Trading The Wyckoff Way

[Head2k 10]

Now I see how I could buy the second dot in downtrend (Middle of August)

We break through 70 on higher volume but the next two days there is only little follow-trough. Volume decreases and so does price progress. The next day buyers take over. Nice volume, closing at highs just below 70. Next is doji, volume decreasing. I would wait. The next day we try lower gound and look - sellers don't push. Low volume and we close at highs, back in the congestion. There is no interest in lower prices. I could buy close or a breakout above high of the test bar.

 

Now lets see the next dot (End of August)

The breakout above 70 met a solid resistance. High volume, narrow spread, but closes at high. Not clear result yet. The next day the result becomes obvious. But then the selling pressure is gone. And where does it happen? Just in midpoint of previous congestion. Is this just a low volume pullback or is it a successful test? The next day is a doji with high at 70. Now if this was only a pullback on the way down price should turn right now, shouldn't it? If it gets above 70 again I will consider it a successful test and I will buy it.

 

I think I wouldn't buy the dot in September because it is too quick. No test and price quickly rises to infavorable levels.

 

Now the last dot, in October

Price makes lower lows but volume decreases significantly. It looks like we are running out of fuel. Now we gapped below 40. Didn't fill the gap but closed at high. The next day we opened at low, tried up again but failed. Doesn't look good. But see what's next! Opened higher, tested lower ground and closed at highs on the lowest volume on this chart so far! Doesn't it mean that there is no interest in lower prices? Lets buy close.

[DbPhoenix 42]

bump................

[DbPhoenix 42]

I do that in real time. I only paper trade and I have not finished my trading plan yet, so my trading is more loose. My paper trading serves mainly two puroposes. When I think I am on something I try it just to see how it feels in real time. That's a loose mode. Then I have a disciplined mode, which serves for disciplined trading of setup(s) that I have worked out. However, I have noticed a behavioral pattern of mine. After a couple of winning days I find myself forgetting or loosening criteria for my setups. The more I lose the more I want to get it back and the more stupid things I do. I switch to loose mode, not to try new things but to earn money, which is nonsense. Today was a nice example. I know, all marks of a stupid beginner. But today's mood of mine is good for the Db's task, as I have these things in fresh memory.

 

The first dot in downtrend (end of July) would be my favorite.

 

Volume on the way down was decreasing, that's a bullish sign, isn't it? Sellers are exhausted. Now we are at support and they don't push. Now look! Buyers stepped in on volume. Then a pullback, quite high volume but it finds suport only just below the midpoint of the rally day. If it breaks the top of the rally now then I am in!

That is exactly how I would buy the top of that correction.

 

The second dot in downtrend (Middle of August)

 

We break through 70 on higher volume but the next two days there is only little follow-trough. Volume decreases and so does price progress. The next day buyers take over. Nice volume, closing at highs just below 70. Next is doji, volume decreasing. I would wait. The next day we try lower gound and look - sellers don't push. Low volume and we close at highs, back in the congestion. There is no interest in lower prices. I could buy close or a breakout above high of the test bar.

 

Now lets see the next dot (End of August)

 

The breakout above 70 met a solid resistance. High volume, narrow spread, but closes at high. Not clear result yet. The next day the result becomes obvious. But then the selling pressure is gone. And where does it happen? Just in midpoint of previous congestion. Is this just a low volume pullback or is it a successful test? The next day is a doji with high at 70. Now if this was only a pullback on the way down price should turn right now, shouldn't it? If it gets above 70 again I will consider it a successful test and I will buy it.

 

I think I wouldn't buy the dot in September because it is too quick. No test and price quickly rises to infavorable levels.

 

Now the last dot, in October

 

Price makes lower lows but volume decreases significantly. It looks like we are running out of fuel. Now we gapped below 40. Didn't fill the gap but closed at high. The next day we opened at low, tried up again but failed. Doesn't look good. But see what's next! Opened higher, tested lower ground and closed at highs on the lowest volume on this chart so far! Doesn't it mean that there is no interest in lower prices? Lets buy close.

 

Nice job. While it may seem as though I'm encouraging wrongthink here, it's an exercise, not a prescription for strategy and tactics. Everyone should keep in mind, though, that it is always a good idea, when preparing to enter a trade, to think about what he'd do and how he'd do it in order to take the opposite side of the trade. If nothing else, he may prevent himself from taking a trade that he had not thought through thoroughly.

