Trading The Wyckoff Way

[forrestang 10]

Here's a "CouldaWouldShoulda" from today.

 

But a recap, price moved out of a prior range, and began creating a new range on the 30th, this range was essentially 1600-1632.

 

Price had dropped hard this morning from the highs, and came towards the 06 area, then to the 04 area and finally to the 02 area before taking off. It took off at approx 13:06.

 

Now, I saw the support zone as rather wide. I tried several times to get long at the bottom of this range, first @ 10:46, then again @11:50. I think taking trades that either stopped me out, or hit me at BE eventually lulled me into thinking this thing isn't going anywhere.

 

All entries into the trade looked decent on the 5sec chart. But the absolute BEST looking entry IMO occurred at 13:06. Here's a picture of what I'm talking about:

 

More specifics about this entry are discussed in the 'Entries' thread.

[DbPhoenix 42]

I neglected to point out yesterday evening that you may want to go back to 7/23 and include the 1605 level in your consideration of support. Though we love round numbers, 1605 hasn't done too badly, and looking at the S level here as a zone will help you to avoid waiting for that last push to hit the limit of the range. Again, don't forget that the range is defined by the location of the bulk of the trades as well as by the limits. The VAP plot helps to drive that home.

[forrestang 10]

I have many other "CouldaWouldaShouldas" throughout the day. But I'd go insanse trying to post them all, so I'm just going to post one that we were talking about today while it was happening.

 

This picture is just the 1000CVB chart and the 5sec chart. Significant levels are transferred from the 10K to the 1k before trading day as I see the swings better, but the 10K is still visible as one of the charts I use as I can fit more days on it.

 

Anyway, price is approacing the 10 level. I'm looking to short. All my entry criteria is pretty much present to enter the trade, with a good few minutes to make a decision, just didn't do it for whatever reason.

 

I have a problem obviously with not taking trades that fit my criteria. And so far my criteria is relatively strict, and I get several opportunities each day to enter.

 

In all honesty, if I'd taken that first entry, I may, may not have been stopped at BE, or cashed in half for some profit..... but a reasonable re-entry may have been there?

 

Hopefully after posting enough of these, I will make the necessary adjustments to the game plan.

 

[Gringo 10]

Below is some longer range prospective of Q's. I would stay cautious at these levels. That being said, so far market hasn't sold off and is continueing to have higher highs and higher lows. Once the dynamic changes, or atleast stalling takes place at these levels, the upmove I consider to be intact. Market can blast through resistances as well. This chart is just a reminder to stay awake. And yes there is considerable support undernethe. Quite a messy area if you ask me.

 

[DbPhoenix 42]

 

In all honesty, if I'd taken that first entry, I may, may not have been stopped at BE, or cashed in half for some profit..... but a reasonable re-entry may have been there?

 

And that's something you're going to have to think about long and hard: given that price not only came back to 10 not 5m later but that it did it so abruptly and quickly, would you have had to change your underwear? If you were stopped out, or stopped yourself out, would you really have had the presence of mind to re-enter and rake in all the profit from a good trade?

 

Trading in real time is a whole different ballgame from "trading" hindsight charts and from reading posts about trading ("here's this fabulous trade of mine from this morning"). But knowing what to look for is quite a hurdle. Now you have to work on trusting that you know what you're doing.

[fifty2aces 10]

How often does TICK update for you? It's difficult to tell from a 1t chart, but yours appears to be updating more than mine (which only gives a new value every 5 seconds).

[habi 10]

How often does TICK update for you? It's difficult to tell from a 1t chart, but yours appears to be updating more than mine (which only gives a new value every 5 seconds).

 

It would be interesting for me too, from which data provider I could receive more updates. With eSignal I have 10 updates per minute for TICK and just 2 per minute for TICKQ.

[Head2k 10]

With DTN IQ Feed (which I use) TICKQ updates approx. every 5 seconds. With data from Interactive Brokers the updates seem to be around 2 or 3 times more frequent than that. DbPhoenix uses IB as a data provider.

