Trading The Wyckoff Way

[DbPhoenix 42]

An embarrassment of riches.

 

Db

[PrymeTyme 10]

well msft is still weaker then the SP500, ( recent price compared to april/may highs)

 

but a retracement after a breakout seems legit to me , to buy

 

so the answer is yes ,

 

 

 

some possible scenarios for long positions within msft

 

1.) if we enter here we can watch how price acts at midpoint A

if we dont break it .. i consider this weak and get out

 

2.) if we enter here we casn watch how price acts @ B if we retrace from point

B i still can watch how price acts at point A and decide to close or hold

also plenty of room between A and B to judge the behaviour before we even come to point A

 

3.) here we can watch how price acts at C and if we retrace how it acts on B

same here i still would hold on and watch the reaction on B

 

4.) we can watch how price acts at resistance D and on a retracement to C

 

whereas each and everypoint would have its own gameplan ,, set within the hourly chart

to gauge and judge the strenght or weakness .. to hold or not to hold or even reverse..

 

a follow up on MSFT,

 

scenario 2 is in play.. and where about to see if scenario 3 will occure..

the fact that the market never really got close to the midpoint.. just shows

that the market is strong or strenghtening..

 

 

 

on H4 we can examine possible entrys and how to judge the market while in a trade

 

lets say we eneterd at point A we put our SL at the previous reaction low

price does advance and hits resistance again , reacts from the resistance

but dont just panic yet, we cans ee thart the reaction is rather weak with decreasing in vol. and rather small spreads,(selling pressure) we form a higher low (point B) the SL has never been in danger,

 

if we get in at point B with SL at the low from point A, we rallie again.. and yet fail again to breach resistance, this time we see a sharper reaction to the downside with wide spread and an increase in vol, wich is even one of the highest vol. since days ,somewhat climactic, but look what happens..

 

we fail to break the low of point A , sure we dip below the low of B, but we close bove point B and the following bars pretty much do the same (cluster closes).. we fail to make new lows even under such pressure! no follow thru,.. someone buys here!

 

and gives yet another opportunity at C to get in,

 

conc:

the stops never where in danger, and the action that took place .. showed a lack of selling pressure while buying pressure was strong..

 

just look at the chart,the bigger upbars, the stronger rallies and the weaker reactions..

and even if selling pressure is increasing someone sits there holding the bag thats how a strong market looks like...

 

cheers

[DbPhoenix 42]

There's no law that says one can't enter within a trading range. Teresa Lo called it a "stealth" entry (if and when the BO comes, you're propelled by the wave). However, one absolutely must acknowledge the risks involved. You show quite clearly that price can be expected to return to the LSL, unlike a trend move. If this sort of "adverse excursion" freaks one out, best to wait for the BO or the subsequent RET.

 

Db

[tupapa 10]

Db, would you consider this a legit entry, expecting a continuation of the trend or is the retracement to violent??

 

I'd be interested in your view on today's 90 min trading if you've traded the NQ today.

[DbPhoenix 42]

The waves become equivalent by 1000EST. The buying wave following is longer and as fast than the previous selling wave. However, though the subsequent selling wave is abbreviated, it cuts deeply into the previous buying wave, suggesting a trading range, which is what you get. There's nothing wrong with taking that RET as long as one understands what's going on and exits the trade when the continuation doesn't materialize. One can also take the RET at 1030.

 

Db

[DbPhoenix 42]

No one has pointed this out so far, so...

 

 

 

[DbPhoenix 42]

And, of course...

 

 

 

[tupapa 10]

Are you trading this? Be good to read ur analysis as this develops, in foresight.

[tupapa 10]

a follow up on MSFT,

 

 

 

cheers

 

 

Today MSFT gapped down ant it is back in the range so the succesful retracement after the Breakout never occured.

 

From your point of view, does this invaldiate the premise for the trade?

