Trading The Wyckoff Way

[Niko 10]

  DbPhoenix said:

Which brings us back to your lines. First, support is only support if it provides support. Price has crossed back and forth over 30 repeatedly for two weeks. But even so, if you had taken the short and been stopped out by a rally off 30, what's the worst that could have happened? While you're waiting for opportunities that are in your forecasts, you're ignoring those that are being presented to you in the moment. Forecasts are possibilities, even probabilities. What's in front of you is a certainty.

 

Db,

 

I have 2 questions:

 

1. While surfing what weight should be given to small TRs (20 poins or less) S/R levels?

 

2. After a Level is crossed back and forth, one should discard it as SR?

[david_uk 10]

(a) I am afraid I don't know how one can select part of someones reply (as a quote) ... is this laid out somewhere on the website?

 

(b) we appear to be edging ever closer to the globex highs (ellipse 9). How the mkt reacts (does it accept the higher prices, or will it reject these higher levels), the jury is still out.

 

© apart from the 1484.25 highs already referred to, if we fail from around current levels, we would fall back within the yellow wedge pattern.

 

http://www.sierrachart.com/userimages/upload_2/1358876455729.png

 

I still believe we are seeing a 're-test' prior to a fall

[DbPhoenix 42]

  Nikorivera said:

Db,

 

I have 2 questions:

 

1. While surfing what weight should be given to small TRs (20 poins or less) S/R levels?

 

"Surfing" is just a term that I use for tracking and trading price at the tick level, which is what W's Studies in Tape Reading and Part 2 of his course are all about, partly because it's compatible with W's current-and-eddy metaphors and partly because I need the shorthand. And anyone who's observed a 1t chart for a minute or so will understand what it's all about.

 

But to answer your first question, none. A 20pt range at the tick level is as wide as the Grand Canyon. But if one is talking about a 20pt range at the daily level, it's the same drill: wait until price nears or hits an extreme, then enter based on the smallest interval possible (if one is experimenting using online free charts, that will be 1m). If price is not near either of the extremes AND has shown no inclination to respect any other prior S/R, then one has to look for whatever S/R and/or patterns present themselves within the range. These can't be foreseen, but that's often the nature of intraday trading.

 

For example, if you look at what price did after I closed up shop yesterday, it neared the top of the daily range at the end of the trading session, then drifted sideways for several hours, displaying very minor "waves" until midnight, when it entered the resistance zone. When it did so, the subsequent selling wave was considerably longer than the buying wave. The subsequent buying wave was (1) shorter, (2) could not reclaim half the downdraft, and (3) appeared to find R at the level of the base which had formed the previous afternoon/evening. If one weren't there to take the short, then those levels are irrelevant to any subsequent trades unless price returns to those levels. The long is taken at 0400 not because price has reached the midpoint of the range -- though that may be a factor -- but because the waves show that the downmove is done. Price can therefore move either sideways or up.

 

As we then near the open, one might notice that price is approaching the 0700 swing high. If he isn't already long, he can pretend that he is. When price then hits this level at the open and forms a selling wave that is shorter than the buying wave but followed by a buying wave that is shorter still, creating a lower high, he can then exit his long, if he has one, or just go short, at around 39.

 

Support and resistance do play a role, then, but they won't necessarily be found until one has gone through the looking glass into the midst of the trading day.

 

 

 

 

 

 

 

  Nikorivera said:

2. After a Level is crossed back and forth, one should discard it as SR?

 

Probably. If it isn't acting as S/R, then there's no reason to classify it as S/R.

 

-

Edited January 22, 2013 by DbPhoenix

[DbPhoenix 42]

  david_uk said:

(a) I am afraid I don't know how one can select part of someones reply (as a quote) ... is this laid out somewhere on the website?

 

Just click "Quote"

 

  david_uk said:

(b) we appear to be edging ever closer to the globex highs (ellipse 9). How the mkt reacts (does it accept the higher prices, or will it reject these higher levels), the jury is still out.

 

© apart from the 1484.25 highs already referred to, if we fail from around current levels, we would fall back within the yellow wedge pattern.

 

http://www.sierrachart.com/userimages/upload_2/1358876455729.png

 

I still believe we are seeing a 're-test' prior to a fall

 

If you want to participate in the thread, that's great. Note, however, that it's about "trading". So

 

how would you trade this?

 

What if price rejects the previous high?

 

What if it doesn't?

 

If price falls from here, what will you do and when and why?

 

As for the retest, what you believe is not pertinent since price doesn't care. What will you do if the retest succeeds? If it fails?

