Trading The Wyckoff Way

[SIUYA 11]

 

3. Don't get so skittish that you sacrifice thoroughness for the sake of what seems at the time to be the "best" entry but which may quickly turn out to be a mistake. The entry on a shorter-term chart is found after the "set-up" is found on the longer-term chart, at least the daily. There's nothing remarkable about the daily, at least at this moment. Therefore, there's no entry to look for. However, you're nearing the time when there will be an entry to look for, so begin monitoring several gold charts, e.g., the spot, the ETF, the futures. You can also follow the index if you like, but I'm not sure there's any point in doing so. TMI can be a disadvantage.

 

4. Remember that there can be a lot of "climactic" selling before you reach the bottom (the Wyckoff posse doesn't tell you that). You're just barely kissing the supply line, and once you get to a legitimate secondary reaction, you won't have any trouble jumping onto the train before it leaves the station.

 

I often read some of your pearls of wisdom and think this is a great one.....so in a similar vein I dragged this out of my notes that I hope might help explain why i think there is so much value in your advice.....(I often forget this myself :doh:)

 

"First look for setups (consolidations or breakouts or rallies into resistance) don’t look for trades.

You will always find trades that look like they might work, but these in reality will simply be like a random entry – look first for the reason for a valid trade."

 

 

........

[DbPhoenix 42]

Well gee, Siuya . . .

[SIUYA 11]

Cartman blushing --- LOL- that's a visual I did not think I would imagine. :haha:

thank god it is Friday

[V_2008 10]

Don't worry about my understanding you. You're doing just great. I'm more concerned about your understanding me. If you have trouble, don't hesitate to ask me to try again. I'll do the same if I have trouble understanding you.

 

Your story is not unusual. Stories like this sadden me, or anger me, depending on the mood I'm in. I don't know of anyone who trades or teaches Wyckoff as originally written, including all the "experts" you mention (what I call the "Wyckoff Posse"). They all teach their own variations and interpretations, or the variations and interpretations of somebody else, which is not necessarily bad. Sometimes updates are necessary. Times change. But I have never encountered a so-called "Wyckoff expert" or "Wyckoff practitioner" or "Wyckoff trader" or whatever who was able to make a living at it. In fact, I've never encountered one of these experts who was able trade whatever they're pushing in real time. They may be great at trading it in hindsight, but what good does that do other than to sell courses and DVDs and software and counseling services and mentorships, which appears to be how the Posse makes its living.

 

You may have trouble getting rid of all that you know that isn't true. All the SOS, SOW, JOC, AR stuff is only going to make things more difficult. While computers and streaming data make much of the course no longer necessary or even pertinent, the core of it provides everything you need to know to become a successful trader. If you don't have a copy of the course, links to both parts of it can be found here. You needn't read all of it, but about half of it is essential. I've selected what I consider to be most important into what I call Wyckoff Lite.

 

So about waves.

 

Understanding waves and what causes them can come in handy both in real time and in hindsight. They help you to see the balances and imbalances between buying pressure and selling pressure. You can also use bars to help you see how much effort buyers and sellers are putting into reaching their respective goals. Or you can use a line chart, particularly if you're following price in real time. Or, if you don't like charts, you can use a time-and-sales display which shows transactions only (not Level II or DOM).

 

The most important thing to understand about Wyckoff's approach is that price is continuous. This is the element that got left by the side of the road very early when all the interpretations and adaptations got started. VSA in particular left this behind when Williams decided to focus on the bar and the bar's spread. However, if you can't grasp the continuity of price, Wyckoff will be of little use to you. It may even be a contributing factor to you failure.

 

The next most important element is the nature of demand and supply, or buying pressure and selling pressure, and how the interaction of these move price. Waves can help you get a feel for this, particularly if you haven't spent enough time just sitting in front of your computer with a 1-tick chart and doing no more than watch price move up and down, not with any thought of where you'd enter or exit or in any way profit from the movements, but only with the goal of becoming sensitive to the flow of it, like currents and eddies.

 

Once you have developed, or at least begun to develop, a sense of this, the waves will seem far more natural. You needn't fool with any calculations. You needn't concern yourself with anything mechanical, largely because to try would be a waste of time. All you need to be concerned with is the duration of the wave, that is how long it lasts, and its extent, that is how high or low it gets.

