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[DbPhoenix 42]

 

Unfortunately, we seem to have strayed off topic quite some time ago and are wandering farther afield. The general topic is Wyckoff.

 

No offense Db, but to me Wyckoff is pretty much "tape reading"...and while I can't wait for the day when I can blow 10k on ebay on a real old school ticker just because its "cool"...no one trades the way Wyckoff actually did now...limiting the discussion to the time and sales software window doesn't make any sense...its like saying that we shouldn't talk about tape reading if prints are not making a "ticker" sound.

..........

[DbPhoenix 42]

 

I rarely mention this anymore, but really one should have gone through a market characterization process prior to deciding on a plan to scale (or not). Nobody seems to want to start "at the beginning"....

 

I find that unless I am paying someone (working in my office) to do this, it doesn't get done. And its too bad, because with enough time into the process traders usually find that it gives them more confidence to hold a position (thus their PnL is more likely to match their projections). Its like trying to get little kids to brush their teeth (lol).

 

All I can say is "learn to use a Monte Carlo engine" and you will never regret the time it took to learn.

 

Learn to characterize a market and you will never again be involved in a "traditional" backtest.

 

and to anticipate the inevitable questions 1.)I use @Risk (Palisade Software) and 2.) A simple Excel spreadsheet. As with all things it ain't about the tools, its how you learn to use them (your skill set).

 

For anyone who take the trouble to actually go out an get the software, you then need some basic background. "Simulation Modeling using @Risk" by Wayne Winston is one way to go...Chapter 16 shows modeling equities, and chapters 17-19 deal with path dependent options, interest rate risk and hedging with futures.

 

So ultimately, scale out or not depends on what you want to accomplish and what compromises you are willing to make. Frankly if I were a newbie or a trader with a small account, I would scale all in on the entry and scale out incrementally in most index futures markets. For any equities markets I would research (characterize) the behavior of the specific issue. Same for currencies although they generally have a greater tendency to trend. Finally if there are any newbie ags traders (soft, meats, grains) I would definitely scale out no question. Energy (scale out), metals (scale out) I believe thats about all I can say from experience.

 

By the way it wouldn't hurt for newbies to get a copy of "Mathematics of Technical Analysis" by Clifford Sherry. It shows a couple of simple ways to characterize price action (market action)....

 

Hope it helps (now go get that Monte Carlo software. It ain't cheap so ask if they still have a student version that you can use for free).....

 

 

Steve

 

please continue...you need to post more!

First question is what is your control group against the monte carlo simulation?

Your real money trading hold time?

I've still never ran a simulation but know @risk is the only real way to do this, evidence based technical analysis, acrary's system dev thread..I'm slowly getting there..

The only problem I see if your talking tape reading, is that tape reading is ultimately high frequency data analysis using a tool that will still be more powerfull than a 3rd generation quantum computer 30 years from now for pattern recognition...I don't believe monte carlo will have much use there for a long time.

However, please make a post in another sub forum on your use of @risk...that would rule.

..........

[DbPhoenix 42]

 

Personally I just like to be conservative, but these things can be calculated precisely.

 

Ehh, im the cheaptest/most risk averse/ bordering on a miser futures trader you will ever meet and the only true fact you can say here is that all this can not be calculated to any usefull degree of percision.

The delusion that risk can be calculated precisely is exactly why all these "smart" guys on the street overleveraged to the point of putting the entire system at risk that we are all surfing through now.

Just like market profile, vwap, whatever, any risk of ruin calculation needs to assume an underlieing probability distribution...the rubber will meet the road in your calculation depending on the distribution you pick..i'll ultimately have to really nail this down when I come to the point of using @risk but if I had to speculate right now I would say we should at least be assuming a Poisson distribution to the market knowing that the market is not a Poisson distribution.

..........

[wjrusnak 10]

Hey guys,

 

I've been reading a lot of the VSA theories, as well as Wyckoff's theories, and noticed most of the posts here pertain to trades with longer duration than say a day trader would be used to. I understand that the principles work in any time frame, but I'm having a bit of trouble applying them to such quick volatile movements such as today's last hour. Check out my chart of the YM.

