Trading Naked

Trading By Price
Trading by price -- and "volume" (or trading activity) -- requires a perceptual and conceptual readjustment that many people just can't make, and many of those who can make it don't want to. But making that adjustment is somewhat like parting a veil in that doing so enables one to look at the market in a very different way, one might say on a different level. One must first accept the continuous nature of the market, the continuity of price, of transactions, of the trading activity that results in those transactions. The market exists independently of you and of whatever you're using to impose a conceptual structure. 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. And while you may attach great importance to where and how a particular bar -- or candle -closes, there is in fact no "close" during the market day, not until everybody turns out the lights and goes home. Therefore, trading by price and volume, 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 example, the volume bar is a record of transactions, nothing more. The volume bar does not "mean" anything. It does not predict. It is not an indicator. Arriving at this particular destination seems to require travelling a tortuous route since so few are able to do it. But it's a large part of the perceptual and conceptual readjustment that I referred to earlier, i.e., one must see differently and one must create a different sense of what he sees, he must perceive differently and create a different structure based on those perceptions. As long as one believes, for example, that "big" volume must or at least should accompany "breakouts" and clings to this belief as ardently as he clings to his rosary beads or rabbit's foot or whatever, he will be unable to make this perceptual and conceptual shift. If you can work your imagination and use it to travel in time, you will have a far easier time of this than most. Imagine, for example, a brokerage office at the turn of the 20th century. All you have to go by is transaction results -- prices paid -- on a tape. No charts. No price bars. No volume bars. You are then in a position wherein you must decide whether to buy or sell based on price action and your judgment of whether buying or selling pressures are dominant. You have to judge this balance by what's happening with price, e.g., how long it stays at a particular level, how often price pokes higher, how long it stays there, the frequency of these pokes, their pace, at what point they take hold and signal a climb, the extent of the pokes, whether or not they fail and when and where, etc., all of which is the result of the balance between buying and selling pressures and the continuous changes in dominance and degree of dominance.

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One way of doing this using modern toys and tricks is to watch a Time and Sales window and nothing else after having turned off the bid and ask and volume. But this wouldn't do you any good unless you spent several hours at it and no one is going to do that. Another would be to plot a single bar for the day and watch it go up and down, but nobody's going to do that, either. Perhaps the least onerous exercise would be to follow a tick chart, set at one tick. Then follow it in real time. Watch how price rises and falls due to imbalances between buying pressure and selling pressure. Watch how and where these waves of buying pressure and selling pressure find support and resistance to their movements. And when I say "watch", I mean just that. Don't worry about what you're going to do about whatever it is you're looking at. Don't worry about where you'd enter or where you'd exit or how much money you'd make or whether you'd have been right or wrong to do whatever. Just watch. Like fish in an aquarium. If that seems only slightly less exciting than watching concrete harden, or it's just not possible for you to watch this movement in real time, then collect the data and replay it later at five or ten times normal speed. You can do an entire day in little more than half an hour (though you won't get any sense of real-time pace). Granted this means a lot of screen time, even in replay, and only a handful of people are going to do it. But those few people are going to part that veil and understand the machinery at a very different level than most traders. Once the continuous nature of these movements is understood, the idea of wondering -- much less worrying -- about what a particular volume bar "means" is clearly ludicrous, as is the "meaning" of a particular price bar or "candle" (including where it "opens" and "closes" and what it's high is and so forth). If this is not understood, then the trader spends and wastes a great deal of time over "okay so this volume bar is higher than that volume bar but lower than this other volume bar, and price is going up (or down or nowhere), so...". And if you're really into this, further reading:

Reading, The First
1. The purpose behind drawing these lines is not to make the chart look pretty but to draw the trader's attention to those areas, zones, points, levels, whatever where price action is most likely to provide trading opportunities. Whether one draws lines, boxes, circles, arrows, or big, pointy fingers is irrelevant. 2. Once those areas, zones, points, etc are identified, volume becomes largely a nonevent, i.e., one pays attention to it only at those areas, etc where it is most likely to mean something. That this point is so often overlooked is probably why so many people think volume is useless. For example, using a 1m time bar chart, I've blown up the shaded area (next page):

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Until price reaches an area where a trading opportunity is most likely to occur, there's no reason to obsess over the minor ebbs and flows in volume. However, once trading opportunities are on the horizon, what might be considered directionless activity elsewhere suddenly becomes important. Here, for example, when price comes back to 1966 the second time, the fact of the test is interesting enough. That it cannot make a lower low even with all the volume is even more interesting. The bullish boost at 1329-30 becomes more important because of what has come before, as does the volume recession when price pulls back to 1975. When another bullish boost occurs, beginning at 1352, it is significant, again, because of what has come before. And when price makes an attempt at a

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As for the TICKQ.. that again becomes significant because of what has become before and provides the "classic" double-top price-volume divergence setup for the short. With the context. Compare the lengths and durations of the buying waves with the selling waves. Without the context.higher high at 1401 and volume isn't there. it becomes a high-probability short trade. You don't know why. if price tests support repeatedly. the odds of it failing is increased. Doesn't matter. OTOH. To illustrate: Note that price rejected 1920 at the end of the day on Friday after having spent so much time there midday. PDF created with pdfFactory trial version www. Price can move quite a distance on very little volume if there's nothing to stand in its way. do the buying waves last longer and go farther? Or are they getting shorter and briefer? Or are the selling waves beginning to last longer and go farther? As for the volume. The Second If price bounces decisively off support. Price rejected 1920 again this morning (next page). The resolve of buyers may not be unassailable. and volume is little more than traders going about their . it can be helpful but it isn't necessarily relevant until you arrive at a point or level where you're testing support or resistance. then support is most likely good.pdffactory. i. is there a divergence during these tests? (See the Dailies posted later) A classic decline on a retest is a concurrent decline in volume and price with a concurrent renewal of strength in both if and when price resumes its progress. Reading. none of this matters.e.

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. whether on a chart or on the tape or on or in some other form. 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 PDF created with pdfFactory trial version www. but then moves sideways. narrating the behavior of buyers and . It tests what might be R again. Price then finally makes a clean break upward at 8. But it makes another higher low (6). but it subsequently makes a higher low (4).Now at 3. price tests what might be resistance (1). make a lower low) is as important if not more so than what it DOES do and provides just as much information to the trader who's paying attention and is as free of bias as possible.. eating away at supply. These waves are a language. but none of this is pertinent to the Wyckoff approach). that is. Among the lessons here is that what price does NOT do (i. digesting the move before moving ahead again at 10.e. all of which is in turn a manifestation of trader behavior. but again makes a higher low (7).e.pdffactory. i. particularly against levels or zones of support and resistance. a different kind of thinking that focuses on price movement as a result of imbalances between buying pressure and selling pressure. And whether participants' every opinion has been correct or not. chart patterns. It then spends quite a lot of time struggling to move higher. "event trading". Understand the behavior and its illustration and you are set up to profit from it (one can also profit from this via indicators. Reading. The Third All of this hindsight chatter about oil serves as an example of the "Wyckoff way" of trading. Understand the behavior and you understand the illustration. This might be called "absorption". and it looks as though it doesn't want to go higher. and so on.

While there are undoubtedly many traders -. 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. None of this is therefore part of the approach. At that point. the Wyckoff trader will not be one of them.continuous changes in buying and selling pressures with the intent of finding the line of least resistance. and he's out or in. as the case may be. except for personal .left holding the bag at tops and bottoms. 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. again whether illustrated by chart or tape. He does not allow himself to be distracted by extraneous information of whatever sort. traders telegraph their intentions by their transactions).retail and professional -. PDF created with pdfFactory trial version www. The following chart was posted at the beginning in order to provide the macro view. if he chooses to do so. By doing so. It's a typical and ordinary bar chart. but he doesn't need to. But while those modifications may alter the approach as he implements it. they have demonstrated that everything one needs to know in order to make a trading decision is in the price movement. he can play with it as much as he likes. they do not alter the nature of the "Wyckoff Method".pdffactory. Price behaves a certain way (that is.

