[brownsfan019]

Originally Posted by PivotProfiler »

BF;

You may have considered this, but I will bring it up anyway. How do you handle, if at all, Long Shadows? Long Shadow candles are the cousins of WRBs. That is, usually, during the interval they WERE WRBs but did not remain so by the end of the interval.

As you exit on the close, this could create "lost" profit taking opportunities. I know you are not concerned with the support/resistance zones they also can create, but do they offer the chance to trail a stop UNTIL the next WRB appears on the close?

Pivot - since my entries have nothing to do with WRB's or long shadows, it's not an impact there. As for exits, that does happen and I may trail my stop based on the candle formation. Ideally the candle closes as a WRB, but it is possible for a retracement in that candle, which is what the long shadow represents.

I understand what you are saying about exits, but the charts that I have posted today and recently are VERY common for my trading - where 1 or 2 WRB's is about all I will get before any type of retracement may occur. I don't like sitting and taking heat on the retracement hoping price goes back in my direction, so I exit fully at the first WRB that meets my criteria and then I WANT price to retrace some and either give me another trade in the same direction as the first trade or a trade in the opposite direction. The WRB exit strategy that I use keeps me nimble and able to quickly adapt to changing conditions, such as that NQ chart that I posted. In a span of about 4-5 minutes price went up and then back down and closed at about the same level before this little pop up then down occured.

And, to be honest, I have never been good at trailing a stop. For me, it's a losing proposition each and every time - either you get out too soon or too late, and rarely ever get out at the most ideal spot simply b/c you are trailing behind the current price. WRB's on the other hand have been giving me exits at/near the high or low that move. Not the low/high of the day, but low/high of that move as I've shown in chart annotations.

It's important for others reading this to understand that while we both use WRB's, we are using them very differently. I think our theories are the same, but implementing the theory into our own trading methodology is different. I am very confident in my setups - entry and initial stop. I have never found a good exit strategy, until studying the WRB's. And I've looked at MANY ways to exit - fixed target, trailing, fibs, high/low of current day/yesterday/last week/etc., pivots, etc. etc. etc. etc.

In my opinion at this point in time, nothing has compared to WRB's in terms of exiting trades. Nothing.

[Anonymous]

Just wanted to post a pic for the newbies.

Here we have 2 other WRB methods for stops/exits.:


1. The first method is one used by Mark. Although, he will at times move to a higher timeframe after the first Pt (profit target). The key here is that the position is scaled out a portion at a time on a WRB. In this method the exit is WHEN THE CANDLE BECOMES A WRB, NOT THE CLOSE OF THE INTERVAL.

If you did not move up or down a timeframe, there would be three WRB profit taking opportunities.

2. My preferred method combines both of my primary methods- WRB & Long Shadow analysis and Volume Spread Analysis.

I like to place a trailing stop 1 or 2 ticks below/above the low/high of the BODY of the WRB after it is formed. Trail 4 is via VSA. I would move the stop to just below the low of this bar. It is a narrow range bar that closes on its low, closes below the previous bar and has volume less than the previous 2 bars. Here I would actually wait until the close of the next bar. In other words, wait for confirmation that the bar is indeed NO SELLING PRESSURE.

So I am also looking for No Supply or No Selling Pressure bars and Tests(low volume) to move my stop.

[brownsfan019]

Good chart Pivot.

Here's what I see and correct me if I am wrong - when looking for multiple WRB exits, you are trying to catch the bigger move of the day. To obtain a 2-3 WRB exit move, you are looking for a fairly substantial move, as evidenced by the chart you provided. There's nothing wrong with that at all. And if you can catch the bigger moves when they are present and take small losses on the 'smaller' moves, it should yield a profitable result in the end.

My take is that while we all want to hit that home run trade - you know, the EC trade that goes for 60, 80+ ticks (at $12.50/tick) - that is not realistic over the long haul. What I mean is that if you simply miss just one or two of these huge moves, you now have the odds working against you making money. These type of moves do not appear every day, so you have to ride them when they do show up. And that sounds great, esp in hindsight, but miss just one of these and your results will dramatically vary on what you thought you were going to make.

Since I know that the odds of me catching the giant move all the time is slim (for a number of reasons), my game is much better suited to catching the 8-12 tick moves on the EC and then simply looking for a reason to enter the next trade. Keep the losses small (5 ticks or under usually) and do not get greedy. I remember when my dad was teaching me card games growing up and he always said to me - do not get greedy. As soon as you do, that's when a fatal mistake will be made. I believe that holds true in the markets as well - never think you got it figured out and never get greedy. Don't get me wrong, I enjoy trading and making money, but to think you are going to catch 20, 30+ moves on the EC with regularity is simply unrealistic in my opinion; however, catching an 8 pt move a couple times a day is very realistic. And catching an 8 pt move, three times a day = $300/contract. You can trade less than 10 contracts each trade and make more money per day than most people will. I think it always helps to put things in perspective. Yes, we all want that giant home run trade and be able to look back one day and think we just nailed that one, but that's no good if you cannot do that regularly.

