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Division 2
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A COURSE OF INSTRUCTION
di
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IN
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TAPE READING AND ACTIVE TRADING 4
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COPYRI GHT 1932
RICHARD D. WYCKOFF, ON E
Niw York.
TABLEOF CONTENTS
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INTRODUCTION
JUDGINGTHE IMMEDIATETRl#fD
Buyingand SellingWaves
Wave Chartof the Leaders
BUYINGAND SELLINGWAVES- PART II
HOW TO LINK THE WAVE CHARTWITH THE STOCKIN WHICHYOU
i WE TRADING
A VerticalLine Chartand ContinuousLine Chart
TRM)INGAREASAND HOW TO PROFITBY THNM
TradingArea of AuburnMotors
THE TAPE READINGCHART
TapeReadingChartof J. 1. Case
HOW TO SPOTTHE BUYI NGAND SELLI NG POI NTS WI THI N A SMALL
FRACTI ON
JUDGI NGSTR$NGTHOR.W3AKNESS
HOWTO KEEP PERCENTi i GEI N YOURFAVOR
TRADINGON INITIALACTIVITY
mGING THE MARKETBY TESTSAND RESPONSES
THE BEST STOCKSFOR ACTIVETRAI)lNG
STOP ORDERSAND OTHERVITALPOINTS
Jud@ng XQur Ftficimcy
Tradingin UniformLots
Dow-Jone$Averagefl
Tradingon Paper
Tradeat the Market
Put a Time Limit cm Your Trades
Qualifications of a SuccessfulSpeculator
lhvmrAsk Advice
Fallacyof Averaging
CapitalRaquired
How Prc)fits Accumulate
Whereto Trade
Choiceot Brokers
Studyyour Losses
Copyright1934 by RichardD. Wyckoff,Inc.
SEC. P.
12 12
Cs 1
w 1
Cs 3
Cs 5
Cs 7
Cs
Cs 1?
PractiaePersistently
CHARTSTUDIES
Amwriad Telephoneat Bottomof Reaction
AmericanTelephoneat Top of Rally
AlliedChmical at Bottomof Reaction
AlliedChmicd at Top of ~ly
J. 1. (laseat Bottomof Reaction
AmericanCan CombinedwithFiveLeaders
00URSE
J@du Ction.
section1.
UMiM the
#MlrtG
section3.
Trading
&QML%
section4.
Tane Reading
gi&$.i& ~.
cop~igllt1932
SUMMARYOFTHE RICHARD D.
IOFINSTRUCTIONIN TAPE READING
Generalprimiples involvedin
the minorfluctuations.
WUXOFF
AND ACTIVE
tradingto
TRADING.
takeadvantageof
Basingjudgmenton impartialanalysisof avai.lab~e factg
insteadof ill advisedimDUJPeSa
How to internrettam actio~and learnto make YO1.W OWll
&Q&3mn cknt d%$cidon~ with a highdegreeof accuracy.
How to constructend~terrm% a Wave Chart.
The selectionofstocksthatrefli]ct .loadorshin and have
o=Q~~~~
c CIIWAI. LtYL
How to detectthe minor pricesurgesand estimatetheir
significance.
How to recognizethe symptomsof a reversalof the trend.
How to employthe barometricquality of the Wave Chartin
judgingthe trendof the individualstockwhordnyou are
trading.
How to operatein harmonywith the Law of Supplyand Dwand.
The general significanceof c,tradingarea and the exception-
al tradingopportunitiesit may offer.
How to judgewhethera stockin a tradingareabecomes
b~~
ish OXbearish.
How to decidewhen to tradecloseto the dangerlinewith
relativelysmallrisk.
Correlationof price movement,volumeand time.
How to interpretthe fractionalpricechangesand the var-
iationsin volumeduringminorfluctuations.
The logical1imitatims of risk and readjustmentof stop
QZ!@Xk
How to recognizeconditionswhermlnderthe risk maY be 1Lmited
to a $Mlaufr~ction.
by RichardD. Wyckoff
and
EQJFJdU
Section6.
iiwmiml
or
Section7.
S63ction 9.
section 10.
Best Stocks
For Active
Trading,
Section11.
2
-- -.
How to so~.tthe buyingand sellinglevelswithina small
fraction.
How the marketis _nun&y 1 Eivinrinformatia~to those
who COIlgoad the ~
HoW to avoidover$tx a the market.
How to WQ MD Y@+lra d what to do at the turningpoints.
Recognizingthe evidencesof technicalstrengthor weakness.
Whet constitutesa normalrallyor rco.ction, and why.
How you may @NelQn Your jUMment so thnt accumulatingsymptoms
of strengthor weaknessbecomerecordsof subconsciousmemory
rad resultingd~ciaons are Vhtud.lY intuitivcl,
How to ld.mi~,roducqand elhinatq the risk.
How to Lnsur@Your PM its,
How to developa tradingpolicywhereinrisksare consistent
with probableprofits.
The generalsignificanceof incrensedLctivitY.
How to interpretchangesin the degreeof activity.
The imnortanc e of volumewxzes in tradingzonesand
followingth$ formationof an apex.
HOIJthe operatorteststhe technicalconditionof the market.
How the individualtradermay secure,withoutexpense,the ben-
efit of the largeoperators testsof the marketsstrength.
Linesof resistane e; how to recoznize themand profit
o..ccordingly.
How to observewhen the marketis in an overbou~htor oversold
condition.
How
The
the
How
to recognize evidenceof manipul~tion.
significnnccof the marketsresponseto news itemshaving
elementof surprise.
to selectthe best stocksfor fictivetrading.
Recognitionof changingleadership.
The importanceof uverngepricer:mgemd its relutionto
flo:~tingsupply.
Copyright1932 by Ri.chmd D, Wyckoff
-3-
Use of
Stop Orders.
Section 12.
Miscellaneous
Vital Points.
Section 12.
Chart
Studi es.
The advantage of familio.ritywith the chief characteristics
of leadingj active issues.
HOW and when to use stop orders.
The scientific location and road.jus+,ment of stop orders.
Substitutes for stop orders.
Judging your efficiency.
Consistent trading policies.
hlh?rr)r~t~t~on of the averages.
Testing your trading ability without monetary risk.
~b~arket orders vs. limited orders.
Limiting the duration of a trade.
How to avoid the dangers of ill-advised ad~ice and ti ps.
Dangerou~ pitfalls and kiov~ to avoid them.
HOIWto select your broker and judge his efficiency.
Tape reading charts of leading active stocks and tP.eir
interpretation.
Typical trading maneuvers illustrated, wiih comentsj
suggestions and explanations.
How to recognize the termination of a reaction, and the
subsequent buying signals.
How to recognize the termination of a rally, and the
usual indication of impending reaction.
How to use the combination trading chart and wave chart of
barometric letadcrs.
Copyright 1952 by Richard D. Wyckoff
t
TAPE READING AND ACTIVE TRADTNG
For the three to five-point moves
with risk limited to
one-half to one-point
The majority of those who follow our Method devote an hour
day, more or less, to studying and planning their campaigns. But we
have learned that an increasing number wish to trade in the market
continuously, either in their brokers offices or in private offices
of their own, equipped with a ticker and other facilities. From these
traders we have received many requests for further detailed information
on Tape Reading; and as the technique of active trading from the tape
is different from that outlined in the first part of our Course, we
have prepared the following to meet the requirements mentioned.
This Division of our Course of Instructionj like the First Divi-
sion, is based on judgment of the technical position: Supply and demand --
support and pressure.
No news, earnings or other corporate or fundamental statistics
are considered; we use only tho~e which relate to the factors: Price
Movement, Volume and Time.
The active trader who is a Tape Reader is concerned only with
Copyright 1932 by Richard D. Wyckoff TR Section 1 Page 1
the immediate*rendof the smallmovesin the murket. This trendcan be
detectedby thisMethodsoona.i%er~hc openingof the StockExchangeat
ten o~clockdai~g It may changefrom bQUsh to bmrish, or vice versa$
and reverseitselffrom one to threetimesduringe.whdays session.
We instructsuch tradershow to followthesetrends,changing
or reversingtheirpositionsas oftenas the marketaffordstradingoppor-
tunities.
In most instancestradesare closedout the sameday theyare
made,but i??thereare strongreasonsfor carryingany stockovernight,
thismay be done.
Detailedinstructionsare givenas to the best stocksto choose
and the exacttimeto make commitments,basedon methodsformulatedand
successfullyemployedfor over twentyyearsof tradingand advisorywork.
Stop ordersare placedon every trade,from one-halfto one point
awayfrom the buyingor sellingprice. Thesestopsmust be constantly
watchedsnd movedas quicklyas the marketpermitsin orderto reduce
risk,thenprotectprofits.
This form of tradingdisregardsthe long trendof the market,
as well iisthe intermediatetrends. It takesinstantadvantngeof the
technicalralliesand reactionsthatpromiseto yielda profitin the
same stockmarketsession,on eitherthe long or the shortsideof the
market.
-M * *
Tape Readingis tho art of determiningthe immediatecours~or
trendof pricesfrom the actionof the marketas it appearson the tape
of the stockticker.
It mims to detectthe mows that are Lik@y to occur
Copyright1932 by RichardD. Wyckoff
TR Section1 Page 2
i n the next few mi nutes or hours; gettingin when they beginand getting
out when they culminate.
It requiresactivityand flexibilityof mind;readinessto change
or reverseonesopinionquickly;slsonerve,poise,decision,promptness,
courageand absoluteindependenceof judgment.
Its purpos~is to derivean averageprofitfrom a seriesof trades.
By keepingthe riskdown t~ a minimumand constantlystrivingto reduceit;
by clevermsmipul.ation of stoporders,a net profitover comiwission~, taxes
and lossescan be realized.
All commitmentsare temporary-- theirdurntionis
ited to hours. They are i ntended to take advantage of the
ate fluctuations.
with this
(andwork for your
preferto go home
Method you, as a trader, search for your
usuallylim-
small,imm@i-
opportunit.ies
profithare and ~-- today. In mo~;tcasesyou will
with a cl esm sheet -- wi th no commi tments orI ei ther
sideof the market. Thus v:hen you start tradi ng nuxt morni ng your mi nd
i s clearfor new impressions;your judgmentis unbiasedby reasonof your
neutralposition.
At eachmo.rningls openingyou make
sensethe trend; decideon the best stock,
a swiftanalysisof the market;
and if conditionsare favorable,
you make your commitment.Thenyou watchthe marketfor a confirmationor
contradictionof the correctnessof your position. i l .1.so for the psychol og-
i cal . moment for novi ng stops, closingtrades or crowdi ng stops so cl ose to
the market pri ce that you leavethe way openfor n furtherprofit,or you
are closedout on stopat a smallfractionfrom the extremehigh or low.
Tradingthus, you are afforded several times as many opportun-
Copyright 1932 by Richard D. Wyckoff TR Sectior~ 1 Page 3
itiesin thesesmallswingsw you wouldhave if you wz~itedfor the more
importantswingsof ten to thirtypoints.
If a tradedoesnot make goodat once,you closeit out,whether
it standseven or at a smallloss. You will nevertradewithouta stop,
foryour risk must be kept down to a minimum. You will nevertakea big
loss. You will neverbe tiedup. You can claanhousein an instant.
And you can stayaway from the tickeras oftentandas long m you wish.
This form of tradingis entirelydistinctand dlffcrentfrom
thatdescribedin the otherMvi.sionof our Method,whichaims to secure
profitsfrom the ten, twentyand thirtypoint swings. It meetsthe re-
quirementsof thosewho wish to trademore or less constantly.
Includedin thisDivisionof the Courseis a plan for charting
the detailedtransactionsin certainstocksas they appearon the tape,
by which you can sense the immediatetrend;figurethe exactpointsfor
placingyour stopordersand whereta move them to reduceriskwhen the
marketgoesin your favor. It showsyou how to C1OEWyour tradesthe
sameday at the most advantageousmomentsby watchingtheseTapeRead-
ing Chartindicationsand gettingout near the extremepointsin the
advancesand declines.
Under tlzisMethodyou mighttakenew positionsfrom one to
threetimesa day, dependingupon the activityof the market. It is
the nearestappronchyet devised,so far as I know,to tradingon the
floorof the StockExchange.
But the most importantadv,ontage of a combinationof Tape
Reading end tradingfor the longorswingsis thatit will aid you in
increasingyour profitsin thisway: Sections11 and 12 of the First
Divisionof our Courseshowhow to determinewhich stocksshouldmove
Copyright1932 by ~chard D. Wyckoff i%SectionL Page 4
threetc fivepointsin a certaindirection. You applythe TapeReading
Methodin makingyour trade:ltthe most favorablenoment,and the poGi-
tionyou then takewith a smallrisk of one-halfto one pointmay later
developinto Position2 on the long side,or Position4 on the short
side,and in{dicute a run of ten,twentyor thirtypointsin your favor.
By thus tradingwith a fractionor a pointoriginalrisk and letting
your profitrun into the many pointsindicatedin your forecastof the
probabled3.stance in points,you will greatlywidenyour marginof profit.
For this reason,theseTapeReadinginstructions,combinedwith our lcmger-
swingplanwill materiallyenhancethe profitpossibilitiesin bothDivi-
sionsof the Course.
Copyright1932by RichardD. P?yckoff
,
JUDGINGTHE IMMEDIATETREND.
For thispurposewe use a Wave Chart,made up of the priceof
five of the most activeleadingstocks. The pricesof theseare added
togd+her,and plottedon a sheetof crosssectionpaper,with the time
scaleat the bottomof the verticallines, and the pricescaleat the
left,correspondingwith the horizontallines. Specimensheetfollows.
All movementsin the marketare made up of alternatingbuying
and sellingwaves. We judgethe strengthor weaknessof the market
by the distancein pointsand fractionsrecordedby thesewaves;we
combinethis distancewith the lengthof time eachwave takesto run
its course.
In studyingthe distanceand durationof eschwave,if the buy-
ing wavesare longerin durationand travelfartherthan the selling
waves,we get an indicationthat the immediatetrendis upward. If
the sellingwavesexceedthe buyingwavesin timeand distance,the
immediatetrendis downward. Wheneverthe buyingand sellingwaves
seemto offseteachotherond no material. strengthor weaknessis in-
dicated,the immediatetrendis in doubt. Our positionshouldthen
be neutral.
Selectthe five leading stocks. At the openingof the market
add the pricesof theirfirstsales,includingthe fractions,which
shouldbe addedin eighths. Put a mark at the pricerepresentingtheir
totalat the properplaceon the price scaleand on the 10 otclockvor-
Copyright1932 by RichardD. Wyckoff
TR Section2 Page 1
ticalline. Next wretchfor eithernn upwardor downwardswingto ex-
haustitself.When it smns to stop,put u dot on the chartat the
propertime and priceleval. Xf the marketthen reverms i ts di rec-
ti on thi s prows that tiw po$$tionof the dot is correct. If it goes
on in the sa@@direction,chmmgethe dot until the movementagainhesi-
tatesand sh~w~siguoof a reversal.
Them watchthe new waveuntilit seemsto cam to an end. Place
the dot, TM marketwill confirmcm contradictyour estimateof that
turningpoint. And so on untilyou are thoroughlyfomilinrwith judg-
ing and recordingthe start,durationand finishof each successivewave.
The ~mmediatotramdis Lndicatodas soanas one buyingand one
sellingwave havo been complwtmd.You thenknow on which sideis the
mostpower-. the buyingor the sailingside. And all you have to do is
to go with that tiido.
But you must alwayshe on the lookoutfor a changein thisimmedi-
ate trad. It is likelyto chmge its directionfrom one to threetimes
in n singleEMZlswion. Thio is how you datectthe change: In an up trend,
when the selung wavoabeginto increasein time and distancesor the
buyingwavw mhorten. E$$heror bothwill be an indicationof a change
in the immediatetrend. Applythe sam reasoningto a dom trend. Watch
closelyfor thesechamgesfor they tellyou when to buy and sell;when
to get long or short;when to closeyour presenttradeand reverseyour
position. IhUther detailsare on thQ chart,Page 4-A.
