DbPhoenix

The trip to 143.20 WAS the retest. You're asking for a second one. If you insist on another one after the DL is broken, the rally to 143.14 will have to do. Db

Yes, yes, and yes. However, you'll note that this swing low is at the same level as the major swing low on the 31st and that price has rallied. Therefore, I'd be inclined to exit the short and look for a long. Whether W would or not, I can't say. He might choose instead to bang his head against the wall. Certainly there have been more and better opportunities to make money over the past couple of days using smaller bar intervals. But people like those who inhabit trading forums can't trade smaller intervals because they're not in front of their screens. So rather than feed these daytrader fantasies, I'd rather trade the longer interval. Whether it is as profitable or not is debatable, but at least it's doable. On the daily, you've had both an upthrust and a downthrust, neither of which accomplished anything. We may here be in the middle of another failed attempt at an upthrust (actually, I should say failed attempt at an upmove; if it does fail, then it's just a thrust). Given that we're looking at another market closure here, one could be forgiven for exiting and waiting until Sunday night to see if there's another gap. Db

The Price Bar and The Meaning Of It All Whether you get anything out of bar or candlestick analysis may depend in large part on whether you are better at inductive or deductive reasoning. If I'm exploring something new, for example, I'll look for specific examples of whatever it is I'm investigating (back testing), then formulate preliminary hypotheses which are consistent with what I'm seeing. Then I'll apply those hypotheses to further examples in an attempt to come up with general principles (forward testing). If those general principles hold over time, I'll ignore specific examples almost entirely unless I find one or several that seem to suggest that the general principle may have changed (or may not have been valid in the first place). Which is why I get very little out of the price bar/candlestick analyses provided by "experts" in books. But whether one conducts his analysis via deductive or inductive reasoning, analyzing a given price bar/volume bar pair -- while interesting and even instructive -- is largely a waste of time in the larger scheme of things if one is trying to determine what it is he ought to be doing about whatever conclusions he arrived at. The reason for this is that a given bar is not anywhere near as important as the bars which follow it. There is confusion, for example, regarding the significance or importance of high volume on a down bar. Is it a good thing? Or is it a bad thing? And the answer is that it depends. It depends on where the bar is, how long it is (how much disagreement there is over value*), where the open is on the bar, where the close is, the spread between the open and close (*), the distance between the close and the low (*), the distance between the open and the high(*), where support and resistance lie, what the market's doing, how strong the volume is and at what point the volume became strong... But even if one decides that the bar is a good thing, that decision can be no more than a preliminary hypothesis. The rubber meets the road in the bars that follow. Does volume increase or dry up? Does the price continue to fall or does it rebound? If support is being tested, does it hold? As with the beginner who asks whether a large trade is a buy order or a sell order, it doesn't really make any difference since one side of the trade can't exist without the other (otherwise it's just pending). What matters is the immediate effect on the stock. If it rises, the trade represented buying pressure. If it falls, it represented selling pressure. But it takes a few minutes to find that out. This lack of appreciation for what happens next is common amongst beginners because of the "distribution" boogeyman. They'll say that "ACME was under distribution yesterday" in the same way that Mel Brooks used the name "Frau Blucher". The horses are supposed to whinny and you're supposed to shudder and eyeball the exits. But distribution is a fact of life, like the opening bell, and is largely irrelevant to the decision-making process. Distribution takes place in every stock on every exchange from the very beginning of its breakout from the base. What matters is what happens after. Is there enough demand to absorb that supply and propel the stock higher? Then hang on for dear life. Is there not enough demand to absorb that supply and propel the stock higher? Then get the hell out without hesitation and stand aside until you see where the decline tails off. Even if you know the "meaning" of strong volume and a long bar (or weak volume and a long bar, or strong volume and a weak bar, or strong volume with a long bar in which the relationship of the open and close to the high and the low are...), you have to arrive at a set of general principles or else you'll never be able to act. And the ability to act decisively and with conviction is essential to maximizing profits. This can get complicated beyond belief, and understanding it can be an insurmountable challenge even if you're unusually bright. Over the years, that understanding will come if one applies himself enough. And there really is no way to understand it without experience. But the experience required to understand all this can be accelerated by sitting down in front of a screen which contains a real-time (or replay thereof) one-minute bar and volume chart (no indicators of any kind) of a stock, a one-tick chart of the stock, and, if you like, daily (or hourly) versions so that you can see important areas of support and resistance. As the bar forms as one is watching it, along with its volume bar, one is very nearly on the floor watching not only the struggle between bulls and bears but also the relative strength of each from second to second. Even a few hours of doing this (lunch hour, coffee break, early morning, assuming the data service is working that day) will lead to a great many Ah-Ha! moments which are difficult if not impossible to reach by looking at static charts in hindsight.

