Trading The Wyckoff Way

[DbPhoenix 42]

You can see that with each potential selling climax price drops sharply with a dramatic increase in volume. The final climax that occurred didn't seem to have any big volume bar, but a lot of volume occurred in a small period of time, which you may not pick up if you were following bar by bar. Also, note that the final climaxes and shakeout occurred at support (or right below), which signals a much higher chance of a reversal than if they occurred in the middle of nowhere. You can also see lower volume on the test, and then large volume during the shakeout followed by rapid price reversal. The job of a shakeout is to get rid of "weak hands" so that a new move could be started. And as you can see that job was accomplished with great success.

 

Your mention of the "final" climax and shakeout taking place at support should not be overlooked by those who read this. Many novices search for selling climaxes at every swing point that has higher than normal volume. But it is not unusual to find swing points with higher than normal volume. That's in large part what makes them swing points in the first place. So how does one differentiate between "climactic volume" and a selling climax? Because the selling climax will take place at or near an important support level.

 

One must understand that just as distribution takes place on the way up and not just at the top, accumulation takes place on the way down and not just at the bottom (this is why price will sometimes spend very little time at the bottom before reversing and taking off in the opposite direction).

 

The "climactic volume" that occurs when buyers attempt to provide "preliminary support" signals an effort toward accumulation. Weak holders will throw their shares/contracts back on the market when price continues to fall, but stronger hands will continue to slow and eventually halt the decline. This is what creates the bottom in the first place.

 

Price does not just stop as if it were hitting the sidewalk after being dropped from a highrise. Its fall is gradually slowed, as if brakes were being applied, until it comes to rest. The accumulation which made possible the rise from 1400 to 1440 did not occur just in those few minutes after the shakeout. It began long before, from the first time buyers tried to halt the decline.

 

There are those who claim that volume is useless, and if one doesn't understand what it is, then it is indeed useless to that individual. But if one understands that volume is a measure of trading activity, it becomes an invaluable aid at key points and levels, providing that extra added insight into trader behavior which can make the difference between a successful trade and a failed one.

[Head2k 10]

My (not) trading today's NQ open provides a nice example for this thread.

 

First a 5 min chart with my prep (including latter action, too):

I had 1508.5 as the nearest important R. The white lines describe a range I wanted to trade off. I noticed that price poked above yesterday high, was rejected, but then failed to make a lower low (compared to the low made after 4 am). On a small scale it made a higher high (after 9 am). So I was looking for a long off another test of support (i.e. a poke below 91.25).

 

Now lets look at 5 sec to see what happened at open:

Notes are mainly in the picture. Except for the white lines, the drawings were added in hindsight.

 

Conclusion:

• Be ready at open to place the order quickly. Don't hesitate. Open is just a continuation of premarket. If the setup is there, then enter, should it be within the first second.
  
• If you miss the entry and the setup is not invalidated yet and original level for moving stop to BE was not reached yet, then you can place the stop limit order later in the original place (i.e. at price where it should have been in the first place) so it acts as a limit. (Though that probably wouldn't help in this case)
  
• If you miss the optimal entry don't start groaning, but focus on looking for another possible entry instead. Today I could have entered somewhere on the test marked with the blue grey arrow or after the SB, at the red arrow.
  

 

Missing this trade hurts, even on paper, because later I made 5 trades back and forth in what turned to be a developing hinge and I ended with a slightly negative total net result. And before the time when it was worth to trade again, that is before the hinge came to its end, I was already so frustrated and bored that I turned the trading platform off and just watched.

[DbPhoenix 42]

I'll never understand those who ignore the premkt, much less those who decline to trade during the first half hour. The S&R created this morning were so clear, and your CWS for trading them is well-thought-out.

 

Note, however, that the situation presented to you this morning does not occur every morning. So don't let your "failure" to take this morning's trade push you into taking another trade that doesn't meet your requirements. This trade worked because of how it was setup. Without the setup, it would not have been so clean.

