Trading The Wyckoff Way

[tupapa 10]

Ive had my eyes on Apple for some time now and looking at the chart today it looks like a good candidate for a short, with a tight stop above 637.

 

On the daily chart, I have noticed a dry-up in volume that could mean less buyers coming in, after that epic rally from 420 to 640. If we make a lower high or volume doesnt come in around 638, I see the stock falling. Buyers supported the price around 530 so that would be my first target for the shorts, if we break this level, we could fall down to the last trading range (360-420).

 

I always thought that exponential rally from 420 to 640 was due to greed, not good quality buying. Would you call that move an "Air Gap" DBPhoenix? It seems to me like if we breakdown, from 530, it could be a big fall.

 

 

IS anyone else following this stock?

[DbPhoenix 42]

I always thought that exponential rally from 420 to 640 was due to greed, not good quality buying. Would you call that move an "Air Gap" DBPhoenix? It seems to me like if we breakdown, from 530, it could be a big fall.

 

When doing this sort of analysis, it's best not to rely on the usual volume bar. In this case, there's too much subjectivity involved. Better to at least include VAP. When doing so, however, stop at the peak of the move so that the volume thereafter doesn't contaminate what you're looking at (see an up-to-date VAP chart to compare the difference).

 

Here you see that volume after 425 is practically non-existent. This doesn't mean that holders/buyers won't support the price on the way down. There just won't be very many of them, comparatively.

 

Also look at volume on the recent test, not shown on this chart. While the volume on the climax low was decent, it was pretty pitiful on the way back up. Still is.

 

Db

 

[tupapa 10]

So would you say this is a good candidate for the short? Do you have any comments on my plan for this trade?

 

1- Short if we make a double top, or a lower high and volume stays low.

2- Stop loss above the last high (638)

3- First Target around 530 (bottom of the range)

4- Second target upper limit of the last trading range, around 430.

 

I am very interested in reading your comments on this trade, would you say its a valid short for a Wyckoff trader?

 

Thanks.

[DbPhoenix 42]

If you're going to short a stock as a Wyckoff trader, you have to go through the routine.

 

What's the state of the market?

 

What's the state of the sector?

 

What's the state of the group?

 

If these don't show weakness, then the odds of success are thin.

 

Db

[PrymeTyme 10]

Some Gold Analysis , any comments welcome

 

Overal we are still neutral to bearish

 

 

on this weekly chart we see that we have left the upward trend channel

while within the uptrend we saw increasing volume on rallies and decline vol.

on reactions wich indeed is a good sign for a steady upmove (hilighted orange)

 

however the uptrend came to an halt .. with a climactic action on overbought level

we have a automatic reaction followed by a retest of the buying climax wich confirms

the climax , the retest was below and near the overbought line..

 

then we have a sideways market wich never came anywheer near the high of the climax

and eventually left the channel to the left.. forming a hinge @ support and below the trend channel..

 

lets zoom in :

 

 

we see tha buying climax followed by the automatic reaction wich ends

with a sort of selling climax (high vol) and forms a spring , reaction ie. the following rallie

however is on declining vol and we gain no real ground to teh upside.. price stops just slightly above the overbought level and confirms our Buying climax , making this upswing our secondary test ,

 

price moves back down the the stopping action (AR) and creates a springboard

note how price moved back down.. one big downbar on increasing vol.

however level held.. and we have a rallie again to teh top of the secondary test

price halts again but this time within the trendchannel.. and forms another lower high,

 

then price just plunges along and eventually left the trend channel unspectaculary

by breaking the demandline..

 

now we form a hinge and within that hinge we see a bar with ultra high vol but small spread

and it makes no new ground .. (effort vs. result)

 

we sit at a supportish level...

 

all in all we see bearish action accross the board

 

lets look at the daily :

 

 

we see the spring and springboard and there followed reactions.. ie. price rallied

but now on the hinge we have nowhere near the same reaction as on the springs

even on high volume.. price doesnt advance .. no , it forms a hinge and that below

the mean value price within the range ...

