Trading The Wyckoff Way

[DbPhoenix 42]

Yes, I have. There are all sorts of "modern" approaches that are based on these "congestion" zones, including the Darvas Box. It's something like a family tree, tracing everything back to Dow, Wyckoff, Schabacker (and Homma, if one wants to include candlesticks). But I find more clarity in the source material than in the adaptations. Sort of like the difference between the simple marinara served to the staff (tomatoes, basil, garlic, olive oil) and the elaborate multi-ingredient designed-to-impress concoctions served to the patrons.

[DbPhoenix 42]

Just a reminder, with regard to all these midpoints. The midpoint of that long upmove from 1950 to 2050 (on the NQ) -- and of course the midpoint of the 100% retracement -- is 2002 (+/-), which is where we're sitting right now. Supposedly, if we can't hold here, that suggests weakness. OTOH, if we can hold above, that suggests strength.

[gassah 10]

W simply used price levels in a range with a fair number of boxes to project counts. Attached are 50 and 100pt charts of the DJIA with 1 box reversals. Simply count the number of boxes in a line, multiply by the number of points in a box and subtract (or add) that to the price at the level the count was taken from. Using the 100pt chart there are 11 boxes along the 12900 line: 100pt X 11 = 1100. 12900 - 1100 = 11800. On the 50 pt chart: 21 boxes X 50 = 1050. 12900 - 1050 = 11850.

 

Don't get hung up on the precise projection numbers. In this particular situation I'm more interested in knowing if there is enough of a count to make it to the other side of the larger DJIA range IF it decides to head down. The count can also be used to project upwards from 12900.

[zdo 20]

Did Wyckoff talk any about the 'auction' dynamics inside chop?

[DbPhoenix 42]

Multiple resistances lining up on the NQ, macro and micro:

 

 

 

If you plot VAP (volume-at-price), you'll note that the micro is at the upper limit of its range, which coincides with the midpoint of November's range (which is part of a range going all the way back to July). I suspect that a market profile chart would illustrate the same resistances.

 

And the macro and micro for the ES:

 

 

[DbPhoenix 42]

After dropping back into the box drawn above on the NQ micro, the NQ found resistance at the top of the box premarket. Shorting here was a by-the-numbers drill sort of entry. Automatic. But whether one has or has not read the "dailies" posted to my Blog (below), he may be wondering what to do now. It's been a long and steady climb from 1950 with not too many consolidations along the way. So, what's the "target"?

 

We've already dropped below the low of the aforementioned box, and the top of the next one is at 2000, and while that's not impossible, we've already dropped twenty points intraday. If one goes by a VAP plot (which, I assume, would be similar to a Market Profile plot), the bottom of the range lies around 1985-1990. The bottom of the longer-term range is all the way back to 1950. So where to exit?

 

And here's where the trendlines and swing points I've referred to come in. If one has no idea -- or too many ideas -- where to find the opposite end of his trade (resistance if he's long, support if he's short), he can either guess and more often than not wind up cutting his profits much too short, or he can resign himself to giving up a few points at the turn and using trendlines and swing points to tell him when to get out. In hindsight, of course, he can locate that elusive reversal signal, or that so-called "no supply" bar, but in real time there are plenty of reversal signals and loads of "no supply" bars, and if he isn't trading counter-trend throughout, he will at least get out too soon.

 

Currently, we are hovering at the top of the range created on 5/20 and 21 (also the midpoint of the longer-term box drawn on the NQ macro*). Is this going to be support or not? Is it going to be enough the reverse the movement? If you don't know, rely on your trendlines and swing points. Or just guess and get out.

 

*Edit: I should also point out that this level (2000 +/-) is also the midpoint of the entire move up from 1950 to 2050.

Edited June 2, 2008 by DbPhoenix

[firewalker 10]

After dropping back into the box drawn above on the NQ micro, the NQ found resistance at the top of the box premarket. Shorting here was a by-the-numbers drill sort of entry. Automatic.

 

It wouldn't be the first time this kind of move starts 10-15 minutes before the market opens. So what do you do? Jump the gun and take the entry because price is sitting there ready to go, or wait for the green light, risking jumping aboard a moving train? We Europeans have the luxury that US markets open mid-afternoon, but I guess you have to get up early

 

But I agree, this was a no-brainer entry.

[DbPhoenix 42]

Depends on what you consider to be a green light. R was rejected at 9:30:30. One could short that. Or one could wait for the bars to calm down and short somewhere between 0945 and 0950. How much does one trust what he sees? How much is he expecting to be trapped? How much confirmation is he looking for?

[firewalker 10]

Depends on what you consider to be a green light. R was rejected at 9:30:30. One could short that. Or one could wait for the bars to calm down and short somewhere between 0945 and 0950. How much does one trust what he sees? How much is he expecting to be trapped? How much confirmation is he looking for?

 

No argument there. Today wasn't one of these "runaway cases" and you had the opportunity to get along nice and early. "The green light" I mentioned was indeed the rejection. I wouldn't wait for more confirmation, because that would mean a wider stop.

[DbPhoenix 42]

Doesn't necessarily mean a wider stop. There were several subsequent places to enter, if you're using a 1m chart or less. And if you choose your entry properly, you can still use a tight stop.

[erierambler 10]

Where do the odds favor rotation back to the bottom? I'm going with the break of minor support, plus a little, around 1380. There's already been a minor false break with potential confirmation from the wide range down bar (with volume).