Anyways, it's late, time for bed. If nothing else Pivot, we are giving two great arguments on how to possibly trade WRB's for our audience.

[Anonymous]

And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to say this: it never was my thinking that made big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine-that is they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade (sit) than hundreds did in the days of his ignorance.---Reminiscences of a Stock Operator.

BF, I think we have been down this road before : confused:

I will just state a few thoughts.

* I believe in surrendering to the market it. I want to let it take me where it is going. I want to want what it wants. Profit targets are about what I want, not what the market wants.

* Exiting a position at a profit target is speculating on the future when it is NOT necessary to do so.

* The more a trader can take himself out of the equation and faithfully mirror the market, the less stress involved and the better the results.

* Most of the "Market Wizards" made their money trading long term positions or swing trading. Because, they could be right and sit tight.

* If you make 5 xs as much on your winners than you lose on your losers, You don't have to be right 80% of the time. Most traders get caught up in being right and the take profits too early on the few times they are.

* Currencies have a high propensity to trend. As a retail trader, trend is one portion of the edge. Hence when this part of the edge is present, one needs to take full advantage of it.

* A trailing stop does not assume the market will trend forever, but taking a profit target does assume it wont. Again this is trying to predict the market and the future. Why bother?

* I liken myself to a salmon egg. The market will take me where it wants to go and I trust that if I allow it to do so the result will be where I NEED to be. Others are like the adult salmon, they fight the river and in the end find their demise.

* It is not about trying to hit Homeruns, but rather positioning oneself to take all of what the market is willing to give.

* Only when one learns that he can not conquer the market can he make a good living in the market. There is no need to try and outsmart the market.

* Be comfortable being IN the market. The market will provide, but not on the trader's terms. Rather on the market's.

* Markets tend to keep on doing what they are already doing. Newton’s law of motion. If the market is moving up the most likely direction it will move is up. Just keep moving the stop in the direction of the trade. At some point the market will stop you out. Overall, the amount made by staying in a market that trends beyond expectations will more than make up for those times when one gets stopped out at a lower profit level than a profit target would have gotten.

* WRBs signal possible shifts/changes in the supply/demand dynamic. If you simply move your stop to a position that signals that change/shift has indeed happened, you are both using market derived information and allowing your profits to run. In short, the market told you when to get in, shouldn't you let it tell you when to get out?

Like I said, we have been down this road before, so let's not do it again. Simply, I believe that trailing stops keep one in tune with the market. They are not based on the unkown and the unknowable (the future).

Be comfortable in the market and let your go of the ego (not directed at you, BF). Take care of the losses and let the winners take care of themselves.

[Anonymous]

Hello BF and others;

I was going to post this in the VSA thread, but while looking at it I got an idea that may appeal to some.

To be sure, this is a "perfect" example, and admittedly, that is probably why I noticed it. This version combines the variations used by BrownsFan, myself and NihabaAshi.

I do think it is more appropriate for time based charts, but BF will be able to say more about that. What you would do is take the trade on one timeframe. After the appearance of the first WRB on that timeframe, move your stop to just below the low of the WRB's body. This is a long trade so we are talking about a white WRB and thus the stop is moved to just below the OPEN of the WRB. Just below would be 1 or 2 ticks.

At that point, you move up to a higher timeframe. Here I have a 30 min chart. So we have moved up from the 5 to the 30. One would not have to move 3 timeframes up, but I was looking at this chart. Moreover, the amount one moves up would be based on the individual preferences and the price action which caused the trade in the first place. In other words, with certain types of news releases one might want to move up from 5 to 30, where the usual move might just be up to 15.

At any rate, that is for the trader to decide. If someone likes this idea, hopefully they will post what they end up doing.

Now once you have moved up to the higher timeframe, You look to exit on the close of the first WRB that appears.

Note how in this example, like so many of yours, the WRB gets you out very near the top of the move. What I like about this is it does allow one to get more of what the market is willing to give you, while still having some of that "get out at the first sign of change" mentality.

Just a thought. Hopefully, someone likes it and can provide more insight and examples.

BTW, notice the bar after the WRB. It has Ultra High Volume, almost as much as the WRB (3 ticks less in fact). Its range is much less however, and it closes in the middle of its range: THIS IS A TRANSFER OF OWNERSHIP BAR. The Smart Money is dumping supply onto the market. Note how price starts to move sideways. Also note the No Demand bar.

[brownsfan019]

Pivot - that's a great chart and had I been using that chart setup, I would have exited my entire position at the close of that WRB and then waited for another reason to enter a trade. As you can see, just a bunch of chop followed. For me, that is much easier than to exit some or none based on the first WRB and then wait to see what happens.

Regarding the previous post, I get what you are saying and most of it makes sense, at least in a textbook fashion. The important component not being discussed though is how the trader's emotions impact the decision making process. As much as we all would like to say 'I am an emotionless trader' unless you are a robot, that's not the case. And I don't believe we ever really become emotionless. I think we get better over time and with repetition, but that aspect will never leave any trader.

