Trading The Wyckoff Way

[DbPhoenix 42]

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

 

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

 

But you have no way of knowing in RT whether R is going to be a problem or not. What if price were to sail right through it? You'd just be watching, making no money. At worst, you'd be out at BE. At best, maybe a couple of points. But at least you'd be engaging the market. And following your plan.

 

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

 

Since you pegged R at 55, correctly, there's no reason why you can't put your stop there. This is much different from taking a RET that occurs after an extended run and putting your stop under the RET rather than under the turning point (2). It will almost surely be hit.

 

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.

 

And all of that is fine. Except for the bias part. Lose that. But none of that has anything to do with taking the long in the first place. You would have served yourself better by thinking how you would take the short if you were in the long at the time. That takes a bit more agility, though not much.

 

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

 

Again, the past is past. You can't trade the past. Thinking about the past while you're assessing the situation or, worse, in a trade, will immobilize you.

 

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?

 

I wouldn't say missed it, but the S/R lines I've been drawing have been at 65-68.

 

This chart may be helpful. Or not.

 

You're in at the green dot. You take your first profit at the break of the demand line. You take the rest at BE.

 

Then the short. In this case, you can enter at the LH, which you would probably do anyway if you weren't incorporating the TICKQ. If there is no LH, then you're pretty much stuck, unless you do an SAR, which I suggest you postpone indefinitely. If you do have an op to short, you will likely draw the supply line in your head. This isn't the time to be futzing around with lines. When you hit S, you have some choices to make. Do you follow your plan or dump everything and wait for a long entry? In this case, there are several acceptable long entries (the three green dots). Of course, the longer you wait, the farther you are from your stop. That's a choice you have to make. But you've got at least 6-8 pts by now, so it isn't as if you're trying to trade out of a hole. These are the informed risks one sometimes has to take.

 

Then you get to R. First exit at the break of the DL, second at the LH. And so on.

 

Db

 

[tupapa 10]

I am leaving the NQ for today, thanks for posting all of this in real time, following your comments has been very interesting.

 

I will go through these in detail and with more time. I have a lot to think about and my biggest problem today has been my urge to improvise and not follow my plan. If I had done the latter I would've finished the day with a nice proffit.

 

Cheers maese, will try n learn from today....

[DbPhoenix 42]

I am leaving the NQ for today, thanks for posting all of this in real time, following your comments has been very interesting.

 

I will go through these in detail and with more time. I have a lot to think about and my biggest problem today has been my urge to improvise and not follow my plan. If I had done the latter I would've finished the day with a nice proffit....

 

This is always a problem when one thinks he knows more than his plan. I guess it depends on whether the plan is just an exercise or if it's a vigorous, robust plan of attack. I can't answer that one for you.

 

Improvisation is often necessary. Today was a good example of that. But being able to improvise and being able to follow a strategy are equally important. Improvisation may often be necessary, but it should not be your default position.

 

Db

[DbPhoenix 42]

Incidentally, let's not lose sight of the fact that you're doing well. But if I didn't think you could do better, I wouldn't be making these posts.

 

Db

[DbPhoenix 42]

Technically, this ought to go in the TICKQ thread, but without the context (today's posts here), it wouldn't make much sense.

 

I post this here to show (a) how the T may or may not have been helpful and (b) that the T is anything but a magic bullet.

 

For me, I see little that is helpful here. If I had a short on the way down and were exiting it at S, the behavior of the T would give me a bit of added confidence if I wanted to enter a long, a bit late, at 53 or 54 or even 55. Or not. Now we're talking hindsight, so who can say for sure?

 

But as for the third/fourth arrow, yes. That, along with the near parabolic rise up into the R zone, screams "lighten up".

 

So not always helpful, but helpful enough.

 

Db

 

[DbPhoenix 42]

Where we are:

 

 

 

Edited July 18, 2012 by DbPhoenix

[tupapa 10]

So what now? We are approaching the Red Resistance Line at 2620, are you considering a short if price is rejected around this area?

 

I think it would be very useful for everyone if you'd share your thoughts and entries in Foresight.

[tupapa 10]

Thursday and Friday were two very strong trend days that lead to a 100 point advance.

 

We are currently inside the tranding range from the 20th to the 22nd of June, which

is inside that large March Trading range, highligted with a rectangle, traders have been comfortable in this price range in the past. After such an advance, we can anticipate a period of consolidation, or not....

 

My thoughts for today, playing S/R

 

Go long:

 

Test of support (old resistance) around 2605

Breakout of 2626 (wait for a retracement)

 

Go short

 

Rejection of 2525-26

Breakdown of 2605 (wait for a retracement)

[DbPhoenix 42]

So what now? We are approaching the Red Resistance Line at 2620, are you considering a short if price is rejected around this area?