[DbPhoenix 42]

No foresight required as trading hinges is essentially a drill. In these cases, the hinges took too long to resolve, so the "breakouts" segued into trading ranges.

 

Db

[PrymeTyme 10]

Today MSFT gapped down ant it is back in the range so the succesful retracement after the Breakout never occured.

 

From your point of view, does this invaldiate the premise for the trade?

 

 

HI

 

 

for the trade to enter scenario 3 ?

 

then yes it does,

 

but if u r in the trade from scenario 2 , then no , you can stay in the trade and watch how price acts at the midpoint wich formed.. at around 30.50

 

and even consider to take a long at this midpoint.. as this is a new opportunity arised

before the scenarios where drawn out .. several days ago

 

price has the right to correct .. and thus far it looks like a retracement rather then a reversal .. even thou its climatic..

 

if we bounce off the midpoint.. we are still strong... and it is an opportunity to go long..

 

also consider we are trading somewhat shy the resistance level of the range..

yes we are back in the range .. but not that far... (zone)

 

we can also gauge the recent strenght on M15 , where we have a range that formed

and use this midpoint .. somewhat 30,77 .. where we trading atm, .. if that level holds

or we tarde back above it.. we are still strong.. adn can be used as an opportunity to join the bulls..

 

cheers

Edited September 7, 2012 by PrymeTyme

[Gringo 10]

Db,

 

Now that I am beginning to understand S/R are only for alerting purposes and not like a hard floor or ceiling other questions have popped up. It has to do with my entry plan.

 

With my incorrect understanding I was relying absolutely on S/R to guide me into the entry. Bounce from an S/R after test was a possible entry point for a reversal. With this new understanding that it's price that is the key and can turn even before the so called S/R lines the entry has to more or less rely solely on the behaviour of price itself.

 

Would something like the below be a reasonable starting point for an entry/exit for a long position after a "reversal". I am selecting long to keep the behaviour consistent and simple in my mind.

 

1) Price is close to S (feel uncomfortable not having some reference to s/r). Am I having trouble letting go of s/r?

 

2 ) SL is broken. (Should TL be broken as well? I'm going to read up on TL as well to know precisely what the difference actually is.)

 

3) Price move upwards due to either demand or a lack of supply.

 

4) Price comes down for a test or at the least drops a a little bit but stays more or less at or above the LSL.

a) it is better if the drop is slow rather than violent.

b) price is moving in a tighter range (smaller price bars)

 

4) Enter:

a) when price crosses above the level where price had stabilized, meaning the price goes above the small bar or bars formed for a test.

b) these could be at or above the LSL. Preferably above the LSL.

 

5) Exit:

a) absolute exit when price drops below the LSL.

b) actively managed exit when price falls below the level where price had stabilized before the buy.

c) DL is broken.

 

I haven't seen many examples on this forum before of an exact plan so my apologies in advance for its crudeness.

 

Gringo

Edited September 7, 2012 by Gringo

[DbPhoenix 42]

Db,

 

Now that I am beginning to understand S/R are only for alerting purposes and not like a hard floor or ceiling other questions have popped up. It has to do with my entry plan.

 

With my incorrect understanding I was relying absolutely on S/R to guide me into the entry. Bounce from an S/R after test was a possible entry point for a reversal. With this new understanding that it's price that is the key and can turn even before the so called S/R lines the entry has to more or less rely solely on the behaviour of price itself.

 

Sounds like an epiphany. But why so long? Perhaps the Forum was too disorganized four years ago.

 

Would something like the below be a reasonable starting point for an entry/exit for a long position after a "reversal". I am selecting long to keep the behaviour consistent and simple in my mind.

 

1) Price is close to S (feel uncomfortable not having some reference to s/r). Am I having trouble letting go of s/r? [Think of potential S. Or anticipated S.]

 

2 ) SL is broken. (Should TL be broken as well? I'm going to read up on TL as well to know precisely what the difference actually is.) [This post may be helpful.]

