Examples & Links :
It is important to note that Redistribution can appear as Distribution just like Accumulation as Reaccumulation as mentioned earlier, here is a example on ETHUSDT:
Redistribution Schematic #1:
ibb.co
In this schematic, the UTAD is located at the end of the TR, showing trapped buyers.
Redistribution Schematic #2:
ibb.co
In this schematic, the UTAD is located in the middle of the TR, showing trapped buyers.
Example of Redistribution #1 Analysis (Press Play!):
Example of Redistribution #2 Analysis (Press Play!):
5. Failure of Schematic :
---------------------------------
Wyckoff based trades can also fail.
It is also important to note that Wyckoff Schematics are not a guarantee, more so a system for you to analyse the market and know potential lower risk areas to position your trades.
In this example below (Click+Press Play!) we can see that the Accumulation on BATUSDT did have a strong breakout, but never entered into a correct markup phase and then "failed" when the price came back inside of the TR (Trading Range):
Nine Buying/Selling Tests:
-----------------------------------------------------------
Whereas the three Wyckoff laws provide a big-picture foundation for the Wyckoff method, the nine buying and selling tests are a set of narrower, specific principles to help guide trade entry. These tests help delineate when a trading range is drawing to a close and a new uptrend (markup) or downtrend (markdown) is about to begin.
In the book, by Hank Pruden, named "The Three Skills of Top Trading" , as well as the following article by Jack K Hutson the Nine Buying and Selling Tests of Wyckoff are discussed and outlayed similar to the above image:
These nine tests can be difficult to understand, or even apply to your charts, so I have summarised them and modernised these tests for a purely candlestick chart and simplified point of view.
Alot of analysts beforehand made use of P&F (Point & Figure Charts). At the top of your Tradingview chart, you can see a small icon, if you click it you can see the different types of charts available, we are currently on Candlesticks, Point & Figure is another option that was used for some Wyckoff Analysis, but in my simplified version we are just using Candlesticks:
ibb.co
Here are my simplified Buying & Selling Tests explained with images
1. Buying Tests :
---------------------------------
I am using the chart of ZILUSDT as a example.
Wyckoff Buying Tests for Accumulation (Simplified Version)
1. Downside price target complete or close to complete of any previous Bearish Patterns
(Bear Flag Pattern used for Target Measurement: www.thepatternsite.com )
2. PS, SC, and AR/ST on chart (Remember our first chart above, with Supply & Demand? ON the left we can see creation of the trading range with the Selling Climax (SC), Automatic Rally (AR), and Support Test (ST) we also covered this in the chart below (The 2nd below is showing that on ZILUSDT):
3. Bullish Signs (volume or price increases on rallies and diminishes during reactions)
4. Diagonal Resistance Broken
5. Higher lows & 6. Higher highs
7. Asset stronger than the market (more responsive on rallies and more resistant to reactions than the market index or other dominant assets)
8. Base forming (horizontal price line)
(It can resemble a Flat Base Pattern: www.thepatternsite.com)
9. Estimated upside profit potential is at least three times the loss if the initial stop-loss were hit (Risk to Reward; 3:1)
We can now see we have completed all 9 Buying Tests:
And for the final images, we can see that ZIL has a massive upside move, moving to the Mark Up phase from our Buying Tests Analysis:
Aswell as starting to complete a larger Accumulation #1 Structure as desribed above.
2. Selling Tests :
---------------------------------
I am using the chart of XTZBTC as a example.
If you missed it above, dont forget to see the original 9 Selling Tests:
ibb.co
Wyckoff Buying Tests for Distribution (Simplified Version)
1. Upside price objective complete of any previous Bullish Patterns on higher timeframes, or close to complete
(Bull Flag Pattern used for Target Measurement: www.thepatternsite.com )
2. Bearish Signs (volume decreases on rallies and increases on reactions)
3. Preliminary supply, buying climax (PSY, BC)
We also covered this in the chart below (The 2nd below is showing that on XTZBTC):
4. Asset weaker than the market (more responsive than the market on reactions and sluggish on rallies)
XTZ was a perfect example of Selling Test #4, as you can see it was much weaker than Bitcoin at the time, which was leading the market.
5. Diagonal Support Broken
6. Lower Highs & 7. Lower Lows
8. Crown forming
(It can resemble a ugly Double Top Pattern: www.thepatternsite.com)
9. Estimated downside profit potential is at least three times the loss if the initial stop-loss were hit (Risk to Reward; 3:1), we have now completed all 9 Selling Tests!