[forrestang 10]

What I have for Monday, 10Aug2009

 

[DbPhoenix 42]

How often does TICK update for you? It's difficult to tell from a 1t chart, but yours appears to be updating more than mine (which only gives a new value every 5 seconds).

 

Don't know about the TICK. I use the TICKQ. It updates every two seconds.

[forrestang 10]

First, here is a follow up from yesterday. Just after the open, price moves up to test the 1618 RESISTANCE zone, it then falls down all the way to 1598. I didn't anticipate that much movement, so had to adjust fire and update levels as the day progressed.

 

I've adjusted some things which you can see on the continuation part of the chart, as well as the 2nd chart in this post.

 

This picture of the follow up should be self explanatory:

 

 

HERE IS THE CHART FOR TUESDAY:

[PFtrader 10]

I just bought Bull's-Eye Broker point and figure charting software. Do you have any experience of vertical and horizontal counts for profit taking, and which one of them is more accurate? Is there a great difference between them, or do they usually project the price objectives at similar levels. The concept is explained in this link. Point and Figure charting software Bull's-Eye Broker

 

Is it better to use price objectives or is it better to close your position at the next opposite signal. I.e. if you have bought, should you sell on the next sell signal?

[motorway 10]

I just bought Bull's-Eye Broker point and figure charting software. Do you have any experience of vertical and horizontal counts for profit taking, and which one of them is more accurate? Is there a great difference between them, or do they usually project the price objectives at similar levels. The concept is explained in this link. Point and Figure charting software Bull's-Eye Broker

 

Is it better to use price objectives or is it better to close your position at the next opposite signal. I.e. if you have bought, should you sell on the next sell signal?

 

 

Most important thing is the TREND

Why because there are trends

 

IE the BOXES on the P&F chart have memory then

The BOXES are not Fluctuations of a fair coin

But of a coin where participants

place their bets ( take positions )

By running to one or the other side ( hence trends )

( Some other very valuable analogies should be considered )

 

The two counts have different "mechanics"

 

Wyckoff ( and de villiers ) talk about

interior ( horizontal count ) ballistics

and exterior ( Vertical Count ) ballistics

 

Wyckoff ( and de villiers ) used exclusively horizontal count

because they were using one box reversal charts as the foundation

and they were interested in seeing "CAUSE"

Horizontal count = Diagonal Lines ( 1 unit of cause = 1 unit of effect )

 

Only type of vertical count in One BOX charts is Measured Move

 

With three BOX charts

Today see total dominance of vertical count ( RDW used 3 & 5 reversal charts as well but to confirm the one BOX not as foundation )

( They do not reveal congestion and Cause so clearly )

 

Why do you multiply by three with Vertical Count ?

Not because it is a three box reversal

But because of DOW theory of three legs to a Primary Trend

 

An impulsive move off a rejection of the other side ( important VCs are abused)

is seen as a precursor ( early savvy adopters and their urgency )

 

H counts wyckoff gives importance to correct use as well

 

 

Counts are ways of quantifying

important principles at work in the P&F charts

 

IF BOXES are a memory process

counting is useful

if BOXES are of a fair coin

Then Counting is not useful even harmful

 

Are there Trends --YES

demand and Supply are dynamic forces

 

and are related to how much demand and supply are already active

( eg memory & Trends )

 

consider there are two keys that unlock the gold

 

one is the P&F chart itself

 

The second is what scale ( what box size )

 

IN markets with min bids approaching 0 ( remember RDW min bid was as 1/8 )

 

P&F filtering is even more important today than in RDW day

and he said even then that these charts were VITAL

 

Unlike coin toss charts

Charts of active stocks ( sponsorship )

move in diagonal lines ( 1926 )

eg vertical to horizontal there is a relationship that is NON RANDOM

 

So YES ---Count

BUT you are not predicting

But identifying

Counts are a tool

qualified by the trend , position in the trend

overhead resistance & underlying support ( areas of congestion )

 

And also consider that counts are qualified by "time"

If your chart pauses and corrects in terms of time ( This is T as duration , there is P , V & T

T in Wyckoff terms not Gann or Elliot )

That there is cause building on a smaller scale

( WAVES BUILD UP AND DOWN )

 

motorway

[forrestang 10]

Here is a 'CouldaWouldShoulda' for you guys.

