Trading The Wyckoff Way

[PrymeTyme 10]

What do you mean shorting in an uptrend? We are in a clear down trend on the 15, 60m and 5hour bar interval, and thats largely why I went short.

 

I guess the fact that buyers took price above the midpoint should've warned me against taking the short and at the time I didn't perceive it as a shackeout, and yes you are right, I shouln't get frustrated

 

Do you guys place your buy/sell stop 1 tick or 2 ticks above the close of the bar on the 1 min bar? What would you recommend?

 

well the trend i still up ..! what you call a down trend is more a correction . and/or the beginning of a trading range.. sure it could develope into a fullblown downtrend .. but for this we have to take out several levels to the downside..

 

in intraday trading , bigger trend or pictures it does not matter that much .. but again put as many odds into your favour as possible ..

[DbPhoenix 42]

What do you mean shorting in an uptrend? We are in a clear down trend on the 15, 60m and 5hour bar interval, and thats largely why I went short.

 

I guess the fact that buyers took price above the midpoint should've warned me against taking the short and at the time I didn't perceive it as a shackeout, and yes you are right, I shouln't get frustrated

 

Do you guys place your buy/sell stop 1 tick or 2 ticks above the close of the bar on the 1 min bar? What would you recommend?

 

If you don't read my posts, tupapa, it's going to be impossible for you to learn anything from them. I will repeat yet again that the interday trend is largely irrelevant to the daytrader. If you don't understand that, then read the posts I've made to this thread.

 

The chart you've drawn has absolutely no relevance whatsoever to the choices you must make once NY opens. Yes, we are in a downtrend at the open, but what happened last week has nothing to do with it. The relevant downtrend doesn't begin until well after midnight on the 24th. And once the hinge begins, whatever trend there might have been goes on hold.

 

If you don't understand how to determine trend or what a hinge is or what a springboard is or what a shakeout is then you're going to have to read the relevant threads and the course. You started out well, but if you insist on continuing to trade even though you're not ready to begin doing so, at least trading by price, your progress will be retarded, not accelerated. Stop trading until you understand what you're looking at. Whether you "place your buy/sell stop 1 tick or 2 ticks above the close of the bar on the 1 min bar" makes absolutely no difference if you're entering the wrong trade in the wrong place at the wrong time.

 

Db

[20814md 10]

tupapa:

If you are looking for a $35 - $36 target I would be focusing on the daily chart. I don't know which instrument you would be trading, but for reference I attached the Silver cash index chart.

 

Price appears to be hesitating at R right now while in an overbought condition. This situation is ripe for a pullback. So perhaps a constructive pullback to a lower risk position will present itself on the daily chart for you to take advantage of.

[tupapa 10]

Thanks v20814md, seems like the best option to way for the pullback and see how price reacts to 29s and 28s, if it gets there...

 

Not sure what instrument I'll be using, any idea on whats the option for long term Silver/Gold trading??

 

Thanks again mate

[40draws 10]

You're welcome. Did you buy that REGN hinge Thursday morning?

 

Db

 

I did trade that Hinge, and it turned out to be my best trade to date. My entry could have been better. I waited for price to start moving out of the hinge rather than near the midpoint of the hinge after the last higher low.

 

My exit could have been better. I drew the demand line I used to exit. I clearly missed the acceleration of the move that would have allowed me to draw a steeper demand line, which would have had me exit at a point about one dollar higher than I did.

 

In the end, not a bad couple of weeks for me. I am going to work on my stats for these two weeks this evening. I am considering putting together something like a journal/log here at TL. I do not know if I should put it in the journal section or here in the Wyckoff forum. For the sake of keeping the Wyckoff forum clean, I would guess I should put it in the Traders Log section.

 

Here is how I viewed the REGN chart on Thursday. I made just over 3 dollars/share before commissions and fees on this trade.

 

 

Not much to say about Friday's trades. I had a 9 cent/share loss on one trade and an 18 cent profit on the second trade for a 9 cent/share profit before commissions and fees.

 

I will tally my winners and losers and profits and losses later and report back here.

[DbPhoenix 42]

I did trade that Hinge, and it turned out to be my best trade to date. My entry could have been better. I waited for price to start moving out of the hinge rather than near the midpoint of the hinge after the last higher low.

