Trading The Wyckoff Way

[tupapa 10]

So how did it all work out?

 

Db

 

Not to well mate...

 

I noticed a potential resistance around 2548.5 during pre-market activity but price didn't really react to it.

 

I placed my first short at 10:32, after a lower high, indicating a reversal and placed my stop 1 tick above resistance (2552.5). Got stoped out instantly.

 

I didn't take the breakout of 2552 because I didn't see conviction, neither did I get a decent retracement, it just didn't feel right...

 

My second short was at 16:46, same reversal pattern, this time I plotted my supply line but exited the trade shortly as price broke the supply line and made a Higher Low.

 

I stopped trading at this point and just aswell since I'm sure I would've kept trying to catch reversals of what would end up being a 30 Point trend day...

 

DB, I read in one of ur articles that traders anticipating a trend day should switch from trading of S/R to buying strenght/selling weakness.

 

Did anyone anticipate yesterday being a trend day? What criteria can a trader use to anticipate a trend day?

 

Are the three bullish bars (green circle) at the market open enough of an indicator to expect this?

Edited June 16, 2012 by tupapa

[DbPhoenix 42]

Not to well mate...

 

I noticed a potential resistance around 2548.5 during pre-market activity but price didn't really react to it.

 

I placed my first short at 10:32, after a lower high, indicating a reversal and placed my stop 1 tick above resistance (2552.5). Got stoped out instantly.

 

I didn't take the breakout of 2552 because I didn't see conviction, neither did I get a decent retracement, it just didn't feel right...

 

My second short was at 16:46, same reversal pattern, this time I plotted my supply line but exited the trade shortly as price broke the supply line and made a Higher Low.

 

I stopped trading at this point and just aswell since I'm sure I would've kept trying to catch reversals of what would end up being a 30 Point trend day...

 

None of this is according to plan. Your plan called for going long at a breakout of 2551. Instead you went short, at the retracement, which is why you were stopped out "instantly". Then you subsequently went short again, even though your plan said nothing about 2558.

 

If the plan evaporates at the opening bell, then perhaps it is not clearly enough defined. What, for example, does "convincing" mean? What about "didn't feel right"? If you're going for mechanical, everything must be defined precisely so that you don't waiver once you begin trading in RT. But even if it is to be subjective, you have to define clearly just what it is you're going to be subjective about. Going with your feelings is not subjectivity; it's guessing.

 

If you had followed your plan, you would have gone long at the BO through 51, or at the RET to 48. You would then have exited acc to some predetermined criterion, such as a break of the demand line around 56. That would have meant 5pts for the day rather than BE or a loss. Granted you would have made more by noting the tentative support provided overnite in the 34 to 37 area and jumping on the opening rejection of it, but that would have required more experience and greater confidence and more tolerance for price risk than you currently, understandably, possess. Better to learn a lesson and take the 5pts and run.

 

It seems clear that you found your plan was insufficient. I suggest you determine why it was insufficient, then correct those shortcomings for tomorrow. Otherwise, you are pretty much back where you started.

 

Db

[DbPhoenix 42]

Where we are:

 

 

 

[tupapa 10]

I havent had time to post anything in foresight but I am still reading and following the Ftsee and Nasdaq futures using replay.

 

I think I am starting to make some sense out of all of the invaluable information that is available, for free in the Wyckoff Forum.

 

I am posting 2 charts of todays NQ action, I took these trades using market replay.

 

The first is a 60 min chart showing S/R levels, I have noted with an ellipse the huge range bar that happened on tuesday, such a wide bar in such a short time period is what DB calls an AirGap, it leaves the market with no support between the high and the low. If sellers manage to brake through the highs, we can expect a sharp decline, to an area where traders feel more comfortable (Trading range).

 

The second is a 1 min chart, with the same S/R levels noted on it. The first trade is climactic action, at support, followed by a retest on lower volume.

 

The second trade is a break through support, followed by a retracement and a drop all the way to lower support.

