Trading The Wyckoff Way

[Niko 10]

Hi, i just wanted to post a trade (Attached chart) I am in at this moment (10:08 ET) that is related to the Springboard question I made some days ago.

 

As can be seen in the chart, price had been falling during the early morning and is currently stuck in a range. From reading the volume behaviour during the range it is not clear for me if the odds favor a breakout to the downside or to the upside.

 

Perhaps someone in the room has a clearer vision and can spot things I can´t, Any comments would be appreciated.

[DbPhoenix 42]

Hi, i just wanted to post a trade (Attached chart) I am in at this moment (10:08 ET) that is related to the Springboard question I made some days ago.

 

As can be seen in the chart, price had been falling during the early morning and is currently stuck in a range. From reading the volume behaviour during the range it is not clear for me if the odds favor a breakout to the downside or to the upside.

 

Perhaps someone in the room has a clearer vision and can spot things I can´t, Any comments would be appreciated.

 

You say you are in this trade right now. When and where did you enter?

 

Db

[Stock.Jock 10]

DbPhoenix,

 

Do you use PnF charts for your trading in using the Wyckoff method?

[Niko 10]

The entry was around 9:35 ET, it was a short trade, It was closed at 10:30 after the release of the Crude Oil Inventories data.

[DbPhoenix 42]

I'm surprised that no one following SPY or ES hasn't posted this entry opportunity:

 

 

The green square is the buy stop.

 

Db

[DbPhoenix 42]

DbPhoenix,

 

Do you use PnF charts for your trading in using the Wyckoff method?

 

No, I don't. But there's a lot of good information in the P&F thread if you do.

 

Db

[DbPhoenix 42]

The entry was around 9:35 ET, it was a short trade, It was closed at 10:30 after the release of the Crude Oil Inventories data.

 

Without context, it's impossible to say. You don't way why you went short, or how, or at what price, or where your stop was. When planning a trade, start with the macro and work your way down to the micro. By doing so, whatever questions you may have about the possibility of springboards and the direction of your trade after entry may be answered as a matter of course.

 

Db

[Stock.Jock 10]

No, I don't. But there's a lot of good information in the P&F thread if you do.

Yes. I know about them. A number of Wyckoff discussions omit the use of PnF charts and I'm interested in why that is so. I've talked with Gary Fullett and Gary Dayton and they don't use PnF either.

 

I thought that PnF charts help to predict where, when and how much the market will move. I don't understand why Wyckoff traders don't use them.

 

Also, some Wyckoff traders speak of the SMI training as the Wyckoff Bible, but there is so much of the method taught by SMI is left out of forum discussions. For example, the 5 steps and the 9 buying and the 9 selling tests. Do you have any idea why these things are not discussed by professional Wyckoff traders in forum discussions?

[Gary Fullett 10]

Yes. I know about them. A number of Wyckoff discussions omit the use of PnF charts and I'm interested in why that is so. I've talked with Gary Fullett and Gary Dayton and they don't use PnF either.

 

I thought that PnF charts help to predict where, when and how much the market will move. I don't understand why Wyckoff traders don't use them.

 

Also, some Wyckoff traders speak of the SMI training as the Wyckoff Bible, but there is so much of the method taught by SMI is left out of forum discussions. For example, the 5 steps and the 9 buying and the 9 selling tests. Do you have any idea why these things are not discussed by professional Wyckoff traders in forum discussions?

 

 

As part of our daily newsletter, we include P&F charts. As far as the other things that are omitted from forums, I think it's mainly because traders are looking for buy and sell setups versus the text of the Wyckoff course. Certainly if there are any questions about the 5 steps and the 9 buying and selling tests, I would be more than happy to discuss them.

 

Gary

 

 

 

There is a substantial risk of loss in trading commodity futures, options and off exchange foreign currency products. Past performance is not indicative of future results.

[karoshiman 10]

Hi, i just wanted to post a trade (Attached chart) I am in at this moment (10:08 ET) that is related to the Springboard question I made some days ago.

 

As can be seen in the chart, price had been falling during the early morning and is currently stuck in a range. From reading the volume behaviour during the range it is not clear for me if the odds favor a breakout to the downside or to the upside.

 

Perhaps someone in the room has a clearer vision and can spot things I can´t, Any comments would be appreciated.

 

 

I'm not into Wyckoff, but I would guess this has something to do with the fact that it is FOMC day. So, I would not be surprised if most trading systems do not provide any clear signals. Wait for the press conference to be in large part over. Trading opportunities might arise after that.

