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The right context for applying the
Wyckoff method.

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In this module, we will address some key
ideas that we must keep in mind if we

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are to apply the principles of the
Wyckoff method in the most productive

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possible.

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We will learn about which markets are
the most suitable for trading in, as

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as those that we should avoid.

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Wyckoff and the Forex Market As we
already know, one of the great

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the Wyckoff method is the universality
of its principles.

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which enables us to trade any asset at
any time following exactly the same

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premises and strategic ideas.

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If we take this to the outermost layer
of reasoning, we need to dig a little

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deeper to continue defining that idea.

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To do this, we must consider the type of
market according to its degree of

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formalization, that is, the type of
market depending on whether it has a

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centralized order book or not.

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The main difference is that in
centralized markets, there is a single

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book, which is responsible for
connecting all the participants in that

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while in non -centralized markets there
are multiple order books, as many as

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there are market makers, where the lack
of transparency regarding market depth

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is clear as, in most cases, only the
price of the last bid and ask is shown.

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It is also important to know that there
are many different prices for the same

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asset. due to the very nature of these
types of non -centralized markets.

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In other words, if we want to trade the
Euro -US dollar currency pair, each

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market maker will offer us a different
price and volume.

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The slide shows three examples of the
same asset, the Euro -dollar currency

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from different decentralized markets,
FXCM, Pepperstone, and Oanda.

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If we look carefully, we can see that
the candlesticks are not exactly the

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so it is likely that the listed prices
also differ.

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The problem here is that any analyses we
perform with these types of markets

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will be based on data which, whilst a
meaningful and valid representation of

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entire market, does not in reality
genuinely represent all trades.

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To ensure the data we have is reliable,
we need to analyze said asset in a

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centralized market.

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Continuing with the example of EURUSD,
we should analyze the futures market,

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centralized market, which corresponds to
the ticker $6E.

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Therefore, the recommendation is, if you
don't have enough capital to trade in

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the futures market, you can analyze the
asset in this futures market and execute

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the trade through another more
affordable financial derivative, such as

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a good broker, not a market maker.

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An intermediate option would be to trade
the small version of the future, the

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micro future, which corresponds to the
ticker $M6E in the case of the EURUSD.

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If we open a chart of the future 6E and
the CFD EURUSD, we can see that the

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price movements are practically the
same, even though they are different

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markets. This is possible thanks to an
arbitrage process carried out by high

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-frequency algorithms, which takes place
systematically between both markets.

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Financial arbitrage is a form of trading
that consists of profiting from the

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price differences between similar
instruments.

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The algorithms used in this approach
identify the difference between both

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and then buy in one market and sell in
another until both prices converge,

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obtaining a profit from said differences
and facilitating market efficiency.