The Hudson Sessions - 2) Market Cycle & Trend

Introduction

The speaker greets the audience and expresses gratitude for their time. They discuss their passion for the topic and introduce the structure of the book.

• The speaker thanks the audience for attending.

• They express their passion for discussing and thinking about trading.

• The speaker discusses how they structured the book to avoid repetition.

• They introduce the Wyckoff cycle as a cyclical concept in trading.

The Wyckoff Cycle

This section covers how markets are cyclical, with specific examples such as market cycles and production cycles. The speaker also discusses how human experience is intertwined with cycles.

• Markets are cyclical, with recurring patterns that can be identified through digital signal processing or chart analysis.

• Commodities have production cycles that affect demand and supply.

• Human experience is intertwined with cycles, from heartbeats to long-term life cycles.

• Humans are wired to find patterns and think in terms of seasons and cycles.

Practical Application of Wyckoff Cycle

This section covers practical applications of support and resistance levels in trading. The speaker shares some insights on support and resistance levels that they have not shared publicly before.

• Support and resistance levels are important concepts in trading.

• The speaker shares some insights on support and resistance levels that they have not shared publicly before.

Trend vs Trading Range

This section introduces trend vs trading range concepts in trading. It sets a framework for future sessions where these concepts will be discussed further.

• Trend vs trading range concepts will be discussed further in future sessions.

• Understanding these concepts is important for successful trading.

Discretionary Trading

This section covers discretionary trading, which involves making trading decisions based on personal judgment rather than following a set of rules.

• Wyckoff was a discretionary trader.

• Discretionary trading involves making trading decisions based on personal judgment rather than following a set of rules.

• There is a lot of anger and negativity in internet forums due to the high failure rate of traders.

Discretionary Trading and Adaptability

In this section, the speaker discusses the advantages of discretionary trading and how it allows for built-in adaptability. The speaker also emphasizes the importance of not using discretionary trading as an excuse for imprecision or laziness.

Advantages of Discretionary Trading

• Discretionary trading allows for automatic built-in adaptability.

• Over time, small adaptations can be made to a discretionary trading strategy in response to changes in the market or by putting oneself in new situations.

• Discretionary traders are more likely to evolve and change along with the market compared to systematic traders who have to adapt very precisely to changes.

Importance of Rigorous Process

• Traders need to be careful that being a discretionary trader does not hide a lack of work or rigorous process for evaluating market ideas.

• The process of trading is rigorous and will evaluate a trader's ideas.

Market Ecosystem

• The market is an ecosystem where groups of traders function as prey and predators, constantly adapting and evolving over time.

• A stable ecosystem is not unchanging, but rather constantly evolving within that change. This happens in markets as well, making it important for traders to adapt and evolve their strategies over time.

The Weaknesses of Discretionary Trading

In this section, the speaker discusses the weaknesses of discretionary trading and how it can hide laziness or lead to leaning too much on intuition. He also emphasizes that discretionary traders are vulnerable to stress and emotional inputs, which can affect their decision-making process.

Overpowering Darkness

• The left brain analytic system on Wall Street has become overdeveloped, crowding out intuition, vision, creativity, and Gestalt sensing.

• Opportunities will exist for those who can sense new directions.

Weaknesses of Discretionary Trading

• Discretionary trading can hide laziness or lead to leaning too much on intuition.

• A discretionary trader's entire being (mental, physical, financial, emotional) is a part of their trading success.

• Stressful events in a discretionary trader's life can affect their decision-making process and cause them to lose money.

• Decision making responds to emotional inputs as much as it does to reason.

Wicked Learning Environment

• The market is a wicked learning environment where outcomes are not very tightly tied to actions due to noise in the market.

• Discretionary trading allows for implicit learning but is difficult to do correctly.

Theory of Mind

• Theory of mind refers to the ability to look at how people act and come up with a theory of what they're thinking.

Theory of Mind and Richard Wyckoff

In this section, the speaker discusses the theory of mind functioning in traders and how it relates to Richard Wyckoff's approach to technical analysis.

Traders' Theory of Mind

• Research shows that even inexperienced traders quickly develop a theory of mind about the market.

