Trading The Wyckoff Way

[DbPhoenix 42]

[20814md 10]

Gringo: you said above :

" 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."

 

Sierra Chart will track this on playbacks, but if you want to store your trade data from these you may need to copy it into excel before you repeat. I haven't used Sierra for quite a while so I am a little fuzzy and may be confusing this need to store externally between replays with actual back tests

 

Also, if you use Interactive Brokers (either practice or regular accounts), and want a way to track in RT (sim or otherwise) take a look at Bracket Trader if you haven't already. It does a nice job with the tracking trades and keeping stats including MFE and MAE. It saves data into files of varying detail for Excel.

[tupapa 10]

Whats your plan for the day?

[DbPhoenix 42]

What's yours?

 

.......

[tupapa 10]

Haha not trading the NQ today... but would love to read yours for once, I might even learn something

[DbPhoenix 42]

Dozens have been posted, mine and others. If you're not yet ready to put together a trading plan, read them again along with the threads and the course.

 

I don't need to learn how to do this; you do.

 

Db

[Gringo 10]

Db,

I don't know how you figured out I wasn't paying much attention to s/r but yes, my mind was on sl/dl and trend and seemed to have drifted away from s/r. Only the longer term s/r I was paying attention too.

 

Another issue I am having is not realizing the use of volume any more. With so much focus on price only I am not sure if I can even trust volume much. On test I just glance to see whether it is lower than before when price reached the same level. I am guessing it's primarily due to newly renewed focus on price itself and will probably improve with continued practice.

 

 

20814md,

Thanks for your attempt to solve my P/L problem. I am only testing using NinjaTrader as they have old minute by minute sim to replay for free. I probably won't be trading futures per se, but will be using mostly ETF's such as QQQ. Now this simulator is very good but not entirely specific to my needs. I'm still getting familiar with the functionality and worst case scenario will have to do some extra work. I haven't figured out how to export the buy/sell record into excel but will be looking into it.

 

Gringo

[DbPhoenix 42]

Db,

I don't know how you figured out I wasn't paying much attention to s/r...

 

Twenty years.

 

Your first post today was a combination of a TBP question and a journal entry. Try to keep them separate for the benefit of those who are trying to follow along.

 

Incidentally, this morning's action in the NQ is an excellent illustration of your quandary.

 

Db

[DbPhoenix 42]

The inset in the lower-left of this chart is a copy of the chart I posted to the TIF thread before the open.

 

This all plays out just as one might expect. Price tests the midpoint of the hinge at 22, no buyers can be found, so price drops all the way through both premkt TRs to 13 (there is no particular S here; in fact, one can anticipate price falling all the way back to 2786). It finds S there, then rallies to make a LH. When it then makes a subsequent HL, this is an indication that a TR is in the offing, and that is what price does for the next 18m (note, however, that one could make a number of both long and short trades if he were to trade without bias and he'd lose little or nothing; in fact, he might pick up a point or two).

 

Price then tests the OL. If a short is in place, that can be easily exited and a long taken there or at the first RET. Price then tests the earlier LH (the dashed blue line represents both the top of the boxes TR in the insert and the bottom of the immediately following TR). A short here would be exited at 07, which nicely coincides with 1100 EST.

 

Thus the range on the NQ was 17pts. The range on the ES was 5.

 

Db

 

 

 

Edited September 11, 2012 by DbPhoenix
Correct error

[Gringo 10]

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.

 

Hello goodoboy,

 

From what I under Db isn’t saying not to have what-if scenarios. He’s saying the what-if need to be in place in advance and if based on that you’ve taken a trade then don’t fret about it while the trading is going on. You observe what happened around S/R, using replay or cover the bars and move along as if you were trading in real time and try to decipher if any clues were visible to indicate interplay of demand and supply, that could be added to your plan of ‘what-if’ scenarios. You could then choose to include or exclude clauses in your plan that would have prevented you from getting sucked into a trade like this in the first place to exit your position in a case where price goes against your position.

 

For a long you’d need to focus on when the demand shows some strength and then whether it has lasting power or is just temporary. How do we find out if demand has intent? Price either halts its downward movement or starts moving up at least for some time. Focus on these and see whether there was a time beginning Apr 23 where demand started to look strong enough.

