All language subtitles for Session 7

Hello everyone, today is October 22nd
and this is our session number seven of

the Wyckoff Trading Practicum course.

Today we're going to do some of the
different exercises.

The main exercise is going to be on
selection and then we're definitely

go through the volume price analysis and
then our usual

segments are going to be The bias game,
that one is going really well. Anatomy

of the trade, we need some kind of
decision.

So it's almost like, you know, in real
life, what do you do, right?

Are you staying with that stock? Are you
going to another one? So we'll talk

about this.

FAQs, not FAQs, oh my gosh.

Q &As throughout the whole presentation.
I think that we have a couple of people

with questions.

Market update, that one will be really
quick.

Then we'll talk about position sizing.
This is something that I want to revisit

if we haven't done so in the WTC cycle
before. If we did, I know there are

always questions about that, so just get
ready for that, and then we'll do the

exercise. Next session, October 29th.

What else in the announcements?

Oh, we still are going strong with the
October special.

So for those of you who are signed up,
I'm sure that you appreciated the second

session, which was really great.

John took us on a much deeper look into
how do we recognize

the conditions for the skin, how do we
recognize the events, how do we combine

those.

And session number three is going to be
very interesting. So this was an

appropriate level.

for this material, this class.

So I would definitely suggest this
special.

And you can sign up and just instantly
have an access to those first two

sessions. And then once the third one is
done, it will be delivered on demand.

All right. As usual, everything what we
talked about here is for educational

purposes.

Let's jump into the bias game.

I did not like...

this chart.

Just, I don't know, just the way how it
looks is just something about this.

Maybe it's just the digital, maybe it's
the structure, but it doesn't really

matter. You know, a biased game is a
biased game, so you only have one stock

trade.

We are in the current uptrend, and I've
seen some kind of changes of character.

those changes of character come on
expanding spread before that we only

observe you know expanding spread
probably right here that was like the

one and even that is already an early
indication of what's going on and if we

would start even our early observations
this is the largest spread on the

way up and it happens on kind of
mediocre

so it's somewhat slightly above average.

So we would probably be thinking that
this not strong

supply signature would suggest a
preliminary supply.

One way or another, whether this is a
reaccumulation or a distribution.

All right, so then,

These bar comes and these bar comes and
they seem to be a part of the same

structure like right here.

Another structure that I'm seeing is
just this whole thing.

And then I'm thinking, what if this acts
as a reaccumulation or just like the

last push?

Now, I'm not really...

fond of the idea of the reaccumulation
here, so close to, let's say, a buying

climax, right? Why? Well, because we
have some kind of causality which

that there is some accumulation
throughout this range to push the price

which is obviously not true. We are just
barely getting above the

resistance by $2 and then coming back.

I think it's just a preliminary action
or even actions.

And you could most definitely consider
this reaction right here that has this

2, 3, A, B, C type of pattern.

You can consider this a change of
character.

And then, as we labeled before,
preliminary supply.

That is a little bit of the climactic
front here.

So let's just tentatively put it like
this.

And then here is your range.

Here is your support.

That includes the majority of the price,
maybe only in this area right here that

we don't have it.

And that would suggest that either this
is a secondary test or we

have maybe like...

or like this a phase a again
alternatively

you could do this and then you're
thinking that this is a buying climax

defined climactic run i would say much
better so this whole area then is just

preliminary supply um and here we would
be thinking okay well how would we label

this

I'm not sure.

Phase A would be this is one structure
right here, this is one structure, this

is one structure, another structure. So
probably would still go with the

original trading range like this.

All right, well let's look at the change
of character.

Definitely comes with the expansion of
the volume signature that suggests

different things.

Looking at the volume increase in
general, suggesting supply is

environment is changing into a trading
range, which we are going after that.

We're also seeing how there is an
increase in selling each time on the way

down. So we would be thinking that this
low should be retested.

This retest is in line with an idea of
the trading range, so we will be

expecting a retest in the near future.

Why is this important?

Think about the strategies. You are in
this position. What do you do? You are

not in this position. Would you be even
looking at the stock at this point of

time?

One might say, well, I really would like
to trade this type of rally right here,

except for maybe volume itself and how
the price moves here.

so quickly you probably will not be able
to find this momentum right away this

is a very short -term trade you have to
intraday trade that if you can find that

and be in it at this specific point of
time that's great but

for the majority of us we probably would
be thinking there is nothing here for

us is going to be a trading range how
does the trading range unfold

Well, as we've had the bias to the
upside, the change of character is not

pronounced.

I mean, it really just reacts into the
area of the previous support.

So I'd say that the bias on the change
of character is

reaccumulation based on how the price
behaves. And then when we look at the

supply signature,

and there is some demand behind this bar
right here. There's some demand behind

this bar right here, those big bars.

Somebody's buying right there, and that
stops the price from moving further

down. And please note how this reaction
is a little bit interesting. It gives

you a little bit of a clue, that nuance
that, you know, if demand has come on

this bar, on this red bar,

If supply is still strong, we most
likely are not going to have a very

reaction. But this one actually commits
above the high of the bar and then stays

there. So there is some strength in the
demand that's coming in on these bars.

So kind of more of the reaccumulation.

This one also has some demand signature
behind it. And then again.

some absorption of the supply as this
demand comes in. Lots of demand, lots of

demand, lots of demand that creates that
momentum.

So we would see like on the momentum
indicators, especially short term, we're

going to go up.

On the longer term momentum indicators,
we're probably going to see something

like this and then acceleration.

So it's going to show us elements of

and therefore our mode is still going to
be, our bias is still going to be a

reaccumulation at this point.

When the price comes to this level and
we are thinking this is an upthrust, I

think in a lot of people's minds,
upthrust is associated with a bearish

condition.

And rightfully so, because at the short
-term juncture, of

this price structure, we usually in the
upthrust action are not gonna spend

a lot of time above the resistance.

We usually just temporarily commit and
the whole definition for the upthrust is

the temporary commitment above.

So here we would be saying upthrust
trading range.

We want to recognize this structure
right here.

The way how this up thrust unfolds, and
I'm gonna erase all of this,

is very interesting.

It's just because of the fact of how
many closes we have here.

to the upside and how many times we have
progressive closes up

within the idea of the time

being spent above the resistance.

And think about what it means, right?

The price is not reacting in the
upthrust manner when it just commits

with one bar with one close and then
goes down it doesn't commit with one

bar and then multiple attempts to rally
failures and goes down no it

actually spends a lot of time here so
this means that there is no selling

or if there is some

then that selling is being observed
really quickly. And we kind of see it

through the structure that there is some
selling that comes in right here, and

yet everything is being observed.

My argument here would be that these
buyers right here that operate

within these areas, they're supporting
now the stock at this slightly higher

level, which is a really good sign. That
support

suggest that the price is gonna stay at
the level of resistance and then it will

try to get out.

All right, so we have support at the
higher level.

Now, unfortunately, the buyers here are
done.

And then when the buy -in is done and
buyers become inactive,

what happens?

Price starts to deteriorate, starting to
create lower highs and lower lows.

And then with this type of structure, if
the price consistently does this, grind

down into the trading range, then we're
going to have some kind of capitulation.

So let's kind of come back to where we
are in the bias.

let me remind you right we're developing
that like of story we were in the

uptrend then we we thought that we're in
the reaccumulation

looking at how the price has spent so
much time

above the resistance we're thinking
reaccumulation up to this point

right here and then right here we are
starting to think that

is exhausted.

And we can't say that it's a poor
demand, because when we look at the

signature off the bottom through the
whole rally, and then we look

at this period of absorption and the
potential backing up action, we're

that there is a lot of demand.

And it's a strong demand, it's active
demand, it's one of the highest demands

the chart.

So it's not that demand is poor.

It's probably more that the demand is
exhausted at this point.

And if there would be some selling into
that demand, we probably would see

how the price go down with more selling.

And yet the volume here is inactive.

But we're still expecting some kind of
capitulation.

We also said that there was some supply
here, so there is a retest expectation

of the low of the automatic reaction
here.

And we have that, and we probably have
in the best case scenario

where

acceleration starts to happen and not a
lot of volume signature comes in

relative to what we've seen before and
then on the actual test

everything goes into the demand on this
daily bar it's

the overnight action that brought us
here so but from the perspective of the

itself we open try to go down and then
closed about the previous day's close.

this is a very bullish bar. So again,
demand, as it was strong in this value

zone, it is strong again.

And we are expecting some kind of better
rally, what we had.

We have really good spread, but yet look
at the spread itself.

Momentum diminishes, there is less
progression.

of the stride to the upside and then as
we do so, demand is diminishing again.

So we're still thinking that from the
reaccumulation idea to this

reaccumulation support idea and then
into this weakness, our expectation

was that we're gonna find some kind of
support just because of how buying has

happened previously.

We do see that.

So that still confirms a reaccumulation
for us. Now we want to see that sign of

strength rally, or maybe a rally in
phase B that would have good

but fails.

It looks something like this. I'm
actually surprised even how it looks. I

be thinking that almost like this is the
structure for phase C.

Because the way how the price travels
off the low reminds me of the ways how

price springs and then goes into the
sign of strength rally, where you see a

of sign of strength bars.

And those are definitely looking like
sign of strength bars.

Or maybe the market or something else.

So we're taking down after the...

just a slight diminishing momentum
characteristics.

