TJ of Trading Price on the QQQ

[Lindsaybev]

Good day. This is my very first attempt at journaling. I just began paper trading the QQQ. I am paper trading so that I can practice trading price by way of Wyckoff's ideas, DBPhoenix's SLAB, in particular. I am starting a journal to learn how to use the ideas in the SLAB, to help form a clear thought process, and learn from my mistakes. At the moment, I am using the Weekly and Daily charts, using the daily to make my trades.

This may be a muddled mess in the beginning. I just hope that others here who are familiar with this way of trading will be willing to instruct me. Thank you for your time.

The Weekly chart has a clear downward trajectory. The last price bar which pierces the SL looks as if it may be an area where I will eventually be placing a fanned out SL. So I am thinking "SHORT at the retracement."

Then on the Daily I see the huge gap up, which gave me pause. The run from Nov. 20 - Dec. 3 has been very strong, passing the halfway point and the last swing high, passing the halfway mark of the swing high before that, almost reaching the second-to-last swing high. With volume on the previous swing lows looking climactic, and with price rising on lower volume...maybe I am incorrect? Possibly I should be looking for a LONG....

Then the next day, Dec.4, the price plummets back into the old trend range, stopping just below the midpoint of the last run up, closing a frog's hair above it. And now I am totally confused. With it holding at the halfway point, it suggests that my LONG thought was correct. But price also made a lower high, suggesting my original SHORT thought was correct.

Any advice would be much appreciated!

-L

My actual journal was thus:

11.30.18
Looking to go SHORT on the QQQ as the channel I have drawn shows that it is in overbought territory. The trend is clearly downward with lower highs and lower lows. I am waiting for a retracement to enter. The trendline has been broken, and I will look to fan it if price passes the last swing low.

I am a bit confused about what is "overbought territory" (AMD theory that price will revert back to the mean of its channel) and what constitutes a real change in trend.

12.3.18
I think I may have made a mistake, as the price is way above the halfway point from the last swing low, suggesting strength not weakness. Today price pierced upward very forcefully. Maybe I should be looking for a LONG on a pullback? I also note that the low points on the prior swing lows have had huge volume, suggesting climaxing out, while the up-moves have been in much lower volume, suggesting that it is not taking much to move the price upward.

But kind of in a quandary, as the price is way above the halfway point, suggesting strength, but it is also above the channel top line, which is the overbought area.

12.4.18
Went SHORT 100 on QQQ @ 169.26, when price passed the low of yesterday's bar. It was a good solid down day, back into the trend, with another lower high.

BUT...the price stopped at almost the exact halfway point. This is a healthy pullback, no? Could this down day have just been a natural pullback from such a stong run up?

 

[dbphoenix]

If one backs up and reads the chart from left to right, certain things become clear that might otherwise be moved to the sidelines. One sees first that price is contained within its weekly trend channel until January '18. It then swings wildly between overbought and oversold conditions due to "news" of one sort or another. Eventually, traders reach an agreement on value at or about 160. After a series of higher lows and higher highs, price reaches a double top in September. If entry here is missed or not taken, there is an opportunity on October 9 (shown on the daily) to enter on a retracement. If this is missed as well, then entry becomes increasingly problematic. However, whatever concerns one might have about entry should not deafen him to what the market is trying to say. If one focuses on what he wants rather than on what the market is willing to give him, he is likely to misinterpret the market's messages. (see next post)

 

[dbphoenix]

If one approaches the daily from within the context of the weekly, he will see that the entry off the double top is desirable not only because of the double top but because it all takes place at the upper limit of the trend channel, which is where nice reversals often take place. If he misses it, or can't take it because he's long, there is a retracement on the daily on the 9th (the red bar). If this is also missed or passed up, the trader will note that price, after reversing, works its way back to the halfway point of this downmove. The fact that it can't get past this provides another opportunity to short. That short reverses off 160, the same level as the apex of that hinge from April/May. There's more to come after this reversal, but it should be clear that channels which may or may not form after the reversal at the double top in September, much less perceived "overbought" or "oversold" conditions are not necessarily pertinent to the market's message, which is that of continued weakness.

In other words, instead of over-complicating the market's message, focus on the most important elements of it, in this case, strength, weakness, and the relative intensity of each. Look again at the rules on p. 44. Note that there's nothing there about overbought and oversold conditions or channels but rather just trending and ranging.

