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.If hebought his first lot at 44, his second at 45, and his third at 46, he couldhave thrown the whole at 46 5/8 and netted $406.50 for the day if hewere trading in 100 share units, or $2,032.50 if trading in 50 share units.CHAPTER VIIIThe Use of Charts as Guides and IndicatorsMANY interesting queries have been received regarding the use ofcharts.The following is a letter representative of most: Referring to your figure chart explained in Volume 1 of theMagazine of Wall Street, I have found it a most valuable aid to detectingaccumulation or distribution in market movements.I have been in WallStreet a number of years, and like many others have always shown askeptical attitude toward charts and other mechanical methodsof forecasting trends; but after a thorough trial of the chart on UnionPacific, I find that I could have made a very considerable sum if I hadfollowed the indications shown.I note your suggestions to operators tostudy earnings, etc., and not to rely on charts, as they are very oftenlikely to mislead.I regret that I cannot agree with you.You have oftenstated that the tape tells the story; since this is true, and a chart is but acopy of the tape, with indications of accumulation or distribution, as thecase may be, why not follow the chart entirely, and eliminate allunnecessary time devoted to study of earnings, etc?Let us consider those portions of the above which relate to TapeReading, first clearly defining the difference between chart operationsand tape reading.Richard D.WyckoffThe genuine chart player usually operates in one stock at a time,using as a basis the past movements of that stock and following a moreor less definite code of rules.He treats the market and his stock as amachine.He uses no judgment as to market conditions, and does notconsider the movements of other stocks; but he exercises great discretionas to whether he shall "play" an chart signal or not.The Tape Reader operates on what the tape shows now.He is notwedded to any particular issue, and, if he chooses, can work withoutpencil, paper or memoranda of any sort.He also has his code of rules --less clearly defined than those of the chart player.So many differentsituations present themselves that his rules gradually become intuitive --a sort of second nature evolved by self-training and experience.A friend to whom I have given some points in Tape Reading onceasked if I had my rules all down so fine that I knew just which to use atcertain moments.I answered him this way:  When you cross a streetwhere the traffic is heavy, do you stop to consult a set of rules showingwhen to run ahead of a trolley car or when not to dodge a wagon? No.You take a look both ways and at the proper moment you walk across.Your mind may be on something else but your judgment tells you whento start and how fast to walk.That is the position of the trained TapeReader.The difference between the Chart Player and the Tape Reader istherefore about as wide as between day and night.But there are ways inwhich the Tape Reader may utilize charts as guides and indicators andfor the purpose of reinforcing his memory.The Figure Chart is one of the best mechanical means ofdetecting accumulation and distribution.It is also valuable in showingthe main points of resistance on the big swings.A figure chart cannot be made from the open, high, low and lastprices, such as are printed in the average newspaper.We produced a Figure Chart of Amalgamated Copper showingmovements during the 1903 panic and up to the following March (1904):Richard D.WyckoffPrice/Time ChartIt makes an interesting study.The stock sold early in the year at75 5/8 and the low point reached during the above period was 33 5/8.The movements prior to those recorded here show a series of downwardsteps, but when 36 is reached, the formation changes, and the supportingpoints are raised.A seven-point rally, a reaction to almost the low figure,and another sixteen-point rally follow.On this rally the lines 48-49 gradually form the axis and longrows of these figures seem to indicate that plenty of stock is for sale atthis level.In case we are not sure as to whether this is furtheraccumulation or distrib ution we wait until the price shows signs ofbreaking out of this narrow range.After the second run up to 51 thegradually lowering tops warn us that pressure is resumed.We thereforelook for lower prices.The downward steps continue until 35 is touched, where a 36-7line begins to form.There is a dip to 33 5/8, which gives us the fullfigure 34, after which the bottoms are higher and lines commenceforming at 38-9.Here are all the earmarks of manipulative depressionand accumulation -- the stock is not allowed to rally over 39 untilliquidation is complete.Then the gradually raised bottoms notify us inadvance that the stock is about to push through to higher levels.If the Figure Chart were an infallible guide no one would have tolearn anything more than its correct interpretation in order to make bigmoney.Richard D.WyckoffOur writer says, "after a thorough trial of the chart on U.P.I findthat I could have made a very considerable sum if I had followed theindications shown".But he would not have followed the indicationsshown.He is fooling himself.It is easy to look over the chart afterwardsand see where he could have made correct plays, but I venture to say henever tested the plan under proper conditions.Let anyone, who thinks he can make money following a FigureChart or any other kind of a chart have a friend prepare it, keeping secretthe name of the stock and the period covered.Then put down on paper apositive set of rules which are to be strictly adhered to, so that there canbe no guesswork.Each situation will then call for a certain play and nodeviation is to be allowed.Cover up with a sheet of paper all but thebeginning of the chart, gradually sliding the paper to the right as youprogress.Record each order and execution just as if actually trading.Put my name down as covering the opposite side of every tradeand when done send me a check for what you have lost.I have yet to meet the man who has made money trading on anykind of Chart over an extended period.The Figure Chart can be used in other ways.Some peopleconstruct figure charts showing each fractional change instead of fullpoints.The idea may also be used in connection with the Dow Jonesaverage prices.But for the practical TapeReader the full figure chart first described Any kind of a chart willis about the only one we can recommend [ Pobierz całość w formacie PDF ]