 

That was a wiser choice. Let the market show its hand. Then you're less likely to get your chain yanked.

 

My exit could have been better. I drew the demand line I used to exit. I clearly missed the acceleration of the move that would have allowed me to draw a steeper demand line, which would have had me exit at a point about one dollar higher than I did.

 

The S/D lines should hug price as closely as possible. Otherwise they become trend lines and are of much less use in intraday trading.

 

I am considering putting together something like a journal/log here at TL. I do not know if I should put it in the journal section or here in the Wyckoff forum. For the sake of keeping the Wyckoff forum clean, I would guess I should put it in the Traders Log section.

 

You're welcome to put it here. Nobody else is using it, and others might learn from the work you're doing. As far as keeping the Forum clean, that ship sailed long ago:)

 

Db

[20814md 10]

Thanks v20814md, seems like the best option to way for the pullback and see how price reacts to 29s and 28s, if it gets there...

 

Not sure what instrument I'll be using, any idea on whats the option for long term Silver/Gold trading??

 

Thanks again mate

 

I assume your use of option is not intended to mean "option contract" and I'm no expert on ETF's, but iShares SLV comes to mind.

 

for silver ETF instruments see: Definitive List Of Silver ETFs | ETF Database

 

of course there are also futures contracts.

[20814md 10]

Since you referenced a 30 minute silver chart as one of the three you originally posted, I pulled up a 30 minute chart of SLV showing most of it's basing, breakout, and run-up.

 

Note that last Thursday's (8/23/12) open gapped up on the greatest volume on the chart and entered an overbought position relative to the trend channel (if you believe in using these interday on intraday intervals).

 

The opening bar volume is 1.6 x greater than the breakout volume on the 20th as price approached R and straddled the 200 day MA (not shown and non-Wyckoff, but just to note what most everyone else is seeing on their daily charts). The daily volume was ~26,000,000 shs with a 50 day average of ~9,800,000 shs.

 

This will be interesting to follow.

[joshdance 10]

The chart you've drawn has absolutely no relevance whatsoever to the choices you must make once NY opens. Yes, we are in a downtrend at the open, but what happened last week has nothing to do with it.

 

Bingo. The past only gives us some relative context for the present, and has nothing to do with direction, at least from a day trading perspective. Just as when driving with a map, the map gives us an idea of where to turn, but the direction we are actually going is unrelated to the map.

[joshdance 10]

In addition (hopefully not out of scope of this thread Db), it helps me to think of the current market's mood rather than the current trend. A trend is more about what has happened in the past, which of course can affect the current mood, but what happened in the recent past can be quite different from what is happening right now. I may have been happy all week, but this morning I may be in a very bad mood, so interacting with me today in the same way that you interacted with me earlier this week may not prove as effective.

 

From Aug 6 until Aug 20, with maybe 2 or 3 exceptions the market's mood every day was lackluster selling, and a willingness to (reluctantly but obediently) buy the lows, and ease back to the highs. Starting on Aug 21, something was different about the selling -- it was from a rejection of 1425 (ES), had conviction, and meant business.

 

But Friday, the mood of the market became clear about 10am ET, and definitely by 10:30am when it traded back into Thursday's range, SPX held above 1400, and then it popped. In that environment, the mood says "buy" and until that mood changes, then selling is like turning the wrong way down a one-way street.

[DbPhoenix 42]

Acknowledging the market's (traders') mood can be helpful as long as one doesn't allow himself to become infected by it. If one is going to trade by price, he must remain clinical. In this way, he can take advantage of others' emotional responses. He must avoid bias.

 

For example, Friday, even though the trend was down, we had reached an inflection point. This left everything open. The beginners, on the other hand, tried to short at every opportunity, which just fed the rise. Now that both the ES and NQ rose on Friday in largely parabolic moves, the beginners will expect a continuation. And they may be right. But both inst. have reached resistance and they've reached the tops of IT trend channels, another inflection point. So it's not beyond imagination that the beginners will be left holding the bag again (except for those who don't mind reading:)).

 

We'll see what happens between now and tomorrow morning.

