Trading The Wyckoff Way

[DbPhoenix 42]

Hello Db,

 

Just re-reading your post again. Why do you say anything having to do with candles or candles patterns? I don't use candles alot, but I know of them.

 

Because Wyckoff is about the continuous movement of price, i.e., the continuity of trade transactions. Candles are about interrupting that flow with an artificial and arbitrary determination of interval. Unless one blends them. But if one blends them, what's the point in charting them at all?

 

Db

[tomerok 10]

Today i was watching the NQ and TF.

I tried observing them both, i probably missed something along the way, since the TF price action caught me, i did not like what was happening on the NQ and naturally gave the TF more attention.

i'm posting the remarks as i wrote them live....(few after thoughts added..)

 

NQ

Long term analysis - bull trend channel, price is at R (my bias is short) waiting for a pullback to see where we are going.

 

09:33 - large buyers, without much success

09:38 - large buyers,large sellers, support holds, but without any decision

09:39 - volume,speed, price jumps up, i was happy something happened and started developing a long bias

09:43 - price did not break HOD!, large sellers, price quickly falls, shook my long bias, and marked in my mind the support below, if it breaks, probably price is headed down

09:47 - no decision, low speed, no buyers or sellers in control

09:57 - clearly no one in control (sometime around here i started focusing on the TF more)

10:09 - still no decision, i'm marking the price range on the chart.

10:12 - large buyers, speed, price breaks the price range (i was happy for a moment.... )

10:18 - buyers left early, and sellers appear, i'm realizing the break is false and drawing an r trend line for later use.

10:33 - still no buyers ... price glides down...

10:34 - large sellers, speed,volume, new LOD

10:37 - lots of big buyers!?....

10:44 - still lots of big buyers, (i now start to wonder how far will price go up...)

10:50 - large sellers, price retraces back, i'm thinking the down trend line is valid and price starts a new move down

11:12 - price breaks trend line

11:18 - i'm seeing large sellers, but resistance fails a minute later and price shoots up, new HOD....

 

 

TF

long term analysis - very similar to NQ.., long term trend channel , price is at the high after testing long term R, i'm waiting for the retracement to complete to give the tone on the long term direction

 

pre session - support and resistance were clearly set in a range.

09:34 - looks like an up trend is forming, only one large buyer, price trades above pre-session R

09:37 - i'm seeing large sellers but price holds and form a new high every bar, so buyers are in charge.

09:44 - price drops, no large buyers or sellers, i not sure who is in charge or why price descends

09:47 - still price descends, i'm still can't tell.. price action (tape) looks indecisive but looking to the left shows that price is going down.

09:51 - a very clear Swing Low is formed, i'm marking a trend line

09:55 - again, mixed buyers an sellers, price did not make a HH, and i'm beginning to lose confidence with buyers.

10:01 - speed , voume, new HOD, trend line is valid, buyers in control.

10:08 - price starts going sideways with no significant new HOD, (i'm watching closely at the tape trying to figure out who is trying to take control.)

10:13 - trend line is tested but still holding. (i'm watching closely at the tape without success)

10:20 - price is near HOD with a clear resistance,round number, large sellers but price holds

10:21 - more sellers but price goes up

10:22 - new HOD, still buyers in control

10:25 - i'm realizing i'm seeing a lot of red(bid's on the time and sales window) in the past minutes price holds on the tick, i wonder what will happen when buyers will stop holding price, since bid's dominated the tape.

10:29 - price start to drop, looks like buyers just left....

10:31 - long term resistance still hold, but there is not a clear pullback yet, that 800 sellers might be the mark for the long term change of direction...

10:35 - little volume and speed longer bars, price is headed down

10:49 - 3 big buyers, price retraces up. (i'm wondering what will happen around 800 if price gets there)

11:04 - trend line still holds, i'm seeing 3 LH but no LL, i'm marking support, and on the lookout when price start descending again towards S.

11:12 - price didn't get near S, trend line broke.

11:15 - big buyers in front of 800 zone.

11:18 - 800 holds, (i was thinking at the time this was the point for the long term down move)

11:20 - volume, speed broke 800, new HOD.

11:27 - another push up, new HOD, (since my long term bias was down i re-checked my long term charts and to verify where is the long term R.... still more 5 pt. to go...)

 

That's when i had to take a break

 

 

Tomer.

[DbPhoenix 42]

Take care regarding diagonal lines of whatever sort: demand lines, trend lines, whatever. They do not provide support or resistance; they only provide information regarding the relative strengths of buyers and sellers.

 

What are you learning from all of this so far?

 

Db

[tupapa 10]

I think it was in the original course where I read that a trader should hide in his office, isolated from the world and listening only to the sound of the tape.

