Trading The Wyckoff Way

[BlowFish 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.

 

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.

 

Quite so. I was going to post a question in the questions thread about identifying the very 'best' S/R.

 

Funnily enough I think my approach would be the opposite of Firewalkers (in the context of this thread.....identifying next days S/R). I would zoom in rather than out and look for a R zone at the top of the rectangle and a S zone at the bottom. Perhaps zoom in is the wrong way of putting it.....there is a good amount of data displayed, what I mean is look for 'finer' (as opposed to courser) S/R. Going back your initial observation maybe the zone is too wide if it is wider than the movement you are trying to delineate in the context of the thread (next days S/R).

 

As an aside I have recently been trying slightly narrower zones, of course you run a greater risk of price over or under shooting. You can also add too many zones and end up with lines all over your chart. Try and keep what you are trying to delineate firmly in your mind

[DbPhoenix 42]

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?

 

When price remains in a range for an extended period of time, weeks in this case, you're going to develop multiple smaller ranges within the larger range, some of them persistent, and consequently multiple S/R levels, some more important than others. At some point, one may begin to trip over his own lines, at which time it helps to look past the lines and even the price swings and focus on the VAP distributions. These are, after all, where the bulk of trades are taking place.

 

In your chart, you have two, and you may be better off looking to those to provide your range highs and lows and "midpoints". They may also provide an anchor, a focal point for your analyses, a place to begin. In any case, they will at least offer a different perspective.

 

Since we dropped to the bottom of the mother range this morning, the ranges in your chart would seem to be moot. But they will act as support and resistance again as price moves its way back up.

[forrestang 10]

In talking with Atto today, somehow I always bring up entries. And Atto please chime in if you see fit.

 

But is there anything of value here on what is occuring in the picture below? When I see it, I don't think there is anything here that would make me want to jump on it.

 

Assume you have support at about 65, price gets pretty close to it. You have a huge jump in price, and then you see price decline. In the discussion today, it's reasonable to wait for a test, a DB, a 2B or a general area of consolidation.......As entering simply on the vol expansion is probably not the best idea.

 

In this chart, after the expansion price continues to drop , and after it does reach at least what seems to be a technical bottom, it goes up without any real consolidation, test, TD or strong TQ.

 

Is this just a case of something that would not stand out as an entry for most, or am I missing something?

 

[DbPhoenix 42]

Whether it's a potential entry or not depends on your criteria for entry. And your criteria for entry will depend at least in part on how aggressive you are, as well as on whether or not you are in a short trade when this "opportunity" presents itself.

 

Looking at the chart you posted yesterday premkt, you noted that 72 was a potential level of support. You could therefore anticipate that price would do something there. And it did. Repeatedly. All the way to 1100.

 

Below that, you find your next range of activity, the busiest area beginning at or about 64.

 

 

Is the activity around 65 close enough to 64 for you to be aggressive about going long here with little else to confirm your analysis, particularly if it involves exiting a short and reversing your position? If not, then the hell with it.

[Gringo 10]

I am seeing weakness in Utilities and Energy groups. This means if market in time gets weaker we might have to look for shorts in this group.

Energy will have mostly oil and alternative energy.

 

XLK = Technology (strong)

XLE = Energy (weak)

 

I have given XLK and XLE to show the relative strength/weakness of these SPDR's that follow some respective sectors.

 

At the end of the day if market musters some power to blast through these resitances we may become buyers. Until than I am keen on protecting my eggs by avoiding longs.

 

Note: October is historically the most dangerous month for market. It's only 6 weeks away. It could all culminate closer to that time (point mentioned by Db in chatroom).

 

QQQ 40 area is Resistance ®

Nasdaq: 2000 area is R

S&P500: 1000 area is R

TSX: 1100 area is R

 

Indexes are stuck at these round numbers. Due to the strength in tech I am guessing sideways movement to have a serious possibility after this substantial advance, as opposed to direct drop in case of more market weakness. S/R is the key and better is to pick a good spot at S/R to minimize danger. I would wait for market to come back up before taking positions on the downside.

