Trading the NQ

[dbphoenix]

These charts are provided without reference to specific bar or candle intervals or timeframes in order to focus attention on the dynamics of demand and supply as illustrated in the template to the left of the chart. The chief difference between for example a tick chart and a weekly chart lies in the number of trading opportunities provided. These opportunities are of course for both profit and loss, but the trader who understands how demand and supply interact will be more likely to profit.

For a more detailed treatment see this thread.

 

[mpups]

These charts are provided without reference to specific bar or candle intervals or timeframes in order to focus attention on the dynamics of demand and supply as illustrated in the template to the left of the chart. The chief difference between for example a tick chart and a weekly chart lies in the number of trading opportunities provided. These opportunities are of course for both profit and loss, but the trader who understands how demand and supply interact will be more likely to profit.

For a more detailed treatment see this thread.

ah right nice one db thanks

 

[dbphoenix]

A somewhat more complex variation:

 

[dbphoenix]

Sometimes the opportunity presented is so obvious and so simple that one can't believe it's this easy, even to the point of not taking it. Which takes us back to fear (post #89).

 

[dbphoenix]

How are we to know in advance why and to what extent someone else is prompted to buy or sell? We cannot know; it is impossible for us to foretell what actuates all of those whose orders are poured into the vast intake of the Stock Exchange machinery during the day's session.

But if we study the action of prices; the responses; the speed of the ticker, indicating urgency or the contrary; the intensity of the buying or selling, as indicated by the volumes; and the intervals when the volume is heavy or light -- all these in relation to each other -- then we gain insight or the design and the purposes of those who are dominant in the market situation for the time being.

All the varying phases of market technique may thus be studied and interpreted from the buying and selling waves as they appear on the tape. From these we form a conclusion as to the balance of the probabilities. On this we base our commitments.

--Richard Wyckoff

 

[dbphoenix]

For those who've been following along, with regard to everything you've read since post #69 and particularly with regard to the above post, is the circled area a short or a long?

 

[Kleft]

For those who've been following along, with regard to everything you've read since post #69 and particularly with regard to the above post, is the circled area a short or a long?

The price drop into the circled area is a little sharper than the last drop, the volume has increased for the drop but not all that climactic and at the hard right price is retracing on much lower volume.

This could lead into a test but I think price will go lower, its a late short though.

 

[chrisg]

I'm going for a weak short as well.

(Might have been a REV off a median/ULTR if volume was more climactic ; could be a leave alone because medians can be choppy)

 

[Gring0]

I see high volume which may or may not be climactic but is worthy of consideration looking at the previous high volumes. After the drop price doesn't rebound strongly but moves in a range. See the few bars of about equal size. This shows that supply isn't fully exhausted or demand isn't ready to take charge, meaning the area isn't a value extreme. Usually when it's a climactic drop with high volume there's a bit of a rebound to show some kind of an emerging strength. That strength hasn't been visible around here. Now there is this retracement taking place and the volume is lower but the slowness of it all is making it kind of a touch-me-not kind of an area for me for now.

 

[dbphoenix]

Whatever is beyond the right edge of the chart is unknowable. Whatever is between that edge and the left edge is information. To do no more than glance at that information is self-defeating. There is a story there, and the story is told through volume and price movement.

Observe closely and think carefully about volume and price movement. Volume tells you what the level of activity is during any given interval. Price movement illustrates the motives and objectives driving that activity, whether the rational and deliberate actions of professionals or the irrational and emotional actions of amateurs. One could develop detailed catalogues of volume bar lengths and price bar lengths and create elaborate systems incorporating these combinations (such as the books devoted to candlestick analysis) but he would miss the point, that volume and price are each and together continuous, that they are manifestations of behavior, and if one is to make the most of this sort of analysis, he must focus on that behavior rather than the "technical analysis" that conceals it.

 

[chrisg]

I've looked more closely- going bar by bar with a piece of paper to hide the future (and pretending to not remember where the price goes).

I make it 110 bars-

1.sellers keener than buyers(because price drops)
2.hello , over double the interest during this bar interval-sellers keenest initially then buyers come in strongly (volume and high 'close' )
3.buyers ease off (lower volume,lower close)

etc, lower highs and higher lows indicate a TR forming but with ill-defined boundaries

22.sellers keen (fairly large price drop on smallish increase in volume)
23.selling eases off - bit of a shake-out?
24.good buying interest (good price move up with small increase in volume) LLTR in place

30. demand greater than supply confirmed (strong up move without climactic volume)
35-40. hinge
42.market says buy- good price increase with less volume=sellers (a lot) have 'gone home'

80-91.not sure. LH.

100-102. liked it as a short because of 50%RET and volume action and RET to LLTR not sure what the story is

circled area is at axis of previous hinge.

if SL and parrallel oversold line drawn- the last bar just re-enters a down trading channel

If short HOLD
105-107 volume together could be climactic - be alert for reversal
(having it both ways

 

[wallstreetwarrior87]

For those who've been following along, with regard to everything you've read since post #69 and particularly with regard to the above post, is the circled area a short or a long?