Given that price failed to hold above R, there are choices to be made. If one entered at the first retracement, he could wait and see whether or not price holds here. If it does not, he could short. If it does, then he's cool. If one entered at the premkt base and did not exit at BE, he's underwater. If he has no tolerance for the risk, he should be out and wait for a test of R to short. If he has enough tolerance for risk to be out but not to wait for the retracement, he could short here. This last, however, may cause him to develop a twitch.

Perhaps a change of focus is in order for 2013 lest I be found guilty of enabling beginners' delusions. Hindsight charts can be great for learning principles and for formulating and testing setups. And, of course, when one is reviewing one's trades, the charts are by definition hindsight. But one can't learn to trade in hindsight. Beginners and not-so-beginners may spend millions of dollars on courses, DVDs, tapes, books, subscriptions of one sort or another, software, indicators, etc., etc., ad infinitum, but they won't learn to trade, and their money will be for the most part wasted because all of these media live in the past. But trading for real is not in the past, and one can't make a dime off hindsight charts. Trading is now, and in the next moment, and in the moment after that. Unless one knows (a) what to look for and (b) what to do with it if and when he sees it, he's wasting his time and his money. And if he doesn't know what to look for or what to do with it, fear will be his constant companion. This is not to say that one can't trade if he isn't glued to his monitor for an uninterrupted span of time, but learning to do so is so near to impossible that it may as well be so. And if one's time in front of the monitor is, shall we say, spotty, it should come as no surprise that the beginner focuses on the meaning of this bar or that bar, probably using a large interval such as the 30m or 60m and using at least one indicator to show him where he's been and where, supposedly, he is likely to be at some point in the future when he is in a position to enter a trade. None of this has anything to do with the "Wyckoff Method", much less learning how to implement it. Anyone can show a profit using hindsight charts. Anyone. But that's not where the money is made; the money is made in real time. And real-time Wyckoff trading means a 1t chart or a T&S display with only price (no bid and ask) and volume (of transactions, not bid and ask). No one who is trading at work or at school or is engaged in some other task can do this. Therefore, if one who can't focus on continuous price action is trying to trade this method, he should trade intraday and interday the same way, trading some instrument, like futures, that trades 24/7, using a bar interval that enables him to trade "real time", even though the price action contained within that larger bar interval will be shuttered to him, except in hindsight. And keep your wallets in your pants, taking all claims of "profitable trading strategies" with a ginormous grain of salt. Having said all of that, let's look at a couple of charts, a daily to show where we are and what we're up against and a 60m for trading. There are two supply lines provided, one of which includes the gap and one of which forms after the gap (these gaps occur only on weekends and holidays). Both have by now been broken. However, price has come nowhere near the last swing low and has in fact formed a nice little base with a marginally higher low. One could enter the first retracement yesterday (the first green dot), or, depending on his risk tolerance, he could enter within this little premarket base (W preferred entering the base rather than at the breakout, though this can present problems unless the base can be expected to resolve itself rather quickly, which is the case with futures due to the volatility one finds at the "open"). If the trader cannot tolerate the risk of price falling below this base, he should not take the trade. And, no, this is arguably not a foresight trade. However, since the groundwork was laid in posts made Monday and yesterday, perhaps I can be forgiven for shifting gears into a larger bar interval. Db Edit: Even if one is so hyper that he begins to chew his face off waiting for the 60m bars to "close", there's little appreciable difference in entry and management with the 30m chart. The 15m chart, on the other hand (not posted), offers many more opportunities to screw up.

The averages all found S at the levels anticipated (see previous chart posts) and rallied nicely. Looking at the NQ in particular, price rallied to the midpoint of the last trading range, which coincides with the midpoint of the previous trading range, which coincides with the top of the Borg range prior. This has proven to be a tradeable level. This morning it sailed thru the midpoint of that range like a hot knife through butter and is now sitting at the top of the range. Therefore, one looks for a reversal signal or waits for a breakout and retracement. Even though W is not mechanical, there is a methodology to be followed if one is to control risk.

