Making of a method

[dbphoenix]

A question:

When validating accumulation - it makes sense that vol should be low at S because the accumulators are not offering to the supply of stock.

But then why is higher volume indicative of accumulation when price reaches R? Is not uncertainty going to be there at R too? Or are the accumulators demanding at R, causing more release by others?

If you're talking theory, with regard to stocks, you'll have higher volume at R because accumulators are counterintuitively selling in order to prevent the price from rising before they are ready for it to do so. Practically speaking, however, the whole accumulation-distribution thing is largely gurubabble which is intended to sell software. This is not to say that the a-d cycle doesn't exist, but learning how to gauge variations in strength between buyers and sellers will likely do you more good in the clinches.

This may not jibe with what I wrote ten years ago, but stuff happens.

Remember also that volume has no meaning in and of itself. It's just trading activity. The buying volume and selling volume thing is more gurubabble, also intended to sell software. Or courses. Or "mentorships". One gauges buying pressure and selling pressure by where price moves and by how much. The volume it took to get there is not particularly relevant. Price can rise, even break out, on relatively little volume. It just depends on how much R sellers want to provide. They may, for example, want to wait until price gets to a certain level before they enter the market with earnest. In the meantime, buyers get a free ride. The astute buyer will learn to recognize when the ride is over.

 

[Handle123]

Quote from game:

I started off with Market replay on Ninja. ES was free so I replayed that.

First stab at this - I tried not to use any rules as such, but it is likely that some concepts from my previous attempt at daytrading colored the comments.

This was from midnight to about 6 a.m.
Each 5 min frame played in 20 sec.

Don't have any experience with ES so not sure if it was a suitable replay period for practice.

There are litterally hundreds of methods to trade long term to day trading. I always recommend someone starting out to learn long term first, you have all weekend to find a good stock or two and try to make 100-200% in course of 12 months or less. I always perfer to trade heavy volume stocks so I can get out quickly. Unless I am buying a stock to make dividend money, I generally don't do much in fundamentals, otherwise I am interested in low debt, increasing sales/earnings for last 8 quarters.

Chart is not what I did, but an example of just a couple simple patterns. I find volume to not have a high enough percentage to rely on to use it much, it is often great for finding lows in the ES, but can have more lows with reducing volume which might show trend continuation to down. ES is not the best market to use trendlines on 5 minute bars for me, I find it much better on hourly charts often starting the trendlines months or years prior for support/resistance. I believe trading the ES works best in finding areas where the inexperienced is going to get screwed the worst. Looking for failures has worked for me going the other way, or just waiting for trend change then retracements. But what many believe in as in trading the ES all day long is generally a losers game, for me it far better to make 2-4pts and quit, adding contract size when one feels comfy with account size. Although, not enough volume in middle of the night times.

But long term stocks way to go, actually have a life instead of looking at screens for years to get day trading down.

 

[game]

Quote from Handle123:

There are litterally hundreds of methods to trade long term to day trading. I always recommend someone starting out to learn long term first, you have all weekend to find a good stock or two and try to make 100-200% in course of 12 months or less. I always perfer to trade heavy volume stocks so I can get out quickly. Unless I am buying a stock to make dividend money, I generally don't do much in fundamentals, otherwise I am interested in low debt, increasing sales/earnings for last 8 quarters.

Chart is not what I did, but an example of just a couple simple patterns. I find volume to not have a high enough percentage to rely on to use it much, it is often great for finding lows in the ES, but can have more lows with reducing volume which might show trend continuation to down. ES is not the best market to use trendlines on 5 minute bars for me, I find it much better on hourly charts often starting the trendlines months or years prior for support/resistance. I believe trading the ES works best in finding areas where the inexperienced is going to get screwed the worst. Looking for failures has worked for me going the other way, or just waiting for trend change then retracements. But what many believe in as in trading the ES all day long is generally a losers game, for me it far better to make 2-4pts and quit, adding contract size when one feels comfy with account size. Although, not enough volume in middle of the night times.

But long term stocks way to go, actually have a life instead of looking at screens for years to get day trading down.

Thanks Handle. Since you are experienced with both long/med term and day trading, are there certain fundamental principles that you use for for both time frames? If you were starting out without much capital, would you seek to learn daytrading setups, thereby having access to prop firm capital, or would you completely focus on swing/long term.

