Wyckoff trading method

Originally posted by Rooster100: ↑

Hi Cabbie, yes this and the Charting and Chat thread were my two favourite threads, and if Jako was still posting concepts and a quiz every now and again, they still would be. I found the Charting and Chat thread when I was extremely new to charting and asked a bunch of really basic questions which were always answered kindly by a bunch of chartists that had been around the block a few times, and introduced me to VSA which is still the lens I look at the chart through.

LTR to me is a good example to me of how hard it is to identify sometimes whether it is in re-accumulation or distribution while it is playing out. Probably because all re-accumulations start with distribution at the beginning and Phase A and most or all of Phase B can look exactly the same. For my quiz fix nowadays I occasionally visit the Wyckoff Analytics website and play their weekly "Bias Game" ( https://www.wyckoffanalytics.com/bias-game/ ). Some are very easy to pick whether distribution or accumulation but if I get more than 7 out of 10 correct I do a little victory lap because some of them still make no sense to me. One thing I noticed however was how often the major behaviour clue comes right near the end of the consolidation, despite what the earlier parts of the pattern look like to me.

So with LTR, back in early 2022 I was reading that as re-accumulation until where you have UT labelled on the chart, which I think you had labelled as UTAD at the time and I flipped to agreeing with you as distribution, and indeed price dropped heavily after that. But no the pattern had not completed and has doubled in length since then with another round of clearly bullish and bearish moves as part of it. Only 3 weeks ago and especially clearly on the weekly chart it looked like text book distribution again. But the last two weeks has seen another change in behaviour and a higher low where the selling has not followed through, but I struggle to see that it is clearly re-distribution or a small accumulation pattern. Yes where you have labelled bclx was definitely a SOW and followed through to the downside, but I think I need to see more for me to plant a foot in either camp.

In the end if I can see an obvious Wyckoff accumulation or distribution playing out, it is really useful in a similar way to trading with the trend, but in general don't find it very useful for finding the entries and exits I like and for trade management- there's other methods that I find more useful. Maybe because I am looking at a reasonably short horizon from a couple of weeks to a few months for my "campaigns" or just because obviously I haven't mastered it yet!

Hey maybe we should get the Charting and Chat thread going again- there's always plenty of topics to discuss and we need a place that doesn't get derailed by the knobs who jump in saying "charting is useless because I don't get it". Maybe we could discuss the merits of Fibs and Harmonic patterns- I know that is close to your heart! But in the meantime, it would be good to hear some of the thought processes or major behaviour clues you use to identify the Wyckoff phases.

Cheers, Rooster

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Ha, I'll just touch on Fibs. and harmonic trading for a second or two.

Scott Carney is the best book I have on Harmonic Trading but only volume 1. He has taken the originator of this pattern recognition technique (Gartley) to what back then was a new high (published 1999). So that's the guy I would recommend if you haven't already read him. His flexible approach in placing the PRZ was at last a deviation from many authors who insist on a certain and exact level for things to happen, and of course then go and find them.

Secondly and perhaps foremost re Fibonacci numbers. The first thing I like to point out to those that rely heavily on them is that in the golden ratios in the sequence based on Fibonacci we have ,,,, 0.0 to 0.236 then 0.236 to 0.05 then 0.05 to 0.618 then 0.618 to 1.00.

The first departure from Fibonacci is including 50% or 0.5 - it is included solely because it satisfies the human brain to have a 50% point, it is not a Fib. no.

The level at 0.236 is also a bit of a stretch to a purist but has been included since day one and is accepted.

Second fiddle is that there is no primary Fib. ratio that gives a 78.6% level or 0.786. So why is it on a lot of charting packages? The answer is when charting using computers was becoming popular our friends in the USA were disturbed by that gap from .618 to 1.0 - there had to be something there surely. It is a large gap. The first solution was to use 76.4% because it was 100 - 23.6..... see where I'm going? You'll still see 76.4 on some very old charts. Then someone had a Eureka moment and discovered that 0.786 was the square root of the primary Fib. no. 0.618 ...... so the second fiddle was done, 0.786 magically became a Fib. level.

I'll leave it there for the moment but you can see my distrust now of using Fib. levels in charting - I'll back that up later with some comments by one Author on the subject which cast doubt on them altogether..... As an aside though Scott Carney does get around this problem by highlighting that 0.786 is a derived ratio, that's why I think he is the better author.