[DbPhoenix 42]

The second is a 1 min chart, with the same S/R levels noted on it. The first trade is climactic action, at support, followed by a retest on lower volume.

 

The second trade is a break through support, followed by a retracement and a drop all the way to lower support.

 

Since you're taking all of this out for a test drive, I suggest you examine your fear at the same time. It's only fake money.

 

First, if you are satisfied that 2598+/- represents S, take the trade by all means. But don't let your fear take over as soon as the trade looks to be successful. Since your stop is probably 2596, your potential reward should be more than equal to that. As it is, your R:R ratio is 1. But if you let the trade alone and allow it reach R, as you should, your R:R becomes 1:3. If your fear will not allow you to hold during the early fluctuations, then move your stop to BE as soon as the price is ahead an amount equal to your stop, in this case, 3pts. IOW, you shouldn't be covering at 2602. At best, you should only be moving your stop to BE. Then just leave the trade alone. If you can't leave it alone, don't take it.

 

As for covering at R, if you see the need for that, there's no reason not to short. If you see no reason to short, then there's no reason to cover. If you do short, there's no reason to cover until at least price has broken the supply line, if you're trading one contract (if you're trading more than one, cover one at S and hold the rest until the supply line is broken; what you do then is another matter). Do not buy until you have compelling reasons, such as a retest. But even then, consider that the easy moves are generally done by 1100 or 1130. Lunch is generally a waste of time, and it's too easy to give back whatever you made during the morning session. After 1400 may present some opportunities, but they will not likely be as easy because traders are not nearly as emotional in the afternoon as they are in the morning. Trade correctly in the morning and you'll have plenty in the bank (or at least you won't have lost anything). You can then take the rest of the session off.

 

Db

 

[tupapa 10]

Cheers DB, great feedback as always.

 

From your reply, you seem to assume 2608 is a resistance level and a profit target, how do you know this in foresight? Is it just the midpoint of that trading range during the first hour? (Highlighted on my chart)

 

Also, I see no clues from volume indicating a potential reversal as price approaches this level, do you see a Tick Divergence on your charts??

[DbPhoenix 42]

Cheers DB, great feedback as always.

 

From your reply, you seem to assume 2608 is a resistance level and a profit target, how do you know this in foresight? Is it just the midpoint of that trading range during the first hour? (Highlighted on my chart)

 

Yes. You will often find that these zones present themselves during the day, like springboards. They won't be available in foresight. You have to be flexible enough to incorporate them. They are unexpected refinements to the plan, not a substitute for one.

 

Also, I see no clues from volume indicating a potential reversal as price approaches this level, do you see a Tick Divergence on your charts??

 

And you may not. Probably won't. And you may not see a retest. And that's something you'll have to get used to unless you make a retest a requirement no matter what. Granted the Goldman-Sachs email probably had a lot to do with this, and it may only be coincidence that price rolled over at R. But it's a coincidence that works for you.

 

No TD. [Edit: Sorry, my error. There was a TD]

 

Db

Edited June 22, 2012 by DbPhoenix

[DbPhoenix 42]

Just a reminder of how all this is playing out in relation to S/R. Those who've read the thread know what this stuff is and why it's plotted where it's plotted.

 

Db

 

[DbPhoenix 42]

And for the ES.

 

How hard is this?

 

Db

 

[DbPhoenix 42]

And, as anticipated, price rolls over.

 

From this point, it's not about trade entry but trade management.

 

Db

 

[Niko 10]

Db, this S/R thing really clears one´s mind when trading, thanks for all your dedication and knowledge.

 

I have been following the WTI spot, as it has been doing something similar to the Index, as you stated some weeks ago.

 

Here is the chart, where it can also be seen how it has managed to exit the trading range and now is testing R (trading range support).

 

 

 

Now, as discussed some weeks ago, the 77 S level is the one to watch in case R at 81 holds during the following days.

[DbPhoenix 42]

Db, this S/R thing really clears one´s mind when trading

 

And I don't have to argue about whether or not one can profit from "TA". These posts make my case for me (see "How hard is this" three posts back).