Rmmber you havenothingto do with the othertrendsof the
market-- d.thar the long trendor tl w intermediateswingsof 10 to 30
points. The latterswingsare the basisof the FirstDivisionof this
Coursein Sto@kMarketSci.anca and Technique. Tradingfor such wings
is .anentirelydifforent proposition,reqwiringless time and attention,
Copyright1932 by Rial%mxl D. Wyakoff l% Sect&on2 Page 2
but havh$
uatmg2 m
Wtv$eC1 kmr t
AJtht$qgh the buying or tlm mmdag WLWQB &ay M $nmic$snt on
certaindays to carrythe marketin e certaindirectionuntilth~ close,
thisdoes not man thatit will eontimm to dc so the next day. And it
do%nnot fnmn thatyOU $hotidWLmy
Tomorrowf 8 trendwill dofim its~f
any tmdtxi overnightfor
in the sameW~. Lnd it
to go into tommrow~B ses$iomwith any stockson handunlem
this rmwn.
is bestnot
threeis acme
extrmrdintqf reason in the action of the market. Such a rcmon wouldbe,
for example,a strongdmmkapmnt of powerMar the beginningof what looks
like an %mportAntbull or km swing,$mlicated~ increasingactivityand
volm in a @ten direction~with scamdy any pointsof llesitntion, or
ralb$ or reac$im$ ZM the mm may be. In suchinstonces,a longpmition,
for exmpla$ mightbe allow$xi to run with R frequentraisingof stopsso
thata tmdo originallymd~ with a half to one pointstopmightrun into
mvmal or many pointsand thu$ixmrmso the net averageof profiton all
yo@ tra$wlfor the month. Full advantageof sucha situationmy be
takenby them who understandcw I Wthod of +awUnfg for the largarstings
and cm forecm% the probablemmi i mr of
anc$Ba tradeis Xnadoon $dW Str(wagth of
@A$ well may from the startingpoint,
points certainstocksshouldmove.
dimctiarm hmd.n, and its price
and imdicate&,accmding to the
othatMvisim of our Methodsthatit will probabLydmmlop a move of
M to 30 pm!.ntse the traderU.owflhia profitto run accordingto instruc-
tiOXiS, and lmg#!profitsshouldrm~t.
The Wawo Charttwdwm Tape Reading. Afteryou have used it for
a while,you ~ not need it. Yom aye and brainwill seo and record
Copytight1932 w E4idmrdD. Wgckoff TR Section2 Page 3
the wave
you have
CM&t too quicklyand do not mpoct intuitionto comeuntil
had long wpmienca and much practice.
***
Tho fiveleaders$hculdalwaysbe repr~sentative of tho market.
At timeswhm a leading railhu~ considerableeffectit shouldbe in-
cluded. At othertimesa ut$ll,ty, like ConsolidatedGas,mightcoae
to the front;it shouldtak~the placeof somootherleaderso l ong as
this ColditicmLmate. Selwtion of tl wse leadersmay btilikenedto ob-
smwingtho pullingpowerof a &oup of fivehorses: If you ware driving
t?nwh a groupamd you naticmione horselaggingin tae tr~aeasnd another
alwaystu@.mg aheadof the rw$t,you wouldat oncedecidethatthe fcxmr
shouldba r@l.acedand that the Iattw is the real leader. Applythis
roason$ngin I ce@pi ng your fi vm l eaders amcmgtho most reprosmtati ve of
al l the stock~in the mark~tin theirabilityto influencethe rest of
the list. Keep weiglxtng the$Qfrom day to day. Wood out poor ones,
whichmmns thosethathaw lost theirinflucance, or have becometoo in-
activeto be included.
**-W
Chartof the previousday shouldbe beforeyou when
so thatyw get the relationof todaytsmarketto that
of ywterday.
Copyright193$? by Fti.chwd D. Wyckoff TR Section2 Page 4
-
4
\

BUYINGAND SELLINGWAVES
(IhelVave Chart-PartII)
In the FirstDivisionof our Courseof Instruction,Section
4, we presentedPart I on the use of the Wave Chart. The materialin
Part I di~cussasin somowhatgreaterdetailthe instructionsset forth
in TR Section2 of the Second Division;therefore,it may be substi-
tutedfor this last-namedSection. Or, if you prefer,you may remove
PartsI and 11 from theirpresentbindersand placethornin a separate
loose-leaffolder. You will then havea completetextbook on the theory
of the Wave Clurtas I havedevelopedand expandedit.
On pages 7 to 9 of Part I, I showedyou how to interpretthe
Wave Chartfrom the standpointof pricemovement,durationof each buy-
ing and sellingwave,and comparf.i.tive supportor pressure. The follow-
ing illustrationwill showin more detailhow to applythe additional
factorsof volumeand activityto your analysisof the smallwaves.
Copyright1934 by RichardD. Wyckoff,Inc. TR Section2-A Page 1.
Fl
340
335
FIG.1
In thisillustration(Figure1),
it will be seenthatvolumeand activity
both shrinkto very smallproportionson
the littlebuyingand sellingwavesfrom
10 olclockto 1:40P.M. The day starts
with a smallrallywhichis promptlyfol-
lowedby a smalldip. Bullsand bearsare
evidentlywellmatchedat thispoint.
Afterthe firstdip (Period2), the bulls
try to put pricesup, but theyfail to at-
tracta following,as shownby the failure
<
of activityto increase. Demandpeters
out aroundthe 11:00A.M. top. A small
dip in the fourthperiodbringsout very
littlestockon the downside,however,and
thisencouragesthe bullsto tryagain.
Qncc more theyfail to attrscta follow-
ing. Note how the rallyin period5 dies
out aroundthe two previoustops. So now, the bearsendeavorto breakthe
deadlockby offeringstocksdown (Period6) until1 ofclock. Thisman-
euvermeetsno bettorsuccess. Activityfailsto increaseon the down-
side,however,and a tentativelybullishsignalis givenby the evidence
of supportaroundthe morninglow.
At this pointthe markethas come to a completestandstill.
Everythingnow dependson the abilityof one sideor the otherto rouse
a following,eitherby breakingdown the supportlevelor by pushing
pricesup throughthe forenoontops. When the bearsfail at 1 o!clock,
Copyright1934 by RichardD. Wyckoff,Inc. TR Section2-A. Page 2.
it is the bulls~turn to try theirstrengthagain, This time,dexmd is
a littlestronger. Pricesrisea littlebit abovethe previoushighsand
activityincreasesa trifleas theyadvance.
If we are tradingfor the shortswings,this is our cue to pre-
pare for action. If activityfallsoff on the next sellingwave,we may
expectthe bullsto becomeaggressive.We do not have long to wait.
Pricessag a bit in the next fifteenminutw but the activitydies out
completelyon the dip. This is the cue we havebeen waitingfor. It
tellsus thatthe supplywhichheld the bullsback on previousrallies
has been absorbedon the smallearlierreactions. Therefore,T7e stepin
with confidenceand buy. We are promptlyrewardedby a sharprisein
Period9.
Any questionas to the validityof thisupwardmove is settled
by the sharpincreasein activityas pricesrise throughthe previous
tops. Shortlyafter2 o~clock,the bullsrestmomentarilybecause,at
this point,the averagehas risento a levelwherestocksencountered
supplyon the precedingFridayand Saturday. (Notshown.) Evidently
this supplyhas alsobeen disposedof, becauseactivitypromptlyshrinks
on anothertemporarysell-off, Sincethereis obviouslyno pressureyet
and few offeringsto be takenat this level,we staylong and waitfor
the bullsto pushon againas theytry for a higherobjective. This
theyattainjustbeforethe close.
In thisand the exampleon page 7, Part I, we have consider-
ed the Wave Chartisusefulnessprimarilyfrom the standpointof short-
swingtradingoperations.For your analysisof the intermediateand
longerterm movements,you will find it helpful. to constructa OXV+
Copyright1934 by RichardD. Wyckoff,Inc. TR Section2-A.Page 3.
pointfigurechartfrom the TapeReadings.
Thiswill permityou to bringall of the principlesset forth
in Sections10-12-14-16and 17 of the Main Divisionof our Courseto bear
upon your anal yses of the Wave Chart, The charts,pages 5 to 8, with ex-
planatorynotes,make clearhow thisis done.
The additionalillustrationson pages9 and 10 showhow to mount
the dailyWave Chartsto form a continuousrecordso you may comparethe
actionday by day with si@fica.ntindicationsdevelopingon the one-point
figurechart.
Copyright1954 by RichardD. Wyckoff,Inc. TR Section2-A. Page 4.
b-----+ ------+
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SUPPLY LINE
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ONE POINT FIGURE CHART OF FIVE
SENSITIVE LEADERS
(AuGuST 28 tO NovEM6EfI 9,1933)
I------ B------+
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PPLY LINE PENETRArEO
./
RALLY W3?$AL COI+?Nl$?E@ ~y X
INCPEASiMG VOLuME ON
(
2REAK T H,R9UGH .
SUPPORT LINE
STRENGTH INDKATED 8} (Q) fWiLITY TO
A ZONbF SUPPLY:
B - ZONE osSUPPLY:
G-QUCK UPWARD
iiOLl) ABOVE Established SUPPORT LINE (b)
\T~ p~,~..,. -
DWELopM~NT Of RESISTANCE TCI PRESWIRE FOR
SECOND TIME A_f PREVIOUS CRITICAL SUPPORT
WEAKNE5S IN CMCP.TED BY iNABiLITY TO A13som Of fERINGS J UST wuGER fW4GE OF J uLY Tops; f~wfw %3 ff*KE PR12GREss
ON FiERVY vOLUME ; 131M! N!31-+ING ACT\VITy ON :UCCESSIW @LIflNG W/3VES.
(5EE c ONTINUOUs LliW CHART or+ PAGE 9 FOR DETAIL)
SE L. {NG S%NALS SZT by INAB}LITY TO fiBSORB OFFER!NGS AT PREVIOUS CRITICAL 3UPPLY LEVEL.
THRIJ s T TO c h4TCH SHORTS, bRIEF DURATION CF RALLY To 7HIRD LOWER TOP EMPHASIZES IN CREP.5WG
WERKNESS OF MARKETS bJ H&F- FC51TION AFTEP. D\ Sr RI EWT@N AT A AND b
n+
.. .-. .-. _..
xx
x
xx !:: T.\ +---F+
I----- G----+
!NABtlJ TY TO l) EVELOP
A
% )
#Jl&
xx x XX %*X
Xxx xxx x%
++++1
MUYMQG POWER Al PREVIOUS
390 SUPPORT LEVEL GIvES T
. . .
x
y I I I
1
x
~
FAiLURE TO RRLLY FoLLY uP TO
p xx
x xx
I
1-
Xxxx
SUPPLY LIM STRESSES EXISTING
$5 S;xy .sss
x I I
wEAKNEsS AND CANCELfj TENTATlvE
xx xxx x
B%xx xxx %)(
I
BULLISH I NIX CI+%YION AT F,
xx2 4 xx@J xx
Swp *
E
I
I
x
x I
:6 0
I
L
I
xxx
I 3%?3
I
x Xxn
x lxx
(JJ :x
xx xx
xxx x
379X%
D6 E precipitate PACE OF OECLINE wvELOPS VVER-30L0 CoNDITKW Ah10
PROWJ (XS SUBSEQUENT CORREc T}VE RALLIES .TECHNKAL. CHARACTER OF THESE
x
%ALLtES INDICATED 8Y FAILURE TO REACH S!J PPLY t.l~t
lEsTA8LiSt+ED AT 417 AND 409.
x
F- PRELIPINWRY SUPPORT. TWTATIVE BASE FORMf F+G. CQWARE WITH t.JAFtROWER FORfIATION AT 375.
~ - SWPORT LEVEL - SU5SC@JEWLY CONFIRMED BY RtSE THROUGH SUPPLY LINE AT 372,
h
Ii
-.
\
x
xxx
x XXl(%x
xx #xx xx
*
XXxx
XXQX XXX &x
Xxxxx,xxxx x)(x
x-x~
-*
*!
lx x xxxxxx@ x %WA
m 3?6 3XC?51SE * 3w_a
/xx&
\
1
I
- ~ ~:,NiTuRtoF
PENETRATION w SMALL FRACTION AND
0?4 LIGHT vCJ LUI% INDICATES PURELY
*LLtNc i SKiF4AL : SUPPORT
LINE PENETRATED .
xxx
.
Xx%x Xx:(gt
3s 5ss
35$s5s.s5.5
x
xx
x x x xx x
xx Xx xxx
H- ZC)W OF SUpPORT .
--aLXxxxxx% i \
xx
xx xx
.%s45
xx x
x xx
%
COMPARE WIDTH OF FORMATION WtTH P@EV~OUS
J NEFFECTlVE SUPPORT LEVELS AT G AND F .
xx xx
% xxx x x xxx x
Bz
Sb14Kti OUT
l?-
E!
ii
Q*
J3
8
63
k-i
+
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/- x
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xx
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xxx xx
XKS XXX
I f+xx$xx
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x xx)(~x )(
x xxx x
(
3$5
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3mG60
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K X% x
WM54545 345
xx xxx
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xxx x x
xxx xxx
x xxx
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933
&
l-v-!
I
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Xxx xxx
xxx x x xxx
~
3yJ7w 3i5mmXY
Xx xxx
%@
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Xxx xxx )( )
xx xx@xxx x:
xx xx
xx xx
Xxxx x.x
+ #p5 X.5553
xxx
X63XX X@x
Jcx xxx
d
x
%xXx ;:
5a
y
:
x
3S
\
:T3kM xx
xxx Y%,
[ - STEEP FITCH OF RISE CREATES OVER - 60WSPT
x
9
LINE @ -,@ BY DRAdiNG
x
CONDITION, iNIXJ C!NG 30%{ NORMAL) TECHNICAL REACTION W5 TO 350
J - INIL17Y 70 RESUME ADVAhJ CE AFTER NORMAL CORRECTIVE REACTIOF+ lNDtCATES WEAKNESS.
( - SUPPORT APPEARING Ri50vE PREVIOUS 330-335 8ASE CONST?7UTES BULLISH SIGNAL AND SPREADS OR{ GINAL BASE
( SEE PAGE IO FOR c ONTifVUOus LINE CHART OF ACTION AT THfs POINT. )
w
.
-- .
I
390
FRI. ALJ~.2.~
flo14. AuG,28
385
Tl+u. AuG .24
Illustratingzoneof distribution:inabilityto absorbsupply
and deveJqment of weakness.
(Comparewith one pointfigurechwt at A,
page 5).
Copyright1934 by RichardI).Wyckoff,Inc.
TR Section2A, Pnge 9
o
s
0.
Cdg;
o 0 On
---711M
FTz
THLJR. NOV2,1933
1 1
I
TUES.OCT.31, 1933 WE D.NCIV. I, J933
Illustratingzoneof support,abilityto absorbofferingsand
developmentof strength. (Comparewith one pointfigurechartat K,
page 8).
Copyright1934by RichardD. Wyckoff,Inc.
TR Section2A, Page 10.
HOW TO LINK THE WAVE CHARTWITH THE
STOCKIN WHICHYOU ARE TRADING.
The Wave Chartbeingbasedon the actionof the five leading
activestocksis completein itselfif you wish to tradein all five
at once and whenevera turn is indicated.
But in the beginningit
isbest to tradein only one stock.
Observewhichof thesefive leadersappearsto followmost
closelythe mings on the Wave Chart;or perhapstheremay be some
otherstocknot includedin your five leaderswhich,by observation
and experiment,you find is betterfor this purpose. This willde-
pendupon the kind of stocksthatmakeup your five leaders. You
might,for example,includeAuburn,whichwouldgivethe groupa
differentaspectthan if it werenot included;or a rail likeUnion
Pacificwouldagainchmgc the textureof your averages.
Whenyou find a stocksuitedto your purpose,studyclosoly
its behaviorunderall conditions;watchthe characterof its man-
ipulation. Duringthe studyperiodmako differentkindsof charts
of it, suchas a verticalline chart,a continuousline chart,(seo
Page 1-A)and a combinationof figureand volumechart,whichwill
be describedin anothersection. Any and all of thesewill aid you
in becomingacquaintedwith the peculiaractienof that stockso
that you can tradein it to betteradvantage.