And for the final images, we can see that XTZBTC has a massive downside move, moving to the Mark Down phase from our Selling Tests Analysis:
As well as starting to complete a larger Distribution #2 Structure as described above. Refer to your schematics above if your confused.
Conclusion:
-----------------------------------------------------------
Not only does the Wyckoff Method teach the novice Investor/Trader the techniques, foundations and methods needed to analyse the market, it also helps create a system and mindframe towards observing and timing the market, which allows the trader to be much more rationalised and organised in their train of thought as well as much more risk averse.
By using the Wyckoff based analysis on Siacoin we can clearly see this token has potential for more upside, although we do need to be cautious as a significant pullback on Bitcoin could easily “Fail” the “Spring” action of the TR (Trading Range) in the original analysis image above.
What would a successful accumulation breakout look like on Siacoin?
Refer to the original chart at the start of the post. I have made a small drawing, describing the characteristics we need to see for this to progress further. You can use that drawing along with the next below to get a rough idea of what a successful breakout will look like, compare with the Accumulation Schematics you studied above.
What would a failure of accumulation look like on Siacoin?
I will give two examples:
1. Failure of Spring
2. Failure of Phase E (Uptrend)
I hope you enjoyed my explanation of the Wyckoff Method - Thank you and if you found this writeup insightful, educational and informative don't forget to hit Subscribe, Like & Comment so others can also potentially see and benefit from this post, if you wish to see these concepts in action, I recommend visiting my signature as well.
Other Resources & References:
-----------------------------------------------------------
Websites:
Wyckoff Analytics: wyckoffanalytics.com
Wyckoff SMI: wyckoffsmi.com
Videos:
Wyckoff Youtube: www.youtube.com
Wyckoff SMI Youtube: www.youtube.com
Stockcharts.com Youtube: www.youtube.com
(I didnt cover volume much in this article, check out the above video for a Volume Tutorial)
Articles:
school.stockcharts.com
school.stockcharts.com
school.stockcharts.com
www.wyckoffanalytics.com
www.wyckoffanalytics.com
Magazine of Wall Street Database:
(Founded by Wyckoff)
shorturl.at
Books:
www.amazon.com
www.amazon.com
References:
en.wikipedia.org
school.stockcharts.com
Trading Psychology
Why Do You Need a Trading Plan?📝
If you want to become a consistently profitable trader you have two choices:
1️⃣strictly follow your trading plan
or
2️⃣fail.
Trading plan is essential for achieving your financial goals.
It is a set of actions to follow for making trading decisions
guiding you on how to react to certain events.
It reflects your personality and characteristics.
Moreover, its entire structure and content are primarily based on them.
Your way to success will be full of obstacles.
A lot of things will come in your way:
losses, drawdowns, and losing streaks;
mistakes, scams, and emotional decisions.
Only your trading plan will show you a correct path, it ensures you will stay on track on your journey to your desired destination.
When you make a wrong turn, it knows to make adjustments, and it points you back in the right direction.
It is your guard from making any hurried decisions you could later regret.
Trading without a trading plan wouldn’t be a smart idea. You wouldn’t know how to get to your destination and it’s highly likely that you get lost.
Most importantly, if you suck at trading (and you certainly will in the beginning), you will know it is down to one of only two reasons: either there’s a problem in your trading plan or you are not sticking to your trading plan.
Stick to your plan traders. "If you fail to plan, you plan to fail".
❤️Please, support this idea with like and comment!❤️
Bearish Pressure Zone (3 Candles In Row With Upper Wicks)Chart example is of a Bearish Pressure Zone:
3 consecutive price bars with upper wicks (VERY strong/either bearish or bullish setups)
Note: Make a zone from top of highest wick to top of highest close with one of the consecutive wicks, this is what you use as you risk or initial stop loss.
Price Action is not about price, but more importantly about decisions other traders/big banks are making related to price action.
Half of Forex trading is psychology (see Mark Douglas- You tube or google him)- might even read and/or buy his trading books.
Wick Psychology: When we have three consecutive bars with overlapping lower or upper shadows, the traders undergo the same emotional cycle three times, all within a compact price range. But these wick bars can be in close area of each other, they do not have to be three in a row, see bullish pressure zone on the attach chart for an example.
Price Pressure Zones :Bearish & BullishTrade Plan:
Locate Buying and selling pressure zones implied by the lower and upper shadows/wicks of candlestick price bars.
