Wyckoff trading method, page-1422

Yep, I can help with that for sure (it is a good book for sure, but seems to be written for those with at least some experience and understanding of Wyckoff methodology, and David's interpretation of it)

In an uptrending channel, you generally use two low points and a corresponding high point (between them), to draw the channel,
and in a reverse uptrending channel, you use two high points and a corresponding low point (between them).

And the opposite for a down trending channel, you would normally use two highs and a low point between them,
and a reverse downtrending channel uses two lows and a high point between them.

*** Where possible it is normal etiquette to draw a reverse trend channel with dashed or dotted lines, to differentiate them from a 'normal' trend channel ***

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There are times when a 'normal' trend channel just will not fit the price action very well, but interestingly (perhaps strangely), a 'reverse' channel often frames the price action very nicely, so you are able to use it to 'read the story' it is telling....so to speak..

Tt is often when the price action become too steep, that a reverse channel may work, when a normal channel won't.

As mentioned already, a 'normal' uptrending channel, you would use two lows points, and the corresponding high in between the two lows, to draw the channel.
But to draw a reverse channel, you would use to high points, and a corresponding low.

and the same for a downtrending channel, normally you would use two highs, and the corresponding low.
And for a reverse downtrending channel, you would use two lows, and the corresponding high.

Here are some charts to illustrate the differences.......
Firstly a normal up channel


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and a normal down channel


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Next, have a look at these three charts......
They are all the same chart, but using different points to anchor the channel channels on them - two normal channels, and then a reverse channel.....

The first one is a 'normal channel, using the most obvious points, but has the price action drop right out of the channel at the lows, before recovering, and does not really frame the price action very well.


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and the second with a 'normal' channel which starts later in the trend, but the price action does still not touch either the supply or demand lines of the channel, before moving away from the channel altogether.


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Now a reverse channel (with dashed lines), which shows many touches of the demand line (lower line- where demand is expected to come in), and the positive response to it. The failure to touch the supply line at the highs shows the inherent weakness at the time (price was not even strong enough to reach up to touch the supply line, suggesting further weakness is to be expected). After price bounces off the demand line at the lows, it moves towards the supply line (upper line - where supply coming in is expected), and shows some potential strength on the breakout above the supply line (with a wider spread), then comes back and puts in a very nice re-test (or backtest) of the channel, before price moves away from the channel completely.




hopefully all that helps.....if not, let me know what you are having trouble with, and I'll explain further.


cheers