 

If I am able to find something worth shorting on individual stocks I'll try to post them.

 

For the EOD enthusiasts opportunities come at a slow rate. Some times dizzyingly slow

 

 

 

 

Edited August 18, 2009 by Gringo

[phase21 10]

Hi FT,

 

Can you share the method U use for determining your S/R lines?

 

Thanks,

[phase21 10]

Message withdrawn - :crap:

Edited August 19, 2009 by phase21
Q already posted

[forrestang 10]

Earlier, price traded down to 80, after coming from the 86 area. There was no immediate rejection, or obvious signs that we were headed back up right away. Price sort of just moved sideways for a while, and eventually began to narraw.

 

Eventually price starts to take off, I personally could see it moving at a good clip, but didn't really take notice of how stong it was till it was 3/4 the way up the range on the chart.

 

And then once price gets to resistance @ 86, price really doesn't even hesitate. And if you were looking at the entry chart, there was none to speak of, and TQ never wanes at all(at least not near resistance).

 

So at this point, if one were looking to get in on a pb of somesort, there really isn't one. There is only the periods I've highlighted of slight congestion, with a nice stop placement, if you can make a decision in that tf alloted.

 

The first point would be optimal, the second I don't know?

 

Is the logic of momentum, and the way price broke resistance a sound reason to want to enter long on a pb or consolidation or whatever you want to call it?

 

[DbPhoenix 42]

As you pointed out yesterday, S appeared to be at 65. I then offered a possible explanation of where that support might be coming from. Today, therefore, the long trade could be anticipated at or around 65, which turned out to be the case. First potential R is at 86. If you were not in and you wanted to enter on the dip to 80, you'd have to find something in the price behavior to tell you that we were going higher. Given the ho-hum reaction to the oil report, there was no reason to suspect that an hour-plus later, oil would suddenly take off. But it did. And price blew right thru R at 86.

 

If you knew the reason for the upmove, in this case oil, you might have had the confidence to go ahead and take the trade at that hesitation you note. But note also that the WTF trade was several minutes earlier, at 1153, when price was booted up to the 87-87.5 level on strong vol and hesitated there for a full minute. If you had noticed that, the reason for the upmove would not have been relevant.

 

Note further that all of this takes you to the next level of R at 1600, where price comes to a screeching halt.

 

BTW, when posting charts, could you use something other than gray on black? I find them extremely difficult to read.

[forrestang 10]

If you knew the reason for the upmove, in this case oil, you might have had the confidence to go ahead and take the trade at that hesitation you note. But note also that the WTF trade was several minutes earlier, at 1153, when price was booted up to the 87-87.5 level on strong vol and hesitated there for a full minute. If you had noticed that, the reason for the upmove would not have been relevant.

Isn't it fair to say it is hard to connect this move to the oil report simply given that price didn't go nutz till an hour later? When do you decide to let the news go?

 

Note further that all of this takes you to the next level of R at 1600, where price comes to a screeching halt.

I had removed this level from my chart, even though it was previously in play, but last night, VAP seemed to drive me in a different direction, will take a closer look a bit closer to midnight.

 

As you pointed out yesterday, S appeared to be at 65. I then offered a possible explanation of where that support might be coming from. Today, therefore, the long trade could be anticipated at or around 65, which turned out to be the case. First potential R is at 86. If you were not in and you wanted to enter on the dip to 80, you'd have to find something in the price behavior to tell you that we were going higher.

 

Thanks for the comments as always.

 

BTW, that opening 65 long was my CWS for the day, catolouged firmly in the journal. I know I say this day after day, and people have noticed the little jargon I've created for this category of trade.

 

But I usually cannot get into them. Atto manages to do it time and time again, but I usually have my face 2 inches from the screen trying to figure out where to enter.

