Trading The Wyckoff Way

[tupapa 10]

Where have you posted this chart?

 

Db

 

I didn't post this because I was referencing your post, where you show the support level at 2610 (red line). And you outlined why one would look for a reversal:

 

Price then reaches the bottom of the TR, then hesitates. At this point, one can wait for a reversal signal to go long, or stay short.

 

 

But here is the actual macro chart showing Support at 2610, for whoever might be interested:

 

[DbPhoenix 42]

I was confused because you referred to a 30m chart. Mine was a 1m.

 

In any case, given that you're trying to define a setup, you don't have the option of my having noted a support level. The entries you've noted are correct. But whether they will work or not will depend on where they occur in the context of support/resistance. Therefore, you have first to determine how you're going to define S/R. Then you can locate your potential entry points.

 

Once you've defined how you're going to locate S/R, for example a trading range, the rest of your criteria can be forward-tested.

 

Db

[pjohnm 10]

Yes, the green dot on the 1m chart is a HL on the 5sec chart so in my opinion it is a legit entry. But as you point out, I would exit at the break of the Dl, shown by the blue dot.

 

 

This is another reason why I think it is essential to test this using a small bar interval such as the 5sec or the tick chart.

 

Hi Tup, having spent some time watching tick charts, I like to see a sequence of HL's and HH's, the only problem I would have with your first green entry is that price fails to make a HH at 2613 after making a HL. As for whether you are looking at a reversal, I would want to see either the swing high at 2615 broken, or a change in behaviour like lessening momentum (sl's fanning out). The second entry would fit this criteria, but again would prefer to wait for a HH after the HL. I agree with your comment on using tick charts for entry though, I believe this is essential.

[DbPhoenix 42]

Hi Tup, having spent some time watching tick charts, I like to see a sequence of HL's and HH's, the only problem I would have with your first green entry is that price fails to make a HH at 2613 after making a HL. As for whether you are looking at a reversal, I would want to see either the swing high at 2615 broken, or a change in behaviour like lessening momentum (sl's fanning out). The second entry would fit this criteria, but again would prefer to wait for a HH after the HL. I agree with your comment on using tick charts for entry though, I believe this is essential.

 

If I may, whether price makes a HH at 2613 after making a HL is irrelevant to the entry as one won't know this except in hindsight. Price exceeds the last swing high, which can be used as an "indicator" of rejection of a continuing downmove. However, one can see at the time, in real time, that price is struggling at the midpoint of that correction, at 13. When the next attempt to get through, just before 15:30, fails, one can exit there and wait to see who's going to win this little battle.

 

The second entry, at the right edge, is not as strong since the last swing high has not been exceeded. However, the supply line (not drawn) has been broken, and that may be enough, considering one's risk tolerance and sound assessment of the situation, to take the chance and go for the trade. On the third hand, one must also take into account the rapid approach of the trendline (also not drawn) across the two "rejection" points.

 

Db

[tupapa 10]

Hi Tup, having spent some time watching tick charts, I like to see a sequence of HL's and HH's, the only problem I would have with your first green entry is that price fails to make a HH at 2613 after making a HL. As for whether you are looking at a reversal, I would want to see either the swing high at 2615 broken, or a change in behaviour like lessening momentum (sl's fanning out). The second entry would fit this criteria, but again would prefer to wait for a HH after the HL. I agree with your comment on using tick charts for entry though, I believe this is essential.

 

Thanks for the comments pjohnm, not sure if I am following you, but are you suggesting entering the reversal after price breaks above 2615?

 

I know each decides how much price risk he is willing to take, but doesn´t this leave you with a very wide stop and reducing your potential profit?

[pjohnm 10]

Thanks for the comments pjohnm, not sure if I am following you, but are you suggesting entering the reversal after price breaks above 2615?

 

I know each decides how much price risk he is willing to take, but doesn´t this leave you with a very wide stop and reducing your potential profit?

