Trading The Wyckoff Way

[Gringo 10]

G, what are you testing in FX? EUR USD is W friendly, I have not ever touched the other pairs so I could not tell. As for instrument you can always use 6E and save yourself the trouble with the bucket shops.

 

I was checking the pairs out indiscriminately. Any pair that had a reasonable spread of 6 or less has been game. EUR/USD surely is reasonable and perhaps more obedient when it comes to S/R respect. I'll probably go back to observing a bit more as I am beginning to get turned off from this. Remember I don't need to get better at Fx when I have reasonable understanding of stocks and futures. Futures I can't trade because of timings and other issues so stocks, ETF's and options on these instruments are the real possibilities.

 

But your suggestion is reasonable to narrow the focus down to a few major currency pairs and then waiting for proper setups.

 

Thank you.

 

Gringo

Edited February 26, 2013 by Gringo

[V_2008 10]

Oh! What a warm and nice welcome words (admittance?!). Hello to everybody! Its a pleasure for me to post here! Have not seen this recent posts, as I was working with selling and buying waves. Don't know where to post some ideas or mine failures on this waves.... Where is it possible to post them?

[DbPhoenix 42]

Well, it's moved around over three threads. This thread is as good a place as any.

 

If you're interested in the previous discussion, do a search using "waves" and my name.

 

 

Edit: Just checked. There are too many. Suggest you start with the posts from Jan 9, '13.

Edited February 27, 2013 by DbPhoenix

[tupapa 10]

 

p.s. Fx is giving me headaches. I am not sure why whatever I am used to doing isn't working. The respect for S/R is a bit lower and the price gyrations a bit extreme. Maybe a bit more time to get acclimated to currencies might help. Db's warning is at the back of my mind.

 

Edit: For futures and stocks there was a procedure I followed, starting from just observing the price and then taking it one step at a time to Analysis -> Setup -> Entry/Exit. I haven't gone through that process for Fx and perhaps it's the reason I feel like floating in sea without any reference to the land.

 

With respect to this it is worth differentiating between trading Forex and trading currency futures. As Niko mentioned, the Euro/Dollar futures is a fantastic market, with plenty of opportunities.

 

But it depends on your time-frame. I know many traders who trade the 6E intra-day and make money on a consistent basis.

 

If you are trading them more longer term, perhaps using daily bars, you might only find 1 opportunity in a week, or 1 in a month....

 

I have a CFD account that I currently use for my longer term trading becuase it has a user friendly platform and I have total control over my risk (I can trade 10 CFDs, 1 CFDs, 0.1 Cfds, etc..().

 

Trading currencies longer term can be hugely lucrative and you get some decent trends so I wouldn't give up on them. Just look at that rejection of resistance in the GBP/USD at the beginning of February, it doesn't get more Wyckoff than that

[Niko 10]

I agree with tupapa, if one is only trading EOD it is harder for the bucket shops to screw you up, although not impossible, i read the story in a magazine of a trader who lost millions of a 20 M usd account because of stupidity of course and because the fx dealer he used consistently screw him over, not executing his stops and other stuff like that. Why he stayed in bucket shop fx with all that money beats me, but the point is when you counterparty is your so called "broker" there are some perverse incentives to run away with your money.

[Niko 10]

Have you guys explored the posibility of using options instead of the underlying to take long term trades in stocks and commodities EOD, I guess that if the distance to stop is equivalent to the premium, one would have the advantage of protecting the trade, but in case the maket turned around before expiration one would still be on the trade, something like a trade resurrection, risk free. Perhaps this is nonsense, i just wanted to know if someone has explored this.

[Perrin 10]

But when it comes to cycles, they used to be regular and predictable. Then came Alan Greenspan along with his extraordinary interference in the markets, a tradition followed by Bernanke. With that, the cycles have been disrupted in the extreme. This is in large part one of the reasons why so many businesses lease nowadays rather than buy and focus on part-timers rather than full-time contract employees (in addition to avoiding healthcare benefits and pensions)

 

Those new cycles created by Greenspan and Bernanke should have been predictable too? Once something is regular and predictable then everyone knows what will happen next. Then everyone anticipates it and at some point something else happens instead due to everyone knowing what the outcome is going to be (or WAS going to be, because the outcome changes because everyone's anticipating it). Then it takes everyone a while to adapt to the new cycle. And then once everyone is comfortable with the new cycle...

