Trading The Wyckoff Way

[wjrusnak 10]

I wanted to try to get two different time (or range) frames going here. Sometimes I miss a lot of activity because I'm way too zoomed out with these levels and not keeping in touch with the more "medium" time frame levels.

 

 

Here we can see a little more reaction to certain price levels within the last few days:

 

 

Bigger levels, like 1720 and 1730 for example, will be noticed on both charts. Those are the more popular levels, thus the ones a trader should consider.

 

EDIT: I don't have it clearly marked anywhere, but don't forget 1713, considering its importance in the past and as today's high (as well as S on the morning of 10/28).

Edited October 30, 2009 by wjrusnak

[wjrusnak 10]

Got negative... then back to pennies above break-even. When that happens after four trades... probably a great time to quit for the week

 

 

The only disappointment I really had was the hinge that preceded a possible break of 1712 (which was what I was thinking at the time). I took it with a very tight stop and it went in my favor then back to stop me out. Guess you can't expect the market to move 20 points every day. The trend seemed like it still had strength... but o well. I also wanted the short, but at 1712. It didn't make it to that level and there wasn't really much of a sell signal for me at 1710.75 (no clear double top on a 1 tick or tick divergence). It would have been terrible to sit through anyway.

 

I gave my long a lot breathing room as it chugged through the middle and I feel I got as much as I could. The entry was a bit late, which is uncharacteristic of me, but it was decent enough for a reasonable stop.

[firewalker 10]

I also wanted the short, but at 1712. It didn't make it to that level and there wasn't really much of a sell signal for me at 1710.75 (no clear double top on a 1 tick or tick divergence). It would have been terrible to sit through anyway.

 

It's just a thought, but perhaps you are changing your levels too much on slight "deviations" like 1712. Apart from yesterday's excursion above 1710, the biggest volume was still traded below 1710.

 

For me, the levels I posted 3 days ago were, and are all still valid. Those included 1707-1710 and 1688-1690 and although I only got 3 points today :crap: perhaps we both need to trust in AMT more.

 

Anyway, looks like you got more points than I did, so well done

Edited October 30, 2009 by firewalker

[wjrusnak 10]

It's just a thought, but perhaps you are changing your levels too much on slight "deviations" like 1712. Apart from yesterday's excursion above 1710, the biggest volume was still traded below 1710.

 

I disagree. 1713 was huge as I said last night, though it turned into 1712... then traders got excited and started selling at 1710. Progressively it was basically all the same level. You were the guy telling me yesterday to trade in zones and this is exactly that. Really, it was just simply hard to trade with all the congestion until after my quitting time. It became a little clearer that 1700 was important and we saw our good friend 1690... then 1687... then 1680... etc. Point being: there are a ton of levels in here. If you look at my chart... I did catch the extremes, especially the 3 longs at 1700ish. I also did try to anticipate a break up at the upper extreme... and by looking at the chart... you can see that 1711 was indeed the extreme. I have no issues with my trading today.

 

EDIT: Also, I did have 1708 as you can see on my previous charts, but I thought it was also important to mention 1713. The way it turned out though, is that 1708 became more of a middle than R and I adjusted to the next level of R.

[firewalker 10]

I disagree. 1713 was huge as I said last night, though it turned into 1712... then traders got excited and started selling at 1710. Progressively it was basically all the same level. You were the guy telling me yesterday to trade in zones and this is exactly that. Really, it was just simply hard to trade with all the congestion until after my quitting time. It became a little clearer that 1700 was important and we saw our good friend 1690... then 1687... then 1680... etc. Point being: there are a ton of levels in here. If you look at my chart... I did catch the extremes, especially the 3 longs at 1700ish. I also did try to anticipate a break up at the upper extreme... and by looking at the chart... you can see that 1711 was indeed the extreme. I have no issues with my trading today.

 

EDIT: Also, I did have 1708 as you can see on my previous charts, but I thought it was also important to mention 1713. The way it turned out though, is that 1708 became more of a middle than R and I adjusted to the next level of R.