 

My preference is to use the the 1 min for determining swing points, sl/dl's and trend, so 2615 would need to be breached to confirm reversal of the trend, which as you say is too late for entry. Entry at 10 therefore can only be considered if it is pre determined S, where I would then switch to a tick chart. The entry drill as far as I'm aware is wait for a successful test (such as a HL or DB), and enter above price.

 

As DB says, the move to 2615 is your first indication of rejection of the trend, as previous swing points are broken on the tick (or on the 1 min, a HH after 10). You then get a HL, above which you have placed your entry, I would prefer waiting for price to to make a sequence of HH and HL's on the tick.

[DbPhoenix 42]

bump..................

[DbPhoenix 42]

To reiterate what I wrote in the opening Trading By Price post,

follow a tick chart, set at one tick (or, if you have no access to tick charts, a 1m chart, but no larger interval than that). Then follow it in real time. Watch how price rises and falls due to imbalances between buying pressure and selling pressure. Watch how and where these waves of buying pressure and selling pressure find support and resistance to their movements. And when I say "watch", I mean just that. Don't worry about what you're going to do about whatever it is you're looking at. Don't worry about where you'd enter or where you'd exit or how much money you'd make or whether you'd have been right or wrong to do whatever. Just watch. Like fish in an aquarium. If that seems only slightly less exciting than watching concrete harden, or it's just not possible for you to watch this movement in real time, then collect the data and replay it later at five or ten times normal speed. You can do an entire day in little more than half an hour (though you won't get any sense of real-time pace). Granted this means a lot of screen time, even in replay, and only a handful of people are going to do it. But those few people are going to part that veil and understand the machinery at a very different level than most traders.

If instead you try to jump ahead to the trading phase and shortcut your way through the understanding price movement phase, you will only be prolonging the process. Whether one indulges in the "Oh, Christ, I screwed up again" routine or the "Yay Me!" only distracts from the central focus: understanding what's going on in front of you in real time.

 

Again, the entries, exits, stops and so on in these charts are merely suggestions. In any given chart, there can be many different entry, exit, and stop placements according to the trader's plan (which will of course accommodate his risk tolerance), as shown below in an ES chart:

 

 

 

 

 

 

Do not make the error, then, of thinking that a suggested entry indicates "YO! Here's the Entry!"

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Edited December 29, 2012 by DbPhoenix

[PrymeTyme 10]

Analysis from: EU, 30.12.12 H1

 

Background:

after a rallie , we trade within a range for quite some time , whereas the recent action

within the range show signs of weakness , we tested the highs on a weak rallie , ie

decreasing vol. and we failed to test the highs at the beginning of the range , we have two

big drops on high vol. and bid down bars , whereas the rallies , are weak again.and end in

hinges ..,

 

however the recent drop stopped at support , so the range is still in play.

but we formed yet again a hinge.. at this at the MP of the range, (below)

if it gets rejected we have yet another sign of weakness..

 

at the time beeing , shorts are low risk and longs high risk ..

as the market shows weakness...

 

 

Notes:

A Sign of Weakness

B Sign of Weakness

series of LH / LLs

Hinge at MP

Weak rallies ,

 

 

Signs of strength:

Uptrend

Support Holds

 

Signs Of weakness:

High Vol. Drops

Weak Rallies

Below MP

Lower Highs/Lows

 

LowRisk: Short

HighRisk: Long

 

Key levels ,above current price :

 

1.32195 MP small Box

1.32305 MP Big box (Range)

1.32412 MP of Hinge

1.32608 Support of small box

1.32660 MP of Small Box

1.32718 Resistance of Small Box / Support small Box (PPZ)

1.32771 MP small box

1.32814 Resistance of small Box

1.32952 Resistance of Big Box (Range)

 

 

Key levels ,below current price :

 

1.32099 Support of small box / MP of small box (PPZ)

1.31922 Support Small Box

1.31812 MP of Hinge

1.31732 Support Big Box (Range) / Resistance of small box (PPZ)

1.31602 MP of small box

1.31486 suppor of small box

1.31306 resistance of small box

1.31094 MP of small box

[DbPhoenix 42]

Well, price hit 2580 (see above post). As for the other majors, they're finding support in interesting but expected places.