These areas have THREE rejection shadows or wicks in a relatively close area or time period.
These pressure zones can be done on 15 minute time frames, but 1 hour, 4 hour or daily charts are stronger and more reliable.
Look at attached chart ( do you see numbers 1, 2 and 3? rejection lower shadows or wicks)- this suggest future bullish or buying trading.
* Buy next 1 hour candlestick bar (blue on chart) after the three rejection lower shadows or wicks, with right risk management under your strategy and plan.
Pro Tip:
A strong pressure zone is not defined just by one pin bar!!! These need a minimum of three rejection shadows and/or wicks, which make these zones ones which the big money or big banks have a wall up that they do not want price action to go thru at this time. Never fight big money/banks- trade with them.
Bullish Pressure Zones- Multiple price bars with lower wicks
Bearish Pressure Zones- Multiple price bars with higher wicks
Common Mistake: The buying or selling pressure found on a single price bar might not be sufficiently reliable for a trading setup. Instead of a single bar, look for at least three consecutive bars with overlapping upper or lower shadows. When multiple shadows overlap the create a price zone that is more likely to exhibit the buying or selling pressure you anticipate.
How To Trade Divergence
Divergence simply means separation.. When two similar things things---get separated and start going different directions, you have to consider which direction to follow. That's exactly the concept of divergence. When trading, and you spot a divergence, you want to be sure to understand what they are trying to tell you. In this video, I explain the concept of divergences, how to trade them and what to do when you sight one. Be sure to like, follow and comment.
I want to see those div trades!
Are Wicks Important? Types Of Wicks: Fill, Rejection & ReversalPlease look at your own charts:
Do you see all of the following?
Wick Fills? These type of wicks happen going with the trend and get filled with further price action on chart.
Rejection Wicks? Mostly happen at key support and resistance zones or key quarter theory psychological numbers, a lot of traders have orders there.
Reversal Wicks? Happen at key areas mostly on 1 hour, 4 hr, daily, weekly and even monthly charts- these are areas with large wicks in past which once price action comes into these areas at key resistance and support areas- will accumulate orders and reverse directions.
See attached 1 hour charts----
How many different types of wicks can you see and/or spot.... you need to see quarter theory psychological numbers in actually real live time when trading Forex. Always start with monthly charts and keep going lower until you are trading with the chart of your choosing. Higher time frames will give you better risk to reward opportunities then under 1 hour...
If you truly understand wicks- you will be a better trader and know if you scalp trade, day trade or position trade when to look for quick wick fill candles to catch some quick pips. These are the easy Forex trades to do, make sure you are trading during high liquidity and volume time periods only.
Elements Of Candlesticks (You Need To Know)Each Candlestick consists of four important elements:
1) The Body- Large bodies equals more liquidity and more volume involved in candlestick, smaller is other side which is smaller liquidity and volume.
2) The Length Of The Wicks- Larger wicks equals higher or lower rejection of price action, from the other side. Example: Pin bar candlestick at top of a bullish run up equals bulls are losing their strength and bears are starting to get control over current price action.
3) The Ratio Between The Body And The Wicks- Example: Doji or indecision candlestick generally has around same length of upper and lower wicks and bodies are small- so both bears and bulls are at a stand off with each one not winning at the moment... sideways price action.
4) The Position Of The Body- Look to left, what do you see? Where are the quarter theory lines on charts- you can plot all xxx000, xxx250, xxx500 and xxx750 lines which are the standard ones to either highlight or be aware of on any chart you trade from. Did current body make either a pin bar candlestick pattern, harami candlestick pattern or an engulfing candlestick pattern?
You need to know that 12 hours a day in Forex is high liquidity and high volume times: End of Tokyo to End of London, this is when most big moves happen.
You can google or YouTube more on Quarters theory which I strongly advise you implement in all of your trading, specially in this choppy price action. Do not be greedy and protection your profits- risk management is always #1. Understand each pairs ATR, lot size , pip value so you can only use 1% to 2% of account per trade, if you slowly grow account using compounding in Forex trading and be a successful trader. Good luck and Good trading.
Trading Mountain: How to reach the top step-by-stepHey, family! Good time of the day and welcome on another educational post.
As we all know, the road that leads to successful and consistently profitable trading is a pretty difficult and long one. It takes years of hard work, patience, dedication, and experience to reach the top of the trading mountain. Many beginners make similar mistakes before starting their journey. They tend to have false expectations and a distorted vision of the big picture.
