means delay. The elapse of afew seconds may result in a lost market or opportunity.If you are in a small private room away from the order desk, thereshould be a private telephone connecting you with the order clerk. Slowexecution won’t make it in Tape Reading.Your orders should generally be given "at the market." We make thisstatement as a result of long experience and observation, and believe wecan demonstrate the advisability of it.The process of reporting transactions on the tape, consumes fromfive seconds to five minutes, depending upon the activity of the market.For argument's sake, let us consider that the average interval between thetime a sale takes place on the floor and the report appears on the tape ishalf a minute.A market order in an active stock is usually executed and reported tothe customer in about two minutes. Half this time is consumed in puttingyour broker into the crowd with the order in hand; the other half intransmitting the report. Hence, when Union Pacific comes 164 on the
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tape and you instantly decide to buy it, the period of time between yourdecision and the execution of your order is as follows:The tape is behind the market …30 secondsTime elapsed before broker can execute the order … 30 secondsIt will therefore be seen that your decision is based on a pricewhich prevailed half a minute ago, and that you must purchase if youwill, at the price at which the stock stands one minute after.This might happen between your decision and the execution ofyour order:UP 164, ¼, 1/8, ¼, ½, ½, 3/8, ¼, 1/8, 164,…and yours might be the last hundred. When the report arrives you maynot be able to swear that it was bought at 164 before or after it touched164½. Or you might get it at 164½, even though it was 164 when yougave the order, and when the report was handed to you.Just as often, the opposite will take place -- the stock will go inyour favor. In fact, the thing averages up in the long run, so that traderswho do not give market orders are hurting their own chances.An infinite number of traders seeing Union Pacific at 164, willsay: "Buy me a hundred at 164."The broker who is not too busy will go into the crowd, and,finding the stock at 164¼ at ¼ will report back to the office that "Unionis ¼ bid."The trader gives his broker no credit for this service; instead heconsiders it a sign that his broker, the floor traders and the insiders haveall conspired to make him pay ¼ per cent higher for his 100 shares, so hereplies:“Let it stand at 164. If they don't give it to me at that, I won't buy it atall."
Richard D. Wyckoff
How foolish! Yet it is characteristic of the style of reasoning usedby the public. His argument is that the stock, for good and sufficientreasons, is a purchase at 164. At 164¼ or 1/2 these reasons arecompletely nullified; the stock becomes dear, or he cares more to foil theplans of this "band of robbers" than for a possible profit.If you believe UP stock is cheap at 164 it's still cheap at 164¼.Here’s the best advice I can give: If you can't trust your broker, getanother.If you think the law of supply and demand is altered to catch your$25, floor -- you better reorganize your thinking.Were you on the floor you could probably buy at 164 the minuteit touched that figure, but even then you have no certainty. You would,however, be 60 seconds nearer to the market. Your commission chargeswould also be practically eliminated. Therefore, if you have two hundredseventy or eighty thousand dollars which you do not especially need, buya seat on the Stock Exchange.A Tape Reader who deserves the name, makes money in spiteof commissions, taxes and delays. If you don't get aboard your train,you'll never arrive.Giving limited orders loses more good dollars than it saves.We refer, of course, to orders in the big, active stocks, wherein thebid and asked prices are usually 1/8th apart.Especially is this true in closing out a trade. Many foolishpeople are interminably hung up because they try to save eighths bygiving limited orders in a market that is running away from them.For the Tape Reader there is a psychological moment when hemust open or close his trade. His orders must therefore be "at themarket." Haggling over fractions will make him lose the thread of thetape, upset his poise and interrupt the workings of his mental machinery.In ‘scale’ buying or selling it is obvious that limit orders must beused. There are certain other times when they are of advantage, but as
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the Tape Reader generally goes with the trend, it is a case of "get on orget left."By all means "get on."The selection of stocks is an important matter, and should bedecided in a general way before one starts to trade. Let us see what wecan reason out.If you are trading in 100 share lots, your stock must move yourway one point to make $100 profit.Which class of stocks are most likely to move a point? Answer:The higher priced issues.Looking over the records we find that a stock selling around $150will average 2½ points fluctuations a day, while one selling at 50 willaverage only one point. Consequently, you have 2½ times more action inthe higher priced stock.The commission and tax charges are the same in both. Interestcharges are three times as large, but this is an insignificant item to theTape Reader who doses out his trades each day. The higher priced stocksalso cover a greater number of points during the year or cycle than thoseof lower price. Stocks like Great Northern, although enjoying a muchwider range, are not desirable for trading purposes when up to 300 ormore, because fluctuations and bid and asked prices are too far apart topermit rapid in-and-out trading.Look for stock leaders where there is a large floating supply;where there is a wide public interest in the stock; where there is a broadmarket and wide swings; where trends are definable (not too erratic);these are popular with floor traders, big and little.It is better for a Tape Reader to trade in one or two stocks at themost -- rather than more -- since concentration is absolutely necessaryfor the work at hand.