• This intuition is important for understanding market action but can also go wrong in many ways.

• The right answer is somewhere in the middle, closer to knowing than not knowing.

Richard Wyckoff's Approach

• Richard Wyckoff's approach was different from other schools of technical analysis as he wanted to understand what was going on behind the market.

• He spent time interviewing big traders who had accumulated wealth in the market and became convinced that manipulation was at the core aspect of market action.

• His actual trading results were successful, unlike some other forefathers of technical analysis whose results are unknown.

Reading Material

• Wyckoff's course has become famous and is worth reading as it contains revolutionary ideas that are now available through charts.

Richard Wyckoff's Key Ideas

In this section, the speaker discusses Richard Wyckoff's key ideas about finding the right places to trade and using stops to get out if you're wrong. He also emphasizes matching techniques to the market environment and understanding what the composite man is doing.

Finding the Right Places to Trade

• Richard Wyckoff believed in finding spots where there was some imbalance in the market or where bigger forces were acting on prices.

• He emphasized that price had not yet moved, which is similar to what was discussed in the last session.

Using Stops

• While he might not have talked as explicitly about probability and odds, he absolutely understood that a trade is still a play on the odds.

• The only way to protect yourself from being wrong is to have a stop to get you out if you're wrong.

Matching Techniques to Market Environment

• Richard Wyckoff was a big believer in matching techniques to the market environment and understanding what the composite man is doing.

• Understanding what emotional reactions are being produced in market participants can help calibrate your emotional responses to price moves.

Understanding What's Going on in Markets

In this section, the speaker talks about understanding what's going on in markets by thinking about buyers and sellers as groups. They discuss how this construct can help us understand what's trying to shape prices.

Thinking About Buyers and Sellers as Groups

• The idea of understanding what's going on here in the market, what emotional reactions it produces in market participants, is very useful.

• This construct can help us understand what's trying to shape prices.

Composite Operator Trying To Be Positioned Correctly

• The composite operator or composite man is trying to be positioned correctly before the public knows what's going on.

• The four-stage Wyckoff cycle begins with accumulation, where the composite operator is trying to buy but doesn't want you to know he's buying.

Market Manipulation

In this section, the speaker talks about market manipulation and how it affects trading. They discuss how understanding the context of market manipulation can help traders calibrate their emotional responses to price moves.

Every Moment of Every Market is Always Manipulated

• Every moment of every market is always manipulated.

• Understanding this context can help traders calibrate their emotional responses to price moves.

Assume That It's Not a Fair Game

• If you feel that you got manipulated against, you have no right to be upset about that because you knew the market was manipulated going into it.

• Don't assume it's going to be a fair game.

What Is the Composite Operator Trying To Do?

In this section, the speaker discusses what the composite operator is trying to do and how they are able to move the market. They also talk about how traders can use this information to make better trading decisions.

The Composite Operator Wants To Be Successful

• The composite operator or composite man wants to be positioned correctly before the public knows what's going on.

• They both desire and are able to move the market.

Traders Can Use This Information To Make Better Trading Decisions

• If traders understand what's trying to shape prices, they can make better trading decisions.

• Richard Wyckoff's ideas about matching techniques to the market environment and understanding what emotional reactions are being produced in market participants can help traders calibrate their emotional responses to price moves.

The Wyckoff Method and Market Cycles

In this section, the speaker discusses the Wyckoff method and market cycles. He explains that while the concept of cycles has no immediate practical application, it is a useful way to think about prices. He also talks about the different emotional reactions people have at different stages in a trend.

Understanding Market Cycles

• The speaker explains that when a cycle starts, nobody notices it. Then there's disbelief, where people say that the fundamentals don't justify it and that it's temporary. After that, people are fully on board and believe it's going to the moon.

• Once everybody thinks that it's real, that's usually where it's over. At this point, what the composite operator has been doing in this area is probably selling to the public slowly and gently.

• We then enter a distribution phase where the operator unloads everything. This is done in a way that the public doesn't see it happening.

• During all of this area, there are many hopeful members of the public who think prices will go higher.

