I will jump in here briefly if I may as I am a user of Wyckoff analysis on an intraday basis in my trading. I wont presume to speak for Motorway, not will I presume to say that what I do is even correct application of Wyckoff. I have learnt Wyckoff with Motorway’s direction, from his many posts on the matter and pm between us. Whether I have learnt, and apply, it properly is another matter entirely and is my responsibility!
The way I apply Wyckoff analysis is in the principles he speaks of, applied to the market I trade. I make this point because it is not as if you can learn some nifty “set ups” (buy when the blue line crosses the red line type stuff) and away you go – no, using Wyckoff is more about understanding what is going on in the market (i.e. with the price & volume within time). The aim of Wyckoff analysis is a low-risk entry point to capture a move that is is going to happen imminently. Always there is risk, so always there is a stop loss. Wyckoff analysis can also be used for exits (stop placement and profit-take price) although I must admit I am not this far advanced … I can see where to place a logical stop with Wyckoff but am placing targets for my profit exits. This is a big area for improvement for me and is a work in progress.
Wyckoff speaks of the 3 laws:
1. Supply and Demand
2. Cause and Effect
3. Effort and Result
I use various tools (charts) to view these 3 laws. You ask to see “intraday demand/supply analysis ala Wyckoff” – understanding supply/demand is getting to grips with law 1 (above), and is done by also using laws 2 and 3.
I wont presume to instruct on how to understand and apply Wyckoff, but this is an idea of how I use it intraday.
Law 2 is Cause and Effect – that is a sustainable effect (price move) will only come from a Cause (a reason for the price move). To understand Cause and Effect it is necessary to understand the 4 stages of a market ‘cycle’: accumulation, mark-up, distribution and mark-down. A point and figure chart is a good tool for viewing these stages.
The first chart shows Friday’s trading (most of it) in the Emini S&P contract (the “ES”). Circled areas are areas that show accumulation taking place. After accumulation you would expect the mark-up phase. (Just to re-iterate, any mistakes in application and understanding are entirely mine). Accumulation is demand overcoming supply.
Law 3 is Effort and Result. You may have seen some of the posts on the board referring to VSA analysis, tech/a has posted much info on this. Much of VSA is related to effort/result. Basically it is looking at how price interacts with volume behaviour and again can be used to ascertain probable demand and supply. For effort/result a ‘vertical’ chart is most readily used, such as a bar chart or candlestick chart (bar charts are the preferred tool of Wyckoff analysts, the ‘open’ is not deemed to be of any relevance (what does ‘open’ and ‘close’ mean on an intraday bar anyway? … Not a rhetorical question).
Chart 2 shows some of Friday’s ES trading on a 3-minute candle chart. I have highlighted a bar which shows huge volume and might well be termed as a climactic sell. At the time this bar formed you would be alert to the potential for a reverse in the downtrend (demand overcoming supply). Note that all we got was a sideways move for a few bars before another move down. This where the P&F chart can qualify the bar chart, the P&F showed no accumulation (I speak here with hindsight of course … when you are live at the right edge it is more difficult and is where being disciplined and sure of your application of principles is important). Of course this is just one chart of many possible – there are many times, especially in the ES where a much shorter timeframe chart is of more value (well, to me anyway). And who is to say that a bar based on time divisions is th best anyway?
Chart 3 I have highlighted another role of effort/result, looking for continuation in the trend, the dots above the bars highlight one method of entry into the trend (these bars highlight the prevalence of supply over demand, what we want in a downtrend for it to continue). Also on chart 3 is a bar highlighted at the bottom of the downtrend with an “X”. In effort/result terms it is very important. It is also important in Wyckoff terms as it shows clear “Change of Behaviour”.
Obviously, there is much, much more to Wyckoff than what I have shown here, but I hope it gives you a view of how it may be used on an intra-day basis.
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