Copyright1962byl?ichardD. Wyckoff TR Section3 Page 1
i
A VERTI CAL LI NE CHART
and
A CONTI NUOUSLI NE CHART
?s
I
volume in Thousands of shares
1
may
J une
Copyri ght 1932 by ~Ch&rd D. Wyokoff
TR Secti on 3 Page 1 A
WMtlm for studyor @real practim, plot its moveson the
Wve Ck% TM price scaleQf this #rtmkshouldbe entmed on the
rightsideaf tha sheet;cm tk left the pric~ male of the five
141MMMPB.
Mow studytk action of your one stockin combintktioa with
the ahangwi b th imwlievte trendas slum on tho Wave Chart.
YOU iwy find that$t is d$##@@m~its trend-Ctly when ti
averagm ckwqe. If this colMJl%MM,you will!know $lstwhezlto buy
and add.it. But you may fiudit is working exactly tha @ppo@it@:
wham the Wave Chartturnsupwardyour stookmy beginto get weak.
Trti@acmmdimlgky.Or you q olwmm thatyour 6tcmkraacbeaits
kming pointsbeforeor titerthe tivw atoclmIn tkm mmm@s. You
do mot carew)mt it does DO long as you Ieam its habitsand turn
theminto profits.
Now thatyou have the idea,it dopmk cm the amuuntof
studyand praaticeyou put inta it. ?lhwtyou see on tha Wave Chart
is the WO-@ out of the h3W Of *PP* and Demand. fk$t(?= ~S
a moving pict~reof a crosssectionof the market,designedby me for
thisvery purpose-- to helpY($U @ ~~fit~ QUt of **~ * *
tape. Mm tallRo$t of yoqr Opportmiti!m.
TR $eetion3 Page 2
TRADINGAREASANDMOWTO
From observationyou know how
of murowrangesof
msnt for most peGple
for Mg profitswhen
many shortswingsto
3 to 5 points.
FROFZTBY THEN.
oftonstocksget into periods
Theseare timesof discourage-
who um on the wrongside,or who are looking
the marketaffordsonly mall profits. Thereare
one long one. Let us seo how we can derive
profitsfrom the 3 to 5 pointmoves.
Keep Q verticalline chartshowingthe dailymovementsof any
of the well-khownaveragws,suchas Dow-Jones,SthndardStatistics,
?kw Iorkl!ime$,New York Herald-Tribune .. whicheveris publishedin
ycmr localdailynewspaper. Use thoseto indicztewhen the marketis
in a trading@ea or whetherit is movingto anotherlevel,upwardor
Clownwmd. You do not carewhichway it goes,or when;but you need
theseavorage$for a broadpictureof the market-- as an indication
of the variouacurrents
mediateor lo~g trends.
th~seare the whirlsor
end eddies.The
The eddieBam
the quietwater
currentsare the small,inter-
the tradingareas. In streams
betweenrapids.
Your vwtical line chartof theseaveragesshouldalso show the
volumeof the day$strading the totalsalesfor the day. This is
very importat becauseit aids in formingyour judgmentof the prevail-
ing trend. Your individualstockchartshould. also showthe volumeof
the day?stradingin that stock,50 thatyou may observewhetherthis
volumeinwemawsor decreaseson the advancesand declines.
Increases
W~ght 1932 by R&chmrdD. Wyokoff
TR SectiOn4 Pago 1
swve to emph@.ae the bullishnessor bearishness.Decreaseswarn
you of R probablereversalin direction, I couldelnborateon this--
mite a b~ok>in fnctjht thereit iS iKI ~ nutshell. Do not let its
brevitydisguim its value.
When you see the runn?agcw! workingback and forthover a trad-
ing area,you till genmnlly findyour individualstockdoingthe same.
Not always,however. All stocksdo not move alike,ss you know. Your
zavarage~ may be in a tradingzoneund otherstocksmay have small,medium
or wide wings withoutaffectingthese. Your stockmay not be included
in the+averaga$;whetherit is or not, rememberyouare tradingin q
X and not in the averages.
The upperand lowerboundariesof thesetradingswingsrepresent
the points(at the tops)wheresupplyovercomw demandand (at the bottoms)
wheredemandexceedssupply. Unlessthe actionof your stockindicates
(bymethod$we shall.explain)thatit is goingout of its presenttrad-
ing range,youm purchasesshouldbe mado aroupclthe bottomsof these
shortswingsand your sales~long or shart~around.the tops. This seems
a simplething,but very few peoplecan do it. That is becau8etheyhave
not had the properinstruction,or thqyhavenot studiedand practiced
it. We will showyou how to do this accordingto our Tape ReXiingChart
the most perfeatmethodthat,ao far an we know,haa ever been dwised
for thosewho tradefrom the tape,in an office,or on the floorof the
StockExchange. If one is a mmbcr of tho Exchangeand cun tradefrom
the tape on thtifloor,thiswill be found,allthe more valuable. It is
qlained in Saction5 of thisDivisionof the Ccur8e.
Mmntinc conaidorthe positionof a singlestockwith its move-
mentsplottedon the !&we Chart,and in connectionwith its location
Copyright3932by Riahmd D. Wyckoi3? TR SQctlon& Page 2
in it#3 trading area. l f i t i t3 0- b@tVJW#Ek 30 @Ud 35 ~ ShC@d
gl vs i ncmcu!k%g atl mti om to i ts bwy$mgopportawai ti m a$ i t approaches
30,and i ts su~ m i t n8arS 35. lhidtdcms not mean that you are
to buy or EoU at or near $hcm pai nts, I mt that you are to watoh
out for CMUMMM for profi t i nti cati by the acti on of your atmk on the
WaveCkrt, ax@ on the Tapa Rami i ng Chart referred to above. You nevar
know, when a atmk appmacbw the upper or l ower l evel $ d a tradi ng
rangs vkthar, thi s ti me, i t wi l l go on through; so you do not take a
poai ti on unti l you have al l the fmts awmmbhd, i .Q., transferred
frm tha tape to yaur Wave Chart and your Tape Readi ng Chart.
* * or Mttom is a small turni ng poi nt, and even a smal l
one may devel op i nto one that i s i mportant.
Cop~ght 1932by Ftidmd D. W@koff TRSIWtion~ Page3
TRADINGAREA
OF AUBURNMOTORS
DURINGMAYANDEARLYJUNE,1952
ILLUSTRATED IN LINECHARTFORM
SHOWINGACCUMULATION
IN PRWARATIONFORAN ADVANCE.
CONFIRMATION OF TREND
X INDICATEDBY THECORRESPONDING
TAPEREADINGCHART
w
50
APRIL /WA Y
~UfVE
Copyright 19$52by RichardD. Wyckoff
TR Section4 Page3-A
THE TAPE REAl)UW
It iEltwanty-fivayearssince
WART.
I firstbeganto fmocaW the
owing movemmts of the mrket from its own actionas it appearedon
#* tapeof the stockticker. M&ny mmorendawere mcessary at the
bqinnirig, bwt
duced q notm
tim possible.
as I developedeffioimcy in thisart,I graduallyre-
and chartsto a minim, wheneverI found sim@ifica-
It &$ one thingto learnto read the tapeand to develop
therefromonors$@mnt md intuition,and another to teachother
peoplehow W do it, makingeverythingperfeotlyclearand practical.
I have dooid~dthat tho ~wsiestway form to teachand for you to
learnTape R8ading
dmwibed bdOW.
This Chart
Vohm and l%m in
is by mmns of the Tape ReadingChartwhichis
CQIUIXLIMWthe three wkttil fttctow PriceMovexmmt,
moh a ww thata tradercan see at a glancejust
what a certa$nstockis doing?howit
tions;the valumeof-a; the
cldmm?;the proportionof tha rallies
aats on the rallies and retac-
progressof the advancesand de-
ad rmotdms to previousswings)
the lines of! mpply and dmand; the best
M6MUM of d63C$dillgwhen to U!OV9 stops
fact,combimm, on one page,most of
TapeReader.
It cm be kept on a sheetof
oblomgin
(33p&i#rt
the
locationfor stoporders;the
how far, etc. This Chart,in
indicationsrequiredby the
crossewtion paper. If thisbe
-- of th fiveleadersand of a
TR t%ctin 5 PqB 1
single stick-- can be kept on the samesheet,so thata complete
pictureof the marketmay be had in combination with tho TapeReading
Chart. If severalindividualstocksare charted on separatesheets
in thisform,the WavQ Chartcan be recordedon a sheetof transparent
paper,half this sire,so thatIt can be laid over any individualstock
chartin oral@to see how that stockis actingin comparisonwith tha
five haders.
Let UEIstudythe
the specimen~heetwhich
Canstrnctionof
follows. This
this Tape
dmuld be
binderand kid besidethis textin orderfullyto
placations.Tho Charthas a price scaleat the left. The full figures
ReadingChartfrom
takenout of the
understandthe ex-
are in one col umn and the fractionsin the next. The figuresrecorded
in the chartare
price, When the
in at the proper
the totalnumberof sharesdesltin at each fractional
pricechsnges,the volumeat the newprioe is filbd
levelon the chart. WNn a prhe is skippeda cipher
is @nt@redat the fract$onwhere t hre were no sales. Now watchthis
pointvery carefullybocau$eon it
in makingW9 ki nd of a chart;it
get it clearlyinto your mindyour
saleat a certainprice,you enter
#are 18
Cohmn.
Imtz$at
blankspaceat the pH3pW
dependsyour gettingthe rightstart
is simpleenough,but ifycnado not
chartwill not be correct. Aftera
the next salein the w _ u
level,aboveor below,in that same
But if that spacesaboveor below,be filled,you make the
the next vacantspace~~-. This will b~ perfectly
clearwhan you go over the folkowingdetailedexplanation.
Your Chart,recordingthe movementsof J. I. Case beginsat
10 A. M. with totalsaibsd 300sharesat 4.0,
This%)0 mi$hth8Ve
beenmade
Cql ymq$l t
up og severallot~;so long aa scalescontinuedat thatprice
1932bYRi cbi I wd m wpkm
TRSecti43m5 Paga 2
thaywere addedtogetherand recordedall at oncemen the mice than~ed,
Not until tnendo you know thattharewill be no uore salesat thatprice
for the moment.
The ne$ctsaleis 100 at 40-1/4. As thcxwwereno salesat 40-1/8,
a cipheris enteredat the 40-1/8level,and the figure1 is enteredon
tha 40-1/4I.inB.Now you have threefiguresin the firstcolumn 9 on
the 40 level;O on the 1/8 leveland 1 on the 1/4 level.
The nsdctsaleis 40-1/8,only 100 shares;next 200 at 40. These
two figuresmust go in the secondcolumnas the firstcolumn5.sfilled
on thosetwo levels;next sale40-1/8(100);then200 at 40-3/8(O on the
40-1./4level);then 100 at 1/2;no salesat 5/8; a totnlof 2100at 40-3/4;
none at i$o-7/8~ 200 at 41.; norm at 41-1/8;200 at 41-1/4;200 at 41.-3/8.
All theseitem@were recordedin the thirdcolumnbecausethe advance
continuedstre4.ght up to 4.3.-3/8 withouta singlefractionalreaction.
The next tremmction is 100 at Q, so in the fourthcolumnwe
must anterO on the 41.-l./4 and 43.-1/8levels. Next s~.e100 at U-U8*
As the spaceabove the previoussoleis alrencly occupiedby u cipherwe
must enterthibin the next column,and when the followingsaletakes
pkacaat u it goes justbelowthe previoussale-- in the samecolumn.
with that exphnationas to how to startkt?cping & chartofthiskind~
whichis redly Q l/8-pointfigurechart,combiningvolumeand price
movoment}I WW proceedwith the instructionsas to how this cmt
shouldbe used in actualtradingand forecasting.
On JaKNWY19, 1932,Case opensat 40. Our positionis neutral.
We wish to make n tradoon eitherthe long or the shortsideas soonr-s
Copykight1932by RichardD. Wyckoff
TR Section5 Page 3
the stock sham a tendency. Let us as~ume that the i ndi cati ons on the
Wave Chart sow after tl ds opi ni ng were bul l i sh, but that we wi sh to
wai t unti l the stock i tsel f has gi vsn some si gn of a defi ni te tendency.
There may be an openi ng bu%ge M.rt thi s may not be i ts true di recti on,
00 we shal l wsi t unti l the i ndi cati ons are defi ni l m enough to promise
a worthwhile swing. We allow1/2 a pointfor commissionend taxes,so
it is best not to go i nto a trade
poi nts. I f we had the background
wouldknow be~terjustwharethis
that dotsnot promisethreeto five
of the previousdsylstrading,we
stockstands;but startingfrom scratch,
We must wait ~til the stocktellsUS what i t i s probablygoingto do be-
forewe make a commitment.
In learningto read thesecharts,it is best to cQverwith a
sheetof papermost of the chart,sxposingone columnat a time ~
drawingthe sheett the right. In thi s way there i s 10ss temdamcy
to form judgmqptson the basisof what alreadyap~)ears on the chart.
ThisMethodnqy be followedin a studyof all formsof charts,care
beingtakennot to see the goncralformationin detailbeforestudy
i s
at
at
begun.
Afterthe
@-1/~; 100 at
openi ng 900 Aares at 40- -
l /8; 200 at 40; 100 at 40-1/8;
40-1/2; and a total of 2,100 at 40-3/4. Then
the tape shows 100
200 at 40-3/8; 100
200 at &l ; 200 at .
4=/4; 200 at &3/8 -.
R rise of 1-3/8 from the opening. Tho re-
actionrecordedby 100 sharessellingat 42.marksfor the presentthe
boundaryline of that tradingrangeof 1-3/8 for the day so far. We
do not wi sh to take a positionuntilthe stockclearlyindicatesthat
it is goingout of thatrange. TO tradewithinit mightnot giveus
enoughroom to turn aroundin, and PW
Comght 1932 by Richard D. Wyckoff
l /2-poi nt for overhead.
TR Section5 Pago 4
Next the tape records 10(3 at &l -1/8 j 100 at @; 300 at &l-1/8;
300 at 43.;300 at 41-1/8j 100 at 41-1/4;200 at 41-1/8;100 at 41-1/4.
The tradingrangehas narrowedto 1/4 of a poi nt; we are sti l l in doubt.
Next saleis 3000at 40-3/4-- a sign of weakness, becausetherewere
no salesbetwaen43.-1/4and 40-3/4;thisindicates@ thinmarket. Next
900 at 40-5/8;800 at 40-1/2;500 at 40-3/8;300 at 40-1/4. Those sal es
total 35OO shaxes,all takenwithinthe rangeof 40-3/4down to @-1/4.
Hereis same a%rength,but it may mean only temporarysupport. The chart
must tellus what the insidersare tryingto do with theirstock. Are
they supportingit becausetheywant to sellat higherprices,or do they
r@wXlywant to acquirea lot of the stock? They take 900 at 40-1/2,mak-
ing@ aroundthatlevel;then300 at 40-5/8;WO at 40-7/8;and 1000
at 43. That is 6,OOOmhareaon the way down to 40-1/4and up to Q. That
dossnot lookMke tnqhg for the sakeof accumulation.If they really
wantedthis stocktheywcWd not have bid up for it; theywouldhaveput
it down. So hereis our indicationthat the pool is tr@ng to selland
not to buy. We form a tentativelybearishattitudeand wait for the
marketto confirm,cancelor reverseit.
The biddingup proceeds~400 at 41.-l/8; 600 at 41-1/4;1.400at
41-1/2. Now the pricestundsat a new high for the day whichhas the
appearanceof an artificialbulgemade by the pool in order to attract
outsidebuying, It required8400 shams to be takenin orderto advance
the stockl-1/&points. Thisis not bullishbecauseof the way theydid
it; tkrefore, bearish. Unlessthis stockgoes on upwardand its volume
increasesas it advancos$we are lookingfor a chanceto go short.
The tapenext records700 at &L-3/8and 400 at 41-1/2;then
(k)pyright 1932 by RichardD. Wyckdf TR Section5 Page 5
400 at &b3/8. So far the ri se i s checked. Tk poolor someoneis
tryingto sell,for tha tape sqm $00 at 41-1/4;then100 at Q and
400 at 40-7/8, Thisis a half-wayreactiorI followingthe bulgefrom
40-1/4 to 41-1/2. Thik reactionconfirmsthe checkingof the rise and
narrowsthe tradingrangeto 5/$ -- between40-7/8and 41-1/2. We
shouldgo with the stockwhan it goesout of that range;thatis, we
shouldsellit shorton a bulge,andaworing to get as high a price
as possibleso as to keep our riskdowm to a minimum. Remmber that
we are tradingnow with a 1/2 to 1 pointstop end it wouldbe betterto
lose opportunities, becausethereare plentyof them,thanto be so eager
to tradethatwe takean a risk largerthanthe dove.
