Trading The Wyckoff Way

[diablo272 10]

That has happened to me many times, and I gotta say, it's never worth it. I now don't leave my screen except to go to the fridge (a few feet away) and to go to the bathroom (down the hall). Neither of these usually takes more than a minute or two, and while price can still do something to surprise you in that amount of time...I can't hold it for that long. I've actually considered hiring someone to go out every day, get lunch for me, and bring it back to my room, but I don't really get that hungry during RTH, so it wouldn't be worth it.

[wjrusnak 10]

So was the lunch worth it?

 

No. I'm done with eating.

[BlowFish 10]

So was the lunch worth it?

 

I wonder how hungry you where and how close to your potential entry you where when you stepped out It's easy to find oneself answering an urgent email, making an important call, or even surfing an 'important' website (or posting here) right around the time price is approaching an area that is likely to require a trade decision. I hope this is not a too non technical observation.

[wjrusnak 10]

I am probably going to be crowned king of this thread. I waited like a hawk, following the YM to the high of the day. I already had my plan set "if it hits the high of day, and retests... I'm making it a go". It hit the high of the day... it retested... I was on my laptop with the chat room open... I checked the chart... and here is my post! (Generally I have my laptop hooked up to another monitor to give me dual screens... not today )

 

 

Realistically I would have caught 30 of those YM points according to my exit strategy. Combining my two CWS trades for the past two days: ~$250.

 

Solution (as DB requested): Eliminate my distractions or at least don't completely cover my entire chart with another screen... so obvious right?

[Head2k 10]

Solution (as DB requested): Eliminate my distractions or at least don't completely cover my entire chart with another screen... so obvious right?

The chat is a tricky thing and you should probably ask yourself why you attend it.

Attending the chat can be a great way how to learn from more experienced traders. You can see what they are looking at and how they are interpreting it in real time. You can ask them questions about market development in real time.

But it can be also very distracting, even in several ways. First, there is a lot of pure chatter going on that can harm your focus. Second, listening to other people can prevent you from trusting or even forming your own opinion.

 

So I think that the chat is good only to a certain point while you learn. And if you truly want to learn, maybe you shouldn't even trade while in chat. But after that point I think it is better to turn the chat off and stay alone just with your chart. Because of self-reliance, accountability and focus.

You can turn the chat on again when you are done for the day, or if you feel puzzled or wondering about what's happening on the chart (in that case you should stop trading anyway).

 

I'd also suggest you to think about Blowfish's post. Since you got your account back to BE because of overtrading you could be trying to avoid making decisions to avoid potential further losses. So the question is whether you really miss the trades unintentionally or you are lying to yourself. I am in such a phase now myself. After letting fear of missing out to cause over- and revenge trading I began to fear losses and that often causes hesitating and passing valid setups.

[DbPhoenix 42]

The chat is a tricky thing and you should probably ask yourself why you attend it.

 

Attending the chat can be a great way how to learn from more experienced traders. You can see what they are looking at and how they are interpreting it in real time. You can ask them questions about market development in real time.

 

But it can be also very distracting, even in several ways. First, there is a lot of pure chatter going on that can harm your focus. Second, listening to other people can prevent you from trusting or even forming your own opinion.

 

So I think that the chat is good only to a certain point while you learn. And if you truly want to learn, maybe you shouldn't even trade while in chat. But after that point I think it is better to turn the chat off and stay alone just with your chart. Because of self-reliance, accountability and focus.

You can turn the chat on again when you are done for the day, or if you feel puzzled or wondering about what's happening on the chart (in that case you should stop trading anyway).

 

It's important to distinguish between a chat room and a trading room. Ours is a chat room and has never pretended to be anything else. One can therefore "hang out" while waiting for a setup, but he must be on guard that he not get so wrapped up in the bonhomie that his setup wings right by him.

 

Therefore, I suggest that one determine exactly what it is that he's looking for (which does not seem to be a problem so far), wait until he gets it, then join the chat while he manages it. Or, as suggested, wait until one is done for the day. But to try to trade, even sim, with all of that going on requires a multi-tasking ability which is very likely unreasonable for someone who is grappling with trading challenges.

