Trading The Wyckoff Way

[Niko 10]

My levels for today. We finally made it out of that TR. The Black short lines are the 50% RET levels.

 

 

Like NT does not let me label the lines here are the numbers (rounded).

 

28

35

44

53

60

 

 

Price at this time: 26

 

25

17

7

 

Will not be able to make it to the chat today. Have a nice weekend and see you all next week.

Edited October 19, 2012 by Niko

[Niko 10]

My levels for Oil

 

[chd850 10]

I find the option 1 risky, as either a fakeout, a reversal, or a congestion (maybe less so) around there will stop you out. Plus you missed the potential from the support or midpoint to the BO point.

 

The idea to enter long around support is that you can have tight stop, and the flexibility to reverse if price break through the S.

 

That may be why the W's think risk is minimized around S/R.

 

The option 2 can be viewed as entering around a short term S.

 

But you are right, it all depends on the context.

[blocp 10]

here are some charts from my journal for yesterdays session.

 

I found it hard to focus yesterday and I don't know if it was me or being in chat, maybe making me think and question what I was seeing to much and not keep a clear mind.

 

This has nothing to do with anyone in chat it's in my head and if I can't cope with it i'll just have to trade on my own.

 

It's a 50/50 really because I am picking up so much extra valuable info, and it is really great to have people to talk to that have the same interest as me, none of my friends or family understand what i'm doing. But I am worried that I can get easily distracted too, I will see how today goes and hopefully I was just having a bad day, as I had no problem wednesday.

[blocp 10]

here are my charts for today

[Gringo 10]

Today's levels are

 

Lots of previous trading has caused quite a mess of levels here. One will need to stay alert to see how price is behaving to determine whether a level is in fact beginning to act as S/R.

 

55

46

41

37

34

29-30

23

15

08

 

Gringo

[Niko 10]

I find the option 1 risky, as either a fakeout, a reversal, or a congestion (maybe less so) around there will stop you out. Plus you missed the potential from the support or midpoint to the BO point.

 

The idea to enter long around support is that you can have tight stop, and the flexibility to reverse if price break through the S.

.

 

Would conditions prior to the BO, like the inability to reach support, and the making of HL, could increase the odds in favor of this kind of entry?

[DbPhoenix 42]

Would conditions prior to the BO, like the inability to reach support, and the making of HL, could increase the odds in favor of this kind of entry?

 

This is the sort of question best answered by testing rather than through logic since so many variables are involved. But that's the nature of discretionary trading.

 

Tell you what. You were asking about bloc's entry on the following chart. There are many possible entries. How might one evaluate each of them? Which ones are worth taking and which not? And why?

 

 

 

[Niko 10]

Db,

 

I will make my homework over the weekend, right now I am on an Ipad, so I am technologicaly impaired.

 

To answer your question I will replay this day, and try to forget what I have seen in the chart in order to be as objective as possible.

 

I will only test what I have written about, trend entries, on BO and on RET.

 

Dont want to get into reversals and TR just yet.

 

I will test the entries with and without taking S/R into account, and post the results.

[eminiman414 10]

Would that be considered a potential buying climax based on how vertical the wave is and how volume is behaving?

[chd850 10]

Db,

 

I will make my homework over the weekend, right now I am on an Ipad, so I am technologicaly impaired.

 

To answer your question I will replay this day, and try to forget what I have seen in the chart in order to be as objective as possible.

 

I will only test what I have written about, trend entries, on BO and on RET.

 

Dont want to get into reversals and TR just yet.

 

I will test the entries with and without taking S/R into account, and post the results.

 

Not to discourage, but one day may not be enough to gain confidence on anything. And the Wyckoff way is actually very hard to backtest. (Tons of screen time is the only way I can think of now.) For example, how do you define a BO, at what level? That alone can be very subjective, not mentioning the various conditions before the BO.

 

For systematic backtest, and especially BO, you may want to look into the original turtle strategy by Dennis and Eckhardt, which may fall out of the scope of this forum...

[DbPhoenix 42]

Not to discourage, but one day may not be enough to gain confidence on anything.

 

True, which is why I've said that a backtest ought to cover at least a year. But a journey of a thousand miles etc etc

 

And the Wyckoff way is actually very hard to backtest. (Tons of screen time is the only way I can think of now.) For example, how do you define a BO, at what level? That alone can be very subjective, not mentioning the various conditions before the BO.

 

Actually, it's very easy, though, as you point out, tons of screen time is necessary. As for defining the BO, that's the purpose of backtesting.

 

For systematic backtest, and especially BO, you may want to look into the original turtle strategy by Dennis and Eckhardt, which may fall out of the scope of this forum...

 

Not a good idea. The two aren't related, and most people have enough to unlearn as it is.

 

Db

[DbPhoenix 42]

Db,

 

I will make my homework over the weekend, right now I am on an Ipad, so I am technologicaly impaired.