For most people. Therefore. 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. Some find this shift relatively easy to make. PDF created with pdfFactory trial version www.But the waves of buying and selling can be illustrated quite clearly without bars. Some Wyckoff traders find it even easier to detect the "pulse" of the market in this way. As I've said elsewhere. this requires a perceptual and conceptual shift. 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. depending on his software. The goal is clarity and simplicity. 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. for many Wyckoff traders. In fact. springboards -that's about it.pdffactory. A chief difference. The tests are the same. not obfuscation and complexity. One can in fact convert trading activity (or volume) into a line. the trend is the same. trading by price. is that one needn't get entangled in quandaries over what individual bars "mean" (if anything). the signals that the trend is over are the same (see. however. the inset). for example. they are easier to see with a line. As for . nothing special: climaxes. If you fall into the latter category. This particular approach is only one of them. reactions. Others find it impossibly difficult. keep in mind that there are many ways of making money in the market. technical rallies.

and can't remember where -. hence the confusion over what is meant by "price action". chart patterns of one sort or another. the latter have in fact gone through all this. he is unlikely to reap the full -. particularly if the trader doesn't care to do the work. as mentioned earlier. but the movement of price) and the imbalances between buying pressure and selling pressure that prompt that flow. Either way. Bollinger Bands. however. Does it get one into moves earlier than an indicator-based approach (including those which focus on bars)? Yes. But trading by price means simply that one is following price flow (not order flow. A good fundamentalist. waiting for confirmations to enter and confirmations to exit. Since all of this depends on its existence on the movement of price. If it doesn't. or even the price bars themselves (range bars. it's all about study and testing and screen time. whether it's MAs. It has nothing to do with any kind of indicator or any sort of bar or even any kind of chart. etc). Pivot Points. Auction Markets I read somewhere recently -. However. Therefore. In most cases. will beat a bad technician any day. There is no inherently better way. then no.having to do with Market Profile. the PA people do not fail to understand indicators. he is similarly unlikely to reap the full benefits of that approach. if one understands the buying-selling dynamics mentioned above. MACD. But getting in early is only part of what is required to make a profit. much less done the testing necessary to make the most of them.Indicators The indicator phase is something that probably everybody probably has to go through. And contrary to the beliefs of some indicator people. all counter-trend traders would be rich. it is all "price action". Without that. Otherwise. candles. if one is using indicators but has no idea how they're calculated. they just don't see the point (other than perhaps scanning a database for price movements). it makes absolutely no difference how one goes about the process of entering and exiting a position. just as they've been dissatisfied with the chat room phase and the newsletter phase and the advisory service phase and the red-green arrow software phase and the seminar-courseworkshop-DVD phase and the trade-the-news phase and the chart pattern phase and have instead found a more comfortable fit with a focus on price flow. Market Profile (if you're looking only at the form if it).com . And if one can make that endeavor successful by going through the necessary testing and developing the necessary plan. If one is trading price flow but embraces irrational views of what constitutes support and resistance. %R. the PA people have no reason to feel superior. stochastics.that most experienced traders will avoid trying to catch the tops and bottoms and focus on "the middle".pdffactory.or any -benefit. then there's absolutely nothing wrong with settling into that phase for the rest of one's successful trading life. Though there are undoubtedly price action people who look down their noses at indicator people. and had insufficient success with it. since "the middle" is by definition where most of the PDF created with pdfFactory trial version www. tick bars. CVBs. after all. Fibonacci. VWAP. VSA. if it makes more money than an indicator-based approach. It's all about the money and how one chooses to go about getting it. I believe -. Is it superior? Yes.

Microsoft or GE or that little stock your stylist told you about? This state of affairs may seem like a recipe for chaos. Blink and you missed it. one avoids most or all of those losing trades. determined by traders’ behavior. These boxes -. and then perhaps for only an instant. One can sometimes avoid this by widening the stops. they match only by accident. . As a result of this work and of his exploration of trading ranges. and that generates a lot of losing trades. the tests. what is the “value” is going on and is largely non-directional. he developed the concepts of support and resistance along with their practical application.e. in the market. that is.. Auction Market Theory (AMT) takes these investigations into support and resistance further.are nothing more than a means of locating those extremes. all confirmed by what the volume was doing and by the effect the volume had on price (effort and result). since the market always teaches us to do what will lose the most money. or of the VAP (Volume At Price) pattern -. one can perhaps find a solid footing and proceed from there. The notion of support and resistance has been and is the missing piece for many market practitioners. not by a calculation originating from one’s head or from a website somewhere. In fact. One can try to hit what appear at the time to be the important swings again and again and be stopped out again and again. Add to this the fact that for all intents and purposes there is no such thing as “value” but rather the perception of value. avoids trading counter-trend. an “organic” definition of support and resistance like Wyckoff’s. as well as to the concepts developed by (and in some cases originated by) Wyckoff. and so on. consolidating. After all. or at least are likely to be. All of this can be very confusing to someone who’s learned to view the market in a different way. reconciling the differences – sometimes extraordinarily wide differences – in perceptions of value. even more important. one could say that since the process of “price discovery” is a search for value. But by waiting for the extremes. whether skewed or not. higher lows/lower highs. perhaps less so to someone who’s just starting since he has so much less to unlearn. hoping all the while that once one hits the true turning point. But backing up to the basic tenets of AMT. that is. say. price is often not the same as “value”. one ends up with line after line after line until the S/R plots become a parody of themselves. if a stock (or whatever) is thought to be below “value” and a trader or group of traders see a large potential for profit ahead. What I've found more useful about them is that they are encapsulated by time. you wait for the extremes. determine the limits of the range (support and resistance). seeking equilibrium. Wyckoff used a combination of events to tell him when a wave was reaching its natural crest or trough: the selling/buying climaxes. Without them. and you’re in business. This enables me to see at a glance where the important S&R are.which are simply a graphic variation of the Market Profile distribution curve. but it is in fact the basis for making a market. all the effort will turn out to have been worthwhile and the P&L will change from red to black. etc). there is also a lot of whipsawing in the middle. but. preferably on “reactions” (or pullbacks or PDF created with pdfFactory trial version www. As Wyckoff put it. and. Determine whether you are trending or “balancing” (ranging. To begin with. the price and volume ranges have a beginning and an end. this will turn out to be an unproductive tactic. Therefore.pdffactory. he/they will buy all they can at or near the current level. The safest and generally most profitable trades are found at the extremes.

basic. If we all used daily charts exclusively. partly because demand is ever-changing. even if that timeframe is only one day (to describe this ebb and flow. flows. but there are trends galore in the 5m chart. etc – there are multiple trends and consolidations going on simultaneously in all possible intervals. That's what provides that PDF created with pdfFactory trial version www. though not necessarily easier. I'm sure everyone has noticed that swing highs and lows and the previous days’ highs and lows and other /\ and \/ formations can serve as turning points and appear to act as resistance. price is arrived at by negotiation between buyers and sellers. Wyckoff used an ocean analogy: currents. But that’s not the case. becomes that area where most of the trades have been or are taking place.retracements). 4) Change in demand drives change in price. then price won’t stop advancing or declining until it has). candle. To sum up where we are so far. are so important for you to watch. 3) Traders seek value. to me. The hourly may be balancing. Or the tick chart. and keeping in mind that there is no universallyagreed-upon auction market theory. it would all be much simpler. Regardless of how one chooses to display these intervals – line. Price then reverts to an area where the trader finds it easier to close that trade. Value. If the stock is above what they perceive to be value. future price levels are not predictable 2) An auction market is in one of two conditions: balancing or trending. Price shifts from a state of trending to a state of balancing (or consolidation or ranging). eddies. and are consistent with what I've learned from Wyckoff et al: 1) An auction market's structure is continuously evolving. 5) One can expect to find support where the most substantial buying has occurred in the past and resistance where the most substantial selling has occurred. dot. Now let’s translate all of this into a chart. then. from monthly to one-tick. even if they’re in the same timeframe. histogram. waves. the following elements are. supporting the price on those pullbacks and unloading the stock on rallies until they are out (or as much out as they can be before the thing begins its downward slide). Or the 5s chart. tides). there’s a change in demand). value is price over time. you’ve found “value” (if value hasn’t been found.pdffactory. being revalued. partly because you’ve got multiple levels of support and resistance to deal with and partly because we trade in so many different intervals. so we must remember always that a trend in one interval – say hourly – may be a consolidation in another.” When price then begins to lose momentum and move in a generally sideways direction. such as daily. However. this type of resistance stems from an inability to find a trade and is accompanied by low volume*. The trading opportunities come (a) when price is away from value and (b) when price decides to shed its skin and move on to some other value level (that . “This”. he writes. “is why these supporting levels and the levels of resistance (a phrase originated by me many years ago). they'll sell it (or short it). bar. the only two states available to it. so they don’t overpay. This is also where it gets tricky. where most traders agree on price.

