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DbPhoenix
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Everything posted by DbPhoenix
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If you're trading while you're trying to learn how to trade, you will likely continue to have these problems. You may resolve them eventually. Most people never do. But you're going to find it difficult to hear what the market is trying to tell you if you're focused on where to enter (there is abundant evidence of this problem on trading forums and it's not difficult to find; in fact, it's nearly impossible to avoid). The goal is not to "nail the turn". The goal is to listen and to try to understand what's being said.
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RULE #19: Make sure you know when you're on a cold streak... You’re not aware of your condition. You’re not stepping back from it and seeing it -- and, more important, not acting on this information. As a result, as cold as you are, you often find yourself right back in there on the next hand, fighting, struggling, betting... You need to be two people-- one is the guy who is doing it, and the second is the guy who steps back and watches the other guy from a slight distance and evaluates whether the first guy is too tired, too upset, too unfocused, too much on tilt, etc, to be sitting at the poker table, trading, or whatever. Most important, this second guy must have the AUTHORITY to pull the first guy out of the chair if he doesn't like what he sees. (William) The first step in the process of creating consistency is to start noticing what you’re thinking, saying, and doing. Why? Because everything we think, say, or do as a trader contributes to and therefore reinforces some belief in our mental system. Because the process of becoming consistent is psychological in nature, it shouldn’t come as a surprise that you’ll have to start paying attention to your various psychological processes. The idea is eventually to learn to become an objective observer of your own thoughts, words, and deeds. Your first line of defense against committing a trading error is to catch yourself thinking about it. Of course, the last line of defense is to catch yourself in the act. If you don’t commit yourself to becoming an observer to these processes, your realizations will always come after the experience, usually when you are in a state of deep regret and frustration. (Mark Douglas)
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I think I used the term "potential climax". What appears to be a potential climax and turns out not to be THE climax is considered "preliminary support". W didn't know at the time whether the selling clmaxes were in fact selling climaxes until they were tested. Rather he went with what was in front of him and stayed open. But an omnibus answer to your questions may be that the best trades are found at the extremes. Therefore, you wait for the extremes. I read somewhere recently -- and can't remember where -- having to do with MP, I believe, that most experienced traders will avoid trying to catch the tops and bottoms and focus on "the middle", waiting for confirmations to enter and confirmations to exit. This is likely what they were taught to do. However, since "the middle" is by definition where most of the trading is going on and is largely non-directional, there is also a lot of whipsawing in the middle, and that generates a lot of losing trades. One can sometimes avoid this by widening the stops, but, since the market always teaches us to do what will lose the most money, this will turn out to be an unproductive tactic. W used a combination of events to tell him when a wave was reaching its natural crest or trough: the selling/buying climaxes, the tests, higher lows/lower highs, and so on, all confirmed by what the volume was doing and by the effect the volume had on price (effort and result). What auction market theory provides is the WHERE these events are taking place, providing an important clue as to whether they are culminating or merely preliminary. Since W was big on extremes (climaxes), support and resistance, stride, momentum, midpoints, etc., I do not view any of this as being off-topic at all. If anything, it's just a natural extension (perhaps nic can chime in here with his opinion). Dunnigan had this same issue, and it may have been for him the missing piece. TLo also had problems with this since she was (and I suppose still is) a Dunnigan fan. One can try to hit what appear at the time to be the important swings again and again and be stopped out again and again, hoping all the while that once one hits the true turning point, all the effort will turn out to have been worthwhile, and the P&L will change from red to black. But by waiting for the extremes, one avoids most or all of those losing trades, and even more important avoids trading counter-trend. These boxes -- which are simply a graphic variation of the MP distribution curve, whether skewed or not, or of the VAP pattern -- are nothing more than a means of locating those extremes. What I've found more useful about them is that they are encapsulated by time, i.e., the price and volume ranges have a beginning and an end. This enables me to see at a glance where the important S&R are, or at least are likely to be. Without them, one ends up with line after line after line until the S/R plots become a parody of themselves. FYI, this is what I'm looking at now on the NQ. I drew this last night, so it doesn't include anything after 1600.
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Just click "quote" at the bottom of the frame. I find the effort and result on Feb 22 and Mar 4 interesting, both in how price was pushed back off the low and in what price did the day after each. And when price made an attempt to exit the range, there was no support to the moves at all, not a lot of supply since that would have increased volume, but no oomph, either. I would not expect an initiation of the mark-up phase to begin with a breakout that's the result of an earnings report. Too sloppy. As of this evening, INTC can't get past the top of this box. If price is pulled back into this range, I'd watch what happens in this base very carefully.
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Ah, 1998. LTCM. Windows on Wall Street (loved that software). As for finding me, I can be googled now. Good to see you again. I thought you'd be a millionaire quant by now. As for INTC, here's the way I'd do it (please come up with something other than "eyeball method"; makes me think of that guy in Pirates of the Caribbean). The problem here with this particular timeframe is that the VAP bars are thrown off by that consolidation off to the far left between 21 and 23 (yours are better). But even without the VAP bars, it's relatively easy to see where most of the action has taken place. In a tighter timeframe, you've got this. I was going to say that there was evidence of accumulation here, but that would be hindsight now that the breakout has taken place (assuming it succeeds). Do you see the accumulation as well? P.S. Forgot to add the midpoint on the lower chart, but you have it.