 

I think it would be very useful for everyone if you'd share your thoughts and entries in Foresight.

 

A short at rejection of R is SOP, though if one were long (chart 4), he'd have to SAR.

 

There's really nothing to think about. R is at 2620+/- and S is at 2500+/-. Thinking about it too much generally leads to an inability to move.

 

As for entries and exits, possibilities are noted on the above charts. Again they are SOP and should be consistent with all the other charts posted in the Forum.

 

Db

[tupapa 10]

What does SOP AND SAR mean?

[DbPhoenix 42]

What does SOP AND SAR mean?

 

Standard Operating Procedure.

 

Stop And Reverse.

 

Db

 

 

 

Edited July 3, 2012 by DbPhoenix
Add pic

[DbPhoenix 42]

I'm bumping this thread for several reasons: (1) there's been a lot of talk about breakouts, retracements, and reversals lately, (2) there's too much good information in this thread for it to be so far down on the list, (3) I want to reiterate and re-emphasize what I've said several times in this thread, beginning with post #2, which is that one must use a small bar interval -- preferably 1m or less -- in order to see the retracements that nearly always occur after breakouts. One cannot very well trade what one cannot see, and a 5m bar interval isn't going to do you any good at all. This was the case not only this morning but on nearly every morning.

 

If you're going to trade price, you have to be able to see it move, and that means left to right, not up and down in a 5m -- or 10 or 15 or whatever -- bar as if it were on a trampoline. If you're trading a longer bar interval than 1m, then you're behind, and if you're behind, then you have to play catch up, and being in that position is prime opportunity for making bad decisions.

 

Knowing what to look for is only part of it. You also have to be able to see it. If you can't see it, you can't trade it. And if you're not trading it, then what is all of this for?

 

Db

[bakrob99 11]

...

If you're going to trade price, you have to be able to see it move, and that means left to right, not up and down in a 5m -- or 10 or 15 or whatever -- bar as if it were on a trampoline. If you're trading a longer bar interval than 1m, then you're behind, and if you're behind, then you have to play catch up, and being in that position is prime opportunity for making bad decisions....

Db

 

I respectfully suggest that there is an equal amount of information contained in the 5m and 30m bars... only different. And if you just are trying to keep up with the rapid movements of a 1m bar then you are likely to make rushed and poor decisions.

 

My only concern is that my entry is timed correctly and in the direction that the market is going to move. My observations have demonstrated that some longer timeframe bars are very good to use for entry when momentum supports it. I do not believe that larger volume traders base their decisions on a 1minute timeframe.

 

I can't elaborate too much now because I am away from my trading computer and using my tablet so my fingers are getting tired.

 

I'll try to demonstrate what I mean tomorrow if you have any interest in discussing it.

Have. A nice holiday

[DbPhoenix 42]

What larger volume traders base their decisions on is not necessarily pertinent to the small volume trader at home. The little guy can't trade what he can't see, and there's too much that can't be seen in a large interval bar. If he feels "rushed" and/or is making "poor decisions", he very likely doesn't know what he's looking for and/or doesn't know what to do with it if and when he sees it.

 

Db

[Kiwi 16]

It seems to me that it depends what you are trying to trade. And thus the market's speed of development determines what is noise and what is useful structure.

 

I like longer timeframe for working the slow development periods, and like db, short timeframes for confirming thrusting action.

[blueberrycake 10]

My observation has been that breakouts of major levels will often get tested in multiple timeframes. For instance a breakout of a multi-day high, will often be tested on the initial break (need a fast chart to see the pullback), however, you then later see another test on a 5 or a 15 minute chart (after bigger progression from breakout level) and again on the daily chart (after a multi-day thrust from the breakout level).

 

-bbc

[DbPhoenix 42]

Given the age of this thread, I did not expect much response, if any, but I should point out that the thread is part of the Wyckoff Forum. In that context, there is no such thing as "noise", and the preferred chart is that which is as close to the tape as possible. A tick chart, if available. Granted a tick chart takes some getting used to, but it beats the hell out of stating at a T&S display for hours on end.

 

Maintaining the broader view is of course essential. Back in the day, this was done by using a form of P&F. Today we have the luxury of multiple bar intervals, switchable in an instant. But focusing on the bars, and assigning meanings to them that they don't have, puts the cart before the horse. The message is in the tick, and in its continuous movement that results from imbalances between demand and supply. Some may build systems on 5m bars or 13m candles or 967tick bars or whatever, and they may enjoy great success with all that. But none of it has anything to do with Wyckoff. This is not to suggest that W is the only way or even the best way. Just trying to keep interested readers on the same page.