 

I suggest you create a 1t (one-tick) chart and see how your 5s bars look. You may smack yourself again for not having taken the trade you believe you should have taken, but you may also gain further insight into just what traders were doing when they were testing all these levels at the time you wish you had entered.

[Shamal 11]

I'll never understand those who ignore the premkt, much less those who decline to trade during the first half hour.

 

I suggest you create a 1t (one-tick) chart and see how your 5s bars look. You may smack yourself again for not having taken the trade you believe you should have taken, but you may also gain further insight into just what traders were doing when they were testing all these levels at the time you wish you had entered.

 

Db

Would appreciate if you could with the help of a chart expand on how a 1tick chart compared to 5sec chart would allow one to gain further insight into what other traders are doing.

[Head2k 10]

Attaching the tick chart of NQ open on 2009/07/16.

 

 

90.5 was tested twice. After the first test price returned to the last congestion, failed to reach its top and poked down again. This second rejection was very fast. After printing 90.5 the next trade occured three ticks higher. After that, price still didn't break up from the congestion, but repeatedly found higher S at the bottom of the congestion, a level corresponding with the tiny swing low visible at the beginning of the chart. This fast rejection (2) and failure to poke down again led traders to seek trades higher. They reached 92.5 (swing high on this scale), failed to breached it so they tested down again. But the last congestion provided S, as could be anticipated (3). And not only the congestion provided S, price also failed to reach its bottom.

Down is a no go, so a higher high follows. After that S is found on the top of the congestion (4, 5).

 

So what one can do here? An aggressive entry could be after (1), a bit less aggressive after (2). The entry after (3) I like the most (suits my style the best), after (4) the least. (5) is a nice retracement and a conservative entry for a worse price.

 

I like the tick chart and I tried to watch it and trade off it a few days in the beginning of this month, but...

The whole part of the chart after 9:30 displays 1 minute, not even whole. Especially during open, the activity is so high that my chart doesn't update with every tick but is printed in "bursts". On a static chart in hindsight I can distinguish between "entry after (1)" and "entry after (2)", but in RT it would be one trade.

Sure, watching the tick chart or T&S is the only way how to watch the real flow, but it is very demanding. I definitely plan to use tick chart in the future, but not right now. I realize that the processing of so much information in such a short time could be much easier if I could put it well in the context (as there is almost no wider context provided on the tick chart itself). It could be easier if I developed timing setups or at least guide lines for the tick chart. But after thinking about it for a while I decided that such a thing I will leave for the future, as another step in my development. Adding a tick chart to what I watch now is too much and the "gap" between 1m and 1t is too big for me. And I yet need to learn how to not hesitate on 5 sec, while on the 1t you must have reactions like a machine .

 

Maybe using IB data is better in some sense. I tried it too, and I liked it more than real tick chart. Since IB don't offer true tick data but rather take snapshots, some ticks are left out in very active periods (especally in algo bursts) and the tick chart provides more context. What I liked about IB was that they update TICKQ roughly 2-5 times more often than IQ Feed. TICKQ from IQ Feed is ok for 5 sec but unusable for 1t chart.

 

So, I definitely appreciate the advantages of 1t chart, but I yet need to learn how to use it and how to trade off it. And since I've got a lot of other problems, I decided to first settle my approach with the tools I am using currently.

[rigel 10]

Guess Db has trained himself to trade from this fast timeframe charts, to get in the trade at optimum price levels with tight stops, personally I would find it difficult to focus for longer periods this close to the trees so to speak, my charting pack goes down minimum to 1min, even that on European bourses can be far too volatile, try trading Dax on 1min and you will see what I mean;)

 

Anyway would be interesting to hear Db's views on this.

[DbPhoenix 42]

Db

Would appreciate if you could with the help of a chart expand on how a 1tick chart compared to 5sec chart would allow one to gain further insight into what other traders are doing.