And as we go down, the key here is just
to see again, what are we gonna do? Are

we gonna expand the progress to the
downside?

Or are we gonna exhibit some bullish
characteristics?

And as we look at the diminishing spread
characteristics, like

this bar right here, we are comparing it
maybe to this one then we are comparing

how the gap happens and yet on the
second reaction we have

just two bars that are much smaller then
you know these bars here

or this one bar right here and that
tells us that probably selling is

exhausted we want to maybe check locally

the same picture so this looks like
demand that is coming in

this was increased selling and now we

are going maybe like this the selling
bar

was

kind of on the same level um

And it looks actually maybe even worse
than the first one.

I mean, if I would be comparing these
two, I would be thinking about the true

range for this bar.

Here it is.

And on the same type of effort, it
produces maybe a little bit better

closes lower.

It's only these two bars, really, or the
collection of these bars, five bars.

are giving us that pause that indication
that absorption has happened is

happening if we go if we do the vsa here
really quickly you know uh

one second this bar yeah this bar right
here um

has some kind of demand behind it
because we had so much progress to the

downside and then we have a diminution
spread on increased effort so effort is

increasing

and yet result to the downside is
decreasing that's bullish that such as

presence so then the next bar has this
demand tail and the volume is

still high so even though effort went
down result improved uh you know uh

to the upside and uh definitely is less
to the downside so less effort

less selling and less result to the
downside still bullish and then these

bars are showing us that demand is
coming in supply is coming in

on both of these bars and yet every time
we recover back we recover back so

bullish so just a rally and right here
just because of how these two tests have

happened we're still in the
reaccumulation bias

And as the rally unfolds, there is a
little bit better sustainability of the

swing.

What do I mean by that?

When the price travels, reactions are
not that

deep. Look at the intraday reactions.

Right here.

Compared to this.

This is a little bit more volatile.

So therefore, you're thinking if
volatility has gone away from the

then we have more controllable

supply or rather demand, very strong
demand that can control the supply.

Otherwise, the structure would be
different.

And then that leads us, you know, this.

low supply environment leads us to the
rally that actually commits above the

previous high and then the price stays
up and the volume signature goes down.

it's almost like we had supply
diminution on the way up and then

the volume actually goes down even
lower.

So supply goes lower.

So throughout this whole picture, we
still end up in the reaccumulation bias.

So let's see.

Okay, let's look at this first. Let's
look at the solution.

So this was the industrial ETF XLI.

Twitter guessed it correctly, analyzed
it correctly.

Good number of votes right there.

Let's look at the labeling here.

I would put probably phase C, and by the
way, it's not like,

you know, this is not the labeling that
I haven't checked or I haven't put

myself here.

We have a whole team who works on the
bias game because we're tweeting it out.

act in kind of like in the middle of
this process where whatever knowledge

comes to me, I definitely put it in the
way how I would label it myself.

So therefore, thinking about this a
little bit

more, I think the thinking here was this
is a phase C relative to this climactic

action.

So we have like this structure here.

So we have a C within C.

You can think about it this way.

And then obviously here as the price
moves

on diminution supply characteristics, we
are recognizing elements of the sign of

strength rally.

And then we probably could have said
that this was a minus sign of strength

because we overcame this high.

And then this would be a minor back, NAP
action LPS, last point of support.

And we would be expecting a commitment
above this area right here, which comes

here. And note again how the price hangs
up over

that resistance that was created by the
off -thrust action.

It's just there is no selling. If there
would be selling, we would almost

instantly have some kind of reaction
back.

into the trading range.

And yet we don't see this. So this is a
really good sign. And then as it comes

back into the resistance cluster, still
no volume signature.

So we're expecting a final breakout with
a lot of acceleration and a lot of

shorts are going to give up. They're
going to cover and that's going to

that bar as well.

Question here.

I thought the buying climax usually was
accompanied by an increase in volume.

Or is a buying climax wherever price
holds its up move and

moves into the trading range?

It's actually both, Simon.

Conventionally, we were taught that
either climactic action

will have a climactic volume signature
behind it.

Now, obviously, knowing that this is not
necessarily just one way, there

are multiple variations of how climactic
action could occur.

But one of the most important things
which you actually said in your question

the stopping action itself.

And we could see that stopping action.

with different characteristics, but the
most important characteristic for us is

still gonna be a change of behavior
where something

is different, where the uptrend might be
broken, where the volume

starts to increase, where the spread
increases, where the distance of the

reaction increases.

It's just different.

And you see that selling has come in.

Somebody's selling, and it doesn't
necessarily mean that this is the actual

but it means that from now on, we could
expect a different environment.

So let's come back to the question of
the volume on the buying climax.

As I said that, this looks a little bit
more like a true,

buying climax because you have that
climactic run. You have that

the spread.

You have the acceleration also in the
volume signature a little bit backwards,

but it still gives you a lot of momentum
to the upside. That's what you want to

see in that last climactic run.

For stocks, in a lot of cases, you're
just going to observe

the actual stopping action.

that initiates the whole trading range.

There are no other points here that
initiated this trading range, but

this one right here.

And it's out of this point that we
started the change of character.

It's before this point that we had a
prelude to the change of character

in the preliminary supply.

So it makes a lot of sense.

also that the subsequent test comes to
the area of the resistance of the same

point.

So as you see in this case, there is
nothing on the volume here that we could

say, oh, this is so climactic.

And that's what it is.

That's kind of like that main variation
where you're going to go into the

stopping action and your volume
signature is going to be either

or be average or below average?

Well, think about the logic of market
participants and how they're thinking

about this spot.

Whoever they are, let's say that we are
looking at the institutional trend

followers and we are looking, let's say,
maybe at retail traders.

How are they looking at this situation?

And what are they doing? In the uptrend,
would they be giving up their

positions?

Well, ITFs definitely would not be
giving up their positions. Why? Because

trend has not changed.

So by their definition, the price is
still bringing them the absolute return.

There is a relative outperformance.

I'm just looking at the price really
quickly.

Maybe, although maybe not.

I'm looking at the 2014 October. Yeah,
so this was that October big move in the

markets. So this particular instrument
might be underperforming at that time.

But on the absolute basis, still
bringing the money. So they would not...

depart from this position until they're
going to see signs of deterioration.

So I think that, in a way, this is where
ITFs, some of them, are going to give

up this position because this shows
change from the trend, and they would be

willing to get out of this position or
just scale out, and they're probably

scaling out at this point.

And then the retail trade is going to
have the same mentality. As long as it

makes me money.

I'm going to keep it and usually in the
late portion of the cycle,

later on,

retail traders are going to make money.

That's where they are making money and
that's what's keeping them in the game

because once they experience that, they
want to come back.

So they would be holding on to their
positions as well.

So therefore, there is no big exchange
of shares at

this point on the climactic action, on
the stopping action itself, because CEO

is mostly inactive. CEO is holding this
position in anticipation that the price

will continue up from here.

as we go through the trading range.

So no shares of supply is being
presented from the CEO.

And ITFs and retail traders are also not
giving out their shares.

So therefore, a stop in action without
any climactic volume signature, just

on the pure diminished momentum itself.
We could see this from the spread,

right?

Look at how it goes.

There's momentum almost in each of the
rallies.

And then here, momentum is probably on
this rally right here and then starts to

vanish a little bit more at the end.

So we kind of see how the price
decelerates and it's ascend.

And it happens also on the diminishing
volume characteristics. So we're

that this is probably an exhaustion of
the demand.

and we could have some kind of reaction,
where would it go?

Probably into the area of where before
there was more dynamic rise, there was

some demand, there was some push to the
upside, so somewhere here into this

area, and that's exactly where the price
came.

For stocks, it's like this. For illiquid
stocks, you're going to see those big

spikes and buying climaxes are going to
be easily identified with the climactic.

volume signature.

For immature markets, you're going to
see a lot of that.

For instance, when you look at the
Chinese market, a lot of the stocks

are having that type of behavior where
they have climactic runs, hypodermic

runs, and then urgent selling.

And that produces that huge climax.

with all of the correct attributes.

But in the markets like the US market,
where institutions are holding the

for a prolonged period of time, those
reaccumulation areas,

especially phases A and early B, might
have some

volatility, but not gonna have a huge
volatility.

And it just all depends on the rotation.

So in this case, we're just kind of
seeing that.

So we just have to go by what? We have
to go by the confirmation of the buying

climax, which is a change of character
itself.

And I would say that this is very easy
because a change of character is very

easily identifiable structural element.

All right, let's come back to this
slide. And this is from Simon.

And I just wanted to comment and commend
Simon on such a

great job here.

He was going through this bar by bar,
swing by swing, segment by segment.

So it's just great to see this type of
work.

I just wanted to acknowledge this.

Several questions, so let's go through
those.

Would this be considered the
distributional pattern? If so, what

would identify this?

Segment two.

This one right here.

I actually had a comment from one of you
which I thought was very fascinating

and kind of right on the money in terms
of the structure.

I forgot the name, just tell me who that
was.

Where we have...

the analogous structure of double bottom
and then the rally after that

fractal nature of this pattern with the
lower low low low

and kind of similar characteristics to
the downside acceleration to the uh

closer to the end acceleration closer to
the end acceleration closer to the end

acceleration closer to the end and then
the recovery that was very interesting

And we'll come back maybe just for a
second to this. Could we consider this a

distributional pattern?