Richard D. Wyckoff
Stocks have habits and characteristics that are as distinct as thoseof human beingsor animals. By a close study the trader becomes intimately acquaintedwith these habits and is able to anticipate the stock's action under givencircumstances. A stock may be stubborn, sensitive, irresponsive,complaisant, and aggressive; it may dominate the tape or trail alongbehind the rest; it is whimsical and exhibit serendipity. Its moods mustbe studied if you would know it personally.Study implies concentration. A person who trades in a dozenstocks at a time cannot concentrate on one.The popular method of trading (which means the unsuccessfulway) is to say:"I think the market's going bearish. ‘Smelters’, ‘Copper’ and ‘St.Paul’ have had the biggest rise lately; they ought to have a good reaction;sell a hundred short of each for me."Trades based on what one "thinks" seldom pan out well. Theselection of two or three stocks by guesswork, instead of one by reasonand analysis, explains many of the public's losses. If a trader wishes totrade in three hundred shares, let him sell that quantity of this stockwhich he knows most about. Unless he is playing the long term heinjures his chances by trading in several stocks at once. It's like chasing adrove of pigs --while you're watching this one the others get away.It’s better to concentrate on one or two stocks and study themexhaustively. You will find that what applies to one does not always fitthe other; each must be judged on its own merits. The varying pricelevels, volumes, percentage of floating supply, earnings, themanipulation of large traders and other factors, all tend to produce adifferent combination in each particular case.
Richard D. Wyckoff
CHAPTER IIIAnalyzing The List of Stocks
IN the last chapter we referred to Union Pacific stock as the mostdesirable stock for active trading. A friend of mine once made acomposite chart of the principal active stocks, for the purpose ofascertaining which, in its daily fluctuations, followed the course of thegeneral market most accurately. He found Union Pacific was what mightbe called the market backbone or leader, while the others, especiallyReading Railroad, frequently showed erratic tendencies, running up ordown, more or less contrary to the general trend.Of all the issues under inspection, none possessed the all-aroundsteadiness and general desirability for trading purposes displayed byUnion Pacific.But the Tape Reader, even if he decides to operate exclusively inone stock, cannot close his eyes to what is going on in others. Frequentopportunities occur elsewhere. In proof of this, take the market in theearly fall of 1907: Union Pacific was the leader throughout the rise frombelow 150 to l67 5/8. For three or four days before this advanceculminated, heavy selling occurred in Reading, St. Paul, Copper, Steeland Smelters, under cover of the strength in Union.This made the turning point of the market as clear as daylight.One had only to go short of Reading and await the break, or he couldhave played Union with a close stop, knowing that the whole marketwould collapse as soon as Union turned downward. When the liquidationin other stocks was completed, Union stopped advancing, the supportingorders were withdrawn, and the "pre-election break" took place. Thisamounted to over a 20 point decline in Union, with proportionatedeclines in the rest of the groups’ list.The operator who was watching only Union would have beensurprised at this; but had he viewed the whole market he must have seenwhat was coming. Knowing the point of distribution, he would be on the
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lookout for the accumulation which must follow, or at least the levelwhere support would be forthcoming. Had he been expert enough todetect this, quick money could have been made on the subsequent rallyas well.While certain stocks constitutes the backbone or leadershipposition, this important member is only one part of the market body that,after all, is very like the physical structure of a human being.Suppose Union Pacific is strong and advancing. Suddenly NewYork Central develops an attack of weakness; Consolidated Gas starts adecline; American Ice becomes nauseatingly weak; Southern Railwayand Great Western follow suit. There may be nothing the matter with the"leader," but its strength will be affected by weakness among all theothers.A bad break may come in Brooklyn Rapid Transit, occasioned bya political attack, or other purely local influence. This cannot possiblyaffect the business of the large transportation stocks or transcontinentals,yet St. Paul, Union, and Reading decline as much as B. R. T. A personwhose finger is crushed will sometimes faint from the shock to hisnervous system, although the injured member will not affect the othermembers or functions of the body.The time-worn illustration of the “chain which is as strong as itsweakest link”, will not serve. When the weak link breaks the chain is intwo parts, each part being as strong as its weakest link. The market doesnot break in two, even when it receives a severe blow.If something occurs in the nature of a financial disaster; interestrates rise; investment demand falls; public sentiment or confidence isshaken; or corporate earning power is declining or are deeply affected -a tremendous break may occur, but there is always a level, even in apanic, where buying power becomes strong enough to produce a rally ora permanent upturn.The Tape Reader must endeavor to operate in that stock whichcombines the widest swings with the broadest market; he may thereforefrequently find it to his advantage to switch temporarily into other stock