Db

 

[Lindsaybev]

Thank you, DB. Back to page 44.

 

[Lindsaybev]

I will get this onto a weekly schedule next week.

12/6
DB mentioned to watch the apex of the prior hinge. Had forgotten to move the hinge from the /NQ chart to the Q chart. This is a reminder to always read the chart from left to right.

Lost a chunk of my profits as it nears the apex. Waiting for tomorrow to see how the market goes. If it continues upward, I am out to save what profits I have.

Changed my colored voulme bars to a solid color so that I will pay more attention to price and the price/volume relationship.

12/7
Market continued downward strongly. We closed just above the apex of hinge line, and I am cautious and ready to pull out.

12/10
Actually hit the hinge line and reversed sharply off on the hourly. But I did not notice until after lunch. Got out at $161.80.

Profit: $746

12/11
This last low at the hinge apex just created the first higher low. Not sure of the significance of this. Could it be a change coming in the trend? The overall trend is down, but it has been stopped from passing this hinge-apex area for the third time now.

Watching now to see how it does at the halfway point on the way back up.

12/12
Started tracking the balances between supply and demand. (Wish I had done it earlier...) Price has continued up past the halfway point, but has since closed at the low of the daily bar, lower than it opened. Tomorrow will be interesting to watch.

The higher low seems like a total change in trend...but it is meeting resistance today at the halway point of the last leg down. It looks like we may be narrowing into a range between the halfway point and the hinge apex.

12/13
A.M.
So far this morning, price has been rejected twice at the halfway point. We are now under the demand line I tracked. So I went SHORT 165.38.

I believe this is keeping with the overall downward trend, but I am still wondering about the lower high. I realize that the hinge's apex is still right below me. And I am prepared to get out quickly.

 

[Gring0]

Are you doing intra-day trading?

 

[Lindsaybev]

Are you doing intra-day trading?

NO, but I did look at the hourly and saw the first two bars had been rejected. Should I only be going off of the daily, and therefore waiting for the close?? I look forwrd to your advice.

I had been waiting to see how price did at the halfway point of the last swing down. It hit and was stopped yesterday, rejected pretty big time, and then today I checked in the hourly chart and saw that it had been rejected twice in the morning time already. I thought this signaled weakness. So I went short, thinking it would resume the pull downward.

DB mentioned in another thread about ranges, and I am also wondering about the higher low on the daily....but am unsure where the top of the range would lie? I guess it is narrowing.

This is why I started the journal. I am still a bit tentative with EVERYTHING and am just putting my thoughts out there. But it is so that I can learn from my mistakes before I trade real money.

 

[Gring0]

NO, but I did look at the hourly and saw the first two bars had been rejected. Should I only be going off of the daily, and therefore waiting for the close?? I look forwrd to your advice.

I am asking not because one is better than the other, but in order to understand the decision process. The charts posted are daily yet the decisions being made are off of hourly (I am guessing). It's easy to get lose in the bars without having a plan in place. Are you identifying areas of interest on the daily and then using hourly for entry?

 

[Lindsaybev]

I am really trading the daily bars. Yesterday the area I was looking at was rejected pretty strongly, and I wanted to see where it was going today. Since it hit and was then rejected two times in a row (on the hourly) , I chose to enter. It seems that once price crosses the supply / demand lines I draw on the daily, it moves in that direction so quickly. I then miss out on chunks of movement during the day if I wait for the close of the day.

But I have not been following the hourly with supply / demand lines. I have only been doing this on the daily. And have only been doing it since DB reminded me to read the rules on 44 over again. I have been concentrating on shorts, as this is the main direction the weekly and daily are taking.....

My goal is to trade the daily chart, using the supply / demand lines. Should I then be taking my cues from the weekly chart only? I don't really have the time available to watch an hourly chart. But I am able to pop in and look pretty often, as I work in a family business, at a desk.

 

[dbphoenix]

I will get this onto a weekly schedule next week.
View attachment 258658View attachment 258659
12/6
DB mentioned to watch the apex of the prior hinge. Had forgotten to move the hinge from the /NQ chart to the Q chart. This is a reminder to always read the chart from left to right.

Lost a chunk of my profits as it nears the apex. Waiting for tomorrow to see how the market goes. If it continues upward, I am out to save what profits I have.