 

So the mornings seem to present good trades more often than not, everyday almost. Price made a hard push up in AH. And it somewhat spooked me since it pierced the 32 level so vigorously. But nonetheless I was hoping for a short right after the market opened, seeing as how it was determined to get back to 32 before the open, signaling a potential short from top of the range.

 

Well, it started heading down before the open. So I didn't get in this trade. Why do I have this bias about the open? I don't know, it's just one of those things...... like taking a leak with your non-dominant hand :shrug:

 

But missing this doesn't bother me much.

 

Next trade occured at the 10 area. 10 has been significant since we entered this 00-32 range. Today it tested pretty much to the tick. The entry was beautiful as well, explained on the chart.

 

What's really bothersome is how easy this trade would have been to manage. Seldom do I see something that works out so cleanly. Price pretty much went straight up, with minor pbs, almost right to the resistance level. But look at the 1min TL, which I always have up.

 

Oh well, time to move on:

 

----------------------ADDENDUM-----------------------------

SO I posted the trade I didn't take. But like many other posts I've created in this thread, I didn't say "WHY" I didn't take it.

 

I have some theories:

 

1) I had on my chart the main trading range of 00-32. This is the big range. I have a midpoint around 18 or so. There are little ranges within. So maybe my logic was I would be initiating trades in the middle of the range, potential bad idea? Probably not, as mentioned there are ranges within the range, and 10+ was reasonable IMO.

 

2) I'm just trigger shy. I watch a lot of trades walk past me. I imagine this isn't based on Fear, but more on me having in my head to look for the 'best opportunities.' Too much thinking on my part I believe.

 

3) More likely for this particular trade, I think it is because I didn't have 10 on my charts prior to the open. I don't know why? I think this is just a lapse in judgement marking things up the night prior. The 10 level has been on most of the charts I posted in the Trading in Foresight thread, and probably on more of the ones I did not post.

 

I have the 10 level, or something right next to it Here, and Here, and Here, and Here.

 

I think 3 is the most concrete reason.

Edited August 13, 2009 by forrestang

[DbPhoenix 42]

 

3) More likely for this particular trade, I think it is because I didn't have 10 on my charts prior to the open. I don't know why? I think this is just a lapse in judgement marking things up the night prior. The 10 level has been on most of the charts I posted in the Trading in Foresight thread, and probably on more of the ones I did not post.

 

I have the 10 level, or something right next to it Here, and Here, and Here, and Here.

 

I think 3 is the most concrete reason.

 

This is an example of when I find incorporating the volume component of Wyckoff to be helpful. Given the "air pocket" that was created yesterday above 1602, I fully expected price to drop back to 1602. However, a lot of volume came in at 0950, then again at 0955. When price tested the 10 level a couple of minutes later, volume pretty much disappeared. This along with the TQ divergence suggested that this was going to be the bottom, not 1602.

 

This is also an example of when it is important to consider not only what price is doing but also what it is NOT doing, i.e., in this case, at 10, it isn't falling. The Dog That Didn't Bark. Granted it's a lot to think about within a span of a minute or two. All the more reason to trade without distractions, at least when price is at or near an important level.

 

Edit: BTW, you have your VAP distribution covered, but I suspect it'll show you that 10 is the limit of the distribution for that range.

Edited August 13, 2009 by DbPhoenix

[motorway 10]

I just bought Bull's-Eye Broker point and figure charting software. Do you have any experience of vertical and horizontal counts for profit taking, and which one of them is more accurate? Is there a great difference between them, or do they usually project the price objectives at similar levels. The concept is explained in this link. Point and Figure charting software Bull's-Eye Broker

 

Is it better to use price objectives or is it better to close your position at the next opposite signal. I.e. if you have bought, should you sell on the next sell signal?