"Resistance" in this sense.pdffactory. Note that you may have more than one "zone of concentration" (this is how jargon gets started). not horizontal (as they would be in a consolidation). and trading drifts back toward the center. the buyers trying to push price higher. but there is a heavier concentration within the blue lines because of where price spends the greater part of its time. so the volume – or trading activity – at each price point is lessr than it would be if the same price were hit repeatedly (again. they linger at those limits. however. Thus there is more volume at these edges than in balloon “A”. Balloon “C” is similar to “A” but much thinner due to the fact that price has made only a single round trip to the bottom of the range. as in the first balloon. Instead of rushing to the limits and bouncing back toward the center. partly because price spends so much time in it and partly because it ranges fairly steadily within it. thinnest at the bottom due to the \/ shape. whether up or down. giving the volume – if one is fanciful – something of a P shape. It lingered a bit in the middle. but buyers eventually fail in their task as sellers do in theirs. is more evenly distributed throughout the zone. as it would be in a consolidation). simultaneously creating that protrusion in the center of the volume pattern. providing.ballooning look to the volume pattern “A” in the following chart. Nearly all the volume is encompassed by the pink lines. the sellers trying to push price lower. but the price points are vertical. a relatively even distribution of volume throughout the range. PDF created with pdfFactory trial version www. The volume in the balloon “B”. *Volume may look “big” at the highs and lows. again. But volume at each end is thinner than in “B”. refers to resistance to a continuation of the . then.

those who bought or sold at the outer reaches of these zones will also be disappointed if they can't find buyers for whatever it is they just bought. There's just too much old trading activity to work through in order for price to progress unless there is enough buying pressure to take care of all those people who want to sell what they have. Second. or a retracement. or it may launch itself through in breakout form and extend itself into the next range. or you prefer to wait in order to determine whether or not the breakout was “real”. there are enough points from top to bottom to make a trade worthwhile). price bounces off or launches itself off the bottom of the range (support). you’ll want to check a smaller interval or two to see what price is up to down there. for example. if there is one. Such actions represent change since price may be looking for a different value level. then push price even higher (in which case those who sold may think they screwed up yet again and buy back what they just sold). tick bars. or create a new range above or below the previous range (in determining which. If instead it falls through support. At this point. if you’re most comfortable with a 5m interval. giving you a good possibility for a short). No change is occurring. price is at the bottom of that range. It may come to a screeching halt and reverse when it gets to one side or the other of the range and return to the midpoint. If you don’t catch the breakout. For example. but you’ll also want to look at larger intervals. not because there's too much volume but because there isn't enough. This is the basis of resistance. If. you have three options: a reversal. So how does one trade all this? First. those who bought within that zone are going to be miffed. lines. trade the reversal and go . you will have to monitor several intervals at the same time in order to (a) find out what interval you want to trade and (b) where price is within whatever range or ranges is/are in that interval. If you find a range that is wide enough for you to trade (that is. etc). get “into” the range via a smaller interval in order to find a trend. prepare yourself to short whatever retracement there may be to what had been support and may now be resistance. That gives you a good possibility for a long (or it may be at the top of the range.If price drops through one of these zones. However. or launches itself off the midpoint if it has settled there. aimlessly. PDF created with pdfFactory trial version www. short the breakout (or breakdown. there is no trade. a breakout. therefore. volume bars.pdffactory. Finding the midpoint of the range may be useful since price sometimes ricochets off the midpoint. back off into larger intervals in order to determine whether or not price is in a range in one of those larger intervals). or at least no compelling trade. Some of these people are going to try to sell if and when price re-approaches that zone. locate the ranges. if you prefer). A more boring alternative is that price is nowhere near the top or bottom of any range that you can find but rather drifting up and down. such as the 15m or 60m or even the daily (I’m using time intervals here in order to keep this from becoming even longer than it will be. Box them or circle them or color them or in some other way highlight them. candles. Perhaps at some smaller interval. but the same approach applies whether you’re using range bars.

resistance (lower limit).com . for example.pdffactory. and consolidations (or congestions or trading ranges or any sort of sideways movement). One can. plot a volume distribution (the hinge [see "The Springboard"] is circled): PDF created with pdfFactory trial version www.Getting Down to Cases So how does AMT play out in trading? There are several ways of locating the requisite support (upper limit).

leading to another profitable trade): PDF created with pdfFactory trial version .Drawing a line below the bottom of the middle distribution gives one a zone on which to focus. particularly when price opens below this zone (price also opened below this zone the previous day.pdffactory.

com .pdffactory.Or one can draw a box around the congestion: PDF created with pdfFactory trial version www.

pdffactory. PDF created with pdfFactory trial version .Or one can use plain ol' S/R lines. And it doesn't require special software. noting the test of the previous day's high: All ways of illustrating the same thing.

If one doesn't know in advance what he’s going to do at each . then he’s not prepared. then. PDF created with pdfFactory trial version www. at minimum. is what one should have had for the day following the previous chart.pdffactory.

pdffactory. Preparation. Review.And this is what happened the day after that: Price finds support at B. . PDF created with pdfFactory trial version www. resistance at C.

price tested R (C).pdffactory. saving one from having to peer fixedly at his screen for however long looking for a particular type of . again. The advantage being. Friday it dropped to S (E). that all of this can be plotted in advance.Let's see how it all worked out (same chart but drawn with Sierra): Monday and Tuesday. Thursday it bounced off the midpoint of the lower trading range (D) and tested R (C) again. keeping in mind that the interface between the two ranges. at 1970. For the coming week. might take on added importance. PDF created with pdfFactory trial version www. the setup was the same.

sectors. has very little to aid him in his trading decisions that does not involve settings.. The high of the range is the high of the range. whether one trades off a tick chart or a weekly . a tick chart or a T&S digital display). or massaging of some sort. the principles of AMT apply regardless of the bar interval of the chart. sister stocks and "indicator" stocks. Any confirmation.And as it turned out. any landmark would be helpful in determining whether or not one was making the correct choices: turn here? there? move forward? go back? The trader who trades via daily charts has a number of aids at his disposal to help him make his choices: a variety of charts of indexes. measures of trading activity and so on. groups. Ditto the low of the range.. And the bulk of the trades take place in the middle. For Daytraders Only: the TICKQ Trading by price can sometimes seem like trying to negotiate Manhattan with a map drawn in 1625. none of which are of interest to the "naked" trader.. The intraday trader. PDF created with pdfFactory trial version www. regardless of how one chooses to display it.pdffactory.g. however. Note that while intraday data is included in these charts.. One aid. weak as it may be. even if there is no bar at all (e. however. which requries nothing of the trader other than to plot it is the TICK (for NYSE stocks) or TICKQ (for Nasdaq stocks). calculations. Therefore. he can incorporate AMT principles into his work..

If a greater number of stocks are falling. you may be that much more confident that what you thought would be supoort really will be support and transmit that entry. to put it more simply. then. tells the trader whether or not whatever it is that he's trading is in synch with the broader market. every swing point. so does the TICK(Q). you may be well-advised to hold back from hitting that Transmit button. almost any chart from any day will yield these same divergences and confirmations as long as support and resistance are being tested (sometimes price just sits there. On the other hand. if the TICKQ reverses ahead of that test of support. Instead I've focused solely on those features which are most likely to directly influence the trading decisions I will have to make that day. if a greater number of stocks are rising. I've taken a pass on flagging every congestion. PDF created with pdfFactory trial version www. thinking about what it's going to have for lunch). However. In order to alleviate clutter. either the NYSE or Nasdaq). Therefore. in this case the 11th. if your work has led you to expect a reversal at support level X and the TICKQ shows absolutely no inclination whatsoever toward reversal when the time comes. the difference between the number of stocks trading on an uptick and the number of stocks trading on a downtick throughout the day. In the application to be described here (and referred to as well in some of the Dailies entries). These TICKQ charts are two months old because I started this project two months ago [written May '09] and got sidetracked and don't want to start over. Or.The TICK(Q) is a simple. This feature of the market landscape. straightforward measure of market breadth (again. you'll see that they are in fact a year apart). so does the TICK(Q). every possible source of support or . the TICKQ is used to spot divergences between it and the NQ at predetermined support and resistance to confirm (within the context of unavoidable uncertainty) potential reversals and continuations. Note: the fact that these charts start on what appears to be the same date as the charts in the Dailies section following is pure coincidence (if you look closely.pdffactory.

if this is somehow overlooked.pdffactory. noting the swing high made at 1127 premarket and backtracking to see if there's any possible reason for it. one has to wait for a test of support. which can be found either by extending the multiply-tested line from 2/24 through the midpoint of the consolidation on 2/27 on to the premarket swing high test on 3/11. or. the TICKQ is of no help here since this test took place before the open. Either way.Here there are multiple resistances (which can be fortunate or unfortunate depending on how you respond to challenges). the top of 3/10's range. in this case pegged at . PDF created with pdfFactory trial version www. beginning at about 1118 (the dashed line across those swing points. which also happens to be the upper limit of a trading range between 1118 and 1072). Above that is another potential resistance level at about 1127. For possible aid from that quarter.