 

Db

[40draws 10]

You're welcome to put it here. Nobody else is using it, and others might learn from the work you're doing. As far as keeping the Forum clean, that ship sailed long ago:)

 

Db

 

I'll use this thread itself for now, if that's ok with you. While I was able to arrange my schedule for the last two weeks to allow for a good amount of market watching and trading, the next two weeks will be a bit more sketchy at best. I may start a separate journal/log thread here in the Wyckoff forum when I am ready and able to commit more fully to day trading. If you prefer that I set it on its own now, just say the word, and I'll start a thread of its own.

 

As for my first two weeks of trading, here are my results:

 

Total Trades: 26, or 2.6/day - Based upon my first investigations when I started to formulate how I was going to trade, I wrote that the set up I am looking for combined with my current capitalization would result in two or three trades/day. So I am right on there.

 

Total Profitable: 18

Total Losses: 8

 

That gives me close to a 70% profitable trade percentage. I am very pleased with that level. My goal was to come up with a plan that allowed for at least 55% profitable. I want very much to work at maintaining my current ratio of wins to losses.

 

Profits: $6224.88 = $345.82/trade, including commissions and fees

 

Losses: $2285.02 = 281.76/trade, including commissions and fees

 

This yields a ratio that can describe my profitable closed trades as being equal to 1.22 times my losing closed trades. This is not where I want to be. My goal is to achieve a ratio of 2.00 profit:loss.

 

One interesting note on this matter is this: My worst two losses = $1300.26 or approx. 57% of total losses. These losses occurred during the first three days of my trading. In each case, I failed to trade my system. In each case, rather than wait for my planned entry signal or trigger, I entered early. Also, in each case, rather than exiting once price traded down to my planned loss cut level, I held the positions. I was sure that given how each of these stocks had responded to pre-opening news that each was poised to continue the move higher. In each case, I had to close each at a substantial loss. I went back and re-read the third part of Neill's book, as I knew after each trade exactly what I had done wrong, and that he and Wyckoff had each address these behaviors and beliefs. I was surprised at how easily I had succumbed to trying to "game the market" and hold onto a losing position in order to do what amounts to nothing more than an attempt to defend my opinion.

 

The first of these was my very first trade on Monday August 13, 2012, and the second occurred two days later on Wednesday August 15, 2012. That was enough for me. I have since then stuck to my defined entry signal, which is either to wait for price to form and leave a hinge or wait for price to make a higher high than the high of the first five minutes after the open. If price is trading below the high of its opening range, I want not to be long. If price is forming a hinge, and is still contained by the hinge, I want not to be long.

 

Additionally, I also have strictly kept to my loss cut points. If I am able to watch the market, I am prepared to exit at the market of my cut loss is reached, and if I am unable to watch continuously, I enter a stop loss order.

 

If I were to back out those two trades, I then have an average loss of $164.12, which gives me a much more acceptable profit to loss ratio of 2.10. Again, these numbers are net of commissions and fees, and not gross trade figures, so it is what appears to be, nothing more, nothing less.

 

So for the first two weeks, I closed $6224.88 net profits and $2285.02 net losses for a total net profit of $3939.86. In keeping with my plan that this account is to generate an income, I withdrew $2254.09 which is equal to 1.29 of my planned draws of $1750 each. The balance of the profits from this first two weeks will stay in the account. The reason for this is that I want to trade a base capital of $60,000, and I actually started with slightly less than that. From this point forward, all profits will be drawn from the account. When the account balance is less than the base equity level, it will not be eligible for withdrawals.

 

Going forward, I have identified three areas for me to focus my attention and efforst on:

 

1) I must maintain strict adherence to my entry criteria

2) I must maintain strict adherence to my loss cut levels

3) I must work on using demand lines to better time my exits from profitable positions. I have allowed several trades to have significant profits erode as I mistook outright reversals for pullbacks, expecting the day's trend to continue in my favor. I need to balance my desire to let my profitable trades run with the need to protect those profits from significant erosion.

 

Overall, I am very happy with my results so far, and I am looking forward to improving my use of supply/demand lines in timing my exits.

 

I want to thank you again, DbPhoenix. You have really helped me to tighten up and clarify what I am looking for when it comes to defining price action as a hinge, and also for your suggestion that I use supply/demand lines to help time exits.

 

I'll be back throughout the week with questions and chart examples to make sure I am on the right track.