 

[game]

Quote from dbphoenix:

If you're talking theory, with regard to stocks, you'll have higher volume at R because accumulators are counterintuitively selling in order to prevent the price from rising before they are ready for it to do so. Practically speaking, however, the whole accumulation-distribution thing is largely gurubabble which is intended to sell software. This is not to say that the a-d cycle doesn't exist, but learning how to gauge variations in strength between buyers and sellers will likely do you more good in the clinches.

This may not jibe with what I wrote ten years ago, but stuff happens.

Remember also that volume has no meaning in and of itself. It's just trading activity. The buying volume and selling volume thing is more gurubabble, also intended to sell software. Or courses. Or "mentorships". One gauges buying pressure and selling pressure by where price moves and by how much. The volume it took to get there is not particularly relevant. Price can rise, even break out, on relatively little volume. It just depends on how much R sellers want to provide. They may, for example, want to wait until price gets to a certain level before they enter the market with earnest. In the meantime, buyers get a free ride. The astute buyer will learn to recognize when the ride is over.

Phoenix - if you are saying that your views have evolved since the 2004 post, are the resources on your article series page on TL the ones you would recommend? There is a vast amount of information in the forums about application. But as for the theory, is the article series page the go to?

 

[dbphoenix]

Quote from game:

Phoenix - if you are saying that your views have evolved since the 2004 post, are the resources on your article series page on TL the ones you would recommend? There is a vast amount of information in the forums about application. But as for the theory, is the article series page the go to?

I hope that my views have evolved since last week, much less 2004, but most likely not that much.

As for the "articles", those are actually blog posts that the then-new owners converted to articles before they deleted the blogs. I suggest you head straight to the Stickies in the Wyckoff Forum since that stuff is all updated.

As for theory, I can't say I'm much into theory that can't be applied. I find a vast amount of theory in forums and very little about application, unless one counts wishful thinking as application. I hope that there is always a link between the two in what I write.

 

[game]

I read jasont's article on your page where he mentions reading Brett Steenbarger's “The Psychology of Trading” and how that led him to evaluate where his niche lies.

I was inspired to start this journal because of a book I just picked up again after having it read it a year or so ago. It was Brett's "Enhancing trader performance". That was a pleasant coincidence.


For me, this book has put the cart behind the horse. Yes probability, emotions and risk management are all well and good but if I do not put in the work of first identifying my niche then I am wasting this incredible principle that is a force of nature. And without this principle, the likelihood of sustaining the effort of finding a durable edge is slim.

Your initial replies to this journal touched that very nerve.


To follow jasont here goes:


Set up plays: Did not have the aggression and timing required of a striker. Played as a midfielder - strength was to set up plays for strikers - free kicks and through passes.

Not reactive: Don't feel I have the killer instinct. I like to compete but I don't think of myself as being competitive. I like to play the game more than winning the game. But I enjoy winning as an outcome of a well played game.

Anticipate: I don't have a quick wit. Not the quickest to understand jokes either but in many cases I often anticipate the humor and laugh before the punch line. I like space and time. They are my friends. I like to anticipate.

Special Ops: If I was a soldier, I would not want to fight in the regular army. Would not want to be a sniper either. Something in between - special ops - small teams.

Like intensity: As a kid I liked eating the entire chocolate all at once to experience the fullness of maximum chocolate in minimum time. And yes shots to savoring a drink. But have found other ways to channel this need.

Perspective: More oriented towards sweeping perspective than detail - More generalist than specialist.

Calculus: Did not understand it in high school. Then while browsing Barnes & Noble one day picked up a book called 'Calculus made easy'. Understood the principles and found that yes it was indeed pretty simple. Like to understand principles behind things even though I often do not have all the technical knowledge of doing so.

Gravitate towards that which underlies outward manifestations.

Inception: Loved the story of a well placed idea causing a fundamental momentous change.

Found the Jamie Mai interview from Hedge Fund Market Wizards to be the best. Connected with using mis-priced LEAPS.

Have knowledge of how to analyze financial statements but detailed investigation does not interest me.