Applying Market Cycles to Price Movement

• The speaker shows charts of Dow Jones Industrial Average from 1934 through early 1980s and uses algo swings tool to identify upswings and downswings.

• While this structure works well for some periods like 1934 through World War II until 1946 or even into mid-1950s, during other periods like mid-1960s through early 1980s, looking for Wyckoff-style accumulation markup distribution marked down does not work as well.

• The speaker notes that since 2009, we have been in a multi-decade bull market with some distortions. There is a tendency for humans to extrapolate moves to the moon and look back to 2009 and ahead.

The Possibility of a Sideways Market for 20 Years

In this section, the speaker discusses the possibility of a sideways market that could last for weeks or months. He explains that traditional technical analysis books do not teach this possibility and emphasizes the importance of being mindful of it.

Sideways Failure Dribble

• The stock indexes are very compressed, and volatility is compressed.

• It's entirely possible that instead of having a big move up or down, there will be a sideways failure dribble that could last for weeks or months.

• Traditional technical analysis books don't teach this possibility.

• Being mindful of this possibility is important.

Manipulation in the Market

In this section, the speaker talks about how markets are always manipulated and how it's important to understand and accept this fact. He also discusses how the idea of manipulation can help traders develop a theory of mind regarding market movements.

Markets Are Always Manipulated

• If you put yourself in the framework where you know the market is manipulated, then you don't allow yourself to cry over it because it's just the way the game is played.

• The strict idea of looking for a market to go sideways and go up and then go back down might not be realistic.

• However, the idea that markets alternate in periods of trending where you're moving from one price level to another and then sitting at one price level is valuable.

Understanding Manipulation Can Help Develop Theory of Mind Regarding Market Movements

• Thinking about these forces of buyers and sellers as if they were people trying to push the market around can be misleading but is still valuable.

• This idea can help traders develop awareness and maybe even a sense of theory regarding market movements.

Accumulation, Distribution, Support and Resistance

In this section, the speaker discusses accumulation and distribution in the market. He explains how to tell the difference between accumulation and distribution by looking at support and resistance.

Accumulation vs. Distribution

• The idea is that support will hold in accumulation, resistance will hold in distribution.

• In accumulation, the buyer is putting something under the price; in distribution, the buyer is not willing to buy higher.

• The mistake people make is assuming they'll see lots of support and resistance.

Importance of Price Behavior

• Markets do trend from price to price.

• The idea that markets don't trend doesn't make sense because it's detached from experience.

• Understanding how manipulation looks on a chart can help traders identify accumulation and distribution patterns.

Understanding Market Patterns

In this section, the speaker discusses market patterns and how they should be expected to behave in a real-world context.

Types of Market Tests

• The speaker explains that while chart patterns may look nice, they are not always reliable indicators of market behavior.

• Instead, he suggests looking for ragged and sloppy tests that are more indicative of natural market behavior.

Failure Tests

• The speaker introduces the concept of failure tests or springs and up thrusts.

• He cautions against confusing the terminology as an up thrust is actually bearish and indicates a failure to clear a resistance level.

Reversal Complexes

• The speaker discusses reversal complexes which refer to areas where the market has tried to go lower but reversed instead.

• He notes that intuitive pattern recognition is effective in identifying these patterns and that two or three bar patterns can be just as valid as single tail patterns.

Offset Bars

• The speaker introduces offset bars as a way of reading charts that is in line with Wyckoff's approach.

• He explains how sliding bars over data can create different patterns on the chart but it's important to remember that it's the same underlying market action creating them.

Critique of Technical Analysis Books

• The speaker critiques technical analysis books written by non-traders such as Edwards and McGee's book which is considered the Bible of technical analysis by certification programs despite being written by failed traders.

Accumulation and Breakouts

In this section, the speaker discusses accumulation and breakouts in the market.

Accumulation and Breakouts

• Accumulation is a short-term measure of stability following a big spike down in markets. It can lead to an upside breakout.

• Distribution is the opposite of accumulation, happening at attempted breakouts from the top that fail.

Wyckoff Method and Support/Resistance

In this section, the speaker talks about the Wyckoff method and support/resistance levels.

