Trading The Wyckoff Way

[DbPhoenix 42]

I understand. However, the turn and downmove may have had less to do with R than with other considerations. R here is a pretty wide zone, so finding some level to provide a potential explanation for the reversal amounts to throwing virgins into the volcano.

 

This is an example of the point I've been trying to make over the past couple of weeks: it's not lines or zones or patterns; it's trader behavior. Price can turn like a school of fish, even though neither support nor resistance are anywhere on the horizon. This is primarily why I've brought waves back into the picture. They are a direct measure of buying pressure vs selling pressure, unlike anything else one might plot (other than the TICKQ).

[Niko 10]

A BO with a nice RET, but we are now in the middle of another TR, not an easy market.

 

[Niko 10]

I understand. However, the turn and downmove may have had less to do with R than with other considerations. R here is a pretty wide zone, so finding some level to provide a potential explanation for the reversal amounts to throwing virgins into the volcano.

 

This is an example of the point I've been trying to make over the past couple of weeks: it's not lines or zones or patterns; it's trader behavior. Price can turn like a school of fish, even though neither support nor resistance are anywhere on the horizon. This is primarily why I've brought waves back into the picture. They are a direct measure of buying pressure vs selling pressure, unlike anything else one might plot (other than the TICKQ).

 

Db, thanks, I have been focusing more in waves in my analysis, just found interesting that the market had found a top at a previous TR top. But after your previous posts I have found many new things i was not paying attention to before.

[DbPhoenix 42]

Just watch out for those virgins

[PrymeTyme 10]

A BO with a nice RET, but we are now in the middle of another TR, not an easy market.

 

 

 

 

jup , we are trading within a range ,, where we have seen alot of indecision.. so

i rather sit on my hands .. and wait till we trade at the extremes .. and judge from there

 

no trading in the middle for me on this one..

[DbPhoenix 42]

-

 

Technically this is not trading in foresight since one can't foresee what these waves will look like. One can, of course, anticipate where one might make the most out of tracking these waves by determining where S and R will most likely lie and paying special attention to the waves at those levels. However, price doesn't always turn at anticipated S&R. Therefore, I'm posting these here (a) to show how one might trade using these waves exclusive of S/R and (b) because this is where the rest of these charts wound up.

 

Note here that there was a possible entry pre-market, but it would have been SO quickly. Thereafter it formed a hinge. Price fell out of this hinge right before the open, dangerous territory. After the open, however, the waves provided a clear signal, which may not have been taken if one were trading only off S/R.

 

Note: tracking these waves can also help one avoid chop.

 

 

[tupapa 10]

IThanks for sharing and illustrating the concept of surfing, or trading waves, I am very interested in this. One question, how does this relate to the process outlined in the trading journal thread, of testing and focusing on one setup/pattern??

 

Are they complementary or is surfing the next stage?? Doesnt surfing difeer from the idea of trading a specific and rigid setup??

[eminiman414 10]

DB, in your opinion what constitutes a wave? I guess I am asking in terms of trading faster charts like a 1 tick, .25 range, or a 5second chart. As in how far up or down does price have to move to constitute a new wave in the opposite direction where it can be taken into consideration and compared to the previous waves? I hope that makes sense. A faster chart obviously you see all kinds of little movements up, down, and sideways. Not asking for a definitive rule just your opinion. At work so I can not post a chart to explain what I am trying to ask.

[DbPhoenix 42]

IThanks for sharing and illustrating the concept of surfing, or trading waves, I am very interested in this. One question, how does this relate to the process outlined in the trading journal thread, of testing and focusing on one setup/pattern??

 

Are they complementary or is surfing the next stage?? Doesnt surfing difeer from the idea of trading a specific and rigid setup??

 

An understanding of waves is basic to this approach: Buying and Selling Waves.

 

The Wyckoff approach is a three-legged stool: demand/supply, support/resistance, price/volume. Two out of three aren't enough.

[DbPhoenix 42]

DB, in your opinion what constitutes a wave? I guess I am asking in terms of trading faster charts like a 1 tick, .25 range, or a 5second chart. As in how far up or down does price have to move to constitute a new wave in the opposite direction where it can be taken into consideration and compared to the previous waves? I hope that makes sense. A faster chart obviously you see all kinds of little movements up, down, and sideways. Not asking for a definitive rule just your opinion. At work so I can not post a chart to explain what I am trying to ask.

 

If you're working, a tick chart isn't appropriate. You shouldn't be using anything less than a 60m bar. If you do, you should have no trouble determining the difference between an upwave and a downwave. If you have not yet read the first part of the course and either the second part of the course or the Daytrader's Bible, doing so will help make this clear.

[eminiman414 10]

I meant I was at work and could not post a chart. I watch from 9:30-11:00 before I go in to work at 12. I just meant do you look more to the general movement or look for strength and weakness in the little ebbs and flows as well.

