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Swing Trading For Beginners - Wyckoff Trading Method & Swing Trading Strategies 馃敟馃敟 - YouTube
Channel: Trade With Trend - Raunak A
[1]
- [Presenter] Welcome
to another video
[2]
on swing trading strategies.
[3]
In this video, we will learn
[4]
about advanced
price action trading
[6]
with Wyckoff Trading Strategy.
[8]
I will show you how to apply
this on Nifty, Bank Nifty,
[11]
and individual stocks.
[12]
By the time you finished
with this video,
[14]
you will have learned how to
use this Wyckoff Trading Method
[16]
for swing trading and how to
apply this trading strategy
[19]
to identify high
probability trades
[22]
and to time your
trades to perfection
[23]
with well-defined entry,
exit, and stop loss.
[26]
Wyckoff Trading
Strategy discussed here
[28]
can be used to trade in stocks,
futures, and in options.
[32]
I have covered swing
trading in great depth.
[35]
And in case you have landed
directly on this video,
[37]
do watch the remaining parts
[38]
of Swing Trading
Strategy series.
[40]
Link to all those
videos is given
[41]
in the description box below
[43]
and will come up at
top end of your screen.
[48]
So if you look at this
Wyckoff Trading Strategy,
[50]
you will find that there
are five distinct phases
[52]
in a range as categorized
by Richard Wyckoff.
[55]
Those phases are Phase
A, Phase B, Phase C,
[60]
Phase D, and Phase E.
[62]
Now with these phases,
there are terminologies used
[64]
for various price action
scenarios, as well.
[67]
I have included those
price action points,
[70]
which are valid for our markets
[72]
and have explained
those in detail.
[74]
For ease of understanding,
[76]
I will take up each phase
individually in detail
[79]
and will then explain the
various price-related terms
[83]
marked here on chart.
[85]
The most common problem
with trying to trade a range
[87]
is that traders don't
spend enough time
[90]
trying to understand the
details of price action
[93]
within a trading range.
[94]
With this Wyckoff
Trading Method,
[96]
I can guarantee you
that your way of looking
[99]
at trading ranges
would change forever.
[102]
Do watch this video til the end
[104]
as I will be showing
applications of same
[107]
on Bank Nifty futures.
[108]
Now credit to this method
goes to Richard Wyckoff
[112]
and Jim Forte for the
schematics used above.
[115]
I have added few things
based on my own experience.
[118]
If you want some resources
on Richard Wyckoff
[121]
and his way of
trading, do let me know
[123]
in the comment section below
and I will name a few resources
[126]
for the same.
[128]
Apart from a simple chart,
you don't need any other tool
[131]
in this method.
[132]
Charts can be accessed for free
[134]
from TradingView.com
and Investing.com.
[138]
So before we get started,
there are some key terms
[141]
I will be using in this video
[143]
and let me explain those
in less than 30 seconds.
[146]
So when I say narrow spread,
it means range of the candle
[150]
that is difference between
high and low is narrow.
[154]
A wide spread candle
with high volume
[158]
would mean that candle
is wide in nature
[162]
and has high volume.
[164]
A narrow spread
candle with low volume
[167]
would mean that candle is not
wide and has less volumes.
[172]
Also, a wide spread candle
with high volume signifies
[178]
strength of the candle.
[179]
I hope all these basic
terminologies are clear.
[182]
I have tried to
explain everything in
a very simple manner,
[186]
but I will still recommend
you to watch this video
[189]
two times today and then
one time again next day.
[192]
I always recommend this
as this is an enhanced way
[195]
of learning a new concept.
[197]
And do not miss out on
this Wyckoff Trading Method
[201]
because it will change
the way you trade
[203]
simple price action pattern.
[207]
So the first phase that we
will begin with is Phase A.
[210]
So main characteristics of
Phase A are as following.
[213]
So, prior down move
exist in the market,
[216]
this is on back of
strong momentum.
[219]
Structure of lower high and
lower low is clearly visible
[224]
without any regions
of consolidation.
[227]
During this phase, first
sign of preliminary support
[231]
shows up that is marked as PS.
[234]
Now, PS means
preliminary support.
[236]
I will be using this term
throughout the video.
[238]
So this support is typically
in a form of a bullish candle
[242]
that is high on volume
and has a wide spread.
[246]
Candles during PS phase
usually have long tails.
[250]
So this is the first sign
that down move may be ending.
