[firewalker]

Nice work Head2k... couple of thoughts:

Originally Posted by Head2k »

After a breakout of the preliminary resistance this former resistance provides support for a selling climax in the beginning of May.

Originally Posted by Head2k »

Bump: We see a potential climax in the middle of July, marking a possible peak of the large scale distribution starting in May.

1. How do you reconcile (a) a selling climax in the beginning of May with (b) the start of a large scale distribution at the same time?

2. You seem to leave out June, which I actually found particularly interesting since price was making wild swings to both sides during that period. Politicians were talking about how speculators were to 'blame' for the violent rise in prices. However, I was thinking: 'big time distribution' (if it were re-accumulation would we see that much volume?) after such a sustained rise.

[Head2k]

Originally Posted by BlowFish »

Just goes to show what is possible when you are diligent and bright Your not a borg are you? Reason I ask is I was impressed how quickly you assimilated Jerrys market statistics stuff too.

Borg? Maybe my mother didnt tell me Perhaps I easily understand theory and I like learning.
Unfortunately that cannot save from doing also the dirty work. As Db pointed out on several occasions, to grasp a concept intellectualy isnt enough.

Originally Posted by Bearbull »

Well done Head2K, I am pleased for you, you have clearly benefited from your study.
BTW your English is hell of a lot better than my Czech, have a friend there, the first words I learnt from him were "nasdravia" don't know if I spelt that correctly but he liked his vodka few other, " jean dobri, dobri vecher, dobra nots," "Yak shu mash" "pienkna" again probably all spelt wrongly

Thank you. The words are indeed all spelled wrongly, but I can understand them Though my English is probably better than your Czech, there is still a lot room for improvement.

Originally Posted by firewalker »

Nice work Head2k... couple of thoughts:

1. How do you reconcile (a) a selling climax in the beginning of May with (b) the start of a large scale distribution at the same time?

2. You seem to leave out June, which I actually found particularly interesting since price was making wild swings to both sides during that period. Politicians were talking about how speculators were to 'blame' for the violent rise in prices. However, I was thinking: 'big time distribution' (if it were re-accumulation would we see that much volume?) after such a sustained rise.

In fact I have some troubles with terms "accumulation" and "distribution". Since every trade has 2 sides, when buyers are accumulating the sellers are distributing at the same time, and vice versa. It only makes sense to distinguish these two in terms of "focused intent" accompanying them. So during accumulation one can say that stocks (or whatever) are accumulated with focused intent, but distributed chaotically. And vice versa.

1. In the end of April price we saw supply entering the market around 70-71. It could be a start of "distribution". But when price hit 66 (March highs and April congestion) buyers stepped in big time. This reversal is interesting, because it is a very sharp V. When one sees volume accompanying this revesal he could expect some problems or at least furher test(s). Price takes off like a rocket instead. I dont know, maybe "large operators", seeing the extremely bullish mood all around the world, rushed to reach better prices to distribute? And the same scenario repeated a couple of times later. But that are just speculations in hindsight. In real time this V would be too fast for me to react.

In fact, during June we maybe witnessed some kind of reaccumulation, that means that while we can see a focused intent accompanying the distribution we can also see some intent to support price on larger scale. While this support could be very well organized by the distributors, we can notice that volume is decreasing (but remains high) during june and price is still holding. And the last dip below 80 in June is in fact a successful test, though volume is rather average than small, marking that sellers are still interested. When I notice that the two prior days showed lessening activity and narrowing spread, I could very well assume that we are done at these levels and ready to depart, probably down. But the test would prove me wrong. Instead of continuing with distribution lower (more aggressively) we move higher. But then again, volume remains high and price stalls. Then it reacts and finds support in the previous congetion, still on the same volume. Price is not rising because sellers are not interested, but because there is still too much demand. But price cannot rise substantialy, because there is still too much supply. A difficult situation. And I would probably wait for it to resolve. Then the solution comes in form of that 3 days long sell-off.

[DbPhoenix]

Originally Posted by Head2k »

I suppose it was for me...