 

Db

[DbPhoenix 42]

Nice to know the TICKQ is still helpful.

 

Db

 

 

 

 

[tupapa 10]

Nice to know the TICKQ is still helpful.

 

DB

 

That looks really nice, volume also gave us some indications today, both to take the short at 10:08, and to exit/take the long at 11:16.

 

Do you use the TICKQ and volume bars in conjunction or do you find the information from both cloud your decision making process?

 

Thanks for this great thread, I will post some Hindsight stuff tomorrow.

Edited June 26, 2012 by tupapa

[DbPhoenix 42]

Do you use the TICKQ and volume bars in conjunction or do you find the information from both cloud your decision making process?

 

B. If there's any inconsistency between volume and the TICKQ, there's just no time to puzzle it out. By the time you've reconciled the two, the entry's gone. Besides, letting volume interfere defeats the purpose of using the TICKQ in the first place. You want the minimum amount of information required to make a decision.

 

Db

[tupapa 10]

Here are my thoughts for today, in Foresight:

 

On a macro level, we are in a down trend since the 21st of june, when we broke the demand line and made a lower high on June the 22nd. The price decline continued on the 25th with and increse in selling pressure (larger spread). Yesterday there was a lifting of selling pressure (narrow spread) as we found support around 2520 and resistance around 2550-55.

 

So the levels that may come into play today are:

 

Resistance:

 

• 2550-55, I will take a short around this area if I see rejection, if we breakout, I will wait for a retracement
  
• 2565, I will exit my long and take a short if I see rejection
  
• 2582 Proffit Target.
  

 

Support: 2520= Proffit Target for shorts.

 

Edit= Following DBs Suggestion, I will paper trade 3 contracts and manage them as follows:

 

1st Contract= Break Demand/Supply line

2nd Contract= Lower High/ Higher Low

3d Contract= Move to breakeven and exit at target

 

Target for shorts= 2526

Target for Longs= 2580

Edited June 27, 2012 by tupapa

[DbPhoenix 42]

Here are my thoughts for today, in Foresight:

 

On a macro level, we are in a down trend since the 21st of june, when we broke the demand line and made a lower high on June the 22nd. The price decline continued on the 25th with and increse in selling pressure (larger spread). Yesterday there was a lifting of selling pressure (narrow spread) as we found support around 2520 and resistance around 2550-55.

 

So the levels that may come into play today are:

 

Resistance:

 

• 2550-55, I will take a short around this area if I see rejection, if we breakout, I will wait for a retracement
  
• 2565, I will exit my long and take a short if I see rejection
  
• 2582 Proffit Target.
  

 

Support: 2520= Proffit Target for shorts.

 

While I agree with your plan overall, you say "take a short" and "exit my long" as if you're trading only one contract. If this is the case, it's an enormous mistake. Nothing triggers regret like The Trade Not Taken or The Trade Exited Too Soon, but these are unavoidable if one is trading only one contract. If you're paper-trading, there's no reason to trade only one contract. Trade at least three, if not five. As long as you nail your entries, you have nothing to lose.

 

This post in the Trend thread provides one suggested means of paper-trading multiple contracts. Since the market doesn't open for a couple of hours, I suggest you modify your plan with multiple contracts in mind.

 

Those who trade only one contract do so out of fear, but their hit rate will never be high enough to assuage that fear. The markets just aren't predictable enough. You may find that trading multiple contracts -- even if only on paper -- will do more toward dissolving your fear than "reducing risk" by trading only one. Risk is reduced by trading correctly, not by limiting the number of contracts traded.

 

Db

[DbPhoenix 42]

Edit= Following DBs Suggestion, I will paper trade 3 contracts and manage them as follows:

 

1st Contract= Break Demand/Supply line

2nd Contract= Lower High/ Higher Low

3d Contract= Move to breakeven and exit at target

 

Target for shorts= 2526

Target for Longs= 2580

 

If you traded your plan as stated, you were out within minutes, though with a small profit. The trick at that point was to keep your wits about you and look at what price did then. Since it bounced off S at 0951, tbere's no reason why you could not have reapplied the same plan. If you didn't, that's fine. But it was there if you were able to maintain (or regain) your calm.