Well with no context, volume alone will yield no meaningful information (apart from hindsight comments), so we need to set a bit of context to help try to decipher the code:cheesy:.

With regards to Wykoff above - well he doesnt really say much other than the obvious - basically volume = activity! Great, but if we cant grasp who is doing what, and more importantly WHY (which by reading his comments we can never know?) volume and price will not help us understand where price is likely to go next, and in what manner. So yes we know someone is doing something, cool, but WHAT?

I have no idea the chart or instrument, so will have to gauge context by what happened at the hard LEFT side of the chart.

It appears that we may have come from above on the bigger picture, we can see falling prices at the open being capped (1), and we rise of a double bottom with a decent amount of supply still about (heads up for what may come later).

2 and 3 - retail shorts are starting to get squeezed out of their positions, but if you notice they try to come straight back in.

We then break out above a resistance level, and retail begin to stop and reverse as they see a confirmation of the double bottom, but still no real pro activity, they (the pros) most likely still hold short, but can get a few more contracts on here, but be sure they wont want price moving too much further.

5 . We have another attempt at the high, which is capped (notice the close here - last minute interaction by those with a bit of mula). All this time we are keeping the retail in on the long side - in a hinge/channel. We can use these bad boys on the way down.

6 - Highs of the day - pretty crap volume to say where we are location wise, and once again capped last minute. Final test on low volume, suggesting retail are all in for now, so no reason to go higher from here. But we still need a drop in PRICE to confirm.

We get that, and 7 . Retail start to dump on mass in a textbook stop area location:whistling. So of course there is volume - but what does it tell us. Nothing without the context of the bigger picture and what the pros hold/maybe holding.

So what will they do? Wykoff says you cant know! Ok lets have a stab based on the current theory.

Pros still want lower, the opening volume was pooh, so we need to find volume equivalent to 8, to make this worthwhile for the big boys.

Retail are now seeing a fall and will follow the trend down, bit by bit, until they all come in on mass through the daily lows. Pro business can then be concluded, and if we are still high enough in the daily range, we can begin to make our way back to the upside (but this depends on the daily time frame)


So yes I agree with what the others have said in terms of the short side, but we may bounce a bit from here before working back down (if we indeed actually do )

Good Idea DP - can we see the full chart (2 days before and 2 days after?)

Then we all get a chance to learn from current action into forward projection

 

[wallstreetwarrior87]

So if I may put a chart to you, based on the thread, what would be your call here - long or short ?

Thanks in advance

 

[dbphoenix]

With regards to Wykoff above - well he doesnt really say much other than the obvious - basically volume = activity! Great, but if we cant grasp who is doing what, and more importantly WHY (which by reading his comments we can never know?) volume and price will not help us understand where price is likely to go next, and in what manner. So yes we know someone is doing something, cool, but WHAT?

Actually he says quite a bit. You may recall "Section 14" (Volume Studies) of The Richard D. Wyckoff Method of Trading and Investing in Stocks: A Course of Instruction in Stock Market Science and Technique. As to who is doing what and why, he is chiefly concerned with imbalances between supply and demand and the resulting price movements. Nor is he particularly concerned about prediction but rather what is happening in real time. As to "hindsight comments", these are the essence of chart review and study, as any transaction other than the one in which one is currently engaged is hindsight, even if one is trading without charts at all.

I have no idea the chart or instrument, so will have to gauge context by what happened at the hard LEFT side of the chart.

The name of the thread is "Trading the NQ".

Retail start to dump on mass in a textbook stop area location. So of course there is volume - but what does it tell us. Nothing without the context of the bigger picture and what the pros hold/maybe holding.

Wyckoff discusses professionals and amateurs at length, but in terms of price movement he is chiefly concerned with the "composite operator", i.e., the amalgamation of everyone who is participating in the market. To concern oneself with who is doing what to whom and why is an unnecessary distraction.

Thank you for your comments.

 

[dbphoenix]

So if I may put a chart to you, based on the thread, what would be your call here - long or short ?

Thanks in advance

The purpose of this particular arc is to apply the template of Wyckoff's supply/demand dynamic to NQ charts (see post #69), not to make calls, in other words to analyze the behavioral dynamics illustrated by the price movement -- and volume -- in the chart rather than try to predict future action. You're welcome to post an NQ chart with your analysis if you like.

 

[Brumby]

Whatever is beyond the right edge of the chart is unknowable. Whatever is between that edge and the left edge is information. To do no more than glance at that information is self-defeating. There is a story there, and the story is told through volume and price movement.