 

Shifting from a 5s chart to a 1t is essentially the same as shifting from a 5m chart to a 1m: the closer you get to actual price movement and the farther you get from summaries (i.e., anything more than a 1t), the easier it is to see what traders are up to. Head's explanation of this using the chart he posted after your request is as good as what I'd offer.

 

The key to trading off pure price action rather than bars is trusting that price moves by design and is not just random. If, as Head explains, price finds S and R in a narrow band and traders poke below that band once or twice or more looking for trades and don't find them, then logic demands that traders will look elsewhere -- higher -- for their trades. And if the line of least resistance is up, that's where traders will go. One can see this in how rapidly and how easily price moves through what one had pegged as resistance, in this case the move above 3.5.

 

One common problem that novices have with this sort of thing is the indoctrination that so many receive with regard to the evil market makers and specialists and "smart money". They spend so much time and mental effort looking for tricks and traps that they fear to take the most obvious trades, often resorting to scalping because they are in continuous anticipation of being slapped down by those ill-defined figures lurking in the shadows (this accounts for the great and otherwise inexplicable pride that one feels for taking 3 points out of a 30pt trend day, snatched from the clutches of the "smart money", like scraps from the banquet table).

 

If one doesn't understand the nature of price movement, he can easily adopt the belief that it is all random, it's all gambling, that the best-laid plans are a waste of time (assuming he ever takes the time and trouble to develop a plan at all: see Stages of a Trader, first post in this thread). But if one opens up the back of the watch and studies how it all fits together and works together to create movement, he will more likely eventually reach the point where he can take advantage of the opportunities which the market presents to him.

[DbPhoenix 42]

Guess Db has trained himself to trade from this fast timeframe charts, to get in the trade at optimum price levels with tight stops, personally I would find it difficult to focus for longer periods this close to the trees so to speak, my charting pack goes down minimum to 1min, even that on European bourses can be far too volatile, try trading Dax on 1min and you will see what I mean;)

 

Anyway would be interesting to hear Db's views on this.

 

Depends on how you define "optimum". I don't just jump in, though some do. If I'm looking to go long, I set an entry above price. This does not give me as good an entry as it would if I were to jump in at or just before the deciding move (assuming that price does in fact move in the desired direction), but it does provide me with a little extra time, it forces price to move in my direction, and it enables me to set a stop that is nearly what it would have been if I had jumped in at a lower price (we are, after all, talking about only a few ticks here).

 

Once I'm a few points away from my entry, I switch to the 1m chart to manage the trade, not because there's anything particularly attractive about the 1m chart, but because I can zoom out only so far with the 1t chart, and following the trend is more difficult there. Once the opposite side of the trade is approached, I begin looking at the 1t again to see how price is reacting, if it's stalling, reversing, resting, etc.

 

But none of this is about how I trade; it's about whether or not one followed his plan, if he has one, and if he didn't, why he didn't, and what he could have, would have, and/or should have done differently. After all, only a handful of those who "trade intraday" are actually trading intraday fulltime and thus are able to follow the charts in real time. The rest are popping in as they can while focusing otherwise on their real jobs. I don't find this sporadic and episodic approach particularly conducive to learning how to trade intraday, but people do what they believe they have to do. The point of this thread is to help them figure out how to do it.

[Head2k 10]

I believe that unless I am using a 1 tick chart my entries are quite arbitrary. Not arbitrary in the sense that I wouldn't have rules or at least guide-lines for them, but in the sense that I am missing an important piece of information which my entries should be based on, too. If I want a tight stop, then I need to enter aggressively. I can have rules for what I want to see BEFORE the test I enter at, but cannot wait for much confirmation DURING the test. And I know that this is sometimes the source of my hesitation and missing trades. 1 tick chart can provide this sort of confirmation while you can still maintain a tight stop. Ideally, it gives you the optimal entry point, which is logical for you within all auction scales up to the largest relevant one for you. If you are fast enough to react, which means if you are sure what you are looking at and looking for.

 

(Not that I would attempt to reply to rigel or Shamal, I will leave that for Db. I just wrote what I am thinking of, as it touches the CWS topic, too, at least in my case.)

