In honor of Richard Wyckoff…
I’m a math and physics trainer by occupation. That is the place the 2 approaches I pursue when wanting on the markets stem from:
1) analogy with mechanics,
2) most show readability.
1) Wyckoff’s Legislation of Causa and Impact
Wyckoff is to monetary markets what Newton is to physics. He additionally left a number of legal guidelines from which to explain market dynamics. The legislation of Causa and Impact states that intense uncertainty (causa) is the reason for a following pattern (impact). In physics, we’d most likely speak about motion and response or the conversion of potential power into kinetic power.
The uncertainty is attributable to the buying and selling of the “composite man” (=large cash). He used the Level and Determine technique to measure uncertainty and estimate the next impact. It was a superb technique for the times of paper, pencil and ruler, however as we speak I’m embarrassed when dot-square graphs are drawn with out understanding the essence of the legislation.
In contrast to Level and Determine:
a) I estimate the path of the longer term pattern – is it accumulation or distribution?
b) Quite the opposite, I don’t estimate absolutely the worth change within the following pattern.
2) What we see
a) Since I create monetary robots, I’m near the binary sign.
b) I expressed the diploma of uncertainty by worth oscillation across the binary stage.
c) I all the time attempt to mark anticipation of a promote alternative (bullish pattern) in crimson and purchase alternative (bearish pattern) in blue.
Readability is a bonus for individuals who commerce on a number of charts on the identical time.
The indicator must be checked out: intense uncertainty results in a change in market path after calming down.
The indicator might be traded in a number of intervals, so you possibly can search for retracements.
On the Legislation of Causa and Impact