I would say that this is definitely
producing an interesting thought

for us, this bar right here.

And we're thinking this seller's coming
to the market. So then we would be

looking for any type of signs where
selling would occur.

We see some selling here, but it's...

being observed and then probably the
next time it's just on this bar.

So if we would be thinking in terms of
the distribution or how distribution,

short -term distribution is unfolding, I
would probably be thinking that after

this absorption, this would be the
distributional pattern here.

So we would be looking maybe at this as
a causality.

If you're thinking about this, Simon,
and then with the effect to the downside

to the low of this trading range.

So that's how I would look at that. But
definitely, in terms of the smaller

structure, you could say that this was a
distributional top, this was a

redistributional top, and then let's say
this formation was a distribution with

the sign of weakness in the middle.

All right, second question, would this
be considered a selling climax?

So this is the question that we just
covered in the WTC, and for some reason

produces a little bit of the hesitation
on the knowledge part as to

how would we label this.

I think that we have to look at the
extent of the reaction.

which we said that comes to the lower
point of the previous support, but

it doesn't go below it. It doesn't
commit below. So there is no

qualities on the price level with this
reaction.

So therefore, we would probably be
thinking either of

the conventional labeling, in this case,
automatic reaction,

Or we could say that maybe there are
some shakeout characteristics here.

we label this as like a shakeout saline
climax?

In that case, there might be a
possibility for us to label it like

But it seems like even with the
absorption characteristics that we have

secondary test actually that is being
obviously followed by the

automatic reaction.

and the bind climax kind of work out
really nicely. Also, it give us a little

bit of the room for phase B to develop
if we want to extend our phase B. So

phase B is larger than A and larger than
C, and that makes

a lot of sense.

Okay, and then the last question.

If you were a swing trader, at what
point would you initiate a short trade

a strong rally on the highest volume in
September?

Right here, Simon?

Or here?

One or two?

Denoted as RA9. Okay.

Where is it?

Okay, right here.

At what point would you initiate a short
trade after a strong rally?

Okay.

Would it be one after a significant bar
on the downside?

Be it 12.

Okay, great.

That breaks below the LCU. What is this?

What is LCU?

Not on this chart, Simon?

Oh, really?

Okay.

I'm sorry.

This is the wrong slide?

All right. Well, let's come back to it.
But, you know, as I'm reading this

question, it kind of makes sense to talk
about this. Okay. So how about this?

I'm going to ask you guys a question.

As Simon is asking this question here.

Thinking about this rally right here and
thinking that we've just experienced

bind climax, automatic reaction, and now
we went into, let's say, a secondary

test.

Thank you, Simon.

Where would we short?

the stock with an idea that we are short
-term traders,

we are oscillated traders,

meaning that our trades oscillate
between

support and resistance, and we trade
only trading ranges.

That's the task, right?

So then thinking about where we are in
terms of the structure, we are in phase

now at upthrust action.

Our goal is to understand a point of
entry.

How would you describe a point of entry,
what would you expect the point of

entry to be, what kind of
characteristics?

Simon is saying it's this chart,
actually.

Yeah, it makes sense that the question
made sense, yeah.

So, but let's just go with this idea.

Looking at this picture, guys, write it
down, looking at this picture, and

thinking about the secondary test here
in yellow, and Who are we? We are a

short -term trader. We are an
oscillating trader.

And we trade in only trading range
structures.

We don't trade uptrends or downtrends.
We only trade trading ranges.

We know within the structure that we are
in phase B at the up -thrust action. We

know that the next move is going to be
to the downside.

These are...

But this is how the trading range would
unfold, right? So we're gonna have those

oscillations.

And we know the structure from Wyckoff.
So what are the characteristics that we

need to see in order for us to initiate
the position and then tell me exactly

which bar that would be?

Rick is saying we want to see a supply
signature.

Yeah, so supply increase, right?

Eric is saying, you would short on the
break below the buying climax level.

All right, great.

So we're looking at this level right
here.

Simon is saying, increasing supply at
the top of the trading range.

Okay, but what is the context here,
guys?

I mean, like, if we are short traders
here,

and this is the stock that we are
trading, then what is the context for

short trade?

I mean, obviously, the structural
context is gonna be that we would be

some kind of test and reaction into the
support area, just structurally.

Okay, but what other context we have,
let's say, on the bias?

The bias before this point is what?

We're still in the uptrend.

Yeah. We're still here, uptrend, and
then reaccumulation, and then look at

rally. So strong.

If this is a strong rally, then we don't
want to short right away.

And that's my point here, Simon,
because, you know, you're asking about

right here, right?

B15.

This is not a good part of short.

I've done this so many times, and so
many times I was right on the bias,

but I was wrong on the timing just
because of the strength of this rally.

There is just so much that is going on
in this rally, so much momentum, there

a lot of buying.

So what you want to do is you want to
have some kind of test and see how the

test behaves.

And then you want to see how, after the
test, supply comes back into the market.

So let me just kind of see. Okay.

We want a short time above the buying
climax on the upthrust action over near

R13.

Okay. Well, we'll definitely get to
that. So we are weak enough to this bar.

we are waiting for the test test comes
here still i see a lot of momentum in

these two bars i mean obviously in the
first one yeah off the low so that just

suggests to me that it's still too early
for the short position so i'm gonna

wait for another retest but before we
need to retest the support if support is

going to be broken and let's say we have
a lower low I know that because of this

momentum, there's going to be some kind
of attempt to repeat to rally.

And that would be my point of entry
right here, because I know that after

low, low, most likely we're going to go
lower.

We're going higher again, and this looks
like an up thrust.

So at this point, this is interesting,
and I'm thinking, okay.

We're having a lot of excitement here.
We're having a lot of excitement here.

thrust, could it be potential phase C in
this structure?

That would make sense. I know that the
next bias is going to be to the downside

if I'm thinking that this is a trading
range.

So up thrust at the point of the
resistance in the smaller structure

of sense.

Therefore, my first entry would be on
this bar right here.

This bar comes back into the trading
range, closes below the low of the

bar, and suggests that this was the
highest point.

This was the highest high.

Now I want to understand how the price
moves.

Well, first of all, our bar point of
entry does not have a lot of selling on

So not that great.

Then the price moves down. We have this
bar right here, and it commands this

level of volume signature. So there is
some increase, but not a lot of

commitment to the downside.

Everything else is within the body of
that bar. So we kind of see how selling

was exhausted.

So we would not be entering this
position or adding to this position

we see a confirmation of the
continuation and maybe supply comes

Where is that?

Okay, let's find that.

So this was our first bar, first point
of entry.

And then the second one, right, let's
look, let's look.

Should be these two bars.

Somewhere we see that increase. So
structurally, we are trying to overcome

high, again, in the upthrust type of
manner, like we did here.

And then the price comes back really
quickly into that smaller range that we

have here.

And it does on a slightly increasing
supply signature. So again, not the

strongest signal. And we kind of know
why, because there is...

by the big interest here in this area.

Okay, so then the next one would be
somewhere on the breakout,

we could do that.

And then probably from there, we're just
gonna stop and just wait until the

price hits our support level.

So that's how we most likely would do
the short here.

Think about the context.

And then think about after such rally
with momentum, what kind of testing

going to have.

You know, a very, very common mistake.

I've done so many of those.

And the most irritating part of this
trade, especially if you trade options,

is that time goes away. It eats up your
premium. And then when you

close out the position, let's say
with...

either a small win or close to break
even, a small loss, then

the price really collapses.

And you have to close it because your
options is close to the expiration or

premium collapse is just accelerating.

Okay, so did we do that? Simon, what
other questions do we have here?

on this chart when we are testing are we
just looking at the swing high or its

volume or are we also taking into
consideration the rally strength i was

more about the strength but uh we've
talked about this volume as well it's

consistency of this volume and
specifically you know these two bars or

bars at the bottom that have a lot of
demand signature

So you could definitely use volume
characteristics also to confirm that

is very strong and then just think about
what kind of short trade you can have.

That's a very interesting non -practical
exercise because obviously we

would never be thinking about shorting
this particular stock or ETF at that

point of time. There are some other
stocks that would be much weaker and

interesting.

All right, great. Let's jump to the next
segment.

What else is here on this?

Oh, the next bias game.

What do you guys think?

Let's kind of have a vote right now.
What do you guys think right now

the bias is?

Have a look.

Hear what your mind is saying to you.
That usually is going to be like your

past is talking to you.

All of the structures that you've seen
like this that you acted before in the

same way. So that's going to reflect the
structure.

I'm sorry, that's going to reflect your
answer.

Okay, I'll give you five more seconds.

And obviously, I'm not going to reveal
the answer today.

That's going to be for next week.

All right, so we have quite a few
answers.

And, wow, we have...

Anonymously, we've decided that this is
accumulation or reaccumulation in this

case. Okay, great.

Wow, so the whole class is just like one
decision.

Usually, I'm surprised not with the
bias. I'm surprised more with how our

bias here is so non -diverse.

Usually, we would have like at least one
or two people, but this is like 100 %

interesting.

Okay, well.

Let's see next week how that's going to
unfold.

And you could go into your analysis,
send

me that, and then if you're unwilling to
wait until next Tuesday, you could

always check out.

this game on our Twitter.

The solution slide comes out on Friday.

And by the way, guys, I really
appreciate that some of you would send

stating that I know what the answer is
because I'm following you on Twitter and

I looked it up.

