1998issue C071-8
A Wyckoff spring is unfinished until it is a few-parameter system
The archive reads springs and upthrusts with the Wyckoff method, then asks that the same supply-and-demand idea be written as a mechanical trading system with a few parameters. Editorial view: reject any version that can look successful only after the fact.
- The Wyckoff method reads a price chart as a continuing contest between buyers and sellers, and springs and upthrusts are sequential bar tests around a pivot.
- A mechanical trading system is presented as a way to falsify that chart hypothesis before capital is committed, because computer tests of discretionary chart ideas often reversed the original conclusion.
- Fair evaluation codes the complete rule set and tracks it forward so no reported result uses hindsight.
- Systems that held up under testing used three or four parameters and simple supply-and-demand methods that could be applied across grains, currencies, and financials.
Read the chart as a contest
The Wyckoff method is presented as a way to read a price chart as a continuing contest between buyers and sellers. Springs and upthrusts belong to that reading rather than to a separate overlay.
A buying climax is treated as a brief Wyckoff window for taking open profits. Averaged indicators are said to lag that turn.
Specify the spring or upthrust
Springs and upthrusts are specified as sequential bar tests around a pivot: prior closes reverse, the close is beyond the pivot, the close is beyond the open and mid-range, and the bar spread exceeds the prior day's action.
The same pattern family is illustrated on 40-minute Treasury-bond bars. The archive uses that scale to show that the reading is not confined to a daily chart.
Restate the reading as a mechanical trading system
Computer tests of discretionary chart ideas often reversed the original conclusion. A mechanical trading system is presented as a way to falsify a chart hypothesis before capital is committed.
A mechanical trading system that survives evaluation is described as encoding the same supply-and-demand principles a thorough chart reading would produce, not as a one-off filter for a known episode. Fair evaluation is described as coding the complete rule set and then tracking it forward so no reported result uses hindsight.
Keep the parameter count small
Systems that held up under testing are described as using three or four parameters and simple supply-and-demand methods. Those methods are described as applicable across grains, currencies, and financials without a separate fit for each market.
A breakout threshold set at 50 percent of a 10-day average range is treated as curve-fitted if it works only at that exact setting, and more credible if it remains profitable across a wide band such as 35 percent to 70 percent. A date-specific filter such as never being short crude oil in 1991 is cited as a rule that can look successful only after the fact.
All readings on this track · 6 readings
- 1985Constructing chart congestion from triangles, springs, and pivots
- 1986Force, a tested spring, and the conservative count
- 1992Construct a Wyckoff futures read from delayed volume and range tests
- 1998A Wyckoff spring is unfinished until it is a few-parameter system
- 2002Constructing trend swings from confirmed pivots
- 2011Potential versus confirmed Wyckoff springs