There$s a rallyof 3/8 on a single100 sharesat 41-1/4. It
looksllke a m@c-up ~ the specialist,or an odd lot houseMy#mg to
Won up. Another100 at 4&l/8, them600 at Q. The stockis heavy.
W look for a rallyon whichto sell. Thisis confirmedby the next
sale700 at i&3/4, whichis lJ8 underthe previouelow; then MOO at
40-7/8j200 at Q; 100 at &l/8 -- decreasingvolumeon the rally.
- w a m _ Q M ~d we get & for it. we ~t a l-point
stopat 42 [in$icatedby an S) in the 42 space. 300 sharesmoreare
soldat thatpkice~makingit 400, followedby 100 at 40-7/8snd 800
at 40-3/4.
The chartnow has a slab-sideddownwardformation,made by sever-
al lemming tops. A rallyto 41.1/4occurs cmlightvolume,confirming
the prwious b$arishindic~tion.Someoneelse triesto sell.300 and gets
Q foxit, folkowedby 100 at @-7/8. The l/4 pointrallywhichfollows
at &l/8 is the weak~atya%. Then comes300 at Q; 200 at 40-3/4;100
at i@-5/8-- a now fractionallow on the down ting sinceit made 41-1./2,
Mtt30 dwmnd at the low level. (lhddo the stockis bid up 5/8 snd
1300 shareschangehandsat 41-1/4.It looksartificial,particul.mly
when a quickslumpto 40-5/8follows. Now observe1/8 pointrallyto
4&3/4j a returnto the 40.5/8low on 100; anotherweak rallyup to @
(n lowertop)3 then t!m real slumpbegins.
When the stockreaches40-1/2we reduceour stopto 41-1/2--
our riskis only 1/2 of a pointnow, for overhead.
Thereis only one rallyof 1/8 on 100 sharesat 40-3/8. Then
a new ).OWat 39-3/4;anoth~rrallyof 1/8 on 400shares to 39-7/8;
thena new low at 39.1/2.Note that the volumeincreasedon the down
side. Therewere only mall lots soldin the upper40s. More sub-
stantiallotswere soldmound 40 and under. Add the salesat 39-3/4
acrossthe page horizontallyand you find they
thesetakingsare not sufficientto absorbthe
dip to a new low -- 11OG at 39-3/8. When this
* to 40-1/$.
are 4400 shares. But
supply,as provenby a
Ocxmrs~-QJ&
The declinecontinuesanother3/4point with a totalof 2300
at 39, and a low levelof 38-5/8,then200 at 38-3/4;200 at 3~7/8;
100 at 38-3/4;600 at 3g-5/8;then a 1/4pointrallyto 38-7/8. Note
thatofferingsare gettingvery thinhere;that is, the volumemound
this levelis light. When the stockagaindips to 38-5/8,we bringour
stopdown to 39, becausewe do not want it to rallyeven1/8 abovethe
38-7/8levelwithouttakingour profit.
and we must not let thatprofitget awe.y
with a cleansheet. Thereis a rallyto
at 38-3/4;@O at 38-7/8and500at 39.
have our profitfor th~ day.
Our initialriskwas 1 point,or
Copyri@t 1932 by RichardD. Wyckoff
It is gettingtoward3 otclock
fromus if we went to go home
38-7/$on 100 shares;then100
Thiscatchesour stopemd we
1-1/2allowingfor overhead.
TR Section5 Page 7
dewere able to reducethatrisk to 1/2 point,then reduceit to nothing--
the flatpride (meaningthe priceat whichit was sold);then to 40-1,/8
whichassureda 7/8 grm!$ ptofit;then to 39, whichwas 3/8 from the
dayslow, at whichpricethe tradewas closodwith a net profitof
1-1/2points.
Thereis a littlestockfor saleon the closingrallybut we
get no cue fnom it for the next daylssassion;M fnctjwe would
rathernot carryany impressionshone withus as we preferto have
am unbiasedopinionwhen the marketopensin the morning.
***
Note: A numberof otherchartsand interpretations of thiskind will be
foundin the ChartStudies,followingSection1.2.Additional
studias will be addedlateron. Many detaihd instructionsin
ChartReadingare includedin Mvision 1 of thisCourse.
Copyri&@t 1932 by RichardD. Wyckoff TllSection5 Page 8
.
--
i
TAPEREADINGCHART
OF J. 1. CASE JAN. 19, 1932
In FigureChartForm
ShowingEach l/8 PointMow
WithVolumeat EachPrice
UNIT OF VOLUME= 100 SiARli3
HOW TO SPOTTHE BUYING
WITHIN A SMALL
AND SELLINGPOINTS
FRACTION.
Numerousexampleeas to how this shouldbe doneare foundin
the explanationsof the TapeReadingC!harts.But thereare some
finepointswhichmay be made a littleniore
this: V/emust learnto anticipatethe high
dayismovesby assemblingin our minds,and
factorsthatpointto a certainconclusion,
cl ear. One of theseis
and low spotsin the
from the chart,all the
and if this conclusion
is justifiedat what we believeto be the rightmoment,it becomes
a commandto lx%de. Thusit will be seen that thereare two important
steps: makingthe diagnoaisand actingupon it.
The marketis cdnt$nuallygivinginformationas to its tech-
nical.position. It does thisthroughthe Wave Chart,whichfdrmsyour
background,and forecaststho immediatetrend. It givesfurtherin-
formationas to the particularstockin whichyou are tradingif you
will plot a Wave Chartof that stockon the sane sheetwith tha Wave
Chartof the fiveleadingstocks.
all the littledetailoif you will
stockon the same sheetas the two
In additionto the above,you get
keep the Tape ReadingChartof that
Wave Charts. With thesethreeand
your eye on the tapeyou am well equipped.
Thus fortifiedtherewill be no reasonto buy on bulgesand
sellon wmk spots;for$in this form of trading,theseare not oppor-
tuni ti es to m&e profitsbut to make lossQs. If you sellon weakness
with a shortstopyou increaseyour chances of havingthat stop caught.
Oopyright1932 by MoW D. Wyckoff 1R Section6 Page 1
But if you forma beariehconclusionand mit for z bulgeon whichto
tie your position,the chancesfavora profit. All suchtechnique
must be takeninto consideration.You must mieavor in everymy to
increasethe percantagoin your favor.
Ono of the nest importantways of doingthisis to learnto do
your buyingon whatI call the drivedown;thatis, duringa selling
wave end at ju$tabouta minutebeforethiswave ands-- whilethe
pressureis on~ not wha you see it hesito.to, but a minutebefore
that,beccuscit takesa minutefor your orderto get into the crowd
and be executed. (Ifit ttakosmore than th:.~t on the average,your
brokeris slowor he has too much businesson hand to giveyou the
rightexecutions.)
Sellingon the driveup is justas important. Most of the
bulgesin a stackare made by pools,specialists,manipulatorsand
floortradersto induceoutsidersto buy. If you lenrnto spotthese
play$,you have all thwe interestsworkingfor insteadof againstyou.
Take advantageof the pl,ablicts tendencyto buy on bulgesand
sellon wwkneas by doingthe reverseof this. It is betterto get out
too soonthan to overstay. The publicusunllyoverstays.
Watch the Y?aveChartfor your cue. If you expectto buy, and
the five leadersare showingan up trendfor the timebeing,wait for
the sellingwave. Look back and see how long the previousdownwave
la s t d ; judge~ thatand the actionon the tapeabouthow far thisdown
wava will go, Watch the Wave Chartof the individualstockycJuare trad-
ing in, almo the TapeReadingChartfor volumes,comparativestrengthor
weakmss, and 41 the othertechnicalpointsmentionedin chartinter-
pretation. Learn to combineall thesevariousLndicationainto a sound
Copyright1932 by Fu.cmrd D. Wycdmff Ill Seetion6 Page 2
conclusion,and when you hmvemade it, timeyour
momentwhenyou givethe order,just as you time
to hit a golfball correctly.
stroke;thatis, the
your strokein order
Watchfor the pausesthatmark the end of the buyingand sell-
ing waves. They indicatethatthe forces that producedthe wave have
cmhaustodthemselves. For a mouentor two, evenin a fairlyactive
market,the tiokeris quiet. Theseare likeperiodsat the end of
paragraphs;a naw phaseof the tapetsstoryusuallyfollows.
V?hena stockhesitatesit notifiesyou thatit has lost its
momentumin the directionin whichit has been traveling. YOU should
thenquicklymnkeup your ruindwhetherit is advisableto buy or sell
or moveyour stoporder. Any haltmay be the finalturningpoint
thatmove. If you have studiedthe FirstMvision of this Course
knowhow to judgethe distancewhicha stockshouldmove,you are
in
and
well
fortified;you can more easilydi6tin@sh the haltingplacesfrom the
probableturningpoints. Thereare more haltingplacesthan turning
points. The periodsof hesitationusuallyindicatea reversalof
temporarytrend. They also oftenmark the beginningof a nsw trading area.
Everymove startsat the end of a previousmove. If thereare
indicationsth~tthe comingmove will be important,take advantageof it.
If thereare no suchindications,let it pass.
Alwaysbe expectinga change. Be constantlyon your guardand
readyto closeyour tradeat the firstsignof danger. (Seeillustra-
tionsin the TapeReadingCharts.)
Even WBenyou havemovedyour stopcloseto the marketpricefor
your ~tock,t~ to do betterby sellingon a strongspotor buying on
w%ahmas if yow reallydesireto closeyour trede.
Copyright1932 byltiohardD. Wyokoff TR Sectian6 ?age 3
When am upwardor dawnwwd move is losingaoraeof its forceit
will be indicatedby a shorteningof the upwardor downwardthrustsas
shownon the T@e ReadingChart.
NeverXes,chfor a stockaxceptin somecaseswhereyou are pyra-
midingand have a substantialprofiton paper. Even at such timesthere
is frequentlyan opportunityto buy on CLreactionaftera breakthrough
on the up sidesor a rallyfollowinga breakthroughon the down side.
Copyri@xt1932 by Ridmrd D. ?@kdf
TsRSecWcm6 Page k
JUDOXNG
We do not
Sl%WWTHORWSAKWWSBY
subscribeto the thf30~
equalin the Stockmarketbecausev#Jhave
in a prmcticalway. Evenif it were trne
see how one couldmake any moneythere~.
gainedby watchingthe half-waypointson
for judgingst#engthor weakness.
m w WAY poINTS.
that actionand reactionare
rarelyfoundit to work
in the stockmarket,we
But thereis advsntage
out
do not
to be
rallies
When a stockadvancestwo pointsand then
may be calleda normalreaction;but if it reacts
givm us an indicationof strength. If it reacts
thereis sn indicationof weakness. Used in thi s
and reactionsas a basis
reactsone point,it
less than a point,it
more than a pointP
ways with the half-
way poi nt as a sort of measuri ng sti ck, we can real l y derivean advantage
Thisis provenby the numerousexamplesexplainedin the text acccmqmny-
ing our Tape RaadingCharts.
Other signswhichmay be includedunderthis head are thoseex-
treme caseswhere,aftera movement
direction,Q reversemovementtakes
all of the precedingmove. A stock
greaterthanthe sellingpower;but
of say threepointsin a certain
placeto the extentof all or nearly
A
advancesbecausethe buyingpoweris
if it doesnot hold this advcwe: if
it i mmedi atel y reversesand losesall or most of what it has gained,this
tellsus that ~omeoneet once took advantage of the strengthand soldthe
stockback to i ts starti ng poi nt by offeri ng more shares than the buyers
were wi l l i ng tO accept.
co-t %932 by FNdMu@
TRSa4#3n 7 Pa&&i1
The saxwillustrationmay be appliedto a raidor drivedown
of say threepo$ntsmore or less,folhwsd ~ a recoveryof practically
tie sameamount. ThisiB a signof strengthbeoausethe reboundshowed
thattharewas more Wam@h thanweakness. This signis more bullish
thanbearishbeqausethe sellers,hming spenttheirforce,are met and
ovwx%xneby the buyars,who, at the momentof completionof the recovery?
,.,
are in a comparativelystrongpodtion. They have takenall offerings
on the way down and whataverstoodin theirway on the advance. The
floatingsupply~s thus reduced;unlessfurtherofferingsappearhigher
up thatthey are not MJM.ng to take,the way is thenopen for a still
further advance.
Studyand learnall thesetechnicalpoints. Considereve~-
thhg that appearson the tape as an evidencaof supportand I.Mting
power,or pressureand sellingpower. Continuallycomparethe strength
of theseforces. Use all th~ judgmentand reasoningpowerat your
command. Endeavorto improveyour judgmmt by constantstudyand prac-
tice. Striveto liftyour Judgmmt from commonplaceto good;from good
to better;from betterto excellent.
When your judgmentha~ becomeexcellentthroughyour own efforts
mkwmbor that
tion; so that
psychol ckgi ml
you can carryit to a higherpointby trainingyour intui-
aftera whileyou wLLl get the pulseof the marketand the
momentfor tradingdown to sucha finepointthatyou can
form conclusionswithoutconsciousreasoning.You can learnto act on
theseintuitiveconclusionsamd tha go back and chackup your recsons
in orderto find out how goodyour intuition$@ becoming.
Copyfi$ht1932 by Riehatrd D. Wyckoff TRs&?ctiom7 Page 2
MM TO KEEP A PEWEMTAGEI N YOURFAVOR.
Thisis accomplishedchieflythroughthe IMtation, reduc-
ticmand d.iillh~tiOtl af risk. Thatswum: (1) You must immediately
placea stoporderas soonw eachn~ tradeis executed. (2) You
mast move thie stopto reduceyour risk as soonas the marketwill.
permitwithoutendangeringthe lifeof your trade. (3) You must
furthermove the stopso as to covorthe priceat whichthe trade
was made,end (4) you must move your stop stillfurtherwheneveryou
havea chanceto insurethme~ a part or most of your profit. These
four stepsare vitalto this form of trading. Unlessyou carrythem
out cold-bloodedly -- withouthope or fear -- and persistentlyand.
with determination, you will greatlyreduceyour chancesfor success.
Baaedon your intentionof tradingfor the swingsof 3 to 5
pointsthat occurin a dny!s session,or perhapstwo or threedaysin
succession,your riskis kept down to a smallpercentageof your pros-
pectiveprofitby placingstopOrders1/2 to 1 pointawey;but %fyou
shouldfail to use thesestopsin the way indicated,you are positive-
ly incraesingthe percentageof your risk.
At 1/2 pointr$sk and 3./2pointfor commissions and otherover-
head?you can bo wrongtw$ceout of threetimesif you realizeon the
thirdtradea profitof threepoints. Your two losseswouldbe 1 point
each,or a tdal. of 2 points,includingoverhead;the thirdtradewould
carryan overhoadof 1/2 point, making 2-1/2. Henceyour net profit
wouldbe 1/2 pointon the threetrades~
On a W30ratical.1 pointriskwith
you are wrongtwicefor 1 pointeach time,
a 5 pointobjective,if
thatwouldbe 2 pointslost.
Iiyour profiton the thirdtradewere
duct the two losses(2 points)and the
wouldtotal14/2 points,making3.1/2
5 points,you wouldhave to d+
overheadon threetrades,which
pointsdebitand 5 pointscredit;
a net of 1-1/2pointson the threetrades;or an averageof l/2-point
on eachtrade.
We do not claimthatyou cen make cut and driedtransactions
likethis,but we emphasizethe pointthatyou mustkeepyour los~es
plus overheadin suchproportionto your profitsthatyou will have a
mar@.nto the good. This whc)leplan for activetradinginvolvosbuy-
ing rightand sellingright,and lettingtradesrun in your favoruntil
you observetechnicalindicationsthat theyhave gone as far as you can
reasonablyexpecton the strengthof
whichyou startwith anticipationof
severalpointsand helpyour average
On the otherhand,your risk
your diagnosis. Thus many a trade
a pc~intor two profitmay run into
profitfor the week or month.
is strictlylimitedfrom the start;
it is ~evor increased. It is frequentlydecreased.Many timesyou can
plug a profitwith a stoporderso thatit cannotget away fromyou.
