Trading The Wyckoff Way

[DbPhoenix 42]

I will look for a short @ the 75-78s treading lightly as we have the possibility of new Hs...

 

I have some of the levels marked off more flexibly as zones (i.e. 1774-1780). I realize that is a 6 point spread for one line labeled as Resistance, but thats the challenge of watching the price action at these levels (flexibility). Either way, it's fairly clear to see that we have a range of 1780 to around 1740 with a couple of significant levels in between.

 

 

Edited November 5, 2009 by DbPhoenix

[wjrusnak 10]

I can't see the picture you posted, DB. Is this a problem only with me or is someone else having the same issue?

 

EDIT: lol... I see it now. It's a damn wizard hat! I think I've been granted secret powers.

Edited October 26, 2009 by wjrusnak

[R/R 10]

no picture or new text. I took it that he was giving you and DaKine a pat on the back.

[DbPhoenix 42]

How's that?.........

[wjrusnak 10]

The hat works. That was an ugly short at 75ish unfortunately. Got me out break-even. Even so, we seemed to have called those levels sufficiently and I took the trade.

[DbPhoenix 42]

The hat works. That was an ugly short at 75ish unfortunately. Got me out break-even. Even so, we seemed to have called those levels sufficiently and I took the trade.

 

It takes a while to trust a strategy. Once you do, trading it will become easier.

 

In the meantime, if you're frustrated, think of all those who tried to short all the way up and go long all the way back down.

[brownsfan019 17]

The hat works. That was an ugly short at 75ish unfortunately. Got me out break-even. Even so, we seemed to have called those levels sufficiently and I took the trade.

 

WJ - good charts and stuff here.

Edited October 26, 2009 by DbPhoenix

[DaKine 10]

We had the 75-78 levels pegged in the foresight thread... and this is the SWC for me as I did not take it. :doh:

 

We had a nice DL heading up to 75s so the first time up would have been a difficult short for me but we did have TD.

 

1. The test of 76.75 on less volume with TD could have been a possible entry but I was afraid of new Hs.

 

2. The breakdown of the SB b/t 73 and 76 may also have been a possibility but you may have gotten shaken out. I don't know how I feel about this one...

 

3. The third test @ 76.50 @ 11:10 I guess was a must take but by that time I was done...

 

Anyways I'd like your insight into where you think the best entry for this trade was...

Thanks

 

[firewalker 10]

Anyways I'd like your insight into where you think the best entry for this trade was...

Thanks

 

I'm not the person best suited to tell you where the 'best entry' was, but I think there were a couple more opportunities to short. These happened later on but, for those (like me) who were not comfortable shorting so soon off R (after such a sharp rally), they worked out reasonably well.

 

At 1605 (the time on the chart) volume spiked up noticeably but there was no follow-through. You could acted straight away, but since price was still rising I waited for it to stall and you could've shorted on the way down when volume picked up (small red dot). I say "could have" because I didn't...

 

 

My short happened later on (big red dot), when price consolidates for about 15 minutes it seems to pause. I've waited to see what happened and when it fell out of this downwards, I was in with a 3 pt stop. Because of the speed of the drop, it was a matter of seconds before moving it to break-even.

 

I think this was worth mentioning because I see a lot of people trying to nail a trade off the extreme, but when they miss it, they quit or they stop looking for other opportunities. And that's perfectly fine, but it doesn't automatically mean there'll be no high probability trades left.

[DbPhoenix 42]

We had the 75-78 levels pegged in the foresight thread... and this is the SWC for me as I did not take it. :doh:

 

We had a nice DL heading up to 75s so the first time up would have been a difficult short for me but we did have TD.

 

1. The test of 76.75 on less volume with TD could have been a possible entry but I was afraid of new Hs.

 

2. The breakdown of the SB b/t 73 and 76 may also have been a possibility but you may have gotten shaken out. I don't know how I feel about this one...

 

3. The third test @ 76.50 @ 11:10 I guess was a must take but by that time I was done...

 

Anyways I'd like your insight into where you think the best entry for this trade was...

Thanks

 

 

Those of you who have worked on application appear to understand the strategy. You understand the AMT behind it and you're able to locate what are most likely to be the important levels. But understanding it and trusting it are two different things, and, as I said to wj, the trust may take a while.

 

Even so, it now comes down to a matter of tactics: exactly where you enter and how and where your stop is and how you manage the trade and so forth. And developing a set of tactics that you're comfortable with may take even longer than learning to trust the strategy.

 

The first entry is the "Wyckoff" entry, your #1. Here the supply line is broken followed by a lower high on lower volume. Short that and place your stop behind the danger point, i.e., above 77. Do all that and you're home free. But boy does that take a lot of trust. More likely you'd tighten your stop at a level that seemed reasonable to you (placed for reasons other than fear). And you'd get shaken out.

 

The next opportunity, your #2, is the one Wyckoff liked least, and you can see why. It still works if you place your stop behind the danger point. But that's a pretty wide stop.