 

Note also that the TICKQ was of no help whatsoever at the opening top.

 

Db

[DbPhoenix 42]

Remember also that you can't draw a demand line until you get at least one RET. So you'll just have to tough out the "weakness" at 1018.

 

Db

[DbPhoenix 42]

And here's a good example of having to modify your plan on the run. Since no new high was made, a supply line technically can't be drawn. So do you draw one anyway, or move everything up below that attempt at a swing low at 1016? Remember that you always have the opportunity to re-enter.

 

Db

[DbPhoenix 42]

At this point, you may be wondering if you should have sold everything and shorted what turned out to be a double top. Resist this. None of that was in your plan. If you traded your plan correctly, you did well, and it's already after 1030. Don't revert to hot-dogging in the middle of a trade.

 

Db

[tupapa 10]

At point 1 I took the short that returned a small proffit, but I didn't take the long at point 2 because I diodn't know what to do with my last contract, clearly that would've been the best entry so far.

 

After that I took a long at point 3, retracement after the BO with a target at support around 2580. Its looking like its going down, climactic volume followed by lower highs...

 

Blue dots represent Stop Losses, is point 3 a valid entry ?

[DbPhoenix 42]

Notice the giant TD at the double top at 70. But the use of that was not part of your plan. If it had been, then you have to think about whether that TD would have triggered a change of plan, exiting the long, and shorting the double top. If it had, you would now have a nice supply line to work with.

 

But note also how much the pace has slowed. How long do you want to screw around with this?

 

Lots to chew on.

 

Db

[DbPhoenix 42]

At point 1 I took the short that returned a small proffit, but I didn't take the long at point 2 because I diodn't know what to do with my last contract, clearly that would've been the best entry so far.

 

After that I took a long at point 3, retracement after the BO with a target at support around 2580. Its looking like its going down, climactic volume followed by lower highs...

 

Blue dots represent Stop Losses, is point 3 a valid entry ?

 

You posted just before I did. For some reason, you're not following your plans, and you need to figure out why.

 

Acc to your plan, your first entry would have been on the RET at 0933. Your first exit would then have been at the break of the demand line at 0941. Then the LH and BE at 0945. None of that happened. How come?

 

As for #2, that's your entry, as I stated earlier. That makes the entry at #3 moot. If you don't or can't enter where you're supposed to enter, don't enter at all. #3 is clearly too late, as trading runs out of steam almost immediately.

 

Db

 

Edit: And BTW, the stop is at 50, not 64.

Edited June 27, 2012 by DbPhoenix

[tupapa 10]

You posted just before I did. For some reason, you're not following your plans, and you need to figure out why.

 

Acc to your plan, your first entry would have been on the RET at 0933. Your first exit would then have been at the break of the demand line at 0941. Then the LH and BE at 0945. None of that happened. How come?

 

As for #2, that's your entry, as I stated earlier. That makes the entry at #3 moot. If you don't or can't enter where you're supposed to enter, don't enter at all. #3 is clearly too late, as trading runs out of steam almost immediately.

 

Db

 

Edit: And BTW, the stop is at 50, not 64.

 

I didn't take that retracement at 0933 for two reasons:

 

1- We are to close to the Resistance line at 2564.

2- I didn't think the RET would allow for a small enough Stop.

 

Instead I took the short at 0939 for the following:

 

1- Climactic volume at 0937 followed by a lower high and a dry-up in volume

2- I had anticipated ressitance at 2564 and was biased towards the short-side from the start the day.

 

I considered entry #2 but was still thinking of the short...

 

As for the short at 2570, I didn't consider it because I hadn't considered 2570 as potential resistance. Did I miss this level?

 

So much to chew on....