 

Even though swing points don't provide the best support since there are so few trades in them, they are highly visible, which creates the conditions for a self-fulfillng prophecy. But if the S&P doesn't find support at that previous swing low, it may do so at the top of that old trading range.

 

The green lines are drawn at the halfway points of the last rallies.

 

 

 

 

And the Dow may be finding support at its halfway point.

 

 

 

We'll see how things look in 12 hrs.

[DbPhoenix 42]

The averages all found S at the levels anticipated (see previous chart posts) and rallied nicely. Looking at the NQ in particular, price rallied to the midpoint of the last trading range, which coincides with the midpoint of the previous trading range, which coincides with the top of the Borg range prior. This has proven to be a tradeable level. This morning it sailed thru the midpoint of that range like a hot knife through butter and is now sitting at the top of the range. Therefore, one looks for a reversal signal or waits for a breakout and retracement. Even though W is not mechanical, there is a methodology to be followed if one is to control risk.

[Niko 10]

Well, happy new year to everyone in the forum.

 

After the lawmakers finally came up with a bill the market has been rallying very fast and we are currently at a R area at the top of a small TR from Aug.

 

 

If buyers manage to take prices out of this TR the next area of interest is the next area of interest is the TR from late Aug and early Sep with levels at:

 

• 737
  
• 755
  
• 773
  

 

If the current TR manages to hold and sellers keep prices lower then 700 would attract prices (MP) and then 89 will serve as S.

 

Below this TR S can be found at:

 

• 654
  
• 618
  

 

P.S. I don't have the new chatroom link, if someone has it, please send me a PM with it.

Edited January 2, 2013 by Niko

[tupapa 10]

Happy new year everyone, tomorrow is the first trading day of 2013 for me and here are my levels and plan for the day. As usual, I will be trading the Bund, I know some of you have mentioned how it can be jumpy, or even erratic, but I wan't to give it a bit more of a chance for at least a week, before considering moving to another instrument.

 

For tomorrows plan I started by looking at the Daily chart. HEre, there is good support at E, A is the lower limit of the squared range, although it didn't act as support during todays session.

Above this, we have the range MP, which acted as resistance for today's gap, and finally resistance at 1, the upper limit of the squared TR.

 

The 30m chart shows these and other relevant levels:

 

The range between B and D could act as S/R and so could the PDL, below this we have E which was mentioned in the daily chart.

 

So the plan is to follow Wyckoff Standard Procidure, and trade a rejection of S/R or a Ret after a breakout.

 

If price breaks below E, I really don't know what to go for, looking at the daily cahrt, the MP of the Oct. Range could provide S/R, but I haven't found the Bund to react to previous Range MPs. I guess the only option is to judge it solely by the price action, and try to judge it in real-time. Any ideas on what to do here?

[Niko 10]

Tupapa,

 

I think that if you go back to the beginning of November you will find several levels bellow E that will provide you with guidance if prices manage to exit the current TR.

[Niko 10]

Buyers managed to hold the 12 S level, keeping prices out of the Aug congestion.

 

 

We are now at the 37 R level again where sellers have managed to keep buyers at bay. If buyers manage to break 37, then the following levels of interest should be:

 

• 55
  
• 73
  
• 94
  
• 16
  

 

If 37 holds then the levels of S could be:

 

• 12
  
• 00
  
• 89
  
• 54
  

 

Given the fact that the old chatroom does not work i have created a new one the link is the following:

 

CHAT LINK

[DbPhoenix 42]

The averages all found S at the levels anticipated (see previous chart posts) and rallied nicely. Looking at the NQ in particular, price rallied to the midpoint of the last trading range, which coincides with the midpoint of the previous trading range, which coincides with the top of the Borg range prior. This has proven to be a tradeable level. This morning it sailed thru the midpoint of that range like a hot knife through butter and is now sitting at the top of the range. Therefore, one looks for a reversal signal or waits for a breakout and retracement. Even though W is not mechanical, there is a methodology to be followed if one is to control risk.

