Welcome to the Wyckoff Stock Market Institute Blog. We have worked hard during the past year to try and build a web site that is an information source to stock market investors and traders who subscribe to the methods and strategies developed by Richard D. Wyckoff.
This blog will include information about new items and changes we are making to the Wyckoff web site, as well as some commentary on the Wyckoff Wave and the markets in general.
We welcome your comments. Our goal is to provide information, services and tools that will help the Wyckoff trader maximize his or her profits. Please use this blog to comment on our efforts and let us know how we can enhance and improve the web site.
I recently read about a “force” index in my Wyckoff readings. I previously encountered a “force” index concept while reading one of Alex Elders books on trading. Is the Wyckoff force index compiled in the same fashion? Here is the formula for Elder’s force index: Force Index = (Close today – Close yesterday) * Volume today. The idea of a force that can move prices makes complete sense to me. Question is, how do you calculate such an index?
The Force Index is a Wyckoff tool that relates to longer term investor sentiment. Like the Elder’s formula it is a volume indicator.
In Wyckoff, it is a ten day moving average that tracks the up volume and the down volume of each individual up or down wave throughout the trading day. Unlike many trading strategies that use end of day numbers, all Wyckoff formulas relate to the many up and down movements of an index or a stock during the trading day.
This data is collected every 5 minutes and the waves are determined by price movements to upside and the downside. Then, we are able to identify the volume related to the up waves and volume related to down waves. Next, a proprietary formula calculates the up volume and down volume to create the Wyckoff Force Index.
Many investment strategies simply apply all the volume on an up day to the up side and all the down volume on a down day to the down side. Wyckoff is much more interested in the intra-day price and volume moves and they are the basis for developing the Wyckoff trading tools.