 

also note that the action within the range looks like supply is off better quality

then demand.. as we see bigger downbars and downs swings accompanied by good/high vol. .. (change in behaviour?) .. as opposed to the rallie/correction/Vol in the uptrend..

 

 

lets zoom in on the hinge:

 

 

well we see a big upbar on average vol.. from support

this however should be considered as a redflag for bears..

but no real follow thru to the upside,.

 

then we see volume getting high . ie alot of activity.. but price just grinds its way up

but we still see higher highs and lows asnwell as closes of the bars.. wich could imply absorbtion... but what makes this actionrather stuffing then absorbtion.. is the fact.. that

price didnt breakout! .. we have seen a decline again...

 

then we see high volume reaction off the lows a springboard action.. wich will be teh last stand for teh bulls ,, if that level breaks .. its going south!

 

 

 

 

so all in all.. it does look bearish.. we have some evidence of buying in the hinge

but opposed by stuffing! and overall a weak scenery.. therfore iam bearish on gold.

 

wadda ya think?

[DbPhoenix 42]

wadda ya think?

 

I find your charts very difficult to see. But using my own, your analysis appears to be generally sound. Whatever difficulties there are arise from your efforts to combine Wyckoff and VSA, which are essentially incompatible. There are no "springs" in Wyckoff, nor are there "stopping bars" or "stopping volume", nor do I see any springboards (see the Springboard thread). I have no idea what "stuffing" is. As to the hinge, that depends on the volume. If your volume is correct, that's not a hinge (see the Hinge thread), but I don't know what you're using for your gold chart. Spot gold, on the other hand, shows the appropriate volume.

 

If you like the VSA way of doing things, I suggest you post all this in the VSA Forum (though perhaps with white background charts). They will be much more likely to understand your terms.

 

Db

[PrymeTyme 10]

HI

 

DBP

 

thnx for your input! , well i do neither use wyckoff or vsa , i do judge the market by its own action! .. well the glosarry i use might not be Wyckoffian .. but that doesent change the chart

per se ,.. anyhow .. will move to the VSA Forum to keep your forum clean of non wyckoffian jargon

 

cheers

[DbPhoenix 42]

HI

 

DBP

 

thnx for your input! , well i do neither use wyckoff or vsa , i do judge the market by its own action! .. well the glosarry i use might not be Wyckoffian .. but that doesent change the chart per se

 

Actually, you're using both, though at this point you may not be aware of it (according to your first post, you began studying both nearly two years ago).

 

As to whether or not the glossary you're using is Wyckoffian, that's not particularly important, at least outside this Forum. However, our perceptions are effected if not determined by the words we use to describe them (witness our various descriptions of our President and how they affect/determine our perceptions of him). Therefore, they do in fact "change" the chart.

 

To illustrate, perhaps someone would like to take the other side of this trade. Analyze the chart using Wyckoffian principles, though from a different perspective, arriving instead at a bullish conclusion. While it may seem as though I'm suggesting a preconceived bias, I am instead suggesting that it's possible to analyze this chart in a different way, coming up with a different interpretation as to bullish/bearish outcome.

 

Use these charts if you like.

 

Db

 

 

 

 

 

[PrymeTyme 10]

Actually, you're using both, though at this point you may not be aware of it (according to your first post, you began studying both nearly two years ago).

 

As to whether or not the glossary you're using is Wyckoffian, that's not particularly important, at least outside this Forum. However, our perceptions are effected if not determined by the words we use to describe them (witness our various descriptions of our President and how they affect/determine our perceptions of him). Therefore, they do in fact "change" the chart.

 

To illustrate, perhaps someone would like to take the other side of this trade. Analyze the chart using Wyckoffian principles, though from a different perspective, arriving instead at a bullish conclusion. While it may seem as though I'm suggesting a preconceived bias, I am instead suggesting that it's possible to analyze this chart in a different way, coming up with a different interpretation as to bullish/bearish outcome.