[eminiman414 10]

I've recently made somewhat of a plunge and began watching a range chart with a .25 range with volume. It's not a 1 tick chart (can not use because i can not zoom out far enough) and even though a .25 range bar chart is still a summary it has been extremely eye opening. It may seem "noisy" in the beginning but after giving it some time it has greatly helped with trading more of the Wyckoff approach. Thanks DB.

[david_uk 10]

  DbPhoenix said:

Just click "Quote"

 

 

 

If you want to participate in the thread, that's great. Note, however, that it's about "trading". So

 

how would you trade this?

 

What if price rejects the previous high?

 

What if it doesn't?

 

If price falls from here, what will you do and when and why?

 

As for the retest, what you believe is not pertinent since price doesn't care. What will you do if the retest succeeds? If it fails?

 

Db,

 

I went short at 1484 a few minutes ago with a tight 1.5 point stop .

 

We are about to have supper and then we are going out, so I shall let me trade run or get stopped out (the mkt decides)

 

 

David

[DbPhoenix 42]

  david_uk said:

Db,

 

I went short at 1484 a few minutes ago with a tight 1.5 point stop .

 

We are about to have supper and then we are going out, so I shall let me trade run or get stopped out (the mkt decides)

 

 

David

 

The market decides whether it is going to go up or down, but the trader decides what he's going to do about it.

 

In any case, a Wyckoff trader would not short an uptrend because of what he thought or felt or believed; he'd short only when the market (price) told him to.

 

Which may sound snooty, but that's a large part of what distinguishes the Wyckoff approach from most else. It is what it is.

[david_uk 10]

Db,

 

I believed that 1484 represented a reasonable area to go short from, but clearly it did not turn out to be so. Hence the stop.

 

As I said I shall try and read up more on Wyckoff whilst we are on holiday.

 

Cheers,

 

David

[blocp 10]

didn't really know where to post this as my time scale is the first 90 minutes of the session this might be a good place.

 

I have started my backtesting over the last few nights and have just browsed through 20 odd 1 minute charts for the first 90 mins, the dates are jan 14th to feb 15th 2011 and i don't seem to have come across many hinges, i was expecting to find more than i have considering the amount that came apparent while sim trading in october/november 2012, while in chat.

 

just wondered if anyone else had back tested this period and if i am missing something, i am wondering if they are easier to locate in real time

 

bloc

[Niko 10]

Levels for today:

 

Seems that we broke above the TR Top and are currently in the middle of a RET:

 

[DbPhoenix 42]

-

 

Seems that change in the support level that I mentioned two days ago has prompted a BO to the upside, and, as Niko points out, we may be in the middle of a RET. Support amounts to a zone.

 

 

[DbPhoenix 42]

-

 

At the moment, the buyside has a very slight advantage.

 

 

[DbPhoenix 42]

-

 

Buying and selling waves become equivalent at the open. The trader can either wait it out to see who wins, or exit and re-enter.

 

 

 

 

Incidentally, the 15m bar interval is used purely for illustration as anything smaller would be next to impossible to read in a message board post unless it were formatted in Cinemascope.

 

-

[DbPhoenix 42]

-

 

Time to check on potential obstacles in the road ahead:

 

 

[Niko 10]

My recount for today's, action:

 

All is hindsight so I don´t know if this should go in the CSW thread.

 

 

1. I did not take the long from what looks like an inverse H&S, guess that was a good entry point as we were testing the top of the range, a SL was broken and a HL appeared.

 

2. This moment was confusing, as there was a break of the LSL and a LL, In RT my thinking was SAR, but that would have taken away some profits. (Comments are welcome about how to deal with this kind of behavior)

 

3. The behavior was almost the same as in 2, the difference was that this time the sellers were decided, perhaps 64 was an old R level that I did no see?. Is there any obvious difference between 2 and 3 that I am not seeing?, in this case an entry would have yielded a decent profit.

 

4. I see a V reversal as there was no HL before the break of LSH, have not really studied these pattern so no comments here. As a note, my analysis was that 53 was the MP of the opening TR.

 

5. The same case that i had in 2, a Break above LSH, and then a break below LSL. (Observations welcome)

[DbPhoenix 42]

-

 

Each succeeding wave gets shorter, putting us in hinge territory:

 

 

[DbPhoenix 42]

  Nikorivera said:

My recount for today's, action:

 

1. I did not take the long from what looks like an inverse H&S, guess that was a good entry point as we were testing the top of the range, a SL was broken and a HL appeared.

 

2. This moment was confusing, as there was a break of the LSL and a LL, In RT my thinking was SAR, but that would have taken away some profits. (Comments are welcome about how to deal with this kind of behavior)

 

Don't change strategy in the middle of a session. If a break of the demand line is necessary, then stick to it.