 

Db

[DbPhoenix 42]

My observation has been that breakouts of major levels will often get tested in multiple timeframes. For instance a breakout of a multi-day high, will often be tested on the initial break (need a fast chart to see the pullback), however, you then later see another test on a 5 or a 15 minute chart (after bigger progression from breakout level) and again on the daily chart (after a multi-day thrust from the breakout level).

 

-bbc

 

True. This is largely due to the different worlds that traders occupy. The 5m people aren't even aware of the RET on the tick chart. So they wait for a RET on the 5m chart. Ditto with the 15m people. And the 30m people may not see any RET at all until the day's nearly over

 

The problem here from a Wyckoff POV is that the longer one waits to enter after one should have entered, the further he is from his stop. This may decrease the information risk, but it increases the price risk to a level that may be so intolerable to the trader that he doesn't take the trade at all.

 

If one is sure of what he's looking for and is reasonably sure that he's seen it if and when it occurs, there's just no reason to wait. If he takes it and he's wrong, his stop is so close that his price risk is minimal.

 

Db

[bakrob99 11]

What larger volume traders base their decisions on is not necessarily pertinent to the small volume trader at home. The little guy can't trade what he can't see, and there's too much that can't be seen in a large interval bar. If he feels "rushed" and/or is making "poor decisions", he very likely doesn't know what he's looking for and/or doesn't know what to do with it if and when he sees it.

Db

 

Fair enough, but the small lot trader does not influence the market to any significant degree. So unless he/she has the support of large volume traders entering at the time he/she does, the trade will not go anywhere.

 

I believe that the footprints of larger volume traders are plain to see and can be viewed in any time frame but the ones I prefer are 5 and 30 minute bars. Full disclosure: I also use a 10K volume chart to provide structure which generates a bar every 1 - 4 minutes during the RTH session. But it is the 5 and 30minute bars that provide the evidence needed to support the setup.

[DbPhoenix 42]

The Wyckoff trader, however, doesn't seek to influence the market. He seeks to determine where it is and where it is most likely to go, then hitches a ride to take him there. For him this will best be done by following price, not a summary of it.

 

It's good that the larger bar intervals work for you. But they're not the MO for a Wyckoff trader.

 

Db

 

Addendum:

 

Figuratively speaking, the small trader should imagine himself as a hitch-hiker in the market. For the ordinary hitch-hiker, someone else supplies the car, chauffeur, oil and gas. When he thinks the car is about to go in his direction, he jumps aboard and rides as far as he thinks the car will go. When he notices the machine has been stopped by a red light, or is about to turn a corner and go in some other direction, or that the car is running out of gas, or the brakes failing to work properly, he steps off and figures he has secured about as long a ride as he may expect. All he has supplied in this transaction is a modest commission and whatever brains were necessary to observe and recognize the opportunity when to get on and off.

 

RDW

Edited July 4, 2012 by DbPhoenix
Add quote

[prosentti 10]

I trade 1 pip range charts mainly CL and 6E. For me breakout is a key component of everything. I am talking about the breakouts which occurs at it's lowest possible level which is wave breakout. I follow wave breakouts and wave failures to catch intraday (micro) swings.

 

Pure price with no indies or volume.

[MightyMouse 12]

DB,

 

"The Wychoff Method" as I learned it was a stock selection system. A very similar system is presented by VectorVest. I used vectorvest first, and then learned of Wychoff and figured that the creator of vectorvest adpated his system from Wychokk. In a nutshell, as I recall it, it is a tops down approach to selecting stocks where you begin by determining market direction, then finding the strongest moving industries (or sectors) and then selecting the best stocks, given technical and fundamental analysis.

 

So, when Wychoff is referenced, are we referencing a bastardized version of Wychoff or is there another version of Wychoff that I am unfamiliar with that does not lead to the selection of stocks?

Edited July 10, 2012 by DbPhoenix

[DbPhoenix 42]

The Forum focuses on the original course (see the Stickies). The process of determining what to trade and when to trade it is detailed therein.

 

Db

Edited July 10, 2012 by DbPhoenix

[DbPhoenix 42]

Even though Gringo's no longer here, I can't help providing closure to his last post (see two up).

 

Db

 

 

 

[prosentti 10]

I trade 1 pip range charts mainly CL and 6E. For me breakout is a key component of everything...

 

I forgot to attach a picture so here it is. NQ in 1 range bar charts.