 

3) Price move upwards due to either demand or a lack of supply.

 

4) Price comes down for a test or at the least drops a a little bit but stays more or less at or above the LSL.

a) it is better if the drop is slow rather than violent.

b) price is moving in a tighter range (smaller price bars)

 

4) Enter:

a) when price crosses above the level where price had stabilized, meaning the price goes above the small bar or bars formed for a test.

b) these could be at or above the LSL. Preferably above the LSL.

 

5) Exit:

a) absolute exit when price drops below the LSL.

b) actively managed exit when price falls below the level where price had stabilized before the buy.

c) DL is broken.

 

This is a fine start (see the notes I made in the body of the quote above). You'll learn a lot by going through the process. Don't be as concerned about nailing everything down as learning to see these movements in a new or different way.

 

I haven't seen many examples on this forum before of an exact plan so my apologies in advance for its crudeness.

 

Gringo

 

No. People will avoid creating trading plans at all costs. You and 40 are the only participants now, and there weren't much more than that four years ago. That's why I decided to view all this as a resource this time and let it go at that. It really isn't my problem if people choose to do it the hard way, if they choose to do it at all. So thank you for setting an example.

 

Now see how all of this works via replay. Fiddle and tweak and adjust as much as you like.

 

Db

[franko 10]

db

there are several lines on this chart that need explanation.

the heavier green lines are MP hi volume nodes and heavier red ones are MP low volume nodes. serve me as pretty good S&R lines.

lighter grey lines are pretty self explanatory as globex hi-lo. others are op and ycl.

black squares represent consolidations and MP balance areas and are carried forward with a black line i have labeled value. they are proving themselves as pretty good SR lines as well as targets.

 

it is the entries i would appreciate your comments on. do they fill the bill even with such humongous stops?

 

 

Edited September 8, 2012 by DbPhoenix

[PrymeTyme 10]

Follow up on Gold

 

 

looks like scenario 1 is inplay .. and added another point .. wich lets me judge to hold or fold

 

gold ... update .

 

plays out nicely

[DbPhoenix 42]

Yes, this was about as good an example of a foresight trade as I can think of. It broke out of the hinge when I anticipated that it would, tested the midpoint of the hinge twice, then took off. And only a couple of people were paying attention.

 

But that's usually the way of it

 

Looks like you were also right about MSFT. I wonder if it'll close the gap. Don't see any reason why not.

 

Db

[DbPhoenix 42]

Well, I assume that "op" and "ycl" mean opening and yesterday's close. And I know what a balance area is (in Wyckoff, a trading range), and I know what value is (the area of heaviest volume, generally the midpoint). But I have no idea what a "node" is.

 

Be that as it may, I know you've been lurking for quite a while, and you may be making an effort to create a chart that is consistent with what's been going on here. So to answer your question, yes. For the most part. The entries are fine, though by the time you get to the third RET, you're pushing it. If the momentum is really great, it will still propel a late entry. But if the momentum is that great, it's unlikely you'll have a chance to enter until the momentum has begun to slow, at which point you don't want to be entering a long.

 

As for the stops, no. The first one is fine as a catastrophe stop, though it could be lower. The rest are unnecessary. If you are exiting off a break of the DL, then just exit. Don't wait for price to hit your stop. To do so is to give the market the responsibility for managing your trade. The market is not responsible for managing your trade. You are. If you have to leave, then exit and begin again when you come back.

 

Good to see you finally posted a chart. Wouldn't hurt to clean it up a little, tho. Helps to see things a little clearer

 

Db

[Gringo 10]

Hi Db,

 

I have posted the questions in the chart where there are circles. The chart has two circles, hence, two questions.

 

 

I am finding it surprising that my questions have become so specific. In this jungle of price movement having a plan does make one see possibilities that were not visible previously. I had gone through charts in this thread before, and although the charts are exactly the same what I see in price behaviour is not.