 

To answer your question I will replay this day, and try to forget what I have seen in the chart in order to be as objective as possible.

 

I will only test what I have written about, trend entries, on BO and on RET.

 

Dont want to get into reversals and TR just yet.

 

I will test the entries with and without taking S/R into account, and post the results.

 

Play with it however you choose. The playing is a large component of the learning.

 

Db

[DbPhoenix 42]

This thread doesn't get used enough, and it should be. If one missed something (and one always misses something), it's very important to try and figure out WHY he missed it AND what he can do to keep himself from missing again in the future.

 

So, while today is still fresh in everyone's mind, let's look at what CWS been done.

 

First, 36 is/was R. Take my word for it or look at the charts that everybody posted this morning. One could just jump onto this and ride the wave or he could wait for a RET. If one is using 1m charts, he'd have to watch the C "notch" in order to find it in a fast-moving market. Here, the arrow points to what would be a more obvious RET with a 30s or 15s interval.

 

Second, if one did take this, he might be tempted to exit at the break of the SL (the circle). However, someone with a stronger stomach might wait to see just what buyers can accomplish here. As it turned out, not much. The best they could do could hardly get past the previous bar, much less the opening bar of the RET. And that effort closed rather poorly, closing in the middle of the bar (the weakness is more obvious on a smaller interval).

 

Third, when a LL is made, a new SL can be drawn. When this is broken and a rally attempt is made, one can see that the peak of this rally coincides with the first stall on the way down. This suggests -- but does not guarantee -- that the rally may be running out of steam.

 

Fourth, once another SL is drawn, one can be tempted to exit the break, but if he wasn't fast enough, he might notice that the RET can't get past the LSH and decide to stay in after all. Or, if he did exit, he might decide to re-enter on the RET and an anticipated continuation of the downmove, particularly since this rally attempt is choked off so rapidly. Unfortunately, all this takes place off a higher low, and shorting off a higher low can be problematic, particularly if one is anticipating a hinge. Price can, after all, just drift sideways, or there can be fakeouts from either or both sides. Even if one ignores -- or never thinks about -- the hinge, the fact that price is able to move slightly more than 50% back into the downswing is not encouraging. But, as mentioned, the attempt is choked off rapidly (on the one hand, on the other hand, on the third hand, etc.). So the risks involved here must be assessed very quickly.

 

Fifth, after that, it's just TLs.

 

Db

 

 

 

 

 

 

 

 

 

 

 

 

[eminiman414 10]

 

 

 

The best they could do could hardly get past the previous bar, much less the opening bar of the RET. And that effort closed rather poorly, closing in the middle of the bar (the weakness is more obvious on a smaller interval).

 

 

Trying to learn as best I can. I see you speak of individual bars is that something that should be looked at in terms of this approach. Everything I have read so far has said not to focus on where a bar closes, opens, size, shape, color etc and just focus on the "flow." Is it ok to analyze where a bar might close/open or the price range the bar spans i guess in relation to the flow? Is that essentially what you are doing? Trying hard to grasp all of this. Also Wyckoff in section 7 does speak of individual bars, the high, low, and close of the bar. Is that type of analysis more applicable to the daily time frame. Don't have his exact words off hand as to how he described an individual bar/day, but I can look it up later on for reference.

 

Thanks for the help again i am very new at this and want to soak it all up.

[Niko 10]

Not to discourage, but one day may not be enough to gain confidence on anything.

 

Chd, dont worry. I am aware of the fact. My intention here is to analize diferent entry alternatives no to backtest those two ideas.

 

To build a trading system you need one or several entry points, one or several stop levels and one or several exit on profit mechanisms.

 

When testing this with a mathematical model, is easier as you can run millions of backtests with tens of variables in a small amount of time, so if you screw up in the research questions you just lose computer time. With Wyckoff the stakes of screwing up in your research questions are much higher, as you will lose weeks of human backtesting hours.

 

With a little experience in heuristic optimization (and by Iittle I mean Tiny) I think that if we all debate about what intuitively is a good entry our collective backtesting efforts will benefit, its something I read about and is known as cognitive surpluss, you can find the concept on wikipedia.

[DbPhoenix 42]

With Wyckoff the stakes of screwing up in your research questions are much higher, as you will lose weeks of human backtesting hours.

 

Well, not weeks The process of defining and the process of backtesting are synergistic. But I'll wait till you've gone over my posted chart before I say more.

 

Db

[Niko 10]

You are right DB, I will do my homework before speculating about how long it can be.

[DbPhoenix 42]

"Bar" is unfortunately a necessity since that's all that anybody knows. If I insisted that everyone use line charts, I'd be talking to myself. If I insisted that everyone use tic charts, their heads would explode.