 

Right now don’t worry about whether you entered or not. Your only focus is to see whether demand is showing sufficient strength to warrant a long position. If it isn’t showing sufficient strength then is supply showing more strength? Again, how would you know if supply is stronger than demand? Yes, you’re right, price will start to move downwards.

Have fun with your analysis.

 

Gringo

[DbPhoenix 42]

(there is no particular S here; in fact, one can anticipate price falling all the way back to 2786)

 

Is 2787 okay?

 

How hard is this?

 

Db

[DbPhoenix 42]

Ah, there we are: 2786 (14m late).

 

Db

[20814md 10]

The inset in the lower-left of this chart is a copy of the chart I posted to the TIF thread before the open.

 

This all plays out just as one might expect. Price tests the midpoint of the hinge at 22, no buyers can be found, so price drops all the way through both premkt TRs to 13 (there is no particular S here; in fact, one can anticipate price falling all the way back to 2786). It finds S there, then rallies to make a LH. When it then makes a subsequent HL, this is an indication that a TR is in the offing, and that is what price does for the next 18m (note, however, that one could make a number of both long and short trades if he were to trade without bias and he'd lose little or nothing; in fact, he might pick up a point or two).

 

Price then tests the OL. If a short is in place, that can be easily exited and a long taken there or at the first RET. Price then tests the earlier LH (the dashed blue line represents both the top of the boxes TR in the insert and the bottom of the immediately following TR). A long here would be exited at 07, which nicely coincides with 1100 EST.

 

Thus the range on the NQ was 17pts. The range on the ES was 5.

 

Db

thanks DB. I think you have a typo in the second to last sentence: "long here" should be "short here".

[DbPhoenix 42]

thanks DB. I think you have a typo in the second to last sentence: "long here" should be "short here".

 

No, the drill is to go long off a successful test of S. This doesn't go far, but it goes far enough. One can then go short when the move runs out of steam. A short at S would be stopped out almost immediately.

 

Db

[20814md 10]

No, the drill is to go long off a successful test of S. This doesn't go far, but it goes far enough. One can then go short when the move runs out of steam. A short at S would be stopped out almost immediately.

 

Db

sorry Db, but somehow we aren't on the same page. Please see my annotation applying your quotes to your chart.

[DbPhoenix 42]

The long refers to the long taken at the test of S, i.e., "if you were long here". Taking a long at R would be, well, not good.

 

Db

[Gringo 10]

This is my replay of the same time frame and bar interval. Around 10:25 am I shorted two contracts by mistake so covered one immediately. I couldn't identify TR. After today's comments I'll add a line to my plan to keep an eye on LH and HL combo for a possible TR.

 

 

I also had to exit a few more times but managed to re-enter. Strangely my replay data didn't show the hinge Db is talking about from the previous day. Maybe it's a few more days back but whatever. As I increases the data downloaded perhaps the accuracy of charts will increase.

 

Another change is my preference to go all black on volume and price. It makes me focus on the price movement rather than bars. I had always preferred multi-coloured bars in the past especially because they made it easier to match price bar with the similarly coloured volume bar.

 

I am replaying the day multiple times until I see the flow better and make better entries. What I have noticed is that once I draw the SL/DL I trade better than just eyeing the price. It most likely is just lack of eye adjustment to the fast pace. It is going to take a bit of time but my anger or fear is significantly absent especially because I know where I'll exit and the opportunities keep coming up so I don't have time to contemplate too much. My only objective right now is to get used to following my own plan. There is still hesitation at not recognizing completely all that's transpiring but there is a ray of hope as well. And it has become enjoyable, more like a video game now that I only have to just follow the plan.

 

Oh did I mention the PnL was showing a couple of hundred bucks even after so many false entries. I haven't bothered to check whether there's an error or something in calculation as I am too tired.

 

Gringo

Edited September 11, 2012 by Gringo

[franko 10]

are the S/R lines in these two charts acceptable? one for above the close, the other below.[/img]

[tupapa 10]

Db, going back to silver, you mentioned the best entry would've been on the 20th, however this is a breakout and I was under the impression that this was the least favorable entry as it has the highest price risk. Wouldnt' one wait for the pullback that in this case woiluld've never happened??

 

I am currently writting up my plan, and enterin on breakouts is something that I always avoid.