But I did this analysis before I looked
it up and I was wrong.

And I want to acknowledge that.

And I see my mistakes here, here, and
here.

These are the best emails that I could
possibly receive from you.

We will make mistakes. I make mistakes
in the markets

on a consistent basis, I would say.

just because there are so many mistakes
that you could possibly have, whether

this is in the analysis, execution, in
the post -analysis, in the process, in

the mental picture, and so on and so
forth.

So we still repeat our mistakes even in
winning trades where we are not

optimizing the trade and so on and so
forth.

So we just have to repeat this over and
over and over.

get rid of our mistakes.

Bias game is one of those games that
allows you to eliminate some of those

mistakes. By the way, I was thinking a
lot about the way of how we actually

construct the bias. We've talked about
this, but could you guys remind me and

write this down, please?

How would you approach the definition of
the bias? I mean, like structurally,

what would you look at when you look at
the chart?

Would you look at the Thwin analysis?

Would you look at the bar analysis?
Would you look at the volume analysis?

would you combine all those step by
step?

What would be the first thing that you
would look at?

What do you guys think? What would be
the first thing that you would consider

observing for the definition of the
bias? What is it one first thing that

usually would look at?

Rami is saying background.

Okay, background, meaning what, Rami?

Rami is saying swing analysis looks for
the supply bars and associated volume.

Eric is saying the run -up or trend
leading into the trading range.

Okay, great.

Okay, Rami is saying trend pre
-existing, the background, context,

So, yes.

So we would definitely, yeah, we kind of
going, the Wyckoff story unfolds from

the right to the left.

We need to establish the context that
we're going to use

in the discussion of the trading range.

We want to understand how, what was the
environment before.

We want to understand how it concluded.

We want to understand how the initial
change of character or resolution of

has happened, what kind of result we
had, and then

we're going to go through all of the
swings one by one through the whole

structure. We definitely also want to
kind of have a look at

the volume signature from the
perspective of institutional presence

it happens and then where maybe it's not
happening and maybe where it happens

you know more on the individual basis
and so on so forth and then how the

reacts to that and that's another step
and obviously a

concluding step would be to think about
the structure itself so by

that time when you already

have a feel for the structure, that's
when you want to apply your structural

layer with all of the labeling.

Eric is saying, could you please repeat
from right to left or left to right? I'm

sorry, Eric.

The Wyckoff story unfolds from right,
I'm sorry, from left to

right because we need context.

And context always comes from the past.

And remember that statement, judge the
market by its own action.

So all of the information on the bias,
on timing, and on the potential

character is already on this chart.

Sometimes, and I think a lot about how
markets are so much

like the universe itself.

kind of like this big, big space with a
lot of events.

And when we look into space and through
the universe, all of the secrets are

there and all of the answers are there.
We just don't see them just because we

are not capable of seeing them.

We are not aware of concepts or we don't
have the technology to see.

Well, the chart... I kind of see the
same way. It's a little bit of the

right here.

Judging the market by its own action
suggests an idea that everything is

on the chart for you to define those
three elements, bias, timing, and

character. So therefore, with that, do
this homework regardless of the bias

we have defined as a group.

go through all of the screens, go
through this whole analysis, and then

week we're going to go through this
together.

Remy is saying, one error in the past
that has cost me more than any other

is not paying attention to context, the
background.

It's a problem of perception.

at least in my case. And I would agree,
Remy, and I would comment maybe from a

different angle, but about the same
thing.

Let me explain really quickly and you'll
see what I mean.

I think our attention always is on the
short -term picture.

Unfortunately, that's how our minds
work.

And I think that maybe because our minds
cannot comprehend

a numerous flow of data, like, you know,
we would be just, it would be too much.

I think I heard somewhere or in some
articles that we could retain

efficiently, you know, on the very, it
was the very untrained brain, only

eight pieces of data.

And that's in a good case. Obviously,
you can develop this cognitive ability.

Because we cannot perceive so much data
at the same time, when we look at the

chart, I think the emphasis goes to the
latest portion of the chart.

And if we would just analyze this, let's
just kind of do this right now, guys.

What do you think about this portion of
the chart? Which definition of the bias

would you give to this particular
segment?

Up. Bullish.

Bullish.

Weak uptrend.

Long mini uptrend. Phase C screen and
test. Well, I was more talking about

kind of like what do you think the bias
is here, Arvind?

So yeah, we see a lot of the bullish
characteristics, right?

this, this, there is some supply that's
coming in, but let's say it's not

as much as here, but we still have to
assess this. If we don't have the

information about this portion of the
supply, then we can't really compare,

right? We don't have information about
this either, or this.

So when we look in isolation, we
probably would be thinking,

wow, this still looks bullish at this
point. There is no other bias that I

think of.

I mean, like I'm trying to figure out
how to think of this in the more of the

bearish bias, and I can't find anything
except maybe some supplies coming in

right here.

And then without any references to the
past, we can't really understand this

supply that is coming in.

Is this a damaging supply or is it the
supply that is being observed?

There are some clues here.

I'm not going to go into those because I
want this to make interesting for us as

a group for the next class.

But that's the whole premise of when we
look at the data and when I work with

students, I think the emphasis first
goes to the most recent price action.

And then the whole context is kind of
being disregarded.

So I think, you know, I would agree with
Rami.

All right, guys, let's jump into the
next segment.

Interesting discussion on the bias game,
but it just took a little bit of a long

time.

I'm going to go really quickly through
this. For those of you who are in WMD,

we'll talk about this.

A high, a low.

That was great.

Good call on the potential phase C test.

This was a very interesting spot right
here.

I really love this bar because it was
very challenging to trade through. It

committed below the last bar that
committed above.

So you have two reversals here. Well,
actually not two, but you have

So one, two, three.

You have three reversals in one, two,
three, four, five, and five days.

So that's why it was a little bit of a
difficult spot. Plus, obviously, this

whole news capitalist situation that
we're in, it could have been, you know,

I said in the class, it was 50 -50. You
know, would they have much worse

negotiation?

It would go down.

So it's just even not kind of fair for
us to make any type of prediction until

we have a confirmation, which came in on
this bar, and I was thinking that this

is the time when we're going to start
breaking out, and we're still here. Why?

Because, again, news dictates the way
how the structure unfolds.

What's still nicely bullish is that the
Russell is not having the same reaction.

It starts to outperform.

And that we are, we could still reside
here for quite some

time. We could create this kind of like
apex formation.

And in some of the analogs that I've
presented in WMD, there is a timeline

January where we could have that apex
formation.

and then we're getting out of this
formation. So we're waiting for the

that makes a lot of sense.

Bitcoin attempt to rally, no lift until
we see more of the commitment

above 9 ,000. There is no question that
we're still probably going to go down.

One of my targets is still somewhere 5
,000, around that, 5 ,500.

Oil.

interesting call right here that I made
on Twitter

and it looks like the two next bars had
a better reaction

than the previous two bars and then the
next bar reverses those bars

not fully yet but we are looking for the
close above 55

that would be

a commitment to the upside that we would
be waiting for. Unfortunately, this

market is also related to the decision
on the tariffs.

But we're seeing, and we've analyzed
this, this is a very interesting

It's a bullish reaction after supply
came in here on the overthrow.

And then look at how the price does not
wanna go down.

Does not want to go down, does not want
to go down, does not want to go down.

Upsloping structure.

They're just waking. That's why the
trading range develops this way.

They're waking. That's why the volume
signature is so low.

So if the resolution, which seems to be
the momentum, is on resolving the

tariffs, at least part one of the
negotiations, then we're going to have

breakout. We're going to have like...

a bar of like two or 3 % where we're
gonna jump up maybe like this,

something like this, above maybe 56 into
this area, into the high of

these bars right here. So that would be
a bullish sign of strength bar.

We could trade it some way here early
on, on that bar, that would be the best.

And obviously just a failure below, I
would say 52, something like this where

have a sign of weakness, and then a
rally that goes nowhere, then

there's going to be a continuation.

But oil is very interesting right now.

Gold, imagine if there is a resolution
on the tariffs.

What would the price of the indices do?

Go up, and again, we're going to have
this acceleration somewhere here on the

breakout. What would gold do?

Well, the gold would do this.

We have a trade that is overpopulated
with institutions right now.

They are all in this gold trade.

And because they are long -term
institutions, they are going to go

sign of strength and they're going to
accumulate on the way up.

And then they're going to hold on. But
nobody's going to buy. And because

nobody's buying, this structure creates,
right? So no activity and the price

slides down.

So what's next?

Capitulation by speculators because long
-term holders are not going to give up

this position, but speculators don't
want to go through a big structure.

If the price is not traveling right away
or after a specific time that

they would consider to be sufficient for
the reaccumulation and where the price

should resume, it's moved to the upside.

then they would get out, and that would
produce that capitulation.

The only thing that could still keep us
in this structure short -term right now

is some kind of news or retest and then
absorption, something like this.

And if news, then something like that.

But if the news are going to be positive
and the market reacts to the upside,

most likely capitulation, and we're
probably going to go into this slightly

above 1400.

level but this could present a very
interesting long -term opportunity to

gold again and then just to wait for the
long -term trend to resume

um and vix is just showing us that there
is really no volatility

to the downside yet um nothing to be
concerned about

unless we are starting seeing

some big bars like this, like this.

That would suggest that at least
temporarily we could have something.