 

Problems with my analysis (I played observer today):

 

1. If I were to go short in that session, I would have sold at ~8400 with the double top on the stochastics (first top marked #1) and granted I would have snatched a really quick, small profit. I can't, by reading volume, understand any way to predict the following upthrust and how to know when to short that (the second top marked #1). On that bar, it hit a resistance line set in place at 12:54pm est. Now if I were to trade that, I would have definitely covered at the next bottom, five bars later and then definitely had gotten shaken out to missed the big drop. Not to mention that stoch were crossing back over.

 

2. This bottom seems straight forward. It hits a previous support, the volume decreased getting there, and the stoch were oversold. Again, though, I would have been shaken out with a small profit after the next five bars.

 

3. How do you predict/play this waterfall of bars?

 

Some insight into what I'm doing here: I do like the stochastic to be on my side, but it seems that by doing so I can miss moves such as #3, especially when I try to keep 5 min on my side. It generally takes too long and I miss a lot. Since I am live, I can watch when volume spikes and which way price moves as it happens: does anyone have any advice on what to look for (hope that doesn't sound too entertaining)? I also have the trading matrix beside my charts.

 

Sorry, this post was longer than I anticipated.

 

Thanks for any insight. -- Bill

 

[OAC 10]

I think a few of Wyckoff guys, and possibly VSA guys, hang out in the chatroom during the day. Perhaps you would like to join in and ask them these questions real-time.

Speaking as a scalper myself, I find little or no value with Wyckoff, VSA, or even MP. So I am not surprised to hear your comments above.

[rsi77 10]

I'm surprised you wouldn't use MP as a source of support and resistance--it often works quite well that way...so what do you use for your scalping?

Ron

[OAC 10]

Oh Yeah, I look at those MP levels, POC, VAL, VAH..etc. and have gone through the whole MP education route. If you read the old Support & Resistance thread under Technical Analysis, I had some 30 types of levels where I look for confluence. But for scalping, you don't need that many of them, but they do have to be precise. Precision and very tight stop is the key. Since this is a Wyckoff thread, if there is a Wyckoff or VSA way of scalping with precision, I would like to hear it. Always keeping an open mind. :missy:

[DbPhoenix 42]

Hey guys,

 

I've been reading a lot of the VSA theories, as well as Wyckoff's theories, and noticed most of the posts here pertain to trades with longer duration than say a day trader would be used to. I understand that the principles work in any time frame, but I'm having a bit of trouble applying them to such quick volatile movements such as today's last hour.

 

Since this thread didn't get off to a very good start, and since daytrading with Wyckoff is addressed throughout the forum, I've moved your question here, along with my reply, and closed the thread. Feel free to ask any follow-on questions at the new location.

 

Those who believe that Wycoff has no value are welcome to begin a thread entitled "Wyckoff: Crock or Not?", but their comments are not especially pertinent, much less helpful, particularly when someone posts a sincere request for information, advice, or guidance.

[DbPhoenix 42]

Db or anybody else,

 

I've only been studying W's methods for a little while, trying to absorb as much as I can from all the great material here on TL. I'm wondering, has anybody here had any experience with

 

http://www.ltg-trading.com/archives.htm

 

One of the brokers there teaches a free class on W's trading method every tuesday night online. I've been checking out the charts and transcripts in his archive and it looks like it's consistent with what I've been learning here from Db and all you other experienced W traders. But before I invest a lot of time in studying his teachings, I wanna verify with you all that he's teaching "pure" W and not some bizzare modern "translation" of it.

 

All comments are appreciated.

 

Moved from another thread. See also this post.

Edited January 17, 2009 by DbPhoenix

[DbPhoenix 42]

Fullett teaches the SMI version of Wyckoff rather than the original course, so it depends on what you want. If you want simple, I suggest you stick with the original.

 

If you can visit the chat room here during the day, you're welcome to ask whatever questions you want, and if they relate to what's happening real-time, that's more likely to be of benefit than more hindsight analysis (of which there is plenty in this forum and my blog, at least).

