[Head2k]

I will do the DAX short entry. I've added a few annotations.

Since 8:00 until 8:30 we see a healthy rise, volume and price move together. Shortly after 8:30 comes the first warning when price hugs demand line instead of bouncing off it. Then supply comes in on the bar you marked with the vertical line, at 8:34. Price then falls below the last swing low. But selling pressure does not have serious follow-through, as one can see on decrease in volume. Hence the first attempt to lift comes at 8:38. On the next bar price if forced down again, makes a new low but fails to hold it. And this is happening on very high volume. This could be a selling climax or not, I guess it would be better to wait. The next couple of bars volume decreases, price congests, spread narrows. Hard to tell what to expect. Then we try higher but the effort is poor and price falls back. I also added a horizontal line to show where this test finds resistance. Maybe it wouldn't be a bad idea to short here.
But then, on the down side the pressure is even lesser, support is found higher and price quickly shoots upwards. Maybe it wouldn't be a bad idea to reverse.
And finally price is quickly rejected, volume quite low showing that buyers weren't trying particularly hard. Time to reverse again?

I guess this scenario could easily happen to me. And it is even likely that the second time I should reverse I would just exit frustrated, only to miss the best opportunity. Maybe the first short I described is a bit premature, but the long IMHO isn't. Somebody wants to argue?

[DbPhoenix]

Where We Are So Far: All of this hindsight chatter about oil serves as an example of the "Wyckoff way" of trading, that is, a different kind of thinking that focuses on price movement as a result of imbalances between buying pressure and selling pressure, particularly against levels or zones of support and resistance, all of which is in turn a manifestation of trader behavior. Understand the behavior and you understand the illustration, whether on a chart or on the tape or on or in some other form. Understand the behavior and its illustration and you are set up to profit from it (one can also profit from this via indicators, chart patterns, "event trading", and so on, but none of this is pertinent to the Wyckoff approach.

Participants have demonstrated this kind of thinking in their analyses of the price movement as it wends its way up and down through a continuing series of crests and troughs. These waves are a language, narrating the behavior of buyers and sellers. And whether participants' every opinion has been correct or not, they have worked toward understanding the story that's being told by price movement and its accompanying volume (transactions) and toward gauging and interpreting the continuous changes in buying and selling pressures with the intent of finding the line of least resistance.

By doing so, I hope that they have demonstrated that everything one needs to know in order to make a trading decision is in the price movement, again whether illustrated by chart or tape. While there are undoubtedly many traders -- retail and professional -- left holding the bag at tops and bottoms, the Wyckoff trader will not be one of them. He does not allow himself to be distracted by extraneous information of whatever sort. Price behaves a certain way (that is, traders telegraph their intentions by their transactions), and he's out or in, as the case may be. He can wait for moving averages to cross each other or for some other indicator or news or a particular kind of bar or candle or pattern to signal or confirm an action, but he doesn't need to, except for personal reasons. None of this is therefore part of the approach. This has the effect of keeping everything very simple and relatively easy to understand IF one can focus on the approach at its most elemental until he thoroughly understands it. At that point, he can play with it as much as he likes, if he chooses to do so. But while those modifications may alter the approach as he implements it, they do not alter the nature of the original (and 2, 3, 4, 5).

In order to save flipping back and forth, the following chart was posted at the beginning in order to provide the macro view. It's a typical and ordinary bar chart.

But the waves of buying and selling can be illustrated quite clearly without bars. In fact, for many Wyckoff traders, they are easier to see with a line.

The tests are the same, the trend is the same, the signals that the trend is over are the same (see, for example, the inset). A chief difference, however, is that one needn't get entangled in quandaries over what individual bars "mean" (if anything). One can in fact convert trading activity (or volume) into a line, depending on his software. Some Wyckoff traders find it even easier to detect the "pulse" of the market in this way.

As for jargon, nothing special: climaxes, technical rallies, reactions, springboards -- that's about it. The goal is clarity and simplicity, not obfuscation and complexity.

As I've said elsewhere, price doesn't care about you or about how you care to view it or illustrate it. It exists independently of your charts and your indicators and your bars. It couldn't care less if you use candles or bars or plot this or that line or select a 5m bar interval or 8 or 23 or weekly or monthly or even use charts at all.

Therefore, trading by price, or at least doing it well, requires getting past all that and perceiving price movement and the balance between buying pressure and selling pressure independently of the medium used to manifest or illlustrate or reveal the activity. For most people, this requires a perceptual and conceptual shift. Some find this shift relatively easy to make. Others find it impossibly difficult. If you fall into the latter category, keep in mind that there are many ways of making money in the market. This particular approach is only one of them.

[Head2k]

Since nobody else continues I will finish my comentrary on BB's DAX chart.

First I want to appologize for wrong annotations of potential selling climaxes in the chart attached to my last post. Please read Pot'l SC instead of Pot'l BC in downtrend. I used copy & paste too much.

So what happened since the test with the nice short entry? It is pretty much a stair step downtrend. At each of the potential selling climaxes one can look for reversal. But if he waits for a test to confirm the reversal he doesn't get it. Also the olive green supply line is safe. Price instead increases angle of down fall and the blue supply line can be drawn. When price rises on technical rallies after the potential climaxes it always finds resistance at the last swing low and always bulls don't show much effort to push through.
At 9:17 comes a slight warning. Blue supply line is broken which means that price slows down. Then another potential selling climax comes, this time volume is the highest on the chart so far. Also we can notice that the technical rally doesn't find resistance at the last swing low but rather one level higher. Just subtle warning signs, nothing of great importance. But then, the subsequent reaction finds support at midpoint of the last down swing and buyers come in on volume, pushing through the top of the technical rally. That is the first time demand presented itself with such a force and it should tell us to cover the short or even reverse position.

[tune]

Interesting to note that OIL has just had the most active day ever.

[atto]

USO did the same thing. In fact, this while area (pretty much all of December so far) has been a very high volume area. Does this mean it's a bottom? Not necessarily, but it does mean to watch closely. For our completely hypothetical short, I'd place some stops at $40-$41ish.

[tune]

Yes, and Oil Service HOLDR might be worth a watch too. Has held well recently.

[erierambler]

With respect to the oil commodity, some people are participating here:

[Susana]

Looks like a falling knife with zero buying interest.