Okay, great.

Remy is saying, I found your recent PNF
chart of crude oil published on Twitter

very interesting and useful because it's
contrary to the existing monetary

economic view, slowing world GDP growth.

Yes, and...

Rami, I would agree with you. This is
the big concern for me when I publish

like that.

So what I'm doing is I'm just basically
translating what I'm seeing on the chart

and the way how I'm translating that
into that analysis.

And what I'm seeing is that there is
some kind of anticipation on the news.

So in a way, it's kind of a little bit
of a gamble, right?

What if it's... bad news then definitely
analysis will be considered erroneous

if it's great news then you know it
would be a good analysis but in reality

the best trade here is most likely just
to wait for the confirmation bar where

we have some kind of resolution
something in a bar like this having said

bet on oil here is with

kind of like the structure itself.

The structure shows inability to commit
below, and that's bullish.

So that tells me that majority of the
smart money is thinking that the

resolution is going to be positive, and
it makes a lot of sense to me as well.

The next structure is upsloping,
suggesting some kind of... breakout and

acceleration. So that also suggests that
the views are more positive on the

development. So in a way, structure
dictates, you know,

kind of like the sentiment of the smart
money as they

anticipate but not participate.

And, you know, we definitely...

could use this to our advantage. Dimitri
is saying, can we talk about the idea

of synchronicity of effort versus result
in crude structure here?

Absolutely. So where is that stop in
action?

We're probably going to see it somewhere
here on the bar like this.

This is the demand that is increasing.

This is our red traffic light.

Then we need to have like this confusion
between the supply and demand.

So somewhere here.

where everything just goes down. And
then we have more demand coming in

and price moves.

So this is where price effort in the
result is synced.

Now, to which degree it's synced, it's a
different thing.

Because I could go back here and I could
say, well, okay, here are the price.

and the volume is synced and the effort
is synced as well.

But there is a much easier movement to
the off -site in this bar than, let's

say, in this one right here. So
therefore, we would be expecting less of

rally on the next bar, which we do have.

And then I would probably also be just
looking on the lookout for the bar

going to have that expansion of the
volume and that's going to commit above

that would be a synchronization bar and
that would be also a breakout bar

uh it

seems volume is going down price is
going up uh from mitri so um when we

about synchronization mitri right so i
went through the bar by bar you can also

think about this for swing to swing
right so for instance

Yeah, probably not here. Okay, so let me
just think about this for a sec.

Something like here. This is the
stopping demand right here on the way

this is our red light. Then going
through phase B, we're going to have

diminished volume characteristic.

And then going into phase C, we're going
to see, again, stopping demand, and

then that demand is going to start
increasing that effort to the upside.

And that's going to produce those bars
that are going to travel.

So this is something what we are
expecting here in oil right now.

Like this type of breakout, local
breakout structure should happen, should

happen on increasing volume signature
showing synchronization.

And also, you know, suggesting that
we're going to travel through this

So that's the expectation.

All right.

Confusion of supply and demand.

Would a dodgy candle provide this
insight?

Well, I was talking more about the
confusion kind of like in a way of like

at this spot right here where we had the
volume increase.

In phase C, we have volume increase.

And then in phase B, you know, both
demand and supply are exhausted.

supply is exhausted because it was
pushing down, pushing down, pushing

there are no more sellers.

And then demand is exhausted because it
was observing, observing, observing,

pushing up, and now it's exhausted.

So, therefore, going into phase B, we
have a lot of situations, I'm sorry, a

of patterns in the volume signature
where the volume goes down because all

the bets are made.

And then people are just seeing how
those bets are going to unfold.

And then they're going to react, you
know, to price movements out of those

areas.

And then, obviously, synchronization,
you know, something like this.

And you can find synchronization, you
know, either on the phase level.

Your phase D is going to be synchronized
with the effort or

with the absorption, prior absorption,
and so on and so forth.

All right.

Thank you for posting this chart and
forcing me to think outside of the

consensus based on macro views. Usually
macro views are going to be

on the completely opposite spectrum of

the contrarian value composite

operator.

Composite operator is going to view
unfavorable macro views for a commodity

this as a favorable time to acquire at
the wholesale price the position of the

size that they want.

So therefore, as they come in into the
market at those prices, those

depressed prices, and they start...

We're going to start seeing the sequence
of events that's going to unfold that's

going to show us emergence of the volume
signature. And this is going to be our

November special, by the way, guys.

Again, something for your level because
we're going to go into such a deep

understanding of momentum and volume.

So volume is going to occur first.

That's going to start to absorb the
supply.

With that, synchronicity starts to occur
as more demand comes in, and we're

going to see momentum increase.

And then we're going to see momentum
change on different time frames, and

going to start producing changes in the
structure.

So that's how it happens, you know, the
sequential things. But the first thing,

there should be a presence.

a presence of somebody who is willing to
step in and observe whatever is

available for sale.

And that intention, that stepping in and
observing that supply, that's what

starts the whole process.

All right, let's jump to something else.

Anatomy of the trade. Oh, look where we
are.

with this trade.

So we have two solutions, and I want
really quick decisions here, guys,

I don't want to spend a lot of the class
time on this anymore.

We could continue with this talk, which
I'm totally fine, and we're just going

to analyze it and take any available
trades until the end of the semester or

going into the next semester.

that this stock is going to give us. Or
solution number two, pick another stock.

One of the proposals was to pick the
stock also in the same group.

So kind of like with the same theme.

And we could definitely do that. Or we
could go to a completely different

So with that, let's do a quick vote. So
just say yes or no.

SunPower, continue with SunPower or not
continue with SunPower?

Yes or no?

Please vote.

Okay, all right.

Five more seconds. Do you want to
continue with SunPower or do you want to

another chart?

So say yes if you want to continue, say
no if you no. Okay, so.

It's definitely 80%. No, people want

another chart. Okay, great. Next
question.

Would you like to stay in the same
industry group, the renewable energy?

Yes or no?

Would you like to stay with the
renewable energy?

Yes or no?

Okay, so this one is a little bit
harder.

So let me just count.

Okay, so this one is actually 50 -50.

Okay, one more vote. Whoever votes right
now who did not vote.

Okay, so no. All right, so we're going
away for this group.

Okay, so then...

We need to figure out the way how to
select the stock. And in this particular

group, because you guys are more
advanced, I would be assuming that this

should be easy for us.

Think also about how much time we have
left. So we are October,

end of October. So we have this is
session number seven. So we're in the

of the class. We still have about two
months, about.

to trade the position.

So this is probably a swing trade that
we want to initiate, that we want to

maybe go about.

So think about the stocks that have that
momentum characteristics. So we want to

find the stock that's going to do
something like this in a month or two,

Where it's not necessarily going to do
this.

Just going up is not enough.

We want to find the stock that is going
to have this momentum characteristics.

So candidates, and we could look at
those right now. I see a first candidate

us that comes from Dmitry. So let's look
at that.

Then we could vote. Maybe that's how
we're going to go about it.

I have an interesting process to do
that.

Okay, so this is in energy exploration
and production.

and i love this pattern um definitely a
very interesting stock um

looks like on the backing up action
right after phase c i love the

minus sign of strength in b here um and
now in this backing up action so

great but it looks more like a campaign
stock would it travel here well actually

it might travel the same way right and
by the way Why oil would go up?

Why would an energy stock have an
increased volume characteristic? So

on unbalanced volume, it's going to look
like this.

And then have higher highs and higher
lows. And the macro view

is still going to be negative on oil and
on energy in general.

Well, because they are buying at the
point of price depression and

bearish sentiment.

That's what they do.

Okay,

so why don't we do this?

Let's vote for this stock, yes or no.
And then if this stock is not being

then we're going to go to the next
submitted symbol. And we're just going

until the point where everyone agrees.

Okay, so please vote on this stock.

This is Crescent Point Corporation. I
actually had just a recent position in

this stock right here.

I caught this move and got out, you
know, on this win out. Actually, it

really nicely and very quick. Has a
point of entry right now.

So, I mean, Mitri, I think I'm with you
on this. I think I understand what...

what you're thinking here my problem
with this probably would be almost none

with an exception of maybe just like a
small analog here what kind of rally we

couldn't expect here um but we could
analyze it a little bit more this would

a homework okay so let's look at the
results okay uh

By one vote, unfortunately, we didn't
make it Mitri, so I'm sorry.

Okay, let's go to the next one.

That's kind of fun.

Okay, the next one is Bitcoin.

So, and obviously, guys, you know, we're
going to vote as well.

Let's look at that.

Look at the Bitcoin real quick.

Here we are in the Bitcoin.

All right, well, let's vote. Let's not
wait.

What do you guys think?

Oh, you can't see the chart?

Oh, yeah, what's going on? All right,
hold on a second.

Strange.

okay you should be seeing it now so here
is a bitcoin let's see what you guys

are saying okay so definitely no

uh more notes to that okay next stock
and uh

let's just definitely pick up the stock

trade desk that's the next candidate

all right so definitely a lot of
momentum close to the moving average

moving average so something where we
experience before a stop in action

and a trading range okay let's vote what
do you guys think

would you like to trade this stock until
the

end of the semester

Okay.

Five more seconds.

Let me know what you want.

As a swing.

We're trading this stock as a swing.

All right. So we're going to close this
out, I think, right?

So you guys are saying that.

this is the stock.