As it can be inferred from the graphical illustration, the mountain pattern connects dots and shows a realistic path of a successful trader to the top of the hill.
We all start somewhere, right? We start taking our first steps and making ourselves familiar with the thing we are interested in. In the example of trading, it can be the first YouTube video that we watch, a chapter of a book related to investments that we read, first chart analysis that we make and many more.
What comes next? We decide on the type of a trader that we are. Do you have enough time to sit in front of the charts for several hours and press BUY/SELL buttons, or you are busy 90% of the time and prefer having a portfolio full of long-term positions?
After we have decided what our strategy will look like, we build a trading plan around it and make it a part of our lifestyle. We identify our trade entry criteria, risk management plan and so forth.
Backtesting our trading plan is a vital part for the journey. It can take days, weeks or even months. However, it will be worth it at the end of the day, as it is crucial to link our strategy with the trading plan and find out how profitable it will be.
Executing, optimising, journaling. Where did I make a mistake? What could have been done better? What should I change in my trading plan? It is important to stick to one single trading plan and optimise it along the way.
Before trading with real money, it is recommended to open positions on a demo account with virtual money. Getting a hand of things, practising the market and gaining experience is important.
After having traded on a demo account for several consecutive weeks, months or even years, we can move to a real trading account. Demo account is completely different from a real account, both psychologically and mentally. Putting real money on the line is much harder than playing around with fake simulation money. Thus, it is advised to start with a small amount and get used to it before moving to larger sums of money and increasing the trading capital.
After everything is went through and all hills are climbed, the top of the mountain will be reached. Of course, being a professional trader does not necessarily signify that there will be no failing trades and the win rate will always be above 90%. Losing days, weeks and even months will always happen. However, as long as you diversify your portfolio, stay cold-blooded, disciplined, and follow risk management principles, you will be profitable in the long-run.
Busy Signal - Gamblertrading is not gambling and gambling is not trading , but like expert gamblers the best traders must think of trading as a numbers game and probability to produce consistent results. Probability may suggest inconsistency but it can still produce consistent results over a large sample of trades if the edge is good enough and is applied consistently.
there is no such thing as ''prefect science'' in trading but there are occurrences in the market that are critical to understand and these can only be discovered by research and experience.
It just takes practice and a lot of screen time to master this art, so be patient, your mind and eye need training, and lots of screen time till it
becomes second nature to you.
“"Easy money" means only one thing when it means money that has come easy: It means money goes even more easily than it came.”
Edwin Lefevre
The Journey of a Trader 🛣🚶
Hey traders,
Why 95% of traders fail?
In this post, we will discuss the trader's road to success and why most of the traders give up at the halfway point.
On the chart, I was trying to portray the journey of a trader:
most of the traders start this game with gambling.
They randomly buy and sell the market relying on their intuition and with a high degree of probability end up with nice cush.💰
However, as they proceed they realize that the profits that they made were the product of luck, not skill. 🍀
The more they trade, the less they win.
At some moment losing trades start to outperform winners.
Trying different things, jumping from one strategy to another, one comes to the conclusion that nothing seems to work.🙅♂️
He goes broke, he is panicking.
At that stage, the majority blame the market for their failure.
Forex, stocks, gold trading is complete scam.
Making profits on the market is not possible.
They give up and leave.👣
Only 5% are persistent. Only 5% are blaming themselves not the market for their failure.
They start following a strict trading plan, they follow risk management recommendations of pro traders and at some moment they start making 0.📝
Buying and selling the market, at the end of the day, they don't lose anymore.
That is the most important milestone in a trader's journey.
Realizing that the one stopped losing, a trader starts polishing and improving his rules in order to achieve better results.
He trains and works with his psyche.💪
After years of struggling, one finally contemplates a consistent account growth.
He became a pro trader.🏆
I wish you to be persistent, traders and don't give up.
Patience pay and at the end of the day winners win.
❤️Please, support this idea with like and comment!❤️
The Power of a good Risk-to-Reward ratio. Reality of tradingRisk Management, alongside with discipline, experience and skillset, is one of the keys to unlock the doors of successful and profitable trading. As it can be inferred from the table, even with as low as 40% win rate, it is more than possible to stay consistent and make nice returns, as long as risk management principles are followed.
*We used 30 pips Stop Loss and 60/90/120 pips Target Profits as a projection. It does not necessarily signify that 1% risk equals 30 pips Stop Loss, as different pairs have different pip values, price differences etc. Moreover, we determine our Stop Loss based on the amount of capital we are willing to risk on a particular trade, price action, intuition and other factors.*
Things you should consider in trading to make it as a career
Hello everyone:
6 points I like to share on what you should consider in trading to make it as a career.