 

[Note: I should also mention that reading those ltg chats in that form could very well lead to blindness and a short temper ]

[DbPhoenix 42]

Hi Rick

 

Gary Fullett is a great guy (one of the best in the business, in my opinion) and a great Wyckoff trader. You won't go wrong learning from Gary. He certainly knows his Wyckoff. His charts & transcripts are highly useful tools to learn the Method (don't get sidetracked about SMI vs original). He was a floor trader and now trades his own account and is also a broker, though the brokerage always seems to me more like a side bet for him. He just lives and breathes the markets like no one I have ever seen. Loves Wyckoff, and loves to teach it--and is a great teacher of the method. He also has Amos Cohen come in from time-to-time, and sometimes David Weis, two other intellegent and perceptive Wyckoff traders.

 

I have watched Gary over the past 8-10 years take several completely novice traders (farmers and their wives, mostly) and teach them the Wyckoff Method to the point where they are quite successful traders in their own right (and there were a few people he taught I wrongly thought would never make it as traders ). His focus is mostly on commodities and the S&Ps. In addition to the evening classes, he opens a chat room during trading hours.

 

As I say, a great guy. Just introduce yourself and say you are interested in Wyckoff and you are automatically considered a valued friend.

 

Eiger

 

Moved from another thread.

Edited January 28, 2009 by gassah

[DbPhoenix 42]

Thanks Eiger and Db for the info on Ltg-Trading.

 

Moved from another thread.

[DbPhoenix 42]

Thanks Eiger

I am a businessman, trading is a business and there are going to be overheads.

I paid for VSA cd etc, have a subscription for Taylor . Am certainly not looking for free handouts nor backing away from putting in the required effort. Know the fully meaning of hard work. Also not getting muddled up in my brain with different approaches, think have enough maturity and experience to separate the wheat from the chaff:)

 

Anyway looks like you know something about this stuff, have heard of Gary Fullet, and know that he uses the SMI version which has certain terms not present in the original but that is neither here or there, the concepts are what matters. Do you personally know anybody who has subscribed to his services.

 

Moved from another thread.

Edited January 16, 2009 by DbPhoenix
Content

[HAKUNA 10]

Eiger,

the above post does not reflect to something you said, it has been edited and the real context left out, but not by me:)

[gassah 10]

<<a great Wyckoff trader>>

 

I don't know about that. I'm aware of a number of complaints against Gary from clients that have lost a lot of money. Let him teach you but you'd better do your research before any money is given to him. He was prohibited from speaking at the "Best of Wyckoff" conference because his integrity is questionable.

 

nic

[HAKUNA 10]

Thanks for that clarification, I am savvy enough to realise when I am being taken for a ride. Am sure to find something of value in the archives but am not going to enroll into any courses.

Had VSA Bootcamp CD and Course DVD, sold them now, not because it was all rubbish. The concepts therein are invaluable which have been reinforced by Wyckoff materials available here, which I have greatly appreciated in my posts before.

However there are some aspects that I like to get clarified now and then, simple as that. I am not chasing any off-the-shelf signals, fully understand the need for hard work, patience and persistence in any business.

Edited January 28, 2009 by gassah

[DbPhoenix 42]

continued in the pdf below.....

 

 

 

 

 

 

 

 

01Journey14ar.pdf

Edited June 22, 2009 by DbPhoenix

[Eiger 10]

 

... I'm aware of a number of complaints against Gary ... his integrity is questionable.

 

nic

 

This is not the man I know. A while back, you accused a member of your yahoo site of unseemly promotion of a seminar Gary held and on another site had an arguement with him. What you post here is hearsay and aspersion. Maybe you just have an axe to grind.

[samhollander 10]

There was a link to a site that had a free course by Hank Pruden on Wyckoff.Anyone have that info?

[DbPhoenix 42]

We seem to have entered the subject of groups by the side door. As mentioned elsewhere, Wyckoff counsels the trader to go through several steps in order to find the most attractive opportunities: (1) determine the trend of the market, (2) find those groups which are most in tune with that trend, (3) find those stocks which present the best short or long opportunities within the group. One can skip the group step and go straight from market to stock, but the odds of finding the right stock are far better if one knows what the stock's group is doing as well as other, comparable stocks within that group. (He'll explain in more detail below.)

 

The following is an edited excerpt from Wyckoff's original course: "Comparing Strength and Weakness: Group Charts" (Sect. 8M). This is only about a third of it. The rest is devoted largely to detailed explanations of charting and compositing with examples of stocks and groups of the time. Today we don't have to go through all that work. In addition to the "mother" averages (the DJIA, DJTA, and DJUA), we have the Nasdaq, the S&P, the NYSE, and a vast array of other averages and indices, all available at a click. BigCharts even goes so far as to arrange all of them for you, from the nine basic sectors (plus Telecommunications, which is highly specialized) to 25 groups to dozens of subgroups and sub-subgroups.