 

This might've been viable 100 years ago, but is it advisable to trade like this today?

 

For example, I trade s&p futures and the FED could anounce QE tomorrow, what do I do?

 

1- I disregard this, cut my self from the world and trade like normal.

2- I include it on my plan and do not trade.

3- I wait for the outcome, and put my Position depending on it.

 

The same could be said if we trade the bund and Dragui is giving a conference or if we are an oil trader and a conflict kicks of in the middle east... Etc.

 

So do we ignore everything around us or do we act uppon the news?

Edited August 9, 2012 by tupapa

[TenCent 10]

as english is not ma mother language, forum members should net judge that way

 

what is wrong with using the word "indicator" several times?

 

enlight me, please

[tomerok 10]

 

What are you learning from all of this so far?

 

Db

 

Db.

 

Thank you for your pointers.

regarding your question...

to be short..., I'm learning another way to look at price.

to be honest..., somewhere along the way i forgot that things should be kept simple....

 

Tomer.

[tomerok 10]

I think it was in the original course where I read that a trader should hide in his office, isolated from the world and listening only to the sound of the tape.

 

This might've been viable 100 years ago, but is it advisable to trade like this today?

 

For example, I trade s&p futures and the FED could anounce QE tomorrow, what do I do?

 

1- I disregard this, cut my self from the world and trade like normal.

2- I include it on my plan and do not trade.

3- I wait for the outcome, and put my Position depending on it.

 

The same could be said if we trade the bund and Dragui is giving a conference or if we are an oil trader and a conflict kicks of in the middle east... Etc.

 

So do we ignore everything around us or do we act uppon the news?

 

tupapa.

 

if we trade price, then i believe it does not matter if there are news or not, there is always "something" to move price around, news is another thing that moves price.

when major news break it could be mayhem till someone takes control.

it's our "job" to act upon it (the price move..)

when i read that section on the ebook it meant (for me...) that a trader should keep himself isolated from distractions (rumors, advice, bias... etc.) and focus on price.

i personally wait for the outcome, it's a technical decision to avoid the violent moves we see sometimes.

 

Tomer.

[DbPhoenix 42]

i personally wait for the outcome, it's a technical decision to avoid the violent moves we see sometimes.

 

In violent moves, however, often lie opportunities. The key is to know how to play them, i.e., let the climax run its course and pick up the test.

 

Remember also that if you're already in the trade, the reaction to the news can work in your favor. Put a little turbo in your trading.

 

Db

[goodoboy 10]

Because Wyckoff is about the continuous movement of price, i.e., the continuity of trade transactions. Candles are about interrupting that flow with an artificial and arbitrary determination of interval. Unless one blends them. But if one blends them, what's the point in charting them at all?

 

Db

 

Thanks,

 

I am reading your thread (http://www.traderslaboratory.com/forums/wyckoff-forum/3877-introduction.html) for Richard Wyckoff because I think so far this is how I want to trade as it makes sense to me.

[PrymeTyme 10]

an analysis on how to spot opportunitys on foresight drawn key levels

 

on this H4 chart of NQ i drew in all meaningfull levels

wich may add to a story and to help to spot opportunitys

on levels where a reaction might take place

 

 

i draw in support and resistance levels ,aswell as demand and supply lines

,midpoints (note i higlighted the ones where price reacted

and i will zoom in on those areas to see what price did

and how to position yourself)

 

 

 

1.)

 

lets start with point 1 where price reacted on 2 midpoinst of a rectangle

lets zoom in on that right to the m1 TF , big leap heh!

 

waht we see here is an almost picture perfect wyckoff accumulation phase

 

 

where we have a premilinary support a selling climax

right @ the lower midpoint line wich acts as support and

gets tested several times , thenwe have an evidence of a

shakeout wich finds support on the H4 demand line wich

allready gives us an opportunity A to go long. the next opportunity comes

just slightly above the reistance level of the small acc. range

wich looks like absorbtion and sure enough it was absobtion

as price poped off on increasing vol.

 

2.)

on the same picture we see that price reacts on the upper midpoint line

it first reacts on 1. acting as resistance ,

2.price eventually breaks abovebut buyers fail to follow along

and we make a lower highcompared to the high on the left,

price comes back below the midpoint and on the next rallie

3. the midpoint holdscreating a lower high and we drop with an

opportunity to go short at c

 

 

 

3.)

now u might notice that on H4 price moves thru the upper midpoint

where we could have gone short on previous point 2 ..

like thru butter . letting u think that this level

gave no opportunity to take action..