The TICKQ. Price then rises almost without pause all the way to . but extending the test into the previous trading range's territory by almost four points. price and the TICKQ (plotted here as a line rather than as "dots") glide southward together. If one has not already exited. The TICKQ also turns weak here. Or he can hold on for a bit to see if this is nothing more than a pause before a continuation. When price tests 1118 again at 09:43. off which it bounces as if from a rubber wall. as with the bounce off support a few minutes earlier. if one is already in a trade). this is a perfectly legitimate and justifiable place to do so (particularly if trading only one contract). more than a minute before price does so. this time a clear divergence. If one is trading multiple contracts.After the open. though whatever divergence there may be is squidgy since there has not yet been a retest of 1118 (I'm tempted to call these "single dips" as if there isn't enough jargon floating around already). PDF created with pdfFactory trial version www. If he's trading only one. However. he can exit and look for a subsequent re-entry. not stopping dead on 1110 (it happens). however. rebounds at 09:36:30. the fact that this is predetermined resistance must be a factor in the trading decision (or management decision. he can cash in one or more of them. the TICKQ also makes a lower high.pdffactory. and while this is not the best example of a tradeable TICKQ divergence (TD) since there's no retest of 1106 (+/-). the fact that this is all taking place at or about predetermined support may increase the probability of a successful reversal enough to provide you with the confidence to take the trade.

but it's not the brass ring. now's the time to look for a reentry. then again (second arrow). he can lean back and feel satisfied with himself. however.pdffactory. either. there is a TD (the double arrow). an organizational nightmare). And the point of this. If he exited his long and didn't short. If he's still holding the original long. is primarily to explore TDs at support and resistance. he'd be wise to cover. we see that price spurts away from this level once (first arrow). his risk tolerance. What the individual then chooses to do about them – even if he chooses to do nothing – is entirely up to him according to his style. keeping our eye on the TD ball. This resistance is more important than the one at 1118. but is this all there is? Might price move all the way to the more important range high at 1135? It's only six points away. So. By now.Whether one has exited or not. Price then rallies again to 1118. and so on. his strategy. there are a couple more things to look at that may help one hold onto his winner (or at least discourage him from shorting) if he is determined to be patient without being irrationally stubborn. then sails all the way to 1128. his goals. Now the resistance here was predetermined and expected (see the macro chart at the beginning of this post). but when price makes a higher high. But to address and track every possible management option from here on out would result in a very long post ( . PDF created with pdfFactory trial version www. If the trader is short. after all. he'll see when price drops to 1116 that the TICKQ makes a higher low. for me.

And when 1125 is tested at 09:53. at 10:01. one should at least know where the exit is). PDF created with pdfFactory trial version www. and one has to ask himself whether the 5 extra points he might get if price moves all the way to the upper limit of the range is worth the 7 points lost if he moves his stop to just under 25 and watches it get tripped. and on the trip back to 1130. Until that trendline is broken. not to detail how to go about finding one's way through it. second. there's no compelling reason to exit (though given the TD. he will see that. BUT price holds at 1125 and doesn't go along for the ride down. which could be a few minutes or much longer. a subtle divergence but one worth of attention nonetheless (also called The Dog That Didn't Bark. your uptrend is . Several minutes later.First. when price drops below 1125. But. when what you expect to happen. Until that's broken. If one holds on. you clearly are in an uptrend by now and can therefore draw a guiding trendline. there is another TD. there is also the matter of the last swing low at 1125. There is also the amount of time it will take for all of this to play out. doesn't). the TICKQ joins in enthusiastically. the purpose here is to describe the landscape. the TICKQ drops like a hot knife through butter.pdffactory. the TICKQ makes a higher low. But. When price tests 1125 again five minutes later. however. again. 1125 holds.

There is a slight divergence at 10:29:30 and one can exit there or place a sell stop just below 1133. PDF created with pdfFactory trial version www.All of these events in combination suggest that the line of lest resistance is up. To hang on after this would be more than a bit hopeful. price takes off for the eventual resistance at 1136. and after one more test of 1130 and a half-hearted test of . Now at last we get to our final level of predetermined resistance at 1136. there is a much clearer TD at 1032 and again at 10:32:30. If the latter. not down.pdffactory.

it can serve as a heads up if it diverges from or confirms movements at predetermined support and resistance. or 1120. Nor is it a "signal" as indicators are (or try to be). And it's only 10:30. and one must use what else he knows in order to make a trading decision. you've got your TD.But what about a short? You're at serious resistance. You also find yourself at the midway (50%) level in the move from the previous day's last swing low to the just-completed swing high. You've also got quite a lot of the house's money in your account and nothing else to do for the rest of the day since it's raining and there's nothing on TV. PDF created with pdfFactory trial version www. Once price gets there. at 13:00. however. And the target. As such. Sometimes it is . according to AMT. you've got price at demonstrated support. is at least the other side of the is range. If it were. What to do? First remember that the TICKQ is not 100%. there's no TD. It is a measure of market breadth.pdffactory. sixteen points away. nothing more. In this particular case. the operative word being "can". and you've done quite well so far. we'd all be rich. . it reaches resistance and presents you with an unmistakeable TD. PDF created with pdfFactory trial version www. you watch and wait to see what happens if and when it gets to the first level of resistance. our old friend 1127 (or 26 or 28.So you pat the TICKQ on the head and let it rest for a while and you either take the trade or you don't. As you then watch price take off with or without you. we're not talking statistical precision here). And forty minutes later.

again. dropping below the last swing low by one point at 14:19. we have an unmistakeable TD.Now we embark on a return trip to support. and. PDF created with pdfFactory trial version .pdffactory.

And demonstrating that you just never know. . Price waffles around in this area for several hours. certainly. probes lower a few . we then watch to see how far price gets to the upside before hitting some level of resistance and perhaps creating another TD. A strong suggestion to exit.pdffactory. ).Taking the long. price gets all the way back to the high of the day before diverging from the TICKQ at 15:43. diverges with the TICKQ by 09:38. It tests resistance at the 1127 level. then opens the next morning at about this level. diverging with the TICKQ by 09:47 (by 10:22. A "signal" to short? 15m before the close? I'll leave that one up to you (though price does drop back to 1123 . it's back to resistance at 1136). then drops to test the 1116 level. PDF created with pdfFactory trial version www. . .PDF created with pdfFactory trial version www.

the black dotted lines the midpoints (not calculated. I switched to the NQ]. The first of the following charts shows the prep done at the end of each trading day since 2/29. and the other. Others contain my thoughts on this. that. he has to prepare for them. staring at a screen. The significance of all of this for each subsequent day should by now be clear.The Dailies These were the result of a discussion on real-time (RT) trading and the preparation necessary to make a success of it. these things happen. PDF created with pdfFactory trial version www. the blue lines potential support. so here it is [after the 11th. I'd like to say that I haven't edited them because I'm so honest. I also recorded my thoughts during my trading day (which is generally brief) for some of them in order to avoid the hindsight wisdom that is so often characteristic of this sort of discussion. The boxes are drawn arouind those areas where the largest number of trades have taken place. Doing these for three weeks. I don't trade the ES. The second shows the prep for tomorrow (the 11th). For Mar 11 premarket If one is going to make the best RT decisions. Others contain just chart annotations. just eye-balled). but it seems to be the popular vehicle. When one is sitting. They therefore almost by definition leave out "tails".com . The pink lines represent potential resistance. but the fact is you can always tell.pdffactory.

We'll see where we are at tomorrow's market .Given where we are with regard to past ranges. it may help to go back a bit further as well: Tomorrow's going to be a challenge given that there are three relatively distinct "value zones" from today. PDF created with pdfFactory trial version www.

whether the volume is expressed.pdffactory. you've got 800. at the point or level or zone where the greatest number of trades are taking place. Another example may be found at the end of the day. the number of contracts traded is less. however. This creates a lack of support at any given price level during that move. If one has a lot of shares to buy or sell. However. This creates an "air pocket" in which one can expect to find little support.For Mar 11 postmarket Patterns aren't so much the issue as what it is that traders are trying to do at each of these levels. when what is meant is more along the lines of "sell apparent strength". PDF created with pdfFactory trial version www. This is a chart of what happened today. The "pattern" at extremes tends to be a lot of trading activity (volume) spread out over a wide range of price in a very narrow window of time. in the area between 1280 and 1310.000 contracts. Note that in area between 1272 and 1280. If one can get past the jargon and catch phrases and buzz words.. but only one between 1315 and 1320. as for example in stocks. This is what is meant by "sell strength". Perhaps the easiest way to illustrate it is with constant volume bars. Note that there are four bars between 1308 and 1315. he is more likely to find the opportunity to do so at a price that is beneficial to him if he trades where everybody else is trading. Thus those who for example buy on such an upmove will be the first to bail when things start to go wrong (the weak hands). or implied. i. as for example in forex.e. this is what is at the core of any approach that trades via price action. This helps to account in part for the ease with which price retraced all the way back to 1286. the range is three times greater but the volume is half as much. Each of these bars represents 100.000 . so at any given price point. .The same pattern can be found in the NQ: PDF created with pdfFactory trial version www.

For March 12 pre PDF created with pdfFactory trial version .

For March 12 post

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For Mar 13 pre

For Mar 13 post
An interesting contrast to yesterday. Here we fell entirely out of the previous day's value range and price range. Gapped, as a matter of fact (though technically the futures don't "gap"). Not only that, we dropped below the midpoint of the entire range that began two weeks ago and came to rest at the midpoint of the heaviest volume range for this this week (see "For Mar 11 post" under "Dailies" where the volume dynamics that resulted in this fall are addressed). All relevant lines from previous days are extended with dashes to act as potential levels of S or R or both. One might expect traders to fill that gap, or at least move toward it. Absent that, a continued move down. Instead, they form a hinge. At 1000, price falls out of it but reverses before it makes much progress, perhaps finding S at the same level that the opening low did. A test. Then it takes off in the opposite direction, back toward that longer-term midpoint and the opening high. Another test. Having tested both ends, traders take price down to the low of that same volume concentration (the blue line). This price is rejected rapidly and forcefully, leading one to expect that the countermove will be as forceful, particularly given the TICKQ divergence. Instead, price waffles around for 20m before finally advancing. And here's where it gets interesting.