 

EDIT: I type so slowly that Db already answered. Good

[DbPhoenix 42]

I believe that unless I am using a 1 tick chart my entries are quite arbitrary. Not arbitrary in the sense that I wouldn't have rules or at least guide-lines for them, but in the sense that I am missing an important piece of information which my entries should be based on, too. If I want a tight stop, then I need to enter aggressively. I can have rules for what I want to see BEFORE the test I enter at, but cannot wait for much confirmation DURING the test. And I know that this is sometimes the source of my hesitation and missing trades. 1 tick chart can provide this sort of confirmation while you can still maintain a tight stop. Ideally, it gives you the optimal entry point, which is logical for you within all auction scales up to the largest relevant one for you. If you are fast enough to react, which means if you are sure what you are looking at and looking for.

 

As regards hesitation and missing trades, at some point one has to settle and face himself. He has to be able to say that he accepts the risk involved in the trade, that he knows where he's going to enter, where his stop is going to be, where he's going to exit (more or less), and that he doesn't care one way or the other how the trade turns out. Hesitation is often the result of an inability -- for whatever reason -- to accept the risk. If one can't accept the possibility that the trade will be a loser, and if one can't be detached from the outcome, then he is right not to take it.

[Head2k 10]

Today Db asked me in chat to post my (performed) NQ long here. He said something like that if even Head2k can do it then it should be trivial for the others. Which is true.

 

I am afrad it will be quite a long story, since it begins before the open. So lets start with my preparation for today:

 

First 10k CVB chart for larger context:

I noticed that we broke June highs and marked both June high and pmkt high (the top 2 white lines).

 

Now 5 min:

A lot of lines. I don't mind a lot of lines as long as I am able to remember what they mean. Here, apart of the top 2 white lines, the most important is 1506 (green) as an importatnt R from yesterday, and 1508 (red) as an older level which was confirmed yesterday and today in the early morning (after 3 am).

Midpoints are yellow, dashed.

Here I noticed that after the yesterday high price found S almost at 1504.75 (an intraday level from yesterday), then failed to make a higher high (that is above 1520.25), but then failed to make a lower low (that is below 1504.75). Given the time it spent near the top and the manner of rejection off the bottom I was biased more toward longs. But I was ready to take a short if 1512 was broken and 1513.5-1516 was tested afterwards. I left this scenario when price broke 1516 right before open.

When that happened I decided to wait how things will develop. We were too close to R to try a long and too strong to try a short.

Perhaps this is the point where I should explain how I see ranges. In a range i don't see S and R as just two price levels. I see zones, or better to say "the extreme" and "the level which there is to be tested". Put simply, I see the extremes and the borders of value area within the range. And to get things more complicated, "the level which there is to be tested" can be peceived for a whole range or for an actual swing within the range. Here, for example, 1508 (red) pretty much marks what i percieved as VAL for the range and 1509.25 is "the level which there is to be tested" for the actual swing.

 

Now lets see 1 min after the open:

You can see that price almost reached yesterday high and was rejected. Then traders tried to go up again but the effort was ridiculous. I shorted 1516.75 but that's not the trade this post is about. The important fact is that I saw a relative strength as price broke the pmkt highs and was able to test the top again. I acknowledged the fact that this higher high could result in a higher low on a larger scale and I anticipated the higher low within the 1508-1509.25 zone.

When price was on its way down I noticed the high activity at 9:39 when price made a swing low at 1510.75. Later, when it poked below that, I noticed that the effort is gone and the down thrust shortened. But I waited. And since I was expecting S a bit lower i started to wonder what the hell is at 1509.75. And i found this:

 

 

So I thought ok, maybe that's it. Maybe I shoud broaden my S zone from 9.25 to 9.75. But I still wasn't convinced.