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issues which seem to offer the quickest and surest profits. Therefore it isnecessary for us to become familiar with the characteristics of theprincipal speculative methods that we may judge their advantages in thisrespect, as well as their weight and bearing upon a given marketsituation.The market is made by the minds of many men. The state of theseminds is reflected in the prices of securities in which their ownersoperate. Let’s examine some of the individuals, as well as the influencesbehind certain stocks and groups of stocks in their various relationships.This will, in a sense, enable us to measure their respective power toaffect the whole list or the specific issue in which we decide to operate.The market leaders are, at the time of this writing – and forillustration only --, Union Pacific, Reading, Steel, St. Paul, Anacondaand Smelters. Manipulators, professionals and the public derive theirinspiration largely from the action of these six issues, in which, exceptduring the "war" markets of 1914-16, from forty to eighty per cent of thetotal daily transactions are concentrated. We will therefore designatethese as the "Big Six". The Tape Reader should understand basicprinciples of the market. One being that leadership changes frequently.But for our purpose we will concentrate on this list.Three stocks out of the Big Six are chiefly influenced by thebuying and selling operations of what is known as the Kuhn-LoebStandard Oil group. Their four stocks are Union, St. Paul, Reading andAnaconda. Of the other two, Smelters is handled by the Guggenheims,while Steel, controlled by Morgan, is unquestionably swung up anddown more by the influence of public sentiment than anything else.Of course, the condition of the steel trade forms the basis ofimportant movements in this issue, and occasionally Morgan or someother large interest may take a hand by buying or selling a few hundredthousand shares, but, generally speaking; it is the attitude of the publicwhich chiefly affects the price of Steel common. This should be bornestrictly in mind, as it is a valuable guide to the technical position of themarket, which turns on the overbought or oversold condition of themarket.
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Next in importance comes what we will term the SecondaryLeaders; for example those that at times burst into great activity,accompanied by large volume. These are termed Secondary Leaders,because while they seldom influence the Big Six to a marked extent theless important issues usually fall into line at their initiative.Another group which we will call the Minor Stocks is comprisedof less important issues, mostly low-priced, and embracing many publicfavorites.Some people, when they see an advance inaugurated in some ofthe Minor Stocks, are led to buy the Primary or Secondary Leaders, onthe ground that the latter will be bullishly affected. This sometimesoccurs, more often it doesn’t. It is just as foolish to expect a 5,000 sharetrader to follow the trading patterns of a 100 share trader, or a 100 shareman to be influenced by buying and selling of the 10 share trader.The various stocks in the market are like a gigantic fleet of boats,all hitched together and being towed by the tugs "Interest Rate," and"Business Conditions". In the first row are the Big Six; behind them, theSecondary Leaders, the Minors, and the Miscellaneous issues. It takestime to generate steam and to get the fleet under way. The leaders arefirst to feel the impulse; the others follow in turn.Should the tugs halt, the fleet will run along for a while under itsown momentum, and there will be a certain amount of bumping, hackingand filling. In case the direction of the tugs is changed abruptly, thebumping is apt to be severe. Obviously, those in the rear cannot gain andhold the leadership without an all-around readjustment.The Leaders are representative of America's greatest industriesrailroading, steel making, and mining. It is but natural that these stocksshould form the principal outlet for the country's speculative tendencies.The Union Pacific and St. Paul systems cover the entire West. Reading,of itself a large railroad property, dominates the coal mining industry; itis so interlaced with other railroads as to typify the Eastern situation.Steel is closely bound up with the state of general business throughoutthe states, while Anaconda and Smelters are the controlling factors incopper mining and the smelting industry.