 

It's like those pictures where one's looking at a young woman and suddenly the same image appears to look like that of an old woman. I feel as if there has been a fundamental shift in my mind. It is this thread showing price behaviour without even volume that I believe caused the shift.

 

I thank you DbPheonix for giving so much valuable advice despite not receiving anything in return. I have seen you getting ridiculed for your ideas and comments repeatedly. If I were in your shoes I probably would have given up a long time ago.

 

You've already spent countless hours maintaining this forum. You don't have to use your free time to do all this, but you repeatedly do. Trading and speculating aside, from you I have learned the meaning of generous giving. I probably will never become as generous with my time as you are but certainly hope to not become as selfish with it as I otherwise would have been without coming in contact with you.

 

Yes, I do know your disdain for guru worship and excessive praise. But, I believe the emotions were meant to be removed from our trading not from our lives.

 

Gringo

[tupapa 10]

gold ... update .

 

plays out nicely

 

Prymetime, did u enter the trade as gold left the hinge or did you wait for price to retest the midpoint??

 

Whats your plan regarding exits, and scaling in or out??

 

Congratulations for the trade, looks like it could carry on going for some time

[DbPhoenix 42]

Well shucks, Gringo, that's very nice of you to say, though in all fairness I did leave for a couple of years. But there was and is no other Wyckoff forum, and this one was not being maintained, and orcs were about. And to let it all go after all that work made no sense. And as far as the brickbats, I came to realize that few of the people who post to these boards actually trade, and even fewer, if any, make a living at it. So who really cares what they have to say? The point is to maintain this place as a resource. What is it to me after all whether or not anybody actually gets to the planning stage? I read a study several years ago about the 95% business that said that it wasn't exactly true, that the successes and failures followed a more or less normal distribution: that about half outright failed, most of the rest piddled along, and the rest -- about 3% -- actually made a living at it. That seemed about right, though it might be even less. Is it worth maintaining this for those 1-3%? Why not? It doesn't take that much time anymore.

 

In any case, yes, there is a conceptual and perceptual shift, but it doesn't always occur. Those are the breaks. But I'm glad that you appear to be parting that veil.

 

As to your questions, the buying waves had been so much stronger than the selling waves for the previous four hours that a short never really occurred to me. If we'd been coming off an LH, then maybe. These things are often much clearer in RT than in hindsight because one is watching the activity itself, like looking at photos of a traffic accident as opposed to watching the accident unfold in real time. Not that trading is like a traffic accident, but I suppose one could make a case for that.

 

As to the long, we had pretty much established a TR by then, and that entry seemed late, i.e., too close to R. And it was nearly 1100. If one were not to stop trading at 1100, he could have taken it, or gone long after the range was broken (price rose 12pts after it exited that range). Even if that first long had been taken, though, reversing at R would have been appropriate. That's just what one does in TRs, though always cognizant of the possibility of a BO and potential trend move.

 

Db

[goodoboy 10]

Don't neglect the macro:

 

 

 

Hello, I am assuming these pictures don't work anymore since the post is from a years ago. Just wanna make sure its not my computer having issues.

 

Thanks,

[DbPhoenix 42]

No, doesn't open up. Don't know why.

 

Db

[goodoboy 10]

First, forget about prediction. It's a waste of time, screws up your focus, triggers all sorts of emotional responses at exactly the wrong time, and makes you feel either unnecessarily bad or deceptively proud (and one should avoid self-deception at every turn).

 

Second, there was no reason to go long before the bottom fell out. But if one did so anyway, there is no automatic SAR in Wyckoff. Nor is there anything mechanical, whether SAR or not. If you had had good reasons to take the trade and it turned out to be wrong, you would have had to exit the trade without tears, without banging the desk, without swearing, without throwing yourself on the floor. Oh, I was wrong. Okay. Now what? Let's see. At which point you re-examine what's in front of you without getting into what you did that you shouldn't have done or vice-versa. That comes later. Just look at what's in front of you. New trade. New data. What is the most appropriate course of action? Go long again? Go short? Do nothing until the picture becomes clearer? Granted, this all has to be done in minutes if you're daytrading, but you can't do it at all if you're getting all emotional about getting it wrong. And going mechanical isn't going to make it any easier, other than inserting an imaginary accounability buffer (it wasn't me; it was my system).