Wyckoff Method

• The best book on the Wyckoff method is "Charting the Stock Market" by Hudson.

• There are many people who have built things around or use it as a core approach, but it's difficult to know how much of it is actually Wyckoff's original ideas.

• The speaker advocates for an approach rooted in Wyckoff's concepts but adapted for today's markets.

Support/Resistance Levels

• Support is an area underneath prices where something might happen, such as buyers stepping in to buy stock.

• Resistance is an area above prices where something might happen, such as sellers stepping in to sell stock.

• The high and low of the day are important levels for intraday traders to be aware of.

Significant Support/Resistance Levels

In this section, the speaker discusses significant support/resistance levels on an intraday chart of the S&P 500.

Significant Support/Resistance Levels

• The high and low of the day are important levels for intraday traders to be aware of.

• Support is an area underneath prices where something might happen, such as buyers stepping in to buy stock.

• Resistance is an area above prices where something might happen, such as sellers stepping in to sell stock.

Potential Support and Resistance

In this section, the speaker discusses how the word "potential" can make a difference in shaping one's actions, expectations, and understanding of market action. The speaker also talks about how to draw support and resistance levels.

Understanding Support and Resistance

• The word "potential" makes all the difference in how it shapes your actions, expectations, and understanding of market action.

• You might eventually get to the point where you can say that the market comes down to support because you understand that it supports an area where something might or might not happen.

• It's important to make yourself say "potential support and resistance" instead of just "support and resistance."

• Drawing too many levels on your chart can be problematic because the market is always doing something at a level.

• Your structural understanding of the market should tie in with how you're going to trade to ensure that you have enough room for your trades and risk-reward framework.

Drawing Support and Resistance Levels

• Drawing from every pivot forward is probably not the best way to draw support and resistance levels.

• Before looking at how to draw support and resistance levels, it's important to understand how this process can go wrong.

• Our brains are good at matching patterns, but they can misfire when we find patterns where they don't exist.

• Chunking is a technique used by experienced chess players who chunk pieces together based on their meaning rather than individual pieces. Similarly, traders chunk patterns together based on their meaning.

• It's essential to be aware that our brain machinery misfires sometimes when finding patterns where they don't exist.

The Danger of Seeing Patterns Where None Exist

In this section, the speaker discusses how people tend to see patterns and connections even where none exist. He explains that this tendency can lead to false beliefs and irrational behavior in trading.

Our Tendency to See Patterns

• People tend to see patterns and connections even if they are not there.

• This tendency can be convincing and powerful, leading people to believe in conspiracy theories or false beliefs.

The Problem with Drawing Lines on Charts

• Any line drawn on a chart will seem important, including horizontal grid lines.

• Even trend lines or Fibonacci ratios can seem significant when used repeatedly.

• Traders may become attached to these lines and ignore other important factors, leading to mistakes under stress.

The File Drawer Problem

• The speaker demonstrates how he drew random lines on a chart without looking at the price bars, then found that they worked like magic when he put the bars back.

• This illustrates the file drawer problem, which is the tendency for people to only show their best results while ignoring failures or randomness.

Overall, this section highlights the danger of seeing patterns where none exist in trading and emphasizes the importance of questioning one's perceptions and being humble in interpreting data.

Understanding Support and Resistance Levels

In this section, the speaker discusses how price usually moves to the next level when one of the levels is broken. He also talks about the random line theory and how any random line on a chart can be used as support or resistance. The speaker emphasizes that while support and resistance levels are foundational tools, it's essential to think deeply about the tools we use and ourselves.

Random Line Theory

• The speaker presents the random line theory, which suggests that any random line you put on a chart can be used as support or resistance.

• People had different reactions to this theory, ranging from anger to disbelief.

• While this theory may seem nihilistic, it's crucial to understand how we can be misled by our perceptions.

• By understanding how we can be misled, we become better traders and thinkers.

Quantitative Testing of Support and Resistance Levels

• The speaker subjected basic trading tools to rigorous quantitative testing.

• When conducting statistical tests, it's essential to determine if your results are better than what you could expect from random chance.

• The speaker shares an experiment where 1500 traders were asked to identify real support and resistance levels from fake ones. This experiment proved that there is validity in some support and resistance levels.