[Head2k 10]

As I said, if one understands -- practically and not just intellectually -- the dynamics of buying and selling pressure against support and resistance, the entry and exit timing are not nearly as much of an issue. But at some point, that means going to the chat room (or working with somebody in some other way) and doing it.

Everyone should keep in mind, though, that it is always a good idea, when preparing to enter a trade, to think about what he'd do and how he'd do it in order to take the opposite side of the trade.

Spending time in chat room is of great help for me. Yesterday I was studying NQ over the last three days and particularly Friday and I defined a different type of entry than I was focused on up to now. Or, as entries are not much of an issue, I defined a change in dynamics which I began to see a few days ago. Seeing this dynamics allows me to take advantage of a move earlier.

However, my main problem remains scale (some might call it time-frame or fractality). This very much relates to the question of if and how to enter in the opposite direction. Its merely my inability to distinguish important from unimportant, or to watch detail in context.

Price moves in waves. One can observe changes in dynamics of buying and selling pressure on all wave sizes. The tinier the setup is the better price it usually provides. But it also provides the least confirmation. If I enter on tiny wave then a bigger wave can easily have a different oucome. Entering into long trades in your exercise is an example of going with the tiny waves only to get washed out by a bigger ones. Being able to find the right spot to enter means being able to notice THE change in dynamics. And to be aware of scale. Entering on those first couple of dots in the downtrend would mean failure to take scale in account, IMHO. How can a buyer think that a congestion zone formed during a couple of days can store enough energy to drive price through a congestion zone built over 2 months? However logical this seems to me in hidsight I merely fail to make these observations in real time. I find myself caught in a fast chart where every swing seems so important...

It is a problem of my perception and information processing. But I guess one can largely avoid these problems when he predetermines his levels or zones of interest. This way one predetrmines importance and even observing the waves gets easier because they can be related to some more or less solid point in space.

[DbPhoenix 42]

However, my main problem remains scale (some might call it time-frame or fractality). This very much relates to the question of if and how to enter in the opposite direction. Its merely my inability to distinguish important from unimportant, or to watch detail in context.

 

Price moves in waves. One can observe changes in dynamics of buying and selling pressure on all wave sizes. The tinier the setup is the better price it usually provides. But it also provides the least confirmation. If I enter on tiny wave then a bigger wave can easily have a different oucome. Entering into long trades in your exercise is an example of going with the tiny waves only to get washed out by a bigger ones. Being able to find the right spot to enter means being able to notice THE change in dynamics. And to be aware of scale. Entering on those first couple of dots in the downtrend would mean failure to take scale in account, IMHO. How can a buyer think that a congestion zone formed during a couple of days can store enough energy to drive price through a congestion zone built over 2 months? However logical this seems to me in hidsight I merely fail to make these observations in real time. I find myself caught in a fast chart where every swing seems so important...

 

Bringing one's expectations in line with the strengths of the support and resistance levels that he's pondering is an important step. There are important levels and zones of S/R as well as trivial ones, and one can't expect as much of a move to result from tests of the trivial as from the important. This does not mean that the trivial lines and zones and moves are "noise". There is no such thing as "noise". It all contributes. It all matters. But contributing is not the same thing as being important.

 

Put simply, if you're playing an S/R level or zone that's seen by everybody on the planet, even those who use only weekly charts, you can expect something more than if you're playing an S/R level or zone that's seen only by those who are trading 1-tick charts. Many who are new to scalping have trouble with this, which is why they scalp for a few ticks those trades that are worth only a few ticks but also scalp for a few ticks those trades that are worth much more. In fact, anyone who consistently cuts his profits short is probably not putting things into context. This has nothing to do with what many call the "fractal" quality that they believe the market has. It's just a matter of context. As such, there is no magical means of illustrating the movements (X number of ticks, Y number of minutes, range bars, CVBs, candles, etc). What matters is the movement itself.

Edited September 9, 2015 by DbPhoenix

[DbPhoenix 42]

Rather than make this thread overlong, let's switch now to the short side, which will appeal to all the counter-trend junkies who are forever seeking to "pick the top".

 

Again playing devil's advocate, since no one would actually make these trades:), what might be the justification for each of these shorts?