[tupapa 10]

An understanding of waves is basic to this approach: Buying and Selling Waves.

 

The Wyckoff approach is a three-legged stool: demand/supply, support/resistance, price/volume. Two out of three aren't enough.

 

Judging the market by its own action, by comparing the length, speed and duration of the buying and selling waves is something extremely logical and reasonable to me, hence why I am sticking to this approach, simply because, it makes perfect sense.

 

But there is something that I still fail to comprehend, and it has to do with the nature of probability:

 

Mark Douglas mentions in his books that an edge, simply gives you a higher probability of something occurring over an other, and a trader should simply trade pattern after pattern after pattern, with little concern for analysis, he even mentions that being to analytical can have a negative effect on ones trading.

 

Now, this makes perfect sense to me, if you are trading using indicators; I.E: Buy when the 7 period Ema crosses the 23 period Ema, easy, there really isn't any space for interpretation here.

 

But doesn't the wyckoff approach require a constant analysis of market conditions making it almost intuitive?

 

You have provided many examples of how to trade relying solely on buying and selling waves, both in this thread, and in the TBP/90minutes thread, which look fantastic and you can clearly trade like this.

 

My main question is; Is each entry an individual setup that you have clearly defined? If so, do you know the % winners, Win:loss, max drawdown, etc.. For each setup??

 

 

Going back to Mark Douglas; He speaks in his book about three stages; Mechanical, Subjective and Intuitive.

 

It seems to me that, what you are showing here and in the TBP thread is more Subjective or even Intuitive than mechanical.

[Niko 10]

Looks like we are out of the TR, but given the strength of the BO and the absence of a RET it would have been difficult to enter on the long side (at least from my perspective)

 

Now I just wanted to provide some context using the daily.

 

[Niko 10]

I did not know where to put this, but this was definitely not something to post int TIF or in the Journal Thread so I place it here.

 

Due to my inclination to look though the keyhole, I am trying to expand my horizon getting out of the 30 tick chart.

 

After finishing my first round of Backtesting, I found positive but disappointing results (50% profit 50% commissions), this added to what DB said some days ago about "small setups yield small profits", I am trying to identify something actionable in larger bar intervals.

 

Here is what I have found so far in a chart from a year ago.

 

 

I post it for comments, just in case I am starting with the wrong foot and maybe some senior member´s wisdom can save me some failed setup backtesting hours.

 

Conventions are the following:

 

BC: BUYING CLIMAX

DB: DOUBLE BOTTOM

BO: BREAKOUT

RET: RETRACEMENT

FO: FAKEOUT

LH: LOWER HIGH

HL: HIGHER LOW

BLSL: BREAK OF LAST SWING LOW

BLSH: BREAK OF LAST SWING HIGH

FT: FOLLOW THROUGH

TB: TRIPLE BOTTOM

MP: MIDPOINT

[Niko 10]

G, stop lurking and come back to the forum

[DbPhoenix 42]

I meant I was at work and could not post a chart. I watch from 9:30-11:00 before I go in to work at 12. I just meant do you look more to the general movement or look for strength and weakness in the little ebbs and flows as well.

 

I don't know what the extent and duration of each move will be until I open the chart. There may be fits and starts or there may be well-defined waves or there may be parabolic moves. If you want specifics, you'll have to read or re-read what I listed above and watch price move in a great many charts. This may take days or weeks or months. If you're trying to trade, it will take even longer.

[Niko 10]

This is the next day (Jan 4 2012)

 

[DbPhoenix 42]

Judging the market by its own action, by comparing the length, speed and duration of the buying and selling waves is something extremely logical and reasonable to me, hence why I am sticking to this approach, simply because, it makes perfect sense.

 

But there is something that I still fail to comprehend, and it has to do with the nature of probability:

 

Mark Douglas mentions in his books that an edge, simply gives you a higher probability of something occurring over an other, and a trader should simply trade pattern after pattern after pattern, with little concern for analysis, he even mentions that being to analytical can have a negative effect on ones trading.

 

Now, this makes perfect sense to me, if you are trading using indicators; I.E: Buy when the 7 period Ema crosses the 23 period Ema, easy, there really isn't any space for interpretation here.

 

But doesn't the wyckoff approach require a constant analysis of market conditions making it almost intuitive?

 

Yes. Mark Douglas is a smart man and writes many smart things. But Douglas is about indicators and patterns. Indicators and patterns have nothing to do with Wyckoff. As to setups, there are only three, four-and-a-half if you include the springboard and the hinge, which is a particular type of springboard. Probability comes into it when the trader examines the context of the setup, e.g., a reversal is more likely to be successful if it takes place off support; a breakout is more likely to be successful if it takes place out of a proper base, i.e., provides sufficient "cause"; a retracement of what appears to be an upmove is more likely to be successful if there is genuine demand, which will be determined by an analysis of the waves.

