Trading The Wyckoff Way

[wjrusnak 10]

  DbPhoenix said:

Too bad you had a cold today. You nailed S&R perfectly.

 

In that case... copy & paste for tomorrow's levels. I did have to include 1708 since it seemed to be of importance. Also 1720ish seems to be the mid point for this upper range (back to 1730 and 1713 again!).

 

[wjrusnak 10]

Just for kicks... I wanted to display how much potential exists with trading levels. Note that all levels were drawn prior to open (refer to the last post). The blue box contains today's movement. Get one set up... just one: Maybe a double top or a double bottom on a small-scale time-frame and just imagine your success at these predefined levels.

 

[MidKnight 12]

If it's OK, I'd like to start posting my Hang Seng charts in hopes I can hone my skills somewhat. Please, do critique as it would be a great learning lesson for me. I'll post them around this time - a few hours before the market has opened.

 

Today the USA was virtually unchanged, so I'm not expecting a big gap in either direction at the open. Yesterday rallied up to my obvious R level in the 20980-21050 area and seemed to respect that. I have tended to treat S/R as zones rather than absolute numbers, but if you have a better way to use it so the zones can be smaller or absolute numbers that are reliable, I'm totally open to it! The R zone I had above is kind of big for me to just short and stick with it until R is broken and as you can see in the chart, it even went slightly above 21050 (hod was 21085). This happens all the time in this market and makes it difficult for me to say 'If my R level is penetrated, then I'm wrong'. There needs to be some cushion on the trade idea as the market probes beyond. Of course, sometimes the probes end up being massive breakouts that literally do several hundred ticks in less than a minute, so some sort of trade mgmt rule needs to be defined in advance to stop the deer in the headlights syndrome.

 

Without further adieu, onto the chart.

Edited September 29, 2009 by MidKnight

[wjrusnak 10]

  MidKnight said:

If it's OK, I'd like to start posting my Hang Seng charts in hopes I can hone my skills somewhat. Please, do critique as it would be a great learning lesson for me. I'll post them around this time - a few hours before the market has opened.

 

HSI is a whack job of a market! In any case, what I can tell from your "big zone" is that I would be calling it a range comprised of an S and R. Calling it a zone seems way to loose. You can see the one S/R that I call a zone below, which is a midpoint of a larger range. I found what HSENG data I could and got my levels from a 15m chart. Ultimately I think we came up with very similar levels. Look below to see what I came up with.

 

In any case, I cannot believe how much more difficult it is to label this market as compared to the NQ Good luck to your trading it!

 

[DbPhoenix 42]

  MidKnight said:

If it's OK, I'd like to start posting my Hang Seng charts in hopes I can hone my skills somewhat. Please, do critique as it would be a great learning lesson for me. I'll post them around this time - a few hours before the market has opened.

 

You're welcome to post them as long as they're posted in advance of the trading day. But dates and times would be helpful if for no other reason than to locate specific areas/bars on the chart.

 

Assuming that this is a standard bar chart, do you have volume available to you? Does your data feed provide reasonably accurate tick data? If the answer to either is "no", then you have a hand tied behind your back. If the answer is "no" to both, then possibly your legs are tied together as well.

 

You are correct that S&R are zones, not absolute numbers. S&R are created at those levels where demand overwhelms supply and vice versa. These reversals aren't going to take place at exactly the same numbers every time (if they did, it would all be too easy). Therefore, maintaining flexibility in the width of these zones is preferable to trying to make them too narrow. The key to successfully trading support and resistance lies not in coming up with a specific level and focusing on it to the exclusion of everything else but rather to become sensitive to how traders are trading as they approach these levels. In this way, if support or resistance are found a few points sooner than anticipated, you won't be sitting there waiting for price to hit "your level" while it reverses ahead of that level instead and leaves you wondering what happened. If they are found a few points later, you won't automatically assume that you were wrong and go make a sandwich while the trade works in your favor after all. Volume and tick data will help you become more sensitive to what traders are doing and what they may plan on doing. Without them, you'll have to focus on how price is bouncing off of or breaking thru a particular level.

[MidKnight 12]

Thanks for your chart wjrusnak. It is a wild market, but I was of the thinking (possibly wrong thinking) that SR should 'work' no matter how wild a market if the concept is valid. After trading the Hang Seng for several months now, I think it does work but there is added emotion in this market. All Asian markets are susceptible to the large opening gaps because they are not 24 hour markets and are usually reacting to USA's trade.