Practical Applications

• Understanding which support and resistance levels are valid has immediate practical applications for traders.

• Traders should look for lines that price seems to respect the most when identifying real support and resistance levels.

The Importance of Round Numbers in Trading

In this section, the speaker discusses the significance of round numbers in trading and presents statistical testing results to support his claims.

Statistical Testing Results

• The speaker plotted over 400 charts focusing on round numbers from a popular price action book.

• The real levels were compared to fake levels that were shifted half a round number.

• Traders were asked to identify the correct chart panel, and the results showed that round numbers matter in the S&P but not in the Euro.

• The statistical testing results may be underwhelming at first glance, but they are more exciting than traditional trading ideas presented with P&L lines.

Lessons Learned

• Traders should not rely solely on round numbers for trading decisions.

• Previous high and low levels and Globex high and low levels are significant in the S&P.

• Fibonacci ratios, moving averages, Murray math numbers, four Trader pivots, camarilla pivots, and other commonly used levels are no better than what you would get from randomness.

The Importance of Fundamental Data in Trading

In this section, the speaker discusses the importance of fundamental data in trading and how it should be visible in the data.

Fundamental Data Should Be Visible

• Something cannot be both profoundly important and invisible in the data. If something is critical to moving prices, it must show up in the data.

• If we can't tease out fundamental data from the market, then we should be suspicious that it's not as important as people say.

Humility and Pattern Recognition

• Traders should approach any trading idea with humility and pattern recognition. Assume that a new system or indicator probably won't work until proven otherwise.

• Successful traders may not understand why they are successful, but they have a rigorous trade management approach and common sense.

Some People Lie

• Some people are successful but don't understand why they are successful. Others lie about their success.

Trader Mindset

In this section, the speaker talks about his orientation as a trader and how he wants to be happily surprised. He also discusses the randomness of markets and how some traders internalize it in an unconstructive way.

The Randomness of Markets

• The speaker's orientation as a trader is to be happily surprised.

• Markets have a big degree of randomness, making much of what you see completely unpredictable and unreadable.

• Some traders internalize the randomness in an unconstructive way, assuming that it's not possible to trade successfully.

Trading Successfully

• The speaker emphasizes that his message is not that trading successfully is impossible due to market randomness.

• Traders need to operate in the market while respecting its challenges.

Support and Resistance

In this section, the speaker discusses support and resistance levels in trading. He explains how drawing too many lines can lead to confusion and presents a better way of thinking about these levels.

Drawing Too Many Lines

• Drawing too many lines can lead to confusion when trying to identify potential intersections in the future.

• This approach is not rigorous enough for successful trading.

A Better Way of Thinking About Support and Resistance Levels

• The speaker presents a chart showing one day in the S&P with some Globex highs and lows.

• He focuses on the day session opening print, which shows rejection from both high and low levels early on.

• When we slip through a low level easily, it's no longer important.

• Critical levels are the high and low of the day, while other levels around the middle may be less important.

• When we get close to a level, there's an almost magnetic effect that can be measured and quantified.

English Understanding Support and Resistance

In this section, the speaker discusses how support and resistance are zones rather than precise lines. They explain that rejection from a level is what defines it as a zone, and how price acceptance can also indicate support or resistance.

Support and Resistance Zones

• Support and resistance are zones, not precise lines.

• Rejection from a level defines it as a zone.

• Price acceptance can also indicate support or resistance.

Intraday Analysis of Support and Resistance

• Price rejection is the core operating principle of support and resistance.

• Candlestick patterns with big tails on top indicate rejection from a level.

• Viewing support and resistance as targets in intraday analysis.

• Validation of support levels through price action.

Double Tops and Bottoms

• Double tops/bottoms are defined by price rejection/acceptance dynamics.

• Clear difference between price rejection vs. acceptance at a level.

• Open print is another important magnet for the day.

Discretionary Management Decisions

• Every tick provides new information to re-evaluate trades.

• Picture can change quickly in one bar, requiring quick response to market messages.

• Reading buyers/sellers messages through candlestick patterns.