[DbPhoenix 42]

Have you made re-entry (after exit) a part of your plan? If not, you'll be much more likely to hold even though you ought to exit because you'll think -- somewhere -- that it's all over if you fold.

 

If you exit quickly when called for, the re-entry will likely be at the same price or even better. See the "trades" I posted in the early part of the Trading in 90 Minutes thread*. But you must take charge of the exit and not view it as a failure. The failures are those who will hang on until price falls much farther than it should until they call it quits, if they ever do. That's why it's called Trading By Price and not Trading By Hope.

 

Db

 

 

*2, 5, 6, 11, 12, 15, 18, 25

 

See also 111.

Edited August 27, 2012 by DbPhoenix

[goodoboy 10]

I'll use this thread itself for now, if that's ok with you. While I was able to arrange my schedule for the last two weeks to allow for a good amount of market watching and trading, the next two weeks will be a bit more sketchy at best. I may start a separate journal/log thread here in the Wyckoff forum when I am ready and able to commit more fully to day trading. If you prefer that I set it on its own now, just say the word, and I'll start a thread of its own.

 

As for my first two weeks of trading, here are my results:

 

Total Trades: 26, or 2.6/day - Based upon my first investigations when I started to formulate how I was going to trade, I wrote that the set up I am looking for combined with my current capitalization would result in two or three trades/day. So I am right on there.

 

Total Profitable: 18

Total Losses: 8

 

That gives me close to a 70% profitable trade percentage. I am very pleased with that level. My goal was to come up with a plan that allowed for at least 55% profitable. I want very much to work at maintaining my current ratio of wins to losses.

 

Profits: $6224.88 = $345.82/trade, including commissions and fees

 

Losses: $2285.02 = 281.76/trade, including commissions and fees

 

This yields a ratio that can describe my profitable closed trades as being equal to 1.22 times my losing closed trades. This is not where I want to be. My goal is to achieve a ratio of 2.00 profit:loss.

 

One interesting note on this matter is this: My worst two losses = $1300.26 or approx. 57% of total losses. These losses occurred during the first three days of my trading. In each case, I failed to trade my system. In each case, rather than wait for my planned entry signal or trigger, I entered early. Also, in each case, rather than exiting once price traded down to my planned loss cut level, I held the positions. I was sure that given how each of these stocks had responded to pre-opening news that each was poised to continue the move higher. In each case, I had to close each at a substantial loss. I went back and re-read the third part of Neill's book, as I knew after each trade exactly what I had done wrong, and that he and Wyckoff had each address these behaviors and beliefs. I was surprised at how easily I had succumbed to trying to "game the market" and hold onto a losing position in order to do what amounts to nothing more than an attempt to defend my opinion.

 

The first of these was my very first trade on Monday August 13, 2012, and the second occurred two days later on Wednesday August 15, 2012. That was enough for me. I have since then stuck to my defined entry signal, which is either to wait for price to form and leave a hinge or wait for price to make a higher high than the high of the first five minutes after the open. If price is trading below the high of its opening range, I want not to be long. If price is forming a hinge, and is still contained by the hinge, I want not to be long.

 

Additionally, I also have strictly kept to my loss cut points. If I am able to watch the market, I am prepared to exit at the market of my cut loss is reached, and if I am unable to watch continuously, I enter a stop loss order.

 

If I were to back out those two trades, I then have an average loss of $164.12, which gives me a much more acceptable profit to loss ratio of 2.10. Again, these numbers are net of commissions and fees, and not gross trade figures, so it is what appears to be, nothing more, nothing less.

 

So for the first two weeks, I closed $6224.88 net profits and $2285.02 net losses for a total net profit of $3939.86. In keeping with my plan that this account is to generate an income, I withdrew $2254.09 which is equal to 1.29 of my planned draws of $1750 each. The balance of the profits from this first two weeks will stay in the account. The reason for this is that I want to trade a base capital of $60,000, and I actually started with slightly less than that. From this point forward, all profits will be drawn from the account. When the account balance is less than the base equity level, it will not be eligible for withdrawals.