 

I'm sorry if I sounded like I was criticizing your trading, I was not. I'll agree to disagree I didn't (and don't) see anything special about 1713 and yesterday's "poke" above 1710 was immediately rejected. Today we hit 1711 and price turned back like someone slammed it down the minute it tried to get higher. For me this doesn't mean that 1711 is an extreme, it means that price tried to get above the extreme (1710) and found no interest. A small difference in interpretation, but still a difference.

 

1700 was not an extreme for me, but again, we both made money out of today, so I don't see what the problem is... I just view things (slightly) different. Like yesterday, 1697 was a midpoint and you can how two hours after the open price went sideways on decreasing volume (springboard). After that we dropped below support, retraced (again on lower volume) towards 1688 (or within half a point) and confirmed previous S as R.

 

Have a good weekend.

[wjrusnak 10]

Guess you can't expect the market to move 20 points every day.

 

Oh the irony of quitting before 11:00 a.m.

[firewalker 10]

Below that, there's potential S around 1688-1690 but you'll have to go back to September to find good reference points, below that there's 1660.

 

Blowing my own trumpet here, but when price exactly stops at 1660..., it's magic! The rest is for the CWS thread, because the amount of profitable points yesterday that I left on the table ... :doh:

 

For me, again, nothing has changed since the levels I posted in the beginning of the week. Zones are on the chart, and the midpoints are something to keep in the back of your head.

 

 

Below that, support is not that clear, but I'll be paying attention to 1650 possibly, but perhaps more important 1642-1645.

[DbPhoenix 42]

Blowing my own trumpet here, but when price exactly stops at 1660..., it's magic!

 

Actually, trumpet section, since this level has been in play, and noted, since August.

 

It's worth remembering too that 1700 represents the midpoint of this whole range, thus the activity around that level the past three days, particularly Thursday. This may also account for what appears to be an increasing number of hinges ("apparent", because I haven't been counting). That price held above 1740 for two weeks before seriously penetrating this range and then "sought" the opposite side at 1660 may also explain what appears to be an increase in WTFs, particularly after lackluster morning sessions. But, in the meantime, when traders spend a great deal of time testing a level, as they did yesterday, this makes for tight ranges, perhaps multiple stopouts (depending on tactics), and more than a little frustration. These can lead, as we have seen, to breaks to one side or the other (the concept behind the springboard). My suggestion, then, at least to those who don't suffer from attention deficit disorder, is to hang around a little longer and keep an eye out for WTFs, as with yesterday, shortly after 1100, when price dropped below 1700 (finally).

 

There may be more to come, of course. If price continues to drop, there are multiple trading ranges to bounce off of and work thru, like falling down stairs. Or bulls may push us back into the channel and resume the trend. Either way, it is important not to lose sight of the larger timeframe (the distance between the August low and the June high is especially appetizing, though there is one hell of a lot of support at the 1650 level).

[traderGeorge 10]

Bear with me I am brand new at this, but I've read everything I can get my hands on regarding the Wyckoff method including Db's eBook. I am at the stage where I'm Sim trading NQ. Here is the NQ 1 minute chart for Oct. 27th. I did abysmally trying to trade this and would appreciate some feedback as to what were really valid entries in foresight for a newbie.

 

I interpreted the 9:30 volume as a buying climax since in my brief experience I thought 4000 contracts was a hefty volume for 1 minute, so I prepared to go short. But as I waited for the indication of a downtrend I noticed the 1 minute bars were pretty wide ranging varying from 2.5 to 3. points. I remember Db cautioning against trading in WRBs so I aborted my entry. At the time time I thougt this was a pretty good decision since I'm prone, like most newbies, to jump in rather than be patient. In hindsight that seems to have been a terrible decision given that there was a 30 point move to the downside.

 

When I saw the 10:02 volume of 12,000 contracts I interpreted this as a selling climax and prepared to go long. I made my entry at 10:04 for 1731.00 and prompty got stopped out since my stop was set at 1727.0. I wasn't willing to set the stop at 1724.0 for a 7 pt. risk. Where was the proper stop? Or was this just not a good place to enter?

 

So now it's 10:43 and it appears that there might be a reversal; however, I have been burned many times by trying to catch the reversal only to have the price pivot and the trend continue on it's merry way. So I'm pretty cautious and don't go short until 10:51 at 1741.0. Get stopped out a lot since I manged the trade poorly.

