Original subtitles

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.