1. Trading is not a get rich quick scheme
Contrary to what social media, scammers, fakers and fake trading gurus want you to believe, trading is NOT a get rich quick scheme.
Those who believe such usually end up over trading, over leverage, blow accounts and give up.
(Trading is actually a reasonable method to yield money return. It is how consistent traders make a return on their original investment/deposit with proper risk management, strategies and methods. )
2. Technical/Fundamental Analysis dont work all the time.
Trading ANY sort of strategy, method or style will always have a percentage of failure and losses.
Its probability, not right or wrong. The main goal in trading is to make sure you have proper risk management, good Risk:Reward ratio, and look for consistency, sustainability in the long run.
(Sometimes traders blame their strategies, method, style, mentor and other things due to their trades not working out.
Not trading strategies can yield 100% strike rate, if there is, there will not need any risk management, and anyone trader should get rich)
3.Limit your risk per trade
Proper risk management is super crucial to a trader’s success. Many traders often risk way more than their accounts can handle, after all what's 10%-20% of a $100 to many people ?
But would you risk 10-20% on a $100,000 account ? and lose $10,000-$20,000 in one trade ?
(Too many new traders deposit a small amount of money hoping it can double and double and double. But they often over risk, over leverage the account.
The result is it only take a few trades to totally blow the account up.)
4.Must use stop loss
It may have worked out for you a few times where you remove your SL, and the price reverses and you close with profits. But what if the price goes against you more and more?
Can you stay mentally sharp enough and continue to hold the trade when the losses pile up more and more ?
You more likely can not, which will end up resulting in a margin call and/or blow the account.
(In the past I had a trader who approached me and showed me his losses on OIL where he removed his SL and price continued to go against him.
IT has come to a point where he reaches margin call, and the broker actually open opposite positions to “hedge” his losses)
5. Don’t over analysis and combine multiple trading strategies, methods and style
Over analysis and complicating your charts may lead to confusion and is not necessarily efficient.
Most trading strategies do work on their own, but when combined with so many other strategies, it creates conflicts, contradiction and confusion for traders.
(Often traders combine too many random indicators, S/R, trendlines…etc all on one chart. It makes it hard to analyze, and have a bias of the direction of the market)
6.Always use a top-down analysis approach.
Multi-time frame analysis is key. Always start from the higher time frame to the lower time frame.
The higher the time frame the stronger and noticeable the price action it is. Understanding a higher time frame can give you a possible direction and bias.
While the lower time frame will be your confirmation and entry.
(Have seen many new traders jump onto the 1 min chart to trade. While there are successful scalpers with proper years of experiences,
good trading psychology and emotion, most newcomers will not be able to handle the stress and pressure from it. )
Don’t give up
Don't put all your portfolio in a single trade -why?I was reading about maths and came across this very nice explanation, that we can apply to especially trading and also to investing in a very obvious way. We all know and are told not to put it all down to a single trade. Too risky. Crazy. But you can bet it all and get rich!
Well, just look at these numbers below:
[adapted from towardsdatascience.com ].
Imagine that we are playing the following game:
I use a random number generator to produce a number. If the number I generate is greater than or equal to 40, you win (so you have a 60% chance of victory) and I pay you some money. If it is below 40, I win and you pay me the same amount.
Now I offer you the the following choices. We can either:
Game 1 — play 100 times, betting $1 each time.
Game 2 — play 10 times, betting $10 each time.
Game 3 — play one time, betting $100.
Which one would you pick?
...
...
...
Outcome Distribution of 10,000 Simulations for each Game:
(this is a super-crude and inexact approximation to the plot you can see on the website I linked above, but you see the gist).
The "---" are the 100$ 1-time bet, followed by the 10$ 10-time and the 1$ 100-time ones.
(ignore the plot frame, just look at the text box within the plot. This was the only way I could figure out to introduce formatted text in this post!)
Seeing this, now which game would you pick?
Game 3 offers the chance to win big money, and to lose it all, at a flat 60% chance of winning. In Game 1, however, you win less money, but look at the consistency... you traded 100 times and you make money in 97% of them (believe the numbers, otherwise check the above link)!
Note that this example assumes a 60% winning chance, so you are not opening a position at random but based on indicators that increase your chance of a win. You can run your own numbers for a 50% winning chance.
Happy trading!