 

DB,

That chart I posted was a 2000 volume chart. I use esignal and have pretty decent tick and volume data. In future I'll post the dates as well. I didn't in this chart because there is other sub-panes below and I didn't want to add them on the post to detract from the posts intent - they are irrelevant to this discussion. In future, I'll make a new chart up just for the purpose of posting.

 

The chart posted is in advance. That is to say, the market hasn't opened yet and those will be the levels of interest to me for today's trade.

 

My best wishes,

MK

[DbPhoenix 42]

  MidKnight said:

Thanks for your chart wjrusnak. It is a wild market, but I was of the thinking (possibly wrong thinking) that SR should 'work' no matter how wild a market if the concept is valid. After trading the Hang Seng for several months now, I think it does work but there is added emotion in this market. All Asian markets are susceptible to the large opening gaps because they are not 24 hour markets and are usually reacting to USA's trade.

 

DB,

That chart I posted was a 2000 volume chart. I use esignal and have pretty decent tick and volume data. In future I'll post the dates as well. I didn't in this chart because there is other sub-panes below and I didn't want to add them on the post to detract from the posts intent - they are irrelevant to this discussion. In future, I'll make a new chart up just for the purpose of posting.

 

Regarding your first comment, as I said in the S/R thread, support is created at the level where buyers repeatedly buy, and resistance is created at the level where sellers repeatedly sell. Therefore, in order to "work", those traders who trade a given market have to behave in a certain way. If they buy and sell for no particular reason at no particular levels in no particular pattern, then "support" and "resistance" will of course be irrelevant concepts.

 

As for your CVB chart, you're not required to use any particular type of bar, nor are you required to use volume or follow transactions on a 1-tick chart. However, if you don't use volume or a tick chart (or some very small interval chart), you'll be in the position of having to trade pure support and resistance without following price action per se, and that can be tough. If you begin to feel as though you're stumbling in the dark, consider including price action in your S/R explorations.

[MidKnight 12]

Roger that DB. I do use a small volume chart as well. When the volume is moving nicely, these print every 0-5 seconds. I'll keep posting daily for a while so we can evaluate the relevance of the S/R concept on this Hang Seng market

[Gringo 10]

I have been hearing of quite a bit of skepticism about this market's upmove. Some expect the end of be near and others are claiming lack of fundamentals for this drive.

 

Below is chart of QQQ with some notes. The main point I am making is that unless the uptrend defined by the trend line is broken decisively we remain in an uptrend. Worrying too much about future and past simply confuses the mind. It's the present that concerns us and it is in the present we make our profits and losses.

 

Ah, fill the Cup! What boots it to repeat

How time is slipping underneath our Feet.

Unborn To-morrow, and dead yesterday

Why fret about them if today be sweet?

 

---Khayyam

 

Too much anticipation not only emotionally hurts us, but also makes it difficult to feel the waves by unnecessarily anchoring us down.

 

S/R is 42.6 and 41.6 (green box at top).

This s/r is equivalent to 1730 and 1690 on NQ.

 

Edited September 30, 2009 by Gringo

[Gringo 10]

Below is chart of AAPL. Notice how it's close to reaching it's higest point ever. 190 and 200 are last hurdles. Is there going to be breather atleast at these levels where those who held through all the turmoil of past year are itching to break even? Anything is possible but 200 is a psychological round number as well which could prove tough.

 

I recall Jesse Livermore wrote in Reminiscences of a Stock Operator the importance of these round numbers like 100, 200 etc. In case price doesn't blast through them or goes only a few points ahead and starts reversing, generally, he considered getting cautious especially if market had had a bull run.

 

Interesting Note: Run in Apr 07 - Oct 07 is almost like the run Mar 09 - Sep 09. Both % wise and time wise.

 

No guarantees here but something to keep in mind. AAPL has been a tech leader in this up run and weakness in it may give some clues about health of the market.

 

Edited September 30, 2009 by Gringo

[MidKnight 12]

As expected the gap was minor. Both the immediate upper R and immediate lower S I had marked ended up containing the market. No change to my S/R areas. Hong Kong national holiday today (Thursday) so these levels will be in play for tomorrows trade (Friday).

[DbPhoenix 42]

Clearly you have support and resistance working for you here, at least in these examples. Do you have a strategy for taking advantage of these opportunities?

