Trading The Wyckoff Way

[zeon 10]

And do you believe that going through an entire day in 30 minutes is telling you everything you need to know and understand regarding the movement of price and volume and the relationship between the two over the course of the trading session?

 

 

No, but like I said, I focus on the first hour and replay the action slower (or at realtime speed) when price approaches my predetermined price levels. In your blog you mentioned yourself you didn't "care" much what price does in between support and resistance.

 

And like I said, I'm also observing the market closely each and every day.

I'm sorry, but what exactly brought this on? I don't recall mentioning anything about my own problems lately, my latest post was nothing more than a general question about dow theory. :\

[DbPhoenix 42]

No

 

Then I suggest you re-examine your approach. If you're trying to locate support and resistance without understanding price movement and volume and the relationship between the two, then you will fail. If you're trying to understand price movement and volume and the relationship between the two by fast-forwarding through the day, then you will fail. If you're trying to understand price movement and volume and the relationship between the two by reading message board posts, then you will also fail.

 

You are not yet at the stage where you are ready to test a strategy through replay since you do not yet understand price movement and its relationship to volume. First study price movement and develop an understanding of that movement. Without replay, this will take six months to a year (100 to 200 trading days). With replay, if used correctly, this amount of time can be cut in half.

 

You can continue to focus on trading rather than understanding, in which case you will likely be at the same place in a year -- or five -- that you are right now, replay or no replay. Or you can forget about trading and focus on understanding, in which case you will discover that everything you need to know is in the charts, and you won't have to ask questions like why Wyckoff thought that Dow was an idiot.

[zeon 10]

...and you won't have to ask questions like why Wyckoff thought that Dow was an idiot.

 

I'm pretty convinced that no matter how much time I spend in front of the screen, that question will not get solved by studying the relationship between price and volume. :\

 

You seem to assume that everyone can find their own answers in the chart without help from the outside. I'm glad you managed to do so, but perhaps others don't possess that talent. I didn't realize my posts were disturbing anyone.

[DbPhoenix 42]

I'm pretty convinced that no matter how much time I spend in front of the screen, that question will not get solved by studying the relationship between price and volume. :\

 

You seem to assume that everyone can find their own answers in the chart without help from the outside. I'm glad you managed to do so, but perhaps others don't possess that talent. I didn't realize my posts were disturbing anyone.

 

Nothing wrong with seeking help from "the outside". But one must first begin to do the work. Otherwise he ends up asking the same questions again and again. If you don't want to do the work, that's up to you. But don't shrug off the value of screen time if you're "studying" an entire day in 30 minutes.

[zeon 10]

Nothing wrong with seeking help from "the outside". But one must first begin to do the work. Otherwise he ends up asking the same questions again and again. If you don't want to do the work, that's up to you. But don't shrug off the value of screen time if you're "studying" an entire day in 30 minutes.

 

I'm not "shrugging of the value of screen time", otherwise I wouldn't be watching the market 7 hours a day in real time. I don't see how posting trading related questions on a message board in the "dull times" affects that. And as for reading books about Dow and Wyckoff, they might not help me immediately, but I'm sure they are worth the effort otherwise you probably wouldn't have mentioned them.

[DbPhoenix 42]

I'm not "shrugging of the value of screen time", otherwise I wouldn't be watching the market 7 hours a day in real time.

 

You're not listening. Your objectives in "watching the market" are inappropriate to your stage of development. Therefore, however much time you spend doing so is largely wasted, as is the amount of time you spend in replay.

 

You are not yet in a position to decide what are or are not "dull times". But if you find the work boring, consider that that may account for your lack of progress.

[zeon 10]

You're not listening. Your objectives in "watching the market" are inappropriate to your stage of development. Therefore, however much time you spend doing so is largely wasted, as is the amount of time you spend in replay.

 

What should I do then, if watching the market and using replay are useless?

 

You are not yet in a position to decide what are or are not "dull times". But if you find the work boring, consider that that may account for your lack of progress.

 

I didn't say it was boring, I just said there were times where the market moves less. Today - so far - for example is one of them. And during lunch hours the market usually moves on lesser volume than near the open.

[DbPhoenix 42]

What should I do then, if watching the market and using replay are useless?

 

You're still not listening. Your objectives in "watching the market" are inappropriate to your stage of development. Therefore, however much time you spend doing so is largely wasted, as is the amount of time you spend in replay.

 

Develop a set of goals that are appropriate to your stage of development. These will NOT include concerning yourself with how to trade what you're studying. Since you do not yet understand the nature of price movement and how it relates to volume, I suggest you begin there.

[zeon 10]

 

That red line looks broken decisively.

[Tannism 10]

Turning Points on Light Volume (struggling market)

".....the action of the volume should tell us what it is. The buying may eventually dry up, and the selling increase, as sellers see they cannot hope to dispose of their stocks at higher prices. This may bring on an abrupt downward trend, the indications of which will be the appearance of larger blocks of stock offered at continually lower figures.