 

Perhaps a change of focus is in order for 2013 lest I be found guilty of enabling beginners' delusions.

 

Hindsight charts can be great for learning principles and for formulating and testing setups. And, of course, when one is reviewing one's trades, the charts are by definition hindsight.

 

But one can't learn to trade in hindsight. Beginners and not-so-beginners may spend millions of dollars on courses, DVDs, tapes, books, subscriptions of one sort or another, software, indicators, etc., etc., ad infinitum, but they won't learn to trade, and their money will be for the most part wasted because all of these media live in the past. But trading for real is not in the past, and one can't make a dime off hindsight charts. Trading is now, and in the next moment, and in the moment after that. Unless one knows (a) what to look for and (b) what to do with it if and when he sees it, he's wasting his time and his money. And if he doesn't know what to look for or what to do with it, fear will be his constant companion.

 

This is not to say that one can't trade if he isn't glued to his monitor for an uninterrupted span of time, but learning to do so is so near to impossible that it may as well be so. And if one's time in front of the monitor is, shall we say, spotty, it should come as no surprise that the beginner focuses on the meaning of this bar or that bar, probably using a large interval such as the 30m or 60m and using at least one indicator to show him where he's been and where, supposedly, he is likely to be at some point in the future when he is in a position to enter a trade.

 

None of this has anything to do with the "Wyckoff Method", much less learning how to implement it. Anyone can show a profit using hindsight charts. Anyone. But that's not where the money is made; the money is made in real time. And real-time Wyckoff trading means a 1t chart or a T&S display with only price (no bid and ask) and volume (of transactions, not bid and ask). No one who is trading at work or at school or is engaged in some other task can do this.

 

Therefore, if one who can't focus on continuous price action is trying to trade this method, he should trade intraday and interday the same way, trading some instrument, like futures, that trades 24/7, using a bar interval that enables him to trade "real time", even though the price action contained within that larger bar interval will be shuttered to him, except in hindsight.

 

And keep your wallets in your pants, taking all claims of "profitable trading strategies" with a ginormous grain of salt.

 

 

Having said all of that, let's look at a couple of charts, a daily to show where we are and what we're up against and a 60m for trading.

 

 

 

There are two supply lines provided, one of which includes the gap and one of which forms after the gap (these gaps occur only on weekends and holidays). Both have by now been broken. However, price has come nowhere near the last swing low and has in fact formed a nice little base with a marginally higher low.

 

One could enter the first retracement yesterday (the first green dot), or, depending on his risk tolerance, he could enter within this little premarket base (W preferred entering the base rather than at the breakout, though this can present problems unless the base can be expected to resolve itself rather quickly, which is the case with futures due to the volatility one finds at the "open"). If the trader cannot tolerate the risk of price falling below this base, he should not take the trade.

 

And, no, this is arguably not a foresight trade. However, since the groundwork was laid in posts made Monday and yesterday, perhaps I can be forgiven for shifting gears into a larger bar interval.

 

Db

 

Edit: Even if one is so hyper that he begins to chew his face off waiting for the 60m bars to "close", there's little appreciable difference in entry and management with the 30m chart. The 15m chart, on the other hand (not posted), offers many more opportunities to screw up.

 

Edited January 3, 2013 by DbPhoenix

[tupapa 10]

Today price found R at C, and broke below E, exiting the previous range and climaxed (Wyckoff certainly knew how to make trading sound more, interesting...) at 143.28, after an aggressive sell-off.