 

I've started you off here with one of your charts. Start at the far left. The green are upwaves and the red are downwaves. Look at how long each of them last and how high or low they are, that is, how far they get in terms of price. As you become sensitive to the movements of these waves, you'll begin to become sensitive also to who's in charge and whose influence is waning (judging the market by its own action). This sensitivity will help you detect ahead of time that one side or the other is losing strength, and a change in trend is imminent.

 

 

 

 

 

And if you just can't get it, don't give up. There are other ways of making money in the markets. This particular approach, however, may make you feel more like a real trader than someone who relies on an assortment of crutches.

 

If you have trouble understanding any of this, let me know. Or maybe you have access to a good translator .

 

As to information which belongs to Wyckoff, I have already read this articles. It is pretty clear for me about what he was telling through his course. Problem is to combine everything. Because , you now, when stride is broken, we see shroter up waves, volume is rising on the up side and after this we still can see further good decline?!

By the way I have been using only buying and selling waves for several months to trade. Only duration and time. But I have met a problem which withdrew mine interest of using only this waves. From Wyckoff point of view it is pretty easy to take those failed buying waves or those that are getting to fail and profit from a move. Wyckoff was using something to determine either rally has died out and new wave of selling will come. As he did in my first post. I had also some triggers, after which I would open a trade. But they are only based on effort versus result.Eg. Prolonged down wave without good progress in an up trend. I am sure that at this level of knowledge if I will see a trade which Wyckoff has described in my last post I won't take it. Thats why I was asking about activity (not volume) within wave. Is this activity can be measured? Or it is pretty hard nowadays?

 

I've got one more question about Daily charts. Why Mr. Wyckoff was using Bars instead of Waves? And why it is impossible to judge, lets say, 60 min interval as Daily chart?

 

As to English, I understand pretty good. No problem with it and no wasting money on a good translator

[DbPhoenix 42]

As to information which belongs to Wyckoff, I have already read this articles. It is pretty clear for me about what he was telling through his course. Problem is to combine everything. Because , you now, when stride is broken, we see shroter up waves, volume is rising on the up side and after this we still can see further good decline?!

 

Supposedly, but it's a little more complicated than that. Volume is just activity. It's neither bullish nor bearish. What's bullish or bearish is the behavior of price. We've been discussing this the past day or so in the FX/Commodities thread with regard to gold in particular. You may want to look at that (it starts at post #33, though you may want to back up a little).

 

By the way I have been using only buying and selling waves for several months to trade. Only duration and time. But I have met a problem which withdrew mine interest of using only this waves. From Wyckoff point of view it is pretty easy to take those failed buying waves or those that are getting to fail and profit from a move. Wyckoff was using something to determine either rally has died out and new wave of selling will come. As he did in my first post. I had also some triggers, after which I would open a trade. But they are only based on effort versus result.Eg. Prolonged down wave without good progress in an up trend. I am sure that at this level of knowledge if I will see a trade which Wyckoff has described in my last post I won't take it. Thats why I was asking about activity (not volume) within wave. Is this activity can be measured? Or it is pretty hard nowadays?

 

Activity and volume are the same thing. However, if you're using a very small interval or 1-tick chart, the volume measurement may be of no use to you. If so, you'll just have to focus on how fast prices are printing, even though they may not be moving up or down (though they probably will). What you're trying to pick up on is increased interest. If you detect that, then something's up.

 

You may also want to incorporate at least one more tool: supply and demand lines (or what W calls supply and support lines). If, for example, in an uptrend, you may want to wait for the demand (support) line to be broken before you make your commitment. After the break, you may then want to wait for a lower high rather than just jump in. That's up to you, and part of what "backtesting" is all about, that is, you needn't test everything in real time.

 

I've got one more question about Daily charts. Why Mr. Wyckoff was using Bars instead of Waves? And why it is impossible to judge, lets say, 60 min interval as Daily chart?