Thereinliesyour expectationfor success. You aim at n largerprofit
thanloss in everytrade. You keep a percentagein your favor.
Rememberthatwe have by thismethodeliminatedall guessing;
all tradingon tips,hopes,hunches,hearsay,news,information,sta-
tistic; snd thatwe are tradingon the basisof stockmarkettechnique
whichhas its rootsin th~ law of suppQ and demand,the onlyreal funda-
mental on whicha
copyright1932w
soundmethodmy be
Richard D. Nyckoff
based.
J%section8 Page 2
TRADINGON INITIAL ACTIVITY.
Deciding upon the stock in whichto trademay sometimesbe
done tQ adventage by letting the marketitselftellyou thathere is
an opportuni~.
You watchthe tqpe. You have no commitments.
of the five leadersis beforeyou, on a sheetof chart
Your Wsve Chart
paper. You make
mentalnote of the pricesthatare flowingacrossthe Tape or Translux.
You wait for impressions.
Suddenlyyou noticea certainstockgettingactiveon the up
or down side. If it is movingin harmonywith the trendof the five
leaders,you immediatelytakea positionin it, long or short,with a
stop1/29 3/4 or 1 pointawqy. Thenyou go back over the tapeand make
a Tape ReadingChartof it from the openingor from somer@uonabh dis-
tanceback. Iithe high and low pricesare on the quotationboardbe-
foreyou,you ean mark theseon the left sideof your chartas a guide
to the daytsr&nge;thenif you have a verticalline chartof that stock
in your collectionyou cen see whereit stands;whetherit is in a narrow
tradingrange,or movingout of it on the up or the down side,heading
towarda new level.
Your incentiveto tradeis due to the fact that this stockwhich
has been idlingalongin a very narrowrangeand with smallvolume,is
now becominga~tive. lhis activitymmn~ that somebodyis gettingbusy
in it and
Copyri$lt
you inferthathe may be in pomswmion of informationlikelyto
1932~ RZchmrdD. Wydw)ff !FRSection9 Page 1
MlLwrm sup$dy m dummd or thatits t$dkmiml positionis suchthat
theyWlleve theyc-anmoveAt to aao4#mxMval ad realisea profit.
You, thereforq,hop m th@ etm!kmd Ad% along with whoever iS en-
glnm%ng the Imve. l!hw you hmre him workingfor you. You are tak-
ing a ride,M to spedq m a qmz%al traincharteredand pUd for by
mmane @lse.
Your Mpe ReadingGhartwill giveyou all tie details. You mu
judgenot onl#by what he does but & what he dom not do, for it must
be yuur first precmut$m to see thathe is not makinga falsemove %n
the appositedirectiontowmd whid he intendsto melm his P*. That
ia$ he may be pl- a down wing, eo M first bids the stockup a
po$mtor twc in orderto attracta followingof buyersto whomhe can
13ella largerquantity-- -either on the my up or beginningat the top
and mZIAng it back. If he intendsto bull tho stockhe may driveit
dawn firstso as to CMMII out the stop ozdersbelowond mcum all the
stockhc can find aroundthe 2017 kvel. Hence you must be on your guard
tith your stoporderfor it ia ymr onlyprotectionagainsta sudden
revoraaland a big 10SS.
If, hawever,the aperatm is reallybull$ngthe stock(or bear-
ing it, ae the casemy be) d raullygoes on with the deal the my he
startedit, your stoporderis safe,so long aQ you do not gd it up too
closeto the priceof the @ock so thatyou are kickedout on a small
reaction. Keepyour stopat a safedistance- on the wl aidebelow
the bottom of the lastdip, and on the bear aideabovethe top of the
lad rdly$ untilthe timouppmmlm for 404ng the trade.
Watchjnmr !l%p Re_g -t, W watchth@ trendof the five
lmdera to mako sure* we not iticatimg a turningpdnt in the dayss
MmYri$kt 1932 by lMh@rd D. WyckMf ~ &3CtiiO139 pA&i 2
thn Iwy bwk again
WMIMWlws on the
Y@lM!
thwl to buy
Cmb on the
Im3aom ttw th$m *8 that the C)permtor will
h faaaof indlomt$ons thatthemarketis
d@Nrmry,ho wi2Aprdtdi ty do justwhat I
probably not con-
aboutto sell
am tailingym
a~ @W his #tQok a suddan6*; themsell. Outsllhe Carl80 86 to
ZW3UW Ms line and thus providepurohming poworaroundthelowpoint
of tha! Ooming
Reading Cha?t
These
dip. You follow hi$ IM3W8 closdy andwhen your Tape
#!MlJV3 he $a bW@JI~ th#M bSCk,buy -6 baok.
paintain tradingare bwed on standardpracticeamong
-pert floort@@Qrs,pml managersand otherimportantoperaknwwho
knowthegame. If you expectto make money,youmustnot tradothe
waythepublicdoes;yQU mwt wb marelybuy, sit and hope, Youmust
@ $n and out at th rightmoments,tradingthe way warlmttach-
nieiam do.
It mwt be your codxnt aim to refineand poli~ ywr jud~
mont w thatyou will be able to keep yourulndclearandunbiasedand
firm yet flexible+Hsverbacomoprejudicedin fmm of
tiemarket, fori f you do you will b like a shipthat
to &hwQ on high tido and is strandedthere.
vw to pqwxw for tradingopportunitieson initialc&Av-
@t yOUrOQMWUd a k??$erwmborOf V@l%iCC.~ ~ine ChWtS
Thisdoes notmoanthatyouwillhaw to makethe dmily
Qntriea on a large rmmbn yartmlf al? through your .cmim?mt, foryow
TR$$wlwm9 lhgs4
JUDGINGTHE WIKE1BY TEGTSAND RESPONSES.
Next he tmtw out Steel, Tdepbne or Can in tho sam my. He
gat~ somefoULowingin Cam, a littlein Telephoneand nothiiig much in
Stiel. Them he triesout the utikL~ groupand getsa Mttie more em-
courqp#m@ltOP the bull side,
From $his seriesd? teatshe now knows
maxwethe marlmtby bullingCan. liefeell?l out
that he can b~st ad-
the other stocks that
sometimesr~spondti the loadarshipof Can so as to get help or at
laaatsupportfrom othorBectionsof the market. He f2ndsa little
mbre
gcml
most
avoids
h a n d.
rmponse in otherindustrialsend wlwm he has thesesizedup he
aheadand bullsthe ones that showthe N3st rwqxmse -- Want seem
to inflw$ncethe rest of the Lh3t.
Ol wwre thathe followsthe
bullingthe railsMcauao he
He dm$ not want to take big
his way; Sonmlne elm am 40 that.
Une of leastresistance.He
wouldtherehAve to play a luno
~OCk8 Of StO&@ I?hi&h standin
He advamcss$ha ones that are easi-
est to put up whilerequitingthe mnlhst purchmes on MS part. After
a while the mnallMl&s whichhe has producedW MS testingopmations,
followed~ the mom activobiddingup of a Mm@@r numbarof stocks,m-
ccnlrege floortradmraand the publicto get in on tho bull aide. Am
ixmwasing mwber of stiochadvame on expandingvolumeand a buU mlmg
of sub~tantialproportionsis underwqy.
The C. O, furtherencowagaJsthis bullishness~ helphg along
wharovorhe O*. If he w#s ca%ain stQckBor groupelsgging,he will
senda brokerinto thosecrowdsto bid themup. If wealmcssbrwdcsat
anywhere, he WJJJ1give support. As a good generalhe is alwaysemdaam-
ing to hold & $inesagairwt attaok and to advauaehis frontMnes (tops)
as far as he @mm.
@W%@t 1932 by RkWMWd IA Wywoff
TR Section%0 Pago 2
Supptase the bul l $vti ng has now Wan runningfor severaldays and
afterd.%ingup the situation~ a swi3s of tests,he findsthatthe
buyingpowerhas temporarilybecomesomewhatexhaustmd;thatis, most
of the peoplewho couldbo influcmcedto go in and buy imvedone so;
they csnnotwend that samemoneytwicennd thereis a scarcityof
otherbuyers to take theirplaces. Demandhas shrunk.
Ho rlOQ#SU@i$?Y WiWtWcX the marketwill take;hc WIUS fill
ho c xin around the top of the swingand on the way down. If the rise
in the cwra~s has amountedto 10 points,he may keep on sellinguntil
it has declined6 points;then
not by biddingup thasQstocks
he may beginto
but takingthem
buy backwhat he has sold--
as theynre offered. Out
of 1,000 sharesofferedat ,atort.nin pri,cehe may take 600 or 700l ~i ~v-
i ng 300 stillofferedsnd the marketunchanged. His reaccumulation is
not apparent. Tho marketis stillhecvyalthoughhe is buyingback on
the reaction.
Aftera whilehe absorbsmost of the floating
abouthalf way back from the top. The sellingpower
supplyat a level
is now lessening;
in fact,he is unableto buy back all ho wants;so he drivesseveral
stocksdownwardto weakenthe marketso he can completehis purchases
on the reaction. Thesedrivesare alsohis txxjts.Whilothesestocks
are weak,othorsadvancea littleas a resultof his raisingbuyinglimi-
ts. Thus the averagesare scarcelyaltered. Peoplewho are bearish
pointto the few weak stocksand decidethat the marketis goingmuch
lower. They make some
to buy more. He takes
With the bears
ventures on the short si de. Thesehelp the C. O.
theiroffarings.
makingno progressand no more stockpressing
for sal e, the market i s now i n a posi ti on techni cal l y known as I tsol d out!!
Copyri ght 1932 byl?iiahwd l?. Wyckoff TR Section10 Page 3
for 12M timebeing. AU the offeri ngs of thosewho sold on the way back
from the top are now absorbed;h@nce,for the n~t five pointsup -- on
the averages-- thereis littleoppositionto an advance. The C. 0,
thereforeadds to his limos,b@ng as careM.ly as he can, to ae not
to advancepl?iCfi?S.
Afterthe averageshave recoveredabout3 pointsout of the 5
theylost,ha has replacedaboutQIl the stockhe wantsand beginsa
rapidbiddingup of pricesall aroundthe room. The marketadvances
to the levelof the previoustop. Here R lot of thosewho boughtat
thattime ,nndwho held throughthe reactionplacesellingordersso
they can get out evenor at a smallprofit. Thismakesa lot of activ.
ity and narrowswingsaro~d the old top and chartobserverssay: Here
is a doubletop;we shouldsell shorton this. But the C. O. finds
thatthe long sellingcombhed with the shortsellingis not sufficient
to stopthe advanceof the market. Thereis a latentbuyingpowerthat
appearsto intreaseon advunces. He bids certainstocksup to new highs
in orderto emcouragethisoutsidabqyingpower.
The strengthspreadsto otherissuesand the marketgoeson
throughthe old high for the averages;bears,findingtheyare wrong,
begin to cover; their stop~are caughtin many cases. BUUS who have
beenholdingback comein and buy. The bullprocessionwidensand
deqans -- more buyers,a gr eat er numberof stocksdealtin, a larger
volumeof tradingall throughthe list.
And so the C. 0. continueshis operationson the bull side--
with the characteristics of the marketin its variousphasesmuch likeone
anotherin principlelxztdifferingin detail-- untilthe bull wave has
Copyri&t 1934by Richard1).Vfyc k ot f
lusted SO long and atendmd to SO WUIY
buyersthatthe C. O.
his long stocks; hat,
the remai ni ng demand,
throughthe &Lst. He
is able not oti l y
as hi s unl oadi ng
stocksand broughtin so many
to unloadeverylust shareof
sucha large9upplyovercomf33
he also beginsto put out a line of shortsall
keepson sellinguntilall of the aemandat the
high l evel i .s satisfied.The marketis now saturatedwith stocksend
thareis no buyingpowm left to lift thattremendousloadwhi.chwould
have to be movedin orderto advancepricesto a new Mgh lavol.
The C. O. seesthis situationand knowsthattho timeis ripe
for a break. He bi ds up severalleadinghigh-pricedstocksto new high
levc+ls, whiahcausesthe publicto say: The nverugcsare up into Q new
high. We shouldbuy xnora.
Meanwhi l e he has been sellingso many otherntocksthat their
prices are tmgging under the weight. He keepson selling,gettingout
of the ones he bid up, and gettingshort of thornalso. No~j~ he is adding
everyhour to the supplyof stocks. The reactionhas broughtthe public
throughthe successivestagesof hesitationto cautionend theninto a
stateof fear. That is, theyfear the marketis goingdown but theyhope
it will racaverenoughto let themout. This emotionalconflicton thb
part of the public
The market
causespeopleto hang on and do nothing.
goes lowerand loworbecausothereare few buyersex-
ceptoccasionalshortscovering. Pricesare falling
Supplyis vastlyheavierthandemand. The C. O. has
a big profiton his shorts,to be sddedto the great
of theirown weight.
only to wtit to red.ize
profitho has already
gatheredon his longs.
And with this vast sum at his commandhe knowsthat
he can buy a tremendousnumberof stocksat the bottomof the dd.ine, pay-
ing greatlyraducedpricmscomparedwith thoseat whichhe sold.
NOW I hav~ explainedall this so thatyou will get a clearidea of
...
Copyrightlq~~ by RkdmuwlD. Wyckoff TRS43ctdJ3n MI Page5
b
what is goingon under the mrfsce in the stocksmrket. Thereis no
Compos$teOperator,but tha effectof the cmdxknedoperationsof bank-
ers$pools,la#$eopmators,floor tradersand the pub~c is$ when
bcdhd down an the tape,of the same effectas if it were produoedby
one mensOparhtiowl$. It is importentthatyou observethe marketfrom
this standpoint,end thatyour tradingoperationsare based,not on what
you formerlyNgarded as t~ marketlscharacteristics but on the ftuxk
meuatallaw of @upplyand dmemd$ whichis at the bottomof everymove
thatis made i~ eva~ stockin the marketat all times. Tlxislaw is
workingand will continueto work alwaysand forever.
Therecan bQ no
gettingawsy ftomit. It doesriotmatterwhetherthe bufingand the
WLling$ or both,are gmuine or artificial;thatis, manipulative;
designedfor a purpose.
Studym applythiBlaw in the way outlinedhere,by meansof
tlw Wave Chartwhich showsthe comparativestrengthof the Supplyand
the Demand;by the TapeReadingChartswhichare a micro~cop$crepro-
ductionof the sesmIaw$soperations;and from the actionof the market
as it appearson the tapeof the StockTicker. All theoecan be turned
to your advsmtsgeif you will followthe methodexplainedin thisCour8e,
con@antly studyingand practicingit so thatyou will.becomehighly
efficientin due time.
***
The manketis QUJO oontinul,ly beingtestedby the variousnews
itemsand developmentsaffeoting$Znglestooks,groupsreprasemtingin-
dustries,the fdmncial or businesssituation,etc. A testof the
stm$ngthor weaknessof my stock,or any kind of a market,is frequently
affordsdby thase. For example, thwe were rumorsin June,1932,that
Copyrigh%1932hy RidMWd I).W@coff TR Section10 Page 6
bothAlliedChemicaland AmericanCm wouldpass theirdividends. 30@
stockswere heavy. Allied Chabxl made a low of 43-5/8em hour or so
baforethe divid~d was announced,and whn the reportcamethat the
r&piLardivi~md had been declared,therewas a half-heartedrallyto
47, a goodpm% of whichwas quicklylost. This affordedQ testof the
timperof the market,whichWLM bearish. Bullishnews had only a momentary
effecton Ws stockand littleor none on the rest of the list. The
tapereaderl$ cue wmld have been to selleitherthis stock,or others
thatrespondedpoorlywhUe the strengthstillappeared
One more word abmt thesetests$ No matterwho
the CompositeMan, a poolmanager,largeoperator,or a
in AlliedChlemical.
me.kmithem --
big floortrader,
the resultof the tewtsshowimmediatelyon the tape. You, sittingat
the ticker,@n observ~at oncawhetherthesetestsbringa bullishor
lmzrishrespanse;and you are just as free to act upon themm if you
M made th-yourself. Therefore,neverfail to observetheseand
othardetaildin Tape Reading. You can neverWll what thaynwy lead
to, or Bighi$. I have
tionswhichwst people
to be hi@ly observant.
darivedsomelargeptofitsfrom tapeix@Lca-
owerlookad.you CSll dO the Sm% Whi31!l YOU learn
copyright1932~lMLdWd D. V@dWMf
BEST STOCKSFOR ACTIVETRADING.