Trading PsychologyA positive mindset is perhaps the most important part of a successful trader's approach to the forex. Of course, developing the proper trading psychology is no easy task. Unless you are one of the chosen few who is not subject to the human element, taking a few tips from the market pros can help you consistently align risk to reward. Trade with no emotion as they say. Master your mind and you master yourself. Keep calm and may the pips be with you! :)
Elliott Wave Theory - Motive WavesElliott Wave Theory , developed by Ralph Nelson Elliott, proposes that the seemingly chaotic behaviour of the different financial markets isn’t actually chaotic. In fact the markets moves in predictable, repetitive cycles or waves and can be measured and forecast using Fibonacci numbers.
The very basics of Elliott Wave Theory ;
The Elliott wave principle at its core consists of motive waves, movement in the direction of the larger trend, and corrective waves, any correction against the main trend. Market prices alternate between a motive phase, and a corrective phase on all time scales of trend.
Wave analysis offers insights into trend dynamics and helps you understand price movements in a much deeper way and offers the trader a level of anticipation and/or prediction when searching for trading opportunities
Motive Waves
Motive waves in general can be categorized as Impulse and Diagonal waves
a- Impulse Waves
Impulse waves consist of five sub-waves in the same direction as the trend of one larger degree.
Elliott proposed that financial price trends, the waves, are created by investor psychology or sentiment and the waves can be measured and forecast using Fibonacci numbers . In adition to using fibonacci retracments and extetion to forcast probable targets, channeling technique is also presented, where channeling technique is used to forecast wave formations and targets using price action .
Disclaimer: besides the rules, the below presented figures displays guidelines that elliott waves may form. Guidelines are tendencies, not set in stone rules
b- Diagonal Waves (Wedges)
Another form of motive waves are diagonals, they appear in the beginning of a larger trend, called leading diagonal and at the end of the larger trend, called ending diagonal
They are five-wave structures in the direction of the main trend within which wave 4 almost always moves into the price territory of (overlaps) wave 1, breaking the rule of impulse motive wave
Diagonals take a wedge shape within two converging lines
Elliott was careful to note that these patterns do not provide any kind of certainty about future price movement, but rather, serve in helping to order the probabilities for future market action. They can be used in conjunction with other forms of technical and fundamental analysis, including technical indicators, to identify specific opportunities.
Technical Indicators
Using various technical indicators among elliott wave practitioners is not so common, except few, probably the common one used is a kind of momentum indicator, such as RSI or MACD , to detect divergencies
Fibonacci retracement and extension drawing tools are essential for elliott wave practitioners. In todays computerized era many of the darawing tool's auto indicator versions are availabe on the trading platforms, such as Auto Fib ( where and how tp apply )
Elliott Wave Oscillator ( EWO ) , is inspired by the Elliott Wave principle and helps counting the waves
Volume and Volume Profile ( Vol / Vol Profile ) combined with price action is esential in technical anlaysis and for elliott wave practitioners helps to identify impulse and correction phases
Other indicators that are referred among elliott wave practitioners
Pitchforks ( how to apply ), Pitchfans , FibFans ( how to apply ), FibChannels ( how to apply ), FibTime , LinReg Channel ( what it is ), Raff Regression Channel ( what it is ), etc
Your Trading Style and Holding Period ⌛ ⌛ ⌛
How long to hold your trading position?
Everything depends on your trading style.
In this post we will discuss the preferable holding period for your trading positions.
First,
Let's define 4 main trading styles:
Scalper, intraday trader, swing trader and investor.
One of the core differences between these styles is the time horizon of their predictions of a market behavior.
1️⃣Scalper attempts to predict minor price fluctuations. His goal is not to pursue the waves, rather a minor moves up and down.
For that reason, pro scalpers tend to hold their position minutes, sometimes even seconds.
Expanding the time horizon they are risking to be stopped out from their positions.
2️⃣Intraday traders operate on intraday time frames.
They are trying to predict the price movements within a day or even a trading session.
The average holding period of a pro intraday trader is ranging from minutes to hours.
3️⃣Swing traders are aiming to catch swing moves - the waves.
Typically by a wave we call a trend following movement.
Pro scalpers usually close their positions once the market starts retracing (correcting itself).
Following such a strategy, scalpers tend to hold their trades days to weeks.
4️⃣In contrast to a swing trader, the investor does not care about the retracements and pullbacks.
The investor is trying to pursue the entire movement within the trend.
Usually he hold his position till the trend lasts and closes that only when the market starts reversing.