 

Use these charts if you like.

 

Db

 

]

 

 

Hi DB

 

well , yea i study wyckoff and vsa since two years , what i meant with ,i use neither of it .. was that probably due to the multiple spinoffs ,adaptions and variations u can find on the internet forums, ebooks,articles,seminars(videos), etc.. i probably use a mashed up kinda methology .. like if SMI ,Hank Pruden , Tom Williams, Gary Dayton , and Richard d Wyckoff ,etc had a baby ... well thats what i analyze/trade :rofl:

 

 

i will analyze your charts from a bullish biased POV a lil later, as its getting late over here in europe ..

 

i will try to leave specific non Wyckoffian terms out off that analysis and instead just write about the action (price volume wise) .. like for example instead of "spring" i will write something like.. price traded below the support level on high volume just to rallie back and close on its high and above support , indicating buyers stepped up and absorbed the selling wich results in an increase of demand at this level.. .. etc... or something like that

 

till then all the best

[DbPhoenix 42]

i will try to leave specific non Wyckoffian terms out off that analysis and instead just write about the action (price volume wise) .. like for example instead of "spring" i will write something like.. price traded below the support level on high volume just to rallie back and close on its high and above support , indicating buyers stepped up and absorbed the selling wich results in an increase of demand at this level.. .. etc... or something like that

 

Or you could just say "test", the primary difference being that a test can be seen in real time, whereas a rally (or "spring", if you will) can be seen only in hindsight, which is also one of the chief differences between the Wyckoff approach and its many knockoffs.

 

Nonetheless, I encourage anyone who's interested to participate. There are more than two ways to skin a cat. Or trade gold.

 

Db

 

Incidentally, to those of you who've been lurking here for so long (you know who you are, and so do I), there's no time like the present.

 

Fish or cut bait

Edited July 8, 2012 by DbPhoenix

[PrymeTyme 10]

OK

 

Here is my Bullish analysis of GLD ....

 

Weekly chart 1 :

Well first off all we are still in an uptrend! the stride isnt broken , however we do form

a range, wich is actually more of a compression! .. but is it absorbtion or distribution?

we dont know yet! but, some assumptions can be made..

 

 

lets take a closer look at the weekly chart:

we see that after a steep upmove price came to a halt and reversed , forming a selling climax , wich is accompanied by a automatic reaction and a secondary test on low/dimnishing volume! confirming the SC.

 

we do also note that there is a form of change in behaviour in progress

wich starts on the secondary test (ST) first the secondary test dips below the SC but on

low volume implyieng no selling pressure (interrest) below that level! on the rallie back to the high of the AR .. volume increseases!

 

then yet again on the following downswing the volume again tends to shrink and the whole move to the next Low (Test) took 3 months! .. ie not a steep move!

 

now we arrived at a low wich tests support again , and volume increases on this low

what we notice is that on the first 3 bars the volume is highest .. and all three bars close above januarys close (ST)

 

there is deffenetly some buying on the lows.

 

lets look at the daily:

we se again the volume on the selling climax compared to the volume on the secondary

test! .. wich clearly shouts NO selling pressure!

 

 

NOW that Volume increased on the level of support and near the low of jan.

but we are even holding the level and stay above the jan. low we can speak of absorbtion

of weak supply (who sells at support!?!) and therfore a change of supply from weak hands to strong hands! or demand = good quality

 

we make a series of higher lows and we have evidence of a sign of strenght after the bagholding .. resulting in a wide spread upbar closing on its high (no follow thru thou)

 

therfore we have recent bullish activity + signs of change in behaviour(within the range)+ uptrend in the background .. therfore mini me is bullish!

 

 

 

BTW i do have a game plan for both scenarios (bullish/bearish)

 

but depends on HOW price reaches the level of interrest and HOW price acts at those levels..

cheers

Edited July 8, 2012 by PrymeTyme

[DbPhoenix 42]

Nice job. Thank you. There's more to say (there's always more to say), but I'll leave it to somebody else to say it, at least for now.

