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. . . You Can Trade Successfully.

 

A 21st Century Adaptation of Wyckoff's Principles of Trading Price

 

 

Much nonsense has been circulated about trading over the past seventy years or so, the bulk of it since the internet made possible discount brokers, affordable charting software, real-time streaming data, chat rooms, trading rooms, trading websites, blogs, and so forth, all of which offered fertile ground to a literally endless assortment of books, DVDs, courses, seminars, "alert" services, mentors, counselors, trading software, indicators and so on, all designed to separate the beginner or struggling trader or otherwise low-hanging fruit from his money.

 

There is, however, only one essential, one lynchpin, one fundament when it comes to understanding the auction market: supply and demand and the Law thereof. Everything else – support, resistance, trend, price movement, volume – stems from the balances and imbalances between supply and demand, selling pressure and buying pressure, sellers and buyers, yet struggling traders are generally incapable of accurately assessing the state of these imbalances, i.e., determining who's in charge at any given moment or interval (some are capable but can't implement what they know, but that's another subject).

 

Trading price hinges on the ability to assess the state of these imbalances not only in the abstract but in every moment of the trading session. If one does not thoroughly understand just what it is that he's looking at, he will be lost. When trading price, the trader knows at all times who's in charge, who's dominant, who's holding the good cards. If he doesn't know this, he's just guessing, and that's not the route to consistent profits, no matter what you read on message boards.

 

Why bother? Because once you learn how to trade price, your edge* will never fail. You will understand trend and how to play it under all circumstances, including its endings and reversals. You will also learn how to distinguish between trending and ranging, the latter including "chop" which is a collection of micro-trends which generate tons of commissions and very little if any profit.

*the knowledge you gain through your research and testing that a particular market behavior offers a level of predictability that provides a consistently profitable outcome over time (from Douglas)

For the remainder, see the pdf, below.

SLA-AMTe.pdf

Edited by DbPhoenix

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The point of a retracement is to give new buyers the opportunity to jump in, which propels the price forward. If they're not jumping in, and you're already in, what are you doing just sitting there?

 

If they don't jump in, then you've got a hinge, and you don't want to be sitting inside one of those, either.

Image4.png.051f5efd5abb417d4e7274bb69f8435f.png

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This is a summary of what I've posted today, plus the last half hour, plus suggested entries.

 

It should be clear that after a couple of hours one has a hell of a lot of notations. Presenting the fait accompli can cause those who know nothing about this sort of trading to think Jesus Christ How can anybody trade this mess? But taking it step by step from the very beginning may reveal the sense and logic of it.

 

And a reminder that no exits are posted because trades are exited by the fearful when a supply or demand line is broken. The more confident who are watching price move in real time can give price a little more room.

Image8.png.33d26b44a4655ac7b07a4ccd17c8a68c.png

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35674d1365175904-auction-markets-wyckoff-way-discussion-image8.png

 

As always, very illustrating. I understand all of the longs, (still puzzled by the entry before the HH or LL, but i think I am getting there). The one i dont find very obvious is the second short, as we are still away from the first entry to give it some time to find support at the MP of the last up swing. Something I have noticed on oil and on nq as well.

 

I wanted to know if there is anything clear in the price action that indicates close and reverse for that specific trade. Is it R at 752 and 750?

 

Not all of these entries are requireds. Most are electives. I put them all in so that no one gets the idea that there is only one entry in each section. Those who are aggressive can take the aggressive entries, those who need more confirmation can wait (the penalty for the latter, of course, being that one can be stopped out rather suddenly).

 

The first long is taken at the first RET after the climax low. This can be assumed to be a climax due to the support level and the capitulative decline.

 

The subsequent short is taken at the first RET after the break of the demand line because there's no way of knowing whether this will be a secondary reaction or if price will continue down toward the next support level. As it turns out, the secondary reaction takes place as it should, and one can take the risk of going long even though the supply line is not yet broken, or one can wait and take it just after. If one had the balls, he could take both, the second one being a scale-in.

 

There's no trade on the next leg down, partly because price is falling out of a hinge and the first move out of a hinge is nearly always fake and partly because price only falls about 50% of the immediately preceding rally. When price makes one of its famous U-turns back into and then out of the hinge on the upside, the long can be taken with more assurance. If more confirmation is needed, the next can be taken. Or, as before, they both can be taken. Note that if only the second is taken, it will be stopped out quickly.

 

The next short is taken at the first RET after the break of the demand line. The fact that the line was broken after price appeared to find R at the premkt high is a confirmative element (waiting for price to find support is another way of saying hoping that it will, and if it doesn't, you're watching price fall and you're not in the trade). The supply line is then broken after price appears to find S at the previous swing low and the next long is taken. If one doesn't like that, he can wait for the next opportunity, though this one takes a while. If he takes both, the second can be a scale-in.

 

The great disadvantage of static charts is that one has absolutely no idea of pace, and pace can provide a great deal of information in real time, particularly with regard to hesitations and punching through (note, for example, the hesitation when price first drops out of that hinge). There are also the elements of extent and duration of waves. Some last a long time but don't go very far. Some go far but don't last very long, like the climax run. Some do both. Some neither. And there is also the tendency of beginners to read charts from right to left instead of left to right. Reading from right to left can create all sorts of confirmation biases, which is why backtests done improperly can so often (always) yield exactly the wrong information.

 

There is also the ever-present hindsight bias. One tells himself that if only he'd held, he would have done so much better, and with fewer trades to boot. This is also why so many will work at this for four or five or nine or fifteen years and never do much better than cover expenses. You have to trade what's in front of you, without hesitation. And if you're prepared to get out immediately if things don't go as expected, there is virtually zero risk. Knowing this, and I mean knowing it, enables the trader to take these trades and even make immediate exit-and-reversals because he knows that he can't be screwed.

 

If you have any other questions, just ask.

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As I said above, I would not have expected this morning to be quite so boring. But trading began to come alive with the exit from the hinge (below).

 

For the daily context, see yesterday's chart post. For the premkt, see chart 1.

 

Chart 2 shows the opening gambits without the hinge so that the entries and exits can be more clearly seen. Since there were no RETs to speak of, I elected to enter off S/R reversals, as long as there was S/R to use. The hinge then formed, which is an overlay on Chart 3, which is otherwise identical to Chart 2.

 

The last, of course, is the entire session, at least until I quit due to the volume dryup and the sideways trendlessness.

 

Gee, it would be so much easier if S&R "worked". :cool:

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But you won't know the weekly trend on Monday. What do you do on the 15th? And each day thereafter?

 

I was referring to my post in which i completely misunderstood your question.:doh:

 

of course i can't tell the trend on monday i would have opened up past week, month , year or whatever i needed in order to to see what going on.

 

for me looking at this chart as is without referring to the left is belongs to the CWS thread or "sharpen your entries" thread..

i have not yet mastered the surfing ability.

 

i tried to answer with that in mind and a little peaking to the left..

assuming always in position..

note the black point which represent indecision points for me.

since this is a 30M i would have liquidated and gone long, BUT let's assume this is a 1M, now there's no reason to rev since we are at the overall right direction. (small red lines marking the tops)

the second black dot would be short if i was long.

 

Tomer.

 

attachment.php?attachmentid=35834&stc=1&d=1366472664

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