 

I'd also suggest you to think about Blowfish's post. Since you got your account back to BE because of overtrading you could be trying to avoid making decisions to avoid potential further losses. So the question is whether you really miss the trades unintentionally or you are lying to yourself. I am in such a phase now myself. After letting fear of missing out to cause over- and revenge trading I began to fear losses and that often causes hesitating and passing valid setups.

The following exchange that I had several years ago may be of benefit here.

 

Or not.

 

I'm noticing a possible pattern concerning my own (virtual) trading: for various reasons (either they were too risky, or not the right time of day, or for some other reason), I've passed on a number of potential entries that would have been successful. It's possible that my objections to these entries (essentially, my fears that they will not succeed) are unfounded. More testing needed.

Why do you say "fears that they will not succeed"? Can you elaborate?

 

Well, this gets right to the reason why I believe I need to have a tested trading plan. Essentially, I have no empirical reason NOT to take these trades. I don't really have any evidence that the entries would succeed either, but they do fit in with my understanding of how the dynamics of price action were working. However, I'm beginning to suspect that I may be avoiding these trades because at some level I do not think they would succeed.

 

The word "fear" may be a bit strong here (and maybe I'm just overly influenced by the last chapter of Steenbarger I've been reading -- where he talks about behavior modification by facing up to one's fears), but certainly I'm interpreting the price action I'm seeing through some kind of filter, attempting to make entries only at times when I think the chances of success are greatest. So, I guess what I'm really wondering is whether I'm allowing some emotional response (based on unknowns -- the effect of extremes in volatility on my setup) to prevent me from making entries I otherwise probably would have made.

 

There's another, deeper issue here as well -- concerning the willingness to accept and take losses in one's trading. On this score, I've moved along the spectrum from a real unwillingness to accept and take losses, to a grudging acceptance of the need to take losses (viewing them as sort of a "necessary evil"), to the point where I see losses as inevitable, and something to minimize.

 

Intellectually, I understand how one could reach the point of total nonchalance concerning losses, but I think one must have some probabilistic basis for such an attitude. Basically, if you know that x percent of the time your entry will result in a loss, but overall the strategy/setup is profitable over time, I believe losses become completely routine. THAT is the point I'm attempting to reach through the process of testing and creating a trading plan.

You've pretty much wrapped it all up in this post. We want to be intuitive. But unless one is exceptional, there are no shortcuts to this level (and if one is not exceptional, he will find out rather quickly). So we take or don't take a trade based on what we think or feel or intuit when in fact we are acting or not acting based on some subliminal fear. In other words, we don't take a trade because we "intuit" that it won't succeed, but we in fact don't take it because we are afraid that at bottom we have no idea what we're doing, we don't want to fail, we can't afford to lose, etc. The doubt and anxiety freeze us, and whatever intuitive sense we may have has been buried in the muck.

 

Which is why the testing is so important, and the experience, which is both a companion to and a consequence of the testing. That is, it's not just the testing that bolsters confidence but the experience that one has gained by having gone through the testing in the first place, regardless of the outcome of the testing.

 

As for the willingness to accept the loss, that's a biggie, and not just the willingness to accept it but to embrace it. If loss disturbs the trader in any way, then he hasn't accepted the fact of it. This alone prompts a number of self-sabotaging behaviors: getting revenge on the market, over-trading to compensate for loss, failing to take every trade that the strategy calls for, reluctance to pull the trigger, chasing price after having been reluctant to pull the trigger, etc. If one believes that he must win, that loss is unacceptable, that he must have made an error if he took a loss, losses will become debilitating. And if one is unfortunate enough to begin trading for real at the beginning of what Yoder calls the "payout cycle" (see Stage Two, Stages of a Trader, post #1), he can suffer a significant setback to his self-confidence.