[253]
So second sign of
down move ending
[255]
comes with the selling
climax, which is marked as SC.
[260]
Now these are the
days when volume spike
[262]
is clearly visible along
with the bearish candle.
[266]
So this day typically gives
a feeling of more selling
[269]
to come in near future and
sentiment is clearly negative
[273]
on such days.
[275]
So third sign of down
move ending comes
[278]
with automatic rally,
that is marked as AR,
[281]
which is this point of a range.
[283]
Now during this, price
actually rallies higher
[287]
to form top end of
this trading range.
[290]
Price movement is very swift
[292]
and is on back of
strong momentum.
[295]
This more or less extends
to the region of PS,
[298]
that is preliminary support.
[300]
So take a note of selling
climax as strength of down move
[304]
on selling climax day aids
overall recovery of price.
[309]
The more intense the
selling pressure is
[311]
on the selling climax
day, the more likelihood
[314]
of lows holding out in market
over the next few months.
[318]
So the next phase that
we will study is Phase B.
[321]
Now during this phase, you
can spot secondary test
[324]
where price test the
supply near the region
[327]
of selling climax that
we saw in Phase A.
[330]
Volume during this
test does not expand
[333]
and range of candle
is limited in nature.
[336]
If bottom is indeed formed in
Phase A with selling climax,
[340]
then secondary test
should confirm this
[343]
with average volume and
average price range.
[346]
The panic that
existed during Phase A
[349]
when the selling
climax was underway
[351]
would be absent
during this phase
[353]
when secondary test happens.
[356]
This is a key
differentiating factor
[357]
and this should
be taken note of.
[359]
During this Phase B, price
faces resistance near the region
[364]
of preliminary support
and automatic rally phase.
[368]
Now, role of Phase B
is pretty significant
[370]
for overall range to develop.
[372]
During this phase,
price is in balance
[375]
and there is equal
demand and supply
[378]
that exist in this phase.
[380]
As Phase B plays
out, volume subsides
[383]
and so does range of candles.
[385]
At the start of Phase B,
volume is usually high
[389]
along with wide range candles.
[392]
So let us now take
a look at Phase C.
[394]
Now in this phase,
we usually get
[396]
what is categorized as spring.
[398]
This is when price
violates the low formed
[401]
during selling climax
and then propels higher
[404]
towards the resistance
region of range.
[407]
This phase is also when price
retests the resistance level
[410]
formed during preliminary
support and automatic rally.
[415]
Now, once a spring is spotted,
it is possible for price
[418]
to do one more secondary
test before heading higher.
[422]
This is a shake-out
phase that occurs
[424]
during the end of
the trading range.
[427]
Volume activity during
spring and secondary test
[430]
should be on the lower side.
[432]
If volume starts picking up
[434]
and range of candle
starts expanding,
[437]
then this usually signals
further down move in price.
[441]
So do not forget this
important aspect.
[444]
Now Phase C is the region
where bears get trapped
[447]
as price makes a new low.
[450]
So this is where those who are
short add to their positions
[453]
thinking price would
head further lower.
[456]
But as price reverses
and heads higher,
[460]
short covering in some ways
helps price even further.
[463]
This is what causes price to
move up with further momentum.
[467]
Now there will be times when
spring part would not play out
[471]
and instead, you would
just get a secondary test.
[474]
Such occurrences are common
and should not be ignored.
[480]
So let us now move to Phase D.
[482]
So the first thing that
you will spot in this phase
[484]
is marked as jump.
[486]
So jump is when price will move
above the resistance region
[490]
of the range with volumes
and range of candles
[493]
seeing a noticeable pick up.
[496]
Now at times when this
range is breached,
[498]
volumes won't expand.
[500]
But in general, always look
out for spread of candle
[503]
to widen and for
volumes to pick up.
[506]
This would actually
signify strong presence
[508]
of buyers within the system
who are participating
[512]
when the price is breaking out.
[514]
The second thing that you
will spot in this phase
[516]
is marked as SOS.
[519]
Now SOS means sign of strength.
[522]
So once price moves
above this range,
[525]
you will now see price propel
higher with wide range candles
[529]
and increasing volumes.
[531]
This is, again, a
very important point.
[534]
So the third thing that
you'll spot is LPS.
[537]
This is also known as
last point of support.