[Gringo 10]

Q's have reached the danger point. It appears s/r has been crossed but barely. Today was a chance to place shorts for those who expect reversal at s/r. Market didn't really show much weakness today and kept going up. It did move sideways intra-day for quite some time.

 

Still, that's the magic of s/r, you play them and in case of adverse move quickly get out. Strangely, I emotionally felt uncomfortable to be thinking about shorting with such a powerful upside move. I had, in my naivete, thought myself to be a Vulcan!

 

Live by the S/R; die by the S/R.

 

Next week shall unravel some more.

 

[boru 10]

I am afraid you are referring to my future ,as far as the unlearning goes hopefully i can do this surely others have. thanks

[boru 10]

Well, I believe it's not that simple. And I am not happy with my inability to write down what I've been doing. I have guide lines. I have even my 2 main setups written down. Often I trade them by the book. But this trade, for example, was not the case. In fact I am a very lazy person and if I was more diligent with systematical replaying and testing, I could probably formulate my setups more specifically.

 

 

 

It's not a feel or intuitive sense. I just learned to perceive the market as an auction in real time. There is nothing more to it. And if I hadn't been blind for so long I wouldn't need such a long period of screen time at all. But as many experienced traders point out, beginners cloud their view with obsolete things and ideas.

I can never know what is going to happen, I draw trend lines and I use an indicator (though it doesn't cross ). Trend lines and the indicator are suplementary tools. I don't necessarily need them. The indicator I use is of my own design and it calculates and plots value area since a selected bar on my chart. Of course I can see the VA of a range even without calculating it, as well as I can see that a trend is slowing down even without a trend line. But these tools can give you some (more or less) objective measure and also a way to double-check. But it's a double-edged sword, because if you focus too much on what these tools are doing or how price is behaving in relation them, instead of how it behaves in relation to what they represent, you are detaching yourself from what matters. That was my problem for a long time.

And I don't know if all can come from sreen time. First you must have some logical framework for understanding the market (Or maybe you could even develop it while watching, but that wasn't my case). I had a logical framework in AMT and Wyckoff. They are both easy and simple to understand intellectually, but it took me way too much time to see how their principles are demonstrated in real time (because of before mentioned reasons). And that is the purpose of screen time.

I appreciate your appreciation but I am still at the beginning. Maybe I've made a couple of first steps.

 

Head2K i know what your saying as far as writing things down. it is something ive always struggled with thanks for pointing this out. the amount of information available is overwhelming if i don't start getting more organized i'm only going to slow down my progress thanks

[Head2k 10]

Head2K i know what your saying as far as writing things down. it is something ive always struggled with thanks for pointing this out. the amount of information available is overwhelming if I don't start getting more organized i'm only going to slow down my progress thanks

There is not much I can say to this. Once I thought (and wrote here) that I can't trade mechanically. That I use intuition because the market is too complex to be described mechanically. I wrote that because I wasn't able to write a precise, concrete plan. So I needed "intuition" to fill the ambiguosness of my setups or I intuitively added unwritten setups.

Now I think that there is no intuition in a true sense. What one calls intuition is in fact such a small plan, a set of rules in his head. These rules are vague, otherwise he would be able to write them down. I think that rules in your head and not on a paper is the worst thing that can happen to you. Because as they are vague (and of course not tested) it is easy to tweak them if you want. Or, OTOH, to forget them if conditions of your halfway written plan are fulfilled and you want to do something despite your "intuition", that is supposedly your additional rules, tell you that this won't work.

 

So now I am working on a plan where no intuition is allowed. Everything must be on the paper. And it is harder, of course. I was never into an excessive testing. The most important for me is to have the plan connected together with one logical thread. The plan for me doesn't mean only my way of trading, but my way of perception in the first place. And I need to define it too.

Yet I realize that one needs to evolve enough to write such a plan. One must gain enough understanding to be able to join his setups under one very concrete logical concept where everything in the plan is natural within this theory and can't be written differently.