So I was first interested in trading in February. Until summer I had no idea what to do, tried automated strategies I didnt understand. In summer I started to watch ES and NQ intraday. Now the most important part: I started with strudying Wyckoff in September and became fully devoted to him in October or November.

I'm impressed, and at least I now have something to go on when people ask how long this takes. I've thought that this stuff would be far easier to understand for those who know little or nothing about the market, much less charts (your ability to read left to right probably has a lot to do with how quickly you've picked this up). Experienced traders know, for example, how easy it is for children to grasp price movement. Unfortunately, those who have the most to unlearn have the most trouble, and are the most likely to give up in frustration. Indicators are so seductive....

I'm not going to interfere with this because the comments and suggestions and questions of those who are still working things out will be far more meaningful than whatever I might say at this point. However, you have been particularly interested in the issue of entry and exit, so the following exercise may be useful to you.

These aren't the only places where one could enter, just as the areas to which I drew attention on the original charts were not all there was to look at. But they're a start. What are your first reactions and thoughts with regard to each of these points? Which seem least and most risky? Where would you place your stop with each? What to you would be the probability of each of your stops being hit?

Don't make too much of this. You won't need a calculator. The central point is that you see selling pressure lessening at some level of support and you want to be prepared for a renewal of buying interest. So where do you enter to take advantage of that move if and when it occurs and where do you place your stop in case you are wrong?

As for exits that are not related to stops, that can wait.

And last, I'm assuming that all of this is pertinent to what BB had in mind when he initiated the thread. If it isn't, I'm sure he'll let me know.

[Head2k]

Thank you for the excercise. I will just write a short message before I take it.
I need to add something regarding your impression and the time it takes to get to the point where I am now.

1. I forgot to mention that I studied MP and auction theory in Spring, though at that times I assumed a wrong attitude towards it (I was looking for a holy grail ). But I think it helps me with my understanding, too. In Summer I studied Trading With Market Statistics threads by jperl here, which made me think of MP and auction theory on more general level.
2. In Summer I left my job because I decided I would become a full time trader. So I do not study charts 1 hour a day before going to sleep.

As for now I think I have an entry which suits me. I focus on springboards (though my definition might not be 100% consistent with yours). But it's not been long since I found I can recognize them in real time, so there is still a lot work to do. But I love the tight stop they allow and how quickly they let me know whether I am right or wrong. My exits (apart from initial stop) are tragedy so far Usually can't hold to profitable trade.

So far for introduction, I will take your excercise in my next post.

[DbPhoenix]

As I pointed out in the Cajas Famosas thread, MP is to me entirely consistent with Wyckoff, though by "MP" I'm referring to the essential concepts of auction market theory, not the books and software and jargon and so forth. As with any other approach, one can get so distracted by extraneous factors that he fails to see what is in front of him. But if one "gets" MP, I should think that Wyckoff would be much clearer.

[Head2k]

The first dot (mid Nov)
I see a 3-days W in the red rectangle. 1st day Climax, 2nd day technical rally, 3rd day test. Although close on the climax day is well off the lows I wouldn't try to enter there, I find it too risky. For the sake of excercise, if I entered on that climax, it would be at close and I would place my stop something like half a point under its low.
But my preferred entry would be the test. The technical rally looks nice, low volume suggests no serious selling interest. That means sellers don't take advantage of better price to sell heavily. Then the test is exemplary. So my entry would be at close of it. Now I know Wyckoff says to place stop under the climax low, so I would probably do it. But in my casual intraday experience I often have problems with
1. When do I recognize the test to be successful?
2. When I find the test successful, isn't it already too late for entry? Am I entering at a good price, isn't my stop too wide? What are the probabilities that this is THE final test? And if it isn't, how much it will cost me to find out I was wrong (if the next test fails)?
I am not experienced enough to compare waves in real time, not paying enough attention to behavior before the test itself. Too eager to enter at a good price, not allowing the test to prove itself, or OTOH, waiting too long for test to prove only to see price departing without me.
I guess there are two main reasons of my doubts:
Lack of experience in seeing shifts of S/D in real time
Lack of systematical testing