English Understanding Price Acceptance and Rejection

In this section, the speaker discusses price acceptance and rejection in trading. They explain how to read wicks and pin bars, how to identify support and resistance levels, and how to trade breakouts.

Price Acceptance Turns into Rejection

• When there is a lot of selling pressure, it can lead to price rejection.

• This can be read like a wick or pin bar.

• A big red or black bar indicates selling pressure.

• Price acceptance turns into rejection when there is a lot of selling pressure.

Support/Resistance Levels

• When there is price rejection, it bumps up the effective support/resistance level higher.

• The previous resistance level becomes a target for any long trades.

• The high of the day looms overhead as potential resistance.

Trading Breakouts

• When there are narrow series with candles having the same high or low on a low time frame, it indicates artificial selling pressure in the market.

• Selling breakout beyond that level can be profitable if the seller loses and buyers have an advantage.

• Long trades don't look good after multiple failed breakouts.

Drawing Support/Resistance Lines

• Obvious levels that everyone sees are good starting points for drawing support/resistance lines.

• As price engages those levels, they will change over time due to supply/demand zones evolving in the market.

English Drawing Internal Support/Resistance Lines

In this section, the speaker talks about internal support/resistance lines. They explain what they are and how they differ from internal trend lines.

Internal Support/Resistance Lines

• Internal support/resistance lines are different from internal trend lines because they focus on horizontal levels rather than diagonal ones.

• These lines help traders identify key areas where prices may bounce or break through.

• Internal support/resistance lines can be drawn by looking at previous price action and identifying areas where prices have previously bounced or broken through.

How to Draw Internal Support/Resistance Lines

• Look for obvious levels that everyone sees as a starting point.

• As price engages those levels, they will change over time due to supply/demand zones evolving in the market.

• Identify key areas where prices may bounce or break through based on previous price action.

Trend Lines and Internal Support and Resistance Levels

In this section, the speaker discusses the use of trend lines and internal support and resistance levels in trading. They explain how to identify these levels and how they can be used to make trading decisions.

Using Trend Lines

• A trend line can be used as confirmation of buyers being present if it breaks below a level and then regains it.

• However, prices may bounce around a lot, so it's important to calibrate your expectations when using an internal trend line.

Internal Support and Resistance Levels

• Internal support and resistance levels are different from internal trend lines.

• These levels can be identified by looking for areas where price has failed multiple times.

• Once you know that you have a functioning internal support or resistance level, you can look for further examples of failure beyond that level.

Drawing Internal Support and Resistance Levels

• To draw an internal support or resistance level, look for anchor points where price has previously failed.

• Draw the line through those points but do not redraw it unless there is conviction beyond the line.

• These levels do not always work, so it's important to go down to lower time frames or take clear overshoots and rejections.

Applying Existing Methodologies to Different Time Frames

In this section, the speaker talks about applying existing methodologies to different time frames. They discuss how internal support and resistance levels can be a powerful tool in trading.

Using Internal Support and Resistance Levels on Different Time Frames

• The speaker struggled at first with applying their existing methodologies to weird time frames like the one shown in the presentation.

• However, they found that internal support and resistance levels could still be a powerful tool on these time frames.

• It's important to frame out exactly how you're going to trade these levels and be on guard for signs that the support or resistance is active.

Validity of Internal Support and Resistance Levels

• The speaker notes that there is more than one way to draw internal support and resistance levels.

• They also mention that these levels do not always work, so it's important to look for clear overshoots and rejections.

• However, the speaker believes that internal support and resistance levels are a very powerful tool in trading.

Support and Resistance

In this section, the speaker talks about support and resistance levels in trading. He explains that while they do exist, they are often not reliable indicators of market behavior.

The Problems with Support and Resistance

• Support and resistance levels can be unreliable indicators of market behavior.

• Trends can break support and resistance levels.

• Backwards-facing levels can become important in trends.

Practical Advice for Using Support and Resistance

• The best support and resistance levels are obvious to everyone.

• It's a good idea to get your support and resistance levels from higher time frames.

• You need to develop the skill of reading the developing story of the market to understand what is happening.