 

Probably because that's what was available to him as published in the newspaper. Otherwise he'd have to draw the charts himself, which he did at the beginning, but you can imagine what a pain in the ass it is to draw your own charts every night. Same goes for the 60m interval: you'd have to draw it yourself as that wasn't available. You can tell by the way he talks about it, though, that he's spent the day following the tape. It's not just about bars but about movement. For him it's all about continuity. It's a movie, not a slideshow.

 

As for using a 60m today, sure, if you can follow it. The mistake that nearly all beginning daytraders make is that they're trying to trade a chart they can't follow because they're at work, or caring for the kids, or doing chores. You can't trade what you can't follow. If one is sitting in front of his computer doing nothing else, he has many options. If he isn't and can check on the market only once every half-hour or hour, then he has fewer options. But the trader who's trying to daytrade while doing something else is going to fail, unless he's just doing it as a hobby.

 

As to English, I understand pretty good. No problem with it and no wasting money on a good translator

 

That makes things easier. I am continually impressed by how participants can write and understand English so well, and we've had them from all over: France, Belgium, Holland, the Czech Republic, Africa, the Phillipines, China, Japan, New Zealand, Australia, Egypt, Brazil, Argentina, Mexico, Thailand, Russia and on and on and on. It's embarrassing.

Edited February 22, 2013 by DbPhoenix

[Gringo 10]

By that time being unprofitable trader and thinking that answers on my questions are lying within VSA, one man (very appreciate his persistence to start to learn Wyckoff) has introduced me Wyckoff analyzes (Structure of the market, selling, buying waves, SOS, SOW, Springboards, 50% corrections, time and duration, Philosophy etc) So since 2012 I am a man who has finished learning VSA and has started to learn Wyckoff. I always knew that if I will be willing to learn Wyckoff I will find many followers on Wyckoff analyzes with leader DbPhoenix (not ass licking, but only poor truth). By this time I have read and examined many Wyckoff followers (SMI, Robert Evan, David Weis, Garry Fullet, Dr. Gary Dayton). I have discovered that each person has its own way to learn Wyckoff principals.

 

Hello Oleg,

 

That's a lot of reading you've done my friend. At least one thing is certain and it's that you don't easily give up. With all you have studied and the questions you are asking I am quite hopeful that you'll eventually make it. I wish you all the best and feel free to pick Db's brain with all the questions you have. He hasn't hand someone in some time who pushed him to his limits.

 

Take care,

 

Gringo

[DbPhoenix 42]

Hfeel free to pick Db's brain with all the questions you have.

 

Feel free to pick Gringo's brain as well. He's been at this for a looooooooong time.

[Gringo 10]

Feel free to pick Gringo's brain as well. He's been at this for a looooooooong time.

 

Db,

 

I got scared when all those acronyms were mentioned by Oleg. I better start reading the W course as well, I have a feeling it's going to get ugly fast

 

Gringo

[Niko 10]

Nice to have a new member. Welcome Oleg, you will definetly find your path to profitability here. Just do as DB says.

 

And buy his book, is Like reading Wyckoff between the lines.

[Perrin 10]

I want to share this because it represents exactly the kind of parting of the veil that I talk about so much. Or taking the red pill. Whatever.

 

Oh thanks for singling me out! I feel like I have been told to stand up in front of the class to show off my homework. Ok, well... I'm not sure quite what to say on auction market theory. And I'm not that good yet at explaining myself and what I'm trying to do. And I'm new with only a year or so of live experience. Also I'm not sure I'm exactly Wyckoff in nature because I have read an awful lot of different stuff, although I think I'm close. And I write a lot (most of which shall never be published!) I might ramble a lot, so apologies in advance.

 

I've been meaning to properly post in the Wyckoff section for a while, but I've been putting it off because, uh, well I think because it makes the most sense to me and there's no hiding in here from the reality of how the markets move, who/what moves them, etc. However, getting challenged (or having people say “Perrin you tit, your chart is upside down and you don't know your auction from your elbow”) may improve me. And of course hob-nobbing with intelligent traders may mean their intelligence rubs off on me a bit. At the very least, other people might think I'm intelligent too just by association (“Did you hear about Perrin? He's been spending time in the Wyckoff section with intelligent traders, he must be intelligent too”), so this is a win-win scenario. So... hmm, what can I say.