 

[HAKUNA 10]

My 2 cents:

 

1. first dot: prices rise on high vol , followed by effort to go up, but vol is low. When vol. does come in, prices fall. But the range narrows, does not too good for a short.

 

2. good for scalp, target support of 52, LSL,

justification: high vol (effort) at the peak, 56, prices close lower(no result)

 

3. Another attempt at 56, but not much effort, and when effort is made (increase in vol), no result via move to higher prices, sellers then have little difficulty pushing prices down, infact vol increases, so not a bad short, again target 52.

 

4. Increasing vol at 50 is unable to push prices down, support building, also resting from support at Dot 1, then vol dries up, buyers have little difficulty pushing prices up, breakout of the range with somewhat feeble vol (not much effort), may be considered as fake breakout as a reason to short, but there is lack of selling pressure, low vol plus price are now going down, --warning sign.

 

5. This would a better exit point for a long trade taken after a retracement following the breakout rather than a shorting opportunity, due to previous resistance on the left at 56.-58

 

6. This is not a bad short really, prices rise to 58(testing resistance level) on low vol, again no effort, better trade via the 5th bar after the dot, at 56 which has a tail and closes on the low, selling pressure, target once again 50, as range is forming between 50-58

 

7. Bounced of support at 50, suppose justification for going short at 54 on a narrow range bar with very low vol, can be viewed ast as lack of buying pressure. And in view of 3 jabs at 58 plus prices unable to rise above midpoint of range, in realtime guess this would be the action but then as price approach 50 vol increase, there is effort but prices once again hold, hence have to bail out.

 

8. after a rise of 16 pts, retracement can be expected , hence a short at dot 8 below those 2 narrow bars , target that shakeout bar , early march.

 

9. This is a lower high on less vol, trendline broken , also LSL broken achieving previous target for trade 8. so short should be justified. But careful monitoring once again shows up effort to go down on high vol, followed by price holding on low vol, selling pressure diminishing and then prices able to rise on low vol.

 

10. More effort via increasing vol, demand increasing, gets nearer and slightly above 70, prices not making much progress, selling pressure increasing. Justified to short with the target as a test of previous resistance at 66.

[HAKUNA 10]

Have to add that all this would not be strictly keeping with wyckoff's trend following method.

[DbPhoenix 42]

Good work, though I may have been intimidating by overstating the position that "no one would actually make these trades". Reading the chart from left to right, there are trades that seem perfectly legitimate. But what matters is not so much that one reads the signals incorrectly, or even that he reads them correctly and life does a 180, but that he is willing and able to get out when things don't go his way. One could actually make money off some of these shorts, but only if he was willing to listen to those signals which tell him that the upmove has further to go, and he'd better not be too stubborn.

 

I know how difficult it is for one to state with any certainty what he would do at some point in the past when knowing full well what was to come. But it's a skill that must be practiced if one is to get the most out of hindsight charts.

 

And now the last, which may at this point seem like falling off a log, but the practice at analysis is always worth doing.

 

 

 

[atto 20]

As a first note, the areas marked as potential support/resistance on this most recent chart aren't virgin. Go back to the previous months, and you'll see the same exact levels. My favorite entry is late Sept '08 (short) at about $70-71. Reasons: We're already in a downtrend (lh, ll), and are testing old support (now possible resistance) on the upside. Note that this area was also important as far back as March. This is the first test locally of this resistance, but check out volume: there's a lot of new interest, suggesting sellers feel these prices are high enough to begin again. Price peaked above res, but was (fairly quickly) rejected. Initial hard stops at $73-74ish. Move to b/e a couple days later after the breakdown.

 

 

============

A note I wanted to make about entries is that not only are you maximizing return, you're minimizing risk. Often I'm much more certain about price's direction than in some of my actual entries, but there's no great way to manage risk. My favorite entry from the bull run in Oil is my favorite largely because of this.

[Head2k 10]

I think I need to re-read your threads and book. Now when I have somewhat better understanding of what's going on I am sure I will discover loads of new wisdom which remained hidden to me during my first reading.

 

Now the exercise (shorting the uptrend).