 

wel then lets zoom in again on that point and look waht we have here

 

 

first we are ina n uptrend , price finds some reistance , but

breaks it and moves torwards our midpoint where it reacts 1 !

we move down and find support and previous resitance 2 ,

forming a range where we could draw in another midpoint ..

we do make a higher low but price again reacts on the midpoint

wich act as resistance.. but the second higher low ..

reacts on our freshly drawn midpoint . given us and opportnity

to go long at A .. price drifts thru resistance quite unspectacular .

then eventually tests the broken midpoint/resistance..

wich holds and gives us another opportunity on b to go long .. on that springboard!

 

cool huh? , at least two opprtunitys .. where on first sight (H4)

it looked like u may could miss a train!

 

4.)

 

now to the most recent action , we notice that we rest at

an supplyline , price found support at 2701ish and resistance

just shy a midpoint .. lets zoom in on m30 this time ..

just to show you that u can find opportunitys on all tfs ..

like on point 1 where price reacted on or near the midpoint

 

 

now lets get on and look what story we have thus far on m30

i could draw in another trend channel a rectangle/midpoint S/R ..

where one can spot opportunitys

 

 

after and uptrend containned between the demand and supply line

of the channel , we drift to the right out of the channel and a

retest of the demand line holds 2. price attempts another rallie/test

and finds resistance @ about 2722ish , however price also finds

support @ the supply line of H4 price drifts along this line

for some time and now lets zoom in on M1

 

 

i drew 2 rectangles as the first one 1 doesnt quite look like a range

more of a sloppy channel.. but nevertheless, price conatined

witin that range .. the smaller rectangle 2. can also work

as midpoint as there is alot of trading going on

 

we see that on 3 price made a lower high .. however

price found support at the midpoint of 1 and attempts another rallie ,

to point 4 but again no buying interrest ie. no follow thru ,

 

price moves back down and again finds support at the midpoint of 1,

the small rallie that occurs stalls at the supplyline of H4 and price starts

a small downtrend conatined within the small channel ,

u can see that price also reacts on the midpoint 2

 

now on point 5 we notice a shortening of the downward thrust

ie we dont come close to the oversold line and we form a hinge where u

can park a long order at A , price breaksout the hinge and finds resistance

again at the H4 supplyline , hover price reacts on the midpoint 1,

giving u another long opportunity B

 

price moves thru resistance and forms a higher high ,price retests supply line

and holds C another opportunity and the last opportunity of the day occurs at D

where price tests broken resistance ..

 

 

cheers

[thalestrader 14]

What happened to Db's Burrow?

 

Best Wishes,

 

Thales

[DbPhoenix 42]

What happened to Db's Burrow?

 

Best Wishes,

 

Thales

 

If you mean the website, that disappeared long ago. However, the best of it -- or at least what I considered to be the best of it -- is in my book.

 

Db

[DbPhoenix 42]

Impressive work. Just the sort of thing that a winner would do.

 

I'm going to leave it to others to comment and ask questions. Otherwise, the Forum becomes Ask Db, and this place belongs just as much, if not more, to the people who are doing the work.

 

But I do want to caution you about the accumulation and absorption business and applying it to futures (or Forex or commodities). Accumulation and absorption, as defined by Wyckoff, have to do with instruments that have floats, e.g., stocks. In fact, the accumulation process can't work unless there is some limit to what is available to accumulate. One can, of course, "collect" contracts, but this will have no effect on the power or extent of whatever upward movement may eventually occur. One who views this as accumulation may anticipate the typically explosive breakout to the upside, but what he is more likely to find is a moderate upward movement on unremarkable volume. Not that there's anything wrong with this, but if the movement is not what's anticipated, the trader may not take it, and that would be an error.

 

Same with absorption. Yes, there may be absorption going on in the sense of buyers absorbing what sellers are throwing at them, but where in stocks there is a limit to how much buyers have to absorb, in futures et al there is no such limit. This changes the dynamic. Again, there may be and will very likely be the same movement upward out of the absorption reststop, but it may not be as dramatic as it might be with stocks.

 

What so many "Wyckoff traders" who haven't read the course call "accumulation" and "absorption" are more likely features of auction market theory, which applies to any market which depends on demand and supply for its transactions. But the "accumulation/absorption" jargon has more cachet, and sells products and services, so it's preferred by vendors.

 

Db

[Gringo 10]

Here's my take on the GLD. My analysis is rusty so use your own judgement.

 

 

 

 

 

Gringo

[suby 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!

 

Could you post a link to those threads... can't find them anywhere

[DbPhoenix 42]

Could you post a link to those threads... can't find them anywhere

 

Sorry to interrupt, but those threads are nearly nine years old. I suggest you stick with what's here. It's current, and you can ask questions.