For thi s purposethereare two chiefrequirements:(1) Wid&
dailyswings${2) A closemarket-- tit enablesa traderto get in
and out closeto the last sale. A thirdmd less importantadvantage
is in a larg#volumeof shareslistedin a stock;thisis sortcd?a
guaranteetMtwham activitybeginsa largenumberof investorsand
traderswill participatein the campaignand thus aid in maintoAninga
C1OW market.
Wide dailyswingsare vital,for withoutthemthereis little
chanceto buy end sell,pay overheadtand. realizea profit.A stockwith
a dailyaverageswingof only a pointwouldbe of no use for our pur-
pose,for in orderto realizea half pointnet profitwe wouldhave to
buy at the bottomeighth,sellat the top eighthand deducta half point
for commissiam,etc. Such stocksshould,therefore,be avoided. As
the dailyswingswiden,a stockbecomm more attractiveas a trading
madium.
A clowemarketin a stockis greatlyaidedby its activity
becausethisattractsa largenumberof tradersin the officesand on
the floor;competitionis keen;fhor traderstry to get theirbids end
offersaheadof the restof the crowdso as to benefitby fractional
moves. AU thiskeeps the marketvery closeto the last sale. By %mrketf?
I mean the combinedbid and askedpriceat the moment. The last saleis
not the market;thntis markethistory.
Copyright193$?by Mdaixrd D, V&ckoff TR Smtion 11 Page 1
Most of the prinaipa,l dailypapercthroughoutthe countrycarry
in theirMonday editions a completelist of transnctlonsfor tho prevf.ouo
mx!k. Such a tableshowsquicklywhic!hstockhad tha widestSWin&l and
the grwatestvolumeof trading$ Thesewere the loadersfor tho pretious
mwk. This flheetcun be premrved as your wdcly recordand the fiveor
ton leadersn$arkedwith a blackor coloredpencil.
Leadershipis constantlychanging. Past rtico~ds aro no guar-
snteefar ths future. It is best to takeoffa list of the leaderseach
week in orderto hmne thembeforeyou for the comingweek but thisis
onlyyour background.Tha tapewill constantlyt~llyou which stocks
are affordin~the best tradingopportunities.Of coursethereare many
stocksout$iduthe lo:~dera whichhave closenarkets. Watchfor these.
Belov#isa Wxil@ion of the averagedailyrango (difference
betweenhigh and low) of fivel~adingactivestockshatingclosemarkets
duringfour mnnthsin 1932:
!wsdQL AA&4uMu &k?AwL Q#uaAil .Mi!aL
March 3 2-5/8 2
l-3//4
l-3/4
klpril 2-3/4
3 2-3/8
~
1-1/2
May 2-1/4 2-3/8 l-7/8 L-718 1-3/8
June
-Ma u&%!Q
4Mos. Average
2-3/4
2-5/8 2-1/8 1-7/8 1-1/2
The dtilyrangeof thesestockssometimesamountedto from4 to
7 points,whichmnde tradingoperationson thosedays more profitableif
a tradm were on the rightside. The dove averageshouldnot be con-
sideredan inucation of the future,but just e.comparison.
Duringthisperiodthcuwwem many days on whichthe nest active
Copyright193$! by RJ.chmd D. V&ckoff TR Section1.1Page2
of these,Tclaphone,quieteddown to a pointand a smallfraction. The
sameis trw af the other$tocks;someat timeswere dovm to less than
a pointbetweanhigh and low for the day. But on the averagethesefive
gavepbnty of activity-- enoughto enabletradersto get in and out,
oftenmore thqn onceon tha samedtny,with a profitaboveovdmad.
Auburnhas not been includedin this groupbecauseit is in a
clast3by it~ekt. At timesit has a fairlyclosemarkut-- in its per-
iods of preparationfor importantmoves,or in its restingBpells. But
one nevercan tellwhan the next saleis going to be 1/2$1, 2$ 3 or 5
pointsaway fron the last sale. It has the reputationof beinga dang@r-
ous stockto tradein. I considerit no more d.nngerous than any other
if you Understandits peculiaritiesand regul.ato your tradingto fit them.
The stockmerelyrequiresa differmt techniquefrom the otherleaders.
Everyone+ is not qualifiedto tradein it. We cannotadviseanyoneto do
so withoutmuch practiceon paper. He will thusbwome accu~tomedto
the erraticchangesin tkds stock. These are clue to its smallcapit<3li-
ationand extr~melylimitedfloatingsupply. Thosewho are manipulating
it snapthe marketwhip1frequently-- greatlyto the consternation of
thosewho are endeavoringto grabprofitsout of its gymtions.
***
The followingtableindicatesthat 66X of the totaluninterrupted
swingswere 1 ad 2 pointsonly. The swingsof 3, 4 and 5 pointsamounted
to 28% of tha tmtal. a very fd.rproportion;nearlyone-third,in fact.
This percentmgamay seem somewhatincreasedby reasonof the wide swings
in Auburn,but} withoutthe latter,it is 27$i!.Nearlyone swingout of
threein thoserunning from1to 10 pointsconsecutivelyaffordedan
Copyri$ht1932 by RichardD. Wyckaff TR Section11 Page 3
In a word,
the tinder
fartherhe
Auburn
Al. Chin.
Am. can
Am. Tel.
con. (MM
U. S. Steel
Totah
Approx.%
Ofltc)lo
pt. mhgs
1
1
1
tradewith the assurancethatit would go far enoughto
eventhoughthiswem not accomplishedin a singlesession,
permmtige of 3 to 5 pointswingsis worthwh?l.le. After
toks a position,if he estimates
ladonly to movo hia stopand let
Nmber of wings of from1 to 10
cm the full figures,withouta
for abmt sightweeks in May
thatWly SwingshouldfJO
him profitrun.
consecutivepoints,
1 pointrevwmil.,
and June,1932.
Qi$t 2!#QuEMEaikE EMQiwlLik3L!3uEi&hli MJaQXwAadaku
I&) 111 72 43 25 U 11 8 6 k 463
6642 2912 3 1 1 - - - 154
59 25 1.4 9 4 - - - - - 111
58 36 22 12 5 5 3 2 -
- U3
4726 Q 9 5 3 1 - - -lo5
JiLJL A-JL=LuL~~~ ~Ji4k
@J+ 253 159
K@ 25 15
With tie exceptionof
leadms are interruptedaftm
91 43 24 16 10 6 4 1030
9
4 2.4 1.6 1 .6 .4 100%
Auburn,most of the movesin the five
theyhave run five or six points. This
my be only a J.or 2 pointmverm move,and a tabulationof the swings
with one suchinterruptiontightmake anotherinterestingpicture.
For three
1932)attractive;
triggmr,and tiqy
who like to tradain a fastmoverAuburnis now (June,
thatis$ if theirtradingfacultiesare on a hair-
CUl qmmtii$ withoutfaar of havingStOp# caughtfrm
1 to 5 points away from thdx stoppricm. The tmblashowsthatin the
Copyright1932,, by RichardD. Wyckoff TR Section 11 Page 4
1 to 10 pointmovesAuburntravelledaboutnine timesas many points
as U. S. St@l; fourand a half timesas many as Can and Con. GM
and threeti#wsas many as Telmphoneand AlliedChemicalduringthe
pwiod mmtibmd. This cmnot alwaysbe expected,forhhiyand June
markedone @ it~ charactml,stically wide swings.
STOPOIUERSAND OTHERVITALPOINTS.
QQ$m of ImQQJ@3xsa Stopordersshouldbe regardedas
inmuranceagainstlarge10s80s. They shouldbe placedimmediately
aftera tradeis made.
We amnnotemphasi~etoo stronglythe absolutenecessityof a
stoporderin wary caseJfor thiswholemethodof activetradingde-
pmds more om the limitationof risk and the controlof lossesthanon
any otheronm factor.
Sto~ can be: (1)placedon the floor;(2) leftwith the order
clerk,or (3)kapt in your own hands.
A strepon the fl oor nwms thatit will be executedthe instant
a tmnsactio~is made by anotherbuyerand sellcu at your stopprice;
your stipthm becomesa marketorder.
If yDu leavea stopwith the orderclerkin your broker~s
officesyou instructhim to executeit pt thq mwks$ , as soonas he
seeHa tranmction on the tickerat your atopprice. This form of
stop is a littleslower,but,in somacases,may work out more satis-
fadOIi&. ~ry it and SW.
If you keep the s40pin your own handstt is calleda mental
stop;thatis, you decidayou will give the orderto the orderclerk
whfmlthe priceon the tickerreachesa certainfigure.
You must deter-
mine to carryout your dmcisionwithouthesitatingfor a moment$for
if you do th$ chancesamyou will Qithtm hed.tatetoo long or you will
Cc$pyri&ht 1932 by R%chardD. Wyckoff TR Section3.2 Page 1
mm ywr mqtal atop MWwr away from the pri ce at whi oh you made
tb trade. ?Mt is a fwlamental er r or i n thi s form of tradtng, tha
whol ~ purposq of whi ch i s to J&@& and H th ri sk. I f you make
thi s er r or yqu wi l l not M Uti ti ng your r%$k, and you wi l l be i ncreas-
i ng i t.
At the fi rst si gn of danger, your stop shoul d al ways be brought
cl ooe or tho trade cl osod out at #o market. I f the danger pas$em and
you are ki ckdd mat, you can al ways get i n agai n.
Stop# shoul d Mwum room for normal ral l i es and reacti ons, so
-t the treds i s opm fox furtbr pomi bl e profi t~. But i f a ral l y
or mmmti m %$ more than ~omal , ym shml d mmi sa your forecmt and
act ao@XCMn@y.
Hem? carxy a trade overn%ght wi thout a stop. Yma may be de-
l ayed or be @aken i l l the next morni ng and an adverse market mi ght cause
a 10SH of smtwml poi nts.
Am awtamati c ~top i s cm i n whi ch you i nstruct your brokor to
mova i t conti nual l y wi thi n a certai n fraction or number of poi nts from
the htghe$t cm l owest mmrl tet pri ce remmded.
I n6tmuctycmr broker i n wri ti ng and get hi s acknowl odgm$nt that
al l of your ati p~ are to M conai dmed good ti &l countermanded.
Wnckral l Condi ti qml ? pl ay S?l fo. Do not see what chanms you can
tel w wi thout ,gmtti ng caught, but wi th what mal l ri sk you can trade.
***
The objecti ve i n thi s form of trad-
i ng i ~ to mak@a l on$ smi es of trades i n uni form number of $hmm from
whi ch we dwWa profi.t~ in mcms of l osmes. We never know whcmwe make
a tradehow ~t is gcd.ngt@ turnout;we cen but we our
and continuallytry to i mprmw our judgmentso thatthsi
net profitincraams atwlily.
best judgment
percentageof
The @mwming stickby whichgoodresultsor bad may be judged
is the perc~tage of profitout of each@O worthof ~
_ That mmM3 this: If you make two trades,one with a net 10ss
of $25 and tlw otherwith a net profitof $75,
i!!! 75. You add the profitto the loss,making
your percentageof profit
$100,and three-quarters
of your total
pro~aming.
runningdowns
is on the profitside. By thismeansyou judgohow you are
.
Wheneveryou findyour percentageof profiton clomd trades
or runninglow, go back to papertradingand studyyour
lossestillyour judgmentimproves.
***
All your commitmentsshouldbe for the
samemumborof shar~sin a~ch trade,so that the percentageof profit
and loss willnot be disturbmdby tradesin largeror smalleramounts
thanyour stendmrd.
Whan you increasethe sizeof your trades,the mm uniformity
shouldbe preflwrved, for the
Rewordswill hot be accurate
same reason. Mn.iltsare measuredin points.
unlesothe lots are the samein all cases.
-X--M*
Thaaeare now beimgpostedin many broker-
Th e e bb a d flow of pricesmay
in form similmrto tha Wave Chartin caseyour attendencoat
Copyri@t 193E by RichardD. W@mff TR Section
be recordod
the ticker
is interrupted.The hnlt-huurly prioeswill.not, of course,corres-
pondwith tho hngth of thw buyingand sellingwaves, Thorof&e,
thasee,vwrag@I are not a substitutefor the latter;but th~yhave a
cmtain advambge whioh it wouldbo WCLI.to test.
***
,, on MWW. Whenyou firstbegintradingon thisMethod,
do not use m@. mon~y. Trade on paperumtil.you thoroughlyunderstand
it* Whenyou dwide to mnke a papertrade,write it down
reoordjusta$ if ~ou ware givingan orderto your broker
fair prim, aooordingto the tqe$ at.whichthe ordorshoul~be ox-
@outWI. Giveyourselfthe worst of thesatrmsactians,in 03s0of
any doubt,so thatyour racordwill be conservativeand youwi.11not
be foolimgyaqrself.
Rememberit is not importantthatyoumdm money
at first;but it is very importantto make a goodbaginningso that when
you Onoe
inoz%)ase
capital,
be at
stand
lwmi how to txvuhand realizenet profitn,
the #i$eofyourtredes withoutat enytim
you can go on and
jCq3mrdizingyWr
yrdiei,lirt M% m .
tb marlmt. A limited
+++(-+$
In nearlyeverycam your ordersshould
ordorehouldrawly be wed.
When W is tim to tako a poaiticmor closoa trade,
1233 fractions~gti in or out at the market.
copyr*t lWW by Mdmrdl$. w@off
TR %ction 12
never
why you
Page 4
shtmld stay h a iamdo
po@iti9nw am tdwm on
tdmld giva them tmta
whi ch does not act rightor gotw std.e. Your
WM$$tratlgth
UJEitl!d t$lrw
?30t mtkh good, YOU Skdd
fmwd Y* stops up alme
wqy op43n fop more profi t.
either
to the
of cC@xLn l n41cati owS and you
i nwhi ohtowwkol xt. I f-
CMM tl mm out at the market,
market ~ZiC@, thm h!c i?ing the
i ndi cati ons shown on the Wave
you ti t for theme to make
Do mot @i* $hmw
h daorti im@tectd
$Oidiifh??zjay.
Xtx? mMd
trodoandwlOyby
that Sitwlmm M
end hop#B* OIM,y the tape G I f i t %eU@ YOU YOU skul d
M MMq&#(get sort 08 a bulge. TM* m trgidmg
no opi ti on when you are coxuatantl y bei ng tol d what
th~ ?lCt&OXl Of th mmrkd. hd WhOll tw ti~e SQYS
douMfM, cl am out al l WOB amd ei t sti l l i n a
***
A maccfMMUL spmmlator poasemes sdf-
courage~ caution amd matal flexibility.
c)wmthimkhgj form your own Conol wi ons,
Never ask advice. The informationyou will durivcfrom the
tapeand from your chartsis far more v.?dLu3ble thanany thatyou can
get from any othersource.
It ie an old saying: The tapeneverlies.
Your judgmentshouldbe basedon soundprcxnises. You have cdl
the factsbeforeyou; assemblethesecnd make yourdiagnosis. Decide
what the sitw.ti.on cil.ls for; thenUSQ cour:~ge in actingupon your
decision. Be courageous,and somewhatbold,but with a certainmeas-
ure of prudence-- alertnessand watchfulnesscombinodwith caution,
Allowfor the Unforeseenand the incalculable.
Learn to thinkand act promptly. Your decisionbecomesa
commandto trade. Havingplacedyour order,neverfear to reviso
your opinion. You must have flexibility;the mereholdingof a cer-
tainpositionis no ruasw for your holdingit; ilev~~ be bullishor
bearishjust becauseyou are in a trade.
The ~rket tellsyou what to do; it continuallyconfims or
cancels its previousindications.It te~.lti YOLI: Get in. Get out.
Move your stop. Closeout. Stayneutral. Wait for a betterchance.
All thesethingsthe marketis continuallyimpressingupon you, and you
must get into the frameof mind whcnwyou.are in re.ditiy takingyour
ordersfrom the actionof the marketitsdf -- from the tape.