Changed my colored voulme bars to a solid color so that I will pay more attention to price and the price/volume relationship.

12/7
Market continued downward strongly. We closed just above the apex of hinge line, and I am cautious and ready to pull out.

12/10
Actually hit the hinge line and reversed sharply off on the hourly. But I did not notice until after lunch. Got out at $161.80.

Profit: $746

12/11
This last low at the hinge apex just created the first higher low. Not sure of the significance of this. Could it be a change coming in the trend? The overall trend is down, but it has been stopped from passing this hinge-apex area for the third time now.

Watching now to see how it does at the halfway point on the way back up.

12/12
Started tracking the balances between supply and demand. (Wish I had done it earlier...) Price has continued up past the halfway point, but has since closed at the low of the daily bar, lower than it opened. Tomorrow will be interesting to watch.

The higher low seems like a total change in trend...but it is meeting resistance today at the halway point of the last leg down. It looks like we may be narrowing into a range between the halfway point and the hinge apex.

12/13
A.M.
So far this morning, price has been rejected twice at the halfway point. We are now under the demand line I tracked. So I went SHORT 165.38.

I believe this is keeping with the overall downward trend, but I am still wondering about the lower high. I realize that the hinge's apex is still right below me. And I am prepared to get out quickly.

I like the fact that you're logging your observations. And if you can do so in real time, so much the better, as cultivating this habit will enable you to become your own real-time trading coach when the time comes. And I say "when the time comes" because introducing the trading element too soon generally means that the trader will be logging how he feels rather than how well he's trading, i.e., sticking to his plan, and the journal is soon abandoned (note how short-lived most of these journals are). Not that there's anything inherently wrong with noting feelings, but the trader without a plan focuses on them and dwells on them as if the key to profits lies in how he feels and in how much in tune he is with those feelings. This state results in making up tactics as he goes along depending on how he feels. This does not work out well.

For example, going back to that double top in October. I've gone into the reasons for taking this reversal before and there's no need to go into them again. Anybody who's interested can look them up (see, for example, post #3 here). However, it is equally important to work out, in advance, the criteria for exiting the trade. Otherwise, every time price ticks against you, a tiny element of panic enters the picture and responsible decision-making takes a back seat.

Here price has tried for three days to make a higher high and failed. This makes a good short opportunity, if the trader is comfortable with trading reversals. Assuming for the moment that he is, he can draw a supply line over the next three days' activity. On the fourth day, the 9th, this line is broken. He knows that eventually this line is going to be broken, i.e., that the trend will change. But if he hasn't worked out in advance what he's going to do about it, all he can see is that price has stopped going his way and that his profits are going up in smoke. All of this can be avoided by working out, in advance, a course of action. If that's done, then "feelings" never even become a factor.

He knows that he will eventually have to exit this short, but what will he look for to decide when and how? Will he exit on a break of that supply line? If so, how much of a break? A tick? Two? A point? Five? If this is determined in advance, emotions become irrelevant: either the trigger is reached or it isn't. Exiting before the trigger is reached is silly. In this case, let's assume that he didn't take the reversal and so he isn't even in a trade; he is rather waiting for a retracement. In that case, he's just waiting to see how far price retraces before it resumes its downward course. If it ever does. He plans to enter the trade just below the retracement -- where I've placed a red dot -- and then just sits and waits. If the trigger is pulled and the retracement is confirmed, he can then fan his supply line to include that swing high, which holds until the third day after what appears to be a climax. Then what? Is he going to use the same criteria to exit? Is he going to let it reach the halfway level? The last swing high? If he's put in his observation time and backtested this, he should have some idea what to expect from those who trade this and know whether to hold and wait and watch or get out and look for the triggers for a subsequent trade.

Being concerned about whatever profits may have been "lost" by not selling at the top tick or buying at the bottom tick serves no purpose whatsoever. Wherever one happens to be in the profit/loss column in real time is completely irrelevant, and giving even a second of thought to it is nothing more than a distraction. Decide on your basic strategy, e.g., retracements. Then decide on those tactics which will enable you to implement that strategy, among them where to enter and where to exit and how. If your choices are based on what you've observed, backtested, forward-tested, and practiced, the money will be there.

