House of If You Can Draw A Straight Line

[eminiman414]

I find this to be a gem:
"For the most part, W uses the term "thrust" generically -- thrust, upthrust, downthrust -- having the same meaning as that found in any dictionary. A synonym for it might be "poke". This particular kind of movement is made out of a sideways congestion to determine if there is any buying interest (if up) or selling interest (if down). An upward thrust can also be used to trap traders into buying if the ultimate intent is to drive price down. This not only helps to reduce demand, but may also aid the downward movement if the buyer is frighened into throwing his shares back onto the market.

A downward thrust is also called a shakeout, and its intent is the reverse, to determine if there is any selling interest and perhaps frighten holders into selling their shares in advance of a move upward. This reduces supply and enables those who are accumulating the shares to accumulate even more.

Upward and downward thrusts may also be used to catch the stops of those who are short or long, respectively.

W calls particular attention to "terminal" thrusts and "terminal" shakeouts, i.e., those which occur just before a breakout to the upside or downside as part of the preparation for the ultimate move. However, it's next to impossible to determine whether or not these are "terminal" except in hindsight, so the value of knowing what these are and what they mean is to be able to interpret the motives behind the movements in real time if the "breakout" quickly fails."

 

[theapprentice]

Those who employ the method in this thread would have been looking to liquidate longs and see evidence of failure at the highs in order to initiate shorts. So, while the exact top was not known at the time of your short, those who have studied the material in this journal knew that any long at that point was a low probability trade. I think DbPhoenix's question was meant to gently point out to you that since you have not familiarized yourself with the subject matter of this thread, the motives for your participation might be suspect, i.e. potential trolling.

I see. I'm not 'trolling' for what it's worth. p.s - Any trolls here must be very well behaved in comparrison to the trading forums that I belong too(!) as threads never seem to be completely 'taken over' here, despite talk of 'trolling'. I thought I was fairly polite and asked a genuine question, but I'll give you the benefit in case there's a 'history' here that i've not seen.

You're right in that I have not fully familiarised myself with the material. I recently wasted about 5 months trying to learn from some muppet over at trade2win who claimed to be an 'expert' trader, but it seems clear now that he hasn't a clue. He's made over 20 thousand posts in under a year at trade2win. (That should have been a clue that he's not actually a trader I guess!!) (my bad). So I am skeptical of this sort of thing at the moment without seeing people implement it successfully in real time.

I also still can't get my head around things like :
''A failure to make a higher high is not a pattern; it's a behavior.''
I'd maintain that it IS still a pattern (even if it is CAUSED by a certain behaviour)
it always looks the same with our eyes and we see it as a lower high?

Anyway, the more I post, the more I imagine that you think i'm trolling, so I'll make this my last post on the matter.

good luck to you, too

 

[dbphoenix]

I see. I'm not 'trolling' for what it's worth. p.s - Any trolls here must be very well behaved in comparrison to the trading forums that I belong too(!) as threads never seem to be completely 'taken over' here, despite talk of 'trolling'. I thought I was fairly polite and asked a genuine question, but I'll give you the benefit in case there's a 'history' here that i've not seen.

You're right in that I have not fully familiarised myself with the material. I recently wasted about 5 months trying to learn from some muppet over at trade2win who claimed to be an 'expert' trader, but it seems clear now that he hasn't a clue. He's made over 20 thousand posts in under a year at trade2win. (That should have been a clue that he's not actually a trader I guess!!) (my bad). So I am skeptical of this sort of thing at the moment without seeing people implement it successfully in real time.

I also still can't get my head around things like :
''A failure to make a higher high is not a pattern; it's a behavior.''
I'd maintain that it IS still a pattern (even if it is CAUSED by a certain behaviour)
it always looks the same with our eyes and we see it as a lower high?

Anyway, the more I post, the more I imagine that you think i'm trolling, so I'll make this my last post on the matter.

good luck to you, too

Thank you for the polite reply. And, yes, trolling has been a problem almost from the beginning of the first journal. And, yes, most of that has been deleted by the mods. The trolling currently is far lighter, partly because some of them have been banned, some of them have exited the field, some have become bored and are making others miserable elsewhere. But there are still plenty of unhappy people who believe they can make themselves feel better by taking it out on others.

As for the behavior/pattern business, yes, a lot of people have trouble with that because they're never exposed to any other way. But with Wyckoff, whom I was lucky enough to discover when I became interested in daytrading, that IS the way. One of the better examples of this is the "head and shoulders", which both beginning and "experienced" traders find under every bush. But if one understands the behavior that is forming this pattern, he soon realizes that only a small fraction of what are thought to be H&S actually meet the requirements of it, and that, at bottom, classifying it as a "pattern" doesn't help much because if played correctly, as a behavior and not just as a pattern, the trader will be successful with it, whereas the results of trading it as a pattern will likely be disappointing.

All of which sounds vague and fluffy but which becomes clear once one gets into the material.