 

The journal. Recent developments in Perrinland – using a trading journal and recording my thoughts, feelings, emotions, ideas, etc.

 

"Keep a journal" the seasoned wise traders have always said.

"Hmm, nah, I'll just keep profit/loss records and some notes on my charts - I don't think I need a journal" says Perrin to himself, for the first year of his live trading experience.

 

Now, I do believe that I could do this without writing a journal (that may be misplaced confidence but I don't think it is). However I realise now how useful a journal is. I started writing one in December 2012 while running some trades. Obviously I have always kept records, and brief notes on my charts (everyone does, right?) But writing down thoughts and emotions while trading has been revealing. It's a very powerful tool, a journal. I think writing helps the thought process.

 

Well, I was of course wrong to not start a journal earlier. Although perhaps I wasn't quite ready to do it properly until recently. It's really given some great insights into my behaviour and that of other traders.

 

I think I was on the right track (I found myself having successes) before I started writing a journal. However I think the journal has brought things into perspective more. I flow a bit more now, I think. Things are a bit easier. Less unexpected things have happened (ok that's famous last words!). I feel it's aided me in reading the charts. I'm more calm and less worried about what will happen.

 

Instead of perhaps panicing and selling at the bottom I try to think along the lines of "oh, wow look at that drop, this is where I would panic", for example. Or another time was where I was watching a stock where a flashy news announcement signalled that the stock was the best stock in the whole world and there was nothing better, and I thought "no guys, don't buy in now, not on that news, look at the prior run-up and fast up-move, it's going to sucker you in and chew you up..." (people bought in, everyone who wanted to buy has bought, there was no one left to buy, so price had little choice but to head downwards.) Also I have thoughts like "Imagine being the poor guy who bought right at the top" and then I literally imagine that.

 

I'm not sure if this is auction market theory or just a jumble of Perrin thinking. It's interesting though. I might post one of my journal entries sometime. But that's quite a scary thing to do. And then you'd all get inside my head, and it's crowded enough in there already. Plus I have the fear that I might explain myself so well that everyone will know what I do (or am trying to do) so that my best laid plans to become a trillionaire are thwarted by everyone knowing my secrets (quite what secrets, I'm not exactly sure, but I guess it's just the feeling of how the markets move, so quite how I explain that, I'm not sure.). I think this is a normal (irrational, apparently?) fear, but that's where I currently am.

 

One thing I would say (and I know I shouldn't make long posts because they put people off) but in the real-world (for want of a better word) auction in the auction rooms that I went to, seeing some of the professional buyers bidding was very interesting. They seemed to know how much to bid, they knew not to overbid – if price was too high, just sit back and wait for another opportunity on another item. They know what items will sell elsewhere (later) for more money. They know what things might look shiny & pretty but may not be easy or very profitable to sell, and are best avoided. I imagine that they have years of experience and knowledge of the auction process, and the markets they trade (e.g. some guys were there to buy large furniture items, others to buy figurines. There was one lady there who bought just maps and old books that no one else seemed interested in. She could see some value there where no one else could.)

[Perrin 10]

And be sure to keep a trading journal

[DbPhoenix 42]

Well. Wow. So. Pull up a chair and write as much as you like. You may feel as though it's taken you awhile, but winners do eventually find the on-ramp you've found and work their way toward the Promised Land, even though they may not be driving the same car. Point is that you're doing the work, or at least thinking about it. The losers will wander around, without a map, until they run out of gas. Or give up and take the bus back home.

[DbPhoenix 42]

And eat your peas. . . .

[Niko 10]

For those enjoying the short ride in oil take into account we are approaching the oct- dec TR so we might face:

 

 

• Rejection at S at the top
  
• Chop as we go trough the TR
  
• Continuation if we manage to break through.
  

 

I guess that sitting tight while prices go through the TR is not going to be easy for some shorts out there.