 

Db

[PrymeTyme 10]

Some thoughts on a potentional play on the actual daily situation

and how i would plan the game,

 

 

well i would look for a long entry on or near the midpoint ..

where we have a higher low accompanied with increased vol.

and we hold this level.. besides that we have broken out of the hinge , etc...

 

Lets pretend that situation occured! (a test of the midpoint)

and iam about to enter along position

 

so now only a few scenarios can happen .. and i have a plan on how to react to them ..

 

First and foremost my SL could been hit! .

 

now on to scenario 1 (s1) we could breakout the top of the highs

wich is also a support line and we might could see a reaction on

the midpoint of the upper range (left) then i watch how price reacts

on the retest of the broken line and either stay in or close the trade or move SL to BE..

 

scenaio 2 (S2) price could bounce off the line . then i watch how price reacts on the midpoint and either let it open or close it out

 

scenario 3 (S3) we might breakdown , we might bounce and

see a retest of broken midpoint if the action is right ,

i close out the trade and might reverse the position ..

but that reverse depends if the reverse position is in lieu

with overall market situation .. like trend , strenght or weakness etc..

else just close out the trade,

 

thats how i plan out trades before i even enter them..

leaving no room to get caught up in a situation where i dont know how to act.. ..

i must confess that i just recently startet planing trades this way ..

so its still new to me , and a construct i work on.. thru expirience etc..

 

cheers

[Gringo 10]

Prymetime,

The below 3 are possible entry points for you as far as I understand.

 

1) BO above R

2) BO below S

3) Long off of Mid

 

You are not interested in reversals at S and R. Correct?

 

Strangely I avoid the setups you seek and take the setups that for now you seem to avoid!

Personality and preferences colour our trading so much

 

Enjoy the journey.

 

Gringo

 

Ps. Sorry on a second read it seems you are open to reversing your position. Quite fluid I say.

[jaygo 10]

Hello all,

 

First trade was entered because of that bounce off previous level, in hindsight i think this trade was ok.

 

Second trade was poorly managed. At the moment I am trading all in-all out. But it seems that this method ends up with me leaving a significant paper profit into a very small profit.

 

Note the bounce off 2709 then the quick rally off 2710 as price tries to trade lower. Hindsight trading is really useless but if a similar situation were to arise half my position would be exit around 2712.5 on that bounce back, then the rest of the position should have been exited after the unfavourable PA between 2713 and 2716.

[PrymeTyme 10]

Prymetime,

The below 3 are possible entry points for you as far as I understand.

 

1) BO above R

2) BO below S

3) Long off of Mid

 

You are not interested in reversals at S and R. Correct?

 

Strangely I avoid the setups you seek and take the setups that for now you seem to avoid!

Personality and preferences colour our trading so much

 

Enjoy the journey.

 

Gringo

 

Ps. Sorry on a second read it seems you are open to reversing your position. Quite fluid I say.

 

 

Hi Gringo

 

i actually wanted to draw out scenarios wich may could happen If I am allready in a long position ,indictated by the Green Square and how i would watch reactions and decide what to do with the open position (trade management) .. i plan out scenarios ahead of time

for entering and if all lights are green to enter , then before i pull the trigger i layout a possible scenario plan .. like the one above.. to sort out any emotional actions wich could arise due to the lack of preparement ... u know what i mean ?

 

catch as many What If Scenarios as possible and knowing in foresight how to act upon it

 

i may come up this week with a play from start to finish .. to describe my process

 

cheers

Edited August 14, 2012 by PrymeTyme

[DbPhoenix 42]

Hello all,

 

First trade was entered because of that bounce off previous level, in hindsight i think this trade was ok.

 

Second trade was poorly managed. At the moment I am trading all in-all out. But it seems that this method ends up with me leaving a significant paper profit into a very small profit.

 

Note the bounce off 2709 then the quick rally off 2710 as price tries to trade lower. Hindsight trading is really useless but if a similar situation were to arise half my position would be exit around 2712.5 on that bounce back, then the rest of the position should have been exited after the unfavourable PA between 2713 and 2716.

 

Assuming your first trade was long, it was legit, but you need to plan ahead more. If-Then statements. For example, if your first trade was long, then what happens if there's no higher high? Are you prepared to exit the long and enter a short (If there's no higher high, Then I short at X)? By doing this, you'll be less likely to be caught by surprise and you won't be strung by an emotional response. After that, there's no reason to exit until you reach 10. And even though you don't have R drawn, I assume you know that that first move up was a failed breakout of the trading range.