With that being said, that is why I believe exiting on the first WRB, regardless of timeframe, should be a strong consideration when trading WRB's. In the end however, each trader must see what fits their personality and then test it, test it and test some more. You've shown us a 30 min chart here. I could not imagine trading on a 30 min chart. 2 candles every HOUR? I think I might fall asleep and then miss out on the one trade that day. That's not to say that there's a problem with the 30 min chart, I personally would have trouble trading off of it. I guess I just like more action and stimuli.

It's hard to put into words, but I enjoy the 'action' of the markets and enjoy being able to participate in that action numerous times in one day. Hence the reason for the smaller VBC charts. With that being said, I am comfortable trading on those charts simply b/c I understand how they react and move. By trading on lower VBC charts, I am able to take multiple trades in a day (which keeps my brain into it) and I am able to hit those singles all day long. Keep in mind as well, I normally just trade the AM session, which is now 7am - Noon EST. I say now, b/c I moved the open up an hour b/c the EC was providing some nice moves in the 7am hour that I did not participate in b/c I was not at my computer. So, by trading 5 hours a day, I cannot trade on a large timeframe or VBC b/c if the one golden trade shows up at 3pm, I am not here.

[brownsfan019]

Quick question for those that have read the thread - has anyone else looked at and/or implemented WRB's into their trading? Not sure how much more to really talk about from my point of view. I can post the occasional chart, but I think you guys get the idea if you read my posts.

Just wondering if anyone else is using the methodology.

[Anonymous]

BrownsFan's question could not be more timely. I too echo the sentiment. It would be nice to see if and how others are using WRBs in their trading.

As you know, my use of WRBs is wider than his (no pun intended).

WRBs give us insight into:

* Changes/shifts in supply and demand.
* Volume or activity.
* Volatility
* Support/Resistance Zones
* Gaps
* WRBs are independent of Japanese candlestick patterns; Japanese candlestick patterns, however, are NOT independent of WRBs.

While WRBs create very good profit taking opportunities, as seen by BrownsFan, this sole use only scratches the surface of the depth of usable information/techniques in my opinion.

The attached chart shows what happens when everything comes together I use them.

Here we see how the primary methods of VSA and WRB & Long Shadow Analysis create the context thru which a candlestick pattern (secondary method-entry signal) can be viewed. Remember, Long Shadow candles usually were WRBs within the interval, so they are a sub-set of WRBs. That is why a trader that exits on the apperance of a WRB during the interval may find that the candle is NOT a WRB at the end of the period. This is another method that can be employed, rather than waiting until the end of the interval as BF does. Hopefully, anyone using this method will post examples and insights.

The method I prefer is to trail a stop using the appearance of a WRB (or Long Shadow). Seen as the red lines on the chart.

It is my contention that VSA and WRB & Long Shadow Analysis have more in common than is first seen. By taking out the open, VSA, takes out much of the information that can be seen. Yet, if VSA did look at the open the conclusions would mirror those of WRB & Long Shadow Analysis. But even without the open, many of the conclusions are the same.

We see a Ultra Wide Spread bar that closes in the lower portion and up from the previous day on Ultra High Volume. This is a hammer line with a Long Shadow (upper). Supply entered the market on this bar. Why else would the close be on the lower portion with all that volume? Moreover, the next bar is down. If the Smart Money was buying on the previous bar, this bar should not be down. The next bar is down, engulfs the body of the hammer line and is a WRB. The Supply/Demand dynamic is changing.

The next bar is key. It is a narrow bar that closes in its upper portion with volume less than the previous two bars and the next bar is down. This is No Demand. Ideally, we would want this bar to close higher than the previous bar. But in this case, the close is equal. Note that the close is at the close of the WRB and the high trades into the body of the WRB. This is why the Upthrust is a better signal of market context than the valid test that comes before it. The Upthrust happens within the body of the WRB whereas the test forms below it. True it forms within the range of the entire WRB candle, but the test bar was not within the body. Now the confirmation bar, the candle after the test is.

This is where the secondary method kicks in. The test does not form a valid candle stick pattern. Hence, even if you mistake the test as a sign of market strength, you would not want to enter. What does happen is a valid reversal pattern within the WRB that has an Upthrust in it. That is, the UpThrust is a Long Shadow Doji with the next bar closing lower than the low of the Doji. This bar engulfs the open/close of the Doji and is a dark WRB. Also note that the bodies and the shadows of the candles in the highlighted area are smaller than the depth of the shadow of the Doji. Except for the white WRB, which is ignored and the reason we look at the three intervals prior to it.

You should note that we are seeing decreasing Volatility in the price action then we see a WRB. Also note that the larger dark WRB after the Doji closes lower than the close of the white WRB. This dark WRB is also larger than the white WRB. In short, increased volatility to the downside.

Enter short on the close of the dark WRB (low close doji) or open on next candle.

There is a lot less here than may one may first think.

But there is a lot more to WRBs than just exits. If you are using them, even for just exits, both B.F. and myself would like to see how.