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You wouldn't be the Tannis from the "old" days, would you?
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Our "Wyckoff short" is about 25 pts in the black here, and we're approaching long-term (back to January) support.
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Downmoves will generally take less time than upmoves, partly due to the cascade effect and partly due to the retail trader's nearly always entering too late. And the fear of standing in front of an avalanche is stronger than the fear of "missing out" on a move. And traders do tend to procrastinate in any case, which is one reason why they enter so late. In any case, forget about looking for reasons, at least with this particular approach.
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RULE#18: Learn from your mistakes... When we factor past lessons in for future play, losses are not losses, but rather stepping-stones toward future correct play. Failure, by its nature, moves us in another direction, away from failure. We need to treat these lessons neutrally. Simply learn from them. Don't take them too much to heart or put too much emotion into them. # Make journals a part of the daily routine. Even if you don’t trade on a particular day, it is valuable to review the day’s setups and behavior at key price levels. Reviewing patterns on different time frames can also help traders internalize the context of the markets they are trading, as well as the interrelationships among those markets. The French scientist Louis Pasteur observed that, in matters of observation, “chance only favors prepared minds”. Replaying market days, reviewing your own performance, and identifying missed opportunities prepares you for future performance, as your increasing familiarity with trading patterns sensitizes you to them in real time (while static charts are better than nothing, they do not capture the unfolding of patterns, the very thing that traders need to be able to recognize and act upon; replay provides the opportunity to see patterns over and over again, accelerating the recognition process). # Incorporate specifics in your journals. If I had to identify the single most common shortcoming among trading journals, it would be their absence of detail. Entries such as, “I lost my discipline; I have to be more patient,” might be nice as post-it reminders, but are inadequate as journal entries. Journals need to clearly state what happened, your assessment of why it happened, and the specific steps you intend to take to deal with the situation in the future. A good rule is that anyone reading your journal should be able to identify and follow the exact same steps that you intend to take in the future. Your journal should be a planning document, not a statement of intentions. (Brett Steenbarger)
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Swing points provide a form of support and resistance, yes, but it's somewhat different from the support and resistance provided by zones. The "resistance" provided by points, particularly if they are isolated, is provided primarily by the inability of the trader to find a trade (which, after all, is the business of the trader). There's nothing going on up there, or down there, so price returns back to an area where these trades can be found, which is where the "value area" comes from. In a V formation, price never stays anywhere long enough to provide these zones, and one is equally likely to find a trade at point A as point B or C or any other point. Since the ES has reached that top zone twice now, the resistance it provides is a bit more formidable than a single point. But whether we make a trip all the way down to the bottom is anybody's guess. If you'll look closely at this particular chart, what appears to be a V has some of those value areas or consolidations within it. 2004 was spent going more or less sideways, then the first half of 2005, then the second half of that year, then a little more than half of 2006. Each of these represents a potential waystation. We're at the first of them now.
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I don't want this thread to become about a particular NQ trade, but I should point out that this is the third trip up to 1808.50:NQ and shorts may be wondering if they made the correct choice. If so, a break above this level might have more oomph to it than one might ordinarily expect.
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RULE#17: Develop a true indifference to the game. George Leonard writes in Mastery that mastery's true face is often "relaxed and serene, sometimes faintly smiling." You sometimes see this with good poker players - a kind of smiling, ironic indifference to the vicissitudes of fate and the outcome of hands. 1. Under emotional distress, people shift toward favoring high-risk, high payoff options, even if these are objectively poor choices. This appears based on a failure to think things through. 2. When self-esteem is threatened, people become upset and lose their capacity to regulate themselves. In particular, people who hold a high opinion of themselves often get quite upset in response to a blow to pride, and the rush to prove something great about themselves overrides their normal rational way of dealing with life. 3. Self-regulation is required for many forms of self-interest behavior. When self-regulation fails, people may become self-defeating in various ways, such as taking immediate pleasures instead of delayed rewards. Self-regulation appears to depend on limited resources that operate like strength or energy, and so people can only regulate themselves to a limited extent. 4. Making choices and decisions depletes this same resource. Once the resource is depleted, such as after making a series of important decisions, the self becomes tired and depleted, and its subsequent decisions may well be costly or foolish. (Baumeister)
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I'm sure it did. And it would be cool to add a ticker wave to the last traded price and last traded volume off the display.
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Partly. I suspect that he would have bought 9/11 since the action then was the result of panic. But then I also suspect he would have moved his stop up below the December lows and exited when the index failed to make a higher high. Maybe nic can help me out here.