[Niko 10]

I'm not into Wyckoff, but I would guess this has something to do with the fact that it is FOMC day. So, I would not be surprised if most trading systems do not provide any clear signals. Wait for the press conference to be in large part over. Trading opportunities might arise after that.

 

Thanks for your reply, yes actually before the FOMC statement the other reason holding the market from moving was the Crude Oil Inventories report. What I am trying to do, (if it is even possible) is to interpret from market action before the report what could be the most probable direction the market would take.

[blueberrycake 10]

The green square is the buy stop.

 

Db - The stop entry above the daily bar high makes sense. I am curious, how do you quantify your stop-entry levels on intraday charts, as you've written that you don't give consideration to intraday bar boundaries . Do you use naturally forming swing highs as your entry breakout points?

 

-bbc

[DbPhoenix 42]

Db - The stop entry above the daily bar high makes sense. I am curious, how do you quantify your stop-entry levels on intraday charts, as you've written that you don't give consideration to intraday bar boundaries . Do you use naturally forming swing highs as your entry breakout points?

 

-bbc

 

Well, well, look who shows up after a year and a half

 

I don't want to give the impression that I took this trade. I posted it only as an excellent example of a Wyckoff entry, and since at least one person has been following the ES, I'm surprised he didn't pick up on it.

 

 

In any case, if using a 1m chart, you'll notice that price slid sideways briefly after testing support (about half an hour). This constituted a springboard and would have enabled a damned tight stop. Whether one uses bars or a line or whatever the software people dream up, it's easy to see what's happening with trader behavior if one is watching it in real time, which is what one ought to be doing if he's trading intraday.

 

Hope you've been making piles of money.

 

Db

[DbPhoenix 42]

Thanks for your reply, yes actually before the FOMC statement the other reason holding the market from moving was the Crude Oil Inventories report. What I am trying to do, (if it is even possible) is to interpret from market action before the report what could be the most probable direction the market would take.

 

Try, but don't be disappointed if you don't succeed. What you view as a possible springboard could be a preparation for an advance or a preparation for a decline or a bunch of traders just sitting around waiting for news, and you're attempting to trade a very news-driven market.

 

Best of luck.

 

Db

[DbPhoenix 42]

Yes. I know about them. A number of Wyckoff discussions omit the use of PnF charts and I'm interested in why that is so. I've talked with Gary Fullett and Gary Dayton and they don't use PnF either.

 

I thought that PnF charts help to predict where, when and how much the market will move. I don't understand why Wyckoff traders don't use them.

 

Also, some Wyckoff traders speak of the SMI training as the Wyckoff Bible, but there is so much of the method taught by SMI is left out of forum discussions. For example, the 5 steps and the 9 buying and the 9 selling tests. Do you have any idea why these things are not discussed by professional Wyckoff traders in forum discussions?

 

I personally don't use them because I don't need them. But as I've tried to make clear whenever the subject comes up, this is nothing against P&F. Some people can't live without it, and that's fine.

 

As for SMI being the Wyckoff Bible, yes, some people believe that. This forum, however, is about the original course, not any adaptations of it. As for the five steps and the buying and selling tests, it's all in the original course. Just do a search. Few people discuss them in forums because few people actually read the course, much less study it.

 

 

Db

[quark 10]

DB-

 

Do you use the Wyckoff Wave in your training. I see the SMI has a version of it & I'm wondering do people use this or make their own group?

 

Also, you mentioned above that you do not use P&F charts, because you don't "need" them. Can you elaborate on this (of course without going into any details that you would not like to disclose)?

 

Thank

[DbPhoenix 42]

DB-

 

Do you use the Wyckoff Wave in your training. I see the SMI has a version of it & I'm wondering do people use this or make their own group?

 

Also, you mentioned above that you do not use P&F charts, because you don't "need" them. Can you elaborate on this (of course without going into any details that you would not like to disclose)?

 

Thank

 

Years ago, I used to construct a Wave. But as the charts of groups and subgroups and sub-subgroups and specialty indices and ETFs etc etc began to proliferate, there didn't seem to be much point. I did try to go through the Wyckoff sequence of assessing the market then assessing the groups when the Forum first began, but the group thing got pretty much a big yawn because nearly everybody was into intraday trading and futures, then forex. So I stopped doing it. But for anybody trading stocks, it is essential to go through that sequence. As for the Wave itself, if it doesn't tell you anything that reviewing the group charts doesn't, why bother?