[PTVtrader 10]

Here's how ES sets up for me for tomorrow. Support is holding at the "highs" of its zones, but layered resistance sits above. Do I have a game plan? :thumbs up:

[MidKnight 12]

  DbPhoenix said:

Clearly you have support and resistance working for you here, at least in these examples. Do you have a strategy for taking advantage of these opportunities?

 

Yes but it's totally discretionary and I have a habit of executing within this S/R areas but being wrong (and stubborn) about the markets respect of these areas in real-time. I have had horrible results when attempting to enter at a first HL or LH out of the S/R. I have had better results fading large moves with very little confirmation, 3 thrusts, or false break type of patterns. Of course the lack of confirmation also means sometimes I can be wrong big time. I really need to refine how I recognize other traders trading as they approach S/R.

[DbPhoenix 42]

  PTVtrader said:

Here's how ES sets up for me for tomorrow. Support is holding at the "highs" of its zones, but layered resistance sits above. Do I have a game plan? :thumbs up:

 

Depends on what you plan to do if and when price reaches any of these levels. How did you arrive at them?

[DbPhoenix 42]

  MidKnight said:

Yes but it's totally discretionary and I have a habit of executing within this S/R areas but being wrong (and stubborn) about the markets respect of these areas in real-time. I have had horrible results when attempting to enter at a first HL or LH out of the S/R. I have had better results fading large moves with very little confirmation, 3 thrusts, or false break type of patterns. Of course the lack of confirmation also means sometimes I can be wrong big time. I really need to refine how I recognize other traders trading as they approach S/R.

 

In order to provide specific suggestions, I -- or anyone else -- would have to have specific examples. Did you make any trades yesterday off the lines you drew?

 

As to recognizing other traders trading, that may be difficult as long as you use summary bars. Is there any particular reason why you're relying on CVBs?

[heretodaygone... 10]

  DbPhoenix said:

Depends on what you plan to do if and when price reaches any of these levels. How did you arrive at them?

They are just zones where I believe initiated buying or selling happened. These areas are not always at the highs and lows. I don't use a footprint chart, I can kinda of just see it in price.

[DbPhoenix 42]

  heretodaygone... said:

They are just zones where I believe initiated buying or selling happened. These areas are not always at the highs and lows. I don't use a footprint chart, I can kinda of just see it in price.

 

The question was addressed to PTVtrader. Do you have two login names?

[heretodaygone... 10]

  heretodaygone... said:

They are just zones where I believe initiated buying or selling happened. These areas are not always at the highs and lows. I don't use a footprint chart, I can kinda of just see it in price.

 

  DbPhoenix said:

The question was addressed to PTVtrader. Do you have two login names?

 

ummm apparently :doh:

[DbPhoenix 42]

  heretodaygone... said:

ummm apparently :doh:

 

For simplicity's sake, I'll go with your established name.

 

Given your familiarity with MP, I'll assume that you know how to locate the various value areas and their respective highs and lows and POCs -- or, in Wyckoff terminology, the various trading ranges and their equilibrium levels -- and that you've anticipated which are most likely to come into play tomorrow and what you will do if and when price gets there. If so, what's your plan for tomorrow?

[wjrusnak 10]

Basically we are dealing with the same levels over and over, but tomorrow I want to zoom out to a 20 range chart to get some lower levels. We have to be prepared for such a move below.

 

 

Zooming back in, we find that price has done some strange things overnight. Again... 25 seems to be important. Also, we have a sort of cluster f%$# of levels. I suppose the trick here is to watch price like a hawk and figure out which area buyers or sellers like the most. Hopefully we can expect tomorrow will be another session of movement.

 

Edited October 1, 2009 by wjrusnak

[MidKnight 12]

  DbPhoenix said:

In order to provide specific suggestions, I -- or anyone else -- would have to have specific examples. Did you make any trades yesterday off the lines you drew?

 

I can appreciate that position. Yes, I made some trades around those areas of which I am happy to post on my low time frame chart if you wish it.

 

  DbPhoenix said:

As to recognizing other traders trading, that may be difficult as long as you use summary bars. Is there any particular reason why you're relying on CVBs?

 

No, there is no reason really. I am open to suggestions....

[DbPhoenix 42]

  MidKnight said:

I can appreciate that position. Yes, I made some trades around those areas of which I am happy to post on my low time frame chart if you wish it.