 

So I watched closely the 5 sec:

 

 

Trades tested 1514.25, the VAL of 4:15 - 7:15 range, and then I waited to see whether they would like to visit lower ground. They tested 1509.75 again. I still waited, because I prefer to trade off a higher low (edpected at 1510.75 here). In cases like this, if price bounces, it can easily test a midpoint (1512 here) and head down then. It did test the midpoint, but then couldn't continue down. And there was a nice TD. So I entered at the green arrow and that's it.

 

And this long story quite nicely demonstrates why it is so difficult to get my setups in writing. When I attempt to write something down I inevitably end with something too mechanical. But I can't trade in a mechanical way. The market is too complex for me to describe. I am a simple guy. Which brings me back to the fact that if I can do it, then it should be trivial for others.

[DbPhoenix 42]

He said something like that if even Head2k can do it then it should be trivial for the others. Which is true.

 

Jokingly, of course

[billbose 10]

Thanks for the reply

[wjrusnak 10]

And this long story quite nicely demonstrates why it is so difficult to get my setups in writing. When I attempt to write something down I inevitably end with something too mechanical. But I can't trade in a mechanical way. The market is too complex for me to describe. I am a simple guy. Which brings me back to the fact that if I can do it, then it should be trivial for others.

 

A great point you made in this paragraph, and it really exemplifies the simple need for screen time. If traders were meant to just become mechanical in their trading, lazy suckers with forex robots and the scum bags who design them would be ruling the market. Obvious that is not the case.

 

I have a strong appreciation for your sense of the market, because it was developed through a long duration of screen time. Staring at charts in real time, basically getting a feel, or intuitive sense, for the market. I assume that many times you can already know what is going to happen without having a trend line broken, indicator cross, etc. and this all can come from screen time.

 

Thanks for the inspiration!

[DbPhoenix 42]

I have a strong appreciation for your sense of the market, because it was developed through a long duration of screen time. Staring at charts in real time, basically getting a feel, or intuitive sense, for the market. I assume that many times you can already know what is going to happen without having a trend line broken, indicator cross, etc. and this all can come from screen time.

 

Thanks for the inspiration!

 

I should probably remind readers -- i.e., those who knew this already -- that Head wasn't detoured at the beginning. He glommed onto this approach at or near the beginning of his studies and has thus been able to save the sometimes extraordinary amount of time ordinarily devoted to unlearning a lot of stuff that is irrelevant, misleading, or downright untrue. This has enabled him to make the most of his screen time. And since he is not plagued by the ghosts of nonsense, he is often able to see trades that other "more expenenced" traders have not.

[Head2k 10]

A great point you made in this paragraph, and it really exemplifies the simple need for screen time. If traders were meant to just become mechanical in their trading, lazy suckers with forex robots and the scum bags who design them would be ruling the market. Obvious that is not the case.

 

Well, I believe it's not that simple. And I am not happy with my inability to write down what I've been doing. I have guide lines. I have even my 2 main setups written down. Often I trade them by the book. But this trade, for example, was not the case. In fact I am a very lazy person and if I was more diligent with systematical replaying and testing, I could probably formulate my setups more specifically.

 

I have a strong appreciation for your sense of the market, because it was developed through a long duration of screen time. Staring at charts in real time, basically getting a feel, or intuitive sense, for the market. I assume that many times you can already know what is going to happen without having a trend line broken, indicator cross, etc. and this all can come from screen time.

 

Thanks for the inspiration!

 

It's not a feel or intuitive sense. I just learned to perceive the market as an auction in real time. There is nothing more to it. And if I hadn't been blind for so long I wouldn't need such a long period of screen time at all. But as many experienced traders point out, beginners cloud their view with obsolete things and ideas.

I can never know what is going to happen, I draw trend lines and I use an indicator (though it doesn't cross ). Trend lines and the indicator are suplementary tools. I don't necessarily need them. The indicator I use is of my own design and it calculates and plots value area since a selected bar on my chart. Of course I can see the VA of a range even without calculating it, as well as I can see that a trend is slowing down even without a trend line. But these tools can give you some (more or less) objective measure and also a way to double-check. But it's a double-edged sword, because if you focus too much on what these tools are doing or how price is behaving in relation them, instead of how it behaves in relation to what they represent, you are detaching yourself from what matters. That was my problem for a long time.