 

In hindsight this downtrend, beginning at 10:44 would have been very profitable.

At what point does a knowledgeable trader know that this is a true trend reversal and what evidence tells him that it's not just a swing low in the uptrend. Where is the proper entry in foresight?

 

This is the most difficult area for me, i.e. determing when a true trend reversal is under way.

 

[wjrusnak 10]

I'll give you some feedback:

 

At first glance, you have a TON of levels. What is up with that?

 

I interpreted the 9:30 volume as a buying climax since in my brief experience I thought 4000 contracts was a hefty volume for 1 minute, so I prepared to go short.

 

Try not to give too much energy to the first minute bar, considering that most days it will be one of the largest volume bars of the session. Seems like you're looking too hard to find some sort of climax.

 

But as I waited for the indication of a downtrend I noticed the 1 minute bars were pretty wide ranging varying from 2.5 to 3. points. I remember Db cautioning against trading in WRBs so I aborted my entry.

 

You'll realize soon enough that these bars are nothing but a compilation of what really happened during that minute. What if you were looking at 10-second bars or 2-tick bars? You would see a different picture. Try to focus on waves rather than bars. For instance, I saw that first bar much differently, considering I watch a 1 tick chart.

 

At the time time I thougt this was a pretty good decision since I'm prone, like most newbies, to jump in rather than be patient. In hindsight that seems to have been a terrible decision given that there was a 30 point move to the downside.

 

Don't beat yourself up over it. In hindsight, everything looks obvious. News reports also make things a bit wild, if you hadn't noticed yet.

 

When I saw the 10:02 volume of 12,000 contracts I interpreted this as a selling climax and prepared to go long. I made my entry at 10:04 for 1731.00 and prompty got stopped out since my stop was set at 1727.0. I wasn't willing to set the stop at 1724.0 for a 7 pt. risk. Where was the proper stop? Or was this just not a good place to enter?

 

I, for one, wouldn't have more than a 2-point stop. That is completely up to you though. Whether you want to get at least eight to ten points using a four stop or nothing less than twenty points using a three point stop, it is solely your choice. You need to figure out how often you are right compared to wrong then adjust your stops accordingly. For me, I'm right only about 35-40% of the time, so I use a two-point stop and try to get at least six or more out of my winners. In that light, one of my winners should make up for three or more of my losses. Experiment and see what is best for you. DbPhoenix has a complete thread on stops in the Wyckoff forum. In short, you want your stop to be a couple ticks or so beyond the "danger zone" of the nearest level that you are "trusting".

 

So now it's 10:43 and it appears that there might be a reversal; however, I have been burned many times by trying to catch the reversal only to have the price pivot and the trend continue on it's merry way. So I'm pretty cautious and don't go short until 10:51 at 1741.0. Get stopped out a lot since I manged the trade poorly.

 

This ends up being the bloody cycle of the over-trader. You miss, miss, miss, miss and finally you decide to quit because you're so afraid, then price finally does what you wanted it to in the first place. Just make every trade count and make sure each one is per your rules.

 

 

In hindsight this downtrend, beginning at 10:44 would have been very profitable. At what point does a knowledgeable trader know that this is a true trend reversal and what evidence tells him that it's not just a swing low in the uptrend. Where is the proper entry in foresight?

 

Honestly.... s/he doesn't. It's probabilities, sir. If someone KNEW that price was going to dive to the lows or highs and break out, this game wouldn't be very hard. You set yourself up with the best chance. For instance: price was nearing a swing high around 1748.50 (which was set in place at 9:50 a.m.) and there was an increase in volume during this time. 1749-50 was also an area of resistance. None of these things tell anyone "hey... it's time to go short and you're going to make a lot of cash!", but together they are multiple REASONS to take a trade that has a high probability of success.

 

This is the most difficult area for me, i.e. determing when a true trend reversal is under way.

 

Yes, and it will probably will be. It's not an easy task and takes a lot of practice. If you're trading reversals, you need to be aware of the trading ranges occurring within the week or month, etc. Maybe it's a good idea for you to brush up on support and resistance (see our foresight thread, since we post on it daily).

