Getting to Grips with DbP/Wyckoff

[dbphoenix]

Given that your journal includes Wyckoff, don't overlook the fact that there was a climax low in what looks to be October, followed by a technical rally, then a successful test. The Wyckoff long entry is/was therefore at your "3". That entry is of course long gone. However, we are now back at that entry, which is not a good thing.

I suggest you look at the "Bottom Fishing" appendix that was included with your book. The chief question in a case like this is whether or not anybody really wants this stock. If they don't, then there's no point in taking on the time risk, unless the stock pays a huge dividend.

 

[barjon]

Given that your journal includes Wyckoff, don't overlook the fact that there was a climax low in what looks to be October, followed by a technical rally, then a successful test. The Wyckoff long entry is/was therefore at your "3". That entry is of course long gone. However, we are now back at that entry, which is not a good thing.

I suggest you look at the "Bottom Fishing" appendix that was included with your book. The chief question in a case like this is whether or not anybody really wants this stock. If they don't, then there's no point in taking on the time risk, unless the stock pays a huge dividend.

Thx DbP. Yes, I had noted the climax low (talked about in the monthly commentary and the post). I didn't regard it as a successful test since it made a new low (which cause the fanned trend line) and would have needed further confirmation as it printed? Take the point, though, that the break of the "new" trend line (3) would have given that confirmation. Will re-read "bottom fishing".

 

[dbphoenix]

It made a lower low but closed at the same level as the last swing low. This signifies enough buyers willing to pay the ask to not only support price but advance it. The behavior shows the way.

Even so, if one had focused on the SLA instead, one would have gone long at the first retracement after the break of your "3" line. He would then be long until the demand line was broken in or around March. Then short. And one would still be short.

So whether one actually took the short or not is not particularly relevant. If one had, he would not be able to go long until he exited the short, and the earliest exit for the short would be a break of the supply line. Therefore, a long is not yet in the picture.

 

[barjon]

Ok, it closed at the level of the last swing low, but below that swing low bar's close. Not quibbling but, in real time, I'd still be nervous of thinking it a successful test until I saw more.

Sure enough, of course, that "more" came and can see the proper sla entry which I somewhat glossed over as "maybe ok long" in the commentary. Should have identified it as a much more certain entry which, as you say, would have resulted in a short later when that uptrend went. Any thought of long must now wait for the downtrend to be broken.

 

[dbphoenix]

The retracement lasted three weeks, so it depends on how much "more" you need.

 

[barjon]

The retracement lasted three weeks, so it depends on how much "more" you need.

I'll post the relevant chunk of the daily when I get the chance.

Have a nice evening, ours is gone and bed beckons.

 

[dbphoenix]

It's really not necessary. This serves as an example of what I meant when I said that the trader has to define "retracement" according to the bar interval he intends to use as his trigger and how much risk he can tolerate, including an assessment of the likelihood that price will reach that level before it begins to move in his direction, if it ever does. What matters most is the probability of reaching the downside target, or stop, not the upside target. No method or system or whatever can define all that for everyone else, or anyone else.

 

[barjon]

mmm, here's the relevant daily section, fanned trend line an' all. Looks rather less climactic than the weekly, but the SLA more clear cut.

A bold entry on the pullback straight after the break bar may have been stopped out depending on how close you put stop. The later one may have been confused by the gap, but came good. Would've been a nice trade.

Bath now run and getting cold, ttfn

 

[dbphoenix]

That would also depend on where one enters the trade and what criteria he uses to determine whether or not the trade has been invalidated.

 

[barjon]

That would also depend on where one enters the trade and what criteria he uses to determine whether or not the trade has been invalidated.

Yes, the tricky bit you mean together with the "when is a break not a break" question.

 

[dbphoenix]

Nothing tricky about it. As I've said, one has to create definition based on the instrument he's trading, the bar interval he's using, the timeframe in which he's interested, the amount of risk he's willing to assume. These are not tricks. They are the minimum expected of anyone who intends to trade profitably.

 

[barjon]

Nothing tricky about it. As I've said, one has to create definition based on the instrument he's trading, the bar interval he's using, the timeframe in which he's interested, the amount of risk he's willing to assume. These are not tricks. They are the minimum expected of anyone who intends to trade profitably.

It may not be tricky to you but when, even you, say things like "excessive rigidity is not a virtue" or "by broken I don't mean just pokes the line" or "don't hug the price like Spandex" it becomes fairly tricky to arrive at definitions that satisfy those "judgement" type elements

 

[dbphoenix]

All of which depends on whether you want to approach this as a complete beginner or as an experienced trader. I may have misunderstood your OP.

