Trading The Wyckoff Way

[firewalker 10]

Here, for example, after testing 17, price dropped back to support at 08. It attempted to rally, but settled back down to 08. At the end of what might appear to most traders as drift but what was in fact a hinge, price dropped on a WTF, providing an entry just below 05 (if one were nodding off, the WTF acts as a wakeup call).

 

Not everyone in the chatroom had fallen asleep by then The great thing about the PA was that some people pointed out price kept making lower highs, and at one point a hinge formed, but you could also see a descending triangle (see chart). What I like about the breakdown was how volume immediately picked up.

 

 

If you trade this "WTF", am I right in saying you would not put a 'technical stop' above support, but instead a very tight one and close the trade if it doesn't move almost straight away?

 

With regards to levels for today, after we fell below 1707, 1688-1690 acted again as support and we bounced off just until the midpoint of this range at 1699. (The former is hindsight, because by then I had already quit trading.) For today, I'm focusing on same levels as mentioned two days ago, and see things (sorry again) a bit different than wjrusnak...

Edited October 29, 2009 by firewalker

[NAVEEVIa 10]

NQ & TY Levels I will be watching today.

[DbPhoenix 42]

If you trade this "WTF", am I right in saying you would not put a 'technical stop' above support, but instead a very tight one and close the trade if it doesn't move almost straight away?

 

Since the entry stop is placed below this "springboard", it won't be triggered if price doesn't move quickly in that direction. And, yes, the protective stop can be very tight.

 

Here you can see this hesitation, a retracement in time rather than price. You can also see the increase in activity. There are other examples in the TICKQ thread.

 

 

 

 

Incidentally, 60 is the midpoint of the August to October leg of the rally, the August swing high, and the October swing low.

 

 

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[NAVEEVIa 10]

Current chart of TY, it did find support at 24, i have long at 26 on demo but i dont know whether PA tells me about rejection, can anyone point me to right direction.

[NAVEEVIa 10]

This is an example of breakout at R with continuation. The second chart shows how trader would have seen first bar at R.

Dax is instrument.

How does a trader reckon going long since V has enterd at R , would you callthe congestion a springboard.

[DbPhoenix 42]

There are other examples in the TICKQ thread

 

Wrong thread. The post is here.

[DbPhoenix 42]

This is an example of breakout at R with continuation. The second chart shows how trader would have seen first bar at R.

Dax is instrument.

How does a trader reckon going long since V has enterd at R , would you callthe congestion a springboard.

 

A type of springboard.

Edited November 17, 2015 by DbPhoenix

[DbPhoenix 42]

Current chart of TY, it did find support at 24, i have long at 26 on demo but i dont know whether PA tells me about rejection, can anyone point me to right direction.

 

If 24 is support, you're buying the first bounce rather than waiting for the test, if any. This is the most aggressive entry.

[wjrusnak 10]

NQ ignored 1690 on the 3rd try and I anticipated a break down after that break... didn't realize 1687 would turn out to be to important. Now the long side won't give up. We are finding R at 1705 though. Feeling like I missed the important move now (long 1687).

 

EDIT: 1705 did hold as R and now forces buyers to defend 1696.

Edited October 29, 2009 by wjrusnak

[firewalker 10]

NQ ignored 1690 on the 3rd try and I anticipated a break down after that break... didn't realize 1687 would turn out to be to important. Now the long side won't give up. We are finding R at 1705 though. Feeling like I missed the important move now (long 1687).

 

EDIT: 1705 did hold as R and now forces buyers to defend 1696.

 

That's why I look in "zones". My focus was on the 1688-1690 area and it's not because price drops 1 point below it's any less valid imho. After that 1697 was the midpoint, and although not everybody likes to trade from there, we did (kind of) double bottom & test there (and it might still be worth 10 points if we end up at the other extreme).

[DbPhoenix 42]

Both 88 and 90 were legit, but unless one is short, dropping the extra couple of points is not a big deal. What is more important is how price behaves at the lower level, in this case 88.

 

But if one didn't take it, there was a hinge which broke at 1000. Again, once one sees higher lows and lower highs, that's the first thing that should pop into his head.

[DaKine 10]

But if one didn't take it, there was a hinge which broke at 1000. Again, once one sees higher lows and lower highs, that's the first thing that should pop into his head.