 

All in all, you seem to have a good start, but you need to get a hang on finding important levels to trade (that is of course if you're going to trust Wyckoff's fundamental ideas). If you're constantly trying to catch reversals in the middle or at random levels, you're going to get burnt a lot.

[wjrusnak 10]

Looks like we had some pushy activity by the sellers at the opening of the futures market. They pushed down to about 1652.50 and were met by buyers. This is just about at our very important 1650 level. Tomorrow, buyers want to be able to hold this level or else we will have to start looking to the lower range, which is why I provided the first chart:

 

 

Next, we can zoom in a little more to catch some details of this 1680 to 1660 range... if that is in fact what we will see:

 

[firewalker 10]

Yesterday we ended the week with two wide range days, and it's quite common for the market to take a breather the next day(s). Overnight so far we've been creeping towards the midpoint of what I consider 'the range': 1660-1690.

 

If we open near where we are now, it could end up a choppy afternoon. So, unless there's a very clear signal to short 1675 or thereabouts, I'll probably wait to see if price can get to one of the extremes and take a trade from there.

[DbPhoenix 42]

Bear with me I am brand new at this, but I've read everything I can get my hands on regarding the Wyckoff method including Db's eBook. I am at the stage where I'm Sim trading NQ. Here is the NQ 1 minute chart for Oct. 27th. I did abysmally trying to trade this and would appreciate some feedback as to what were really valid entries in foresight for a newbie.

 

What trading plan had you written down in advance of the trading day?

 

In hindsight that seems to have been a terrible decision given that there was a 30 point move to the downside.

Whether or not it was a "terrible decision" depends in large part on where you would have entered a short and why, where you would have placed your protective stop and why, how many times you would have tried to reenter and under what conditions after being stopped out and why, how you would have managed the trade if the trade had gone your way after your entry and so on. If you had not asked and answered at least these questions in advance, then a decision to stay out was the best one you could have made.

 

Where was the proper stop? Or was this just not a good place to enter?

Review the answer I gave to your last post in the Stops thread and apply it to this situation.

 

So now it's 10:43 and it appears that there might be a reversal; however, I have been burned many times by trying to catch the reversal only to have the price pivot and the trend continue on it's merry way. So I'm pretty cautious and don't go short until 10:51 at 1741.0. Get stopped out a lot since I manged the trade poorly.

Since you've been "burned many times" and "get stopped out a lot", do you understand what traders are doing at each of these points? Or do you find yourself playing Follow The Bouncing Ball? Again, have you written out a trading plan in advance of the trading day?

 

At what point does a knowledgeable trader know that this is a true trend reversal and what evidence tells him that it's not just a swing low in the uptrend. Where is the proper entry in foresight?

If you have not already done so, I suggest you begin with the first post in the foresight thread and study the linked material. These posts and charts will explain how to determine reversals, where to look for them, how to manage them. In the meantime, I strongly suggest that you stop trading and remain in observe and study mode until you've put together a consistently profitable strategy.

[wjrusnak 10]

Rough...messy support at 1663, 1660 and 1656... three fake outs... then finally nailed the entry at 1657. That made up for all three stops and then some. I gave a lot of room after the news, but buyers didn't step in until my stop was hit at 1670... missed out on 10 more points. Really, even though it seems like I gave back 6 points, I was only giving them 3 points of breathing room, because 1676 was hit only for seconds and it was back to 1673. The only way I could have gotten more was to have a set target or to have given just one more tick of breathing room. All in all, though, a great start to my week. Done by 10:03. Needless to say... there was a double top at 1680, but I was already much too stressed from the four previous trades to pay attention. When you get to that point... you might as well quit and regain yourself for tomorrow.

 

[firewalker 10]

After that we dropped below support, retraced (again on lower volume) towards 1688 (or within half a point) and confirmed previous S as R.

 

Seems like the market is repeating itself

 

Price, as expected, reacted at 1688 (strictly speaking it was 1687.75...), and although it might have been a bit cheeky to short before the trendline was broken, it did work out rather nicely with price returning to the midpoint.