 

Pftrader ?

 

Also--> what is a BUY or SELL signal ?

 

double tops ,spread triple bottom ,bullish signal reversed ?

 

what makes them so ?

 

THE TREND IS WHAT IS IMPORTANT

and naturally THE TURNING POINTS

 

Predicting them ( like with a clock ) NO

 

But identifying them ( like with a stick ) YES

 

Those "signals" are part of a trading system that overlays ( utilizes ) the

"FIGURE CHART"

 

A Wyckoff trader might well buy underneath those patterns

 

Using "TRUE TRENDS" ( revealed by the fluctuations themselves )

TRENDS confirming to TRENDLINES ( as adjunct )

Congestion Analysis ( IMPORTANT )

& COUNTS

 

Dynamic and Static aspects

 

More of this

 

Writing in the Wall Street Journal on January 31st, 1901, Charles Dow compared the ebb and flow of the ocean to the action of the stock market when he said:

 

A person watching the tide coming in and who wishes to know the exact spot which marks the high tide, sets a stick in the sand at the points reached by the incoming waves until the stick reaches a position where the waves do not come up to it, and finally recede enough to show that the tide has turned. This method holds good in watching and determining the flood tide of the stock market.

 

and less ( lot less ) of BUY AND SELL SIGNALS

 

DOW saw three movements at work

TIDES WAVES RIPPLES

 

Wyckoff saw FOUR

 

Decimalization ( quoting in .01c instead of 1/8s )

 

means we need to give some thought to BOX SIZE

 

there is both more noise and more signal ( think about that )

 

FIGURE CHARTISTS

used 5 box reversal 3 box reversal and 1 Box reversal

 

( mathematical relationship at work here )

 

TIDES WAVES RIPPLES

 

I use 4 charts of different scales

 

at one one end is the TIDE

at the other the "Speculative cycle"

 

These are all aperiodic ( There is no clock no tide chart )

But they can all be identified and utilized for profit

 

with "Sticks in the Sand "]

 

Never confuse the "FIGURE CHART" with a particular trading system-->double tops /bottoms etc..

 

In working with THE incoming TIDE --> There are only BUY SIGNALS of different attractiveness.. A "Sell" signal could be a very good one

 

With the Figure chart you have an OBJECTIVE WAVE CHART

 

just made for counting all sorts of things

Sticks in the sand and the WAVES

 

motorway

[MidKnight 12]

Not much to discuss re follow-up. Price rose to R, as anticipated (not predicted; anticipated), then dropped to the bottom of Thursday's and Friday's trading range (tested yesterday), again as anticipated. Then wound up back at R represented by that last major trading range, again as anticipated (though not predicted). This level is also now clearly the midpoint of this most recent range (66 to 92) and assumes the importance attached to a midpoint.

 

And since we're back where we started, all the S/R levels apply to tomorrow as well.

 

Thanks for the efforts here DB. As I read this though, I don't see any comment about what was anticipated, even though you say it was anticipated. More specifically, what the market did, even though you may have anticipated it, the order of which they occurred was also anticipated?

 

I'm not trying to be rude, it may be foresight to you. But as I'm reading it, it doesn't appear that way. I will read on though. Especially when you say if a reaction occurs at the support level than a long may be warranted.

 

With kind regards,

MK

 

PS: instead of referencing past market action by thursdays high, or fridays low, can you use the price and the date on the chart? The reference points you mention in the text is difficult to follow along with when reading at a later date.

Edited August 17, 2009 by DbPhoenix

[atto 20]

I don't see any comment about what was anticipated, even though you say it was anticipated.

We run through most levels of interest in the TL Chat Room (link above in the navigation bar) before market opens. That's likely what he was talking about.

[DbPhoenix 42]

Thanks for the efforts here DB. As I read this though, I don't see any comment about what was anticipated, even though you say it was anticipated. More specifically, what the market did, even though you may have anticipated it, the order of which they occurred was also anticipated?