 

If and when you become comfortable with the notion of price movement as a movie (a continuous line) and not a slideshow (bars, candles, etc), you will be able to see the line and the waves in a bar chart. The bars will, in effect, disappear. You will have swallowed the red pill. If price bounces off the "low" of a bar and "closes" in the middle, you will see the wave that that bar represents.

 

Or you won't.

 

But when trying to learn how to interpret price movement, or talk about it with others, one needs a common frame of reference, and bars are about as common as it gets, especially if one is looking at pre-1990 charts. Therefore, even though there is no open or close (each wave does have a high and a low, or a peak and a trough), using bars to locate points on the chart can be helpful. But one must remember that the bar is not price; the bar is only a representation of price, and at that it is only a snapshot of a particular time in price. Price does not open or close anymore than time does.

 

As for W, the OHLC for each day was all traders and investors had back in the day, so that was the common frame of reference. As for intraday, there were only notations, usually in the form of P&F, often on scratch paper, or the back of envelopes (how else to keep track). Nothing elaborate, just some means of locating oneself in the stream: price was here, now it's there, now it's back here again and whoops there it goes up there, and now it's back here again -- Support! And so on. Traders back then had no difficulty understanding the continuity of price because that's all there was.

 

It takes a while to get used to this, but it will take even longer -- sometimes much longer -- if you concern yourself with entries and exits. Once you start thinking about trades, you monitor price in a different way, most often in relation to where you entered. But the market doesn't know where you entered and wouldn't care if it did. Your task is to follow and observe price movement, not to worry about how it all relates to some trade you are in. If you are unable to observe and evaluate price movement in and of itself, you won't know what to do when it threatens some trade that you will take in the future, and you'll be back where you started. Bloc offers a good example of how to approach this. Study his charts and his notes. If you find yourself wondering where he entered, you're on the wrong track. Bang your head against the wall and relocate your objective.

 

Db

[boru 10]

Not a good idea. The two aren't related, and most people have enough to unlearn as it is.

 

Db

 

very true

 

..............

Edited October 19, 2012 by DbPhoenix
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[blocp 10]

gringo, I tend not to look at this analysis too closely, not that I am uninterested but because I have great trouble shifting what I have read from my mind and it might interfere with my decisions during the trading day/week, which might be my loss. but after what we have seen today and having now read over your posts more thoroughly, well done, great analysis.

[blocp 10]

heres a bit of doodling I have been doing tonight, it might be rubbish if so Db please feel free to remove it, but with all the talk of line charts I thought I would have a play around, I was also inspired by the work Gringo has done on the trading off daily charts thread, and thought maybe i'll start paying more attention to higher time frames not just the 10,000 volume chart.

[DbPhoenix 42]

Looking at longer timeframes can be misleading if one is doing it for TLs and SLs and DLs and even S&R. This can often lead to a bias that prevents the trader from seeing what's in front of him. It's not impossible to do it without forming a bias, but it is difficult.

 

However, there are confluences that can prompt traders to throw in the towel. We've seen this more than once recently. Think of them as tipping points. Taking a wider view is not much different than looking at a closeup of somebody's nose and zooming out to get the wider view of the subject at a table in a cafe next to a park in a village...

 

Key, then, is not to focus on one or the other but to put everything in context. The intraday is part of the interday, but it does have it own rhythm. It can, for example, make U-turns and roundtrips and wind up where it started. Stay tuned to both.

 

Db

[eminiman414 10]

Hmm. That's really interesting and makes total sense. Price bouncing off the "low" of a "bar" and "closing" in the middle is in essence an up wave and since you have let's say a one minute bar chart open without the concepts outlined one may only see a vertical bar or vertical price movement when in the above scenario it should really be seen as an up wave. So instead of watching price just tick up and down vertically on the bar I should be visualizing the waves in that "summary" i guess moving left to right as opposed to just watching the up and down movement? Do I have that right?

 

Thanks for your response once again opening my eyes even more. I can't tell you how grateful I am for this forum.

[DbPhoenix 42]

Or you can make it easier on yourself and just put up a tic chart alongside your bar chart (not on top/bottom) and see what's going on inside those bars. Though somewhere in your head you know how those bars are created (just as you know where the meat in the plastic package really comes from), seeing them being created enhances your perception of the process.

 

If you're viewing charts in hindsight, a tic chart is the only way of opening up this process to you. If, for example, you have a given bar with open and close notches more or less in the middle, you have no way of knowing if price traveled to the top of the bar, then to the bottom, then to the middle to close, or to the bottom, then the top, then the middle. The two bars appear to be identical, but they each were created in opposite ways, and the two waves send different messages. This is not to say that what occurs in one interval has cosmic significance, but the flow is different, and it can be seen only if one "opens up" the bar. Candles won't help.

 

Even though you may not be interested in the TICKQ, and you needn't be, there are examples of tic charts against bar charts in the TICKQ thread.

 

Db