 

I won't go any further into the process. Wyckoff does a much better job of it, as one might expect. However, one example of the process is provided in the EOD thread, linked in the first sentence, top. Following, I'll provide charts of the nine sectors as of yesterday with simple annotations. I'll try to update these charts when there's something worth updating, but I'm not promising anything. One can do this quite easily for himself. The symbols are in the upper-left-hand corner of each chart and can be plotted anywhere. But they do provide a starting point, and one can explore each sector all the way down to the bottommost levels at BigCharts.

 

 

 

COMPARING STRENGTH AND WEAKNESS

 

GROUP CHARTS (Sect. 8M)

 

 

After we have determined the position and trend of the market as a whole, we next must determine the position and trend of the various groups and, finally, select from the best situated Groups those Individual Stocks which promise the best moves.

 

One of the best indications of the future course of a group or a stock is its comparative strength when the rest of the market is weak, or its comparative weakness in a strong market.

 

James R. Keene used to say: “Watch the stock that shows strong resistance to pressure when the market is weak, and buy those stocks for all you are worth.”

 

The reason for this: Someone is trying to buy while the market is weak. He would not do this unless he has reason to believe that he can sell it later at a higher price. So he takes advantage of the weakness in the rest of the market by holding the bag for all the offerings of other people who are prompted or compelled to sell. When a stock is exceptionally weak in a strong market, we conclude that somebody knows something to its disadvantage and is forcing his offerings on a market that is otherwise strong. This may indicate need for urgency, based on fear or necessity; or it may signify the taking advantage of a strong market.

 

Large operators often test the market for a stock by buying 5,000 to 25,000 shares in order to see how easily they can buy it, or by selling a similar quantity to ascertain how well the market will absorb their selling. Thus they are able to decide which side shows the least resistance. If they find other people are trying to buy it and that the stock is rather scarce, they regard it as a bullish indication and take a long position. However, if the price yields easily to pressure, they regard it as a bearish indication and take a short position.

 

A small operator is unable to test the market in this way before he takes a position, but by a close study of his charts, he is able to estimate the comparative strength or weakness of a stock and thus reinforce his judgment as to whether, considering the trend, it is time to buy or sell it.

 

When large interests are planning a campaign in a stock, they “lay the foundation.” That is, they accumulate or distribute a quantity of stock according to the size of their venture and the anticipated profit to be derived from it. This quantity bears a relation to the estimated number of points profit. (Figure charts afford a means of judging this relation and hence frequently indicate the approximate objectives of such campaigns.)

 

If a stock is below value, and these interests see a large potential profit ahead, they will take all they can buy at certain levels, then gradually raise their bid prices until they get all they want. They buy preferably on reactions until such time as they are ready to mark up the price. Or if a stock is above value, and they see trouble ahead, they will sell all they can at certain levels, supporting the price on reactions and unloading on rallies until they are read to let it drop. This is why these supporting levels and the levels of resistance (a phrase originated by me many years ago), are so important for you to watch.

 

In brief, when you see strong support in a stock, with the rest of the market weak, you know the buying is better than the selling -- that insiders are probably doing the buying because they believe they can sell out later at a profit. And when you see the reverse, that is, strong resistance in a stock with the rest of the market advancing, you know the selling is better than the buying -- insiders are selling because the outlook for that stock is turning sour, or because they believe they can later reaccumulate at a lower level.

 

Likewise, when an individual stock in any group is stronger than the Average of that group, this is an indication that such a stock is likely to move sooner and faster than the Average, provided its behavior otherwise confirms the indication. If it is weaker than its group, this may signify that the stock is preparing to decline more rapidly than the Average.

 

The fact that an individual stock may be moving against the trend of its group does not destroy nor impair the value or effectiveness of the indications given by the Average in which it is included. On the contrary, such action, of itself, frequently conveys significant information which should not be ignored with respect to the behavior and position of that stock.