 

I'm not trying to be rude, it may be foresight to you. But as I'm reading it, it doesn't appear that way. I will read on though. Especially when you say if a reaction occurs at the support level than a long may be warranted.

 

With kind regards,

MK

 

PS: instead of referencing past market action by thursdays high, or fridays low, can you use the price and the date on the chart? The reference points you mention in the text is difficult to follow along with when reading at a later date.

 

As explained in the opening posts, the thread is about locating S/R for the coming day. What is anticipated is that price will find S/R at those levels. The focus is not on what price did but on what price will do. If you read the charts in hindsight, then they are of course no longer foresight charts. Keep in mind that each chart is posted in advance of trading, not afterward. There are occasional recap posts, but only with regard to what was posted ahead of the market action.

[MidKnight 12]

Ok, maybe I can post some Hang Seng charts because, honestly I struggle with S/R in this emotional market. I have tended to view S/R as zones which can be quite big. I would love a little more precision with this, but maybe I am asking for too much.

 

Here is my attached volume chart. The different colour bars signify a different day. Currently in a trading range and interestingly the approximate midpoint hits that prior swing high. That swing high marked the largest correction since the huge 20%+ bull move of July.

 

Any suggestions, critiques are warmly received.

[firewalker 10]

Ok, maybe I can post some Hang Seng charts because, honestly I struggle with S/R in this emotional market. I have tended to view S/R as zones which can be quite big. I would love a little more precision with this, but maybe I am asking for too much.

 

 

With all those 'gaps' it's like trying to put a puzzle together but not knowing how the end result should look like.

 

Zooming out to the dailies however, it looks as if we find ourselves at an important level, likely to offer resistance (around 21000).

 

 

I'm not sure what you mean with zones that can be "quite big" but if the market moves 500 points intraday then S/R congestions will most likely not be 10 points or a straight point.

 

On the 15-min chart I've drawn two areas where I would expect price to find support or resistance and those zones are about 50 points wide.

 

The line in the middle is the midpoint of that area and doesn't necessarly have to mean anything, but price does seem to be turning from there several times.

 

 

If you plot volume by price, I think you'll get a clearer picture.

[phase21 10]

G'day Firewalker,

 

Interesting charts.

 

What struck me most about them, was that this market tends to find congesting/ support/ resistance at key fib levels (weekly timeframe).

 

It'll be interesting see where this one goes next - hit a wall and head south mid Sep/09?, or just keep going!!??

 

 

 

Edited August 16, 2009 by phase21
Another thought

[firewalker 10]

G'day Firewalker,

 

Interesting charts.

 

What struck me most about them, was that this market tends to find congesting/ support/ resistance at key fib levels (weekly timeframe).

 

 

Well 50% retracements are common in each timeframe, and when price dropped from the all time highs to 20000-ish, it bounced about half of the drop there too. I don't see that much evidence of other levels though, they seem to be crossing price at random points. In any case, it looks like we are at an important juncture.

[DbPhoenix 42]

Just as a heads-up, since this is an application thread, and the point of posting these charts is to plan one's trades for the following day, if no plan for the upcoming trading day is presented prior to the open for the HSENG chart, the posts will be moved to the general S/R thread.

[forrestang 10]

The range was previously an area of 00-32 or so. And over the past few days we've had some substantial moves down through the 00 area, into the previous range. This has created what appears to me to be substantial overlap and not as clean a big picture as before.

 

Now price hasn't retreated to far into the previous range thus far, maybe simply towards the midpoint of the previous range at most. Is this cause for concern, or a prompting to redefine the range? Or am I looking into this too much?

 

It seems like even if one were to redefine the range as I have on the picture below (70-32), the overall levels will still come out similiar as the old defined range, it just leads to a different outlook as to what price is doing. Regardless, the bulk of the trades are still in the upper portion of the range, whichever way you slice and dice the areas.

 

Does this question make sense?