Your judgmentwill becomepoorerfrom the very timewhen
you decidethatyou know more aboutthe marketthanthe marketic
tellingyou. From thatmomentyourresultswill be unsatisfactory,
for in this tradingbusinessthe tapois tho boss. You must l-camto
oboyits orders,doingexactlywhat it tellsyou. Whenyou can accomplish
this,you are on the highroad to successin your stocktrading.
Copyright1952 by RichardD. P&ckof.f TR Section12 Pago 6
When the priceof a stockis in approximateequilibrium,
your bid or offorat the marketwill have a tendmcy to raiseor
dqmma the priceam ei@th of a pointor more. Hence,if your
otieris to $u, you WIU maceive1/8 pointless than the priceof
the last trde; and if ywr order is to buy,you KU ~ l/8 point
more thmm th~ priceof * laat trada. Thisvazztmtion in priceis
(Wled the %nvialbleE&gbth.~~ W&n a atookis dxmdlng still,the
prioeis, W, 53+% bid$ cM#Qti at 1/4. 3f you buy,you uswally
have to pay thm offeredprioeMawe thereis someoneahead of you
biddtng1/8. If you hold it say W au hour and the bid and cmkod
am the WMNBtyou wouldMve to ueU it at 5>~8. Tkks combination
of bid and amod pticeis the realm@rkW. Do not Comfwe thisWith
the I.@stALiBJyou cannottradeat the last salebut only on the bid
and aakodm@k@% ptiO& For theserewnm, it is beat to allowa part
of your overkeadto coverthe imvM.ble 1/8.
++**
~ If a tradeonce goes againatyou, it proves
your judgmentwas wrongwhen you readsit. To averagathe trademeana
thatyou inm$stupon beingmorewrongthanyou were in the firstplace.
Co-@t 1932 hy Rl@ard D. Wgckdl TR Section 32 Page 7
Your profitd~es net dopkticm any one trade,but on the net aVEWage
of Q long Suqwmim of trades. W average.
***
UnlQssyou have a steadyincomefromyour
busirmss,pruf%ssionor your investxwnts,it is best to providein
advamoeand qot asideyoux livingexpensesso thatin trdingyouwlll
not be ccmcenne(i with thiovitalmutterand your jud~ent thereby
impaired. It is a mistakoto attemptto make moneybocausoyou need
it, or Mve $o haveit for somespecialpurpose,for in such cases
your judgmentis nwar~ 03ways@o biumd by your necessitythatyou
do tha wrong thing.
It i8 betterto tradeon paperuntilyou are in suchftnencial
conditiontJW your mind 2s properlypoised. Itis betterto test
your judgmentwith 10 $harelots of actualstocksratherthanlarger
lotsif you have to use mqm+yrequiredelwxdwre. Allowfor the
pcmlbility af sevemiicqsecutive losses.
When you find thatyou have made many papertradesand
establisheds successfulrecord,beginin a smellway makingactual
trades,but, If you continueto make realmoneyon these,do not be
misledinto irmreasingtha si%eof your tradestoo soon. You are
buildingfor the future;therefore,make each stepwithcaution,par-
ticularlyin the matterof incrwwing the sizoof your trading.
Whenyou mah monay,do not put all of your profitsinto your
tradingfund. Use only half of t h m j wit h the otherhalf pay yourself
baokyour ori~mil capitaluntilyour tradingftmdis sll.velvet.
Followthisidea continuallyso thatyou will alwqm have a reserve
over the monqyyou are using as margin.
***
Copyrkght193? My Makrd D. V&@knff
TRs@ctioll32 Page 8
QC9W mm ts wa~ If you can realizean averageprofit
of $50 on 100 aharcmper d~y, the totalwill amountto $1,000in 20
tradingdays. I mentionthisin orderto showthat when you are trad-
ing continuously, you do not need to secureve~ largeprofitsin
orderto makeyour eftortapay. Eut thereis no reasonwhy you should
comeout with wucha smallaverageprofitas 1/2 per day if you con-
tinueto study,practice,Wain your judgwentend dewlop your intuit-
ion. This?&Mod gets awqyfrom the big profitidea and teachesyou
to rollup snwllnet profitsuntil theyaggregatea largesum.
The way to increasothe averagesiseof your profitswill be
foundin thatpart of our Courseof Instructionwhichexplainshow
to tradefor the 10P 20 and 30 pointmoves. With thatincludedin
your tradingMnowledge~you can use the presentinstructionsin tuki.ng
your positional.md,whom indicationsfavor,hold thosepositionsfor
the ilnportunt swings. Your originalrisk of 1/2 to 1 pointtakenon
the basisof TapeWading Ohartindicationsmay thus resultin profits
whichare Iar@ein proportionto your risk.
Whenyou are able to judgethe approximatenumberof points
that a stock@houldtravalin a certaindirection,it givesyou the
courageto go in, ~ramid ad hold on untilthat stockmalwsgood,
or warm you ?@@ it
fap will do xore to
That part of
will mot. And this one factorof knowingthow
increaseyour averageprofitthan any other.
the Coursealso givesplansfor pyramidingat
certainlevelsand under certainconditions,by whichyou can derive
morenet profitsout of somemovesthan the totalnumberof points
fromhigh to 30W.
WMre,to ,- As soonas you can arrangeit, have a little
privateoffic~of your own whereyou can installa tickerand a private
oopyright1932~ M&lsadI).WyOkoii TR Section12 Page 9
tdephane to your brokerl~ordorclerk. It is bestnot to let your
friendsknow wherethey can findyou so theywill not botheryou dur$ng
the day and you cm concentrateon the tapein brderto get the best
results.
If yQu ccnnotdev~teall your time to the tapeduringmarket
hours,perhnpsyou can have a youngman or womanassistantkeep your
chartsfor yau so thatyou can go in at convenienttimesduringthe day
and find Wf@@lin~ up to date. You will find this nrr,nmgement very
helpfulin gattingthe best results.
If tl&eamountof your tradingwarrantsit, your brokerwill
probablybe glad to provideyou with a smallprivateoffice,ticker
and telephonq. If not,you can make a startin his customers room,
end,as you WJd up your accountyou willundoubtedlyfindit profit-
able to get into a sacludodplacewhereyou will.not hear the board
room gossipand willnot he botheredby peoplewho want to giveyou
tips and so-aalledin~ormation.Of course,that sortof thingmay not
confhe you but it is a handicapto most people.
Keep as many chartsas your timawill permit,or your assistant
con keep for you. The largerthe numberofcharts,the greaterthe
varietyyou have to selectfrom,and the more opportunities you can
takeadvantagoof if you have the necessaryworkingcapital. Thisis
particularlyadvisablewhanyou are tradingon paper. Ten chartswill
giveyou far more practicoand experiencethanone chart,and one
hundredchartsten timesmore than ten.
***
Ch~i(waof broker~ Your brokershouldbe able to giveyou
Copyright1932by RichardD. Wyckoff TR Sectioq12 Page 10
promptand satisi!a&rymecu~on of
halfminutesfromthe tiswyou place
orciem,within
the8eorders.
one or one and a
Executionstaking
longerthan thismmtimo$ xwsul.tfrom congestedconditionof the floor,
or on wLresw telemos duringvery activemarketswhen everyonewho
Mndkea your ordersis mmmawded with MAness. In ordinarymarkets,
however,a mimte or ao ix time enoughunleusyou huve sufficientcon-
fidencein yaw brokerb let Mm use his judgmnt in waitingfor frac-
WmsUy bettirmkats b@forehe tradesat the bid or askedprice.
Adv5m your Mokor justhow you are trading. Let him undm-
standyour raquimmmts. You tradeactivdy, p&y mauy cmmismions and
am, therefore,worthmora to Mm thansevmal clientswho get in and
out onlyoccqlli#nally* Ho shouldbo wiUing to giveyou specialatten-
tion. You cm a&Msa Mm when your ordem come throughby hatingthe
ordain clerkmmtion your wame when ho plmms
All them litKieS&ran-a will add much to
run.
*2**
the orderto the floor.
your prcfitsin the long
All of your tradesshouldbe basedon a
line of reaso@ingwhichia mom or les~ settledin your mind a set
of reasonsWh&chhave bemnte$tedand tried~ you, so you lmow as a
rule whichwQl work and
so &md YOU shoulddudy
too muchwith nm ideas.
promn.
Control
selves. Have a
-oh will not. When you find resultsnot
amd loam why; pmhqm you are experimenting
If m, go back to the ones whichyou have
your loismaand your profitswill take care
spacein your Recordof Msults showing,in
of them-
eachcase
of losingtrmie$,tha causeof thatloss.
Copyright193&lby Riohard1).W@koff TR SeCtioll 12 Page 11
You may, especi al l y i n the beginning, or even after you are
well started, find yourself running into a series of losses. Do not
let that discourage you. Go back to trading on paper.
Depend on the law of averages and your well-tried practices
to yield a profit over losses.
Never be concmrned about any one unsatisfactory trade. It is
the net result.that counts, oad after a long series of trades. You
will learn more from your losses than from your profits; those tell you
what not to do.
-% * %-
Practice Persistently. The more time you devote to stock
trading, the more profits you should derive from it. If convenient,
keep your charts in a pocket-size book and study them in spare mo-
ments. Ask your broker for the tape after it comes off the trans-
lux; take this home and study it. It will enable you to review the
dayts trmsactions, and to observe small details that you might have
missed.
Practice on paper With other stocks than those in which you
are trading. Dull markets give ample opportunity for this. Con-
tinually absorb all the information you can on this subject. Read
all available books for valuable sidelights.
*%*
Copyright 1932 by Richard D. Wyckoff TR Section 12 Page 12
CHARTSTWIHS.
Amer&mn Tdephone & Ie@raph
At Bottom d ReactionJuno 2, 1932.
Note: In theso@x@Q@es~ wa will $14u@rat@ what CS31be donewith
avera~eJudgmwmt,Qmo with 6wuxUleatjudgmant. No one can
tell justwhat we wouldhavedonq~undm th~ ciroums$sncss~
but ~ damonstrat,i~g wbt mighthavebeen done,we can learn
how, @ *o* ctndsantpractic~inareaseour efflcienoyo
This TapeRqadingChsrtbeginsabout2:30P. M. on Jum lst,
with the StOfJk
prewiou~day.
stock. ht US
night. At W
at %-3/8 m the downwardswingfrom 91-3/8on the
The ahart@Iowsthat thereis littlesupportfor this
assumethatwe have a shortpofiition snd carryit over-
closether$is a rallyof only l/4point at &5-1/8.
On June 2md the stickopwmd with 3100 sharesat 84,-1/4--
down7/8 of a pointovwn$ght. Thereis not so much stockpressing
but therostillseemsto bo lack of support. Two riil.lies of 1/8 point
eachare the only onosuntil the pricehits 83-1/4;then thereare two
of l/4 each ~d
Anotbwr
trading*one$.s
stockbeginsto
a lineindicatingslighthesitationat 83-3/8.
declineta 82-7/8end a 3/8 pointrallyoccurs. The
now confinedto tb 3/8 between$2-7/fland 83-1/4. The
get a little~upportthere. MOO is takenat 83, then
300*ML Two smalldips
3oo.1/4 700.34! 600.!s3
tionshave totalled6300
on lightvolumeand 1700.83 100.1/8 600.83
100.1/8. At and under83 we find trsnsac-
@harew. The stockhas twicerei%sedto go
below83$ and the saleat WAJ,/4gave the up signal. Stop on our short
Copyright193$!byl?ichardIl.I&oknff TRsecti@nC$ Page 1
stock(if any) shouldnow be broughtdovm to 83-3/8
takenif the pricetouchesthatfigure. That mums
83-3/8.
long at
The pricetouches83-3/$. This coversour
thatpricewith a stop1/4 underthe low of
Telephonenow workflin a 1/4pointrangein
and a longposition
a doublebuyingstop at
shortstockand putsus
82-7/8;ViZ. , 82-5/8.
smalllots Cxcopt
1,400.83-l/2.The supportline is now 83-1/4and only smalllots come
in at that. FollowingUXL83-1/2, the stockbreaksthroughon the up
-.
sideend makes8A. W3 raiseour stop to 83--1/8. Soilingis clearto
84-3/4,then a littlereactionto 84. SupportjustaboveQ is much
strongerthanpressure. The sellingdriesup againand the stock pops
setsin; a 5/8 dip ,
This formation
Demandovercomessupply. The
straightup to 86-1/2. ThiS
up to 85-1/4. Meantimewe have raisedour stopto 83-3/4.
At 85-3/4therois littledemandand a reaction
to 85-1/8,thena rallyof 1/2 to a lowertop,85-5/8.
above85 doesnot indicateany seriousdecline. A recoveryof nwuly~
pointscallsfor about1-318reaction,but it falls1/8 shortof this and
the dip ends at 84.-1/2.Pressme on the decl&e is neitherlightnor heavy;
it is a normalreaction.
The reactionwearsitselfout.
stocksoon sellsabove85 and continues
is new high ground;we raiseour stopto 8&l/4 .cndawaitfurtherdevel-
opments. The 1600.86-l/2bringsa 3/8 dip to 200.1/8. On the nextupward
surgethe stockonly gains3/4twith 500.86-7/8.The upwardthrustsare
shortened,incticating anotherrcnction. So we pushour stopup to 86-3/8.
Addingthe sal~sabovethatfigurewe find that10,000shareshave come
into the markethere and as we are in the lasthour of the trading,we may
decideto Bell.at the market. If we do not, our stopis caughtend we have
the followingnesult: Bought83-3/8. Sold 86-3/8. Profit3 points~loss
1/2 pointoverhead;2-1/2pointsnet for the dtay.
Copyri#lt1932byRichardD. Wyckoff TR SectionCS Page 2
Amrkcan Tel@phone& Telegraph
At !fO~Of Rally Jum 1%%6, 1932*
This @hartbeginsat 86-1/4on the upwardswing
from 81 On
June gth. our Wave Chartat the opening gave us an upswing. Me do
nothing until the chmrly WMwd U.M of supportunderthe light
pressureat $&5/$ and 3/4 tells us to go long dth a stop 1/4 to 1/2
below#Q bot$m of the dip to 86-5/8. If we put our orderin when
the stockis ~t or closeto its low,we probablywouldpay 87 for
it, and mm stop dmild, therefore,be made 86-3/8-- a riskof 5/8.
The stockworksout of this rangeon the up sideand on a
raactionto 87-1/2meetsmppart amouutingto 2500 shares. On the
further1/2 p~intbulgeto 88, observe the increasein supply--
1400.8793/4300:7/8 1700,88. The ga$nover the previoustq at
87-3/4iB only 1/4 point,@d the remtim to 87-5/8i~ 3/8 with
1000.87-5/8at the bottomof thatdip. A rully of 3/8 to 88; another
l/4point dip? highersupport;then a snapup to 88-1/2on very light
volumewith 5(M)at the top and an immediateracemion of 5/8.
The tmdimg zonei# maw 87-7/$to 88.1/2. On tho last dip
1100 camein at 88-1/4;threw WQSno demandat 1/8 or $8. Weakness.
Vh now push our stopup to 87-5/8for we are suspicious Of t~ long
side,and we decideto sellon the next bulge,or raiseour stop
further. The next bulgeia to $8-1/4. We raise our stopto 1/8 under
the lastlow,whi.chwas 88* ad when thereis anotherbulgeon light
volumeto 88--3/8, we raisethe stopto 88-1/8and doubleit; thatis,
we #en twiceas much as m are long. This givesus a shortposition
at 88-1/8. m
copyright193ZI
immediatelyput a 1/2
by ~Ch&Pd ~. Wyckoff
pointstopon our shortwhiohEMIMS
TR SectionC6 Pa$e 3
the 8tOp88-5/$. Net profiton long trade,5/8.
The volmmei,snow very light,and a tebnical reacti on at l east
i s indicated.
Thereis a dip to 8?-1/2j anotherto 87. The ralliesme frac-
tioml at fir@j 12hm a 3/4mUy from 87 with Voltiepeteringout at
the top. A 5/@dip and a 1#4 ri%lyhave the stockat 87-3/8with 800
sharesat the &osel and as the indicationsare bearish,we lowerour
etopto 88 amd mrzy the tradeovernight.
Next dqglsopening,June 16th,is at 87-1/2and the stock
imdiately redumm its decline. The verylightvolumemakesus suspicious
of & rallyao m tellour brokerto coveron a 1/2 pointrallyfrom any
new low. At %6-1/4a rallyof 3/8 follows;thm laterextendsto 3/4 and
catchemour S*.