[541]
So this is where
price pull backs
[543]
into the previous
resistance region
[545]
to test demand and supply
before resuming its move
[549]
on the upside.
[550]
This pullback should
happen on low volumes
[553]
and spread of the candles
should not be wide.
[557]
This is also the region where
one must be looking to go long
[560]
as price has moved out of the
range and exhibited strength,
[564]
and then it has retraced
one time more to test
[568]
if any supply exists around
the previous resistance level.
[572]
So this level that is LPS is
a very low risk entry point
[577]
and we'll be discussing
more about this
[579]
when we start the section on
entry, exit, and stop loss.
[584]
So this is phase E,
[585]
which is the last phase of
this Wyckoff Trading Method.
[588]
During this phase, you see
sign of strength by price,
[592]
along with last
point of support.
[595]
Now Phase E is crucial as it
repeatedly signals to trader
[598]
about the underlying
strength of price,
[601]
which in turn can help
trader be with trend
[604]
til it finally gets over.
[606]
Through last point of support,
[608]
trader can assess
previous resistance levels
[611]
turning into support, and hence,
[613]
can mark out
relevant pivot points
[615]
in order to assess whether the
trend is going to continue
[619]
or to spot signs
of trend reversal.
[622]
Now assessing the strength
of trend in this phase
[625]
is extremely crucial.
[627]
Take note of three
things mainly.
[629]
Number one, range of candle.
[631]
Number two, closing of
candle towards the high point
[634]
of the day.
[635]
And number three, tail
section of candle.
[638]
All these are subtle
signs of demand
[640]
and one must pay
attention to these
[642]
in order to determine the
probability of trend continuing.
[647]
If you spot lot of sign
of strength candles
[649]
along with last point
of support price action,
[653]
then odds are high
that up move has begun
[656]
and price will move
higher with momentum.
[659]
Pay attention to the
angle of price rise
[661]
and element of momentum.
[664]
If angle of price move is
greater than 60 degrees,
[668]
then odds will be high
for this trade to be
[670]
a 1:3 or 1:4 risk/reward trade.
[675]
Important thing that
you have to consider
[676]
is that there are
many variations
[678]
of this Wyckoff Trading range
that may occur on charts.
[682]
You will have to
adapt as range forms
[685]
and make use of your notes
to label various phases
[689]
in a range.
[690]
I hope this particular
aspect is clear.
[693]
So now that we have
basic understanding
[695]
of Wyckoff Trading Method, let
us now get down to specifics
[698]
of how to enter, how to exit,
and how set a stop loss.
[702]
Stay tuned as important
aspects of this strategy
[705]
are coming up.
[706]
Now entry in this method
is very straightforward.
[709]
You need to enter on
signs of first LPS,
[713]
that is last point of support.
[715]
Now this is a low
risk entry point
[717]
because this is where test
of up move has happened
[720]
and then price prepares
for further up move.
[723]
At times, you will see that
LPS does not form immediately
[726]
after breakout of range,
[728]
and this is mainly when
momentum is exceptionally strong
[731]
and price takes off
in a vertical manner.
[734]
To avoid such instances, you
can enter 50% of positions
[738]
once the breakout has
happened on expanding volumes.
[742]
This way, you would not miss out
[744]
on any momentum-oriented move.
[747]
Now remaining 50% of
positions can be added
[750]
when last point of
support is tested.
[753]
I hope this particular
aspect is clear.
[755]
So let us now move to
the section of stop loss.
[758]
Now once entry is taken,
stop loss for this method
[761]
can be set in two ways.
[763]
If you spot spring in the range,
[765]
low of spring would
be your stop loss.
[768]
If spring is absent,
then in most instances,
[772]
low of selling climax would be
the stop loss for the trade.
[775]
If both spring and selling
climax are present,
[779]
then exit 50% when selling
climax low is breached
[783]
and remaining 50% when
spring low is breached.
[788]
So let us now move
to potential up move
[790]
once range is breached and
all conditions are fulfilled.
[793]
Now the main advantage
of this method
[795]
is that you usually get
one 1:3 or 1:4 risk/reward
[799]
with this method.
[800]
I have tested this method
across Nifty futures,
[803]
Bank Nifty futures, S&P
500, and some key stocks,
[806]
and findings are
pretty consistent
across all instruments.
[810]
Now, 1:2 or 1:1 risk/reward
[811]
is the base minimum
that you get,
[815]
and this is when
volumes won't expand
[818]
on breakout from range.