The 1st dot (Oct)

Because of lack of history I don't know where is this potential reversal taking place, but volume suggests that 50+- is a significant level. The first warning comes on the second day in the red rectangle. A sharp rise in volume and result almost doji. It could be a climax, lets see what happens next. The next day price opens higher but sellers come in big time, as if price above 50 was a trigger to throw everything off board. Now I could wait for a test to enter. But what happens the next day? Price rises on volume comparably low to yesterday, makes a higher high and holds it. This doesn't look like a successful test. This looks like the sellers are done and buyers keep pushing. Maybe we are going to go higher. Then bang! Another battle. Narrow spread, volume same as the day before yesterday, closing back below 50. What does this mean? Are the sellers back? It looks like that. However, this action is not clear enough for me to act. The only entry I can think of is breakout of this day's low, or selling close if we close below that low. The rationale behind it could be that since the narrow spread day represents a battle with not so much clear result I would let the next day decide, or to provide the result.

The next day is takes price lower, on lower volume, but the result is unclear again - a doji. What the heck is going on here? Now when I've sold could we just go down, please? The next day we open higher and close near lows, but all this is happening within the previous day's range. Volume is very low. Hard to interpret. If we go higher on low volume tomorrow, this might be a successful test. If we go lower it might mean that buyers finally gave up and withdrew their support. The next day provides a clear answer and proves the short trade wrong.

 

The second dot (beginning of November)

The fourth day in November we see a very narrow spread, suggesting some difficulties. Then there comes a sell-off. But buyers provide some resistance against this selling pressure, as one can see at close. The next day the situation repeats itself on a smaller scale. Lets se what happens next. We open lower and buyers try to take over. But volume is low and price fails to get above yesterday's close. This shows clear reluctancy of buyers. Now if we drop below today's low tomorrow (fiishing a successful test) I will sell.

 

The third dot (end of Nov)

We break 56 on decent volume but then we open lower, try ro make a higher high but we fail to hold it. Volume is quite high during this rejection, buyers met resistance. The next day the buying pressure is not renewed and price stalls on low volume. Who will take over now? he next day we open higher but then we fall. Volume is slightly higher but not high. It doesn't cost much effort to drive price lower. This might be the test I am looking for. If it breaks today's low tomorrow then I am in. After all, all this is an attempt to take out the early Nov highs and look what the effort is compared to those times. This is definitely going to fail.

 

The fourth dot (early Dec)

We found support at Oct highs but we fail to bounce for several days. Doesn't look like buyers are particularly determined. Ok, now we broke up but price was quickly rejected - we lost half of the gain the next day. And look where it found resistance: in the early Nov congestion. The breakout was on low volume but on the retracement it vas even lower. Well, if it is only retracement and the low volume shows lack of interest to the down side, it should continue up now. If price breaks today's low instead it may mean that it's the upside we are not interested in. So lets sell a breakout of today's low, if it occurs.

 

The fifth dot (late Dec)

Nice volume on the breakout through Dec highs. But where is the follow-through? We need to continue pressing if we want to break Nov highs, guys! But volume decreases and we see doji. This looks like buyers are somwhat reluctant. Lets wait for tomorrow to see whether they were jus having break or what. Now look, volume is gone and price heads lower, buyers are definitely not interested at all. Time to sell.

 

The sixth dot (early Jan)

The last day in Dec sellers showed some serious pressure. But buyers opposed very well. Lets see how this develops. Nice, we gap up and advance without serious difficulties. But what happens then? Are we getting finaly sober after the New Year party? Looks like the enthusiasm is gone. Then the next day we see reluctancy. Now this might be just a pullback or it might be the top. I will go with the side which will take over tomorrow.

 

The seventh dot (late Jan)

We bounced off 50.5 support but now we are having troubles in the midpoint of the range. If we fail to break through the midpoint it is definitely a bearish sign and I might even anticipate a breakdown. Look at volume, there is no interest in the midpoint, the fair value. Nobody is considering this value fair any more, we are done with this range. The first of Feb volume comes in! Lets quickly sell and ride the breakdown before it's gone without me.

 

The eighth dot (mid Mar)

Price seems to stall after a long rise. Are we just having a break or are serious problems to come? Now this indeed looks serious! Highest volume on the chart so far! But the result is not quite clear. The next day we go higher on low vol. Are sellers done or is this a test? The next day we open near yesterday's lows and fail to go higher. This suggests buyers failed. If we break through yesterday's low I will consider this action a successful test and I will sell.