The dots in Dec
As we arrive just above 50 where we can expect potential support price stops without any fireworks. But the attempt to reverse is quickly checked the third day in Dec. Since then price is congesting, slightly condensing and volume is decreasing. It looks like less and less traders are willing to trade at this level and a quick departure can be anticipated. Sort of a springboard forming. In this case I would definitely prefer to look inside the daily candles and find the entry point on a smaller time frame. However, given the daily chart only, I would probably enter at a breakout of high of the bar right below the dot and I would place my stop below its close, which appears to be in the middle of the congestion area.
The second dot marks the same situation, so my entry and stop would be the same, too. Only now we gapped up over my entry so maybe it would be wiser to wait for a test and then enter at a re-break of the given high.
Stop below midpoint is fairly aggressive in these cases but I think it is a logical place to put it at. Since I am entering on a springboard I want price to spring away. If it tests the lower half again then I was wrong, or at least my entry was premature. Which in fact is the same.

The dot in January
This one is problematic. It is a 3-day W, sort of. But in real time I probably wouldn't know if to consider the third bar to be a test or just a continuation of a technical rally (Maybe it would help to drop the time frame). Then another test comes at the bar right after the red rectangle, but that is already too far away from what I would consider a good price. Hence I wouldn't probably enter at all.

Now I am going to watch NQ live, and I will finish the exercise later.

[atto]

Thank you Db for picking this thread back up.

Originally Posted by DbPhoenix »

These aren't the only places where one could enter, just as the areas to which I drew attention on the original charts were not all there was to look at. But they're a start. What are your first reactions and thoughts with regard to each of these points? Which seem least and most risky? Where would you place your stop with each? What to you would be the probability of each of your stops being hit?

I'd argue the best entry (real time, mind you) is the long in Jan '08 (4th dot). Reasons: Test of support after a hh, with volume entering on the low end of the range (peaking at the low). Place initial hard stops 48-49 (so risking about $2 max, using the widest stop). Probability of stop being hit is moderate: we're working with support, increased buying pressure, and "value"/"liquidity" up above (it's not virgin).

A couple of the others are decent entries, which I'll leave to others to analyze.

Worst entries:

• Nov '07 (1st dot). Besides an entrance of volume, there's not a whole lot going for the trade. A massive surge of selling interest entered the markets at the highs right before, so you're buying into possible resistance as is. Stop placement: Difficult, $49ish?
• Early Dec, '08 (2nd dot). Just made a ll, and approaching virgin possible support (which wasn't even that big of a pullback). Volume entering isn't super convincing, and price has hung out at the bottom of this range for a few days. Stop placement: Difficult, nothing direct from PA; I'd keep it tight at $54. Chance of hitting is high.
• Mid Dec, '08 (3rd dot). No real idea why you'd enter besides the tiny increase of buying pressure right before. Stop placement is awful (you'd be looking at under 50's, most likely). Chance of hitting is low/moderate, but about the same as the trades much closer to 50.
• Late Feb, '08 (6th dot). The only thing you have going for you is the breakout (which wasn't horrid: price kept at the top for a couple days without rejecting, which means sellers didn't sweep in). imho, this is one of those "missed a trade, late entry is better than no entry!" Stop placement: Difficult, nothing logical from PA; I'd put it right below that congestion right before R ($56). Chance of hitting: Moderate.

[Bearbull]

Db, this is just great, the intent was to encourage those with genuine interest in learning Wyckoff, to read and re-read posts on this forum and in your blog (wyckoff pdf file including) and then spend quality time on the screen identifying buying and selling pressure and how the patterns are created via this, as per the principles observed and explained 100yrs back. It is certainly heartening to know Head2K has clearly benefited from all this.
Hence the title Trading the Wyckoff Way, to get into the nitty-gritty, where to enter, how to manage the trade, where to exit etc.

Keep it going, thanks to everybody.