 

From now on I will join the EOD team as after a long process in the Intraday world I have finally found what I wanted (thanks DB) and now my biggest challenge is to be able to hold on and sit tight . The goal now is to be able to enter in the 1 tick to minimize stop distance as much as possible and be able to hold the trade as long as the trend lasts. Besides I am kinda lonely in the chat :haha:

[DbPhoenix 42]

From now on I will join the EOD team as after a long process in the Intraday world I have finally found what I wanted (thanks DB) and now my biggest challenge is to be able to hold on and sit tight .

 

If that's the case, then I suggest you find something that is either trending or that has established a very wide trading range. Oil doesn't fit either of those criteria. If you attempt to do otherwise, you'll be stuck in chop.

[tupapa 10]

Niko, if u dont mind sharing, what is it that you want?

[tupapa 10]

No, 1660 is old news. I was referring to 1375, though price has to clear the MP of the range first, at around 1550.

 

Trading EOD is not for the hyperactive. Better to look for something else that's on the springboard and let stuff like PLAT percolate for a while. ES looks awfully good, though the best op was yesterday early morning.

 

You mentioned the s&p twice on thursday, as a great op. Is this from an EOD perspective?? I see a strong downwave, break of dl and correction on friday. Could you show what you are focusing on like you did with oil??I can see the short after a LH but I feel like im missing a lot..

[Gringo 10]

You mentioned the s&p twice on thursday, as a great op. Is this from an EOD perspective?? I see a strong downwave, break of dl and correction on friday. Could you show what you are focusing on like you did with oil??I can see the short after a LH but I feel like im missing a lot..

 

Tupapa,

 

Why don't you do your S&P analysis and post it here. This way you'll get some direct input. I'll try to get to it as well and then we'll be able to compare notes.

 

Gringo

[tupapa 10]

Tupapa,

 

Why don't you do your S&P analysis and post it here. This way you'll get some direct input. I'll try to get to it as well and then we'll be able to compare notes.

 

Gringo

 

Sounds good to me, Ill post something by tomorrow, dont wana rush it.

 

Damn this job is addictive, workin on the day of the lord....

[Niko 10]

Currently I enter a trade with multiple contracts, but as I am focussing on the 1 min for setups and the 30 tick for execution it has been very hard to keep the trade open for long.

 

For example, lets imagine a break of DL, a LH and a break of LSL around a level or R, with a stop entry 1 tick below the LSL. That has proven to be a good strategy so far for me.

 

All this happens in the 1 min, I take the short and start closing contracts as buyers strength signals start showing up:

 

1. Break of the first SL
   
2. HL
   
3. Break of LSH
   
4. Reaching of next S level.
   

 

I try to keep the last contract as long as possible, but I am currently closing it as I get a contrary setup, that is when 1 to 3 happen around S, just to find out later that this was just a small pullback within a larger downtrend.

 

I know I could solve this issue with a reentry, but I have not tested any other setup so I do not have any other entry that I can use. But I have also thought that if I take a longer term perspective I could change the way in which I close the trades in order to take advantage of a favorable entry.

 

I am sure someone else has traveled this path and has already found a solution.

Edited February 23, 2013 by Niko

[Niko 10]

Don´t overwork yourselves!

[Gringo 10]

I have already finished the analysis for QQQ and S&P500. Contemplating whether I should wait for Tupapa to post his analysis first or just take the lead. Maybe I'll go play some ping pong to clear my head and then decide.

 

Gringo

[Niko 10]

If that's the case, then I suggest you find something that is either trending or that has established a very wide trading range. Oil doesn't fit either of those criteria. If you attempt to do otherwise, you'll be stuck in chop.

 

Db, do you refer to 1) the current situation of the oil market, or are you referring to 2) the typical behavior of oil. If it is the first situation, I think I will stick to oil, because the main goal is to integrate my short term analysis to a long term view of the market (long term in this case is just a few days, for starters) and my short term positions will remain in oil. If it is the second, would you please elaborate on what takes you to that conclusion.

 

Thanks as always.

[DbPhoenix 42]

In the case of oil, both. You're not likely to be able to "sit" on a trade for very long while you're in a giant hinge.

[Gringo 10]

I believe Db is referring to the large hinge into which oil price dropped back into. The presence of hinge means oil is not trending. In shorter bar intervals there might be a trend but stil within the hinge which due to its very existence is non trending.

 

Gringo