 

For tomorrows morning session, I am focusing on price action around the following areas:

 

At A I will go long on a reversal, if we break below, I will go short if buyers fail to get price above

 

At B, I will go short on a rejection, if we hold above this, I will go long and look watch judge price action at C, if there is rejection I will SAR, if price slides through I will hold.

 

If we break above C and hold above, I will go long.

 

At D I will look for a long on a rejection.

 

 

This should cover most scenarios for the morning, I will update the plan for the afternoon session.

[Niko 10]

Here is the recount of today´s action, there are not trades described yet as I am currently filtering different entry setups, but I am focusing more and more on hinges and rectangles, that is why these shapes are traced over the chart.

 

 

 

The market opened with sellers pushing buyers to the downside towards the S level at 37.

 

1. After sellers managed to take out S at the open and tested R successfully at that same level, they started losing steam and finally buyers started pushing higher around 33. Choppiness took over the market and a hinge formed after the low of the opening range was defined. Prices broke out of this hinge.

 

2. But buyers were not able to hold the HH above R at 37 and the LH around 9:46 gave a signal of weakness. Sellers started pushing harder taking prices inside this new TR between 33 and 37.

 

3. After reaching the bottom of the TR buyers came in strong taking prices to the bottom of the range in two strong swings, at first the LSH at 2 provided R, but then after sellers could not take prices below the MP of the Last swing, buyers came strong once again and this time managed to break above R at 37-38 and kept on pushing until the PDH was reached.

 

4. Sellers were waiting at the PDH and rapidly configured a V reversal taking prices towards the MP of the last upswing.

 

5. Buyers pushed and broke above the LSH and the PDH, turning this last one into S and pushing even higher until reaching 46. But at 46 sellers were waiting and stopped buyers advance rapidly, making a LH around 10:10.

 

6. At first it looked as if the PDH was providing S, but buyers finally gave up and prices collapsed below S going all the way to 39 were S was found an choppiness took over the market.

 

7. A failed attempt to break above the PDH turned into a V reversal back to the bottom of the TR.

 

8. By the end of the session prices were back at 37 were S was provided rapidly and prices bounced.

[DbPhoenix 42]

Given that price failed to hold above R, there are choices to be made.

 

If one entered at the first retracement, he could wait and see whether or not price holds here. If it does not, he could short. If it does, then he's cool.

 

If one entered at the premkt base and did not exit at BE, he's underwater. If he has no tolerance for the risk, he should be out and wait for a test of R to short. If he has enough tolerance for risk to be out but not to wait for the retracement, he could short here. This last, however, may cause him to develop a twitch.

 

[Niko 10]

My levels fot today are essentially the same as yesterday as we are around the same price levels:

 

 

S

 

• 12
  
• 00
  
• 89
  
• 54
  

 

R

 

• 37
  
• 55
  
• 73
  
• 94
  

 

As prices have not been able to break above the 37 level and hold I interpret this as weakness and therefore will mainly look for selling opportunities, nevertheless we all know that the market can be fickle so will look for buying opportunities above R at 37.

[tupapa 10]

Given that price failed to hold above R, there are choices to be made.

 

If one entered at the first retracement, he could wait and see whether or not price holds here. If it does not, he could short. If it does, then he's cool.

 

If one entered at the premkt base and did not exit at BE, he's underwater. If he has no tolerance for the risk, he should be out and wait for a test of R to short. If he has enough tolerance for risk to be out but not to wait for the retracement, he could short here. This last, however, may cause him to develop a twitch.

 

Could you update us on this Db? If you entered on the first retracement and you are out at BE, you look for a short right? At what point do you determine resistance has been tested? I am having difficulty establishing this on the 30m chart

 

Is this your test?

 

Thanks for posting this, it is very interesting, for me, to learn how to apply Wyckoff entries using larger bar intervals.

