House of If You Can Draw A Straight Line

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Let summer come and it usually slows down. These trending to non trending cycles are to trading what water is to fish. Every pause is a preparation, and every preparation an opportunity.
 
Gringo said:
Let summer come and it usually slows down. These trending to non trending cycles are to trading what water is to fish. Every pause is a preparation, and every preparation an opportunity.
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What I like most about Wyckoff is that he keeps you in during a strong move and gets you out and keeps you out of a weak one. In the latter case, one can simply go for a bike ride.
 
For those who are new to this and have no idea what I'm talking about with regard to observing without worrying about entries and exits, I know of only two people who are interested in this and are also going through the observation phase: lajax and gears. I suggest dropping in on their journals and seeing what they're up to.
 
fortydraws said:
This has been an extraordinary week - an extraordinary month, actually. A good friend of mine visited me a few weeks ago, and the one thing he wanted to do while with me was learn how to trade. I had him read your SLA/AMT and study both Wyckoff's big course and his active trading course prior to his coming up here. I had sent him charts and he had spent several weeks prior to coming up here just watching the NQ for the first couple of hours each day. I would say he started studying about the middle of November - it was before Thanksgiving, so about two and a half months.

Two weeks ago, he sat and watched me for a few days trade in the morning, and then we spent the afternoon watching and observing. In my journal here at ET, some of this activity is recorded in the first 26 or so charts.

Then, he went back to his home, spent the week before this week doing exactly what I was doing in the charts I posted here. This week he started trading live, using a very small account - $5K to be exact, trading 2 contracts at a time with a broker that has reduced day trading margins (not my broker - I use IB). He figured with his broker, he could trade 2 contracts and lose $4K before he would not have enough margin to trade his plan which requires an even number of contracts and a minimum of 2. If he lost his $4K, he would stop. I imposed a similar cap of myself when I started as well.

Monday he took 1 trade, and made 8 points average with two different exits, or $320 before his broker commissions. Since it was just 1 trade he obviously was able to figure out in his head about how much he made. Now, one thing I told him was to turn off his profit/loss, do not look at his account balance, not to open his daily statement when it arrives in his in-box. I wanted him not to look at any money related stuff until he got his last daily statement for Friday on Saturday morning. I told him to just trade his plan for the week, and not to concern himself with the money.

We spoke every night, and we discussed his trades. He knew he was ahead but after Tuesday he really seemed to have no idea by how much.

He called me this morning after he opened his daily statement as of the end of the day Friday, and what do you know - his little $5K account is now a little $11K account. Not bad, right? Of course, I had to calm him down, and I spent the better part of 45 minutes reminding him that this week there were multiple 50+ point intraday swings, and that I've seen weeks where the range for the whole week was 30 - 50 points low to high, and that while there will be weeks like this, he should not expect them to be the norm.

The point is that he simply traded as though it were a job. When you do your job, you are not worried about your paycheck at the end of the week. You are not constantly fretting over whether your boss is going to dock your pay or whether you'll get that raise at the next review - who could work well under such mental conditions? He did his job: "Here are your duties and responsibilities, here is what is expected of you, here is what you do if X, and here is what to do if Y." His daily chart looks just like mine, which looks just like DbPhoenix's posted above - daily trend channel and weekly trend channel. On our intraday charts, he and I add the prior days highs and lows, and of course the globex high and low. Then it just a matter of drawing lines, making a trade, closing the trade. Repeat.

From what I have read in the journals here at ET, there are three consistent and persistent problems keeping people from doing this. 1) They have no idea what they are doing - SLA, even without AMT, is an easy way to learn what to do and when, but many who try fail because either 2) they are too afraid of losses to allow themselves to win or 3) they insist on making this far more difficult than it is.

I many who try this might be better off if they started their observations from a five minute bar interval chart - though I hesitate to say this because most will want to over complicate it and start thinking in terms of the bars individually and not the transactions which are being recorded to make the bars. But I spent almost a year trading nothing but stocks from a 5 minute bar interval chart before I started using SLA to trade the NQ. My friend doesn't even look at anything but the 5 minute bar interval which is where I started him. It might be a good place for some to start. But if you are trading the money, and not the chart, I think you're screwed and you ought to use the money to buy your wife something nice instead, because from what I have read in the ET journals, you're going to lose it anyway.

And before someone says that my friend has done well because of his access to me, I'll say right now I can take no credit for what he is doing or how well or poorly he does it. He studied the same things I studied. If anything, DbPhoneix is more responsible for my friend's education in trading than I, even though DbPhoenix has never contacted in been in contact with him. But the bottom line is this: He did the work required to learn the job, and he did it without dragging in ideas and emotions that would have prevented him from learning and doing his job as a trader, and he made it through his first week without his individual profits and losses ever being an issue for him. If he keeps it up, he should be able easily to replace his salary trading just 2-4 contracts even under more ordinary conditions.
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4D, Thanks for sharing your experience in mentoring. I am sure that by seeing your actual results that your friend was more motivated than most mentored students. Plus you started him in the right direction from the git go. Please drop a line here now and then on your friends progress.
 
bmwhendrix said:
4D, Thanks for sharing your experience in mentoring. I am sure that by seeing your actual results that your friend was more motivated than most mentored students. Plus you started him in the right direction from the git go. Please drop a line here now and then on your friends progress.
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I think starting right, bmwhendrix - Wyckoff the original and DbPhonenix - should get most of the credit as to what helped him most. It occurred to me after I posted yesterday, that even the analogy I used with him came directly from DbPhoneix's Wyckoff forum. I think it is his "How to do it" thread - "Hire yourself to do a job." I told my friend, "This is your job. Here is how you identify these levels (AMT/S&R). Your job is to identify them and track price using supply and demand lines relative to the levels you identified as potential S/R, and AMT limits. When price reaches these levels, if is fails, do X, if it breaks out, wait for the retrace, then do y, - use supply and demand lines to help you identify failures, breakouts, and retracements when in doubt." I was really just a librarian telling him where on the shelves to look - Wyckoff and DbPhoenix the mentors. And most importantly, he rolled up his sleeves did the work required of him to learn this method.

Also, (and this goes to a suggestion made by kp, so this is not directed at you bmwhendrix) while the amount my friend profited this week relative to his trade size was obviously due to the wide ranges and big swings, that, imo, does not mean that SLA somehow "worked better this week than at other times." I would remind people following DbPhoenix's journals that I started SLA trading the NQ in July 2013, and I posted somewhat regularly through September 2013, and I did very well from the get go, even though quite a few of those weeks had small ranges in the 40-50 point range for the whole week. So while it is nice when the market gives me an obvious buy stop point well before the open, and even nicer when not only is it triggered and filled within seconds of the open, but also I'm then out with 25 points within 20 minutes or so, that is not the norm - but the norm has not been so bad to me either. The opportunity offered by the market will vary, but the means by which to profit from those opportunities does not. And even during those narrow range weeks, the NQ has very consistently offered me, using SLA, AMT, and using trading points as defined by Wyckoff in his active trading course potential S/R, low risk entries to gather 5 - 10 points most days. But to do it, you got to cut out the touchy feely Dr. Phil "let's explore" BS and roll up your sleeves and do the work - and before I get DbPhoenix mad at me, I will add this should all be addressed in your own journal. :)
 
Those who've studied the material will understand what these suggest. They will also understand that there are no guarantees (since price is moved by traders).

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