So finally we found something that let's
say at

least the majority agrees.

So some of you said no.

So let's just guys kind of let go with
where we are.

So for the homework, let's analyze the
stock.

Please send me your bias game and also
your analysis of the trade desk.

And then next class we will discuss
where we are.

Again, remember that we are

looking for kind of like one to two
months trade, which

is a swing trade.

That's our goal.

Could be both on the upside and on the
downside.

All right, great.

I'm happy that we're done with that. A
question from Ronnie, and that was on

SunPower. If possible, and if it fits,
okay, can you share the view that you

would see as a good timeframe to look
for a positive test on spring LPS or

reversals? Is it correct for me to
assume a commitment above the white

Okay, so this was the line right here
that Ronnie had. A commitment above this

line would be a positive sign.

for entry assuming the analysis bias and
everything else makes us believe it's

accumulation would it be better to wait
for the test that is big enough to show

on the daily charts so you can actually
do both on the intraday

and this was the top of this latest
attempt to up thrust

in kind of like this smaller
distributional pattern right here

And look how much momentum we have to
the downside. So don't go in into

the first rally after such increase in
the momentum.

Don't do that. It's kind of the same
conversation that we had on the bias

chart, where a very strong rally
suggested some kind of continuation of

the absorption of that selling.

And you would be rewarded because right
away we see some more selling, selling,

some selling, exhausted selling, and
then we're thinking there's going to be

another attempt.

And here it is. And you can trade this,
and you could actually trade both

places. But I think that Ronnie has a
very solid logic here.

Waiting for a daily confirmation
definitely gives us...

a much higher probability that the swing
has been reversed.

Having said this, the intraday points of
entry would give us the best possible

entry point on the price itself.

And if you're thinking of using some
kind of mechanical ways of identifying

to get in into the position, and you're
using some levels and the breakouts,

this still would work, but you would
have to think about the exit.

exit strategy, how do you exit the
stock?

So probably after the reversal, so I'm
not sure if we

would reverse here, but we definitely
would reverse here.

So something like this, this could be a
trade if the pattern fails and if it

doesn't go up.

As you've mentioned here, this could be
a point of entry and then this could be

an exit and this would be a trade. And
as both cases, it could be even a

breakeven trade or you could develop
also some methodology where you are

kind of getting out on the momentum on
acceleration and not anticipating

a continuation. You can do like one half
exit and then still continue

with the trade and then exit on.

on the reversal bar, something like
this.

So use daily more as a confirmation of
much longer trend and use

intraday just to initiate some points of
entry,

add -ons, scale -outs.

talk about the position size I think
that we did talk about this in

the WTC course but I just want to make
sure that you know

we've covered that this chart is

Kind of like showing, and I borrowed
this, I thought it was from Etsy

Now I'm thinking it's probably not from
Ed.

So basically your optimal spot, not just
on the performance, but in terms of the

size in itself, is going to be that bell
curve where if you're

increasing the size, it's going to
increase the risk. If you're not,

in a full -sized relative to the risk,
then you're not optimal.

So you need to find this spot for
yourself. What is it? 1 % of the equity

you want to spend on the exploration of
the bias, if you're correct or wrong,

2%, 5%, maybe some other techniques that
you're going to use where you just

divide your capital and then you size it
up.

um and there are so many uh things that
you can use here specifically on this

picture we also introducing some you
know performance matrix right

um where we're talking about you know
mental uh

landscape um and the background of our
daily um

daily activities. So are we stressed?

Are we relaxed?

So that would produce specific feelings
and then obviously we could act on those

behaviors and so on and so forth. So we
have to make sure that as we go through

those that the sizing is correct.

So we need to understand how personally
we are risk averse, to which degree.

We need to optimize our position size.

We want to understand our position size
in the relationship to the whole

portfolio risk that we have.

And we also want to define the position
risk and therefore the position, the

portfolio risk to be defined by the
context of the environment and the price

structure.

So what do I mean by that, by the way,
guys? This last point, position risk

defined by the context of the
environment and the price structure.

Think about this.

For instance, we could go through
different price cycle

positions.

For instance, this position right here
in the price cycle would be something

like this, where we are At the climactic
action, we

are in the overbought, climactic run.

We are in the overbought, overthrown
condition.

And we would be thinking about

the weight or the size for each

position at this point of time.

Contactually, this is not a favorable
place for us to be aggressive.

So we could have a definition here just
based on technical conditions as to the

size and exposure of our overall

portfolio.

And we could also size up positions,
individual positions.

And then let's say when we have a
reaction, and that reaction, let's say,

minus 5, minus 10, minus 15, minus 20,
like right here.

This is going to be described
technically as an oversold condition

volume characteristics and therefore
presence of the institutions.

So from that perspective, this would be
interesting for us to have a different

sizing and position sizing algorithm at
this point of time. And as we go

through the whole structure, that
position sizing could change or fuller

exposure could change as well.

So just for you to kind of think about
this idea, this is more of the

institutional approach, how institutions
are approaching the risk and how

that risk is being structured within the
price structure, so to say, but

extremely useful.

What if you have a small account, 5 ,000
to 10 ,000 net

liquidity, hard not to use 100 % plus
even leverage?

Yeah, and I totally hear you, Dmitry. I
mean, like I've been in a lot of those

situations, have multiple accounts at
this point.

Some of them are that small.

Could be highly speculative accounts
where if I commit to a position, if it

works out, great. If it doesn't, I'm
moving on, so to say.

And then larger accounts, you usually do
it like this.

At least this is how my trading works,
and this is how

I'm trying to follow this. I have
speculative accounts.

I have two of those. And I have
retirement account.

One of those.

So speculative accounts have

different strategies behind them.

And the goal here is aggressive growth.

And they are smaller.

than the retirement accounts.

And retirement account has the majority
of the funds and the goal here is

preservation.

You've earned this money, you've
invested it correctly, you want to be

riskier, less risky with

a large amount of money. And that's why
in an institutional world where people,

you know, your investors have made,
let's say, big money, the

big thing is preservation.

And that's why investors go for the
funds that have

low volatility for their portfolio.

So less rotation among the positions,
less speculative moves.

more of kind of like buying whole type
of strategy over the cycle, but with an

idea that it's still gonna outperform
the market based on the selection

algorithm.

So the key here is to transfer the funds
from your speculative account once

you have good trades and you have good
profit into your retirement account

and just to keep

kind of increasing your retirement
account this way.

And that's basically the mechanism that
I'm using right now with my trading.

Have some trades that work out really
nicely and then, you know, put that in

retirement. So hopefully that's helpful
to me.

Okay, Eric, I missed exactly what we
were talking about, you know, high

probability setup.

Okay, so Stephen is saying never take a
position with the risk greater than 1 %

of your trading capital.

Okay.

Let's come back here.

So that's what I meant by the position
risk. And then obviously we go into what

Stephen is referring, you know, position
size. So Stephen is saying never take

more than 1%. I would agree with this. I
think that 2 %

it's kind of like on the higher
threshold, let's say for the any type of

retirement accounts, I would still
accumulate shares by

pyramiding. So for instance, if I have a
2 % risk that I've accumulated here,

then I would be okay accumulating
another 2 % here just because my

be already profitable and my stop loss
is probably gonna be somewhere here.

So I'm not against increasing the risk
in the stock that is proving me right.

fact, this is something that I'm working
on a lot in my trading lately because

in a lot of cases when I'm right, I
don't have a correct position size. I'm

undersized. So I'm trying to be very
cognizant of how

I pyramid and I'm actually...

I would be willing to add if the trend
is showing me the correct

movement and the correct character.

So let's go through this process.

It's not very complicated at all. This
is for stocks.

And as we go through the reasons for
entering this trade, in

the end of 2018, beginning of 2019.

We're thinking about the context for the
market. Market is in oversold

condition, so therefore at least a
relief rally is gonna be unfolding.

PayPal is outperforming, price structure
is complete. We're thinking this is

phase C.

Kind of reminds me a little bit
structurally of what we have in the

just in a different way right this is a
huge structure in the market in the

market the smaller structure first
initial volatility rally then volatility

phase c but this is obviously just a
much larger structure here so uh enough

causality short -term reversal on the
point of entry it was at 82 dollars so

next question is what's the allowable
risk based on the total equity and on

initial

difference between point of entry and
stop loss.

Let's assume that we have a 100 %
equity, 2 % per

position risk is gonna equal 2000.

Our point of entry is 82.

Our stop loss is gonna be somewhere
here, 76.

So this is point of entry.

And so our risk defined by

dollar amount is six dollars.

So we know how much we can risk on this
position and we know how

much in dollars the difference between
the point of entry or entry and the

stop loss our risk is.

So now we could go to the next point and
we could say okay well

could we define the reward reward to
risk ratio

and then calculate the number of shares
allowable for this position

all right for the reward to risk ratio
we need to understand what the reward is

and our pnf target was at 122 dollars as
the

minimum count oh by the way did it reach
it i wonder i have

not looked at paypal recently

we are taking that target and taking the

point of entry.

So $40 until our target, we take that
$40 and we divide it by the

measure of risk, $6, and we have the
ratio of six, that equals 6 .7.

