Understanding "Wyckoff's Market Rating System"
Jim Wyckoff on the Markets

Jim's Daily Markets Update displays the exclusive "Wyckoff's Market Rating System" for each market. Jim distills risk, probability, technical indicators, fundamental analysis and many other factors in determining these ratings. This simple system can be your quick key to how all the markets are trending (if they are).

How it Works
Wyckoff's Market Rating System is based on a scale of 1 to 10, with 1 being the most bearish market rating and 10 being the most bullish market rating. Thenumber 5 would be a neutral rating. And it is not uncommon to see fractions used - like 1.5, 3.5, etc. - if conditions warrant.

It's important to note that just because a market is rated as very bullish (8 or above), it does not mean Jim wants to establish a fresh long position in that market. A high rating likely means a market has been trending higher for a sustained period of time. An 8 or higher bull market is likely a more mature one -
with the risks of steeper setbacks and a more volatile topping process being much
higher.

Similarly, a market rated as very bearish (2 or below) does not indicate you should rush out to establish a fresh short position and sell a market. It means a market has likely been in a longer-term downtrend and is at or near its contract low. It is a more mature bear market. Markets rated 4 to 6 are in the middle. They are characterized by recent trading in more of a longer-term sideways and choppier trading range, have just backed well off from a recent up-trend high or have moved well up from a recent downtrend
low.

Importantly, markets that have been in sideways trading ranges for a while - i.e., non-trending and then move to either a rating of 5.5 or 6 on an upside price move, or to 4.5 or 4 on a downside move are the most critical to monitor. It's at these ratings levels that most trading "set ups" occur, based on Jim's trading philosophy and experience. But remember, the market has to have been trading generally sideways beforehand.

For example, let's say soybeans had been rated between 4.5 and 5.5 for several weeks. Then one day prices pop above a congestion area on the daily bar chart and are then rated a 6. That's likely when a good trading "set up" on the long side can occur.

Here's an important reminder. The Wyckoff Market Rating System is not and should not be used as a "stand-alone" trading system. But it can be a valuable tool in your "Trading Toolbox."