[820]
Now if this range
represents 100 points,
[823]
then you should expect
minimum of 200 point as reward
[827]
and more often than not,
300 to 400 points on trade.
[831]
This does depend on underlying
market cycle, as well.
[835]
And also on volume and range
of candles post the breakout.
[841]
Now do take a note of this
point as this is crucial
[843]
in assessing strength of
entire trading pattern
[846]
and will help you to
potentially identify
[849]
where to sell in a swing trade.
[851]
If volumes and range of
candle expands after breakout,
[855]
and price has an angle
greater than 60 degrees,
[859]
then odds are high for 1:3 to
1:4 risk/reward for the trade.
[865]
I hope this aspect is clear.
[868]
So let us now come to the
application of this method.
[871]
I will explain this
with Bank Nifty.
[873]
I won't go back too
much in history.
[876]
Example taken is of
October 2018 to 2019.
[880]
Now there are two things
I will recommend here.
[882]
Number one, take screen
shots of all the slides.
[885]
And number two, while
watching the video again,
[889]
take notes on your chart.
[891]
In September to October 2018,
[893]
Bank Nifty was heading lower
[895]
with exceptionally
strong momentum.
[898]
Volumes were rising
as price was falling
[901]
and making a structure of
lower high and lower low.
[904]
So the first sign of
preliminary support came in
[907]
at this point, where a
bullish candle formed
[910]
with long tail on high volume.
[913]
Remember one thing,
you have to draw out
[915]
a line from closing of
preliminary support candle
[918]
as potential top end of range.
[921]
After few days then,
you get a selling climax
[924]
on high volumes.
[926]
Volumes was highest
at this point.
[929]
Look at the candle on this day.
[930]
Sentiment is clearly
very negative
[933]
signaling continuation
of down move.
[936]
Couple of days later, you
also got a secondary test.
[940]
Look at the volume here,
clearly on the lower side.
[943]
From here on, price then rises
[946]
and forms automatic
rally region.
[949]
Now this pauses at
the resistance line
[951]
drawn from the preliminary
support region.
[954]
Excess found here marks
the second range line.
[958]
From here, price again retraces
and forms a secondary test.
[964]
It's important to know that
spring stage does not form here
[967]
and price instant forms
secondary test stage.
[971]
And then it takes off
to form the jump stage
[974]
where price pierces the
range on the upside.
[978]
Now some variations,
therefore, will exist
[980]
and your main aim is to
adapt to how this plays out.
[984]
If you see while breakout,
volumes have not expanded either
[989]
and hence, you should avoid
taking trade right away.
[993]
You should wait for the last
point of support to form
[996]
and then take entry.
[998]
Post this, sign of
strength emerges
[1001]
in form of strong candles
and gap up price action.
[1005]
There's a second last
point of support that forms
[1008]
to test out this region here,
[1010]
and then price moves above
with momentum exhibiting
[1014]
sign of strength.
[1017]
So there are a couple of
variations that have played out.
[1019]
Number one, lack of
volume while breakout.
[1022]
And number two, spring
stage was absent.
[1025]
Such variations
are not uncommon.
[1027]
So range of price
was 1,200 points,
[1030]
that is from 24,200 to 25,500.
[1035]
Approximate movement
was 1:1 risk/reward
[1038]
as price moved from
25,500 to about 27,000.
[1044]
This was mainly because there
was no expansion of volume
[1047]
that was seen when price
broke out from range.
[1050]
This was something
that we covered
[1052]
in the risk/reward section.
[1054]
These principles of
Wyckoff Trading Method
[1056]
can be practiced on any
instrument of your choice.
[1059]
If range is formed over
two to three months,
[1062]
then risk/reward is much larger.
[1065]
Also note that if prior down
move and momentum-oriented,
[1070]
then again, this impacts this
pattern in a positive manner.
[1074]
This method of identifying
accumulation in range
[1077]
works really well
and do include this
[1079]
in your trading arsenal.
[1081]
If you want pointers on which
timeframe to practice this
[1084]
and which stocks to target
for high probability trades,
[1087]
then do let me know in
the comment section below
[1090]
and I will guide
you in this aspect.
[1092]
Kindly consider
hitting the like button
[1094]
and sharing this video
if you liked the content.
[1097]
Thanks a lot for watching
this video, guys.
[1098]
Take care and be safe.
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