[SIUYA 11]

Those new cycles created by Greenspan and Bernanke should have been predictable too? Once something is regular and predictable then everyone knows what will happen next. Then everyone anticipates it and at some point something else happens instead due to everyone knowing what the outcome is going to be (or WAS going to be, because the outcome changes because everyone's anticipating it). Then it takes everyone a while to adapt to the new cycle. And then once everyone is comfortable with the new cycle...

 

are you talking about the old normal becoming the new normal becoming the old new normal?

Even if something is predictable - you have to act on it, follow through, ensure you are not too early, too late or in fact have actually judged the cycle correctly....same old issues of defining and measuring a cycle.....

 

How many contrarians are they that always have positions even if you are not technically in an overbought, oversold, bull or a bear market.....in other words why do they have a position? How many bull/bear markets occur and people are trying to pick the tops and the bottoms - just to get a position or say they were right?

 

Plus maybe it just the simple thing of - we are human, we make mistakes, many of us repeat those mistakes.

Best leave these thoughts to those who trade cycles profitably and have better thoughts on them than me. :missy:

[tupapa 10]

Gringo has mentioned options a few times but I don't know enough about them to even consider using them. It is something that I will decently explore. They are best used to bet on an imminent move right? I think Wyckoff would approve of them since he was such a fan of the springboard.

 

Question about Gold to the more experienced EOD guys;

 

The most recent rally was strong meaning the low at 1556 and we may have just experienced a technical rally. If that is the case, we want to buy on a successful secondary reaction.

 

This is what Wyckoff had to say about this, from Section 7m:

 

-The second opportunity comes when the market completes three days of lower support but the closing prices of each of these days are close, showing that the selling pressure is losing its force, since the net result of this pulling and pushing is to leave the asset unchanged after a considerable reaction (Contraction of Volatility).

 

-At the same time, lower volume on the reaction confirms the inference that selling pressure is losing its force; buying power is overcoming it, as it now appears that the market has completed a secondary reaction.

 

 

1- When I trade intra-day, I have a rule of thumb that the secondary reaction, must retrace at leas 2/3s into the technical rally. Is this reasonable for EOD trading?

 

2- In this example,Wyckoff mentions three days of lower support and lower volume as the characteristics of the secondary reaction. Doesn't it make more sense to find the entry on a smaller bar interval than the daily like DB mentioned a few days ago? Maybe look for a micro-range on the 15-30m chart and place a buy stop above or a limit order at the lower limit of the range?

 

Since I am used to intra-day and I have done my testing on 1m and 1tick charts, I don't want to apply the wrong principles to EOD trading.

[Perrin 10]

Yes, I think I was talking about the old normal becoming the older normal and the now normal becoming the old normal. And we need to be thinking about the future normal before it actually becomes the normal.

 

I still can't quite believe that Bruce Lee video with the ping pong and nun-chucks is real. But whether it is, it's along those lines, isn't it?

 

I might be complicating things too much And what I'm rambling on about here is possibly not Auction Market Theory. However, it is interesting to think through things, even if I can't quite put into words what on earth I'm thinking about.

 

I think what you're saying is we don't need the whole cycle to be traders, just part of the cycle. I think the same - see something happening and understand why it's happening and what is likely to occur, buy at X, price goes up, Sell at Y, then it doesn't matter what happens afterwards.

[Perrin 10]

Does anyone know what hobbies Wyckoff had? Did he ever get bored of trading? What was his library like (outside of trading books)?

[Perrin 10]

27th Feb 2013

 

AGK – Aggreko (UK Stock) Swing trading (with a bit of not-selling-at-the-right-time thrown in for good measure)

 

Mainly written around midday today, with edits in the evening. Someone will have to tell me if this isn't what I'm supposed to be writing in this section of TL. I would copy & paste my earlier AGK thinking & journal from the past few weeks, but unfortunately the internet does not have enough hard drive space to store all the words, so I'd better just stick to today's entry.