 

As for the P&F, I know exactly where I want to enter and I know exactly what I want to see. I also know exactly what to look for to tell me to get out (or at least begin doing so). So the P&F is just superfluous. I have no targets. I ride the train as long as it continues to go in the direction I want to go. Which is also why I don't bother with risk:reward ratios. For me they're a waste of time since there's no way of knowing what reward to expect, which is, one might say, one of the functions of doing P&F. The difficulty there is that having a target of one sort or another, one might be encouraged to stay in when he should be long gone.

 

But no one should mimic me. If one finds value in the Wave, by all means continue constructing it. Yourself. For free. Ditto with P&F. If one loves it, why shouldn't he do it?

 

Db

[quark 10]

My interest lies in trading stocks & not looking to trade intraday, so I will take that advice. Another question for you. If you were to look into constructing group charts how would you go about doing it. The course leaves this to discretion of sorts & I'd like to hear your opinion.

 

It says to pick industry leaders & give examples for that day & time. So far, I can only look at market cap as what makes them a leader. What would you say are other attributes of creating groups?

[DbPhoenix 42]

My interest lies in trading stocks & not looking to trade intraday, so I will take that advice.

 

Really! Good for you (the trading stocks EOD part).

 

Another question for you. If you were to look into constructing group charts how would you go about doing it. The course leaves this to discretion of sorts & I'd like to hear your opinion.

 

It says to pick industry leaders & give examples for that day & time. So far, I can only look at market cap as what makes them a leader. What would you say are other attributes of creating groups?

 

Sierra Charts allows you to combine charts in order to come up with a composite and I'm sure other programs do as well. But it's still a pain in the ass. If you can look at five charts and more or less combine them in your head, you're way ahead in terms of time and money. And it's unlikely that they're going to be wildly different anyway.

 

As for creating groups, the most heavily-weighted stocks in the DJ are IBM, CVX, MCD, CAT, and XOM. In the S&P, they are XOM, AAPL, CVX, IBM, and MSFT. In the NDX, they are AAPL, QCOM, GOOG, MSFT, and ORCL. At Stockcharts, you can display multiple charts in one view. Click Free Charts, then CandleGlance Groups. You can also go to Bigcharts, click the Industries tab (next to the Home tab), and wallow in the nine sectors, the subsectors, the groups, the subgroups, the sub-subgroups, with enough charts to make you wet (the Home Construction chart under Household Goods under Personal and Household Goods under Consumer Goods -- the 4th sector -- is what told me to sell my house in Phoenix two months before the peak).

 

Selecting the "leaders" based on relative strength doesn't make a great deal of sense. If one uses that criterion, his Wave will always show strength, and may end up giving a distorted view of the state of the market. "Leader" means important. High quality. And if the high quality stocks are in the doldrums and the low quality stocks are leading the market averages, you have a problem.

 

And incidentally, you may want to look at the original course rather than the SMI course for further guidance. I really can't help you with the SMI course since it's not the subject of this Forum.

 

Db

[quark 10]

Yes, my focus is the original course. As you stated, very few haven't read it, let alone studied it. I guess I'm one of the few studying it.

 

It states:

 

GROUP CHARTS: In the selection of the best stocks in which to trade, and

invest Group Charts are of material assistance. These are made of about five

(more or less) leading stocks in each industry — Oil, Steel, Motor, Copper, Sugar,

Tobacco,. Retail Trade (merchandising), Building, Railroad Equipment, etc. There

are so many different lines of business represented on the New York Stock

Exchange that these groupings can be made to include as many as you like.

 

I don't think I was clear in my question above. I will make a composite average of the top 5 or so stocks in a group (I don't want the garbage companies pulling the average down or pushing it up). This is Wyckoff (vanilla).

 

I guess my question is what should go into my decision making process when deciding what makes these the leaders.

 

All I have to go on is market cap, which is a perceived value. What other factors do you think can help me decide? I've read many of your posts, so I know you can appreciate the fact that I'm asking how I can make my own lists & not asking you to name a list in this group, a list in that group, etc.

 

I hope I'm more clear this time. Thanks for engaging in the discussion with me.

[DbPhoenix 42]

Yes, my focus is the original course. As you stated, very few haven't read it, let alone studied it. I guess I'm one of the few studying it.

 

It states:

 

 

 

I don't think I was clear in my question above. I will make a composite average of the top 5 or so stocks in a group (I don't want the garbage companies pulling the average down or pushing it up). This is Wyckoff (vanilla).

 

I guess my question is what should go into my decision making process when deciding what makes these the leaders.