 

At its simplest, the purpose of the thread is to anticipate those levels at which trading opportunities will occur during the next trading session. If one finds that he got the levels correct, great. That's an important task to complete. If he didn't get them correct, then he must go back and figure out why so that he can work toward an ever-closer approximation of accuracy in the future. But the emphasis is on the future, the next session, not the past.

 

Beyond that, one can look at how he traded at the levels he anticipated. Even if he nailed the levels, there remain the strategies and tactics to be employed to take advantage of the preliminary work he's done. In other words, one can be dead accurate on the levels but remain flat if he doesn't know what to do with them. If you're happy with the trades you're taking at the levels you've anticipated, there's no need to go further. If you aren't, then this thread may be a resource.

 

The first step, then, is to gain accuracy in locating these levels (see the first seven posts as well as the linked material).

 

The second step is to determine what one will do if and when price reaches these levels, i.e., go short here, go long there, stop and reverse at this or that level.

 

The third step is to do it.

 

The fourth step is to review the trades and determine what went right and what went wrong so that the following session's trading can be more focused, more relaxed, and, one hopes, more profitable. Without the review, one is more or less running in place.

 

Therefore, if you're shaky on step one, work on step one and leave the rest for now. Do you know how to locate these levels? If not, as stated above, see the first page of the thread. Are you locating them accurately? If not, then review what you did the previous day and show in a new chart where you were right and where you went wrong, then plot the anticipated levels for the following session.

 

  MidKnight said:

No, there is no reason really. I am open to suggestions....

 

If you're interested in trading price action rather than bars, then it will become necessary to follow price action rather than a summary of it, akin to watching an event take place in real time as opposed to reading a report of it in the daily paper the following day (or in a weekly newsmagazine the following week). If you want to understand the behavior of traders as they approach important levels, then you'll have to observe that behavior. One can watch the little right-hand notch on a bar of one sort or another move up and down in real time until a new bar forms, but this is no substitute for watching price move laterally, transaction by transaction, printing the little hesitations, the thrusts and shakeouts, the feints and fake-outs.

 

One chart is of course insufficient. You'll need something that shows the forest since all of this is based on accurately locating support and resistance. CVB charts and range charts are both good for providing that context. But trading this broad context will lead to a lot of false starts and missed opportunities. When it gets down to actual trading, you'll need something that has a much narrower focus, preferably with separate volume bars (since these show activity). I suggest a time bar of some sort along with a 1-tick chart. The time-bar chart will keep you focused on important swings and pullbacks and congestions as well as the overall trend and prevent you from getting distracted by what can be unimportant activity on the tick chart (unimportant being anything that isn't taking place at an important level or that isn't interfering with the trend). Whether this is 5m, 3m, 1m, or 30s is entirely up to you. The tick chart will show you, trade by trade, what traders are doing, especially and most importantly as and when they approach the levels you've anticipated.

 

Other than these three basic charts, you can add additional broad context charts. You can also add charts of other indexes. You can also add charts of various breadth measures, if you have them. But the more you have to look at, the more difficulty you'll have in reaching a decision and the more likely you'll miss the trade. Therefore, I suggest that you keep it as simple as possible.

[DbPhoenix 42]

  wjrusnak said:

Zooming back in, we find that price has done some strange things overnight. Again... 25 seems to be important. Also, we have a sort of cluster f%$# of levels. I suppose the trick here is to watch price like a hawk and figure out which area buyers or sellers like the most. Hopefully we can expect tomorrow will be another session of movement.

 

What makes this continually interesting as well as frustrating is that the market morphs, and one has to be willing to adapt. Yesterday, for example, waiting for a test of 30 was a losing proposition. The market instead found R at the premkt swing high of 25. Why? Who the hell knows? But premkt highs, lows, and congestion levels have been becoming more and more important for some time now, and if one sloughs that off, or ignores it entirely, he will likely be ill-prepared for the coming session's trading.

[Gringo 10]

I have noticed tests are done more and more frequently on shorter intervals than 1min. This is making it tougher to get in as those who are waiting for confirmation seem not to be getting it before price goes the other way.

 

Either one's got to make a decision on the first touch of s/r or it's too late. It's here that TickQ and other volume based secondary support can give some advantage. The s/r is still working quite reliably but the setups that used to work aren't becoming available frequently (1min in my case). In a way it taxes one's patience to wait for that setup or to adapt and get a plan to deal with this touch and go price action which is prevalent now.