 

[N.B. I have edited this journal entry to remove my 3000 word novel (I exaggerate only slightly) on philosophy, psychology and me, leaving just the bare bones of my AGK's trade thinking today as it currently stands. Actually it's hardly bare bones. It's more like a giant huge fat thought process, which I probably do need to slim down. Sorry about that. I will attempt to diet my thinking (or at least my attempted explanation of it) soon.]

 

I am currently in AGK. Price is at 1666. I find myself thinking this is when it goes up again. Or maybe I'm just over excited (I get like that sometimes when I think I'm in this zone place, I'm feeling good and I start babbling on). It could be that my vision is being skewed by emotion – though I don't think so – although at least I am aware that is a possibility. Maybe I shouldn't be trading when I'm thinking a lot...

 

In AGK now, people start thinking “hang on, this thing has stopped its decline.” Not many are selling. I think this is a place to buy in (but then I did think this the other day too, hmm I do need to be careful). But then, if other people are thinking "I need to be careful" and are awaiting confirmation, then perhaps price really has fallen as far as it will and the majority of traders coming in now will be those buying the stock up.

 

So if people are thinking price will reach as low as 1625. But it only reached 1650 and has rallied to 1670 then is jigging around 1660 ish. If price doesn't fall that low (i.e. if it can't reach 1625) then there is strength there and when others start to realise that, then the movement starts upwards again, perhaps stronger this time as traders gain confidence. People (when I say people, I mean me) originally thought that price would stop the retracement of the last few days at 1680 but it carried on through. Long term (3 months & 1 year chart) the price is downwards although it's a turning point around now, and will go up more soon, I feel.

 

I know that I should have sold at 1740 (I knew I probably should at the time – price was hitting resistance, I could have banked profits), but that's ok, at least I knew at the time that was a potential turning point and a place to exit perhaps and re-assess. I can be wrong and learn from it. I need a bit more experience before I can start being good at this.

 

I assume it'll go up now. Unless I'm wrong... but it's in an uptrend long term on the 5 years timescale. 1 year timescale is down but it can't go down much more can it? (heh, that's what you think Perrin!) … If people refuse to buy perhaps, I suppose then it could carry on down. But I doubt it will do that.

 

I feel that I should be playing the trends within the trends - trying to take bites on my chosen timeframe. I missed closing this one out at 1740 - I kind of knew that I should sell there, but I didn't. That was resistance and price tried to get through and couldn't, so retraced. Price hasn't retraced too far though (yet). So if price can run back up to 1740 now, I'm more hopeful that it will get through on a re-test. At least knowing that perhaps I should have sold there is good. Doing it time after time is the hard part, I guess. But it should become less hard the more I do it.

 

I thought it might go through resistance there (and I'm sure that it will, sometime), so I didn't sell - I waited instead. After it stalled, I could (should? - In hindsight yes) have sold there, taken a fresh look at what was happening with the movement and then re-bought if the action deemed it a good idea (if I sold at 1740 or 1730, I could have re-bought on the other side of resistance, perhaps, if the price had cut up through resistance without much bother).

 

Am I supposed to say where I bought? Ok, ok, 1610 on the 4th February. Yes price went down after I bought it but it was within acceptable levels (just). However, price had to go up, look at the chart, it didn't have much choice did it. I could have bought at a better place, however my entry wasn't terrible. It wasn't perfect though and I'm not entirely sure how I become a trader who consistently buys at a near perfect entry point (for example where price rises as soon as I've bought and it doesn't look back), but I shall persevere.

 

I know some people may say "Bad Perrin, should have sold at 1740!" and indeedy, I agree. Long term, it's going up though. Unless it doesn't, in which case, fair enough. I will laugh (in a sad, ironic way) if tomorrow this comes back down on me.

 

That 1600 level does look like it is calling out to the price though, doesn't it? I am slightly concerned that price might have one more downward punch to throw before it goes up (e.g. it might climb to 1700 and then those who bought at that (small?) resistance level might throw their stock out quick. But we'll see. If it does go down I cannot see it going past 1600.

 

It is slightly frustrating looking and knowing that I could have sold 1740. If I were the younger version of me I would have sold at 1650 / 1660 in frustration. Perhaps the current version of me will sell out at 1625 in frustration! Perhaps the best option would have been to have bought 1610, sold 1740. Then bought back at 1660 (or even 1625 if it does get down there), or perhaps after selling just left it alone and gone to a different stock.