 

The ninth dot (Late Mar)

We maybe saw a climax in the middle of March. But price then found a serious support at 59. Lets see how it will behave at the preliminary resistance outlined by the potential climax. Where is the effort? Price fails to get above 64 and the next day it falls, all on low volume. No interest hi higher ground, we just saw a test. If it breaks today's low I am short.

 

The last dot

The two bars above the dot: Price above 71 is quickly rejected and the next day volume is gone and we fail to make any progress. The next day price gaps down and closes near low, on quite low volume. That means buyers are done and support is gone. Lets quickly sell before it drops to 20!

Edited December 15, 2008 by Head2k

[Head2k 10]

Shorting the downtrend exercise:

 

The first dot (early Jul)

We broke out of the Jun congestion but failed to make any substantial progress. Instead we congest again and volume remains high. A continuous distribution? The day before the dot we close at high, above the three previous days. Are we going to break out tomorrow? Well, maybe buyers wanted to take price higher but sellers were prepared. Such a tiny spread gives a hint about a huge supply cap ready to satisfy all buyers. And such a tiny spread also allows a tiny stop. Pretty aggressive entry but not much to lose.

 

The second dot (mid Jul)

Gapped up but failed to break out. But lower ground rejected too, we hold high. Next day shows indecision: tiny spread, lower volume, doji. A springboard? I could enter a breakout in either direction and maintain a tight stop.

 

The third dot (mid Jul)

I don't like this one. Volume is stunning, showing very clear rejection of higher prices. But we find support in June congestion and close is well off the lows. The previous entry at least provided nice price so one can wait for this to solve with stop at BE, but entering on this day is much more risky.

 

The fourth dot (early Aug)

After the buying climax in July we went quite a long way down. Volume kept decreasing and since sellers are lifting their pressure one can expect an upside test. In the end of July buyers take over and push price higher on nice volume. The day after that they have a break and it's sellers's turn. But buyers come back with new force the day after. But here, as we approach June congestion, the supply presents itself, returning price deep to close near low. Maybe it wouldn't be a bad idea to short a breakdown under today's low.

 

The fifth and sixth dot (mid and late Aug)

A potential buying climax at former support. Since we close at high, an aggressive entry could be a breakdown under this day's low. But with these aggressive entries one must be prepared for a test. And it comes a couple of days later. The reaction prior to test is nice, reverting rather on low volume than on new demand coming in. Then on the test rally volume increases slightly but on the last but one day in August the result becomes obvious. Time to sell.

 

The seventh dot (Sep)

Maybe we saw a selling climax, maybe not. One should be careful with shorts now. But look what price does now. The third day of congestion it looks like we might have completed a succesful test of resistance. If one decides to enter at a breakdown under the M low the entry won't be filled in the next two days. Instead he will experience price congesting under former support. Volume is decreasing. Looks like a springboard. Price could go in either direction and the move could be quite fast.

 

The eighth dot (early Nov)

Rally stopping at former support, price bounces off and then buyers try again. Yet another failure. One could sell this weakness. However the last four days ending with the dot form quite a rectangular congestion so the situation doesn't seem so clear to me. I am also reluctant to call this a potential springboard since it takes place so close to support.

 

The last dot

This also doesn't seem much clear, I can see a similar characteristics as in case of the previous dot.

[HAKUNA 10]

1. A short on the first dot would not be a huge reward/risk type of trade, target was the upper level 80 of the range in June.

 

2. This would perhaps be in keeping with Db’s post elsewhere, with a very tight stop

 

3. The third appears much better as there is effort /selling pressure as price approach the upper trend line

 

4. Shorting on this bulge again would in line with what BB has shown on post 11.

 

5. first there is an effort via increased vol, but price hit resistance, no result,

 

6. buyers again try but this time without much gusto, ideal short with a tight stop

 

7. lots of vol, prices unable to get past the resistance of 65, again opportunity for a short with tight stop loss.

 

8. the short around 60 would have been exited or scaled out on vol spikes at 45 and 40

 

9. probably would have gone for a long here, seeing that prices have fallen over 40pts, although the trend is still down.

 

10. after getting stopped out a new trendline as per the first BB post would encourage a short this time with a tight stop

[Bearbull 10]

Despite rises in Tokyo and HK, buying momentum carried prices the European bourses straight into overhanging supply, ideal shorting opportunity.

 

Anybody wishing to take the trouble to study previous posts and look at attached price action on Dax and Eurostoxx this morning, same principles, nothing esoteric, labyrinthine.