Again, if you're genuinely interested, you're welcome to participate, but every question you may have has already been answered. I suggest you review the charts which were posted yesterday. If you find them intriguing, look at the charts posted from the beginning (you can skip most every post that does not have a chart in it; much of it is either trolls or chat). If you want to go on, read the pdf I put together. It's only about the length of a chapter in most trading books (about 20 pages without the charts). After that, it just depends on how deeply you want to get into it, if at all. In the end, however, it's DIY, and nothing that I want to argue about after all these years. It is what it is. I should point out, however, that if you're afraid of being wrong, trading, particularly discretionary trading, and most particularly this approach to it, is very likely not for you. At some point, you'll be required to do a lot of self-examination that few traders are prepared for.

 

[dbphoenix]

Reviewing the wyckoff way thread was a godsend.

Anyone who wants any of that stuff better download it soon.

 

[fortydraws]

So I am skeptical of this sort of thing at the moment without seeing people implement it successfully in real time.

I'm sorry that you had that experience. I consider myself incredibly fortunate that the first book I read when I became interested in trading was Wyckoff's Studies in Tape Reading, and that a google search brought me to another forum where I found DbPhoenix and his work in the Wyckoff Forum. It made the learning process very structured and focused for me, which is how I learn best.

I have tried from time to time to post trades in as close to real time as I am able, and there is a journal here by KP called NQ trading via price action where this past week I did share some charts in the morning and mentioned some entries in real time. Some might be able to do it regularly, but I can't. While I may think to post a trade occasionally, and while I do enjoy the company of a few here at ET, the truth is simply that when I am entering a trade and setting my stop and watching to see whether the trade is going to go as I thought or whether it is to be a scratch I am just not thinking about getting the trade recorded for posterity at a trading forum.

When price is meandering in the middle of nowhere, I am free to read, or talk on the phone, or make a sandwich, or post to ET. But once price gets close to an area I selected as a level of interest where I may find a trade, my focus narrows to that alone. So much so, that it is now habit. Yesterday late afternoon, as an a example, when price again made attempt on the level of the prior day's consolidation range low, even though I had no intention of entering a trade that late in the day on a Friday, I found myself focused like a cat following a flashlight beam. I wish I hadn't been, because I saw the failure set up, and in hindsight, I wish I had mentioned it here, before the failure occurred, just so that those following might have been able to see what I look for, but by the time I snapped out of my trance, price had not only broken lower, but was setting its next failure for a renewed leg down, which I did post here before the failure and the failure did indeed occur.

In the end, whether you choose to investigate what DbPhoenix does here or you chose to seek elsewhere, whether something will work for you or not is not up to someone else to demonstrate. Your own work will be the final answer for you. Again, wherever you end up, I hope you find what it s you're looking for.

 

[fortydraws]

An upward thrust can also be used to trap traders into buying if the ultimate intent is to drive price down. This not only helps to reduce demand, but may also aid the downward movement if the buyer is frighened into throwing his shares back onto the market.

A downward thrust is also called a shakeout, and its intent is the reverse, to determine if there is any selling interest and perhaps frighten holders into selling their shares in advance of a move upward. This reduces supply and enables those who are accumulating the shares to accumulate even more.

Upward and downward thrusts may also be used to catch the stops of those who are short or long, respectively.

This is excellent, and imo, one might want to study the price activity at yesterday's NY session high and at yesterday's at yesterday's NY session low, and review this activity using the above as a framework for understanding. It might be able to spark a few of those "Aha" moments you speak of eminiman, especially if one were to study the activity first, and then do so again after plotting lines at the prior day's NY session low, the high, the low of the prior day's afternoon range, and the high of yesterday's premarket range.

I think it also might be instructive to consider this in light of what DbPhoenix says about patterns vs. behavior. NoDoji, for example, has posted some links in the other threads explaining what she calls a 123 pattern and a 2B pattern. These are "reversal patterns." Some people may look at yesterdsay's high and low and they may see a 123 or a 2b at either the top or the bottom yesterday, I don't know. And, by no means am I trying to be critical of those who trade patterns - each individual is responsible for determining what he/she trusts to trade upon.

But, imo, from what I have read here in the journal section of ET, once someone latches on to the notion of a pattern, they put a barrier between themselves and the actual price activity by limiting in their mind what a reversal "looks" like. And once they do that, they will, possibly forever, miss the small little signs of waning demand or dwindling supply that always occur at reversal, even when this that or the other pattern is absent. It Furthermore, by focusing on the pattern, and not the behavior within the pattern, they will likely also miss the signs that the pattern itself is going to fail. Absent the pattern, all else appears to be mere "noise." I'm not saying there is not "noise" within price action, but if there is, it is far, far less than most assume. Price is telling a story, and every tick is a word, which is part of a sentence, which is part of a paragraph ... you can see where I'm going with this.

And I don't dismiss patterns either. I read Edwards/MaGee, and while I have little use for head and shoulders and the like (if you need to wait for price to break the neckline of an H/S to know the trend has changed, you need to go back to Wyckoff, imo), I do see these little flags and pennants and of course we all know what hinges look like. But, imo, these are all merely trading ranges of different sorts, and if one is going to trade them effectively, imo, it is best to understand first what the implications of a trading range are, so that one knows what to do when the breakout comes, what to do if the breakout fails, and what to do if the failure fails.