 

Actually I've just rechecked the charts and realised that one of the other reasons for getting in was that I thought price may get back up to 2100+ at some point.

 

Ah, predictions. I get these so spectacularly wrong sometimes. We shall see. By the way, if anyone's managed to read all the way to the bottom of this and has seen anything wrong with my thinking, please let me know. Thank you!

 

5 year chart:

 

1 year chart:

 

3 month chart:

 

5 day chart:

[Niko 10]

Perrin,

 

Lots of writing, you really have a lot to say, sometimes I want to write like that on my journal but my muse never shows up.

 

Don´t give you such a hard time for missing the exit, but if it was in your plan and you did not do it then you should ask yourself why are you not following your plan (if you have one), if you do not have a plan then don´t trade until you write one and once you do it, follow it verbatim.

 

Regarding this:

 

 

Am I supposed to say where I bought? Ok, ok, 1610 on the 4th February. Yes price went down after I bought it but it was within acceptable levels (just). However, price had to go up, look at the chart, it didn't have much choice did it. I could have bought at a better place, however my entry wasn't terrible. It wasn't perfect though and I'm not entirely sure how I become a trader who consistently buys at a near perfect entry point (for example where price rises as soon as I've bought and it doesn't look back), but I shall persevere. - See more at: http://www.traderslaboratory.com/forums/wyckoff-forum/13708-trading-journal-trading-log-discussion-49.html#sthash.88k22Ecx.dpuf

 

 

Why on the 4th. Where you sure that was the right entry, what was the setup, and do you know the probability of success of that setup?

[V_2008 10]

Does anyone know what hobbies Wyckoff had? Did he ever get bored of trading? What was his library like (outside of trading books)?

 

Yeah, thats will be great to read some biography of Wyckoff. To know him as a person.

[V_2008 10]

I was looking for todays market action and had some trades. But I always see that price don't respect support or resistance levels. In my case I was looking to open short trade. But at point when I had to act, I was in doubt on which level I must pay my attention.

So, today I was looking at 1.3125 (red line) as it was tested several times. When I was typing this message I have found one more level 1.3235 (green line), so is it possible to say that Asian session resistance level was more important or at least it could be important? I was looking to short on the last UP wave (arrow). By the way, thank you DbPhoenix for introducing me Stride in its full action in 90 minutes trading forum. Now I can rely on it.

[eminiman414 10]

Read through the whole TIF thread again and visually everything seems to be making a lot more sense. Price makes its way from one zone to another sometimes rapidly if nothing stands in its way and sometimes it takes a while to move to the next zone. Just depends on the traders, the pressure they exert and how interested they are in certain price levels.

 

For tomorrow these are my levels/zones of interest for the Russell.

913.2, 910.7, 908, 904.6, 901.2

 

I am not making trades but beginning to devise plans/thoughts on what I would expect for the next coming day. A short at the 908 level seems to make sense as we are channeling downward. If I am understand AMT correctly if there is a test of 908 and prices decline one would expect to see 904.6 and possibly 901.2? Is that correct? The way price is moving I feel as if I larger trading range is in the works of forming.

 

A question I have is those smaller ranges as price moved upward would those really classify as areas of interest or potential s&r?

 

One final question. For anyone watching a 1 tick chart can you really have a particular setup using that chart? I see double tops and bottoms around key levels all the time but then price moves away from the area only to come back again/again/again then sometimes moves up from the original double bottom sometimes downward. Watching the 1 tick I am getting a much better sense of what traders are up to but I am wondering how to turn that into a setup. I can definitely detect the changes in speed/pace but have some trouble with watching those little spurts/jumps up then some slow ticks down then price takes off which makes sense to me but then I see those spurts up and some slow ticks down then price takes off downward. Sorry to ramble.