 

Would this be the correct drawing of the hinge?

 

[DbPhoenix 42]

Would this be the correct drawing of the hinge?

 

Mine doesn't start until I saw the lower high at 0952. When I then saw the higher low at 0954, I drew the hinge, with a projected apex at 91. Price then left the hinge at 1001.

 

Is your chart CVB?

[DaKine 10]

Mine doesn't start until I saw the lower high at 0952. When I then saw the higher low at 0954, I drew the hinge, with a projected apex at 91. Price then left the hinge at 1001.

 

Is your chart CVB?

Its a range chart I changed it to a 1m here... Is this more representative of the hinge?

 

Thanks!

 

[DbPhoenix 42]

"Is this more representative of the hinge?"

 

Yup.

[wjrusnak 10]

Didn't really see this until hindsight. This is the hinge I called in the chat. It was broken to the upside then came back for a perfect test. Even though its perfect in hindsight, the 1690 level threw me off completely, as I even tried a break of 1690 to the short side (at 9:47am) before this hinge. If you notice, price broke the hinge (upward) then successfully made lower highs until testing the middle of the hinge (which was 1690!). That would have been the entry had I not been .

 

 

Too many signals to not take this trade... the beauty of real-time

[wjrusnak 10]

I saw this hinge differently in real-time. It actually broke before yours and tested the middle before taking off. It is another CWS .

[DbPhoenix 42]

Didn't really see this until hindsight. This is the hinge I called in the chat. It was broken to the upside then came back for a perfect test. Even though its perfect in hindsight, the 1690 level threw me off completely, as I even tried a break of 1690 to the short side (at 9:47am) before this hinge. If you notice, price broke the hinge (upward) then successfully made lower highs until testing the middle of the hinge (which was 1690!). That would have been the entry had I not been .

 

Too many signals to not take this trade... the beauty of real-time

 

I can understand why you'd short 90 if you didn't see 88 as support. Part of this depends on how one enters. For me, even if I'd wanted to short 90, there's no entry, so it just never came up. And when 88 held, that was that.

 

As for your drawing of the hinge, that's one way of doing it. Either way, price has to break past 92.

 

Once one has worked with a few dozen or hundred of these hinges, the lines don't matter so much. What matters are the lower highs and higher lows and the general decline in volume. One might even be able to play them using range charts or CVBs. But if one is new to these, or if one isn't particularly new to them but still has trouble seeing them, sticking to the traditional means of plotting them may be best for the time being.

 

It's also important, and difficult for many, not to disengage after a failed trade and stop observing and analyzing. If, for example, in this case, one tried to short 90 and the trade didn't work out, he'd have to set that aside almost immediately in order to remain engaged, see the hinge, and wait for the opportunity to play it. If he were able to be objective about the aborted short, he would also be more likely to consider the other alternative, that if the short didn't work, price would be that much more likely to move to the upside.

[wjrusnak 10]

I can understand why you'd short 90 if you didn't see 88 as support. Part of this depends on how one enters. For me, even if I'd wanted to short 90, there's no entry, so it just never came up. And when 88 held, that was that.

 

Yes I see your point. My only breakout trade is one that breaks one of my levels then retracts to that level and rejects it from the other side. In this case it was a perfect entry when it rejected 1690 after breaking through it. I took the trade and got stopped out... I can live with that.

 

It's also important, and difficult for many, not to disengage after a failed trade and stop observing and analyzing. If, for example, in this case, one tried to short 90 and the trade didn't work out, he'd have to set that aside almost immediately in order to remain engaged, see the hinge, and wait for the opportunity to play it. If he were able to be objective about the aborted short, he would also be more likely to consider the other alternative, that if the short didn't work, price would be that much more likely to move to the upside.

 

This is where I completely agree, but I have not mastered this in real-time yet. Remember last week I had a long that could have been stopped and reversed into an even bigger short play had I been ready. It takes me some time to reorganize and I think that is my biggest weakness so far. My biggest fear with that is getting stopped quickly in the order direction. Nothing hurts worse than being wrong both ways in a matter of minutes!

[DbPhoenix 42]

This is where I completely agree, but I have not mastered this in real-time yet. Remember last week I had a long that could have been stopped and reversed into an even bigger short play had I been ready. It takes me some time to reorganize and I think that is my biggest weakness so far. My biggest fear with that is getting stopped quickly in the order direction. Nothing hurts worse than being wrong both ways in a matter of minutes!