 

[superfly]

What matters most is the probability of reaching the downside target, or stop

i wish i understood the critical importance of this guideline a few years ago.

At the same time Im very glad I do understand it now, regards

 

[barjon]

All of which depends on whether you want to approach this as a complete beginner or as an experienced trader. I may have misunderstood your OP.

I didn't say I haven't, nor couldn't, come to grips with such things, just that it's easy to say things like "enter within a few ticks of the retracement low" and more difficult to actually define how one is going to do that.

I'm not having a go, DbP, but although you have detailed what I think is a an excellent and well thought out approach, there are still judgements to be made which are not always plain sailing. That's as it should be, of course, and doesn't detract from your work.

 

[dbphoenix]

There's nothing particularly difficult about it if one focuses on price movement rather than something other than price movement, e.g., one or more indicators, and maintains records of his observations.

You drift among beginning SLA, advanced SLA, and Wyckoff using multiple bar intervals for reasons that are unclear. And as you want to use only some elements of the SLA and apply them to your trading plan, I can offer only general answers unless and until I know what your trading plan is. It may be after all that the SLA is useless to you.

The SLA as presented in my thread focuses on weekly, daily, and hourly bar intervals in a mean-reverting futures instrument. If one wants instead to apply it intraday to a gapping stock which may not be mean-reverting, then, yes, that will require a little extra work. And if one completes the condensed version of it posted to my thread and still doesn't understand what a retracement is or a reversal or how to define a range, then, yes, extra work will be required there as well.

If you have come to grips with whatever it was that you wanted to come to grips with, then you ought to be able to define your entries with precision. If you haven't, then you have your work cut out for you. But, again, there's nothing difficult about it.

 

[barjon]

There's nothing particularly difficult about it if one focuses on price movement rather than something other than price movement, e.g., one or more indicators, and maintains records of his observations.

You drift among beginning SLA, advanced SLA, and Wyckoff using multiple bar intervals for reasons that are unclear. And as you want to use only some elements of the SLA and apply them to your trading plan, I can offer only general answers unless and until I know what your trading plan is. It may be after all that the SLA is useless to you.

The SLA as presented in my thread focuses on weekly, daily, and hourly bar intervals in a mean-reverting futures instrument. If one wants instead to apply it intraday to a gapping stock which may not be mean-reverting, then, yes, that will require a little extra work. And if one completes the condensed version of it posted to my thread and still doesn't understand what a retracement is or a reversal or how to define a range, then, yes, extra work will be required there as well.

If you have come to grips with whatever it was that you wanted to come to grips with, then you ought to be able to define your entries with precision. If you haven't, then you have your work cut out for you. But, again, there's nothing difficult about it.

I thought I had made it clear. I want to better understand price action from a Wyckoff perspective and do that, in part, from observing sla which you have designed based on Wyckoff. From that observation I can determine whether the approach could be beneficial to my main trading or, after thirty odd years, changing tack and trading sla instead.

Your general comments are extremely useful - vis the recent exchange on selling climax and successful test - in helping my understanding.

As an aside I do make my entries with precision. Precision, that is, in terms of my definitions and plan. Not the same, of course, as precision in terms of immediate and satisfactory price action.

 

[dbphoenix]

The challenge, then, appears to be determining what invalidates the trade. Wyckoff referred to the "danger point" as the point at which the trade would no longer be considered "good". Few traders, however, can hold a trade which to them appears to be in trouble until the danger point is reached, unless of course they're trading OPM. There is also the matter of whether one is trading dynamic charts or static charts. If the latter, then defining a retracement in terms of the low or high or close of a "bar" becomes more important, as does the willingness to accept the risk entailed by whatever stop one chooses.

 

[barjon]

The challenge, then, appears to be determining what invalidates the trade. Wyckoff referred to the "danger point" as the point at which the trade would no longer be considered "good". Few traders, however, can hold a trade which to them appears to be in trouble until the danger point is reached, unless of course they're trading OPM. There is also the matter of whether one is trading dynamic charts or static charts. If the latter, then defining a retracement in terms of the low or high or close of a "bar" becomes more important, as does the willingness to accept the risk entailed by whatever stop one chooses.

I would see several challenges that require definition/judgement

1. Is the trend line drawn correctly.
2. What constitutes a break of the trend line
3. What constitutes a pullback/retracement
4. Where to enter
5. What invalidates the trade
6. Where to exit profitable trades

I would suggest that the more one understands the price action and the messages it conveys the more one can rely on judgement. Otherwise one must rely more on definition and mechanical application.

 

[barjon]

Still can't trade, but here's my thoughts on FTSE (monthly, weekly, daily)