 

The "methodology", then, would have you stop, forget about everything that just happened, examine what is happening now, then decide upon an appropriate course of action without any sort of drama.

 

Third, as to whether or not a short below 90 on a breakout of that range would have been a good idea, we enter the land of hindsight trading, in which traders, beginning and otherwise, wander aimlessly, sometimes for years, usually on message boards/trading forums, but often in the clutches of some guru who couldn't trade in real time if his life depended on it. Unless you are learning the ins and outs of some new technique, it is a terrible place to be and can screw you up for far longer than you'd believe possible. Don't go there.

 

However, trading ranges are everywhere, as are potential breakout scenarios. Analyzing what makes some work and others not is perfectly legitimate, something very different from the "here's a trade I took this morning" nonsense.

 

So, let's analyze this, and you tell me whether or not this would have made a good short and why. Look at the behavior of price (i.e., buyers and sellers) and how it relates to volume each step of the way. Where are the clues that tell you that this might be a good short trade, or at least a not-so-good long one?

 

Start with April 23rd. And make sure you read the chart left to right. If you have to cover prices with a sheet of paper and reveal only one day at a time to yourself, do so. This will help you to avoid nonsense.

 

Db

 

 

This is very good discussion and comments about hindsight and really just ignoring the what-if scenarios. Basically, what you are suggesting, is to just look at the price action as it approaches S/R and just see how buyers/sellers respond as price gets to these levels and nothing more.

[Gringo 10]

I am having trouble when a trend transitions into a trading range. I tend to keep trying entries and all I get out of it is stop outs or forced exits. Either a change in approach is warranted at that time because it's not clear after how many swings to support and resistance the BO will occur.

 

Seems prudent to just wait for a BO or RET when I identify a trading range than getting nicked multiple times. Then again at times the entries work out and I catch a better entry because of not giving up. But it's not easy to tell early on whether the sideways movement is relatively short or long.

 

I am also feeling the need to have a plan for BO and RET to have a better flow to my trading. When I am replaying data at faster speeds it's tricky to record much of anything. I'll have to get used to recording some thoughts regarding my thinking. I do need at times to draw DL/SL otherwise I tend to lose my orientation. Going at faster speeds I just place the buy and sell as market orders instead of going for limit stop entries. It does get me mostly the worst prices but strangely I haven't experienced anything like a catastrophic loss despite getting the worst prices on entries and exits. This is something new for me to have quite a few forced exits and still not having much of an effect on principal.

 

It is going to take a bit of training to get used to my own rules. Price certainly doesn't look the same in RT as in post analysis charts.

 

More data and replays are required to have a clearer picture. I am replaying the same day at least two times or more. I do increase the speed significantly for third time onwards.

 

I have to work on:

1) Noting my thoughts down.

2) Better manage transition from trend to non trend.

3) Maybe get a plan for BO and RET as well, which look like late entries to me now.

4) Not get disoriented especially when price gyrates significantly up and down.

5) Handle better when volatility is higher. Stop out exits tend to get farther away when this happens which increases risk.

6) Get the win/loss and profit/loss calculation done properly. The trading platform for replay doesn't calculate profit loss stuff. Either I'll have to find a way to convert the buys and sells into excel or something but it will require some intervention.

 

 

Gringo.

[DbPhoenix 42]

Locating S&R will be key and should always be kept in mind. You'll find it difficult to distinguish between a RET and a REV in RT without them. This is the flaw in Ross and Dunnigan. Not that they'll deliver 100%, but they'll eliminate a lot of guesswork.

 

Db