 

There are those who believe that if one is not trading intuitively, he isn't trading. This is unrealistic. Perhaps at some point one will "get it". Or perhaps he never will. Does that preclude him from trading? Not necessarily. If he can develop a system that he trusts, he will put himself in the position of trusting his system rather than his intuition. Of course, since he developed the system, he will in a sense be trusting himself in either case (this does not apply if one uses somebody else's system). However, trusting the system (or strategy or whatever one wants to call it) is not quite so fuzzy as trusting one's intuitive sense. The system is also more easily fixed.

 

When you reach those "inflection points" where you must decide whether to pull the trigger or not, based either on your system or your intuition, put your thoughts into words. Employ Steenbarger's tactic of being your own coach and explain to yourself, out loud, just what it is that's going through your head -- and what you're feeling -- at the moment you have to make that decision (this is difficult to do in "chat"). Get a digital voice recorder (you can pick up an Olympus VN-240 on eBay for $20 or so) rather than try to write all this down, then review your explanation/analysis/rationalization at the end of the day when you aren't on the spot and can be more objective. Use your charting program's replay function at the same time you play your recording. At the very least, this exercise may help you clarify and separate what's going on with you intuitively and what's going on with regard to your perception of your system.

[wjrusnak 10]

I'd also suggest you to think about Blowfish's post. Since you got your account back to BE because of overtrading you could be trying to avoid making decisions to avoid potential further losses. So the question is whether you really miss the trades unintentionally or you are lying to yourself. I am in such a phase now myself. After letting fear of missing out to cause over- and revenge trading I began to fear losses and that often causes hesitating and passing valid setups.

 

I assure you that the distractions are simply a byproduct of this not being "full time" for myself yet and because of the summer season. Remember I am a full time student applying to medical school at the moment. Though, I am aware that I share the same fear of even taking a trade (due to the recent over trading), but that is very expected and I'll work through it. So, I am not lying to myself or anyone. Believe me, I'll be the first to admit when I psychologically fail to make a trade.

 

And if you truly want to learn, maybe you shouldn't even trade while in chat. But after that point I think it is better to turn the chat off and stay alone just with your chart. Because of self-reliance, accountability and focus.

 

Noted and I believe you're probably right. We do have our fair share of technical market speak in the room, but it comes with much "chit chat". You know what I mean...

[jonbig04 10]

I am probably going to be crowned king of this thread. I waited like a hawk, following the YM to the high of the day. I already had my plan set "if it hits the high of day, and retests... I'm making it a go". It hit the high of the day... it retested... I was on my laptop with the chat room open... I checked the chart... and here is my post! (Generally I have my laptop hooked up to another monitor to give me dual screens... not today

 

I would check into what Hlm suggested (its also what I do) and set price alerts near your entry zones. I personally fart around all the time, UNTIL I hear the alert chime. IMO when price is near S/R or whatever you're trading, that's when your focus should be on absolutely nothing else. To me its unrealistic to watch a chart all day, hanging on (and analyzing) every bar- that's why I set the alerts and just forget about it until they chime. I wouldn't beat yourself up too much, its an easy fix.

[BlowFish 10]

Unless you are a scalper maintaining peak focus all day is probably counter productive. It's certainly needlessly tiring if price is points away from anywhere that requires your attention. Having said that if I sit down at the open (or before) and carefully focus on PA (or 'the flow' if you like) I seem to get a much better feel for what's going on. I find it much harder 'to snap into things' later. It's like joining your buddies for golf on the third hole or starting a race on the 5th lap.

 

I wonder how easy people find it to shift focus? Is it just mental discipline...when the alarm goes off shut down everything and concentrate on the entry chart. Are you just good at multitasking, or maybe you exclude all potential distractions during the hours you trade? I guess if people use some sort of mechanical 'trigger' it makes things easier.

 

I think there may be an argument for some people to remain fully focused and engaged with the market, not because it is required but because it minimises the risk of distraction. Apart from the various 'fears' allowing yourself to be distracted seems to be a common cause of CWS.