This is more than three to one.

reward to risk ratio so 6 .7 is a really
good rate for us we definitely would

consider this position just based on the
risk parameters and now how would we

calculate the number of shares again
we're taking that six dollar risk and we

are taking also two thousand dollar risk
that is defined on two percent of

equity that we're willing to risk each
time on the

size that we have, and we divide that 2
,000 by $6 risk, and we could

get 333 shares at this price with this

risk. Now, a big question here, what if
the price gaps to let's say $70

the next day after the point of entry?

Well, this would mean that our risk

is gonna increase by the factor of 30 %
about

$2.

Hold on, $2, 76,

no, by 60%, right? So instead of, let's
say 2%, we

will have the loss of about, I'm just

approximating, guys, so maybe I'm gonna
be wrong.

3 .5 % about.

So that's way above, let's say, 2 % that
originally we were willing to spend.

But think about how many of those
situations you're going to have

where you have those gaps

against you. So this year...

you know i have those each year i must
say um you know this year i had let

me quickly think about this i probably
had one

um maybe two but those happen but on the
number of trades let's say per year

that you have this is going to be a
minimal number

And you could even historically go back
to the previous years, let's say, take

the last three years as a better
measurement of where you are with your

equipment of analyzing the stocks and,
you know, executing, and use that as a

reference. You know, how many stocks
will get down like this on you.

And you could calculate what are kind of
like the probabilities of the...

of a loss like this. It's going to be
probably more minimal than you think

your knowledge increase and with your
skill increase.

That's how we would calculate the
position size for

stocks. If you are using leverage, you
could increase your equity size.

If you want to use, let's say, 1%, so
obviously this would change to 1 ,000.

or if you want to increase that, you
could do that as well. You could put

into the Excel spreadsheet and just have
this algorithm

coded there.

Somebody was commenting on the PNF. Yes,
it's useful to calculate, approximate

the target. I'm not even going through
the whole structure.

I just want to know what is the most
minimum target that I could have on the

that makes sense to me. And it looks
like within this structure brings us to

122. And now I'm looking at the numbers
that you guys are posting, Michael, and

saying, okay, PayPal hit a high of 121
.48 on July 16th.

So we came literally, what, within like
50 cents, 52 cents of this target.

on july 16th that's uncanny um and that
would be the trade um it's not

necessarily that we would be getting out
we would be looking for the signs of uh

short -term distribution reversal
stopping action and so on so forth how

we be dealing with this if we have
options instead of let's say a

cash position okay well these parameters
are still going

to be the same the equity size uh the
risk per position two thousand point of

entry and stop loss as well we just
don't necessarily need to understand the

risk in terms of the dollar size uh if
we're entering on option position here

and we enter in directionally so we are
buying a call then

this purchased and therefore our risk is
defined by the premium that call so

let's say that the premium of that call
would be let's say five dollars

so it's five dollars we're going to be
spending a price on the

option we're going to be spending five
hundred to control 100 shares

and this would be our maximum risk

we can allow this option expire
worthless, or we

can sell it as it loses value and still
collect something back.

But our maximum risk is going to be
defined by $500.

So within $2 ,000, we could have how
many options?

Four options.

And we would control 400 shares.

with these four options, which is
slightly more than what we would with

Obviously, you know, we are going
through the risk controls here, but, you

when you use options, you need to
consider the time duration and, you

the option price is going to change just
based on the volatility and time and,

you know, some other factors.

All right, great. Let's see where we
are. Almost five.

All right, great.

Let's go into our exercise. Good time to
start the exercise.

This action sequence is going to be on
the selection and also on the price and

volume analysis.

I'm presenting you four stocks, four
selections.

I'm going to give you some time to think
about these four stocks.

I want you to analyze them.

Think about the structure. Think about
the volume and price analysis.

Think about comparative analysis.

And then write down one stock

out of these four stocks that you think
is going to outperform

all of them.

And let me give you...

maybe three minutes until five o 'clock
to think about this. And I'm going to

mute myself, guys.

all right guys let's have a look um any
more answers

which stock would you guys pick

all

right okay well we have three answers we
have

stock number two we have stock

number three and we have stock number
four um that's probably not a surprise

right because here we have an uptrend
here we have an uptrend here we have an

uptrend and then higher high and higher
low so still kind of like in this

upsloping structure and here we clearly
have a downtrend okay so

what i would like to do

And by the way, the majority of you said
stock number three.

So what I would like us to do is maybe
just to go through the stocks really

quickly. And please give me the reasons
for those of you who said, let's say,

stock number two. Give me the reasons of
why stock number two would be a

potential outperformer here.

So write it down, kind of like bullet
points.

And I'm thinking here, okay,

stronger than three.

Okay, so where exactly stronger? So we
have the same type of the reaction.

This move to the upside in the stock is
stronger

than this move.

Although, you know, we'll have to see.

Just on the comparative basis, let's
just quickly see.

So we are, what are we doing here?

What are we comparing?

We're comparing this high. This is a
long -term high.

That was in July.

In July.

Okay, this, this, and then this one
here. This one was in March.

Something like this here.

Okay.

We kind of...

have a short still short -term
outperformance by stock number three i

i mean if we would be looking at let's
say uh

oh i see what you mean oh this rally
right here okay got it

got it okay from april april to

june this is late june right so late

june would be here okay yeah okay i
could see that yeah there is a little

outperformance here um on the way up um
but not necessarily on the way down i

i think so maybe a little bit yeah a
little bit okay well even if we have

this outperformance what happens here
are we outperforming here um probably

Not as much.

I would have to go point by point just
to come to the conclusion to this.

But there is something about stock
number two.

Let's look at stock number two in more
details.

What do you guys see here?

What is the character with which the
price moves?

And I definitely see the point here
about this reaction being less

than this, this, and this, and then this
reaction is also not being that much.

I think these are all great points here,
and we would be expecting a

continuation to the upside.

Actually, all of the...

Stocks went up to the upside up to that
point.

We're just trying to define a selection
for us. What is that one stock?

Okay, so look at the character with
which the price moves up.

What are you guys saying? Okay,
increasing volatility, moving up with

supply.

The reactions kind of dip, and they have
those gaps,

volatility type of.

Look at even like this reaction right
here.

One, two, three, four, five, six, seven,
seven, or maybe even

more times. It was just like push down,
push down, push down.

Look into this stopping action.

Look at the size of the reactions.

You could be thinking that this is an
upsloping structure.

You could do that.

there are some elements of stop in
action here.

So therefore, this would be a bind
climax area by itself.

Change of character, we see that from
the bind signature and the gap, test,

phase A, B, B, C, and then we are in D.

And D behave exactly how we want it.

So, yes, there is a lot of logic here as
to why this selection.

But, again, it's just that character
with which there are so many spots

where the stock is just being sold so
aggressively, you know, with

so much volatility that it is not as
attractive.

maybe as not as attractive as stock
number three. Let's go into the details

stock number three.

Stock number three moves very nicely to
the upside, and we

can observe that the momentum increases,
the volume signature increases,

we are overcoming the price highs, we
are committing to the upside.

We are reacting in the non -threatening,
non -aggressive ways, and our reactions

stay that way until we actually have a
final climactic run

with the final gap, change of character
bar.

This was also a change of character bar,
but nothing happened. This one actually

follows through, so this becomes a
change of character, and then we know

are going into a trading range.

Throughout this trading range, we are in
the downsloping structure.

So our sign of strength is this.

And a backup.

Phase C.

And a nice continuation.

The majority of the momentum came on the
initial sign of strength.

continuation and usually we're gonna see
that momentum confirmed by the volume

signature. And this is what November
Special is gonna be about.

It's just to looking for those patterns
where we have that initial momentum kick

out of the structure and that's
confirmed by the presence of the

And then the key for us will be in
November Special to define also these

moments.

where would the reaction go?

Well, usually after the initial momentum
kickoff, we're gonna see,

let's say, last portion of the upswing
with less volume signature, less demand,

less bind.

Therefore, momentum is gonna fade.

And it's into the area where the late
buying was happening,

this is where we would be expecting the
reaction to come.

And this is where we would be expecting
the reversal to happen.

And I'm gonna show you a lot of examples
of this type of relationships between

the momentum as the function of
institutional

presence and their increased effort.

to push in the direction of the bias and
how that plays out in the structure.

So hopefully that's gonna be useful.

All right, well, majority of you said
stock number three.

I would probably be thinking about
either stock number three or stock

four. If I would be choosing only one,
stock number three would be my candidate

as well.

Why am I choosing it?

Because I clearly see that institutions
here are very dominant and

that the uptrend is very dominant.

It's stable. It's defined.

There is really not a lot that is
happening in this uptrend in terms of

distribution. Every time we have a high
volume signature, there are ways of how

the price manages.

to reverse itself, observe this supply,
and specifically here, we see an

emergence of the supply, and look what
happens.

The price actually creates a higher low.

There is a lot of momentum behind this
rotation, so we would be expecting maybe

a slight continuation, maybe a slight
retest, but probably rapidly the price

could leave this trading range.

Also, in the middle of the chart, look
at the bell curve that we see here.

That also tells us that institutions
were getting in into this position

heavily.

And they added to this position here as
well.

And now...

you know if we're looking at the value
zone for this point of entry so we're

going to say that this is this is where
they were buying

and then the price quickly came down to

the same value zone and they bought in
again so there is a lot of

buying throughout this whole structure
And then there is a confirmed volume as

buy again as an add -on into the value
zone again.

So I think this is a really good
candidate.

Let's talk about stock number four. For
those of you who have picked stock

number four, give me the reasons why you
think that this stock is going to

outperform.