 

You have provided many examples of how to trade relying solely on buying and selling waves, both in this thread, and in the TBP/90minutes thread, which look fantastic and you can clearly trade like this.

 

My main question is; Is each entry an individual setup that you have clearly defined? If so, do you know the % winners, Win:loss, max drawdown, etc.. For each setup??

When I was beginning, yes. Eventually I got past all that.

 

Going back to Mark Douglas; He speaks in his book about three stages; Mechanical, Subjective and Intuitive.

 

It seems to me that, what you are showing here and in the TBP thread is more Subjective or even Intuitive than mechanical.

 

There's nothing mechanical about Wyckoff, as I've said many times. Those who try to make it so, much less try to make software out of it, will never succeed. And those who are going through the Trading Journal process should understand that it is universal, that it applies to all approaches. Wyckoff, if I recall correctly, isn't even mentioned except with regard to springboards. But even with Wyckoff one must be specific. One can't simply "trade reversals". He must determine just what a reversal is. If he doesn't, his trading will be largely random. But this doesn't mean that trading reversals will be mechanical.

 

If the fog doesn't lift, I suggest again that you re-read what I suggested in my previous post. One reading won't do it, and chapters 7 and 16 should be read once a week until they become cemented.

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

Edited January 25, 2013 by DbPhoenix

[Niko 10]

Levels for the morning:

 

 

I have changed the color of the levels from last year, in order to give more relevance (in my head) to the levels that are being formed this year.

[DbPhoenix 42]

The purpose of studying price movement via a tick chart or T&S display is to develop a fundamental understanding of the continuous nature of price movement. This is why I say over and over again that one shouldn't be trading while he's going through this. If he does, it all just takes that much longer, sometimes years, if ever.

 

But once one does understand this, the bar interval is irrelevant. He can use 5m or 15m or 60m bars if he likes. But he won't be coloring them and candling them and obsessing over where they "close". They will be markers along price's journey and nothing more. He will also be in a position to surf his way back and forth through many intervals in order to find the best entry once price is in a position, e.g., heavy-duty support, to provide him with one that has a higher-than-average probability of success.

 

I'm sure you've noticed by now that the longer the interval, the fewer the opportunities. Plus, the longer the interval, the more traders you have who are looking over your shoulder. Retracements which occur on the 1m or 3m or even 5m chart will be invisible to most everyone else. This is an edge, or at least an important element of one, particularly when one considers the traders who view anything below the 5m chart as "noise".

 

If you're still having trouble opening things up, provide yourself with several simultaneous intervals, e.g., a tick (or close to it), a 1m, and a 5m. Include a 15m if you like. Watch how they relate. This will free you to at least some extent.

[Niko 10]

Interesting place to think about what to do:

 

 

Perhaps a zoom in would clarify or confuse (:haha:) even more:

 

 

Perhaps buy the BO of the hinge?

 

 

I will post a follow up later.

[pjohnm 10]

The immediate levels of interest for me this morning:

 

S at 12

Trading Range at 26/31

MP of uptrend at 22

Potential R at 40 +/- but not yet tested

 

Price is now hovering at the MP of the TR, so wait for the test of 26/31 and judge whether there is price behaviour that can be traded off. Note that buying waves on the 1 min are now getting smaller.

[Niko 10]

The purpose of studying price movement via a tick chart or T&S display is to develop a fundamental understanding of the continuous nature of price movement. This is why I say over and over again that one shouldn't be trading while he's going through this. If he does, it all just takes that much longer, sometimes years, if ever.

 

Yes, thank you for this, you have set me free of the "waiting for the close" vice. I confess, I traded during screen time out of boredom, and that took me back, but I am in rehab .

 

 

But once one does understand this, the bar interval is irrelevant. He can use 5m or 15m or 60m bars if he likes. But he won't be coloring them and candling them and obsessing over where they "close". They will be markers along price's journey and nothing more. He will also be in a position to surf his way back and forth through many intervals in order to find the best entry once price is in a position, e.g., heavy-duty support, to provide him with one that has a higher-than-average probability of success.

 

I am using HiLo bars, in order not to be biased by the open and the close, the colors are just courtesy of NT that I did not change, but they are not essential during the analysis, I will just remove them in future post. I see this more as a way to condense a tick chart, that as an interval preference. That is again a result of screen time that I appreciate very much DB.

 

I'm sure you've noticed by now that the longer the interval, the fewer the opportunities. Plus, the longer the interval, the more traders you have who are looking over your shoulder. Retracements which occur on the 1m or 3m or even 5m chart will be invisible to most everyone else. This is an edge, or at least an important element of one, particularly when one considers the traders who view anything below the 5m chart as "noise".