The Green Bathrobe Story By the third day of their honeymoon in Las Vegas, the newleyweds had lost their $1,000 gambling allowance. That night in bed, the groom noticed a glowing object on the dresser. Upon closer inspection, he realized it was a $5.00 chip they had saved as a souvenir. Strangely, the number 17 was flashing on the chip's face. Taking this as an omen, he donned his green bathrobe and rushed down to the roulette tables, where he placed the $5 chip on the square marked 17. Sure enough, the ball hit 17 and the 35-1 bet paid $175. He let his winnings ride, and once again the little ball landed on 17, paying $6,125. and so it went, until the lucky groom was about to wager $7.5 million. Unfortunately the floor manager intervened, claiming that the casino didn't have the money to pay should 17 hit again. Undaunted, the groom taxied to a better-financed casino downtown. Once again he bet it all on 17 -- and once again it hit, paying more than $262 million. Ecstatic, he let his millions ride -- only to lose it all when the ball fell on 18. Broke and dejected, the groom walked the several miles back to his hotel. "Where were you?", asked his bride as he entered their room. "Playing roulette". "How did you do?" "Not bad. I lost five dollars".

And a deluded well-armed lamb who thinks he's an action figure is a menace.

Well, price hit 2580 (see above post). As for the other majors, they're finding support in interesting but expected places. Even though swing points don't provide the best support since there are so few trades in them, they are highly visible, which creates the conditions for a self-fulfillng prophecy. But if the S&P doesn't find support at that previous swing low, it may do so at the top of that old trading range. The green lines are drawn at the halfway points of the last rallies. And the Dow may be finding support at its halfway point. We'll see how things look in 12 hrs.

All good. Thank you ............

Ditto, though it's been a bit more than 30.

None of the above. You'd be dead before you had a chance to lift your head from the pillow. Life is not the movies.

The "favorite post" option -- or whatever it was called -- seems to have disappeared from the posts. The saved list of favorite posts seems also to have disappeared from the UserCP. Will these reappear or have they been wiped for good? Db

To reiterate what I wrote in the opening Trading By Price post, follow a tick chart, set at one tick (or, if you have no access to tick charts, a 1m chart, but no larger interval than that). Then follow it in real time. Watch how price rises and falls due to imbalances between buying pressure and selling pressure. Watch how and where these waves of buying pressure and selling pressure find support and resistance to their movements. And when I say "watch", I mean just that. Don't worry about what you're going to do about whatever it is you're looking at. Don't worry about where you'd enter or where you'd exit or how much money you'd make or whether you'd have been right or wrong to do whatever. Just watch. Like fish in an aquarium. If that seems only slightly less exciting than watching concrete harden, or it's just not possible for you to watch this movement in real time, then collect the data and replay it later at five or ten times normal speed. You can do an entire day in little more than half an hour (though you won't get any sense of real-time pace). Granted this means a lot of screen time, even in replay, and only a handful of people are going to do it. But those few people are going to part that veil and understand the machinery at a very different level than most traders. If instead you try to jump ahead to the trading phase and shortcut your way through the understanding price movement phase, you will only be prolonging the process. Whether one indulges in the "Oh, Christ, I screwed up again" routine or the "Yay Me!" only distracts from the central focus: understanding what's going on in front of you in real time. Again, the entries, exits, stops and so on in these charts are merely suggestions. In any given chart, there can be many different entry, exit, and stop placements according to the trader's plan (which will of course accommodate his risk tolerance), as shown below in an ES chart: Do not make the error, then, of thinking that a suggested entry indicates "YO! Here's the Entry!"

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If I may, whether price makes a HH at 2613 after making a HL is irrelevant to the entry as one won't know this except in hindsight. Price exceeds the last swing high, which can be used as an "indicator" of rejection of a continuing downmove. However, one can see at the time, in real time, that price is struggling at the midpoint of that correction, at 13. When the next attempt to get through, just before 15:30, fails, one can exit there and wait to see who's going to win this little battle. The second entry, at the right edge, is not as strong since the last swing high has not been exceeded. However, the supply line (not drawn) has been broken, and that may be enough, considering one's risk tolerance and sound assessment of the situation, to take the chance and go for the trade. On the third hand, one must also take into account the rapid approach of the trendline (also not drawn) across the two "rejection" points. Db

I was confused because you referred to a 30m chart. Mine was a 1m. In any case, given that you're trying to define a setup, you don't have the option of my having noted a support level. The entries you've noted are correct. But whether they will work or not will depend on where they occur in the context of support/resistance. Therefore, you have first to determine how you're going to define S/R. Then you can locate your potential entry points. Once you've defined how you're going to locate S/R, for example a trading range, the rest of your criteria can be forward-tested. Db

Where have you posted this chart? Db

If you're referring to the initial bounce off 09, how do you know it's support without hindsight? (I'm not ignoring your ?s about entries, but your objective here is definition; the conditions for the entry precede the entry.) Db