 

Those who are trying to break the pricebar mindlock often find it helpful to use line charts, which are far better at illustrating the continuous movement of price.

 

The following may open a window or two.

 

Db

 

 

[DbPhoenix 42]

A note about this hinge. I believe it was Schabacker who said that the back-and-forth should resolve itself by the time price has moved two-thirds of the way toward the apex. Otherwise, it is more likely to just dribble its way out and go nowhere. We'll reach that point by the end of the month.

 

Db

 

[tupapa 10]

Thanks for the analysis Pryme Time, very interesting but Im not sure if I share your Bullish Bias.

 

What I see is a Buying Climax in mid 2011, followed by a sequence of Lower Highs that find Support around 1570 (The Upper Limit of that May-August 2011 Trading Range).

 

Price is currently forming a Hinge that could lead to a Brekout to the upside or to the downside. If we breakdown, I would anticipate some support around the midpoint of the trading ranges indicated on the chart.

 

If we break to the upside, I would expect some Resistance around 1790 and strong resistance around the Climactic High (1886).

 

If I had initiated a possition during the Buying Climax (1886) or the secondary reaction (1790), I currently see no reason to exit my shorts.

[DbPhoenix 42]

Another thread that deserves a bit more visibility.

 

Db

[DbPhoenix 42]

Trading in 90 Minutes

 

The first 90-120m block is generally the most active of the day. Here one finds maximum confusion, maximum emotionalism, maximum jockeying for position. The profits are quicker, and, if one knows what he's doing, easier. Once the patterns resolve and the day settles into its rhythm, the astute trader is already in position. His task is not entering, but managing.

 

There is also the matter of focus. Few beginners can maintain their focus for more than two hours. Quite a few can't maintain their focus for a half hour. Therefore, the "guerrilla" approach becomes the preferred option: in and out, quick and dirty, then bank the gains or suffer the losses and head for the beach. Or work. Or school. Though I have no statistics, the number of sessions in which price just trails off at 1100-1130EST is very high. It is not often that anything of consequence is missed after that point, at least in comparison to what transpired before. Certainly the beginner who enters after that point is going to find fewer trades, if any, push harder to find something, find mostly bad trades, take them anyway, and retard or halt his progress in learning how to trade, if he does not end up actually sliding backward. Put another way, at 0930, the buffet is fresh and hot. By 1100 or 1130, what one must poke through is, for the most part, leftovers.

 

The 8 charts following-- drawn from the first 25 posts -- are intended to illustrate at least some of Wyckoff's more important principles. Those who have studied the Forum and Wyckoff's course will, I hope, understand what I am doing and why.

 

These trades, however, do not illustrate a "plan". A plan must be created by the trader using criteria which he has tested and found to be reliable. If he hasn't determined the criteria and tested them, he won't be able to create a plan on which they are based, much less follow it. And if he doesn't or can't follow it, there's no point in doing it. If he forces himself to follow it anyway, or at least pretend to be doing so, then the emotions which would otherwise be immaterial will dominate his trading. Nor do these trades illustrate a template, to be followed mechanically. While there are laws, principles, and guidelines, there is no "mechanically", just as there is no "mechanically" in sailing a boat. Yes, there are also laws and principles and guidelines, but one must also take into account winds and currents and the condition of the boat (and the sailor).

 

The point, then, is to understand the principles and guidelines and to develop a trading plan based on them. If my and others' illustrations help, great. But there's no way that anyone is going to be able to copy what atto or head or cows or wj or I or any other contributor has done or is doing and become a successful trader as a result. This Forum will help most beginners leapfrog over most other beginners, but the grunt work must still be done.

 

These charts, therefore, were created for readers who have at least some grounding in the material, who have studied -- or at least read -- the theory, who have at least played with the application, who have moved past the obsession with trading and learned at least a little something about the dynamics of price movement. But this is not a course. There cannot be a requirement to start at Point A, then proceed to Point B, and so on. People can start and stop wherever they like. So anyone starting here might justifiably think that here is yet someone else offering to lead beginners around by the nose, with blinders, selling yet another quick fix. But it ain't so. As stated above, the grunt work must be done.

