[DbPhoenix]

Originally Posted by winnie »

Dear DbPhoenix,

According to your experience, could Wyckoff method be use in day trading ?
thanks

Sure. However, since your posts to the VSA thread show up on "new posts", they're hard to miss, and so are the responses you receive. Therefore, I know you've been investigating VSA. But since Wyckoff and VSA have fundamental differences, you may find it difficult to reconcile the two. This is not to say that you can't take bits and pieces of each, along with bits and pieces of all sorts of approaches, and put them all together into a trading strategy that's unique to you. But that's a heavy burden to place on a beginner.

If you find that analyzing bars has been helpful, I suggest that you focus on VSA. I'm sure that mister ed and Sledge will continue to be helpful. On the other hand, if you view price action as a flow which bars are used only to illustrate, then you may find a better fit in the Wyckoff approach.

[Paul71]

Originally Posted by DbPhoenix »

Good question, sulong (I was afraid the first question might be something along the lines of "Did W wear boxers or briefs?"). And I don't want to pundit the answer because I really have no idea, and there are some awfully smart people in this neighborhood.

It may help to keep in mind that these charts were done by hand (though they may have been provided by a service). Therefore, one would include only that information that he considered to be important, as today. Ergo the open price may not have been considered to be all that important (I know the logic here is a stretch and that there may be other possible conclusions). It may also help to keep in mind that W was not about bars but about flow, or "waves" (but you knew that). He was also about energy, and balance, and he would more likely have been interested in who won the daily contest than in what the relative positions of the players were at the beginning of the contest. Whatever follow-through there might be the following day would be told by the high and the low.

All this is just conjecture, though. I'll have to chew on this some more. The answer may be embarrassingly simple.

This may be the logic, DB. Gann (i know it's not Wyckoff), suggested that the majority of overnight orders were placed by non-professionals, the 'pros' would then take advantage of these orders after the opening depending on their view of the market.

Maybe part of the reason why Wyckoff dismissed openings in the main is because they were not normally professionally motivated, and also because of the reasons you yourself have given, DB.

?

[jasont]

Hey Db,

Thanks for your great work in the Wyckoff forum. I am currently in the middle of "The Day Traders Bible" and am curious about the use of the Tape in todays market. Obviously the volume is much higher than it was in the early 1900's, so how could one effectively apply the volume of the tape? Is it a matter of finding out the size the major players tend to trade and filter out the smaller volume with the platform we use?

I notice just in the ES alone there is a massive number of trades that are below 10 contracts at a time. I commonly see the turn of the market coming but my timing is off which often results in numerous attempts at the same move. I think the tape might give some clues to help avoid early entries but not sure how to apply it in todays high volume markets. Any advice from yourself in its application today?

[DbPhoenix]

That's pretty much the subject of the entire Forum and my Blog, so a brief answer isn't easy. Whether volume is higher now than then is irrelevant. What matters is the character of the volume wave and how it relates to the price wave, both within the context of support and resistance and trend. And by "wave", I'm not being esoteric. I'm referring to the character of the flows of price and volume (call them oscillations, if you like) rather than focusing on individual bars. See post 3 in the Trend thread.

This can most easily be seen on a chart, though some may be able to see it in a T&S display.

[jasont]

Thanks Db,

I read the post you mentioned. From what I understood in your post, do you believe it is more beneficial/easier to read the volume in chart form rather than a T&S display? I have been looking at possibly using the T&S to help see the distribution flow during the wave peaks and troughs.

My concern about the volume now as opposed to early 1900 is that there seems to be a lot of orders. The T&S might show 100 orders change hands but only one might be of substantial volume say 150 contracts. The rest might be 1 to 10 contracts at a time. My possible idea for this was to use a platform filter that only shows orders that are say 100 contracts or more. The rest are ignored so I can focus on the big traders at important times. Is this a logical approach or am I missing an important element?

Regards,

Jay

[DbPhoenix]

Yes, I find charts much easier to use than T&S. When it comes to tape reading, particularly W's approach, one must remember that his book, first published in 1910, provides only part of the answer. Yes, if one is trading only one stock (or, today, one futures contract or one ETF or one whatever), then he can be expected to "keep all of this in his head": support, resistance, the trend, all the minor fluctuations with their accompanying volumes. But to do it for several stocks is beyond the capacity of the average trader. Charts enable him to keep track of all this for n number of whatevers, however many he can handle.

By the time he assembled his course twenty years later, P&F charting was in usage, though I don't know how common it was (it was not codified in book form until around 1933). He used a shorthand-style of P&F on whatever was handy in order to keep track of where prices were going in whatever it was he was watching, thus freeing him from having to "keep all of this in his head". If he'd had a laptop with streaming data that could be plotted on charts, I seriously doubt that he would have left it in his desk drawer.

As to orders, what matters is the consummated transaction. However many orders there might be is irrelevant if no deals are closed. People can "intend" to move price up or down until they turn blue, but unless price actually does move up or down, who cares?

As to filtering out orders of fewer than 100 contracts, you could give it a try. I can't say whether it would make any difference or not since what matters most is the behavior of price.

Later:

Those who are interested may find it useful to compare Chapter 8 from the 1910 tape reading material with a similar chapter from the 1932 tape reading course, below.

[jasont]

Db that section in the pdf you provided is great. Thank you very much for offering that as reference. In this section he mentions "after a sale at a certain price, you enter the next sale in the same column if there is blank space...". Does that mean Wyckoff combined orders at the same price or did he track individual orders? The least amount of shares traded in a transaction was 100, did that mean he didn't bother with smaller transactions or that less than 100 in a single trade wasn't done?

The reason I ask is that he seemed to look for the big money and where it was headed and tag along. In my opinion that is the ideal way for a smaller trader to trade. When I mentioned tracking the orders I meant ones that had been actually traded which were shown in the T&S. I have an image below from Monday 26th May.

It turns out to be a good example because typically the big traders won't waste their time on a half day of trading especially when the stocks are not trading. The T&S on the right only shows the transactions that have a volume of 100 or more. You can see the smaller traders get left out of the equation making the big players the ones to keep an eye on for possible weakness at wave tops or strength at wave bottoms.

I think this is on the right path as to what Wyckoff was talking about in tracking the volume on the tape but I have only a minor experience with it so far. Please let me know if this is not in the right direction or getting too far away from the thread topic.

Regards,

Jay

[DbPhoenix]

They are combined. However, it is important not to get too bogged down in "what Wyckoff did" or "what Wyckoff would do". No trader who has been in the business for decades trades the same way he did twenty or thirty years earlier, and he will not likely be trading the same way twenty or thirty years from now. Or even next week. Anything and everything written represents a point in time, and change is more likely to be a factor than not.

Therefore, focus on principles and concepts, not on details. Among the more important ideas here is to avoid the attempt to trade chop and to initiate trades only when it looks as though price is actually going somewhere. If you're interested in this particular approach, I suggest you pump gassah in his P&F thread.