 

Going forward, I have identified three areas for me to focus my attention and efforst on:

 

1) I must maintain strict adherence to my entry criteria

2) I must maintain strict adherence to my loss cut levels

3) I must work on using demand lines to better time my exits from profitable positions. I have allowed several trades to have significant profits erode as I mistook outright reversals for pullbacks, expecting the day's trend to continue in my favor. I need to balance my desire to let my profitable trades run with the need to protect those profits from significant erosion.

 

Overall, I am very happy with my results so far, and I am looking forward to improving my use of supply/demand lines in timing my exits.

 

I want to thank you again, DbPhoenix. You have really helped me to tighten up and clarify what I am looking for when it comes to defining price action as a hinge, and also for your suggestion that I use supply/demand lines to help time exits.

 

I'll be back throughout the week with questions and chart examples to make sure I am on the right track.

 

Good job. The discipline part to follow the plan is what we have to do.

[goodoboy 10]

Bingo. The past only gives us some relative context for the present, and has nothing to do with direction, at least from a day trading perspective.

 

Thanks Josh,

 

It took me a long time to figure this out, but after you and Db constantly repeating this, it make sense. What happen yesterday has nothing to do with today when it comes to intra day trading. It helps for context what happen yesterday.

[40draws 10]

This one did not gap open higher, so I didn't trade it ... but as it was forming, I was tempted. If you have read Wyckoff's Techniques in Tape Reading, this little hinge looks a lot like Wyckoff's "pendulum" drawing describing this price action.

 

[DbPhoenix 42]

This one did not gap open higher, so I didn't trade it ... but as it was forming, I was tempted. If you have read Wyckoff's Techniques in Tape Reading, this little hinge looks a lot like Wyckoff's "pendulum" drawing describing this price action.

 

I think you mean Studies in Tape Reading. Techniques in Tape Reading was written by Vad Graifer. The former is posted to the Introduction. In any case, Wyckoff was not wedded to jargon. He used a variety of synonyms to describe the same thing. The hinge was an excellent example of this.

 

Focusing on one setup -- in your case, gaps -- is a plus for a beginner, but you will find at some point that it's limiting -- you miss too many ops that seem to you like shooting fish in a barrel. Hinges -- and other springboards -- are excellent trading ops, at least partly because they go unnoticed even by "experienced" traders. And one can't scan for them.

 

Play with them if and when you like, but be careful how you play them. Hinges unleash a torrent of emotional responses, and if you succumb to that as well, you'll get batted around like a soccer ball.

 

Db

[40draws 10]

I think you mean Studies in Tape Reading. Techniques in Tape Reading was written by Vad Graifer. The former is posted to the Introduction. In any case, Wyckoff was not wedded to jargon. He used a variety of synonyms to describe the same thing. The hinge was an excellent example of this.

 

Focusing on one setup -- in your case, gaps -- is a plus for a beginner, but you will find at some point that it's limiting -- you miss too many ops that seem to you like shooting fish in a barrel. Hinges -- and other springboards -- are excellent trading ops, at least partly because they go unnoticed even by "experienced" traders. And one can't scan for them.

 

Play with them if and when you like, but be careful how you play them. Hinges unleash a torrent of emotional responses, and if you succumb to that as well, you'll get batted around like a soccer ball.

 

Db

 

Yes, I "mispoke." I read Graifer's book last week, and I mistakenly cited his similarly titled book. Thank you for the correction. After having read Graifer, I was happy I had read Wyckoff first. The second half of Graifer was worth the read. I could have done without the first half autobiography.

 

You are right about missing opportunties. I do intend to broaden the hinges I will trade beyond those arising after gaps. I also am studying other springboards, and adding a more complete view of supply and demand to my understanding of how the market operates. I try to wait for price to begin a movement outside the hinge before buying. I have also been very strict about maintaining my stop loss since about day three or four.

 

I am not in a hurry to add set ups to my repertoire, as my results thus far indicate that I do have a definable edge in the trades I am taking. So far this week I have only added three trades to my total. Two were closed for a profit and one for a loss. The two profitable trades are within range of my average profit so far (approx. $345) and my loss was within the range of my acceptable loss level ($250 or less).

 

I do have one other set up I have been trading which is basically a variation on your WTF entry, but I apply it specifically to the ETF's that track the Russell 2000. I have observed that after the Russell 2000 makes a big quick move, it often will trade in a very narrow range for 15 - 60 minutes or so, and then it will start moving again in the direction of the first big move. As with the hinges, I wait for price to start moving out of the tight little range before entering a trade, because sometimes instead of continuing the move, the Russell 2000 will just keep going nowhere or even move in the opposite direction of the big move.