So I might like to trade:

Anticipatory
Counter-trend, pullback.
OK with making many small stabs to time and ride the reversal.
Medium time frame that will give me enough time unless I can learn how to anticipate in day trading as well.
A mix of fundamental and technical - was drawn to Michael Marcus's quote when he said that " The best trades are the ones which have all three things going for them, fundamental, technical and market tone"

Over the past few days, Phoenix has graciously pointed me towards something I was seeking. And that is - what is the basis of all this? And once that is grasped then the rest is execution.

 

[Handle123]

Quote from game:

Thanks Handle. Since you are experienced with both long/med term and day trading, are there certain fundamental principles that you use for for both time frames? If you were starting out without much capital, would you seek to learn daytrading setups, thereby having access to prop firm capital, or would you completely focus on swing/long term.

Has absolutely nothing to do with capital, has to do with experience. In order to day trade successfully, you have to know the answer to money management BEFORE the questions arise, more like breathing, You have to be able to constantly think of "what ifs" while in the trade. It is like the game of chess, you are formalizing moves 3-6 ahead of the current game. So dealing with day trading, you have to plan ahead of what to do if the price moves in the direction you want but much more importantly against your direction. You have to be able to think 10-30 decisions in a split second, and this talent does not come easy to newbies, this is why it takes 10,000 hours of screen time top get good at day trading. And you have to look at daily risk as well. Say you take ten trades, risking $100, you have risked $1,000 and if you are targeting 4-8 ticks, it is a huge amount of risk for the reward. Day trading for me, have worked years to get the smallest losing percentages. But for someone starting out, you are Prey.

Since you don't have much experience, I strongly recommend to do long term trading using monthly/weekly bar charts on stocks, have a regular job or go to school and in off time study market movements, tackle the "what ifs" of money management. I have 35 rules I use for money management to only a couple ways to enter.

But anyone can open a brokerage account, I would learn and study at least a year, backtest for at least a year first. It is better to have a plan first than have no patience and lose what you have.

I never recommend for anyone to learn counter-trend trading when starting out, takes too many years. It is better to learn first trend trading, like after a retracement, don't get greedy and add on many attempts in same trend, and as one's studies to learn when the end of a move is likely.

 

[game]

Quote from Handle123:

I never recommend for anyone to learn counter-trend trading when starting out, takes too many years. It is better to learn first trend trading, like after a retracement, don't get greedy and add on many attempts in same trend, and as one's studies to learn when the end of a move is likely. [/B]

I may not be using the term counter trend correctly. After a little bit of Wyckoff reading, what I want to say is that I may be suited to anticipate turns in trend based on the behavior of price.

My earlier definition of counter - trend would be to fade the market just because I want to be a contrarian - this being based on fundamental thinking - but missing the crucial timing element, which price study will now hopefully provide.

Thanks for that chess analogy.

 

[game]

Focused on establishing S & R and watching for opportunities at the range boundary.

Does the hinge work here as drawn?

I could have drawn a support line at 2752 and then sold once the hinge was broken on the downside for that move which went all the way to the day's low.

What are the key areas that would interest you in this chart?

 

[dbphoenix]

If you're asking me, I'm reluctant to jump in here because there is value in your involving yourself in your own explorations without outside interference. Plus I traded this. Once you've done several of these, you may want to look at what I did for an alternate perspective. But if you do it too soon, you may end up trying to do what I do, which would not be good.

If you've decided to explore daytrading again, it's important that you be there. If you have a job or you're in school or for some other reason you can't be in front of your screen watching price move throughout your trading session, don't even get started.

If you meet these basic conditions, then give yourself context. Futures trade 24/7, so what has price been up to overnight? The previous day? The previous week? What are traders trying to accomplish? What levels if any have they been hammering at before the opening bell?

Consider also trading only during those periods when traders are most active. For the NQ, this tends to be from the open or just before to 1100EST or 1130, rarely 1200. Once activity dies, you may as well hang it up for the day. You aren't going to get any important moves if nobody's there.

Finally, if all of this is replay, consider running it at no more than 2x. This can get extraordinarily boring, particularly once you have it down, and 90m can seem like forever, much less two or three hours (and if you run it at more than 2x, you may get the impression that it's a lot more exciting than it really is). And if you're bored, you're far more likely to make mistakes. I can rarely trade for more than 90m unless price has settled into a trend and I don't have to do anything about it other than monitor it casually.

If you're not asking me, of course, then just ignore all of the above.

And I strongly suggest you get rid of the colors.