 

The second eventuality is that prices will roll over and sag under their own weight, without the increase of selling-pressure. ...While the demand dries up, the supply likewise remains light. We then have a sagging, dull reaction, following the tired upward movement. This may continue until a level is reached where there is a greater demand, which, in turn, will be indicated by larger blocks. These dull markets may reflect a temporary indecision of the speculative powers, who await definite news from the business world. "

 

Neill

 

This may be an example.

[gassah 10]

It's probably not a coincidence the TPOs from the higher range provided resistance on the DJIA. I wish I could grasp how MIDAS does it.

[gassah 10]

That red line looks broken decisively.

 

I'll disagree because it's important how a trend line is broken. The low volume is not encouraging.

[gassah 10]

W says:

 

"It is bad practice to buy a stock simply because it has penetrated an established supply line or broken out of an extended congestion area; or to sell it merely because it has violated a line of support or broken through the bottom of a trading zone, and for no other reason. Do not forget: The breaking of a trend line, by itself, is neither a conclusive nor an all-inclusive symptom. The significant thing is HOW the line is broken; the conditions under which the change of stride occurs. The behavior preceding such an indication must also be taken fully into account.

 

In short, the quality of the buying or the selling at and around the point of penetration determines whether the violation of an established stride may be regarded as evidence of a further movement in the direction of the breakthrough, or whether it means only temporary change. This admonition applies equally to the violation of former tops and bottoms and old levels of resistance and support."

[zeon 10]

W says:

 

"It is bad practice to buy a stock simply because it has penetrated an established supply line or broken out of an extended congestion area; or to sell it merely because it has violated a line of support or broken through the bottom of a trading zone, and for no other reason. Do not forget: The breaking of a trend line, by itself, is neither a conclusive nor an all-inclusive symptom. The significant thing is HOW the line is broken; the conditions under which the change of stride occurs. The behavior preceding such an indication must also be taken fully into account.

 

In short, the quality of the buying or the selling at and around the point of penetration determines whether the violation of an established stride may be regarded as evidence of a further movement in the direction of the breakthrough, or whether it means only temporary change. This admonition applies equally to the violation of former tops and bottoms and old levels of resistance and support."

 

Thanks gassah, most informative.

[BlowFish 10]

Then I suggest you re-examine your approach.

 

If you keep doing the same things expect the same outcomes - paraphrased from someone cleverer than me.

[zeon 10]

If you keep doing the same things expect the same outcomes - paraphrased from someone cleverer than me.

 

If that were the case, than I'd still be making profits now. I didn't just change my methods, the market must have changed, because I continued doing what I was doing last year and I was making a profit. Not big and I had a lot of losing trades, but in the end a profit is a profit.

[BlowFish 10]

I have been in that position before (a couple of times) I can certainly empathise.

 

Are you absolutely sure you are doing the same thing? The psyche can play some pretty mean tricks on us. Have you tested (back forward sideways it doesn't matter really) to establish your old method really doesn't work any more? Why? Btw was it a completely different approach or similar to what you are doing now? Could it work with some minor adjustment or do you think there is a fundamental flaw in what you where doing? The reason I ask is it may be easier to get back to where you were rather than to some place new. BTW I am not saying abandon your education in Whycoff PA volume etc. Not knowing what you where doing before I can't really comment if that would be a viable course of action.

 

As I said I have been there before so I am speaking about my experience when I say that it is tempting to want to change the wrong things rather than dealing with the root causes. That quote was as applicable to me as much as anyone. In the past I have probably spent tens of thousands of hours doing 'work' that, while it contributed to my trading 'education', it did nothing to advance my actual trading.

[zeon 10]

I have been in that position before (a couple of times) I can certainly empathise.

 

Are you absolutely sure you are doing the same thing? The psyche can play some pretty mean tricks on us. Have you tested (back forward sideways it doesn't matter really) to establish your old method really doesn't work any more? Why? Btw was it a completely different approach or similar to what you are doing now? Could it work with some minor adjustment or do you think there is a fundamental flaw in what you where doing? The reason I ask is it may be easier to get back to where you were rather than to some place new. BTW I am not saying abandon your education in Whycoff PA volume etc. Not knowing what you where doing before I can't really comment if that would be a viable course of action.

 

As I said I have been there before so I am speaking about my experience when I say that it is tempting to want to change the wrong things rather than dealing with the root causes. That quote was as applicable to me as much as anyone. In the past I have probably spent tens of thousands of hours doing 'work' that, while it contributed to my trading 'education', it did nothing to advance my actual trading.

 

 

The main thing I noticed is that while the market had a nice steady trend to it last year, it's been up one day and down the next since the beginning of this year. I took a whole lot of losses on shorts in the last couple of months, because I believed that trading with the trend was the safest thing to do. Now I'm not so sure anymore.

