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My understanding is that Wyckoff really focused on the retests for his favorite trade setups. An example is when price jumps the creek area and then backs up(down in price) to the creek area on low volume. This I believe was a favorite setup for Wyckoff.
One has to view or analyze volume - relative - to other price action in the area in question. Relative to me, means to compare volume on the jumping of creek, then compare volume on the back up to the creek. This all takes place within the particular cycle trend in question.
To me, ignoring the elapse of time during price testing, retesting analysis could be misleading.
If a person should ignore elapse of time between tests and retests, then that's like saying, comparing volume on IBM stock back in the 1960's at a certain price level is valid to compare it to today's volume price action. We know this doesn't cut mustard logic. There's more traders, likely more stock issured, etc..
I've had a hard time wrapping my head around "relative volume" and comparing it to the comparable area in question during analysis.
Yes, those big round numbers will always be there but we are comparing relative volume and price action at those levels.
Let me ask this for example, if ES hit's resistance during the day session, then how does it break that price level in after hours trading on alot lower volume? It doesn't always break that level after hours but it does at times.
If all a person had to do was find the highest volume area for resistance or support and then wait for price to test that area again on low volume, and shazam, take a trade should work every time, right? Nope.
i understand what your saying, but like you mention its hard to know when, but especially why it will hold from the past.. if the big boys are just testing the area looking for supply/demand knowing they just want to break through it at some point could be reasoning.. which is on point with what you are saying, but significant highs or lows from long ago(im not sure what the time frame would be) will still hold equal merit if for nothing else than the big boys dont know how that price is going to be perceived by the mkt..
dont believe anything you hear and only half of what you see
The stock market volume in general has been lighter over recent years. The reason could be that there are fewer speculators in the market and more institutional traders. Either way, this has been the pattern lately. Retests can occur in a matter of minutes or a matter of years. For example, the S&P, during the high of the dot com era, retested seven years later. Conversely, the Nasdaq has only recovered one half since the dot com bubble. So you never know when and if a market will have a retest, but as you can see, it can take a very long time. That length of time, does not decrease it's significance. In fact, the longer the time to retest, the more potential cause is built. So the longer the retest, the more significant the retest.
Gary
There is a substantial risk of loss in trading commodity futures and options. Past performance is not indicative of future results. The opinions expressed here are those of Gary Fullett, and are not to be taken as a recommendation to buy or sell commodity futures or options. This is for educational purposes only.
There is a substantial risk of loss in trading commodity futures and options. Past performance is not indicative of future results. The opinions expressed here are those of Gary Fullett, and are not to be taken as a recommendation to buy or sell commodity futures or options. This is for educational purposes only.