[tupapa 10]

A follow up on Apple, starting with the technology sector:

 

It poked above the last R level at 31 but wan't able to hold above this, showing some weakness.

 

The SPX looks strong, as we recently broke previous highs and managed to stay above them.

 

Now to the stock, starting with the daily:

 

It is currently ranging between 660 and 680, yesterday it tested the highs and we saw a strong rejection, marked by strong volume (effort) and a long bearish bar (result).

 

Before this, the market gave signs of weakness as we can notice the bars between Tuesday the 5th and Wednesday the 7th are very narrow, showing very little price progression, thus can be seen more clearly on the 60 min chart.

 

So moving onto the 60 min, we can see more clearly how there was strong selling pressure yesterday and we are currently approaching the range lows. The volume yesterday was very strong, showing good effort and in the lat bar on the 60m chart, it could be interpreted as climactic. However, the last bar closed at its low, hence I assume there is little buying here, and selling pressure prevails.

 

Today should be interesting since we may test the range lows, around 660. If buyers come in, this could be a buy opportunity, after a retracement. If buyers can't hold the stock above 660, a short could be appropriate after a retracement.

 

 

 

So we have a situation where the Stock and the sector look weak, but the market is strong, what would Wyckoff do? Would he look for a trade or would he leave it until all three look bearish or all three look bullish?

[DbPhoenix 42]

are the S/R lines in these two charts acceptable? one for above the close, the other below.[/img]

 

They're acceptable, but you have so many of them that each has little practical value. Draw enough lines and price is bound to hit one of them.

 

Each of these lines indicates potential support. However, support is not a line. Support is that level where buyers are most likely to step in and reverse the demand/supply balance. Buyers aren't thinking about lines; they're thinking about trades. So look for that level first where the most trading activity has taken place in the past. On your chart, that would be around 2777 to 2771. At each preceding level, there are fewer and fewer trades, therefore less and less potential support.

 

For example, you will have noticed the parabolic rise on the 6th. At any given price point there are fewer trades than there would have been on a much slower rise, particularly if price had spent a lot of time in RETs and congestions. Therefore, when price rolled over and returned to that zone, there was little to stop it. And here we are.

 

If you have it, you can plot Volume At Price or Volume By Price to help you. But it's not that difficult to just eyeball it and note in which zone price has spent the most time.

 

Db

[DbPhoenix 42]

Db, going back to silver, you mentioned the best entry would've been on the 20th, however this is a breakout and I was under the impression that this was the least favorable entry as it has the highest price risk. Wouldnt' one wait for the pullback that in this case woiluld've never happened??

 

This is one of the objectives of testing, to determine what is least favorable, most favorable, or neutral. Or there may be no difference, leaving it up to trader's choice. But the BO is the lowest price risk, not the highest. It is instead the highest information risk.

 

Db

[DbPhoenix 42]

This is my replay of the same time frame and bar interval. Around 10:25 am I shorted two contracts by mistake so covered one immediately. I couldn't identify TR. After today's comments I'll add a line to my plan to keep an eye on LH and HL combo for a possible TR.

 

I also had to exit a few more times but managed to re-enter.

 

Don't feel clumsy. You may have noted that none of the pundits called this yesterday, though one did call attention to it after the close. If you had been following the chatter instead of the price, you probably wouldn't have entered at all. Or at least entered in the right direction.

 

Db

[tupapa 10]

Today the stoxx has spent all morning in a tight range, and now price got to R, I went short following my plan.

 

I am thinking twice about this entry however, since last time price rejected Resistance, at around 11 am UK time, it wasn't able to test the lower limit of the range, instead it made a HL at 2516.

 

So when price got up to R, at 12:27, is the short still a good trade? Or would the LH and failure to re-test the lows invalidate it??

 

I am currently trading but at the same time annotating my thoughts and the outcome of each trade, to improve my trading plan.

[DbPhoenix 42]

So we have a situation where the Stock and the sector look weak, but the market is strong, what would Wyckoff do? Would he look for a trade or would he leave it until all three look bearish or all three look bullish?

 

As to what W would do, you'll find this in the Course. Check the table of contents. As to what is best for the trader, this again is one of the objectives of testing. If you find through testing that you can succeed with a weak stock and sector and a strong market, then go for it.

 

Db