Trading The Wyckoff Way

[YertleTurtle 10]

gozila -

 

Here you go: http://cdn3.traderslaboratory.com/forums/attachments/131/17907d1263785828-wyckoff-resources-wyckoff-method-tape-reading.pdf

[DbPhoenix 42]

i am so sorry DbPhoenix, but all i have are

 

"Wyckoff method of trading and investing in stocks book"

 

and i am looking if there are any thread have more details or charts explaining supply and demand line

 

Yes, that's the course. Go to Section 15.

 

If you need more examples, there are dozens, if not hundreds, in the threads here. You can search each thread or search the Forum in its entirety using the Search This Thread or Search This Forum tabs with "supply line" and/or "demand line", but you'll likely get a hell of a lot of results.

 

Others may have favorite posts to which they can provide links, but I'm afraid I don't.

 

Edit: Actually "supply line" and "demand line" yield about 130 posts each throughout the Forum, which isn't all that bad, considering there are around 5000 posts all told.

Edited April 5, 2013 by DbPhoenix

[DbPhoenix 42]

This is a summary of what I've posted today, plus the last half hour, plus suggested entries.

 

It should be clear that after a couple of hours one has a hell of a lot of notations. Presenting the fait accompli can cause those who know nothing about this sort of trading to think Jesus Christ How can anybody trade this mess? But taking it step by step from the very beginning may reveal the sense and logic of it.

 

And a reminder that no exits are posted because trades are exited by the fearful when a supply or demand line is broken. The more confident who are watching price move in real time can give price a little more room.

[tupapa 10]

Today I've been watching and perceived the imbalances in a similar way, but what about this one?

 

 

Why short instead of long?

[DbPhoenix 42]

Today I've been watching and perceived the imbalances in a similar way, but what about this one?

 

 

Why short instead of long?

 

Well, a, you're looking at it in hindsight, b, your demand line would not be drawn that way in real time. In RT, the line would be broken at 2747, and since you would not know in RT that price would rebound at 2740, you'd take the short. If you took the short and got stopped out by a break of the supply line (which you don't show), you'd still make money.

 

Trade what's in front of you, not a scenario.

[DbPhoenix 42]

Given gozila's questions about supply and demand lines, this is as good an opportunity as any to point out the difference between these and trendlines.

 

This is a little cramped, but you get the idea.

[tupapa 10]

Well, a, you're looking at it in hindsight, b, your demand line would not be drawn that way in real time. In RT, the line would be broken at 2747, and since you would not know in RT that price would rebound at 2740, you'd take the short. If you took the short and got stopped out by a break of the supply line (which you don't show), you'd still make money.

 

Trade what's in front of you, not a scenario.

 

Actually I looked at it in real time.

 

Why don't you go long in the first bounce at 43, but you go long at the bounce at 40?

 

In real time I noticed an up-wave that was practically as long as the previous down-wave, then a Ret to around 43, which is the 50% Ret of the up-wave, so I thought if buyers step in this shows strength.

 

[DbPhoenix 42]

Because you're ignoring support and resistance. Given the extent of the drop pre-market, it's unlikely that the secondary reaction would be so far above the climax low.

 

But let's assume that it was, or might be. Opening this up, you'd go long at the spot you've chosen and be immediately stopped out. If you had your wits about you and stayed calm, you'd then reverse and go short anticipating a better test of the climax low. Or you could just wait for it and go long at the true secondary reaction. As long as you immediately exited your first entry, you'd lose nothing, or maybe a couple of ticks depending on how quick you were.

[DbPhoenix 42]

Keep in mind also that this 50% business is merely an indication of strength or weakness. Where you've pegged 50% is an indication of strength. And where you would have taken your long is a 50% retracement of the previous rally, also an indication of strength.

 

However.

 

Go back up to my post about retracements. The retracement is an opportunity for new buyers to jump in on a trade they think they've missed. And some might have entered where you would have. But for whatever reason (you may insert whatever conspiracy theory you subscribe to), they didn't have it. So price, despite all indications, resumed its downtrend. This is something you have to be prepared for.

 

If you expect it to move, and it doesn't, then get the hell out.

[DbPhoenix 42]

Depending on the amount of baggage one is carrying, this can all seem too complicated to deal with. So much simpler to plot a MACD and a slosto.