 

To reiterate what I wrote in the Trading By Price stickie,

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!"

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attached Thumbnails

 

Attached Images

Edited February 6, 2013 by DbPhoenix

[DbPhoenix 42]

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!"

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attached Thumbnails

 

Attached Images

Edited February 6, 2013 by DbPhoenix

[blueberrycake 10]

I agree with the point about the continuous nature of trading activity. At the same time to trade, one has to impose artificial conceptual structure on the market, even if it is an oversimplification of the underlying market dynamics.

 

In your chart above, you are entering on breaks of 1-min bars and you are exiting on trendline (demand line) breaks. Both the 1-min bar boundary and the trendline are fairly crude artificial constructs, that in your own words the market doesnt much care about, yet they provide reasonably useful decision points for defining practical entry/exit rules.

 

-bbc

[DbPhoenix 42]

I agree with the point about the continuous nature of trading activity. At the same time to trade, one has to impose artificial conceptual structure on the market, even if it is an oversimplification of the underlying market dynamics.

 

In your chart above, you are entering on breaks of 1-min bars and you are exiting on trendline (demand line) breaks. Both the 1-min bar boundary and the trendline are fairly crude artificial constructs, that in your own words the market doesnt much care about, yet they provide reasonably useful decision points for defining practical entry/exit rules.

 

-bbc

 

Fairly crude, maybe, but not artificial. The demand line tracks those points at which demand won out over supply. The trader has no control over that. As to the break of the 1m bar, that's just a matter of having the market come to you. The entry could be anywhere. But the closer it is to the swing point, the lower the price risk. As to the exits, those are the trader's choice, in this case, a change in the trend, but the change itself is the market's doing.

 

Understand as well that the 1m chart serves to illuminate a concept. Better would be a 1 tick chart, but there's no way to cram 90m-worth of tics into a single readable chart (I've also posted plenty of tick charts, but they are not as large a segment).

 

The underlying point, of course, is that none of this need be complex. Determine the trend and trade it according to simple demand/supply, support/resistance guidelines.

 

Db

[DbPhoenix 42]

Trading in 90 Minutes:

 

[DbPhoenix 42]

Trading in 90 Minutes:

 

[tupapa 10]

Thanks for these charts DB; they are the perfect illustration of the principles outlined in this forum. Could you, alongside with the 1 min chart, post a 10K CVB bar chart or whatever you use to identify S/R and trend?

 

It would be useful to get an idea of the context and personally, I am interested in knowing what S/R levels you take into consideration.

[DbPhoenix 42]

Thanks for these charts DB; they are the perfect illustration of the principles outlined in this forum. Could you, alongside with the 1 min chart, post a 10K CVB bar chart or whatever you use to identify S/R and trend?

 

It would be useful to get an idea of the context and personally, I am interested in knowing what S/R levels you take into consideration.

 

These are just ordinary 1m OHLC bars, available for free off the net. Volume is not a consideration as I'm trying to make this as simple as I can. Therefore, no CVB. Watching the price move is preferred. The context and S/R levels are obtained by using a longer bar interval. 10m should be sufficient. Just look at a continuous (incl overnite) chart of several days and you ought to be able to see where the levels and trading ranges come from (I believe you know by now that the dark blue lines represent the ranges and the dark blue arrow the midpoint; in the last chart, there are three different ranges represented by three different line styles).

 

Db

 

Edit: All of this began with these charts, posted two weeks ago.

Edited July 18, 2012 by DbPhoenix

[boomslang 10]

Guess I may have the very similar trades with Db today;) Thanks for all of your sharing, ur the true gift for me, haha.

 

btw, i fund your threads of "keep it simple1&2" on ET yesterday, still very powerful!

[boomslang 10]

here's the chart of QQQ. than u, Db.

 

Edited July 18, 2012 by DbPhoenix
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