 

Yep, I have found fewer opportunities, but also fewer false entries and less trades per day, hence less commissions. I am not hardwired yet into a bar interval, just wanted to explore a bigger picture that provided me opportunities in the 90 min TF that is why I chose the 1 min as a leap from the 30 tick.

 

If you're still having trouble opening things up, provide yourself with several simultaneous intervals, e.g., a tick (or close to it), a 1m, and a 5m. Include a 15m if you like. Watch how they relate. This will free you to at least some extent.

 

I am currently in this process, I have posted something regarding this in the eurusd thread.

There is a problem I face:

 

Lets say I spot a DT around a relevant R level in the 1 Min, I get into my 30 tick chart to look for an entry level, and find a LH and a Break of a LSL. I take the short, with a stop above the LSH.

 

Lets assume the LSH holds and price starts to go down. How do you recommend I use the different intervals levels in order to extract the most of the trade? (After I wrote the question, I realize I have the answer from previous post and the whole forum (There are no intervals, they are in my head, there is just price action), but I leave it just in case there is something new you would like to add)

[Niko 10]

Link to the chatroom:

 

Your Own Chat - Free & Easy! ? » stinto.net «

[DbPhoenix 42]

Quote:

Originally Posted by DbPhoenix »

The purpose of studying price movement via a tick chart or T&S display is to develop a fundamental understanding of the continuous nature of price movement. This is why I say over and over again that one shouldn't be trading while he's going through this. If he does, it all just takes that much longer, sometimes years, if ever.

 

Yes, thank you for this, you have set me free of the "waiting for the close" vice. I confess, I traded during screen time out of boredom, and that took me back, but I am in rehab .

 

 

Quote:

Originally Posted by DbPhoenix »

But once one does understand this, the bar interval is irrelevant. He can use 5m or 15m or 60m bars if he likes. But he won't be coloring them and candling them and obsessing over where they "close". They will be markers along price's journey and nothing more. He will also be in a position to surf his way back and forth through many intervals in order to find the best entry once price is in a position, e.g., heavy-duty support, to provide him with one that has a higher-than-average probability of success.

 

I am using HiLo bars, in order not to be biased by the open and the close, the colors are just courtesy of NT that I did not change, but they are not essential during the analysis, I will just remove them in future post. I see this more as a way to condense a tick chart, that as an interval preference. That is again a result of screen time that I appreciate very much DB.

 

If you remove them because you don't need them anymore, fine. But don't remove them just for me. I know that many people who've posted here in the past have kept their indicators on their charts and removed them solely for posting. This didn't accomplish anything other than to detour them into a dead end, at least as far as Wyckoff is concerned. But then W is not for everybody.

 

Quote:

Originally Posted by DbPhoenix »

I'm sure you've noticed by now that the longer the interval, the fewer the opportunities. Plus, the longer the interval, the more traders you have who are looking over your shoulder. Retracements which occur on the 1m or 3m or even 5m chart will be invisible to most everyone else. This is an edge, or at least an important element of one, particularly when one considers the traders who view anything below the 5m chart as "noise".

 

Yep, I have found fewer opportunities, but also fewer false entries and less trades per day, hence less commissions. I am not hardwired yet into a bar interval, just wanted to explore a bigger picture that provided me opportunities in the 90 min TF that is why I chose the 1 min as a leap from the 30 tick.

 

You needn't become married to a particular interval. Once you "get" the continuity of price, you may elect to enter one trade off a 15s and another trade during the same session off a 5m. Just depends on how it all "looks". Eventually you may be able to trade off a tick chart, combining the waves into 5m segments and seeing a 5m "bar" in your head, not unlike the "blending candles" thing.

 

Quote:

Originally Posted by DbPhoenix »

If you're still having trouble opening things up, provide yourself with several simultaneous intervals, e.g., a tick (or close to it), a 1m, and a 5m. Include a 15m if you like. Watch how they relate. This will free you to at least some extent.

 

I am currently in this process, I have posted something regarding this in the eurusd thread.

There is a problem I face:

 

Lets say I spot a DT around a relevant R level in the 1 Min, I get into my 30 tick chart to look for an entry level, and find a LH and a Break of a LSL. I take the short, with a stop above the LSH.

 

Lets assume the LSH holds and price starts to go down. How do you recommend I use the different intervals levels in order to extract the most of the trade? (After I wrote the question, I realize I have the answer from previous post and the whole forum (There are no intervals, they are in my head, there is just price action), but I leave it just in case there is something new you would like to add)

 

You'll extract the most from any given trade by monitoring the balance between buying pressure and selling pressure. If this becomes anything other than a purely objective exercise, then you most likely have hope and fear issues that you haven't put to rest. If the latter, that will interfere with your ability to assess what's going on in front of you in real time.

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