 

The third opportunity is almost a gift since you also have a TQ divergence. However, if you don't take it for some reason, there are two WTFs following, one at 1116 and one at 1131.

 

But don't feel bad about not taking these trades. Feel good instead about not just jumping into something that seemed like a good idea but wasn't thought through. As I told wj, think about all those who tried to go short all the way up and go long all the way down. You knew what to do; you just weren't quite confident enough to do it. All that will come.

[DbPhoenix 42]

About this morning. Though I mentioned 52, I neglected to point out that 52 was also the top of that larger, older range that we discussed last week, the one reaching all the way back to 9/23. Being the top of that range may have given it a bit more fuel today (God knows something did), but even though we've addressed all this several times, I should have mentioned it yet again.

 

Edit: Here's an update on that chart.

 

 

 

 

And I'm sure that at least some of you have noticed that a couple of important sectors have double-topped, as have the transports. This isn't the first time they've double-topped this year, but it's still worth noting.

Edited October 26, 2009 by DbPhoenix

[wjrusnak 10]

Big early rally... Bigger afternoon plunge. The buyers didn't have enough to pull this one off. Let's see if they can defend Support again tomorrow. Still a bit messy in the middle, but that is expected as Db stated.

 

[NAVEEVIa 10]

I am demoing NQ . Attached will be levels i will be watching.

 

Good Trading

Naveen

[DbPhoenix 42]

Entering these old ranges is like visiting old friends. Remember 20, the bottom of the range on the 12th and the midpoint of the range on the 8th and 9th (see NAVEEVIa's chart)? Price dropped down to it like a stone after a WTF.

[dla133 10]

Please except my appologies for butting in here. I have been skim reading this thread with great interest. I believe what I am about to ask could be a stupid question, however here goes. I am trying to learn to trade using price action around key support and resistance levels, while considering the overall trend. My strategy is to place entries near proven support levels in an uptrending market and sell signals near proven resistance levels in a down trending market. I also was looking at using trend lines as areas of support and resistance but this doesn't seem to be as easy for me to draw on a chart. Should I be using trend lines to highlight the trend and not use them for price entry and exit areas and just use price levels of support and resistance within the trend?

 

Cheers

Lee

[DbPhoenix 42]

Please except my appologies for butting in here. I have been skim reading this thread with great interest. I believe what I am about to ask could be a stupid question, however here goes. I am trying to learn to trade using price action around key support and resistance levels, while considering the overall trend. My strategy is to place entries near proven support levels in an uptrending market and sell signals near proven resistance levels in a down trending market. I also was looking at using trend lines as areas of support and resistance but this doesn't seem to be as easy for me to draw on a chart. Should I be using trend lines to highlight the trend and not use them for price entry and exit areas and just use price levels of support and resistance within the trend?

 

Cheers

Lee

 

It's not a stupid question, though it has been asked before. Trendlines don't provide support and resistance, so you are less likely to find success with them as entry triggers than you are lateral price levels of support and resistance (see posted charts, particularly the one just above). What you may want to do instead is use demand and supply lines in order to provide yourself with a measure of momentum. See the Glossary.

[DbPhoenix 42]

Some interesting interplays here as ranges begin to play with each other, with searches for equilibrium adding depth to the stew. This morning, a range from R at 52 and S at 42 was established, after which traders sought equilibrium at the midpoint: 47. Then price dropped to 20 and traders sought eq at the midpoint, 35, first finding R, then S, at 30 (remember how much fun 30 was from mid-September to mid-October?). Price then bumps up against the bottom of that long range from 38 to 55, then works its way toward the middle of that mess between 38 and 52.

 

The point being that all of these moves can make good trades, though they will more likely make good trades if you know why price is doing what it's doing where it's doing it. You can then assign some probabilities regarding whether price will rise or fall or do little but drift at a certain level. And since a wider stop will be necessary, you can arrive at a more reasoned judgement regarding the amount of risk involved and whether or not you want to take it. And if you don't, so what? It's your money.

[dla133 10]

Thanks for the reply DB. I get what you are saying with regard to supply and demand lines and the momentum behind each. The steeper the angle the greater the momentum behind the supply or demand.

 

From your recommendations I have just finished reading How to buy by Justin Mamis. A very interesting read which has given me a new outlook on trading. I am now reading The Nature of Risk by the same author.

 

Hopefully with reading threads like this and reading solid books on trading as you have recommended I will start to see improvements. The one thing I still struggle with is patience. I make the same mistake again and again because I am too concerned with missing out on a potential winner rather than avoiding potential losers.

 

Cheers

Lee

[DbPhoenix 42]

The one thing I still struggle with is patience. I make the same mistake again and again because I am too concerned with missing out on a potential winner rather than avoiding potential losers.

 

If you have no clear-cut, well-thought-out plan for the coming day, then suspend trading for the time being, read the linked threads in the first post to this thread, post your plans here, then review.