Four Trades

In this section, the speaker discusses four possible trades when trading directionally.

Trend Continuation

• There are different ways to trade trend continuation, such as entering on a breakout or looking for little pauses or consolidations in trends.

Trend Termination

• Trading trend termination involves looking for signs that a trend is ending, such as price compression or divergences between price action and technical indicators.

Support Holding

• When trading for support holding, you look for areas where buyers have previously stepped in to prevent prices from falling further.

Support Failing

• Trading for support failing involves looking for areas where sellers have previously taken control of the market.

Market Tendencies

In this section, the speaker discusses how markets tend to continue doing what they are already doing. If a market is trending, there is a natural edge for that trend to continue. If it's chopping around, there's a natural edge for that market to continue to chop.

Market Behavior and Uncertainty

• Every trade involves uncertainty and is like asking a question of the market.

• Understanding this can help put the right framework around market action and address problems labeled as "market psychology."

• Every trade has an opportunity for failure, so be careful with trend termination trades.

Trend Termination Trades

• Trend termination trades refer to when a trending market stops its trend and turns into a range or reversal.

• The name may be awkward but precise because it describes what traders should look for in these types of trades.

• Traders should think about where they might be able to structure risk points and where the trade could go wrong.

Price Behavior and Market Activity

• A principle of price behavior is that the market will do whatever it can to screw most traders because its job is to find activity and facilitate trade.

• The market always goes to levels, tests, and probes because it's always looking for new orders.

• Support and resistance holding well are some other traits of price action in trading.

Understanding Support and Resistance Levels

In this section, the speaker discusses how to identify support and resistance levels in the market.

Identifying Support and Resistance Levels

• A market is coming into a supported resistance level.

• Put a very short-term moving average on that chart to see what happens as the market approaches that level.

• Study lower time frame action to understand where price acts around these levels.

• Define your trading time frame.

Trading Support and Resistance Levels

• Specific trades occur when support and resistance break, such as breakout trades, pullback trades, and consolidation trades.

• Clarify your expectations for any trade by understanding what can usually be expected when taking a trade.

• Understand what usually happens with most breakout trades.

Conclusion

• The study of lower time frame action is one of the best ways to train yourself to see how support and resistance levels hold or fail.

• Defining your trading time frame is critical for avoiding being misled by patterns outside of your chosen time frame.

Understanding the Details of Trading

In this section, the speaker discusses how good trading is simple and not about weighing thousands of factors. However, to achieve simplicity in trading, one must first understand the details.

The Importance of Understanding Details

• Good trading involves seeing a pattern with a directional bias, knowing your risk point, executing the trade, and managing it.

• To achieve simplicity in trading, one must have a complete understanding of all the details involved.

• Eventually, traders need to see the truth with clarity by illuminating areas of confusion and conflict.

• While good trading is simple at its core, achieving that simplicity requires an understanding of complexity.

Technical Analysis and Trading Ideas

• Technical analysis cannot be taught entirely as it involves nuances that cannot be learned in an hour.

• The goal is to take tools and perspectives from Wyckoff's teachings to understand modern markets better.

• Testing trading ideas is essential for success in trading operations.

• Traders should rethink their current framework for trades and consider specializing in specific areas.

Market Action Framework

• Understanding support and resistance levels dynamically is crucial as probabilities around these levels shift every time the market moves.

• Reading market action through a four-trades framework is important for traders' success.

Front Running Trades

• Front running trades are technically illegal but happen frequently. Brokers do not use offset charts to front run trades as they do not provide any predictive value.

Trading Operations and Q&A

In this section, the speaker discusses trading operations and answers questions from the audience.

Trading Operations

• Traders should ask themselves questions about their current trading operations to improve them.

• Specializing in specific areas of trading can be valuable for traders.

• Understanding market action through a four-trades framework is essential for traders' success.

Q&A

• Front running trades are technically illegal but happen frequently. Brokers do not use offset charts to front run trades as they do not provide any predictive value.

Prop Firms and Volume

In this section, the speaker discusses prop firms and volume in trading.

Prop Firms

• Prop firms can be a mixed bag depending on the specific firm and arrangement.

