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Postcards:
Wyckoff

Figuratively speaking, the small trader should imagine himself as a hitch-hiker in the
market. For the ordinary hitch-hiker, someone else supplies the car, chauffeur, oil and gas.
When he thinks the car is about to go in his direction, he jumps aboard and rides as far as
he thinks the car will go. When he notices the machine has been stopped by a red light, or
is about to turn a corner and go in some other direction, or that the car is running out of
gas, or the brakes failing to work properly, he steps off and figures he has secured about as
long a ride as he may expect. All he has supplied in this transaction is a modest
commission and whatever brains were necessary to observe and recognize the opportunity
when to get on and off.

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The experience of the past few years has emphasized the value of disregarding all
considerations except those which relate to price movement, volume and time. If one is
endeavoring to realize profits from the principal swings in prices of stocks, it is my opinion
that he should disregard fundamental as well as corporate statistics relating to the stocks in
which he is trading, stick closely to a study of the action of the market and become deaf
and blind to everything else.

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You must always be on the lookout for a change in the immediate trend. It is likely to
change its direction from one to three times in a single session. This is how you detect the
change: In an up trend, when the selling waves begin to increase in time and distances or
the buying waves shorten. Either or both will be an indication of a change in the immediate
trend. Apply the same reasoning to a down trend. Watch closely for these changes for they
tell you when to buy and sell; when to get long or short; when to close your present trade
and reverse your position.

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No one but a floor trader should always be in the market. Those who trade from the tape in
an office should assume a neutral position frequently. They should not delude themselves
that they can anticipate everything that happens in their favorite stocks. They should take
vacations from the tape varying from a walk around the block to a trip into the country for
a week or two.

A neutral position clarifies the mind.

Trading should never become a habit (like smoking cigarettes) so that you've simply got to
satisfy that craving to jump in and out. Such a practice warps the judgment; eagerness to
trade supplants deliberation.

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The action of the whole market tells you when the selling is better than the buying and vice
versa. You do not care why insiders are buying or selling, but you should care a lot about
the action of their stock on the tape, for that is what tells you the truth.

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How are we to know in advance why and to what extent someone else is prompted to buy
or sell? We cannot know; it is impossible for us to foretell what actuates all of those whose
orders are poured into the vast intake of the Stock Exchange machinery during the day's
session.

But if we study the action of prices; the responses; the speed of the ticker, indicating
urgency or the contrary; the intensity of the buying or selling, as indicated by the volumes;
and the intervals when the volume is heavy or light -- all these in relation to each other --
then we gain insight or the design and the purposes of those who are dominant in the
market situation for the time being.

All the varying phases of stock market technique may thus be studied and interpreted from
the buying and selling waves as they appear on the tape. From these we form a conclusion
as to the balance of the probabilities. On this we base our commitments.

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The market always tells you what to do. It tells you: Get in. Get out. Move your stop. Close
out. Stay neutral. Wait for a better chance. All these things the market is continually
impressing upon you, and you must get into the frame of mind where you are in reality
taking your orders from the action of the market itself — from the tape.

Your judgment will become poorer from the very time when you decide that you know more
about the market than the market is telling you. From that moment your results will be
unsatisfactory, for in this trading business the tape is the boss. You must learn to obey its
orders, doing exactly what it tells you. When you can accomplish this, you are on the high
road to success in your stock trading.

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In a certain sense, reading charts is like reading music, in which you endeavor to interpret
correctly the composer's ideas and the expression of his art. Just so a chart of the
averages, or of a single stock, reflects the ideas, hopes, ambitions and purposes of the
mass mind operating in the market, or of a manipulator handling a single stock.

The study of charts is not as some people claim, the mere identification of certain labeled
patterns made by the actions of stocks. That sort of thing borders on the mechanical and
does little to aid in the development of one's judgment. But when a student undertakes to
read from his charts the purposes and objective of those who are responsible for a stock's
action in the market, he is beginning to see, in a true light, the meaning of scientific stock
speculation.

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