Investors tend to hold their positions months, even years.
Recognizing an average holding period is crucially important for a selection of your trading style.
Which one do you prefer?
❤️Please, support this idea with like and comment!❤️
Are Losing Trades Still Winners?Alright, before I show you the “light at the end of the tunnel,” we need to create a fictitious system so I can logically demonstrate my point. I want you to bear with me here— it may seem a little ridiculous, but trust me, there’s a solid point I’m going to make. Let’s face the facts here: It’s easy to blame the market and commiserate with other traders, but it’s a lot harder to think for yourself and look for the silver lining after a bad trade.
I know, “Are Losing Trades Still Winners?” sounds like a crazy question, right? Read on and you may just find that it’s not really an irrational thought once it’s put into perspective.
Let’s list some trading rules to start:
1. You can only trade between the hours of 07:00 a.m. and 10:00 a.m. (UTC) London
2. You can only trade with the current trend of the market (up or down)
3. You must base your entries and exits using only support and resistance
4. You must have had a good night’s rest (no trading on 4 hours of sleep)
5. You must be drinking a Coffee while trading (just to be ridiculous)
Some trading rules to set for yourself, Right? I know, it’s a little silly, but what can I say? I like Coffee.
For this example, we’ll use an unrealistic stop for the EURUSD of 10 pips
Looks like we have a winner! You followed the rules by only trading during the established hours, you entered as the price breaks the support, you took the trade (SHORT) in the direction of the current trend, and your still in the trade right now as you hold trades over the weekend or youv exited at a round no level of 1.09 for a neat 1:11 RR come 14:30 p.m. , as planned (all while sipping your Coffee)!
We’re good, right?
Wrong: you broke a rule! By “widening” your stop, as you can see from the chart above the price surpassed your 10 pip stop loss set at 1.10200 reaching 1.10242 give or take a few pips (spread) before resuming the freefall, but hey your still in the trade or youv closed the full position for a healthy 110 pip gain, you violated one of your day trading rules; does this send you to the traders naughty corner?
Well, this is a losing trade (there will be losses, sorry), but you stuck to your guns and you've even created an opportunity to learn from your loss.
I’ll be honest here, a 10 pip stop on the EURUSD with as much volatility as there is these days isn’t only too tight, it’s not realistic.
Do some back-testing and you may find that the initial break of your rules (adjusting to 15 or 30 pips) may be what you need to set your stops at to weather the volatility and stay in the trade. If this is true, then make it a rule and stick with it.
For starters, I want you to know how important trading rules are and how important it is to stick to them. I mean, what if you widened the stop to, say, 50 or 100 pips and got stopped out?! You’d be mad at yourself! There is ofcourse different ways of deciding how many pips risk you are are happy to risk per individual trade as stop loss doesn't have to be fixed number you can adjust accordingly depending on the trade type/where price is when you reach your charts but this is an interlinked-subject that is beyond the scope of this idea
Another reason is that you can take a bad trade where you did stick to your rules and learn something from it. Who knows? Maybe you can even improve your day trading strategy.
Last but not least, your rules can help keep you on track. What if you did do the back-testing and you discovered that, more often than not, “that” particular rule held true?
If that’s the case, why change it?
After all, in trading, you’ll have some losses— it’s just part of the business. And remember: Don’t beat yourself up if you have a bad trade. If you stick to your rules, you’ve made the best decision you can. Give yourself an A!
Stay cool, drink Coffee, and trade well.
FX:EURUSD
👍
Is it okay to FOMO?You need to look at price action, and specifically, Heikin Ashi candles along with the Volume Indicator to tell you whether it's okay to FOMO. Use lower time frames to get in quicker.
Mostly, I never recommend it, but sometimes where there is strong buying and a clear trend change, a dip might not come for a while. And when it does, because it went up so fast, it can usually lead to a downtrend so you have to be careful. Especially in crypto where there is Bull Trap manipulations upwards.
However, the Volume Indicator can tell you if the bears have lost, which on the left hand side, they clearly lost as we went from Green to red to immediately Green again, showing the strength of the Bulls.
The sharper the rally, the longer the correction.When any asset appreciates its value very quickly then people will book profits and invest in other assets.
Journey of a Trader: All of us have gone through this!Good time of the day, dear TradingView family. Happy new month! May March bring you lots of happiness, love, and profits.
Today we are gonna be doing a quick reality check and scrutinizing a long way every trader goes through before becoming successful and consistent.