Observe closely and think carefully about volume and price movement. Volume tells you what the level of activity is during any given interval. Price movement illustrates the motives and objectives driving that activity, whether the rational and deliberate actions of professionals or the irrational and emotional actions of amateurs. One could develop detailed catalogues of volume bar lengths and price bar lengths and create elaborate systems incorporating these combinations (such as the books devoted to candlestick analysis) but he would miss the point, that volume and price are each and together continuous, that they are manifestations of behavior, and if one is to make the most of this sort of analysis, he must focus on that behavior rather than the "technical analysis" that conceals it.

I just want to add that reading price action and trying to understand the nature of the order flow is the means to an end and not the end itself. As a technical trader, we actually put on two hats. There is the hat of the technical analyst which is about interpreting the chart information on the hard left of the chart. Trading is about the right hand side of the chart. There are different skills involve between the two. Only some traders are able to combine both skill sets successfully. It is a reason why some have remain as technical analyst and educators because knowing technical analysis and performing historical analysis is not trading. Trading is about application, execution, and management of the trade. It is making trade decisions based on available information. There is never enough information.

Based on the chart as given and if that chart is the only chart that you can trade from, how would you trade it? There is a Wall Street saying "bulls make, bears make money, pigs get slaughtered". Trading is about continuously managing your risk/return. That equation changes as the price bar changes.

 

[wallstreetwarrior87]

The purpose of this particular arc is to apply the template of Wyckoff's supply/demand dynamic to NQ charts (see post #69), not to make calls, in other words to analyze the behavioral dynamics illustrated by the price movement -- and volume -- in the chart rather than try to predict future action. You're welcome to post an NQ chart with your analysis if you like.

OK, well if the above chart was NQ then I have done the analysis, with basis and future volume projection, based on the information in between. All this using dynamics.

Just need to to see the full chart to see what actually happened and to be able to learn more.

So if you could please reference the date of the screenshot

Thanks

 

[wallstreetwarrior87]

The purpose of this particular arc is to apply the template of Wyckoff's supply/demand dynamic to NQ charts (see post #69), not to make calls, in other words to analyze the behavioral dynamics illustrated by the price movement -- and volume -- in the chart rather than try to predict future action. You're welcome to post an NQ chart with your analysis if you like.

Surely the principals can be applied to any chart with transparent volume?

The reason why you are confident to use the principles on NQ is that you have CONTEXT, which gives you confidence in reading the price/vol dynamics. You know what has happened previously so you can apply supply and demand principles and work out if a trade opportunity exists.

If not there would be no reason not to do a quick analysis on my chart?

Final point - what is the point in doing all the analysis if you are not prepared to make a projection/call based on the information ?

Not being critical of the thread idea, in fact kudos to you for creating an awareness of price and volume. But other than showing "previous" areas of interaction it really does not help a trader develop the actual ability to trade. Ie it shows a lot of people rushing to the shopping mall, but if we don't know why, you have no idea if you should join in or stay in the street.

Surely a better idea to prove value of Wykoff concepts is to take a screen grab at the "actual" time it happens (you have seen what you want to see). Then putting it on this thread and stating how you would trade the position? So you won't already know the outcome, and others can also develop a way/style to use the information? Then see how it all ends up?

This is one of the better threads on the site, and can go a lot further if it "wants" to.

So thanks for starting it

 

[wallstreetwarrior87]

I just want to add that reading price action and trying to understand the nature of the order flow is the means to an end and not the end itself. As a technical trader, we actually put on two hats. There is the hat of the technical analyst which is about interpreting the chart information on the hard left of the chart. Trading is about the right hand side of the chart. There are different skills involve between the two. Only some traders are able to combine both skill sets successfully. It is a reason why some have remain as technical analyst and educators because knowing technical analysis and performing historical analysis is not trading. Trading is about application, execution, and management of the trade. It is making trade decisions based on available information. There is never enough information.

Based on the chart as given and if that chart is the only chart that you can trade from, how would you trade it? There is a Wall Street saying "bulls make, bears make money, pigs get slaughtered". Trading is about continuously managing your risk/return. That equation changes as the price bar changes.

Great point about the 2 sides

All the key elements to having an edge, respect them all, and the results will follow.

 

[dbphoenix]

I just want to add that reading price action and trying to understand the nature of the order flow is the means to an end and not the end itself. As a technical trader, we actually put on two hats. There is the hat of the technical analyst which is about interpreting the chart information on the hard left of the chart. Trading is about the right hand side of the chart. There are different skills involve between the two. Only some traders are able to combine both skill sets successfully. It is a reason why some have remain as technical analyst and educators because knowing technical analysis and performing historical analysis is not trading. Trading is about application, execution, and management of the trade. It is making trade decisions based on available information. There is never enough information.

Based on the chart as given and if that chart is the only chart that you can trade from, how would you trade it? There is a Wall Street saying "bulls make, bears make money, pigs get slaughtered". Trading is about continuously managing your risk/return. That equation changes as the price bar changes.

That's what the template is all about, knowing how one arrived at the point at which a decision has to be made.