 

In like manner, by comparing the behavior of the various Group Averages with the action of the whole market — the way they respond or fail to respond to advances and declines, rallies and reactions in the Composite Average [the Dow, S&P, etc] — you may gain valuable additional information on which to base your stock market campaigns.

 

These comparisons are especially important because they help you to select the best opportunities and to avoid the slow movers (“sleepers”) -- thereby keeping your capital working at maximum efficiency.

 

Bear in mind that all stocks do not move at all times in harmony with the prevailing trend; nor do they all rise and fall together. Bull markets usually begin with advances in the leaders, that is, the seasoned, higher grade, and higher priced issues. This is so because the big interests, who are best informed as to prospects for approaching recovery dominate these stocks and hence reflect their sentiments toward the market by their operations in the leaders. As the rise in the leaders continues, large independent operators, taking their cue from the action of the leaders, are encouraged to begin bullish operations in the secondary issues and specialties, In due course, the public is attracted by bullish demonstrations in various parts of the list and by the revival of market activity, whereupon the lower priced and more speculative stocks come into line. This demand rotates from group to group as, for instance, from Steels to Rails to Coppers, etc., and from one stock to another.

 

As the rise progresses, individual stocks and groups of stocks that have advanced too rapidly may rest and react while other stocks and other groups are brought forward. Thus bull markets are built up by a Process of Rotation. That is, demand shifts about from week to week, day to day and even from hour to hour.

 

Price movements tend to become increasingly selective (mixed) after a prolonged advance because when the big fellows see that some industries have about attained maximum prosperity, they will wind up their speculative campaigns in those groups and turn to those laggards in which there is still room for improvement.

 

When large interests are distributing at the tops of the intermediate or maJor swings (or on the way down from the extreme highs), they sometimes fool the public by rapidly marking up the prices of a few easily influenced stocks, or by applying hypodermics to a few of the leaders. These whooping up tactics maintain the atmosphere of bullishness so essential to keep the public in a buying mood while other stocks are being unloaded.

 

An indication that demand is being exhausted may be given when the majority of stocks respond sluggishly to such whooping up maneuvers; or when they tend to fall back quickly on repeated attempts to continue the process of rotation, or when the leadership of an advance shifts from the recognized leaders to the secondary issues and to the “cats and dogs”; or when representative stocks fail to follow the strength in a few hypodermically stimulated fast movers.

 

The Process of Rotation operates in much the same manner at the beginning and during the course of a bear market. That is, supply rotates to break down prices in one section of the list after another until offerings are finally exhausted. Likewise, selling pressure rotates while the market is in process of forming a bottom. Hence some stocks may reach their downward objectives sooner than others. Therefore, when we see that the early leaders of a decline are refusing to move materially lower, while supply is still rotating to other stocks, we have an indication that demand is overcoming supply. This helps us to determine the levels at which accumulation is taking place.

 

Supply in a falling market rotates more rapidly than demand in a rising Market. This is explained by the fact that there is seldom (if ever) sufficient buying power to lift all stocks at once in bull movements; whereas, in bear movements, fear, necessity, or both, eventually compel holders to liquidate all stocks without regard to value. This characteristic difference may easily be seen by reference to the accompanying charts.

 

Another reason why stocks fall more swiftly and uniformly than they advance is that the public long interest is always greater than the public short interest. Most people are willing to buy stocks but fear to sell short, although intelligently conducted short selling operations often yield more substantial profits and involve no greater risk than commitments on the long side. At any rate, those who are long of stocks greatly outnumber those who are short. Consequently, upward price movements are retarded by frequent profit-taking on the part of the numerous bulls, especially in stocks below the $50 class which attract the largest outside following. But downward movements are not so effectively retarded by profit-taking on the part of the relatively few bears.

 

And, because the public’s attitude is unbalanced (leaning always toward the bull side), actual and potential demand for stocks is greater when the market goes up than when it goes down. In other words,the majority will buy while the market is strong but this demand fades away when it is weak. In fact, the untrained trader and investor hangs on to his stocks through falling markets until prices reach a point where hope suddenly evaporates. Then he sells out in a panic. The herd psychology that characterizes the Wall Street public often causes unskilled investors to reach this panicky state of mind simultaneously. Thus there is a concerted rush to sell which cleans out all of the weak holders at about the same time, relieving the market of pressure and reducing the supply quickly at that point.