All beginning traders get super motivated and excited before beginning this long journey. Instagram “gurus” create false expectations and trick people into thinking they will be making quick profits and becoming millionaires with a $100 capital. Beginner’s luck is real and super relevant in this case. Without having a proper trading plan and a backtested strategy, newbies jump into the markets and start trading full-speed. “Wow, I made my first profits! I can keep going like this and make lots of “Benjamins”. Overtrading, greed and self-confidence lead to a losing streak, panic, anger, and loss of faith. Solutions need to be found, and therefore traders start changing strategies and trying to find a way to the doors of success. They lack motivation and hunger to keep going. They start questioning themselves and thinking whether they should quit or keep pushing. At this stage of the journey, around 90% of beginners give up and leave the markets. The remaining 10% still have hope, so they keep grinding and enhancing their trading capabilities. After some time, they start seeing some progress in their abilities. They start having more winning trades now, and they become breakeven traders, meaning they neither make any profits nor encounter any losses. They stick to their strategy and optimize it along the way. They plan, execute and journal all trades. After a few months, they finally reach the doors of success and profitability. Of course, they do not get greedy or self-confident. Though, they still have losing days/weeks/months, their main focus is concentrated on long-term growth and prosperity. They know that if they keep following their trading strategy, obeying risk management principles and being disciplined, they will always be profitable in the long run.
To sum up and to motivate the beginners reading this: if you are going through hard time in the markets, if you do not know what to do or how to make thing work, keep pushing more and more. There is always a golden sky at the end of every storm. Therefore, never feel discouraged, do not give up, and keep grinding. YOU WILL ALL MAKE IT!
The Only Proven Way To Success in Trading 🥇
Hey traders,
Like any discipline, consistently profitable trading requires many years of practice.
In this post, we will discuss the only proven way to become successful in trading.
🔰First, let's start with the axiom: there are no inborn traders, trading is a skill, a skill that can be learned. Though talent may help you in some manner it does not guarantee your success.
One more axiom that is logically derived from the first one is the fact that trading is a complex skill.
The one that can be split into dozens of subskills.
Making that statement we may assume that our success in trading directly depends on mastering each subskill, each domain that it consists of.
But how do we master these skills?🤔
The only way to do that is to practice. Practice means doing something regularly in order to be able to do it better.
With your first attempts, you are doomed to fail. Inevitable you will suffer and you will feel miserable because of your incompetence.
Trying and doing the same thing again and again, at some moment you will feel the progress and growth. Your perseverance will bear fruit.
Knock, and it shall be opened to you.
And as a consequence, with some attempt, you will feel that finally the skill is mastered, that one more stage in your journey is passed.
Polishing the entire set of subskills and learning to apply that as a single unit will make you a consistently profitable trader.
Just stipulate the domains properly, name them and be ready to work hard.
❤️Please, support this idea with like and comment!❤️
WATCH OUT FOR THESE RED FLAGS !!!!!These are some common Red-Flags that'll ruin your relationship with trading.
Watch out for them and Stay away for a Successful trading Career
Can't stop trading Stock/Options? You may be addictedTraders with symptoms of gambling addiction “tend to follow a more active and speculative trading style, indicated by a higher frequency of stock trading, day trading and investing in derivatives and leveraged products.”
Here are some signs of addiction:
Trading becomes the main focus of your daily life.
You are trading at work, which isn’t your job.
You are chasing losses.
You can’t stop trading.
You have feelings for frustration, aggression, or attempt to suppress other personal problems.
Losing money makes you depressed.
You're constantly checking the latest value.
You hide the degree of participation in trading.
You rely on social media “experts” for investment advice.
You borrow money on a home equity line or a personal loan to invest.
No self-control or ability to stay away from your trading app.
Your emotional state is directly tied to the outcome of the stock market.
One of the strongest psychological factors that influence day trading is the fear of missing out (FOMO). That’s why day traders often suffer from ad-lib actions as they are not capable of anticipating sudden market changes.
Trading is fun when it doesn’t hurt your health and daily life. Addiction-prone traders have a gambler’s mentality. The strategies to avoid harm associated with pathological trading that have similarities with gambling could be the following: Do not spend more than you can afford. Stick to the budget. Do not chase losses.
Automated trading tools help to:
Address the lack of time issue: many traders have day jobs, families, etc., and can't spend all day in front of a screen.
React to the opportunity faster: Algos are way faster than people.
Remove emotions: Algos have no emotions.
Low code allows traders to experiment faster.