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[Ignore the reference to posts 117 and 118; context is provided in the charts previously posted] Ordinarily, one would expect price to travel to R, at which point one could reverse or cash in and go home. But where's R? First price stops at the midpoint. But rather than bust through like it did yesterday, it falls back 10pts. Then it futzes around here for half an hour, finally moving on to the next level of "resistance", the previous day's low, filling the gap. Then to the previous day's close. THEN ALL THE WAY BACK TO THE OPENING HIGH before taking off yet again for the top of the previous day's volume range. Anyone trading one contract must have been driven crazy trying to figure out what to do, but even those trading multiple contracts would have had to be on their toes. The most logical place to exit would be a point equal to the distance between the midpoint of the opening range and the initial range extension to 1700, i.e., 1730. This point would also serve to fill the gap, more or less. But the only way to rack up those extra 30pts without getting tossed around would be to leave at least one of multiple contracts back where it was bought at 1700 or thereabouts and just leave it the hell alone. Therefore, the only "error" today was not to have taken the long at 1700. Given the number of resistance levels along the way to 1760, one could have been forgiven for taking profits just about anywhere.

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For Mar 14 pre Given [where] the market [stands] . we have to go back a little further: PDF created with pdfFactory trial version www.pdffactory.

Jeez. Right back down to yesterday’s low. though since we never really established a range for the day. Perhaps one of them will supply an analysis on the VSA thread. appears to be due to Bear Stearns news. not Consumer Sentiment. obviously. 0915 Price finds R at the old February hinge midpoint. Therefore. No TICKQ divergence here. Contrary to what has been posted elsewhere. “For Mar 14 pre” for nearer-term context. The drop. 0940 The top of the value range for the last two days is the same. however. Jesus. 0830 The market likes the CPI results. one must include events in the mix before jumping to what may turn out to be spurious conclusions. 1003 Sellling running out of steam. TICKQ divergence on the 5s chart. But Consumer Sentiment is due in 20m. See.pdffactory. this isn’t the proper use of the term. This is an excellent example of the information that can be found on what is close to a tick chart v a 1m chart v a 5m chart. which is also where price is hesitating now. much less a 15m chart or longer. 1028 The VSAers would probably call this a “no supply” bar. 80pts. one cannot make any assumptions regarding a particular “setup” without considering news events since the “success” of the setup may have absolutely nothing to do with the setup itself. whether backtesting manually or by computer. PDF created with pdfFactory trial version www. 1002 Incredible.For Mar 14 post See “For Mar 13 pre” for longer-term . 1020 And we come to rest at the midpoint of the day’s two range extensions. 1039 Volume drying up.

1130 Largeish sell order.1040-45 A test on low volume. but it’s absorbed. apparently. 1105 Enough buying pressure to take us back to the midpoint. This is a good example of when a hinge is not necessarily a preparation for a further advance or decline but just an PDF created with pdfFactory trial version www.pdffactory. 1113 Heavyish volume but no progress. 1202 Another sell order. 1230 Bernanke due to begin speaking in a half hour. 1135 Forming a hinge with a midpoint at 1720. Volume drying up in classical .

but one should look for activity here nonetheless. This is minor resistance. if any. Busting out of this requires an event. price drifts sideways in a relatively tight and stable range with insignificant volume. 1520 And back to the midpoint of that hinge again. again. Therefore.pdffactory. the midpoint of the day’s volume range. zip result. And 1730 is. in this case. 1430 Viagra anyone? 1440 TICKQ divergence during the test of 1700. 1250 A bit like batting a balloon in the . Bernanke. 1528 Big effort. This is more important than the hinge. And everybody heads off for the Hamptons… PDF created with pdfFactory trial version www.illustration of marking time while waiting for something to happen.

For Mar 17 pre PDF created with pdfFactory trial version .

Um-hmm. NQ falls to last week’s low within a few ticks and that’s currently acting as support. Fed makes emergency rate cut to try and support the markets. 1210 Price has dropped below 1690 but 1690 appears to be providing resistance against big volume. 1125 Another lower high. 1140 Just waffling around midpoint. 1110 Lower high. 1100 Price testing demand line. 1055 Higher swing low. Volume also considerably less. Demand no sufficient. 1230 A test of the pre-market low? (which. Building up some volume in this area. No supply to speak of. again.For Mar 17 post Pre-mkt: JPM buys BSC for $2/share (was $30 on Friday). Price takes off in opposite direction. Price dips below demand line but is pushed back above on lighter volume. Also now an uptrend. 1020 And back to midpoint. is last week’s low) Big-time TD throughout. Uptrend still in place. 1045 TD at test of high. 0943 Appears to be hesitating at the lower end of last week’s value range. 1040 And back to toward midpoint but a higher swing .pdffactory. higher swing high but price is rejected forcefully. 1115 And back into the opening range. No TD here. Resistance is confirmed at 1708 and support appears to be 1690. 1015 Slight TD at this test. which is also bottom of hinge. 0935 TICKQ divergence (TD) during pause after upmove off support. So until there’s another test of one or the other. though price does make a lower low. there’s nothing to do but wait. 1710 (+/-). 1050 Price continues to eat away at resistance. Another hinge? 0947 Test of last swing low. 0952 TD at first resistance level. 1030 Range extended to 1708. 1105 Ditto 1100. PDF created with pdfFactory trial version www. 0950 Passing thru midpoint of opening range.

PDF created with pdfFactory trial version www.1300 Another test of 1690. Reconfirmed as resistance.pdffactory. but this time there’s a big-time TD .

1530 Higher price and a higher tick. 1540 No demand here. 1435 Higher low. 1340 Another TD. And another TD.pdffactory. 1400 And back to the midpoint 1410 And retreats almost to the dime. 1510 And back to resistance. 1345 One doesn’t often see traders skipping back and forth among such welldefined value ranges.1325 And another test of the pre-mkt/previous week low. PDF created with pdfFactory trial version . Good place to exit the short.

but today's may be of interest to those who get something out of these charts [there was no "pre" done for today.For Mar 18 post I wasn't going to post any more of these. as did the comments for the post]: PDF created with pdfFactory trial version www.pdffactory. or it got lost .

e..e. the three measures of central tendency . The bottom becomes support. it should be clear what they are about without my getting wordy about it. Whether one calls that a volume range or volume area or value range or anything else is irrelevant. I won't do anything at all. I'm just talking about the middle. and mode -.For Mar 19 pre It appears that people are reading this stuff [after all]. of course.for resistance. that's where the bulk of the trading activity has taken place. PDF created with pdfFactory trial version www. largely because that extends back to the 13th.the mean. or perhaps the "point of control". The boxes encompass those areas of greatest volume. Otherwise. Today. and also the midpoint of the hinge) -..which happens to coincide with what has been repeated resistance going all the way back to January (the midpoint of the box from 1720 to 1840. we'll be outside yesterday's volume range. or inside yesterday's "bar". So I'll look to the top of the price range -. but it appears we'll be inside the price range.pdffactory. and the top of yesterday's volume range for support. so when I use the word "mean". These charts are largely inductive. inside the high:low. so I'll post more for at least today and tomorrow (the next day's a holiday).. i. Given those and what they mean. Unless the day has a wild range extension off one end.should not be much different from each other. price is likely to stay there. the midpoint the equilibrium level. i. i.e. the top resistance. median. or trading activity. I don't necessarily mean the arithmetic calculation.