 

Never mind "WHO is doing WHAT and WHY" Look upon the market as a single entity and free the mind to focus on what is happening in front on the chart. Leave others to engage in endless debates on who exactly is moving the market and what part of volume represents which entity ie. those in the know of events in advance, floor traders, scalpers, others with harmonics , some looking to convert squiggly lines into maths formulas etc.:crap:

[Bearbull 10]

forgot the charts Dax was pretty much leading the way.

[cowseathay 10]

An update to my previous chart.

[Head2k 10]

I will do the DAX short entry. I've added a few annotations.

 

Since 8:00 until 8:30 we see a healthy rise, volume and price move together. Shortly after 8:30 comes the first warning when price hugs demand line instead of bouncing off it. Then supply comes in on the bar you marked with the vertical line, at 8:34. Price then falls below the last swing low. But selling pressure does not have serious follow-through, as one can see on decrease in volume. Hence the first attempt to lift comes at 8:38. On the next bar price if forced down again, makes a new low but fails to hold it. And this is happening on very high volume. This could be a selling climax or not, I guess it would be better to wait. The next couple of bars volume decreases, price congests, spread narrows. Hard to tell what to expect. Then we try higher but the effort is poor and price falls back. I also added a horizontal line to show where this test finds resistance. Maybe it wouldn't be a bad idea to short here.

But then, on the down side the pressure is even lesser, support is found higher and price quickly shoots upwards. Maybe it wouldn't be a bad idea to reverse.

And finally price is quickly rejected, volume quite low showing that buyers weren't trying particularly hard. Time to reverse again?

 

I guess this scenario could easily happen to me. And it is even likely that the second time I should reverse I would just exit frustrated, only to miss the best opportunity. Maybe the first short I described is a bit premature, but the long IMHO isn't. Somebody wants to argue?

[DbPhoenix 42]

Where We Are So Far: All of this hindsight chatter about oil serves as an example of the "Wyckoff way" of trading, that is, a different kind of thinking that focuses on price movement as a result of imbalances between buying pressure and selling pressure, particularly against levels or zones of support and resistance, all of which is in turn a manifestation of trader behavior. Understand the behavior and you understand the illustration, whether on a chart or on the tape or on or in some other form. Understand the behavior and its illustration and you are set up to profit from it (one can also profit from this via indicators, chart patterns, "event trading", and so on, but none of this is pertinent to the Wyckoff approach.

 

Participants have demonstrated this kind of thinking in their analyses of the price movement as it wends its way up and down through a continuing series of crests and troughs. These waves are a language, narrating the behavior of buyers and sellers. And whether participants' every opinion has been correct or not, they have worked toward understanding the story that's being told by price movement and its accompanying volume (transactions) and toward gauging and interpreting the continuous changes in buying and selling pressures with the intent of finding the line of least resistance.

 

By doing so, I hope that they have demonstrated that everything one needs to know in order to make a trading decision is in the price movement, again whether illustrated by chart or tape. While there are undoubtedly many traders -- retail and professional -- left holding the bag at tops and bottoms, the Wyckoff trader will not be one of them. He does not allow himself to be distracted by extraneous information of whatever sort. Price behaves a certain way (that is, traders telegraph their intentions by their transactions), and he's out or in, as the case may be. He can wait for moving averages to cross each other or for some other indicator or news or a particular kind of bar or candle or pattern to signal or confirm an action, but he doesn't need to, except for personal reasons. None of this is therefore part of the approach. This has the effect of keeping everything very simple and relatively easy to understand IF one can focus on the approach at its most elemental until he thoroughly understands it. At that point, he can play with it as much as he likes, if he chooses to do so. But while those modifications may alter the approach as he implements it, they do not alter the nature of the original .

 

In order to save flipping back and forth, the following chart was posted at the beginning in order to provide the macro view. It's a typical and ordinary bar chart.

 

 

 

But the waves of buying and selling can be illustrated quite clearly without bars. In fact, for many Wyckoff traders, they are easier to see with a line.

 

 

The tests are the same, the trend is the same, the signals that the trend is over are the same (see, for example, the inset). A chief difference, however, is that one needn't get entangled in quandaries over what individual bars "mean" (if anything). One can in fact convert trading activity (or volume) into a line, depending on his software. Some Wyckoff traders find it even easier to detect the "pulse" of the market in this way.