 

This isn't about therapy; it's about putting together a plan, implementing it, then reviewing what went right and what went wrong. This takes longer in the short run, but saves enormous amounts of time -- and stress -- in the long run.

Edited November 17, 2015 by DbPhoenix

[NAVEEVIa 10]

Db I have qusetion regarding attached chart. I have my levels marked before open. Today i had 1765 1750 as R & 1740 1736 1720 as S.

Market rejects 50 i did not trade it rejects all S after confidence data except 1720

Now should i look for trading opportunities at centre of these boxes or not.

Once a session starts should i still be looking for S/R from days back or should i consider the congestion area that form in current session like the 3 boxes here.

I have not read all material so maybe you have answered this.

 

Thanks,

Naveen

Edited October 27, 2009 by NAVEEVIa

[DbPhoenix 42]

Db I have qusetion regarding attached chart

 

Yes? .............

[DbPhoenix 42]

Db I have qusetion regarding attached chart. I have my levels marked before open. Today i had 1765 1750 as R & 1740 1736 1720 as S.

Market rejects 50 i did not trade it rejects all S after confidence data except 1720

Now should i look for trading opportunities at centre of these boxes or not.

Once a session starts should i still be looking for S/R from days back or should i consider the congestion area that form in current session like the 3 boxes here.

I have not read all material so maybe you have answered this.

 

Thanks,

Naveen

 

Whether or not you should look for trading opportunities at the midpoints is not an easy question to answer. It depends in part on whether you like to trade trend -- or at least swings -- or scalp, how wide a stop you're able to tolerate, how comfortable you are with the whole idea of AMT, and so on.

 

I'm sure you understand first that midpoints represent traders' search for equilibrium. Because of this, the midpoints also represent chop. If you like trading chop, then by all means go for it. But if you get beaten up by it, then avoid it. Trade instead the extremes of the ranges (if you have the patience, wait for the extremes of the larger ranges).

 

If you have not yet read the material linked in the first post of the Foresight thread, that will likely answer whatever questions you may have. But keep in mind in the meantime that ranges are created by moves away from a mode, which is also often a mean. Buyers will attempt to move price away from that mode to the upside. Sellers will attempt to move price away from that mode to the downside. If these efforts fail, price will return to the equilibrium level, i.e., that level where most of the trades are occurring, i.e., the mode, and a range will be created. Eventually, however, price will exit this range for one reason or another (the reason itself is irrelevant) and trend up or down until one side or the other runs out of steam and traders again seek equilibrium.

 

As I explained in the Foresight thread today regarding this particular chart, 20 was dead-on support for this move, and you don't have to have a tick chart to see the rejection down there. If you didn't buy that for whatever reason, there was another opportunity at 30 when price found R there, then S (and, yes, you'd have to go back a month to see how important 30 has been). But this isn't just a matter of buying the "middle" of the "box". There is a clear flip being made here from 30 as R to 30 as S which just happens to look like a range due to traders' sniffing around that level.

 

Once price leaves this range, it finds support at the top of it four bars later. You could also enter here, but doing so might be a bit more nerve-wracking as price marches sideways with little movement up or down until it exits the range on its way to 47 (compare this sideways movement with the up/down/up wave movement of the previous box/range).

 

Remember also that the longer you wait to enter, the more obvious the trend will be and the more other traders will mess with you as you try to get into it. At the very least, those who bought early will be scaling out, and that results in hesitations and mini-pullbacks, any of which might toss you out. And if you wait so long that you're nearing the end of the move, then you may not get even lunch money. The last is a common problem with traders who need multiple confirmations before they enter a trade, creating a conflict between their levels of information risk and price risk (the more information they require, the worse the price they get will be; the less information they require, the better the price).

 

So I can't tell you what you should or shouldn't do. I trust support and resistance, in this case, 20. So I'd buy there or as close to it as possible, at least in part due to the obvious rejection of it. Once in, I'd look to the next level of R, then the next, then the next after that. But if you do not yet sufficiently trust S/R, or at least your ability to locate it in advance, then jumping into a trade at that level would be reckless.

Edited November 17, 2015 by DbPhoenix

[Mr_black 10]

Good Old S/R Levels:)

[dla133 10]

With regard to support and resistance, do you base this entirely on the price movement or do you also consider volume levels? Do you normally see high levels of volume at support and resistance levels or a lack of volume.

 

High levels of volume would indicate to me that there was a lot of trading in these areas which could incidcate strong support or strong resistance at those price levels.

 

Low levels of volume would indicate a lack of buying demand which would lead to strong resistance and lack of supply which could indicate strong support.

 

If I am sounding confused I suppose thats because I am. Even though I have read a couple of Wyckoff books the penny still hasn't quite dropped yet.

 

I have attached 2 charts each showing the above.

 

I think that chart 1 is the right approach, or am I getting this totaly wrong?

 

Cheers

Lee

[DbPhoenix 42]

Good Old S/R Levels:)

 

Thanks for the chart. If you post another, however, please do so in advance of the trading day.