 

On previous websites, I preached price/volume, support/resistance, demand/supply, trend/trendlessness (ranging). Or if volume doesn't do it for you, focus on the waves and how far and how fast one side or the other is able to push price. Either way, focusing on these four elements helps to clarify the situation and clear the mind, thus enabling the trader to act quickly and decisively and not fuck himself over.

 

By all means do not fall into the trap of believing that the market is a jungle and everyone is out to get you/trick you. Once you're in that place, you will be incapable of assessing the situation objectively and rationally. You will instead be second- and third-guessing yourself, and that's not the road to profit.

[tupapa 10]

Depending on the amount of baggage one is carrying, this can all seem too complicated to deal with. So much simpler to plot a MACD and a slosto.

 

On previous websites, I preached price/volume, support/resistance, demand/supply, trend/trendlessness (ranging). Or if volume doesn't do it for you, focus on the waves and how far and how fast one side or the other is able to push price. Either way, focusing on these four elements helps to clarify the situation and clear the mind, thus enabling the trader to act quickly and decisively and not fuck himself over.

 

By all means do not fall into the trap of believing that the market is a jungle and everyone is out to get you/trick you. Once you're in that place, you will be incapable of assessing the situation objectively and rationally. You will instead be second- and third-guessing yourself, and that's not the road to profit.

 

It certainly doesn't seem easy, I imagine it is also hard to explain how to trade this way, once it becomes second nature.

 

You have posted a week of trading much like the Trading in 90 minutes Thread, Surfing the waves using Demand and Supply Lines guide you.

 

 

How does this relate to;

 

The idea of trading only at Support and Resistance and planning your trades in foresight before the market opens??

 

The idea of defining a unique setup, testing it and waiting for it to take place??

 

 

This seems to be like a very active trading plan, where you are constantly entering, exiting, and reversing.

 

Isn't this a completely different ball game from how you and others traded in the Trading in Foresight Thread a few years ago??

 

Example; Go long on a rejection of Support, if there is a breakout sell the retracement, if none of this happens do nothing.

 

What exactly are you trying to accomplish by posting these charts? Is this supposed to help traders develop a trading plan?

[gozila 10]

DbPhoenix,

 

I draw supply and demand line on bar chart and line chart,but the result are difference,i need your opinion

[DbPhoenix 42]

People learn in different ways. Some can read an article or book and run with it. Others need the visual equivalent. The charts are simply another way of expressing the content of the course.

 

The chief advantage of observing price movement without any consideration of entries and exits is that one develops a sensitivity to what buyers and sellers are trying to accomplish and how well they're doing. This cannot be done if one is continually worrying about where he should enter or exit or where his stop should be and how much money am I making/losing. The trader should be concerned enough about what price is doing to take action when necessary, but he should not care in the least about it otherwise. Call it active apathy. If he gets stopped out, his reaction, if any, should be Oh, well, not Oh, shit waddoo I do now?

 

All of your questions have to do with entering and exiting and managing, not with what buyers and sellers are doing. Even when you think you're focusing on price flow, you're still thinking about where do I enter? If you can't get past this, you'd really be better off trading with indicators.

[DbPhoenix 42]

Doing this on a hindsight chart doesn't make a great deal of sense. However, doing it in real time enables the trader to track the progress of supply and demand and pick up on changes in the balance between buying pressure and selling pressure and get out when his trend is over.

 

See the charts (6) I posted to the AM thread this morning to see how these lines are plotted in real time.

 

You can also plot trendlines (chart 2), but while these may help you know where to look for trading opportunities during the coming day (again, see the charts I posted this morning), they aren't going to do you much good in real time in terms of tracking the push and shove of buyers and sellers.

[gozila 10]

thank you DbPhoenix, your answer is clear,and i saw your chart...i have question on your chart

[DbPhoenix 42]

This is the same question tupapa was asking. Did you not see my reply?

 

The chart is not mine; it's his. I added the S/D lines.

 

Edit: Once you've read my reply to his question, the chart below may be helpful.

Edited April 5, 2013 by DbPhoenix

[Niko 10]

 

As always, very illustrating. I understand all of the longs, (still puzzled by the entry before the HH or LL, but i think I am getting there). The one i dont find very obvious is the second short, as we are still away from the first entry to give it some time to find support at the MP of the last up swing. Something I have noticed on oil and on nq as well.

 

I wanted to know if there is anything clear in the price action that indicates close and reverse for that specific trade. Is it R at 752 and 750?