 

As for jargon, nothing special: climaxes, technical rallies, reactions, springboards -- that's about it. The goal is clarity and simplicity, not obfuscation and complexity.

 

As I've said elsewhere, price doesn't care about you or about how you care to view it or illustrate it. It exists independently of your charts and your indicators and your bars. It couldn't care less if you use candles or bars or plot this or that line or select a 5m bar interval or 8 or 23 or weekly or monthly or even use charts at all.

 

Therefore, trading by price, or at least doing it well, requires getting past all that and perceiving price movement and the balance between buying pressure and selling pressure independently of the medium used to manifest or illlustrate or reveal the activity. For most people, this requires a perceptual and conceptual shift. Some find this shift relatively easy to make. Others find it impossibly difficult. If you fall into the latter category, keep in mind that there are many ways of making money in the market. This particular approach is only one of them.

Edited September 10, 2015 by DbPhoenix

[imahippi 10]

db

I've asked this a few times before and never seem to a) find the answer as I've forgotten the thread I posted too b) get an answer.

You are an experienced trader. Why do you trade the NQ as opposed to say, QQQQ?

Why is it better for you?

Jay

[Head2k 10]

Since nobody else continues I will finish my comentrary on BB's DAX chart.

 

First I want to appologize for wrong annotations of potential selling climaxes in the chart attached to my last post. Please read Pot'l SC instead of Pot'l BC in downtrend. I used copy & paste too much.

 

So what happened since the test with the nice short entry? It is pretty much a stair step downtrend. At each of the potential selling climaxes one can look for reversal. But if he waits for a test to confirm the reversal he doesn't get it. Also the olive green supply line is safe. Price instead increases angle of down fall and the blue supply line can be drawn. When price rises on technical rallies after the potential climaxes it always finds resistance at the last swing low and always bulls don't show much effort to push through.

At 9:17 comes a slight warning. Blue supply line is broken which means that price slows down. Then another potential selling climax comes, this time volume is the highest on the chart so far. Also we can notice that the technical rally doesn't find resistance at the last swing low but rather one level higher. Just subtle warning signs, nothing of great importance. But then, the subsequent reaction finds support at midpoint of the last down swing and buyers come in on volume, pushing through the top of the technical rally. That is the first time demand presented itself with such a force and it should tell us to cover the short or even reverse position.

[cowseathay 10]

Update to my previous chart. I'm using a chart of spot Nasdaq-100 (RTH session) instead of NQ futures because of rollover messing up the continuity of the chart. Whereas the NQ chart was a volume-based chart, this is a 30-min price chart. However, the result is practically the same. If NQ can get above 1250 then it could head to 1280 and then 1300 where there is some big R from the midpoint of the large consolidation from 10/06/08 to 11/10/08. It's already at R right now, so if it fails to break above then I think it is going to go back into the range from last week and possibly head lower from here on. All imo of course.

Edited December 16, 2008 by cowseathay

[DbPhoenix 42]

Update to my previous chart. I'm using a chart of spot Nasdaq-100 (RTH session) instead of NQ futures because of rollover messing up the continuity of the chart. Whereas the NQ chart was a volume-based chart, this is a 30-min price chart. However, the result is practically the same. If NQ can get above 1250 then it could head to 1280 and then 1300 where there is some big R from the midpoint of the large consolidation from 10/06/08 to 11/10/08. It's already at R right now, so if it fails to break above then I think it is going to go back into the range from last week and possibly head lower from here on. All imo of course.

 

Given the time of year, it's more likely that it will go up, but it's good that you're prepared for either eventuality.

[Susana 10]

Don't you guys feel that if enough horizontals are drawn one of them will surely serve a purpose but then again many of them will mislead?

[DbPhoenix 42]

Don't you guys feel that if enough horizontals are drawn one of them will surely serve a purpose but then again many of them will mislead?

 

That's pretty much the same thing you said six months ago, and my reply is pretty much the same as well, except that the trading ranges are different.

 

If this makes no sense to you, perhaps Market Profile would strike a chord.

[atto 20]

Additionally, different zones of interest will be dominate in different timeframes. From a trading viewpoint, I personally wouldn't actively pay nearly as much attention to a smaller congestion that was a while back nearly as much as one (larger or smaller) from more recently. The same goes for midpoints of said congestion areas.