Mike Sokolik – MBoxWave Wyckoff Trading System v2.34 for SierraChart (Waves package Jun 2018)
Wyckoffian Logic
For those new to Wyckoffian Logic known as the Richard Wyckoff Method, this page aims to explain the concepts. Richard Wyckoff presented 3 basic laws at work always in the market. The MBoxWave Wyckoff Trading System aims to show these 3 laws at work and helps identify periods of harmony or imbalance in the market. When imbalances can be identified this opens up a world of low risk trading opportunities.
The Law of Supply and Demand
When there is an excess amount of something (supply) the value of that item is reduced to draw in the demand needed to absorb that supply. Or, if there is a scarcity of something, then the value of that item will increase to create the supply that will meet that demand.
The Law of Cause and Effect
In order for there to be an effect (change in price), there needs to be a cause. The effect will be in direct proportion to that cause. Best price moves occur when there has been enough time to allow for a period of accumulation or distribution (or in other words a cause). A great example is when we see an expansion of box volume, length, and time.
The Law of Effort vs Results
If there is an effort, the result must be in proportion to that effort and cannot be separated from it. An example is when we have a lot of volume on an attempted up/down move. If we see a lot of volume we should see a lot of move. If we don't, we could have an imbalance in the market. These can create great entry points for trades in the market.
Important Concepts
Waves Within Waves
When combined, MBox + MWave present a very powerful trading system. One of the secrets of success is viewing waves within waves. MBox gives us a closer look at the market by analyzing the smallest waves, while overlaying MWave on top gives us a broader look. By carefully looking at what the smaller waves are doing (MBox) it is easier to predict when the larger waves (MWave) will turn. We will see this in the trade setups and examples going forward. This is a very important concept to keep in mind.
Volume & Time vs Length
The length property of a wave is the only property that shows result. Volume and Time properties can be seen as forces, while the length shows the result. That is why length should ALWAYS be paid attention to. Volume & Time are important and are valuable. You can analyze how much volume and time was spent in a move and then see where it went. It should always be remembered that price is the most important factor.
Support / Resistance / Trend Lines
You should always analyze wave properties at support and resistance lines carefully. At these levels they give clues as to continuation of market direction or the start of a reversal. NEVER forget about support, resistance, and trend lines when making your analysis.
Effort / Result (Follow through or lack thereof)
Waves should be constantly compared to each other to find market imbalance. For example if up wave A spent 100 volume, 20 minutes, and achieved a length of 50 points, while down wave B also spend 100 volume, 20 minutes, but achieved a length of 25, this is something that you should pay attention to! Wave B exerted twice the work and achieved half the length (result).
At the same time if you see a large wave in a certain direction, wait to see what the follow through is. If it fails to continue it most likely was a trap for longs or shorts. Watch out for these tricks.
Change in Market Behavior
When we are in a trend, always be on the look out for a change in market behavior. This could mark the end of a trend or a start of a new one. If we had big down waves and small up waves trending down and now suddenly you see a large up wave, the largest you’ve seen in a long time, it needs to be accounted for and adjusted for.
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