[DbPhoenix 42]

.....if I sit down at the open (or before) and carefully focus on PA (or 'the flow' if you like) I seem to get a much better feel for what's going on. I find it much harder 'to snap into things' later. It's like joining your buddies for golf on the third hole or starting a race on the 5th lap.

 

I wonder how easy people find it to shift focus? Is it just mental discipline...when the alarm goes off shut down everything and concentrate on the entry chart. Are you just good at multitasking, or maybe you exclude all potential distractions during the hours you trade? I guess if people use some sort of mechanical 'trigger' it makes things easier.

 

I think there may be an argument for some people to remain fully focused and engaged with the market, not because it is required but because it minimises the risk of distraction. Apart from the various 'fears' allowing yourself to be distracted seems to be a common cause of CWS.

 

I agree. The core of this approach is being sensitive to the imbalances between supply and demand and how those imbalances result in price movement. This is not compatible with "farting around" until a chime is sounded. The chime option may, as you pointed out, work with a mechanical system, but this is not a mechanical system.

 

If one can't focus on the work, he shouldn't be doing it. If trading all day is too much, he should trade only as long as he can do what is required (which is why I try to finish by 11:00). Or switch to a mechanical, or even an automated, system.

[sep34 10]

Price action is like a Movie or a Book and each day is a new chapter that is connected to the prior day as chapters (i.e. chapters of a book) usually build on a prior chapter.

In short missing the morning price action or not paying attention would be to me the same as starting a movie by skiping the first 30min or starting a novel from the 2nd chapter.

You will evetually be able to understand whats goign on...but you will be playing catch up and doing a lot of guessing for some time until you figure out whats going on.

 

Thats ok if you are reading a book or watching a movie, unfortunately with trading one will most likely pay a penalty until they catch up.

 

Even if one is waiting for some levels to be reached. That does not mean that new level will not be created in space between where price is now and where the nearest level one is waiting for is reached.

 

In short I hate to miss the opening price action...feels like a handicap.

 

Other benifits of focusing and paying attention...one will learn a lot durring the time span between trades. I learn something new every day...seriously. Everytime I think I know it all, I will learn something new that humbles me and reminds me that a lifetime of learning may only scratch the surface.

 

Exceptions are systematic/automated trading.

 

That said everyone has there own methods and if what ever you are doing is working for you... more power to you.

 

 

 

The Market is willing to reveal Her secrets, but one must be willing to meet Her half way.--xyz

[DbPhoenix 42]

While trading is simple, it is not easy, and beginners often make it more difficult than it already is by virtue of the choices they make.

 

Inattentiveness is a common cause of CWS. The most obvious solution to this is to determine just what one's attention span is, i.e., for how long a period one can maintain maximum attention and efficiency, then trade for only that length of time. However, it's not all about the trader. The market has something to say about all of this as well. And that's where Wyckoff comes in: find the market or instrument that's most likely to (a) move, (b) move the farthest, © move the fastest.

 

In the chart wj provided (though this is not about wj per se but about all those who suffer from the dreaded CWS), note that price moves from R to S first in only 45m. It then rallies back to R in 30m. It then takes three times as long, 90m, to revisit S. then three hours to get back to R. So if one has attentiveness issues, when ought he to be trading? When is the market most ready to move? When does it move the fartherest the fastest?

 

One can, of course, elect to trade during that period of the day which is most inappropriate for his "style" , but doing so will involve unnecessary struggle, which will often lead to "fear", at which point the trader will focus on dealing with his fear, when a more pertinent concern is the choice of the interval in which he's trading.

 

The fear, in other words, is most often an irrelevance, the result not of deep-seated neuroses which fatten the pockets of psychologists and counselors but of poor choices. If the trader were to alter his trading environment, he would very likely find that his fear evaporates.

Edited September 15, 2015 by DbPhoenix

[cowseathay 10]

I think I see a potential hinge/coil in the DAX Future in the one hour chart. Volume seems to be diminishing, the hinge seems to be "filled with price" and the ranges are getting smaller and smaller. Seems like it is poised for a breakout.