All but l/8 of thisrallyis soonlost,but highersupportappecrs--
at fi rst 1/8 atmvethe previouslow, thenat 3/8 above. l?ohm!iS l i ght.
I t l ooks like a furtherraUy. We do not go lang becausethe indications
are beari~h. Wm merelywish to sidestepmore of a rallyand pmh.apmget
a new and high= rollingpoint. We wish to see how the stockacts on the
next bulge-- whetlmrit haa powerto go through, wel l above 8!3, orif
supplytill ommcocnedmand ageinabovethatfigure. OUr #JtOpthatW~S
caughtat %-?figaveus 1-4/4 point grow prof!kt.
Volumeincreasesslightlyon thisfurtherbulge:600.88 400. L/8
200.8$ 700.87-7/8. But i ti s now 2 PMmdti th the tradingquieting
down,it seemsunlikelythat therewill be activityenoughto giveus
a good swingin the next hour. So we Btmd pat for the day,with 3/4
pointnet to our credit. We mighthave covereda littleloweron that
second morni ng di p from 87-1/8 to 86-1/2, or pushed our stop down further
ao as to gain an additionalfraction.
Cop@@t 3932 by Ri @m?d D. Wyckoff TR Secti on CS Page 4
b
!!
w
.
*
Open
close
I
--w
Dow n
on dune 27
Allied Chmical
At BottomofReacti on June 2, 1932,
This stockhas comedown from 51, and at 2 P. M., June lst,it
standsat Q. It dips 3/S belowthat,and jumps7/8 pointon one sale
of 1200.48-1/2.hen some1/4 pointWrigglesbet~eexl 1/2 ~d 3/4~ a
dip to 600.4.#-l/8, and a rallyon smalllots to 48-7/8whereit closes.
The opening,June 2nd,is 1-1/4wints down,~th 1300at 47-5/$;
then900.l/2 400.5/8 UOO.3/g 100.l/4 500.llg 400.47. A rallyof
3/8 and a dip to 47 mskesa 3/8 tradingrange. We retch to see wMch
way the stockwill go out of this ranget The firstsignalis bullish--
100.47-1/2,3/3 higher. Next supportat 47-3/8;anothergain of 1/8;
stillbullish. l/4 pointrange3/8-5/8Sthena l/4 point~P be~.~~
thatto 47-1/8;highersupportthan the formerlow. If it doesnot
go on through47, this indicationis bullish. 500.47-1/4100.1/2
makesa gain of 3/8 after1/2 pointdip -- stillbullish.
When the pricerecoversto 47-1/2,we have a forecastof a
breakingout of this rangeand decideto go with it eitherway. We
placeordersto go long cm stopat 47-3/4or shortat 46-3/4.Our long
stopis executed;this cancelsth~ sclllngstop. We immediatelyenteran
orderto sel$100 on stop at 1 pointdown,whichhappensto be also at
46-3/4. Thie is intendedto limitour risk on our long tradeto 1 point.
The breakthroughon the up sidemakes48-3/8. AU but 1/8 of
this recoveryis lost,but anotherrallystartsfrom47-1/4.Therehave
been frequentskipsof 1/S to 5/8; thesecoming at the bottomof the re-
(hpyright 1932 by RichurdD. Wyckoff TR Section C.!S Page 5
cemtdecline3Mic,ntea lightening pressure. l%isis bullish. From
47-3/4the n=t saleis 500.48-7/8,then400.1/4 100.1/2.
Now look back over the past few swingsand note that the last
bottomwas rntade on 100 shares3/4 pointdown from the previoussale
end the followingdip wus 400 at 5/8 down. Then after1/2 pointrally
on 100 share lots tharoiH anotherdip of 200 $haresat 3/4 down from
the last sole, Someone is evidentlytryingto mark this stockdown
in orderto bringout freshselling. Thismeans tha~ t!aeywant the
stock. Buyingis betterthanthe selling.
Thereis a bulgeto 49-3/4and a dip back to 49 where1300
share~are taken. Than the pricesnapsstraightup to 50-1/4,then
50-3/8. we raiseour stopto 48-3/4on bothlots. Volumeenoughcomes
in to bringa reacti on to 49-5/$but the stockclosesstrongat 50-1/4
within1/4 of its top. Inoreadxqjindicationsof strengthhave led us
to carrythe trade
profitof l-5~8if
thereis neverany
ChemicalWhiCki, M
that is not at all
overnight.Our stopis raisedto 49-3/8assuringa
the stopis executedat that exactprice. Of course,
assuranceof this,especiallyin a stocklike Allied
the chartshows,has numerousskips,indicatinga market
close. The activityof this stock,however,compensates
for thisadditionalfactorof risk.
Copyright1932 by Richardt).Wyekoff TR SectionCS Page 6
Allied Ghernicu7
A-L Bot t om Of Reaction
dune 2, /932
.
5/
Up t o 53~ J u77e 3--
f
50
- -,-.
T
6
3 25 20
000/0/0
4t3v
) 00 ,s Lonfg
-.
Copyright 1932 by Richard D. Wyckoff
TR Section CS Page 6-A
AlliedChmical
At Top of RaUy June 15-16,1932.
On June 10th this stockmade a low of 4/,then ralliedto
54-1/2cm Jwne Uth, reactedto 50 on June 13th and closedat 53 on
June I-4th.It opensJune 15th at 53-3/4. Our positionis neutral.
The firstMying wave in thisstockamountsto 5/8. The next downwave
wipesthis all out. Then an up wave of 3/4 and a norml half way dip
of 3/8. l!h@ pictureis bulli~hso far, becausethe stockhas worked
out of its 3/4 pointrangeon the up side. We give an order to buy
smd get it at 54-1/4. Our stopiS 53-1/2.
Next a rallyto 5&5/8. The upwardwing is not very vigorous.
It is a driftingupward;littlepowerunderit. The gainsare slightand
the volumeis small. Above 55, the formationbecomeshorizontal.A
1/2 pointCUP to 54F3/4bringsin a littlesupport;it indicatesauaother
bulge,and the stockrunt up to 55-1/2jwith two 900 sharelots at 1/4
and 1/2. On two sales100.55-1/8and 200.54-3/4the stocklosesnll the
rally-- n signof weakness. We must get out on the next bulge. Then
1.200.5570iU/4 200.3/8. We @ve an orderto reverseour position
(i.e., C1OSQout our long commitmentand sail shortan equalquantity, )
and get 55 for one and 5%1/8 for the other. We placea 5/8 stopat
55-3/4on our shorttrade. The formationis now pointedlike an arrow-
head. The stockhas coma to a balancewith 55-1/8formingthe point.
It shouldpass out of that rangeon the down side,unlessit contra-
dictsits signof weakness.
The tradingrmgo narrowswhen the stockdips to 54.7/8and
Copyright1932by RichardD. Wyckoff TR SectionCS Page 7
mllies to 55-1/4, Note the di p of 1/4 poi nt belmwthe critical
55-1/8leveland tl m ral.~of only 1/8 abovethat. Thisdelicate
wile shows that the bnlame of pmmr i~ stillon the down side.
A furtherdip to 54-3~8and l/2 poht rally;then the stock.
sdd.fi at !$4 m two mlo$. It x?all$mtQ 54-9/$;th~ tie$ a trting
rtmgo54-1/4-5/8. Hem we btingw stopdown to 55-1/8(our sell-
ing price)amd carrythe $mde ovmxlght. Havingrd.liedfrom47 on
200.54the formatiomlmxmes wmdgs-$haped,with the pointaround54.,We
bringour @tipdown to ~-X/4 as protectionagaimt a rallyand this stop
is oxeoutedat 54-1/2- & net profitof 2/8. Now we am neutm+l,aweit-
The ml,ly contixnum to buildup end we watohto see whetherthe
up swinghas powerenoughto go in%onew high ground,above55-1/2. Two
rallies,the firstto 54-7/8ml the secondto X&l/4S =e betiate~
wipedout -- weaknessagain. Mow we look for a chanceto sellon a bulge.
On the next Upwardsurgeit mkec$55-114 tigain, tbn reactsquioklyto
54-3/4. Supplyis greaterthsm tm demmd. We put in a shortselling
ordersnd get 5&l./2for %t, Our stopis 55-1/2. The steadydecline
continuesand the stockcloseswithinl/8 of the daytslow, tith 500.53-5/8.
WQ bring our stopdown to our Bellingprice (54-1/2)and carrythe short
The mall sectionof the VerticalLine Chartindicatesthe sub-.
sequmt actianof the stook,whichdeclinadto 43 on June 27. The action
on the two as dmcr$bed in tho TapeReadingChartwas, therefore,a
fair exampleof a turningpointfor a normalreactionwhiohdevel oped
into a substmtialdQwn swing.
Copyright1992by RichardD. l?y~koff ITSectionW Page 8
##17ied ~hemi cu?
At Top c3# RuhJ
dune /.5- /6, /932
Per 4!ict37 line Chart
S how~ngthe Ti p *
Detui l ed Z3el ou.
56
,.4
.
32 z
J. I. CASE
Reactionof!darchJJ$,1932.
This stockopensat 37-1/2,declinesto 37 and immedhtely
recoversall but 1/8 of the decline. It thendipo to 37-1/8and the
next salei~ 37-1/2. All thisis an indicationof $Wx@h -- first,
tbo abilityto recover;next, the 3./4Pint dip ad ~.~ recovew to
the openingprice. Thereis more streqgth* weOkn@WOW
W @ long at 37.3./2 with a atopat 36-3/4. A tr~.ding zone
37-1/2to 3/4 is @stabli#h@d,and aftera dip of 1/3, the pricemoves
up to 37-7/@,1500beingtakenthere. Another1/8 dip and 1300mcm
are takenat 37-7/8,followedby a straightrun up on substantial. volume
to 38-3/4. A reactionof 1/8, thanone of 1/4; 1/8 rallyand another
dip of 1/4,makinga tradingacme38-3/8to 3/4. Note the dullnessbe-
tweenU A. M. and noon -- a bcwlsh signon a rally. As the trading
stringsout to the righton the chart,we find that Q con~iderablevolume
is comingin on thisbulge. Addingthe transactionshorizontally,wc
note that 8400 shareschangehandaat tho 38-3/8leveland above.
On the firstrun up we *we movodour stopup to 37-1/8,then
to 37-3/4. Wo now cbngo it to a doublestopat 38-1/4,for if this
8600 share~is not followedup ~ furtherpurchases,we expectthe price
to decline. And if it bxwks even1/8 belowthe 38-3/8support,we want
to get out of our long stiockand go short.
The pricotouches38-1/4,whichgivesus a not profitof 1/4 on
our long stockand putsus shortat thatfigure. Our stopon the short
tradeis 39.
Copyright1992 by Richard D. Wyckoff TR &@iOKk CS Page 9
In a t%w mlos nfterthat,the entiregain for the day is lost;
the pricetouthos37, the low pointof the qmning clip.This iS 1-3/4
downfrom the top and cane for a 7/8 rd.ly; but the rallyfallsl/8
shortOf half wqy. TM volumeis light-- bowiah. Our stopis first
mowaddown to 38-1/&,axM3When the rally beginsto fadeout,we make
it 3?-7/8.F~m thmttimelon,thereis a succ~ssionof naw lows and
weak rallie~, We keepmovingour stopdown-- firstto 37-3/8;then to
363/4; Ih%n 36-1/4; then ?5-3/4 and finallyto 354/4. Nothing that
has Mppened $o far has cmumd us any uneasinesson this shortsale.
Afterthe 3/4 rallyfrom37, not~ thut the subseqwnt ralliesare as
follows:l/4P3/4, 3#$, l/4fi 1/4, 1/$, 1/8, 1/2, l/4, 1/411/8. NOW
the stookis j&L/4, S@ at thatpricewe are 4 pointsto tha goodon
paper,with a stopat 35-1/43so at least3 pointsare assured.
We mayho smartsmugh to coveron the declinewound 2 P. M.,
or to shoveour Htopdownwithinl/4 of the bottom$becausewe cant
expectit to go ri@t on down withouta rally. But the rallyof 3/4
to 35 wttrns ua that th~ stickia meetingmore resistance~%lowthere
and whenit ~ps againto 34+2 we give= orderto buy it at the
marketand cancelour #top. We have to pay 35* whichgive~us a @?oss
profitof 3#& points,or a net of 2-3/4. We standpat for the rest
of the dq.
TR SectionCS Page 10
AMERI CANCAN
Cmblmd with fivo leaders
Juw@ 3.4-15-16-17, 1932.
ThisITapeReading
Chartoffivo Ieaders@ of
Gmeral ElecWc, Oemml
Chmt of Amcmtccn
whichCan is me;
Motoroand Steel.
Can f!ctlbws the five leadms. Pmdlapethis
Can is combinedwith a Viave
the otlmrfour am Anncon&,
It is rmmkable how closely
is becauseit wa6 at that
the more doWmnt in its marketmovawats than the othersamongthe tivu;
but thisis justwhatwe am lookingfar n stock that can bo plotted
wuttha @W $n whichthe ~&Vf5 (hart aidswe in im~qmb$ the Tape
Rmd$ng Gharlj.PhuaWQ cm antkaipatethe movesad trudewith profit
in the one stick.
!h qmning of Can,June 14th,is 200.38-l/8.Them ia a quick
declineof l@ pointsto 37; thm a mlly of l-1/2points,whkch shows
that the greatestpowm in Can is on the W side. The Wave Chartmm-
firm thisbyadvana$ngusar~ twioeas much as it declinedfrom the open-
ing. Follow@g the straightupming of l-1/2points
of 3/4, but the dip 18 only 5/8 a mmfirmuthn of
On Ws dip W* go long at 3$, tith a stop at
pricegoestq a new high,38.-5/8, we move our stopup
aftera l/4 @ointtradingrange,Can touchesthe high
200 sharesat 38.5/8,we raisethe stopto 38-1/8.
we expecta decline
strength.
36-7/$. WMn the
to 37-5/8. When
pointagainwith
A fux!thar bulgeend n new highis made -- 1000.39-1/4. The Wave
Charthas hetietofore mmf$rmed the bullishness,but the down swing from
thatpoint,tihefourthfor the My, is a littlelongerthan the third
down swing,and we got readyto cellcm the rally,unlensCan goeson
Copyright1932 by RichardD. V~ckoff TR SectionCS Page Xl
throughto a mm high with considerablevoluue.
Can SItOpS agdn with 900.39+4. W+ bringour stoptightUP
underit to 39 and mko it Q doubh stop,&o thatwhm the pric~rG-
cedm againm@ .nreout of our long with a gros~profitof 1 pointand
are shortat 3$)with Q stopat 39-1/2.
Aftertouching38-7/8, there is Q wcmk rtilyto l/8 lowerthnn
the previoustop, and the Wmo Chartrecordsa fmcticmnll,ylo~7ertop,
whichis a cotiimationthat the shortsidois the rightone.
(Mm d$clinm to 38.1/2,rallies1/4, then bcicksup to 38. Our
Stop is moveddOWn to 39. The ViaveCharthas been bemish, but the
followingral~ in th~ Wave Chartis longerth.m tho previousone,and
th@ dip whimhfollowsis shorterthan tha previousom. Thisis our
warningthat d ralil.y is coming. We coverour shortat the marketand
get it at 38-~/13, whichis 5/8 gross, or 1/8 not. Addedto the previous
profitof 1 paht gross,OXl/2 net, xmhs 5/8 mt profitfor the day.
The olo~ingpniceis 38-1/4.
From now on, we suggestthat studentsuse this comnbimtionchart
for workingout correcttradesbqed on instructionsgiven%n thismd
otlmCM@ SQudiescontainedin thisDivisionof the Course.
Also that
the rwult of theirpapertradingbe sent to w in writing so thatwe can
go over and ci%mkprogress and correcterrors. Thiswill giveus both an
opportunityto see wlwthertheseTape ReadingInstructionsand examplesare
beingfullyunderstood,and in caseof any misconceptj,on or departurefrom
pmpm pmcedulm, we shallbe able to make corrections.
Copyright1$)32by RichnrdL).Vyokoff
\/
, --%
--4
$?
ii
8
. .
4?8