 

You are right about scanning. I can scan my list for stocks with opening gaps, but once you have your candidates, it becomes a game of "watching and waiting."

Edited August 28, 2012 by 40draws
spelling

[DbPhoenix 42]

I do have one other set up I have been trading which is basically a variation on your WTF entry, but I apply it specifically to the ETF's that track the Russell 2000. I have observed that after the Russell 2000 makes a big quick move, it often will trade in a very narrow range for 15 - 60 minutes or so, and then it will start moving again in the direction of the first big move. As with the hinges, I wait for price to start moving out of the tight little range before entering a trade, because sometimes instead of continuing the move, the Russell 2000 will just keep going nowhere or even move in the opposite direction of the big move.

 

Funny you should mention that since there was a nice one in the NQ this morning at 10:55, for 8pts. But then S won out and price reversed for 14pts. Judging from the other threads, nobody else saw it, but that's usually the case.

 

As for adding setups, no hurry. Get comfortable with what you have. Success feeds success.

 

Db

[Gringo 10]

Hi Db,

 

Is this the WTF?

 

 

Gringo

 

p.s. Do you have a sample trading journal or a format that works for you?

[DbPhoenix 42]

Hi Db,

 

Is this the WTF?

 

Specifically, the drop out of it. Hence, WTF? Here's the post I made several years ago.

 

p.s. Do you have a sample trading journal or a format that works for you?

 

Back in the day, I used what I've provided in the first post. But I'm way past the point of looking for new setups.

 

Db

 

 

 

Edited August 29, 2012 by DbPhoenix

[Gringo 10]

Hi Db,

 

Thanks for the reply. Are you implying that you don't keep a log/trading journal now? Meaning because you have identified most of your if-else price behaviour scenarios you don't need it?

 

Gringo

[DbPhoenix 42]

Hi Db,

 

Thanks for the reply. Are you implying that you don't keep a log/trading journal now? Meaning because you have identified most of your if-else price behaviour scenarios you don't need it?

 

Gringo

 

No. But then I don't have any emotional issues. If I did, I'd be scrupulous about the if-then to prevent myself from getting all tangled up in should I shouldn't I and being incapable of taking action.

 

Db

[goodoboy 10]

Yes, I "mispoke." I read Graifer's book last week, and I mistakenly cited his similarly titled book.

 

Hello 40draws, hello DBPhoneix

 

40draws, how do you manage to read one book in one week? That's a good gift. I am still working 40 hours fulltime, trading part-time (1 or 2 trades), and studying price action part-time. And I still don't feel like I have time to read.

 

Thanks,

[40draws 10]

Hello 40draws, hello DBPhoneix

 

40draws, how do you manage to read one book in one week? That's a good gift. I am still working 40 hours fulltime, trading part-time (1 or 2 trades), and studying price action part-time. And I still don't feel like I have time to read.

 

Thanks,

 

If there is something I want to do, I do it. I have devoted all time not committed to my business or my family to building a trading business. Its what I want to do, so I am doing it.

 

I am just about done with trading books. I have what I need. I am re-reading Wyckoff's Studies in Tape Reading this week in conjunction with Db's eBook, which I just got on Sunday. I liked Graifer's enough to keep it for another look down the road. I find myself thumbing back through Neill often.

 

I am only on section 9 of Db's book, but I will say that it has been full of "A Ha" moments. It is like reading Wyckoff, but between the lines. There is probably a level of experience at which someone would get a lot more from Wyckoff than I am able to get starting from where I am (hence my reading and re-reading and re-reading him again).

 

Db's book is a kind of learning curve accelerator for me in that it makes more clear and concrete some of the more difficult to discern elements of Wyckoff (Wyckoff often implies much more than he makes explicit, which is why I find myself reading and re-reading him).. I will get through a first read of it this week, but I am making it a slow first read, and it will really be a study guide going forward.

 

If you want to read more, all you have to do is pick up a book, open the cover, and turn the page.

 

Speaking of learning curve, today was a doozy for me. I'll cover it in another post.