Riding the Wyckoff Wave

[DbPhoenix]

	Quote:	Tannism
	I don't know where the links are, but here is my quick key for NZ variables (begin na) after the chart you posted recently. Note: the histogram lines have different scales. The NY variables begin with ny.

I don't know where they are, either. I may not have posted it at all.

In any case, this is how I display it. Note that new highs were not shabby yesterday.

[firewalker]

	Quote:	DbPhoenix
	Yesterday there was an upthrust in the Nasdaq and the Dow. There was also an upthrust of sorts in the SPX, but there've been so many over the past few weeks that they are forming their own base . Whatever these thrusts mean in and of themselves does not matter as much as where they are occurring, i.e., against important, previous support. Therefore, both intraday and EOD traders would do well to concentrate on how price behaves at this particular juncture.

	Quote:	brownsfan019
	As the resident Candlestick guy, I'll tell you that just finding a shape and calling it a reason to trade is exactly why candlestick analysis does not work for some. B/c that's a completely inaccurate way of using them.

The topic of this thread seems to encompass a broad range of interesting elements.

Brownsfan, as you're the "resident Candlestick guy", would candlestick analysis tell you to take the upthrust on the NQ as a short signal? It was on decent volume and into previous support (context). Seemed pretty good to me, but I'm not an EOD trader. Intermediate trend still up though.

Has anybody else observed that there seem to be a whole lot more of "one-way days" then before? Or is it just my perception?

[DbPhoenix]

	Quote:	firewalker
	The topic of this thread seems to encompass a broad range of interesting elements.

I hope so.

	Quote:
	Has anybody else observed that there seem to be a whole lot more of "one-way days" then before? Or is it just my perception?

I stopped keeping records of this sort of thing some time back, but daily ranges are twice what they used to be, and the number of trend days has dramatically increased. It's been suggested that two-thirds of the trading days end up in the quartile opposite to where they began.

[firewalker]

	Quote:	DbPhoenix
	I stopped keeping records of this sort of thing some time back, but daily ranges are twice what they used to be, and the number of trend days has dramatically increased. It's been suggested that two-thirds of the trading days end up in the quartile opposite to where they began.

I remember February last year, at a certain point the daily range contracted to around 10 points on the NQ. On some days even less than that. But that was before the correction. Nevertheless amazing to see 40-50 point days.

Contraction and expansion in volatility is normal I suppose, but the sudden increase in trend days seems odd. Not that I care a lot about the underlying reasons, but did Wyckoff or anybody else have something to say about this? I believe Steenbarger wrote something about it too in his blog recently...

Btw, do you still use the daily range as a potential warning signal the intraday move has exhausted? Had a look at your blog and I did notice some new elements (TICK for example)... a lot of new material to digest, that's for sure.

[DbPhoenix]

I don't recall W saying anything about it specifically. One can infer certain things, but I've seen inferences become axioms, and that can lead to all sorts of trouble. One can infer, for example, that the "smart money" hasn't a clue, which helps to explain a lot of what's been going on. But there's not much one can do with that unless he can become especially sensitive to volume surges, breakouts, and fades. There have also been very good trades on both the long and short sides in what anybody would call very dull markets. So, again, one has to be sensitive to flow and pay little or no attention to individual bars.

One of the few rules-of-thumb that appear to hold up is that one can't expect one trend day to follow another in the same direction. There has to be a rest of some sort at some point, even if it's only a turn in the opposite direction (e.g., the /\/ pattern we've followed the past three days).

As for the daily range, no. As I understand auction market theory better, I rely more on support and resistance. Auction market theory also adds another level to Wyckoff, which enables me to become more sensitive to flow. A side-effect to this is that I don't trade as much, which can be a good thing or a bad thing, depending on how one looks at it.

[DbPhoenix]

Edit: Incidentally, you posted something about bias. If one looks at market internals and the behavior of small, mid, and largecaps, it's difficult not to acquire a bias. However, it is absolutely essential that one remember that the market can be irrational for far longer than one might believe. Therefore, one must focus on what's there, not on what one expects to be there or wishes to be there.

The "smart" money is not any smarter than anybody else. There's just more of it. So when the elephants are swaying back and forth or wandering in a circle or taking a nap, one must be sensitive to that and not make more of it than it is. And if one gets tired of waiting for the mouse and decides to hang it up ten minutes before the big stampede that begins as soon as they've left the room, that's okay too. One can't trade well if he's so bored that his eyes are beginning to bleed.

[DbPhoenix]

Regarding the various "upthrusts" and why they didn't make good shorts today, it may help to set aside overhead resistance for the moment and look at the trend, or "stride".

Note here that even though the YM and ES are struggling, they are also each coming off their respective demand lines. And while they have been unable to maintain their strength since mid-April, they nonetheless remain in uptrends in this interval.

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As for the NQ, note that its demand line has altered its course.

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Keep in mind that resistance is not a line but a zone. And that the herd is always right. Except at turning points.


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[Kiwi]

"Keep in mind that resistance is not a line but a zone. And that the herd is always right. Except at turning points."

I don't know if you've read the wisdom of crowds but its worth adding to your late night reading pile. One thing I found interesting was a distinction made between situations when crowds are wise and situations when they are not. Crowds are wise when they vote individually - wiser than the individuals. Crowds cease to be wise when they start paying attention to what everyone else is doing the ultimate expression of which is group-think. Does that remind you of anything

A comment on volume and Wyckoff. I never got volume. I kept trying. For years. And I still didn't get it. I think my problem was that I tried to assign too much importance to it, vsa like, and it wasn't until I'd read a million of dbphoenix's sometimes irritatingly vague posts and peoples sometimes frustrated questions that I started to get it. Now volume is an integral part of my trading and the most useful thing it does is keep me out of trades I would have taken without the little clues that volume adds to the pattern of price movement.

[DbPhoenix]

	Quote:	Kiwi
	A comment on volume and Wyckoff. I never got volume. I kept trying. For years. And I still didn't get it. I think my problem was that I tried to assign too much importance to it

See post 387.

[Bearbull]

	Quote:	Kiwi
	"Keep in mind that resistance is not a line but a zone. And that the herd is always right. Except at turning points." I think my problem was that I tried to assign too much importance to it, vsa like, and it wasn't until I'd read a million of dbphoenix's sometimes irritatingly vague posts and peoples sometimes frustrated questions that I started to get it. Now volume is an integral part of my trading and the most useful thing it does is keep me out of trades I would have taken without the little clues that volume adds to the pattern of price movement.

Yes patience, persistence and effort pays off with wyckoff and db's posts in the end, when I first started with candlestick charting , I went through similar phase, thought I had discovered the holy grail, all I had to do was to identify engulfing patterns, doji, morning , evening star etc and money would roll in, took some time to learn the importance of context, same is happening in the VSA world, to the newly so called enlightened wannabe traders who have emerged out of the 3 recent weekend seminars on VSA armed with the ability to read all the footprints of the smart money, mulling and chewing of every upbar and downbar. When an effort is made to point out the fallacy and the divergence of VSA from its original source Wyckoff, instead of engaging in productive discussion, it is looked upon as an attack on their Gurus teachings and in turn they try to teach you the right way of trading, sometimes I wonder how Db manages to persist and keep on casting pearls..............and putting up with the aggro.