 

And if you're not willing to accept the risk and you force yourself to take it anyway, you'll feel far worse about it if it doesn't work out.

 

I understand how difficult this is. Whenever you get stopped out, train yourself to ask "What is the market telling me?" rather than zero in on your failure. The market may be telling you that it wants to go in the opposite direction. Or it may be telling you that you were right but you were too early. Or it may be telling you that it's entering a period of chop (or a hinge).

 

If you feel pressured by time to make a decision without having fully considered it, take the loss and switch to sim. If you lose again, at least you won't have so much emotional fallout to deal with. And if you analyze correctly and make the right decision, you'll then have more confidence to take the trade the next time it comes up. And it will come up. Granted you may kick yourself for not taking what turns out to be a winning trade, but taking the trade is not the point. Overcoming the hurdle that prevented you from taking the trade in the first place is a more immediate concern.

[brownsfan019 17]

 

But don't feel bad about not taking these trades.

 

That's a good point DB - some can analyze like no other but actually placing real trades is another story. Doing this in real-time and with real money is not easy and many can't/won't be able to do it. I'm sure you understand.

[wjrusnak 10]

That's a good point DB - some can analyze like no other but actually placing real trades is another story. Doing this in real-time and with real money is not easy and many can't/won't be able to do it. I'm sure you understand.

 

Now I think we all know you still have some bitter feelings at Db for not posting his P&L, but I don't think it is necessary to start passive-aggressively making snout remarks Let's try to keep this productive. I know that both of you have invaluable advice for new traders, so be cool.

[firewalker 10]

TL appears to have been broken today as I write and we'll see how price behaves to deduce if it's worth shorting possibly closer to top if price gets there.

 

Could you explain what exactly you are looking for when you say the above?

 

And you're right, TL has been breached, just like on the NQ. Same view, but different chart:

PS: Interesting thread, keep up the good work.

 

[Gringo 10]

Could you explain what exactly you are looking for when you say the above?

 

 

 

Hi Firewalker,

 

Due to the lack of climax this daily move and the top box don't appear to be indicating an end of longer term upmove. I am thinking of this top box now in terms of consolidation rather than reaching a solid s/r.

 

DbPhoenix, highlighted earlier that just because price turned direction at a level doesn't mean it's the top (but rather a swing high) when I had earlier mentioned 43.2 area to be to of box and an s/r. His opinion was that it was a more likely a swing high and due to lack of climax not really an s/r.

 

This is a very subtle concept that I didn't catch earlier, and even now am quoting DbPhoenix according to what I believe he meant. It was an nontheless an eye opener as I couldn't even understand what he was talking about. Now, if we compare this daily to say a monthly chart this area would be considered in my eyes a small consolidation in middle of a very large area with bottom around 25 area adn top around 50. So say we go down even 15-20% doesn't mean we're at the bottom of that very large area but merely consolidating during the up move.

 

To explain this to you I looked at a monthly chart and actually came up with a pretty impressive outlook (if I may so unhumbly say it myself! )

 

Please note that we may not have picked top and bottoms using monthly charts as they contain so much within each bar. But the concept we are talking about may become clearer after seeing this. Also, that s/r can be created at any place if the traders start fighting at that level. That will though again as said earlier require some hint of climax.

 

 

Edited October 29, 2009 by Gringo

[DbPhoenix 42]

DbPhoenix, highlighted earlier that just because price turned direction at a level doesn't mean it's the top (but rather a swing high) when I had earlier mentioned 43.2 area to be to of box and an s/r. His opinion was that it was a more likely a swing high and due to lack of climax not really an s/r.

 

My point was not that these various levels of resistance did not act as resistance but that none of them meant the top to the overall trend. You'll note from your earlier chart that while the first swing high in each of these pairs may have presented resistance within each subsequent range within the overall trend, none of them presented an insurmountable obstacle to that trend. Price may work its way back to the bottom of this particular trading range (from 41-43), and doing so will mean breaking the trendline. But that doesn't make it a trend reversal (note that price broke the trendline in May and again in July [Edit: make that June]).

 

Edited October 29, 2009 by DbPhoenix