 

All I have to go on is market cap, which is a perceived value. What other factors do you think can help me decide? I've read many of your posts, so I know you can appreciate the fact that I'm asking how I can make my own lists & not asking you to name a list in this group, a list in that group, etc.

 

I hope I'm more clear this time. Thanks for engaging in the discussion with me.

 

In Section 22, W says that the leaders are those "which are used by large interests to influence the market toward higher or lower levels". The biggies. Major companies. That's why I offered the five biggest in each of the markets. You could, if you like, use only those which show up in two or more lists. These would be ibm, cvx, xom, aapl, msft. If you want to select the major players in a particular group rather than in the market as a whole, then market cap is probably the best way to go since it is these stocks which will be used to exert the greatest influence on the group and the market.

 

For example, if you're looking at Oil & Gas, go through the Bigcharts procedure I outlined, select Oil & Gas, then Industry Analyzer, sort by Market Cap, and pick your timeframe. In this case, you'd get Exxon, PetroChina, Royal Dutch, Chevron, and Petroleo Brasileiro.

 

Db

[Kiwi 16]

Well, well, look who shows up after a year and a half

 

That's got to be the pot calling the kettle black.

 

BBC's still been on the Sierra Chart board but I was wondering if you'd slipped into another dimension. Welcome back DbPhoenix.

[quark 10]

DB-

 

What makes you biased towards the original course? By the way, I love it, it free & complete. Just curious to know why you are strictly keeping this forum about the original course. I wondering if it has to do with things like VSA and other interpretations of Wyckoff that are not Wyckoff proper.

 

Thanks

[DbPhoenix 42]

DB-

 

What makes you biased towards the original course? By the way, I love it, it free & complete. Just curious to know why you are strictly keeping this forum about the original course. I wondering if it has to do with things like VSA and other interpretations of Wyckoff that are not Wyckoff proper.

 

Thanks

 

As I wrote in the first Stickie:

 

Please note that this forum is focused on Wyckoff's original course, The Richard D. Wyckoff Method of Trading and Investing in Stocks: A Course of Instruction in Stock Market Science and Technique. Wyckoff died in 1934, and his course passed into other hands. The provenance of the material and the relative quality of subsequent additions, deletions, alterations and so forth is not the concern of the forum but rather the study of the original material, the belief being that by studying the original material, the individual is in a better position to evaluate any other approaches, methods, systems, etc that are "based on Wyckoff", whether they make that claim or not. Without access to the material, the individual is in the position of having to take somebody's word for the content and intent, and that's not the best basis for beginning a trading strategy.

 

All threads which contain sections of the original course or pertain directly to the original course are designated with an arrow in a green circle.

Back during the Gold Rush, it was said that the only people making any money out of all the prospecting activity were those who were selling the picks and shovels. One could make the same observation with regard to trading, only in this case, it's those who are selling the newsletters and dvds and tapes and courses and software and datafeeds and books (hello!) and seminars and T-shirts and coffee mugs and mouse pads. Anyone whose bullshit detector is in reasonably good working order should be clanging like a fire engine.

 

 

Yes, sometimes things need to be explained, and it's often helpful to be able to discuss certain points with someone who's engaged in the same struggle (which is what forums, to at least some extent, are supposed to be about, as opposed to hens in the henhouse, waiting for the foxes to arrive). But the density of the swarm of people with something to sell to beginner traders is appalling.

 

 

Wyckoff didn't learn how the markets work by watching a dvd or playing with software or even by studying charts. He did it by watching price move. And the beginner who tries to get around this by spending loads of money on some proxy or other -- like software -- is wasting his time and his money. Anyone who believes he can get away with avoiding the work is just fooling himself, no matter how much he's spent. One has to do the work.

 

And if you're not already sorry you asked, here's a post you may want to look at: http://www.traderslaboratory.com/forums/wyckoff-forum/3866-wyckoff-resources-3.html#post67112

 

Db

Edited April 26, 2012 by DbPhoenix

[quark 10]

LOL. Got it now. You know you raise a great point that I read in the Hoyles book, "The Game in Wall Street", whom some think was the precursor to Wyckoff's work.

 

He states, that for those selling systems, tips, stock picks, brokers, etc. If they have the answers & know how much & how easy it is to make money in the stock market, then why would they bother telling you about it instead of making their own fortune (this is paraphrased, but fairly accurate excerpt).

 

In other words, the pimp is making all the money, not the prostitutes. So, I agree with you on that topic.