 

But I am working on it

[momop 10]

Hello all

 

I just bumped into this forum and am kicking myself for not checking this earlier. There is so much TA info for a novice like me! Quick question - I see Wyckoff methods mostly discussed on Futures trading..Can those with more knowledge tell if they have experimented with stocks as well ? Probably a dumb question since price/volume action should be similar - but thought someone could provide pointers..

 

Thanks a bunch

momop

[Head2k 10]

Hello all

 

I just bumped into this forum and am kicking myself for not checking this earlier. There is so much TA info for a novice like me! Quick question - I see Wyckoff methods mostly discussed on Futures trading..Can those with more knowledge tell if they have experimented with stocks as well ? Probably a dumb question since price/volume action should be similar - but thought someone could provide pointers..

 

Thanks a bunch

momop

Wyckoff himself traded stocks, not futures, and he elaborates on trading stocks thoroughly. But altough he traded stocks, the principles of his method can be applied on any auction market.

Edited August 27, 2009 by DbPhoenix
Referral to Question thread unnec

[Gringo 10]

Q's are above s/r but xlf are heading towards it. Tech's have been holding quite well but let's see for how long.

 

SPX is rising and reaching s/r but on reduced volume. It's volume on drop was larger. Lets see if supply shows up as traders return. I am quite bearish in my outlook due to lack of new stocks going up and change in volume behaviour indexes. At the end of day violation of s/r may change this outlook.

 

 

 

 

RIMM's a personal love/hate stock for me. I have some puts on it and they've come back to break even. I chose RIMM because of better spread on options. Compared to AAPL which is almost at recent peak RIMM has been unable to reach it's previous high despite some analysts upgrades this past week. What concerns me is that RIMM did hold well when market was dropping and started going up. Strength in adversity! (Now shorters do use these news items to re-short when stock reach logical shorting points). Considering tech's one of the strongest group's it's quite dangerous to be short on a tech stock. I like liquidity though and used s/r around 78 for short. Beyond 80 I'll bail on it.

 

[DbPhoenix 42]

 

RIMM's a personal love/hate stock for me. I have some puts on it and they've come back to break even. I chose RIMM because of better spread on options. Compared to AAPL which is almost at recent peak RIMM has been unable to reach it's previous high despite some analysts upgrades this past week. What concerns me is that RIMM did hold well when market was dropping and started going up. Strength in adversity! (Now shorters do use these news items to re-short when stock reach logical shorting points). Considering tech's one of the strongest group's it's quite dangerous to be short on a tech stock. I like liquidity though and used s/r around 78 for short. Beyond 80 I'll bail on it.

 

Don't overlook this hinge:

 

[forrestang 10]

Ok.... let me start with the disclaimer, I HAVE TONS TO STILL LEARN ABOUT TRADING. I AM NOT GOOD YET!!!!!!

 

OK, with that out the way, people sometimes ask me how to improve their trading (I don't know why cause I still suck)? I must give the impression that I know what I'm talking about.....well if that's the case I must have the whole 'fake it till you make it" thing down?

 

Particularly the people asking me for advice are those that either take too many trades per day, and people that can't sit through a pullback or retracement after entering to save their lives. Or they ask how to reduce the number of trades they take.

 

I always ask, have you looked into Support and Resistance? I go on to say this will probably lead to a more deliberate approach, maybe help you filter out a lot of useless trades, and give you some confidence to sit through a trade without pulling out too soon. I then direct them to the Wyckoff forum.

 

I give the above story to get to this point? After I suggest this, why is the first comment always, "but I am not interested in volume?" Or, "I don't think volume is going to help me!"

 

Then I always yell inside my head, and usually tell them to just focus on the S/R threads. This has happened with at least a half dozen people so far! And it doesn't make me upset, I'm just curious as to why this is the case?

 

Ok, I haven't formally studied Wyckoff. My knowledge is limited to the help the kind folks that participate here have imparted upon me. I have transfered this to futures trading, with ok success, my equities/options trading(this which I am utterly killing right now), and just a general way to look at things.