And I don't know if all can come from sreen time. First you must have some logical framework for understanding the market (Or maybe you could even develop it while watching, but that wasn't my case). I had a logical framework in AMT and Wyckoff. They are both easy and simple to understand intellectually, but it took me way too much time to see how their principles are demonstrated in real time (because of before mentioned reasons). And that is the purpose of screen time.

I appreciate your appreciation but I am still at the beginning. Maybe I've made a couple of first steps.

[DbPhoenix 42]

There was a lot of discussion regarding this action today in chat, and I don't know quite where to post these charts as they draw from several threads. But that's as it should be if all the pieces fit to make an integrated whole, so here is as good a place as any.

 

First, the support zone was from 28 to 31, established all day yesterday.

 

 

 

 

The trade occurs at 1312, Why? The TQ divergence.

 

 

 

 

And it's managed according to trendlines and swing lows. The green arrows designate scale-out points (the more contracts you trade, the longer you last). Details on this can be found in the Trend thread.

 

 

 

 

That chart above is practically impossible to read. I've posted another below with an exaggerated aspect ratio so that you can see what the hell is going on:

 

 

Edited October 6, 2009 by DbPhoenix

[daedalus 10]

could you explain what constitutes a "springboard entry"? I searched quite a bit in the Wyckoff forum and the entire forum for that matter (as well as google) for an explanation to no avail.

 

Just curious what makes a springboard entry. Thanks!

[DbPhoenix 42]

could you explain what constitutes a "springboard entry"? I searched quite a bit in the Wyckoff forum and the entire forum for that matter (as well as google) for an explanation to no avail.

 

Just curious what makes a springboard entry. Thanks!

 

Springboards are addressed in sections 4, 7, 8, 14, 16, and 21, among those sections which are posted here. To save time, use Ctrl+F. There is also a section in my blog on springboards (if this doesn't work, try this)

Edited April 22, 2012 by DbPhoenix

[firewalker 10]

There was a lot of discussion regarding this action today in chat, and I don't know quite where to post these charts as they draw from several threads. But that's as it should be if all the pieces fit to make an integrated whole, so here is as good a place as any.

 

First, the support zone was from 28 to 31, established all day yesterday.

 

The trade occurs at 1312, Why? The TQ divergence.

 

I agree that most traders would be looking at that area to take trades, but before "thé trade", were there not several other (some more aggressive than others) signals to enter long? Or did the TICKQ not provide confirmation on those occasions?

 

[DbPhoenix 42]

I agree that most traders would be looking at that area to take trades, but before "thé trade", were there not several other (some more aggressive than others) signals to enter long? Or did the TICKQ not provide confirmation on those occasions?

 

 

One could have entered at noon, but there was no TQ div.

[forrestang 10]

I have a question, and it is pretty basic. So basic I'm sure it's answered somewhere here, and may or may not be obvious?

 

But the question is, when planning your day, what do you do when things just don't make sense in terms of plotting your S/R?

 

I experience this from time to time, I am fairly new at trying to exploit this dynamic of the market (trading mainly with S/R and not much else). There are times when I am planning my day the night before, and things just..... COME TOGETHER.

 

I.e. it just makes sense..... One can say, "Oh, I see this area.... the areas are clearly defined.... we have consolidation here.... we have a trend there... clearly there is Resistance here above!"

 

But there are times that things don't really make any sense. When I feel like the market is throwing too much information at me with regards to where one can expect price to react one way or the other.

 

Often times when this happens, I find myself having so many areas on my chart that it begins to resemble a tic chart, with something occuring at almost every price point, which then becomes cumbersome to me making a decision.

 

So I will usually delete all annotations and start over. This sometimes helps, other times not. I enjoy the idea of being able to almost fully plan what I will do the day prior once price gets to a certain place, and trying to trade according to what price does once it gets there.