 

[rigel 10]

When the move comes, it will be quite volatile, Dax does move,

BTW do you get much slippage trading Dax on Ninja.

[tracker77 10]

insightful analysis. thank you.

[atto 20]

Update on your FDAX hinge.

[monad 10]

Nicely anticipated based on price action:))

[djohnsonhot 10]

Well, I think that this failed hinge was a single candle move and reading that particular candle, one MUST observe the follwing:

 

1. The real body of the red candle immediately following the up-move break-out candle would be called a REACH or a TEST of the high (an attempt to push higher) with a failure to do so. I would like to see VOLUME accompany this chart in that real time-frame...I would suspect a pop.

 

2. The body of this red candle has a lower open and higher close. LH and an inside closing point...hardly a move anywhere and in and of itself, we are talking a lack of momentum within its shorter timeframe.

 

Go over to the Al Brooks forum and look for what they call a signal candle.

 

DJ

[DbPhoenix 42]

Well, I think that this failed hinge was a single candle move and reading that particular candle, one MUST observe the follwing:

 

1. The real body of the red candle immediately following the up-move break-out candle would be called a REACH or a TEST of the high (an attempt to push higher) with a failure to do so. I would like to see VOLUME accompany this chart in that real time-frame...I would suspect a pop.

 

2. The body of this red candle has a lower open and higher close. LH and an inside closing point...hardly a move anywhere and in and of itself, we are talking a lack of momentum within its shorter timeframe.

 

Go over to the Al Brooks forum and look for what they call a signal candle.

 

DJ

 

What charts are you referring to? There are no candles in these examples.

 

As to the "failure", the hinge did exactly what it was supposed to do.

[DbPhoenix 42]

Wyckoff is not about being mechanical. It's not about quantification. It's not about indicators and geometry. It's not about questionable "patterns", much less the cute and clever names invented for them. It's not about trading "bar by bar". It's not about software and little red and green arrows. What it is about is trading price movement, continuous and uninterrupted price movement, price movement that is created by the imbalances between buying pressure and selling pressure. The further one moves away from that and toward bars and candles and indicators and patterns, the more closely focused his attention becomes on those bars and so forth and the more disconnected he becomes from price movement, which may be the reason why so many people continue to fail and resort instead to mechanical methods (which may or may not serve them any better).

 

The TICKQ is a simple measure of market breadth. It is not an indicator, anymore than the Dow Jones Industrial Average is an indicator. It has no settings. You can't futz with it. Plotting it against stocks, ETFs, futures, or any other trading instrument is not much different than overlaying a price plot of the S&P or the DJIA, which tells you how whatever you're trading is doing against the broader market.

 

Was anything like the TICKQ available a hundred years ago? No. Would Wyckoff have used it if it were? Given his repeated emphasis on knowing what the broader market and the various groups were doing before selecting a stock and while trading it, I have no doubt that he would. I suggest, therefore, that those who are tired of labeling bars and candles and drawing patterns and searching for hidden meanings and trying to discern the motives and activities of the so-called "smart money" and want something simpler and more elemental may find the TICKQ helpful in detecting those turning points at which price is running out of steam.

 

For example, from yesterday:

 

First locate support and resistance:

 

 

 

 

Zooming in to the day's sweet spot:

 

 

 

 

And making the entry:

 

 

 

 

Entry can be made as soon as the divergence manifests itself, a tick below, two ticks, three ticks, whatever. That's up to the trader. The order can be a market order, a limit order, a stop-limit order, whatever. Makes no difference. Up to the trader. What matters are not the minutiae of entry location or order type but the fact that price and the TICKQ are moving in different directions at resistance. If one doesn't grab that basic fact and hang onto it, then all the geegaws and tschotkes that he has loaded onto his chart aren't going to rescue him.

Edited December 29, 2012 by DbPhoenix

[DbPhoenix 42]

The TQ was not particularly helpful this morning. It and the NQ clung together like horny teenagers. But if one is patient enough and puts the Wyckoff methodology first (climaxes, tests, springboards and so on), the TQ can provide that extra little bit of confirmation that one may need to pull the trigger.