Richard D. Wyckoff
This is how you should look at groups of stocks. Who is thePrimary Leader in the group? Who are the Secondary Leaders and whothe Minor issues?By classifying the principal active stocks we can recognize moreclearly the forces behind their movements. For instance, if ConsolidatedGas suddenly becomes strong and active, we know it will probably affectBrooklyn Union Gas, but there is no reason why the other stocks shouldadvance more than slightly and out of sympathy.If all the stocks in the Standard Oil group advance in a steady andsustained fashion, we know that these capitalists are engaged in a bullcampaign. As these people do not enter deals for a few points it is safe togo along with them for a while, or until distribution becomes apparent.An outbreak of speculation in Colorado Fuel is not necessarily abull argument on the other Steel stocks. If it were based on tradeconditions, U. S. Steel would he the first to feel the impetus – then itwould radiate to the others.In selecting the most desirable stock out of the Kuhn- LoebStandard Oil group, for instance, the Tape Reader must consider whetherconditions favor the greatest activity and volumes in the railroad orindustrial stocks. In the former case, his choice would be Union Pacificor St. Paul; in the latter, Anaconda. Erie may come out of its rut (as itdid during the summer of 1907, when it was selling around 24), andattain leadership among the low-priced stocks. This indicates someimportant development in Erie; it does not foreshadow a rise in all thelow-priced stocks.But if a strong rise starts in Union Pacific, and Southern Pacificand the others in the group follow consistently, the Tape Reader will getinto the leader and stay with it. He will not waste time on Erie, for whileit is moving up 5 points, Union Pacific may advance 10 or 15 points,provided it is a genuine move. Many valuable deductions may be madeby studying groupings of stocks.
Richard D. Wyckoff
Experience has shown that when a rise commences in aSecondary Leader, the Leaders are about done in their advance anddistribution is taking place, under protection of the strength in theSecondary stock and others in its class.Professional traders used to call these stocks "Indicators."The absence of inside manipulation in a stock leaves the wayopen for pools to operate, and many of the moves that are observed inthese groups are produced by a handful of floor or office operators, who,by joining hands and swinging large quantities of stock, are able to forcetheir stock in the desired direction.For example, U.S. Steel is swayed by conditions in the steeltrade, and the speculative temper of the general public, assistedoccasionally by some insiders. No other stock on the list is such a trueindex of the attitude of the public, or the technical position of the market.Including those who own the stock out-right, and those who carry it onmargin. Reports of the steel trade are most carefully scrutinized, and thecorporation's earnings and orders on hand minutely studied by thousands.This great public rarely sells its favorite short, but carries it onmargin until a profit is secured, or until it is shaken or scared out in aviolent decline. So, if the stock is strong under adverse news, we mayinfer that public holdings are strongly fortified, and that confidence isstrong as well. If Steel displays more than its share of weakness, anuntenable position of the public is indicated.At this point public sentiment becomes intensely bullish andspreads itself in the low-priced speculative shares. Insiders in the juniorsteel stocks take advantage of this and are able to advance and find agood market for their holdings.Stocks find their chief inspiration in the orders for cars,locomotives, etc., placed by the railroads. These orders are dependentupon general business conditions. Consequently, the equipment issuescan seldom be expected to do more than follow the trend of prosperity ordepression.
Richard D. Wyckoff
We should introduce ourselves to the principal speculative mediumsand their families, each of which, upon closer acquaintance, seems tohave a sort of personality. If we stand in a room with fifty or ahundred people, all of whom we know, as regards their chief motivesand characteristics, we can form definite ideas as to their probableactions under a given set of circumstances.
So it behooves the Tape Reader to acquaint himself with the mostminute of details pertaining to these market identities, also with thehabits, motives and methods of the men who make the principal moveson the Stock Exchange chess board.