[DbPhoenix 42]

Yes, yes, and yes. However, you'll note that this swing low is at the same level as the major swing low on the 31st and that price has rallied. Therefore, I'd be inclined to exit the short and look for a long. Whether W would or not, I can't say. He might choose instead to bang his head against the wall.

 

Certainly there have been more and better opportunities to make money over the past couple of days using smaller bar intervals. But people like those who inhabit trading forums can't trade smaller intervals because they're not in front of their screens. So rather than feed these daytrader fantasies, I'd rather trade the longer interval. Whether it is as profitable or not is debatable, but at least it's doable.

 

On the daily, you've had both an upthrust and a downthrust, neither of which accomplished anything. We may here be in the middle of another failed attempt at an upthrust (actually, I should say failed attempt at an upmove; if it does fail, then it's just a thrust). Given that we're looking at another market closure here, one could be forgiven for exiting and waiting until Sunday night to see if there's another gap.

 

Db

Edited January 4, 2013 by DbPhoenix

[tupapa 10]

Alright everyone, this is a CWS trade that I encounter frequently and would like to discuss with folks in the forum.

 

I have R noted from the 15m chart, so I know I want to go long if this level holds or short if it breaks. On the 1m chart, you can see price broke below and came up to re-test the level, this is the entry trade I would like to discuss (circled area).

 

I knew I wanted to short here, but I have a very specific set of entry rules, so there are no doubts when trading real, I know what I am looking for, and I trade it.

 

In this case, looking at the 5sec chart, there was an initial rejection which broke the Dl, but there was no re-test (which is what I normally look for in an entry). Which resulted in price falling and me missing a trade, which I had anticipated and even perceived in real time.

 

So what do you do in these cases? Do you just move on? Is there something in the 5sec chart that would make you take the trade?

[DbPhoenix 42]

The trip to 143.20 WAS the retest. You're asking for a second one. If you insist on another one after the DL is broken, the rally to 143.14 will have to do.

 

Db

[tupapa 10]

Thanks for the clarification Db, it makes sense what you say about the trip to 143.20 being the re-test. I believe the reason why this is not entirely clear to me, is because of a lack of definition.

 

In my case, I find it easy to get familiar with terms such as "climax, test, re-test, support, resistance, even Swing High and Swing Low" but much harder to make a clear definition of them, where there is no room for subjectivity.

 

Defining the terms is important for me, since I am constantly using them when trading live. If they aren't defined clearly, it results in confusion and hesitation when trading live.

 

So here is a practical example of what I mean, using a reversal example in the Bund.

 

On the 30m chart there is support at 145.26 (Top of trading range), so I am anticipating a reversal setup if prices reached this area.

 

On the 1m chart, price reaches this level around 10:30. Now this is where, in my opinion, definitions are vital, and here we can move to the 5sec chart.

 

- At 10: 37, price reaches support. At this point, "support is virgin", that is, it is the first time it has been tested for the day.

 

Since it is the first "test" I want to see a rejection, followed by a successful test. At this point, the information risk I am willing to assume is low, I am looking for confirmation that the level will hold, at least temporarily.

 

So price is rejected and makes a HL on the test, and this could be a great place to enter. One could then move his stop to BE, scale out on the failure at 42, or get out entirely.

 

- At 11:52, price visits support again, on a "re-test". Here support isn't virgin, it was already rejected during the day, so maybe one could afford to be more aggressive in his entry. Maybe enter at the break of the Sl, or look for something in the tape, such as bids holding?

 

The basic idea behind this is: If support is virgin, I am looking for more confirmation (less information risk) before I enter, whilst if support isn't virgin (re-test), I am willing to enter with less confirmation. This could also apply to the cases in which S/R is broken. If it is broken, it is no longer virgin, so one could enter with less confirmation. My post from yesterday is an example of this, as I didn't take the short at R because I waited for to much confirmation. I wanted to enter the trade as if resistance was virgin, when it wasn't.

Edited January 6, 2013 by tupapa