 

First, because of the lows put in Monday, yesterday, and overnite, we have to back up a bit to find support:

 

 

 

 

Now we look to the same bar interval as my previous post and locate support and resistance for today (I haven't transferred all the notations from the previous chart to this one because I'm too lazy and for you it's only a little scroll upwards):

 

 

 

 

Here, because of yesterday's high, we have resistance at around 1468 (the more recent swing point trumps the one from a week ago: see previous post). Next most likely "zone of interest" (see how jargon can creep in?) is 1460. Then we have those little trading ranges that were formed Monday, yesterday, and last nite. That they were interrupted by that rally to 1468 does not change the fact that a lot of trading went on there, and that alone makes them important. So we have yet another possible resistance level at 1452-3, and support at 1440-42 (see first chart).

 

The TQ provides no help as it and price bounce back and forth between the support and resistance levels noted above, though one can make pure resistance and support trades at 09:33 at 1452 and at 10:01/2/3 at 1439 if he's good enough. But that's not the subject of this thread, the TQ. The TQ does give guidance 45m later during the test of the first swing low at 1439 (see the little red arrows, above?):

 

 

 

 

Look what happens here. Price reaches the level of the first swing low 45m earlier (and you see now why it's necessary to have at least a 1m chart to provide the context), but then it just sits there, for over two minutes. And while it's sitting there (which, again, is a relatively important support level: see first chart), the TQ waves goodbye and heads north. This may give the trader a bit more confidence toward taking the trade. Is this an in-your-face divergence that is to be taken regardless? No. It's really pretty subtle. But look where it's taking place, at a level where, according to Wyckoff's methodology, the trade ought to be taken anyway. The TQ just gives it that little extra oomph, the cherry on the sundae, the paprika on the deviled egg.

 

 

[DbPhoenix 42]

So what happened later?

 

 

 

 

Price made it all the way to 1469. (And see that little red arrow pointing at that bar at 1460? When price busts through a particular level like it's been shot out of cannon, you can be sure that the resistance level you thought was a resistance level really was a resistance level.)

 

 

And what did the TQ look like at resistance?

 

 

 

 

Time to scale out, or exit entirely. Maybe even reverse, if you're not tired.

[facc 10]

I trade the euro stoxx 50 and I am amazed that price doesn’t move if there is a big imbalance between bid vs ask volume, on several occasions this week I saw bid vs ask ratio of more than 5:1 or 1:5 and price went nowhere not even a single point.

 

Am I missing something here?

 

I do find the speed of the tape very helpful but it seems that it doesn’t always matter how many contracts are being traded.

[DbPhoenix 42]

I trade the euro stoxx 50 and I am amazed that price doesn’t move if there is a big imbalance between bid vs ask volume, on several occasions this week I saw bid vs ask ratio of more than 5:1 or 1:5 and price went nowhere not even a single point.

 

Am I missing something here?

 

I do find the speed of the tape very helpful but it seems that it doesn’t always matter how many contracts are being traded.

 

Price moves because of transactions, not because of intentions. Bid and ask "volume", therefore, are not pertinent unless and until they result in a transaction. Once the actual transactions have taken place, one can then analyze the results of those efforts and judge the balance between buying pressure and selling pressure.

 

If you're scalping, however, you're more likely to be concerned about the initial impulse away from your entry point. That may have more to do with where the entry is made than with the volume behind it. Without knowing your strategy, I can only guess.

[facc 10]

I trade of the 5 min chart and I don’t scalp I normally try to go for 10 to 20 points on the fesx and on a trend day I will try to hold my position until I think the move is overdone or before a news event comes out. I also don’t use level 2 but just time and sales.

 

And the bid vs ask I mentioned are the real volumes being traded so those are transactions. I do see value in volume on daily chart. But on a 5 min chart I sometimes see thousands of lots being traded while price goes nowhere for minutes and then it moves on less volume, and it doesn’t always move in the same direction as the thousands of lots traded minutes before.