 

So do I have it wrong? Based on what I see here talked about the most frequently, I would think the areas of consolidation, S/R etc are the most important parts of the idea?

[Gringo 10]

I was forced to zoom into XLF to see what's going on in there. Below is 30min bar chart.

 

upper s/r: 14.85

mid s/r: 14.63

lower s/r: 14.4

 

There's a clear uptrend channel enclosing this recent move. Unless it's violated the trend remains up. I have quite been humbled by this up move. Perhaps I was forcing myself to see a drop in prices instead of just seeing s/r and staying content. Indexes have started to break into new ground and lets see if it stays that way or they drop back into lower value areas.

 

 

RIMM hasn't followed Indexes into new highs but is above the hinge and resting right under s/r at 80-81. There is support around 78.

Edited September 11, 2009 by Gringo

[DbPhoenix 42]

I have quite been humbled by this up move. Perhaps I was forcing myself to see a drop in prices instead of just seeing s/r and staying content.

 

A point which the vast majority either cannot grasp or doesn't trust. The observable result is the same.

 

You may recall that I saw potential topping in June given that we were having trouble at R, broke the trendline, and made a lower high followed by a lower low. But speculative fever shouted "gotcha" in July and drove the market to new highs. One could argue that it shouldn't be happening, but that wouldn't yield a profit unless he put that aside and "judged the market by its own action".

 

As long as one focuses on the principles (and by "principles" I'm referring to those detailed in this forum) and confines the shoulds and ought tos to a place where they won't affect his trading, he can't go very wrong. In the XLF, for example, you'll note the climactic volume on Sep 2 (at S) followed by the test on Sep 3. Once one acts on that, all he has to do is follow a simple trendline (ditto Aug 18 and 19). As for RIMM, this is a reasonable place for it to pause, and both longs and shorts are wondering if they did the right thing. The character of the move away from here will reflect the extent of their nervousness.

[wjrusnak 10]

Time for the wizardry: The levels should stay nearly the same as yesterday (Monday), but now we have a new high to work with. I'm keeping my highest level at 88, since we are now below it. If we do break higher, hopefully a nice setup (break out or retraction to 88 support) can occur at that level. Otherwise, I am level-less above 88.

 

I decided to use a 10 Range to get a real clean look at S/R. This works much better than using a 5000 or 10000 volume chart at the moment, since my data feed ends up smashing all the previous months into an inch of my screen (makes sense if each bar is a certain amount of volume and this is the "new" contract).

 

[Gringo 10]

Below QQQ daily is shown with some s/r, but I tried to put some channels to it. We seem to be in an up trend channel and touching the top of it. Volume has risen on this move up however there has been little price movement upwards after all's said and done. s/r are getting quite messy on dailies, atleast for me.

 

 

RIMM from previous posts has crossed above 80 and negates the earlier short. It is a nice example of the futility of shorting a stock from the strongest group. The earlier posts identified XLE (Energy) as weakest group and quite a few of it's stocks haven't held up well.

 

XLF 30 min bounced from s/r and it wasn't too hard to see it go up after it returned in the box from the bottom. It is reaching the upper s/r area close to 14.9. It hasn't followed other indexes into new highs yet.

 

 

[DbPhoenix 42]

You may be right about 88, but I'm extending it up to 90+, with the other limit at 72, maybe 74. Depends on how climactic the action is when price gets to those levels, but the very most recent activity has been more pertinent lately than that going back several days. This range also gives us pretty much that same midpoint that was so useful yesterday.

 

So shorts at the upper limit and longs at the lower, unless we break out of the range.

 

[DbPhoenix 42]

 

RIMM from previous posts has crossed above 80 and negates the earlier short. It is a nice example of the futility of shorting a stock from the strongest group.

 

For future reference, when a hinge forms at the very top of a rise (see my last chart), it will most likely lead to a continuation. And you always have the option of bracketing the trade.