Finally, one thing that really impressed me when I was first studying Wyckoff's trading course was the notion that one should pay attention not merely to supply and demand, but to the quality of supply and demand - who is buying? Who is buying that low? And who is selling it? Who was buying the opening range breakout yesterday? And who was selling it? I know I'm not the smartest guy in the room, and I know there are many here with more education than I, with more impressive titles than I could ever attain. But though I was merely a blue collar tradesman for nearly 30 years, I am and have all my life been an avid reader of fiction. And to me, the type of thinking and imagining I engage in when reading price action is not all that different from than what I experience when reading my all favorite novel Crime and Punishment. Every tick is a word ...

 

[eminiman414]

when I became interested in trading was Wyckoff's Studies in Tape Reading, and that a google search brought me to another forum where I found DbPhoenix and his work in the Wyckoff Forum. It made the learning process very structured and focused for me, which is how I learn best

I did the same exact thing. I just didn't get it at first. Sort of gave up. Came back when the SLA was developed thought it would be easier but I was too busy hitting the buy and close button to notice what was really going on. Then started to get deeper into wyckoff with the help of the wyckoff forum and this last trip thru...I'm kicking myself for not getting it sooner. Some may troll here but if they read the wyckoff thread they may have a different appreciation for the info DB provides. And he's been saying the same "stuff" for years. Many post from 2008 are almost carbon copies to his posts in the present. In fact this week even lol. His opinions have not changed the same way the way wyckoff traded is still applicable today. To me that means something.

 

[k p]

This is excellent, and imo, one might want to study the price activity at yesterday's NY session high and at yesterday's at yesterday's NY session low, and review this activity using the above as a framework for understanding. It might be able to spark a few of those "Aha" moments you speak of eminiman, especially if one were to study the activity first, and then do so again after plotting lines at the prior day's NY session low, the high, the low of the prior day's afternoon range, and the high of yesterday's premarket range.

Finally, one thing that really impressed me when I was first studying Wyckoff's trading course was the notion that one should pay attention not merely to supply and demand, but to the quality of supply and demand - who is buying? Who is buying that low? And who is selling it? Who was buying the opening range breakout yesterday? And who was selling it?

Really great post here fortydraws. I wonder if I may ask two questions.

First, when you say to study the price activity, I wonder if you can put into words what this entails... not that I'm confused, at least I don't think, but I like the way you write, very similar to how Db writes. Watching it in real time, watching that right tick move on the price scale, this certainly gives you a sense of this behavior. You've been showing 150 tick charts with a "line on close" and these seem to show that shift from buyers being in control to sellers and vice versa quite well. So if you're studying this from charts... if you want to see the behavior on a chart since the price isn't moving in real time or replay, would you say that the "line on close" helps you to see this the best?

You had mentioned in my journal that I probably don't know what you're at when you're looking for this change and hence if you could elaborate, I'd very much appreciate this. A tick chart moves far too quickly and its difficult to display this shift in balance on one page, and yet when looking at a chart where all the ticks are summarized in a one minute bar (hence when you're looking at a 1 minute bar chart), this behavior IMHO is lost... so I wonder therefore what you would say is an appropriate way to summarize/package these ticks that show the shift in balance for you (I certainly understand where you say though that each trader has to decide for themselves what is sufficient for them to see what they need to see to act). As you know from my journal, my 5 sec charts I believe are showing me what I need to see, but I'm curious about what you think is sufficient for showing this behavior if you aren't watching live and hence looking for this behavior on a static chart.

Second question refers to your point about who is buying. How can you determine this and why do you say it matters? I realize that the general notion is that amateurs and retail traders are always buying a top and selling a bottom, but is there really any way to tell who bought those contracts for the last few ticks at the high? I suppose that if price doesn't continue and immediately drops, especially below support, we can make the inference that its those people who aren't as savvy at this trading business because they should have been buying at the bottom, close to support, or just above the breakout. But if price does break out of a top, and enough buying comes in to fuel a further rise, then should we assume this is big money since you need big money to move price even higher?

 

[eminiman414]

Second question refers to your point about who is buying. How can you determine this and why do you say it matters? I realize that the general notion is that amateurs and retail traders are always buying a top and selling a bottom, but is there really any way to tell who bought those contracts for the last few ticks at the high? I suppose that if price doesn't continue and immediately drops, especially below support, we can make the inference that its those people who aren't as savvy at this trading business because they should have been buying at the bottom, close to support, or just above the breakout. But if price does break out of a top, and enough buying comes in to fuel a further rise, then should we assume this is big money since you need big money to move price even higher?

I'd say this is where AMT comes in. Where does someone playing for ticks buy and sell versus someone looking to make money in chunks. Or potentially make money in chunks. Who's buying/selling what price levels? Where do you think those levels are?

 

[samuel11]

Page 22 of SLA-AMT pdf
Yesterday’s morning action in Nasdaq (i’m looking at QQQ here)

Exact same price action on both charts

Draw trendline from 103.65 to 102.34 (11:34 am ET)
50% ret. level at 102.83