Edited April 5, 2013 by Niko

[DbPhoenix 42]

 

As always, very illustrating. I understand all of the longs, (still puzzled by the entry before the HH or LL, but i think I am getting there). The one i dont find very obvious is the second short, as we are still away from the first entry to give it some time to find support at the MP of the last up swing. Something I have noticed on oil and on nq as well.

 

I wanted to know if there is anything clear in the price action that indicates close and reverse for that specific trade. Is it R at 752 and 750?

 

Not all of these entries are requireds. Most are electives. I put them all in so that no one gets the idea that there is only one entry in each section. Those who are aggressive can take the aggressive entries, those who need more confirmation can wait (the penalty for the latter, of course, being that one can be stopped out rather suddenly).

 

The first long is taken at the first RET after the climax low. This can be assumed to be a climax due to the support level and the capitulative decline.

 

The subsequent short is taken at the first RET after the break of the demand line because there's no way of knowing whether this will be a secondary reaction or if price will continue down toward the next support level. As it turns out, the secondary reaction takes place as it should, and one can take the risk of going long even though the supply line is not yet broken, or one can wait and take it just after. If one had the balls, he could take both, the second one being a scale-in.

 

There's no trade on the next leg down, partly because price is falling out of a hinge and the first move out of a hinge is nearly always fake and partly because price only falls about 50% of the immediately preceding rally. When price makes one of its famous U-turns back into and then out of the hinge on the upside, the long can be taken with more assurance. If more confirmation is needed, the next can be taken. Or, as before, they both can be taken. Note that if only the second is taken, it will be stopped out quickly.

 

The next short is taken at the first RET after the break of the demand line. The fact that the line was broken after price appeared to find R at the premkt high is a confirmative element (waiting for price to find support is another way of saying hoping that it will, and if it doesn't, you're watching price fall and you're not in the trade). The supply line is then broken after price appears to find S at the previous swing low and the next long is taken. If one doesn't like that, he can wait for the next opportunity, though this one takes a while. If he takes both, the second can be a scale-in.

 

The great disadvantage of static charts is that one has absolutely no idea of pace, and pace can provide a great deal of information in real time, particularly with regard to hesitations and punching through (note, for example, the hesitation when price first drops out of that hinge). There are also the elements of extent and duration of waves. Some last a long time but don't go very far. Some go far but don't last very long, like the climax run. Some do both. Some neither. And there is also the tendency of beginners to read charts from right to left instead of left to right. Reading from right to left can create all sorts of confirmation biases, which is why backtests done improperly can so often (always) yield exactly the wrong information.

 

There is also the ever-present hindsight bias. One tells himself that if only he'd held, he would have done so much better, and with fewer trades to boot. This is also why so many will work at this for four or five or nine or fifteen years and never do much better than cover expenses. You have to trade what's in front of you, without hesitation. And if you're prepared to get out immediately if things don't go as expected, there is virtually zero risk. Knowing this, and I mean knowing it, enables the trader to take these trades and even make immediate exit-and-reversals because he knows that he can't be screwed.

 

If you have any other questions, just ask.

[Niko 10]

Just superb....

 

Let me digest this first and questions will surely come up.

 

Thanks

[gozila 10]

springboard is it indecision zones before explosion price (inside bars) and if not that how you define it on chart??

[DbPhoenix 42]

springboard is it indecision zones before explosion price (inside bars) and if not that how you define it on chart??

 

As to your first question, both.

 

As to your second question, see the Stickie on Auction Markets and scroll down to Springboards. Most of your questions will be answered once you've read the material in the Stickies. You may also want to do a search on "springboards" using my name.

Edited April 8, 2013 by DbPhoenix

[Niko 10]

springboard is it indecision zones before explosion price (inside bars) and if not that how you define it on chart??

 

Gozila,

 

have you read the wyckoff course book?.

[gozila 10]

Dbphoenix please look at this chart

[Gringo 10]

Dbphoenix please look at this chart

 

Forex for learning to trade? My personal opinion is that it's quite a difficult task to apply Wyckoff principles to forex. There are those who have done it successfully but they are the exceptions. Trading is tough to start with and then choosing an instrument that doesn't even behave with much consistency make the task doubly difficult.

 

I wish you all the best.

 

Gringo

[DbPhoenix 42]

If you trade price action, your edge never fails.