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Wyckoff did not invest his ego in his trades. Nor did he trade out of fear. Therefore, he had no problem with being stopped out. But rather than moan and wail about it and about what a failure he was as most traders do nowadays, he'd immediately shift into reassessment mode and look for new opportunities. If he saw climactic action again, he'd likely re-enter. Given how tight his stops were, he'd shrug off these trivial losses because he kept his eye on the prize. Today, for example, even though the last attempt at a new high hit the old one to the tick, the short's still good. But even if it had been stopped out, so what? Just get another cup of coffee and wait for the next crest. Edit: For example, there was a lot of discussion at the time over whether or not the April '01 swing low was a selling climax or not. At the time, it sure looked like it, and who knows how the landscape would have looked if it hadn't been for 9/11 just five months later (though one should note that the market was falling into that for more than three months). But even if one had bought that and also bought the 9/11 low, he would not have been out much, even though the true selling climax did not come until nearly a year later. But he would have avoided buying every single swing low along the way, focusing instead on those that included climactic activity. Further edit: All this assuming, of course, that one is making no use of trendlines whatsoever.
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I suspect he'd wet himself over RT streaming charts.
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If you mean literally, no. But then there were only a fraction of the listings then that there are today. So given that he was a tape reader, I suspect that he had a subconscious "feel" for how many issues were rising and how many falling. He also incorporated activity and pace, which mattered as much then as it does now. It wasn't that difficult to feel when the tape was jumping to life, just as it does today after Fed announcements.
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Well, assuming that he was better at all this, he'd also be better about distinguishing between a "preliminary" selling climax and the real thing. In any case, the stop is below the climax swing. If the test were a lower low, I assume he'd stop himself out and re-enter. To do otherwise might be to assume that one has information that one doesn't really have but is actually hoping, instead. The advantage, of course, is getting in at a lower price, but there is also the advantage of having all the short-coverers propel you into a profit position fairly quickly, along with all those who were supporting the reversal in the first place.
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On the one hand, it's awfully arrogant of anyone to say Well, Wyckoff would have done this or Wyckoff would have done that. But it is fun (if you don't get out much) to speculate about what he might have done. For example, with all these index minis, I suspect he wouldn't even have bothered to trade any of this sideways movement since mid-January. If he did, his stop would probably have to be above 1900:NQ. Whether he would have agreed with my suggestion for today's short is anybody's guess.
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I don't recall where I read this, but at some point he said that the best entry -- though the most aggressive -- was the climax; second best, the test; worst, the breakout above the intervening swing point, largely because everybody on the planet is looking at that point.
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I should also point out, given that this is the first day of trading after the initiation of the thread, that W advocated entering on swings rather than on breakouts. So, for example, one would look to enter somewhere in the trough of the retest after a selling climax.
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It also depends on timeframe and bar interval, which takes you back to Dow (where would Elder be without Dow?). Using the NQ for an example: Notice we are not only finding resistance at the August swing low, but all this is taking place in the same zone we were in 18mo ago. And for a very short-term example: Of course, many people will say Yeah, well, I've seen charts like this a lot of times but so what? What do I do with it? What one does with it is note the differences between the length and slope of the swings. In this case, it tells you to focus on the downside rather than try to fight what W called the "stride", at least until the character of these swings reverses.
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My copy of Nature of Risk is packed away somewhere, so I can't referee. But they think alike, so.....
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As for the top-down approach to selecting stocks, I don't know how many people still do this since it's so much easier nowadays to scan for stocks using indicators (e.g., MA crosses) or candle patterns. But even if one takes the bottom-up approach, it still pays to check the various groups of which the stock is a part to see if he's out there all by himself or he's got lots of company. At the very least, one ought to keep track of what's going on the sectors, even if he trades only index futures. There are only nine of them, after all (not counting Telecommunications), and keeping tabs on them has become easier than falling off a log since the invention of ETFs. Reviewing these, it is clear that Technology (XLK) is weak. It may be bottoming, and it is showing signs of accumulation. But, for now, it's weak. If we go to BigCharts and click Technology, we get a list of the major groups in that sector, in this case, 2. If we look at those charts, we see that Hardware and Equipment is a nice match: Under Hardware and Equipment, there are two subgroups that are also weak, Eletronic Office Equipment -- which is forming a hinge -- and Telecommunications Equipment: Now if we go to each of these subgroups, we can get a list of all the stocks that belong to that particular category. Unfortunately, BigCharts doesn't provide scanning by price or market cap, so the universe of stocks is often broad, to say the least. But it's free. And if you scan the list for companies that you've actually heard of, their market cap is likely to be acceptable, at least at this level of screening. For Electronic Office Equipment, we get this prospect (the purple line is the group): Pitney had its problems all at once and has been trading sideways for nearly six months. Perhaps its downside is limited. However, it's also forming a hinge: For the other subgroup, Telecommunications Equipment, we get this prospect, one that most likely everyone has heard of: And this one has some possibilities: At this point, of course, one then goes on to analyze the individual stock charts. But for now, this gives you an overview of the process. Clearly, you have to love doing this. Even if you scan for stocks bottom up using indicator or candle scans, you have to love doing it. I stopped loving doing it long ago, the day I discovered eminis. And I haven't researched a stock since. But for those of you who remain bright-eyed and bushy-tailed and still love doing it, this is more or less the process. .
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So it's hers? Excellent. Thanks for posting. This sort of reminds me of something I've included in one of my pdfs: .