 

I guess this is not a purely technical question that I am asking, as there is plenty of info in this particular section and many others. I don't know if it's just lack of experience, a physio-logical chemical brain fart of some sort due to lack of proper caloric intake for the day, or if there is really nothing there that is clear?

 

Like tonight here is what I am looking at, which might not be the best example? I usually have plenty of things to write on my charts, but tonight might be one of those 'brain fart' nights:

 

[DbPhoenix 42]

When one is trading S/R, he will most likely have to be satisfied with noting those levels where buyers stopped buying and sellers stopped selling. Of course one has to think about what he's doing and what he's looking at, but if he overthinks it and tries to figure out the why of buyers' and sellers' behavior, he will very likely find himself unable to act, for there are hundreds of thousands of reasons why traders choose to buy or sell at any given level. And, when it gets down to the trading decision, the why of other traders' decisions is not particularly relevant.

 

The trading ranges occur when price stops advancing and moves sideways. Sometimes these trading ranges last only long enough to provide S or R to subsequent movements, such as a retracement once price has begun advancing again. Sometimes they are far more substantial, and the more substantial they are, the stronger the S or R.

 

 

 

But you needn't go into the entire history of the S/R of whatever you're trading. All you need to look at are those levels which are most likely to affect your day's trading. Today, for example, since we are now at 61, the following levels are the more important.

 

 

 

This last "trading range" which began forming this week has been troublesome because it's not yet really a trading range but rather a series of higher highs followed by, yesterday, a lower high. If we move down rather than sideways, we'll have a "mountain" top. This has its own levels of potential S and R, as I've noted, but these aren't necessarily as strong as those provided by a more easily-defined, rectangular trading range.

 

The more emotional traders are, the less "pretty" the chart will look. If you understand this emotional component (such as that which we are now experiencing) and can trade it, that's fine. If you don't and can't, then best to let things settle into a "pattern" that you recognize -- e.g., a well-defined trading range -- and then resume trading.

[forrestang 10]

Thanks for the above! It's good to know that sometimes things just aren't clear.

 

With these current ranges or levels we're looking at now, would you consider either side of this current zone well defined? I'm just looking at the places in which price touches.

 

I'm sure you can find more on a different time frame, but when we don't have as many 'touches' of support, would you say that conditions aren't as clear to define S/R? And I really can't see any?

 

Maybe this chart illustrates what I'm asking? Prior to today's open there really seemed to be no place where price just respected too much. Are these levels here as they are the best that price has to offer as of right now?

 

For the novice, would it be best to just stand aside when S/R doesn't fall into place?

[firewalker 10]

For the novice, would it be best to just stand aside when S/R doesn't fall into place?

 

I don't think it has much to do with being a novice. There are times that price is drawn to a particular S/R zone like a magnet, or that price bounces off such an area exactly where you anticipated it would happen.

 

But it's not because you have identifying S/R beforehand that price always sticks to exactly what you thought is S/R. If it doesn't act as S/R, you could say it isn't (or not anymore) or your interpretation wasn't correct.

 

When I face a situation when price chops around what I perceived as important S/R, (sometimes stopping me out on both sides), I try to stand aside and evaluate from a neutral point of view. Some people are better at reading the market in real time (than me) and when the pieces of the puzzle don't fall exactly into place, I become confused, make mistakes and lose money. It's not necessarily a bad thing: recognizing the condition under which you don't perform that well, is imo an important factor in trying to trade profitably.

 

One other option is to look elsewhere for a setup. For example, I had simular thoughts as yours with regards to identifying clear S/R on the NQ and reconciliating the overnight/premarket action with the intraday. However, I also track the ES and I noticed we had established a decent resistance area around 955-956 where price stopped each time the last couple of days; but each time setting a higher low (increasing the odds for a breakout). This isn't about the ES though. What I'm trying to say is that I found a more attractive pattern there, and left the NQ alone (at least for today )

Edited July 23, 2009 by firewalker