Edited November 2, 2009 by firewalker

[firewalker 10]

Hi traderGeorge, you sound a lot like someone I used to know some time ago.

I believe that person was... me!

 

Studying the material and putting in hours of screentime, it's all a necessary but not sufficient condition. What you need, and from what you're telling looks like you lack, is a well thought out trading plan which tells you what to do when you see it.

 

I read in your post that "I was this and I thought...", or "I saw ... and I interpreted it as...". But most of the thinking and interpreting should've been done before the market opened, not during the day when the markets are open. Most likely you are not going to think straight when you see all that action happening and you'll be thinking "how can I get in", "why am I missing out on such a huge move"... A neutral position clears the mind, but unless you know exactly what you are looking for, you're not really better off than just trying to feel your way through the day.

 

Also, you're likely to experience many times that what appears to be a good decision in real time, is a bad one in hindsight or vice versa. That's where testing a strategy comes into play. You can't afford to think about "should I put this trade on, or is the stop too wide?" during the day. All that needs to be thought out, preferably written down, before the market opens.

 

For your final question, determining when a trend has reversed, that's a tough one. What looks like a trend reversal on a smaller timeframe, might only be a trend retracement on a bigger timeframe. But usually by the time it's clear that the trend has 'reversed' you will be far too late to take an entry, or price will be ready to pullback. There is no way for "a knowledgeable trader" to know that it is a "true" trend reversal until after the fact. But you don't need to know per se. If you have a plan for trade entry, trade management and trade exits, you will be prepared to take profits of whatever the market throws at you.

[firewalker 10]

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.

 

I don't believe having a climax is a necessary condition to end a certain move. Some trends just fade out and when the last man carrying the bucket realizes there is no one else left to hand it over to, price can suddenly and sharply collapse.

 

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.

 

I agree that it's not because price turns at a specific level this means it's "the" top, it could be "a" top.

[wjrusnak 10]

Buyers held 1650 as we anticipated, but nothing impressive. We have a new range formed between 1690 and 1650 and a slightly noticeable smaller range within that (1660-1677ish). Again we should look to play 1650 or even 1660 if the entry is obvious, but in case of a break down, refer to my previous post for the lower levels (1632-34, 1609, 1585).

 

[firewalker 10]

Buyers held 1650 as we anticipated, but nothing impressive. We have a new range formed between 1690 and 1650 and a slightly noticeable smaller range within that (1660-1677ish). Again we should look to play 1650 or even 1660 if the entry is obvious,

 

For once I completely agree

 

but in case of a break down, refer to my previous post for the lower levels (1632-34, 1609, 1585).

 

Unlikely to come into play today, but my idea of levels ("zones") lower than that:

1585-1587

1602-1605

1628-1632

[DbPhoenix 42]

We have a new range formed between 1690 and 1650 and a slightly noticeable smaller range within that (1660-1677ish). Again we should look to play 1650 or even 1660 if the entry is obvious....

 

58 to 77.5. Not too shabby

[wjrusnak 10]

Tomorrow should be about the same game plan, except maybe this time we'll be looking to break up or get a nice reversal off 1690. In any case, we're ready for the above levels and the lower levels again can be found here (1632-34, 1609, 1585).

 

Keep playing the range until someone gets serious and breaks it. Also, overnight we are pushing 1680 already. Should be an interesting open.

 

[DbPhoenix 42]

Don't overlook the potential importance of 80. A time chart or CVB chart may make this clearer.

[NAVEEVIa 10]

Db i have CVB chart with 1680 marked , could you please explain why you would consider it important

[wjrusnak 10]

Db i have CVB chart with 1680 marked , could you please explain why you would consider it important

 

I'm not so sure why you don't see this already. In the middle of your chart 1680 provides R from below a couple of times and just recently (two days ago or so) it provided S. The entire 1678-1680 was a very significant area. Even today it provided S later in the day, but at 1682, indicating that buyers got a little more excited than previously (FOMC can do that). If you can't see why it's important after reviewing your own chart or my chart above, you might need to review S/R concepts.

[DbPhoenix 42]

Db i have CVB chart with 1680 marked , could you please explain why you would consider it important