CHAPTER IVTrading Rules
WHEN a person contemplates an extensive trip, one of the first thingstaken into account is the expense involved. In planning our excursioninto the realms of day trading we must, therefore, carefully weigh theexpenses, or fixed charges in trading.Were there no expenses, making a profit would be far easier -profits would merely have to exceed losses. Whether you are a memberof the New York Stock Exchange or not, in actual trading- profits mustexceed losses and expenses. These are incurred in every trade, whether itshows a gain or a loss.They consist of:••
Commissions'Invisible eighth’ (i.e. the difference between bid and asked price,assuming that you buy and sell at the market price)
Richard D. Wyckoff
••
Income Tax on saleExchange fees
In addition… interest if the trade is carried over night.By purchasing a New York Stock Exchange seat, the commissioncan be reduced to $1 per hundred shares, if bought and sold the sameday, or $3.12 if carried over night. This advantage is partly offset byinterest on the cost of the seat, dues, assessments, etc.The "invisible eighth" is a factor that no one -- not even amember -- can overcome. The bid and asked price is never less than aneighth apart. If the market is 45¼ to 3/8 when you buy, you will as arule, pay 45 3/8. Were you to sell it would be at 45 ¼. This hypotheticaldifference follows you all through the trade and has been designated bythe writer as the "invisible eighth".The Tape Reader who is a non-member of the exchange must,therefore, realize that the instant he gives an order to go long or short100 shares, he has lost an eighth of a point. In order that he may not foolhimself, he should add his commissions to his purchase price, or deductthem from his selling price immediately.People who boast of their profits usually forget to deductexpenses. Yet it is this insidious item that frequently throws the netresult over to the debit side.The expression is frequently heard, "I got out even, except for thecommissions," the speaker evidently scorning such a triflingconsideration. This sort of self- deception is ruinous, as will be seen bycomputing the fixed charges on a trade of 100 shares.Bear in mind that a loss of the commission on the first tradeleaves double that amount-to be made on the second trade before a dollarof profit is secured.It therefore appears that the Tape Reader's problem is not only toeliminate losses, but to cover his expenses as quickly as possible. If he
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has a couple of points profit in a long trade, there is no reason why heshould let the stock run back below his net buying price.Here circumstances seem to call for a stop order, so that nomatter what happens, he will not be compelled to pay out money. Thisstop should not be thrust in when net cost is too close to the market price.A small reaction must be allowed for.A Tape Reader is essentially one who follows the immediatetrend. An expert can readily distinguish between a change of trend and asimple, minor reaction.When his mental barometer indicates a change he does not waitfor a stop order to be caught, but cleans house or reverses his position inan instant. The stop order at net cost is, therefore, of advantage only incase of a reversal which is sudden and pronounced.A stop should also be placed if the operator is obliged to leavethe tape for more than a moment, or if the ticker suddenly is out of order.While he has his eye on the tape the market will I tell him what to do.The moment this condition does not exist he must act as he would iftemporarily stricken blind -- he must protect himself from forces whichmay attack him in the dark.I know a trader who once bought 500 shares of Sugar and thenwent out to lunch. He paid 25 cents for what he ate, but on returning tothe tape he found that the total cost of that lunch was $5,000 and 25cents! He had left no stop order, Sugar went down ten points, and hisbroker sent him a margin call.The ticker has a habit of becoming incoherent at the most criticalpoints. Curse it as we may, it will resume printing intelligibly when thetrouble is overcome -- not before. As the loss of even a few quotationsmay be important, a stop should be placed at once and left in until theflow of prices is resumed.If a trade is carried over night, a stop should be entered againstthe possibility of accident to the market or the trader. An important eventmay develop before the next day's opening by which the stock will be
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violently affected. The trader may be taken ill, be delayed in arrival, or insome way be incapacitated. A certain allowance must be made foraccidents of every kind.As to where the stop should be placed under such conditions, thisdepends upon circumstances. The consensus of shrewd and experiencedtraders is in favor of two points maximum gross loss on any one trade.This is purely arbitrary, however. The Tape Reader knows, as a rule,what to do when he is at the tape, but if he is separated from the marketby any contingency, he will he obliged to fall back upon the arbit rarystop.A closer stop may be obtained by noting the "points ofresistance" in a stock -- the levels at which the market turns after areaction.For example, if you are short at 130 and the stock breaks to 128,rallies to 129, and then turns down again, the point of resistance is 129.The more time it turns at 129 the stronger the case you have.In case of temporary absence or interruption to the service, agood stop would be 129¼ or 129¼. These "points of resistance" will bemore fully discussed later.If the operator wishes to use an automatic stop, a very goodmethod is this:Suppose the initial trade is made with a one-point stop. For every¼ pt. the stock moves in your favor, change the stop to correspond, sothat the stop is never more nor less than one point away from the extrememarket price. This gradually and automatically reduces the risk, and ifthe Tape Reader be at all skilful, his profits must exceed losses.As soon as the stop is thus raised to cover commissions, it wouldseem best not to make it automatic thereafter, but let the market developits own stop or 'signal" to get out.One trouble with this kind of a stop is that it interferes with thefree play of judgment. An illustration will explain why: A tall woman
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and a short man attempt to cross the street. An automobile approaches.The woman sees that there is ample time in which to cross, but he hasher by the arm and being undecided himself backs and fills, first pushing,then pulling her by the arm until they finally return to the curb, after anarrow escape. Left to herself, she would have known exactly what todo.It is the same with the Tape Reader.He is hampered by an automatic stop. It isbest that he be free to act as his judgmentdictates, without feeling compelled by a priorresolution to act according to hard and fastrule.