 

The Principle of Rotation is operative also in group movements. Thus, strength or weakness in the leading stock of a group influences traders to buy or sell other stocks in the same group. This helps those who are conducting a campaign of accumulation or distribution to work their stock to the lower or the higher level at which they wish to acquire or unload their line. At the turning point in a falling market, the continuing weakness in other stocks creates the atmosphere of general pessimism which induces the public to go on selling around the bottom. This affords large operators an opportunity to buy what they want without bidding prices up. Similarly, at the turning points in a rising market, the rotation of strength to other stocks in a group enables the large operator to unload the one he has marked up to its objective under cover of the activity and strength in the other issues, without forcing his offerings upon the market.

 

This explains why you so often see individual stocks in a group topping out, or rounding out a bottom, one after another and why all stocks do not necessarily touch their highs or lows together, on the same day or in the same week, or perhaps the same month. It likewise explains why some of the leaders of one phase of a bull market may not lead nor actively participate in its later stages.

 

You must strive to take advantage of the above principles. Seek out the stocks in the strongest position when buying and the weakest to sell short. Aim to pick the leader of a group for your operations.

 

It is a mistake to ignore the laggards in a group simply because the leader “is too high.” Some of these other stocks may be in preparation for moves which will come after the leader is finished. That gives you an opportunity to switch from the leader (when you see it may be near the end of its swing) to the next best issue or issues, that is, to those which may not have come fully into line with the advance in the leader. But in searching out these opportunities, you must be sure to weigh each situation carefully. The fact that a stock is moving sidewise around a low point, while others in the group are going up, is, by itself, no assurance that this laggard must be under accumulation. Study its volume behavior. Note particularly whether the price shows a tendency toward rising supports after it has been in the range for some time. If it does not show such a tendency, better leave it alone. A stock that persistently hugs a low line of supports (stays near the bottom of an apparent range of accumulation) and refuses to rally well when the rest of the market is strong, is very apt to be subjected to a shake-out, or it may be in a weak position.

 

Therefore, bear in mind that even though a group may be in a strong position, every stock in that group may not be desirable nor in a position to move aggressively. Vice versa, in a weak group, some stocks may be in a relatively stronger position than others, while some may be neutral.

 

Judge the progress of stocks and compare strength or weakness directly from your charts. From your vertical charts you can see immediately, by casual inspection, how a stock is behaving in relation to the general market averages and in relation to its own group. Changes in its action become apparent at once so that you can adjust your conclusions promptly.

 

--Richard D Wyckoff

 

 

 

 

Edited February 14, 2009 by DbPhoenix

[Trader333 10]

Great post DB. I have used something similar to this to trade US stocks on an intra-day basis. Basically taking a top down approach and buying the strongest stocks when INDU rallies or shorting the weakest stocks when INDU falls.

 

Of course when doing this on an intra-day basis the way in which INDU is determined as strong or weak and the key measure of which stocks are strongest and weakest by comparison is of prime importance to enable to be traded profitably.

 

 

Paul

[Guest Tracywangxh]

thank you, guys! very interesting!

[OAC 10]

Since you are interested in trading currencies which is actively traded around the clock. You should really look into trading the 240 minute chart, a happy median between intraday and EOD, also followed by many pros.

[dla133 10]

Thanks for that information.

 

Is there a particular reason why they choose the 240 minute chart?

 

Cheers

Lee

[BlowFish 10]

 

Granted it all appears romantic and sexy, but it is primarily little more than busy. Playing World of Warcraft would keep you just as busy and it would be a lot easier on your pocketbook.

 

Damn I've been rumbled :\ though currently prefer Lord of the Rings Online.

 

I guess I should add something imformative (though I am afraid it is rather negative). Be a little wary of forex yeah it's hugely liquid but most retail 'traders' don't have access to that liquidity. 99/100 'brokers' are actually bookies they are your counter party. Also the volume information is not actual volume it is limit order book changes that are reported. It's decentralised and pretty unregulated. having said that I have traded spot FX both with a 'bookie' and with a proper broker. I am just suggesting there are a lot more things to consider with spot FX than a centralised well regulated market. There is lots more I could say on the subject but better you do your own due diligence.

 

Sorry for the digression I think its important.....back to your normal programming.