[Niko 10]

 

One final question. For anyone watching a 1 tick chart can you really have a particular setup using that chart? I see double tops and bottoms around key levels all the time but then price moves away from the area only to come back again/again/again then sometimes moves up from the original double bottom sometimes downward. Watching the 1 tick I am getting a much better sense of what traders are up to but I am wondering how to turn that into a setup. I can definitely detect the changes in speed/pace but have some trouble with watching those little spurts/jumps up then some slow ticks down then price takes off which makes sense to me but then I see those spurts up and some slow ticks down then price takes off downward. Sorry to ramble.

 

Sure you can find patterns in the one tick, it is not easy at first, but after enough screen time you start finding stuff. From my experience, be specific about what you look for, try to find that and other setups will emerge.

 

My 2 cents.

[Gringo 10]

A question I have is those smaller ranges as price moved upward would those really classify as areas of interest or potential s&r?

 

S/R can show up anywhere they want but to keep things in perspective we limit our entries to setups that form closer to pre-established potential S/R. When price behaviour shows that there is some interest by supply and demand in that area we could choose to enter.

 

The smaller ranges or mini consolidation areas have or don't have importance based on your bar interval. If you are looking at daily bars than smaller consolidations such of a few minutes are not going to have much importance for your as your time horizon and intervals are larger. However, if these same consolidations appear very close to the potential S/R then you could time your entries based on price exiting these in the intended direction after your setup has been identified and all that's left is an entry.

 

As Niko stated above, the more you observe the better you're bound to get. Keep your observation within the confines of S/R for faster results.

 

Gringo

[DbPhoenix 42]

One final question. For anyone watching a 1 tick chart can you really have a particular setup using that chart? I see double tops and bottoms around key levels all the time but then price moves away from the area only to come back again/again/again then sometimes moves up from the original double bottom sometimes downward. Watching the 1 tick I am getting a much better sense of what traders are up to but I am wondering how to turn that into a setup. I can definitely detect the changes in speed/pace but have some trouble with watching those little spurts/jumps up then some slow ticks down then price takes off which makes sense to me but then I see those spurts up and some slow ticks down then price takes off downward. Sorry to ramble.

 

You can create setups on the tick chart, but that's not necessarily the point of the exercise, which is to become sensitive to price movement (as an aside, it may help not to think so much in terms of price movement but rather trader behavior, i.e., price isn't moving, traders' behavior is being illustrated by prints; the movements may seem less random that way). For those who are just beginning, this may all seem like a duh. But for those who have spent a lot of time with a bar approach, this may take quite some time.

 

If you see something that looks like it might be a setup, whether in this interval or a larger one, don't become fixated on the setup itself. Look as well at what happens afterward. Did it pay off? Why? If not, why not? There are, for example, spectacular reversals. Others will just fizzle out and lie there. If price is just a bouncing ball, these differences may seem random. But if they're viewed in terms of trader behavior and motive and goal, the characteristics of both muscular and wimpy setups may become more clear.

[DbPhoenix 42]

I don't know that I can help you with this. I see nothing here that I would bother with. It appears that traders are just trading to keep busy, without any kind of goal. Whatever S&R levels there may be don't seem to be particularly important.

 

Don't make things harder on yourself than they need to be. Look for something easy to trade, something reliable and predictable.

[philmg 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.

 

May I ask what book you are talking about? DB you have written one yourself?

[tupapa 10]

So it looks like the secondary reaction is probably coming to an end, how do we know this?

 

1- Sl is Broken

2- Buy waves are gaining in length and duration and the sell waves are getting shorter.

3- Three was lower volume on the test

 

 

We must now assume the trend is tentatively up.

[SunTrader 10]

I was looking for todays market action and had some trades. But I always see that price don't respect support or resistance levels.......

I have a suggestion if I am not stepping on anyone's toes. I also don't know if it is wyckoff related or not.

 

For Euro look to the first hours range (Frankfurt time, since this is the main euro trading city - which on my chart is 2am-3am ET) and watch how price reacts when it revisits the zone at some point in the future:

[tupapa 10]

Following the last post, there is currently a potential Hinge in Gold:

 

[Niko 10]

A couple of thoughts on oil, gas and the bund, I can´t do gold because ninja´s charts are lacking some data.

 

WTI Oil

 

 

Natural Gas

 

 

BUND Tupapa´s favorite.

 

 

I will check out next week how well I did.

 

Meanwhile, comments are welcome as always.

Edited March 2, 2013 by Niko