 

The reverse is true at the bottom. Even though you've broken the second supply line, you haven't reached S. So do you re-enter the short? It's justifiable, but if you do so, you'd see quickly that you're not making a lower low. This would prompt an exit from the short and a long entry. But without the If-Then statement, you'd likely be too fogged by disappointment to take action.

 

And hindsight analysis is not useless if you engage in it to learn. These situations come up again and again. If one learns from the failure instead of wallowing in it, he's less likely to be unprepared the next time.

 

You have no enemies. The market is not out to get you. You just have to keep your wits about you.

 

Db

 

[Gringo 10]

Db,

 

For a certain setup if price behaves in a certain way the actions to be taken remain constant?

 

To illustrate what I meant by actions to be taken, suppose not seeing a higher high after taking a long position might lead to partial unloading of the long.

 

For a long taken at Support

Price Behaviour: negative occurrence of a Higher High

Action to be taken: Partial unloading of the position.

 

So next time around the support level is perhaps different but the same scenario would lead to the same unloading of partial position after observing an absence of higher high?

 

This seems logical and for some reason what you said today hit some cord within.

 

With a set up if one keeps adding possible what-if’s then eventually there will be a enough what-if’s to have an almost mechanical execution, cutting the emotion out.

Now I should know this already but somehow my brain wandered into too many theoretical aspects of trading instead of keeping it so simple :doh:. Strangely I feel excited to re-realize this basic point .

 

Thanks,

 

Gringo

[DbPhoenix 42]

Db,

 

For a certain setup if price behaves in a certain way the actions to be taken remain constant?

 

To illustrate what I meant by actions to be taken, suppose not seeing a higher high after taking a long position might lead to partial unloading of the long.

 

For a long taken at Support

Price Behaviour: negative occurrence of a Higher High

Action to be taken: Partial unloading of the position.

 

So next time around the support level is perhaps different but the same scenario would lead to the same unloading of partial position after observing an absence of higher high?

 

This seems logical and for some reason what you said today hit some cord within.

 

It's the old Dog That Didn't Bark. We expect price to do something after we transmit the order. If it doesn't do what we expect it to do, then Hope is triggered. And Fear is triggered so soon thereafter that they might as well be simultaneous.

 

How much more productive is it to think Well, price isn't doing what I thought it would do when I entered this trade so maybe we ought to lighten up a bit... But traders don't do this because transmitting an order is equivalent to putting it all on black and spinning the wheel.

 

With a set up if one keeps adding possible what-if’s then eventually there will be a enough what-if’s to have an almost mechanical execution, cutting the emotion out.

 

Bingo!

 

It can never be mechanical because there are so many possible routes and outcomes, but one must be and can be open to dealing with all of them. That's what trade management is all about, not entering a trade and hoping for the best.

 

Db

[joshdance 10]

It's the old Dog That Didn't Bark. We expect price to do something after we transmit the order. If it doesn't do what we expect it to do, then Hope is triggered. And Fear is triggered so soon thereafter that they might as well be simultaneous.

 

How much more productive is it to think Well, price isn't doing what I thought it would do when I entered this trade so maybe we ought to lighten up a bit... But traders don't do this because transmitting an order is equivalent to putting it all on black and spinning the wheel.

 

It can never be mechanical because there are so many possible routes and outcomes, but one must be and can be open to dealing with all of them. That's what trade management is all about, not entering a trade and hoping for the best.

 

Db

 

Great post dB. At the root of most of our problems in trading is what you just said. I think it's that simple. Gambler's mentality kills. Hope is a 4 letter word.

[MightyMouse 12]

 

With a set up if one keeps adding possible what-if’s then eventually there will be a enough what-if’s to have an almost mechanical execution, cutting the emotion out.

Now I should know this already but somehow my brain wandered into too many theoretical aspects of trading instead of keeping it so simple :doh:. Strangely I feel excited to re-realize this basic point .

 

 

 

It is simple, but then it isn't so simple.

 

You want to determine direction and then strength of direction and choose a set up to enter or choose to stay away. Your actions/reactions when you enter should be a lot different from when you know the trade is right. So, you may want to start bailing shares or contracts right away if you do not get the higher high when you enter, but if your trade is right and you get a bar that doesn't make a higher high, you shouldn't still want to get rid of the contracts or shares at this point because a bar didn't make a higher high when or if the trade is right. Your trade management should change as the trade changes.

 

Every new trade you take should be treated with suspicion; don't trust or have confidence that it is a good trade. Start chopping if it gets red or doesn't do what you need to see it do. But, a winning trade, should be treated like its a winner. Don't be afraid to let a profit get bigger. Stay in it and look for reasons to stay. Small profits are the biggest mistake you will ever make.