• Be careful if you are paying them because then you are the customer. If it's some kind of arrangement where you pay money, then the business is probably getting you to pay money.

• There are cases where working for free for a while is okay, but in most situations, paying a prop firm is not a good outcome for the customer.

Volume

• The speaker does not place any value on volume when looking at chart patterns.

• However, there are isolated examples where volume can be useful such as when a stock makes a large move on extreme volume.

• Many traders use volume without questioning whether it adds anything to their trading strategy.

• While using volume may not hurt your trading strategy, it may not necessarily help either. The speaker encourages traders to look at the correlation of volume to range on the chart and see what happens to their trading if they take volume off of their chart.

Bear Market Rallies vs Pullbacks in Bull Markets

In this section, the speaker discusses bear market rallies versus pullbacks in bull markets.

• Bear market rallies tend to be sharp and vicious whereas pullbacks and bull markets are usually much more orderly with symmetry between elements of uptrends and downtrends reflected around the y-axis.

• Traders find that different skill sets are required to trade each environment.

• The speaker finds himself more nervous to take shorts compared to longs due to the presence of long wicks and higher volatility in most bear flags.

Short Pullbacks vs Long Pullbacks

In this section, the speaker discusses short pullbacks versus long pullbacks.

• Traders should have a long bias as a stock trader.

• The speaker discusses his approach to entries and trade management for short pullbacks versus long perplex pullbacks.

English Shorting Stocks and Anchored VWAP

In this section, the speaker discusses the challenges of shorting stocks and whether it is valid to use anchored view up as support and resistance.

Shorting Stocks

• Shorting stocks is statistically difficult to overcome due to a statistical drift that is hard to manage.

• Even with valid short signals in equities, traders can still lose money due to the difficulty of shorting stocks.

• Traders can consider trading smaller or using option verticals as a possibility when managing shorts. Pullbacks are structures amenable to training outright options because volatility IV usually contracts a little bit in pullbacks.

Anchored VWAP

• The speaker has not tested using anchored view up as support and resistance but has done some testing on v-wap.

• An anchored v-wap involves anchoring to an event such as a critical chart point or news pivot and calculating a volume-weighted moving average. It's challenging to test due to subjectivity, making it difficult for the speaker to determine its validity.

English Realistic Expectations for Trading Success

In this section, the speaker talks about how realistic it is for traders to be successful.

• Most failed traders don't educate themselves or do what it takes to become winning traders. However, those who put in the work have a higher chance of success than they might think.

• Developing trading skills requires grit and stick-to-itiveness since it's one of the most challenging things humans can do. It's not going to be easy or quick testosterone-driven success; instead, it will require refining and time.

• Acknowledge that trading is a journey, not a straight line, and approach it as one of the most difficult things people can do.

Managing Stress in Trading

In this section, the speaker discusses how to manage stress while trading.

Tips for Managing Stress

• Don't trade when you're under stress. If you hit your loss limit or are emotionally compromised, step aside and remove the opportunity for you to hurt yourself.

• Avoid doubling up on trades that have gone against you. It's not going to get better that day, so just stop.

• Take a break from trading if you've taken a big loss or are angry at yourself. Nothing good is going to happen from trading under those conditions.

Understanding Drive Levels

In this section, the speaker explains what drive levels are and how they can be used in trading.

What Are Drive Levels?

• Drive levels are calculated levels used in trading.

• They can include measured moves or other statistical calculations.

• Some traders use specific sets of drive levels that have been tested statistically and found to be effective.

Market Profile Concepts

In this section, the speaker discusses market profile concepts and their relevance in trading.

Market Profile Concepts

• The concept of price levels needing repair is not strictly analyzed by the speaker but is aware of it.

• Market character refers to the speaker's subjective read on the validity or conviction of composite man on both sides.

• The next few sessions will cover more details about trends and provide a comprehensive look at them.

Wrapping Up

In this section, the speaker answers some final questions before wrapping up.

Final Questions

• The slides will be made available soon after the session ends.

• The speaker will focus more on composition than piano since he doesn't have enough time to maintain his piano technique.

• The next few sessions will be more specific and detailed, covering trends comprehensively.