One last thing, which I've noted in the book but will repeat here: if the trader doesn't take the best entry, anything else will be less than the best. Second-best. Or even tenth-best. If one knows what to look for and sees the best entry in hindsight, he must be prepared for at least some difficulties in entering "late", i.e., in spots that are not as desirable (note, for example, the mess you have in November and December). He can develop tactics for these kinds of entries as well, knowing for example from his backtesting that giving price a lot of room to maneuver if one is entering late is probably not the best choice. Patience, waiting for a better opportunity, may instead be the best tactic.

Db

 

[Lindsaybev]

Great post, DB. Thank you.

 

[Lindsaybev]

Sooo...on this last note...

I hate to have jumped the gun. I am going to run through much more backtesting / forward testing to alleviate many of my concerns and questions. When I return, I will have a more substantial plan in place, with which I will begin my next post. I jumped too quickly to paper trading, and although my first two decisions were positive, I need to have a better understanding of my whys, hows and whens....and then also have a plan in place to recognize when to get out.

So...until I write again. I will be off this thread until at least the new year. I do have some good vacation time coming over the next three weeks, during which I will be doing backtesting and forward-testing.

Got out of my last short at 158.63. Profit: 6.75/sh.

 

[Lindsaybev]

Started backtesting from 2016 on the Daily. Will run this through several times with varying parameters. I will have a lot of time to work on this during the holiday vacation time. I am stoked!

 

[Jamal D]

Started backtesting from 2016 on the Daily. Will run this through several times with varying parameters. I will have a lot of time to work on this during the holiday vacation time. I am stoked!

View attachment 258808

Could you tell me what the red/green dots are?

Btw, how is your back-testing going?

 

[Lindsaybev]

Could you tell me what the red/green dots are?

Btw, how is your back-testing going?

I am sorry that it has taken me so long to write. That is just my first run through with some "rules" that I gave myself to see how I would have done. I have changed some of the rules since this list. I only posted it to show "how" I was going about doing it.

I went back as far as June 2016, I think, where the last big change in direction took place. From there I drew supply and demand lines (as I am learning with DBPhoenix), using these to BUY (green) to open AND to close, and SELL (red) to open AND to close. I just moved the chart from right to left, slowly, with each day's bar showing one at a time, making decisions as best I could with "my rules."

I am still working on my rules, as sideways movement still bothers me a bit in my trading. Up and Down is much easier. LOL. But it is going very well. The above posted pic has been modified two more times since I posted it.

I hope this explanation helps. I am learning a lot by doing this, and definitely feeling a lot more comfortable making decisions.

 

[Jamal D]

Good stuff! Db has done a great job introducing a primer to Wyckoff. I also recommend the articles of Bruce Fraser over at Stockcharts to supplement the SLA. I been throught the book of Weiss (Trades about to happen) recently that was starting out great but slowly was just random ranting and hindsight about charts. Also did some research on him that was not very flattering.

Saw a seminar from Hank Pruden the other day...I think he was much better at explaining, and it feels much more serious and less "snakeoilish" so I am starting on his book these days.

Did you use any other resources for Wyckoff other than the DbPhoenix book?

I agree, the ranges can be tricky, but there re really great lessons inside them, and one day perhaps trading opportunities. Cleaning up the charts was really a mind-blowing idea for me, and I hope to see more charts in time. My journal will be quiet for some time until I have gone through material. I do some demo-forward testing, and a few times with real money just to work on the mental game also (with 0.1% risk) and stay in touch with that aspect. Are you in a test-period with demo or are you trading real money?

 

[Lindsaybev]

I have been 'trading" for about 5 years. But this is the first time using Wyckoff concepts. I never lost much, but I never profitted greatly either. I have downloaded the Wyckoff books, from Wyckoff himself...and they seem a bit arduous. I need to definitely spend more time studying them. But, alas, I also work a full-time job, among other important endeavors....and time is tight. But I want to learn and do it according to how DB has suggested learning. The more I practice and develop rules that work and make sense for me, the quicker and (less painful) the learning curve. There will always be opportunites.....

I sat through the QQQ's fall from the double top....was pretty sure about the climax at the recent low, and wanted to get in. But...I have been determined to run this through back and forward testing to get my ideas formed more concretely. So....no, while it has been a bit "annoying" to watch it travel up from what I thought was the bottom, I did not get in on the upmove either as I have not finished my testing phase.

Thank you for your input and suggestions!

 

[CertainWay]

Lindsay
Do you use an intraday chart to fine tune your entries? Thanks
CT