an equally significant move is not of the highest . 1030 New low. but a bounce back to yesterday’s high and close. I’m going to draw a supply line and use a break of that as a signal to exit. is shorting at or near resistance. There’s a lot of support in general on the way back down. But the probability on these is nothing to write home about. If I get stopped out. he’s more likely to get screwed. Also clearly the level of the pre-mkt low and the prior levels with which it coincided were in fact support. It’s a beautiful day. at least for now. I get stopped out. If resistance is found here again. If one waits for the latter. 1005 Retracement to 1772.For Mar 19 post. What may be most important is that traders are accepting these higher levels. at least for the time being. 1035 Going back. 0950 Price continues to hover up here. not off the pattern. Rather than be depressed about not catching it in real time. PDF created with pdfFactory trial version www. It’s a form of “fronting the market”. breakouts are dicey. 1105 Supply line is broken and last swing high is exceeded by at least a point. So I’ll put this on the back burner for the time being. Since support is a little vague today. and there’s no TD. though. one could now say Aha! Descending Triangle. which is the last swing low. and price has already found resistance at 1780. You just have to watch and wait. which means that traders are accepting this level. and here’s where pre-planning plays its most important role. A setup for a trend day? Without news. The key. which coincides with the midpoint of the range on the 12th and the bottom of the range on the 13th. and he’d rather go do something else. Volume is unremarkable.pdffactory. It should also be noted that we’ve dropped 30pts. 1040 We appear to be hesitating at the pre-mkt low. the people who are selling the pattern will propel him into further profit. What do we do in the event of a bounce here? Do we consider that to be a confirmation of support and a reversal signal? Or do we consider the pre-mkt low to be trivial and any test to be at best unimportant or at worst coincidental? Do we just wait for a break of the supply line and ignore all the points we “left on the table”? How badly will we feel if we exit and price suddenly resumes its descent? All of this constitutes a personal problem and all of it has to be addressed before the day ever begins. I’m going to plot a demand line here. If he’s already short. And with the extent of the move yesterday. of course. so if this does decline. one can include this bit of information in his “map” and develop a revised plan based on this new information. 1015 Hesitating at the last swing low. it’s going to take a while. sort of Pre-mkt A dip into yesterday’s range. 1135 No tick divergence there. Perhaps that’s enough for the trader. 1110 Now clearly back into the previous range. there’s the option of shorting a lower high a la Wyckoff.

there’s a lower low and a confirmed downtrend. and I can now draw a supply line. since there was no TD. And sorry to disappoint. it will keep me in. Is the TD enough? Ordinarily not. However. AND KEEPING CLEARLY IN MIND THAT THIS IS ALL HINDSIGHT. why not? 1205 By now. But given where we are. there appears to be a lower high accompanied by a TD. but there is no TD. I wait for the last swing high to be broken. PDF created with pdfFactory trial version www. If this trend reverses before support is reached. I can use this to exit. Right.1150 Demand line broken. at resistance. so I stay in the trade. 1210 A lower high. and given the small risk. I must make an extra effort to stick to the rules. and given that there’s money in the bank. and one should keep that in mind when reading it.pdffactory. It isn’t. but that will all be hindsight. or at least my rules. Here. so there’s no reason to run away. 1245 We reach and reconfirm support at . 1320 Price waffles around here for half an hour before finally breaking the supply line. 1155 Carrying on. Otherwise. I can come back later and review what happens from here on. in order to avoid the Yeah. but I have other things to do.

com .PDF created with pdfFactory trial version www.pdffactory.

PDF created with pdfFactory trial version www. which takes place 25m later. as it turns out. I have three choices: (1) exit immediately. I would have chosen (1). 1440 Price reaches the support level I had anticipated in the first place. the TD. And there is a TD (more easily seen on the 5s chart). price makes a new . or (3) exit when the last swing high is breached. Therefore. and the extent of the move.1340 By now. Given where we were. isn't. which. so I can draw a new supply line.pdffactory. (2) exit at the breach of the supply line.

com . Therefore. or any other swing point for that matter. but you would have noticed by scrolling back to previous charts that price opened on this day at February's most important resistance level. the greatest number of people being on the wrong side of the trade. and. he just as often meant selling and buying. the boxes you see are those areas where the greatest number of trades have taken place.literally -the relationship between the open and close on larger bar intervals. I stopped focusing so much on points. such as the PDH and PDL. I made – or would have made – the best decision I could based on the information I had at the time. The support and resistance found at the "value areas" or volume ranges is a similar kind of S/R in that the trader can't find a trade (or at least the trade he wants). Your comment was posted to this particular chart. Q: I suspect. So. to some degree. I have a firm grasp of using PDH and PDL ..1535 A new low is made and price drops to the next level of support.pdffactory. buying pressure if he's a seller. but one can avoid all the MP "stuff" simply by plotting "volume at price" (one can do this at bigcharts to play with). and that failure is what prompts the turning point. A: I don't know that one would elevate it to the level of "method". i. One will therefore find either support or resistance or both depending on where the market opens in relation to that range. The task then became to cut away all the vocabulary -. This is not to say that points such as the PDH and PDL and levels that price has repeatedly tested are not important (new highs and new lows do attract attention).. However.). PDF created with pdfFactory trial version www. Once one grasps that. but his problem has to do with being overwhelmed by the pressure from the other side. I also understood that what we call "support" and "resistance" at points. This is in concept similar to what MP calls the "value area". after a certain age. most of what he taught having arisen from his views on supply and demand. Eventually I got to the point where I understood that all of the various groups who were addressing trading by price were all talking about pretty much the same thing. e. I stopped focusing so much on levels and began looking for where the greatest number of trades were taking place over time..all that was being said and how it was being said -. I stopped using candles (except to see -. or support and resistance. to make a long story short. he was actually one of the originators of it. Not getting the extra 10 or 15 points is – and would have been – of no importance to me. all the fiddling with "what does this bar mean" and so forth comes to an end... as with many worthwhile endeavors. or "box" (these are easier to see than stacks of lines). that I will need to study the methods of generating S/R that you use. a failure to find a trade.. Those who don't understand the nature of support and resistance might interpret this as strength.e. Therefore.and focus on what it was all being said about. But they take their appropriate place in a more encompassing concept of just what constitutes support and resistance. though rather than always meaning literal supply and demand. Though people don't generally think first of Wyckoff when the subject of "auction market theory" comes up. first choice until proven wrong would be to short. but those who do would understand that it was business as usual.g. but haven't found PDC to be much of use as of yet. is a different kind of support and resistance.

Also. such as at 1775. as long as the trend is intact. Once that has been determined. who cares about volume? PDF created with pdfFactory trial version www. Further. It seems you pay more attention to what price and the TICKQ is doing at S/R points than volume? Could you comment on that? Thank you.pdffactory. All sorts of strange things can happen with volume that can divert your attention and throw you off your game. if there ever is a trend. volume is pretty much irrelevant. . the trend takes precedence at some point. A: Volume isn't mentioned directly partly because I hope that by now it's more or less self-evident. volume matters primarily (one could say "only") at those points or levels where S or R are being tested.Q: I noticed that there is barely any direct mention of volume in this posting.

For Mar 20 pre I'm hoping that anyone who's interested in this sort of thing is learning how to do this themselves: PDF created with pdfFactory trial version .

but the last two swing lows have both stopped at 1727. e. it’s easy to see the change in momentum. 1045 Demand line broken. so even though there isn’t a higher high. PDF created with pdfFactory trial version www. if one can’t see it already. volume levels are nowhere near what they will be at and after the open. 1000 Back up to the pre-mkt high at 1734.For Mar 20 post Pre-mkt Though we dipped down to 1710. Jobless Claims. there is a TD here.. If this is to be considered resistance.5). a lower high or a break of the demand line (which can now be drawn due to the higher high). we’re opening within yesterday’s range and also within the volume range of the day before. in this case. I’m going to draw another demand . he can elect to wait for an alternate setup.g.5 are more important than I thought (see dashed line above). but price quickly moves back above it. This is still below the expected resistance in the 40 area. Apparently. Therefore. 1125 Higher high (yes. the area of interest will be around 1720-1740. This may therefore be nothing more than a waffle between 27 and 36. 0945 1718 tested and rejected. It’s also worth remembering that we’re approaching noon on the day before a three-day weekend.pdffactory. the two swing lows from the previous afternoon at 1737. to 37. again (even though 0830 is pre-mkt. But we’re spending a lot of time up here. If one is looking either to exit a long or enter a short. but the price behavior is something to keep in mind). I give greater weight than usual to the price action there if something important has been issued. 1115 Second demand line broken. 1100 Another test of 1736 and another TD. 1035 Another TD at a higher level: 1736. but the market doesn’t always do what one expects. Another demand line. Given their angle.

com . On the other hand. he’d have to have a good reason for having held all this time. And I’m not going to get into whether he should or not. the probability is that we will go higher. very wrong. If long with only one contract. and that he should get the hell out? A higher high in the TICKQ at 1433? This would get him out with a 3pt loss. if he were still long from an entry at the open. or he can just exit when things aren’t going as he expected and reassess the situation from a neutral position (which is what Wyckoff suggests). once again. there is at last a directed move (not just treading water and pitching pennies) toward resistance. One can determine what it means to be wrong. he might just follow the upmove with a sellstop and stay alert for any suggestion that his short entry – wherever it might be – was incorrect. this is where a trendline comes in handy for preventing one from trading countertrend. What would tell him that he was wrong. So what he does should be directed by his plan. 1445 A pullback from a higher high. 1510 Now at the next level of resistance. If he’s not willing to do that. I’m dry on sympathy for all the points he may be leaving “on the table”. that price had further to go to the upside. However. and this is where the rock and the hard place meet. and extremely wrong. And. again. all of this would have to have been thought out in advance. And there are all those TDs that so far have not signalled shorts after all (The Dog That Didn't Bark).pdffactory. the TICKQ begins to slide from 1338 forward. Given that we’ve spent so much time at or near 37. perhaps at 1747. one could be forgiven for exiting here. So if one wanted to short. But it’s not a certainty. This is not to say that there isn’t one. but. There is also the traditional stop above the “congestion”. 1405 Let’s say just for the hell of it that one trailed price with a 1pt sellstop to short and his order was triggered at 1741. But if he does exit.1150 Demand line broken and price drops below last swing low. and equally dry for all the points he stands to lose if he doesn’t exit and price collapses to 1680. 1200 Price starts waffling again. PDF created with pdfFactory trial version www. 1340 If you’re still awake. he ought to be able to trade the rest of the day on paper as if he had another contract in play.