 

3. The behavior was almost the same as in 2, the difference was that this time the sellers were decided, perhaps 64 was an old R level that I did no see?. Is there any obvious difference between 2 and 3 that I am not seeing?, in this case an entry would have yielded a decent profit.

 

Again, if a break of the demand line is necessary, then stick to it. If you draw a parallel supply line, you'll see that 3 just touched it. The "H&S" is significant only in hindsight. If you shop around bar intervals, you can find H&S tops and bottoms just about anywhere. If you had entered where you were supposed to at 0938, you'd have nearly a 10pt profit even if you waited for a break of your supply line.

 

As to the short entry, that's at the first pullback, at 2760.

 

4. I see a V reversal as there was no HL before the break of LSH, have not really studied these pattern so no comments here. As a note, my analysis was that 53 was the MP of the opening TR.

 

5. The same case that i had in 2, a Break above LSH, and then a break below LSL. (Observations welcome)

...............................................

[tupapa 10]

Copper is getting closer to the upside breakout point, however, we already beyond 2/3s of the way from base to Apex, which increases the chances of a failed hinge.

 

If there is an expansion of volatility and price over the next few days, the hinge will serve its purpose, if not it could develop into a small range.

[DbPhoenix 42]

-

 

Regarding my comments above, this may or may not help:

 

 

[DbPhoenix 42]

There isn't much time in chat for elaboration. In fact, uv prb ntcd tht I uz a lt of abbrv n my psts thr.

 

But the issue here is not so much the distance to R. As you point out, one cannot know in advance whether R will hold or not. The more important issue is that the entry is at 14, and if you wait, then your price risk increases substantially. If you enter at 15 rather than 14, your profit potential is less, your chance of being faded is greater, your chance of being trapped inside a hinge is greater, etc.

 

This is not to say that you shouldn't take it, but to remind that there are risks involved in not taking the proper entry that should be considered before taking action. And even if the trade works out, one should not feel too satisfied as the market has just taught you a bad habit, and it will make you pay at some other point in the future.

 

Db

[Niko 10]

  DbPhoenix said:

-

 

Regarding my comments above, this may or may not help:

 

 

 

Thank you DB,

 

This is helpful as always. Will look for ways to include your comments in my strategy design as I am sure they will improve my results as they have done so far.

 

I am now on the look for something that perhaps is not possible to get (Avoid the Chop) and also with a doubt about how close must the DL or the SL follow price.

 

The greatest challenge so far, has been to avoid the Chop in RT, the two examples provided in the chart today with the word "confusing" where the kind of environment where I lose the most money on back testing, because by the time I realize there is no FT, i am already in the red (2 points per trade of Stop Loss is the average). Will have to find a way to minimize this problem in the future.

 

As an example here are over 100 trades, where the exit is the break of the Last Swing High or Low. As I enter a period of choppiness I start experimenting what i have called "confusing" behavior in today´s chart, and that starts draining my account, whit what I consider an unacceptable drawdown.

 

 

I have also experimented with an exit at the break of the DL or the SL, and got the following results:

 

 

In this case, the SL was adjusted to follow price touching the lows or the highs of the swings that were equal of larger than 1 point, but I don't know if I am following price too close and not allowing prices to breath, an example of the confusion I usually get in RT is the following:

 

 

Anyway, this were just some thinking out loud, in case any other member in the forum has experienced the same problems and perhaps has a different perspective on the issue.

[Niko 10]

After buyers met R at 68, the market collapsed and we are at the bottom of the TR we were just trying to get out. A hell of a RET :haha: :haha:

 

My levels for today:

 

[Niko 10]

Levels for EURUSD.

 

 

Looks like we are in the middle of a hinge.

[DbPhoenix 42]

  Nikorivera said:

After buyers met R at 68, the market collapsed and we are at the bottom of the TR we were just trying to get out. A hell of a RET

 

I suspect it had less to do with any kind of R and more to do with AAPL, just as the pop out had mostly to do with GOOG.

 

Keyholes.

[Niko 10]

DB thanks,

 

I was aware of Apple, just did not want to point out a fundamental issue in the W forum.

 

 

What I meant was that 68 -70 was a level of R (top of an oct TR), and prices reached that level before defining a new course, I guess people were not really defined about how to interpret the news (better eps but disappointing income), so at first sellers pushed but were stopped around 54, then buyers got exited and pushed for a 14 points run, then after a 50% pullback they failed to hold a HH (DT). Then a break of LSL and a strong downwave were a confirmation of news being bad. Then the last train for bears was the RET to 60, from then we all know what happened.

 

What I was pointing out, was that even if one is not aware of the news, or how to compute the EPS and the income figures in a valuation model, just following PA gives an edge.