This one is very interesting.

Why would it outperform?

Okay, so let's look at this.

It broke the downtrend.

Indeed, it did.

So I'm assuming this would be the cause.

High or low?

All right.

What else? We look at the volume
signature and we're seeing that's like

diminished volume characteristics here
going into the last reaction.

So volume is going down, suggesting
supply is going down, suggesting some

of rally.

Well, we know that, yes, all of them are
going to rally.

Now look at how aggressively this rally
starts.

Does this remind you of anything?

Analogs? Okay, well, let's look.

This analog here, the bar is this one.

So we see that there is slightly less,
slightly less

effort.

Pushes the price up.

Does it push the price in the same way
or in a different way?

Obviously, it breaks the trend.

What do you guys think?

effort is almost the same slightly less
pushes the price

easier or harder

same way urgency to buy yes we see the
urgency to buy but

we want to define the level of
resistance of the supply

and the way how we can measure this is
by the progression of the price.

We have the same analog, almost the same
analog effort, so how would we

measure this? Okay, let's look at this.

We could measure it by the distance
traveled. I'm taking the true range

in both cases there is a gap.

That probably would be still less
accurate.

because the volume signature does not
belong to the gap. The volume signature

that particular bar does not belong to
the true range.

It belongs actually to this whole body
here.

So I probably would just take the gap
itself and just say, okay, 50 cents here

on the gap.

What's the gap here?

From about 17 bucks to...

What is it?

1780, maybe 85.

So maybe like 80 cents.

So which gap do we like more? Obviously,
more bullish. And we're looking here

for the definition not of bullish. We're
looking for the definition of better,

more bullish, moves better.

I'll tell you why in a second.

Okay, so much better gap in the second
case.

Let's see if the movement of the price
is much better in the second case than

the first one.

So we are traveling here, the range, and
I'm taking the high and the low,

approximate in 19 .25, and maybe like 17
.60, so

that's, what is it?

60 1760 okay so 18 about

185 just about okay

and here we have maybe 17

85 and here the low

is about 1670.

So $1 .50.

Here's a quantification and algorithm to
calculate the velocity

with which the price moves on the volume
signature that is

analogous to each other. Again,
something...

of a preview for the November special,
something that we'll talk about within

the context of the momentum, because we
want to define the momentum and how it

moves, right?

Arvind is saying, do you compare
absolute or should we compare in

terms? Because the price is very close
to each other, we don't have to think in

terms of the percentages for the
complication of the calculations, but

definitely do that with the different
scales.

And usually analog bars are supposed to
be somewhere in the same price zone.

Otherwise, you might actually compare
apples to apples.

Well, in this case, we see that gap
moves faster.

And then on slightly less effort, the
price moves more, suggesting

that the price moves easier.

than in the first case.

So what does it mean?

It means that we're probably gonna have
a rally that's gonna be better than what

we've seen before.

And if that's the case, then the rally
that we're expecting is gonna be at

from 15 to $24, so that's gonna be nine
bucks.

So we're probably gonna overcome

probably gonna overcome 30 bucks,
something like this. And then if the

is gonna work, we're gonna still have a
continuation of the rally. So we want

to understand how we would trade that.

So any type of small reactions would be
something that we would consider

actually entering and thinking about
some kind of continuation.

One other thing before we jump to the
next two actual, you know, the results.

We've talked about how the momentum bar
defines the ease of movement

and character, possible character, gives
us the distinction on the character.

I'm still struggling with some of the
people that come to me and they're

What are you talking about with the
character?

How could you define the character of
the next move? It's impossible.

I understand the sentiment, but I see
what I see, right? So I

see that this movement is easier. So
that suggests to me that supply

is more observed at this point. I could
confirm this with the volume signature,

but I also could see this in the
reaction itself.

Look at how analogous reactions
developed.

A lot of volume, a lot of cell in coming
in.

A lot of volume, a lot of cell in coming
in.

And then what happens? Some kind of
pause.

And then we have more or less this
laborious way to the downside.

That's what defined actually the rally
itself.

They were buying on the way down, on the
way down, on the way down, and then on

the way up.

Kind of the same pattern happens here.
They were buying on the way down, on the

way down, on the way down.

But look at how much less supply we have
compared to what

we've seen here.

So the level of supply is less as well.

And that's why this momentum is much
more dynamic.

And that's another thing that we'll be
talking about in November special.

So it's going to be an interesting
series.

So again, we would be expecting a
dynamic rally from here, probably

what we've seen, overcoming the 24,
probably even going to around $30.

Again, I think this is a much difficult
stock to trade because of the volatility

to the upside.

It might not give you a lot of points of
entry.

Stock number three is probably the best.

It shows you the most recent absorption,
the test, attempt to break out, kind of

like a perfect spot to get in.

Stock number two.

suggest a continuation of the uptrend,
have some short -term

elements of the outperformance. I like
how volatility is kind of almost out,

still, even here, this type of spikes
like this are kind

of a little bit cautionary for me, and I
would say that

this trend is

going to unfold with less intensity and
supply still going to be present

and then stock number one is very
interesting because we have a lot of

volume coming in so institutions are
present that is being reflected in the

momentum itself and that is such a big
momentum change from what we've seen

before on the way down

So that suggests a change of character,
and we are definitely in phase A. We're

probably in some kind of trading range
formation at this

point. We just don't know where is the
boundary for the resistance because this

momentum cannot stop right away. There
is no selling here.

So therefore, there might be
continuation above this level, and there

trade that is hidden here.

Percentage -wise, this could be the best
trade for short -term.

Why? Because of the most current
development by the momentum and how

continuation is going to happen also
very quick.

But I think long -term, it's either
stock number three or stock number four.

Also, another...

Other observations here.

Where would we potentially be looking
for the target?

Look at the extreme oversold condition.

And this is not just a short -term
oversold. This is also a long -term

Look at this downtrend.

And because of that, we're thinking that
the price...

is in the extreme oversold condition.

Out of the extreme oversold condition,
price always quickly will bounce up to

what was perceived before as the fair
value by institutions.

So we would be expecting our target
somewhere here.

Plus, considering that the price might
move really fast, continuing the initial

momentum, this could be a very good
short -term trade.

Would probably have something here,
short term, just like for a week or two.

Would definitely have an overweight in
stock number three.

Would have a position in stock number
four, but depending on the reactions

are going to come after this level.
Let's look at what happens next.

Okay, stock number one was Apple.

This was happening in 1996.

Here is that first reaction to the
upside.

Again, look at the momentum of the
deeply oversold condition that we have

that moves the price so quickly.

That type of momentum suggests a
continuation.

And I said maybe like two or three
weeks. I think I'm wrong here. Duration

much longer, but we did come to the
value zone.

So probably in this trade,

just thinking more about the duration
itself.

Although we were right here, so two
weeks would take us to the higher

maybe somewhere here.

Actually not, but still would be a
profitable trade.

Stock number two, we were right here.

And again, it's just the nature of how
the stock moves with a lot of

stopping actions.

That is...

come to the whole trend that we have.

So it's almost like there is somebody
that always is going to sell into this

trend, sell into this trend.

So what could we expect?

After the point of entry, a very quick
sharp move.

I don't know how we would behave there.
Our stop loss would save us, most

definitely.

But then again, sharp move here and a
change of character.

such a profound continuation um so still
you know a good profit

but not uh as much as let's say stock
number three or stock number four let's

look at stock number three we were here
we said that this increase in the volume

signature was very fortunate for us why
well because it shows the increase of

the supply

But it also shows that demand is there
by the volume spike and the way how the

price reacts to the high or low, how it
initially balances up. And we're

thinking that there might be a quick
absorption on the way up.

Usually, that type of pattern means that
the price goes up to the previous

resistance point and then consolidates
in the upper part of the range

and then comes out with a lot of
momentum.

So that was very fortunate for us to
think this way and think that we might

some kind of acceleration.

This was a great run.

This was in Microsoft.

And until probably this point right
here, you had no hesitation of staying

this trend.

Stock number four was interesting. And
we said that we need to see some kind of

small reactions like we've seen on the
previous upswing so here is one here is

another one here is another one so that
would be a point of the entry for you if

you're thinking about the same type of
trade kind of like a continuation to the

upside that you would definitely you
know get We were saying that our

target is going to be above this high
just because we are starting as a high

low. And we are saying that this rally
is going to be better than the rally

before. So this means that distance is
going to increase.

Character is going to be better.

And we're seeing that in the over
extension.

So once we're here, I think we have two
decisions here.

Scale out or...

completely closed position.

And we're probably staying, which is
scaling out some, just being at the

overbought condition here, and then
through this structure, probably gonna

a way to get back into the position,
especially on the breakout, and the

majority of the position would stay into
the climactic run.

So both number three and four were great
trades.

I think here we are still thinking about
the availability of the supply.

And then short term, I think recognition
was great.

Just had to think a little bit more
about the duration target was identified

correctly.

All right, guys.

That's it for today. That's it for this
class.

We are at 5 .30.

I think that...

We went through a lot of great material
today on different topics, so let's just

keep it up.

Don't forget that you have two
homeworks. One is a bias game, and then

second one, we're going to look at Trade
Desk, right?

Trade Desk TDD.

Please make your analysis of it and send
it to me.

Thank you, guys. I'll see you all next
week.

Have a wonderful week. Bye -bye.