“Fear, hesitation anduncertainty aredeadly enemies of
the Tape Reader. TheThere is another time when the stopchief cause of fear isorder is of value to the Tape Reader, viz.,when his indications are not clearly defined.over-trading.”The original commitment should, of course,be made only when the trend is positively indicated, but situations willdevelop when he will be uncertain whether to stand pat, close out, orreverse his position. At such a time it seems better to push the stop up toa point as close as possible to the market price, witho ut choking off thetrade. By this we mean a reasonable area should he allowed fortemporary fluctuations. If the stock emerges from its uncertainty bygoing in the desired direction, the stop can be changed or cancelled. Ifits trend becomes adverse, the trade is automatically closed.Fear, hesitation and uncertainty are deadly enemies of the TapeReader. The chief cause of fear is over-trading. Therefore commitmentsshould be no greater than can be borne by one's susceptibility theretoHesitation can be overcome by disciplined self-training.To observe a positive indication and not act upon it is fatal -more so in closing than in opening a trade. The appearance of a definiteindication should be immediately followed by an order. Seconds areoften more valuable than minutes. The Tape Reader is not the captain -he is the engineer who controls the machinery. The Tape is the pilot andthe engineer must obey orders with promptness and precision.
Richard D. Wyckoff
We have defined a Tape Reader as one who follows theimmediate trend. This means that he pursues the line of least resistance.He goes with the market -- he does not buck it.The operator who opposes the immediate trend pits his judgmentand his hundred or more shares against the world's supply or demand andthe weight of its millions of shares.Armed with a broom, he is trying to keep at bay the incomingtide. When he goes with the trend, the forces of supply, demand andmanipulation are working for and with him.A market which swings within a radius of a couple of pointscannot be said to have a trend, and is a good one for the Tape Reader toavoid.The reason is:Unless he catches the extremes of the little swings, he cannot paycommissions, take occasional losses and come out ahead. No yacht canwin in a dead calm. As it costs him nearly half a point to trade, each riskshould contain a probable two or five points profit, or it is not justified.A mechanical engineer, given the weight of an object, the force of theblow that strikes it, and the element through which it must pass, canfigure approximately how far the object will be driven.So the Tape Reader, by gauging the impetus or the energy withwhich a stock starts and sustains a movement, decides whether it is likelyto travel far enough to warrant his going with it -- whether it will pay itsexpenses and remunerate him for his boldness.The ordinary speculator trading on tips gulps a point or twoprofit and disdains a loss, unless it is big enough to strangle him. TheTape Reader must do the opposite -- he must cut out every possibleeighth loss and search for chances to make three, five and ten points. Hedoes not have to grasp everything that looks like an opportunity. It is notnecessary for him to be in the market continuously. He chooses only thebest of what the tape offers.
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His original risks can be gradually effaced by clever arrangementof stop orders when a stock goes his way. He may keep these in his heador put them on the "floor." For my own part I prefer, having decidedupon a danger point, to maintain a mental stop and when the price isreached close the trade "at the market."Reason: There may be ground for a change of plan or opinion atthe last moment; if a stop is on the floor it takes time to cancel or changeit, hence there is a period of a few minutes when the operator does notknow where he stands. By using mental stops and market orders healways knows where he stands, except as regards the prices at which hisorders are executed. The main consideration is, he kno ws whether he isin or out.The placing of stops is most effectual and scientific whenindicated by the market itself. An example of this is as follows:
Here a stock, fluctuating between 128 and 129, gives a buyingindication at 128 3/4.
Richard D. Wyckoff
Obviously, if the indication is true, the price will not again break128, having met buying sufficiently strong to turn it up twice from thatfigure and a third time from 128 1/8. The fact that it did not touch 128 onthe last down swing forecasts a higher up swing; it shows that thedownward pressure was not so strong and the demand slightly larger andmore ur