demand. If one is long. but just as often it clouds things up more thoroughly. experiment. PDF created with pdfFactory trial version . supply. keep careful and detailed journals and logs. he could have used a TD as a signal to short at several different points. watch. and one must be open to the interactions amongst all of these elements in order to understand just what is going on. Getting wrapped up in VSA-speak or MP-speak or candle-speak or whathaveyou-speak may make things clearer. volume. But it’s whole cloth. It’s price. and eventually you will make sense of it without having to drink anybody’s KoolAid. What matters more than the choice one makes is that the choice be thoughtful and not the result of doubt or anxiety or fear or panic or greed. If one were determined to short. At best. If he were long. and no one could fault the trader for taking any one of them: exit at the TD. exit at a breach of the last minor swing low. support. All of it. and we’re only a half hour from the close. he might have been “frightened” out of his position prematurely. exit at the close. But he would have been incorrect in doing so. the TICK or TICKQ may have some value.pdffactory.1530 Trendline drawn from midday is being tested. And if one is trading the NQ or ES or QQQQ or SPY or even the YM or DIA. study. trend. Think. it is only a contributor to the information one gathers in order to make a trading decision. exit at a breach of the trendline. resistance. there are several places to exit. I’m glad that this day unfolded as it did because it shows graphically that using a TICK or TICKQ divergence as a definitive signal is a misguided tactic.

com .pdffactory.For Mar 24 pre PDF created with pdfFactory trial version www.

these lines will be broken. there are those who grabbed quick profits 30+ points ago….pdffactory. On the other hand. All he has to do is trade what’s in front of him. Not quite at resistance. 0955 They seem to be waiting for the housing report.For Mar 24 post Pre-mkt A little BSC/JPM news lifts the market into the midpoint of the volume range. and the trader will have to have decided ahead of time what he’s going to look for in order to decide whether to exit or hold. 0945 Spending a lot of time up here. 0940 And here we are at resistance. 1050 Second demand line broken. this one at a more acute angle.g. and a trader just jumping in here with a short would be f**ked. There aren’t that many possibilities. e. And again. so anyone deciding to exit and take the rest of the day off could not be criticized for doing so. he who trades more than one contract. On the other hand. etc. PDF created with pdfFactory trial version www. has more options available. a break of the line. price can just as easily make a new high and create the conditions for drawing a new line or adjusting the old . 1025 Price has consolidated again and made a new high. Fortunately. but a bit more difficult in real time. 1035 At some point. and there’s a nice pause here after the breakout. but the upper level of this zone has been in place for two months now. Waves getting very shallow here. e.. The LSL Is also on the same level as the first demand line.. Time for a demand line.. and a hesitation anywhere near this level is to be expected. but last swing low is not breached. 1100 And everything gets very quiet. 1005 Buyers are in control. And if the importance of this is not obvious. the day or week after. Next resistance is at 1820. but last swing low not breached. So we wait for a test of either support or resistance. 0950 Absorption and distribution are much like the cup-with-handle and the triple top: it’s easy to see in hindsight. so time for another demand line. one isn’t required to make the call in real time. a break of the last swing low.g. 1000 Price didn’t drop below the last swing low. or who’s trading two or more lots of QQQQ. we’ve moved 45 points. 1045 Demand line broken.

the rest is just management. so we can draw a new demand line. If one wants to exit early with only a few points. 1320 Volume dries up again and more sideways movement. 1145 A new high. 1155 Volume dries up again. price holds. but it runs into a stone wall. 1300 Volume picking up on the downside. This above that earlier consolidation at 1800. 1255 And the demand line is broken. PDF created with pdfFactory trial version www. But it all counts. or volume. Or both. It all adds up.1110 Extreme dryup in volume.pdffactory. 1305 But no follow-through. Once a trade is in profit. one must decide in advance what he’s looking for and what he’s going to do if and when he sees . but he ought to be honest with himself as to whether he’s making that choice out of fear or ignorance. the TICKQ also makes a new high. 1245 And a higher high. A lot of people would see this “lack” of activity. However. No directional movement. 1230 And we make a new high at resistance. so let’s not jump into anything. and shrug it off. that’s his choice. Again.

I mention this because somebody who’s new or newish at this might think that the housing report is terribly important. It’s funny that the wires are attributing today’s rise at least in part to the housing report. and the next time it comes out. and the reasons were many. and ultimately frustrated. again on low . but pulled back from 1826. but sellers overwhelm buyers (or sellers orchestrate the poke in the first place. 1505 Volume appears to pick up to the downside. 1400 A little test. 1420 Price being boosted from 1818. Anything else is just filler for those who just have to know “why?”. PDF created with pdfFactory trial version www.pdffactory.1330 A half-hearted test on low volume. resistance. 1350 And we test the bottom of this little range. prices were way down. But since the report really has nothing to do with today’s rise. volume. he will most likely find himself on the wrong side yet again. price. but it’s actually the opposite. The market rose because demand outweighed supply. supply. It’s demand. Fact is that the reports were only an excuse. support. he’ll be ready to pounce. even though the answer is completely irrelevant and often silly. but what difference does it make?). confused. Duh. funny because even though sales were up.

Or just say the hell with it and take the money at a predetermined target. This . 1120 For those who are still awake. volume appeared to be picking up to the downside. PDF created with pdfFactory trial version www. one using a longer bar interval will see weakness where there is actually strength. Traders are clearly seeking equilibrium. price dropped back again to the bottom of yesterday afternoon’s range. One has to be very explicit about what he sees as a reversal signal.e. 1200 Zzzzzz. Midday Wrapup 1000 Loads of volume up and down between support and resistance. the longer the summary. but hesitating at the opening low. i. note how volume has subsided during this period. but trading a narrow range can be a challenge. 1005 A drop below support. (e. 1025 And to the midpoint of the range.g. except for those occasional little nudges to the upside. That it appeared to be picking up to the downside is a function of how one chose to view the data. but it was actually the opposite.. is that one makes a habit of cutting his profits short.. 1045 Price pushed back nicely into the midrange. The problem with the latter. the more inaccurate the presentation. etc). 10m. Therefore. 5m.For Mar 25 Pre-mkt As I pointed out at the end of the day yesterday. Over the long haul. 1015 And we’re back above support. but the selling was half-hearted. This strength was particularly clear at the close and shortly thereafter. this is a failing strategy. but buyers are trying to stop it. of course.pdffactory. and price was easily propelled upward thereafter to yesterday’s high. when price rose all the way back to the top of the day’s range.

so any divergence in the TICKQ would appear to be irrelevant. though good for me.pdffactory. And the "test" is a higher low. and I should have posted it.Intermission I've been asked why I didn't take the long off support this morning. There is a potential selling climax at 1000 and a test at 1003. You have price dropping to a support area (given the extent of yesterday's rise. I don't like hanging around on a beautiful day to make just a handful of points. And all of that is fine so far. really has nothing to do with this blog. After all. The principles and tactics are the same. and the reason. I'd hesitate to establish a hard level as support). there are lots of places where the weather is crap. So here you are. But not everybody feels that . However. at least a few traders would want to have something to go by besides just a maybe-maybe not support level and volume that they might not be interpreting correctly. PDF created with pdfFactory trial version www. Who am I to make decisions for other people? The reason is/was that I don't like trading these itty-bitty ranges. in order to gather up the will to take this trade.

However. all is not lost. The morning in its entirety: PDF created with pdfFactory trial version . the stop could be extremely tight. One could then enter at or around 1809 with a little more confidence in the long. And if it didn't work out. he could see how price drops below 1808 on moderate volume. though here with a divergence in the TICKQ. recovers. then tests on slightly less volume. If one were to drop down into an even smaller interval (bad news for those who can't handle even a 1m interval).

price breaches the top of the last swing high by only a couple of ticks. 1505 Tickling the next level of resistance here. absent news of some sort. see Intermission. but he may want to rethink the stop for these situations. He may also want to keep the next resistance level at 1840 in . 1350 And at last we make a new high. However. How nervous one might get would depend in part on whether he entered off support like he should have (sorry. 1435 Price drops just below 1830. above) or at the breakout above the day’s range. and while the demand line is broken.And the afternoon. breakouts into a range extension are often aborted. Where to enter? Consider that little pause along 1830 immediately after the BO. on decent volume. 1530 Repeated tests of 1840 accompanied by higher lows and a decline in volume. 1545 And phffft! PDF created with pdfFactory trial version www. 1430 And we’re back at 1830.pdffactory. This doesn’t mean that one shouldn’t take them.