 

As of yet we haven't seen much selling pressure on the downside ( volume ). Could this be absence of sellers? Buyers hanging on.......?

erie

[gassah 10]

As of yet we haven't seen much selling pressure on the downside ( volume ). Could this be absence of sellers? Buyers hanging on.......?

erie

 

Coming off resistance today. I thought it was worth a short (SDS long) today to see if selling comes in.

[Tannism 10]

Penn had a consolidation period at the halfway point of the move. It is the accumulation vs distribution question here. Maybe PnF can give some insight.

 

I see potential cause to go to the top again. There have been several recent big bar down weeks when long term support held.

 

As a whole, casinos are not strong, but Penn has held up better than most. The DJ casinos index appears to be stabilizing.

http://tinyurl.com/5uk7gm

[gassah 10]

I see potential cause to go to the top again. There have been several recent big bar down weeks when long term support held.

 

Hopefully the count from the top won't be fulfilled and the lower base isn't re-distribution. Along the 55 line is a count of 31 projecting down to 24-29.

[gassah 10]

the chart...

[mike_ITL 10]

Yes, I have. There are all sorts of "modern" approaches that are based on these "congestion" zones, including the Darvas Box. It's something like a family tree, tracing everything back to Dow, Wyckoff, Schabacker (and Homma, if one wants to include candlesticks). But I find more clarity in the source material than in the adaptations. Sort of like the difference between the simple marinara served to the staff (tomatoes, basil, garlic, olive oil) and the elaborate multi-ingredient designed-to-impress concoctions served to the patrons.

 

 

Goodmorning DbPhoenix,

 

do you know if the original Wyckoff course is still for sale ?

If yes, do you know where can I find additional information about it and eventually who can I buy it from ?

 

Thank you for your kind attention.

 

Mike

[DbPhoenix 42]

At the moment, no. The chapters posted here, as noted, are from the original. The SMI adaptation of it is available, but it runs around $1000.

 

If you're interested in that, links are provided in the Wyckoff Resources thread. If you're not, study the chapters posted here which, for the most part, focus on the fundamental concepts. Then review the posts which, for the most part, have to do with application. Then put in your own screentime (which can't be avoided, no matter how much you read or how much you spend) and try to apply what you've learned (or think you've learned) in real time.

 

The process of learning how to trade this -- or any other approach -- is considerably more involved, however.

Edited September 5, 2015 by DbPhoenix

[Tannism 10]

Very helpful reply, thanks.

 

My intraday tools don't go back far enough here on User defined PnF, but do on %PnF. I think it is related to the relatively large % move PENN has made.

 

Using 3 %PnF, I seem to be in the zone, especially comparison with Db's boxes. It is maybe a clue as to why he doesn't find PnF useful.

 

My % Pnf Calculations are from the du Plessis log charts.

 

Thank you for providing a place to post PnF.

[DbPhoenix 42]

 

Using 3 %PnF, I seem to be in the zone, especially comparison with Db's boxes. It is maybe a clue as to why he doesn't find PnF useful.

 

 

Though to avoid misunderstanding, I should point out again that I don't personally find it useful. This is not to say that it's worthless or that many people don't profit from its use. Perceptual differences among traders are not uncommon.

[mike_ITL 10]

Great, thanks for your suggestions Db.

 

I will follow your indications and will order a few books about Wyckoff on Amazon, before evaluating if to take or not SMI course.

 

Best regards.

 

Mike

[DbPhoenix 42]

If you enjoy "market books" in general, and classic market books specifically, and if you're looking primarily for trading advice and "wisdom", then you will likely find all of these books enjoyable. However, if you're looking for specifics on how to implement Wyckoff's ideas, you will likely be disappointed.

 

Those of Wyckoff's books which are available are useful primarily for preparing you mentally for the nuts and bolts of creating and developing a trading strategy based on his ideas. Therefore, if you can obtain these books without spending too much money, buy them, read them, enjoy them. But don't expect a course.

Edited September 5, 2015 by DbPhoenix

[DbPhoenix 42]

Looking at what's currently available re Wycoff's work, I notice a book I hadn't seen before: Stock Speculation Classics. I've never heard of most of the people included, but 12 titles which include Wyckoff's Stock Market Technique #2 and Neil's Tape Reading and Market Tactics, all for $6.95 used, is a hell of a deal.

 

Unfortunately, there's only one copy. But a little googling should find other copies elsewhere in case this is gone by the time you get there.

[mike_ITL 10]

Thank you for your support, Db: let me evaluate the preview of your ebook and I will PM to you shortly.

 

Have a great day,

 

Mike

[DbPhoenix 42]

One picture, a thousand words, yada yada

 

 

Please note that these boxes were drawn before and posted by Sunday evening.

 

 

.

[Yquem 10]

Hello there, this is my maiden post. Would like to first thank the moderators et. al. for sharing. Found this website when I was trying to look up materials on tape reading.

 

Would like to ask a question on Wyckoff too - Wyckoff and Livermore are both great masters of the tape. Is it possible to trade "on the tape" in the forex markets?

 

I'm asking this because I have no exposure to forex at all, and can't trade stocks due to work commitment (I'm not a professional trader). Was thinking about the difference in methodology/strategy between the 2.

 

Would appreciate any comment. Thanks!