 

I posted my basics of what I do some time ago, but to cut to the chase, I basically was buying hammers at support areas and selling shooting stars at resistance lines. The change in volatility probably has affected what I was doing to a certain extent.

 

The suggestions I've received tell me to go back from square zero basically and forget about trading and focus on the chart. That's the kind of thing you'd tell to a person who looks at a chart for the first time imo. I can't help feeling that perhaps systems run out at a certain moment in time.

 

Could you really find a method that works and then trade it for the rest of your life? Sounds nice in theory...

[DbPhoenix 42]

While I don't want to short-circuit genuine discussion, I don't want this to become yet another shared misery thread, either. Those of you who are interested in trading by price and are further interested in the application in addition to -- or instead of -- the theory should open and maintain blogs. And by "maintain" I mean every day that you trade. Otherwise it all becomes "woe is me".

 

If you have no idea where to start, see The Trading Journal and The Trading Log, including the linked articles. A community of bloggers, even if there are only three or four, will be able to help each other advance, even if they do no more than keep each other honest.

Edited March 7, 2009 by DbPhoenix

[brownsfan019 17]

The main thing I noticed is that while the market had a nice steady trend to it last year, it's been up one day and down the next since the beginning of this year. I took a whole lot of losses on shorts in the last couple of months, because I believed that trading with the trend was the safest thing to do. Now I'm not so sure anymore.

 

I posted my basics of what I do some time ago, but to cut to the chase, I basically was buying hammers at support areas and selling shooting stars at resistance lines. The change in volatility probably has affected what I was doing to a certain extent.

 

The suggestions I've received tell me to go back from square zero basically and forget about trading and focus on the chart. That's the kind of thing you'd tell to a person who looks at a chart for the first time imo. I can't help feeling that perhaps systems run out at a certain moment in time.

 

Could you really find a method that works and then trade it for the rest of your life? Sounds nice in theory...

 

zeon,

 

A few observations if I may:

 

1) The markets change, we know this. You do have to adapt whether that's an overhaul or minor changes. Personally, I am always tweaking something, no matter how minute.

 

2) With regards to the candle plays at S/R, they still work (and well) but ultimately it depends on how you define your S/R. As you know well, what you see as a level, others may not.

 

3) I agree that finding one way of trading and doing it the rest of your life would be very hard b/c, as stated above, markets change. They change and will continue to change.

 

So the question is - do I revamp when I hit a drawdown or do I work with that I have? If you made money with your method, I would try to figure WHY you made money when you DID and what CHANGED. Did YOU change or did the MARKETS? And how did either/both change? It's not as easy as saying the volatility changed. The markets are volatile at different times for different reasons in differing degrees.

 

My view would be if you were making money on your hammer/inv hammer method, work with that. Of course, you know I am biased towards candlestick analysis. But you proved that it could make money. You just needed to work with it and tweak it.

 

There's so many questions I could ask about your previous system...

How did you define S/R?

What timeframe(s) were you trading on?

What other confirmations, if any, did you receive before entering?

Why just hammers/shooting stars?

How long did you trade it live?

How long did you backtest it?

Where did your S/R come from? why?

etc

etc

etc

 

Just changing a few item(s) could turn that into a profitable system.

 

Forgive my saying so - but changing 100% when you hit a drawdown is a very amateur move. I did not mean for that to be degrading, so please do not interrupt that way. My point is that every trader goes through drawdowns, even the guys referenced in this very thread. Even DB. We all have drawdowns and rough times. The key is whether you work with what you have or jump ship trying to find the next grail.

 

Maybe you found a system that works in a certain market environment and only that environment. Once you can diagnose what that environment is and how to spot it going forward, you have system A ready to go.

 

Now it's work on system B.

 

There's no rule that says you can ONLY have 1 system to trade from and ONLY that system. For example, I have two systems that I rely on currently - one for a trending market and one for a range-bound market. Once the type of market is identified, I switch on the appropriate system. Of course, there are plenty of times when I am wrong in my initial diagnosis of the market movement. But I also know that over time, I will be right approx 80% of the time and when I am, I capitalize on it.

 

Good luck zeon and feel free to stop back over in the CC and we can discuss candlesticks.

[DbPhoenix 42]

An update on the NDX channel:

 

 

And a longer-term view:

 

Edited June 11, 2008 by DbPhoenix

[DbPhoenix 42]

And the SPX:

 

[Tannism 10]

I am still studying "on the springboard".

 

The first chart snippet is from Wyckoff's "Determining the Trend" as discussed on page 3. He writes that he is illustrating "on the springboard".

 

Is the area marked 2 (for 2nd best place to buy) on the CAT chart an example of on the springboard?

 

I am thinking both charts show a period of preparation, then little variation in closes for a few days.

 

 

Thanks,

TannisM

[DbPhoenix 42]

Given the fact that 60 represented important S/R dating back to '05, yes.

[zeon 10]

An update on the NDX channel:

 

 

And a longer-term view:

 

 

Ehm... those are two identical charts... ?