An aggressive short. No TD to speak of. If still short. with the accompanying decline in volume. Volume was heavy on the downside. No long trade here unless very aggressive. and if one were certain of support. sell resistance. second resistance is the range extension. PDF created with pdfFactory trial version www. Doesn’t have to be a higher low. and shouldn’t be. such as it is. 1055 Supply line. this would be a potential exit. not selling pressure. Price rejects support but no TD. this is a good reason to stay in.For Mar 26 Looks like we open in the middle of yesterday's volume range. Therefore. First resistance is the top of the range. 1010 And back to the midpoint. 1050 At yesterday’s low. 1045 Another test. but the volume pattern should suggest buying pressure. If still short.pdffactory. Even so. an aggressive long could be taken here. A moderate TD on the 5s in that the T is the same but price is lower. the midpoint. 1035 Another test of support. a potential exit. so we follow the drill: buy . another potential exit. of course. Mid-day: 0945 A subtle TD on the 5s at 0941 as price hits what may be pre-mkt resistance. If short. is broken. 1025 Forming a hinge of sorts (it’s not quite “filled with price”) at. but there’s no demand here. Volume to the upside is unremarkable. But selling appears to be done. 1000 New Home Sales. if short.

but there’s no demand here. Volume was heavy on the downside. EOD 1500 At resistance. 1155 And back to the midpoint. finally. and shouldn’t be. Volume subsides dramatically as well. 1515 And back toward the midpoint. Q: At 1045.pdffactory. There’s a slight TD here between 1500 and 1501. you say "Another test. and the T slides dramatically during the 7 or 8 minutes that price spends up . Doesn’t have to be a higher low. but the volume PDF created with pdfFactory trial version www.1100 And back above the first support level.

Therefore. not selling . But selling appears to be done. If one isn't watching all this in real time. If short. you don't want to see continuing heavy volume on the downside. Yes." How did you come to the conclusion that the selling "appears to be done. If looking for a long. then it's necessary to get into the bar with a shorter bar interval to find out what's going on in there." I just need some clarification here: do you say volume "shouldn't" be heavy on the downside because price is at support and therefore you would be looking for a long. you want to see lighter volume on a further test. then much heavier as it tested it again two minutes later. at which point the volume subsided dramatially and price bounced. 5s ought to do it. This isn't a method but a process. I saw that volume was lighter as price tested 1807 at 1048 the first time. And you see that since there is heavy volume on the downside then that potential long would have to be nulled for the time being? Also at 1050. No TD to speak of. Keep in mind that these were done in real time while watching the price and the volume bars move. B. Yes to both. a potential exit. If still short. though one can go down to a single tick if he wants to.pattern should suggest buying pressure. At the very least. though by then you will likely also want to see a break of the TL. you say "At yesterday’s low. if any. such as at 1050. an aggressive long could be taken here. PDF created with pdfFactory trial version www. then never looked back (or at least for an hour). this is a good reason to stay in." Is it because of the re-test with price being rejected higher very quickly? Or that because there was very heavy volume to the downside you would expect price to go further lower but it didn't do that? A: A. waffled for a couple of minutes.pdffactory.

Price spent much of February between 1820 and 1780. will look for first . So I’m using 1780 as support until the market tells me different (see chart I posted pre-mkt). Attempts to move higher fail quickly. or a secondary climax (the latter may seem like a contradiction in terms. given that 1800 is the midpoint of the 1780-1820 range. 1020 And here we go. Shorting breakouts absent news.For Mar 27 It appears that we are going to open within yesterday's volume range and price range.pdffactory. 0950 Rejects 13. 1030 Potential selling climax. However. Buyers just can’t get it together so far. so the drill's the same as yesterday: buy support. and support could be found in this area. Mid-day 0940 Hits and rejects the pre-mkt low. with a pause at 1803. 1010 If and when we fall out of this on volume. though momentum may slow). so there’s a great deal of potential support throughout this range. can be unsettling.5. 1000 Testing the opening high again. then retests and rejects again. however. sell resistance. 0955 Testing pre-mkt low again but spending much more time down here. the decline can continue. which makes some sense. the action on Monday may have created a short-term air pocket. This PDF created with pdfFactory trial version www. the likelihood is that we will drop out of this. 1035 A continuation of the climax. but what may appear to be a climax in real time may be only tapping the brake. Waiting for volume increases the odds in one’s favor. 1005 Given that price has spent so much time at the bottom of yesterday’s price range.

There’s no appreciable TD up . it’s acting as support. 1120 Higher lows. 1150 And to the midpoint of the opening range. 1125 Higher highs. Supply and demand lines can be useful here. a candlestick fan who blends bars would have a shooting star here. 1115 We hover at the midpoint of the 1780-1820 range. 1145 And back to the opening low. including a strong rebound. PDF created with pdfFactory trial version www.pdffactory. 1235 And we make it to the top of the opening range.time there is a clear rejection of price. 1250 Lower high on pitiful volume and a break of the extended demand line. 1135 Price continuing to rise on moderate volume. but. there would be a hammer here. If a candlestick fan is into blending bars. EOD 1210 Test of the opening low. 1320 Another lower high. here at 1794. For the time being. 1055 A higher low at 1050. again.

1345 Retest on lower volume and an immediate rebound. I should point out again that trading around this area may be difficult. 1500 And volume picks up to the downside. six points either side of the midpoint. PDF created with pdfFactory trial version www. Moves toward the midpoint from the extremes tend to be easier and more profitable than moves away from the midpoint toward the extremes. 1405 Buyers can’t hold it.pdffactory. Anyone trying to trade this probably has way too much time on his hands. as I’ve said before. or hold onto his trade and risk ending up at breakeven for the day. Buyers are likely sweating here. like a dog on a . 1410 Buyers drive price back toward the midpoint. 1420 And a test of the low of the day.1325 Another test of the opening low. 1340 And back to the midpoint of the larger range (1780-1820). 1355 Higher low and higher high. 1530 Another test of the day’s low. 1440 And back to the midpoint. and demand is weak. Therefore. Potential selling climax. and this time price isn’t bouncing quite so exuberantly. All of this is relatively meaningless. anyone trading only one contract is going to bring a lot of baggage to the party unless he decides ahead of time whether he’s going to exit at a midpoint reversal signal and papertrade the rest of the day. (See what I mean?) 1445 And no demand. We’re pulling back and forth. all of which has to do with the trader and none of which has to do with price action. however. Huge volume and another potential selling climax.

1545 So we are six points from “support”. 1559 Still no demand. a slight TD. Do we exit? Or hold till the close? 1550 Demand not materializing. PDF created with pdfFactory trial version www.1540 And volume picks up to the downside.pdffactory. but this is good enough. and 15m to go before the .

0945 1330. price will likely go higher. I've decided to do ES just for the hell of it. 0950 The above setup invalidated just a couple of minutes later. 1015 Below 35 again. For the aggressive trader. If the T can be relied on. there is clearly support between 29 and 31. but a long would not have been triggered anyway.pdffactory. I haven't traded it in dog years. Given that there’s a TD here. Also note that all of this coincides with . However.For Mar 28 Since this will be the last in this series. Midpoint of this particular range is 1339. there is a retest and long entry off the 5s. coinciding with support. 1010 Price goes higher and 35 appears to be acting as support. Could be considered a retest and rejection of the midpoint. sell resistance. is expected. I see no reason why the principles and tactics I've detailed in this series over the past three weeks shouldn't apply here as well. the same drill: buy support. PDF created with pdfFactory trial version www. 1000 And here we are at 1335 again and no TD (keeping in mind that the TICK is linked to the NYSE. which price rejected pre-mkt. We'll see. and even then I I didn't focus on it. 0955 ES sluggish. Mid-day 0940 1335 is presenting resistance issues. again. there is a justifiable short.5 rejected twice with a TD. NQ performing much better. so. Looks like we're going to open within the previous volume range. And the opening low. so there may be more unpredictability here than I anticipate. but there’s no follow-through. On the other hand. Or resistance from the lows of Wednesday (which are also the bottom of Wednesday’s “box”). not the S&P).

1045 A rejection of support area again and on high volume. No . The trader has to consider exiting his long and shorting again.1035 35 again tested as resistance. this would be the place to prepare for exiting the short and taking a long trade. PDF created with pdfFactory trial version www. For the sake of consistency with what I’ve been posting these three weeks. Next level of support is 20. Wait for higher low and/or break of the supply line. but this price is rejected decisively. not because I was correct. so no special reason to cover or reverse. Volume is on the downside and there’s no TD. 1200 Another test of 1335. 1120 Gratifying to see that I was correct about 30 to begin with. but it can’t do it.pdffactory. 35 now formidable. 1245 Price tries. 1215 And here we are back at support. but because it validates the application of what I’ve been doing with the NQ. Instead it drops toward yesterday’s low. EOD 1515 And here we are at 1320. 1100 No TD on the poke below 28.

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