Making of a method

Quote from dbphoenix:

I strongly suggest you read Wyckoff's one-year-long analysis of the 1930-31 market (the first pdf listed). Many of those who are attempting to learn a "trading by price" approach read this section once a week. No lines, no patterns, no indicators, no algorithms, no (fill in the blank).
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I have gone over this myself, but I am going to incorporate a weekly study of section 7 into my trading journey.


Quote from game:

If S/R is key, then becoming familiar with it's anticipation and interpretation should hold the maximum weight. Once I feel familiar with this, I can form a more testable hypothesis.

May 28th:http://www.sierrachart.com/image.php?l=1375339268657.png
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Your journal here has been a great example of rigorous observation. I wonder if I have been conducting my own journey too loosely. I have been spending the last two weeks observing price (no trading) and reviewing Wyckoff's course. I have also been reviewing your journal. You have really developed a good eye for price over the last few months of journaling publically!
 
Quote from fortydraws:


Your journal here has been a great example of rigorous observation. I wonder if I have been conducting my own journey too loosely. I have been spending the last two weeks observing price (no trading) and reviewing Wyckoff's course. I have also been reviewing your journal. You have really developed a good eye for price over the last few months of journaling publically!
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Why not start a journal on ET to share your observations and receive course correcting feedback from those who know? It's a good bet.
 
May 29th:

The attempt to resume the uptrend has been selling off since yesterday's high. There was a retest during PM and the latest buying wave has just broken the SL drawn from yesterday's high. The selling may be over for now, with buying emerging after the DB made during PM. No clear bias yet.

R: 3000 (S from 28th, now is R)
R: 2998 (Multiple R from PM and ON

S: 2989 (SL)
S: 2983 (DB from retest during PM)

Summary:

1: Exploration of downside is quickly rejected

2: Rejection confirmed as selling wave is smaller forming immediate HL. If there was a ret here, there could have been opp to go long in anticipation of the test of R, as the upside had not been explored yet.

3: Anticipated R of 3000 shows itself.

4: Retest of R forms LH. A ret here would have given an opp to go short in anticipation of S being tested

5: Anticipated S shows itself. We are in a range.

6: LH forms. Presence of this in combination with confirmed S zone below gives a long bias and anticipation of price going back to Range top.

7: 2nd time R shows itself. Range holds.

8: A lot of trades in this zone. Traders positioning themselves in an attempt to break through R.

9: No luck. 3rd time R.

10: Most interesting spot of the day. Price has not only been stopped thrice at 3000, it has also just recently broken through the congestion, signaling that buyers are done with the upside for now. Bias shifts to a clear short.

http://www.sierrachart.com/image.php?l=1375482903156.png
 
May 30th

The LH from the 28th and yesterday's slight selling, in combination with the strong buying bring backs of the 23rd and 24th keep my bias at neutral. Strong 20 point buying hit R at 3006 and is now selling off, having just crossed the MP. There is no clear direction right now, and strong hands are probably waiting for price to reach some extreme before stepping in.


R: 3006 ( from 29th's high and ON's high)

S: 2995 (retest from PM)
S: 2989 (mp of congestion from ON)
S: 2983 (Been tested 4 times)


Summary:

1: First exploration since open is up. The downwave of this exploration is brought back by buyers, setting up an opp to go long. The nearest major R zone is still about 4 points above at 3006.

2: There is not significant ret at anticipated R of 3006. This lack of any deep ret at anticipated R zone points towards strength. The steep buying after breaking free of this R confirms this.

3: The steep buying wave finally retraces and loses momentum, creeping up to form a HH. The lackluster pace in combination with the HL shifts bias from long to netural and profits can be taken.

4: The ret never reaches the mp zone. Instead price goes sideways, forming S or R zone for any upcoming moves.

4 onwards: Although price does leave the sideways zone, there is hardly any pace. No compelling reason to position for take new longs.

http://www.sierrachart.com/image.php?l=1375486075170.png
 
Quote from game:

This first exercise was more observation and review rather than backtesting. Other than the first Reversal hypothesis based on the retest, at the moment I don't have anything else that can be measured via a backtest for performance. I don't want to create a hypothesis just for the sake of measurement.

So I am starting off with a broad encompassing hypothesis:

The confirmation or failure of past S/R levels carries information while at the same time offering low price risk entries. Thus, these zones offer the most compelling trades via the best balance of price and information risk.

If S/R is key, then becoming familiar with it's anticipation and interpretation should hold the maximum weight. Once I feel familiar with this, I can form a more testable hypothesis.

snip ....
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hi game:

It looks like you have discovered RDBMS. If you re looking at the full offer of the market as a possible goal, then it will be very constructive to consider the process within the boundaries at some point.

It is unfortuneate that you are using inductively determined data, however.

good luck.
 
May 31st

Price feel sharp ON. Most recently, the big down wave has been retracing and buying has brought price to the mp zone at around 2999. S from the 2983 zone came in a little early to push back price above again. Likely to be sideways action, although the range is wide enough for trend moves.

R: 3006

S: 2995
S: 2983

Summary:

1: The most important zone of the day. It's not common for price to spend the first few minutes after the open bouncing around a 2 point range.

2: It was clear that pressure was being built. There was no significant anticipated R nearby. Zone could have been bracketed and a long would have been stopped in as an outright Reversal trade, leading to a low price risk position for the upside exploration.

3: At anticipated R of 3006. Price initially takes off R after a brief hesitation but then falters just as quickly. Scale out.

4: Finds S again and launches off the former R, which has now become S. No compelling opp for new longs, although the existing longs would have been in play.

5: Almost forms DT with medium pace. Bias shifts from long to neutral.

6: Downwave finds S at former R of 3006. This zone is repeatedly tested, although the action is largely sideways. This S beneath and the R from the DT above along with the generally flat pace means there is neutral bias.

7: Price breaks congestion and retraces a bit. One more chance to go long in anticipation of going past R. Resumption of flat pace means exit.

http://www.sierrachart.com/image.php?l=1375507885915.png
 
June 3

Climactic sell off from 31st afternoon was halted and confirmed by a retest of S at 2974, forming a LL during ON. Since then, there has been a 22 point buying wave that has been retracing. Presently just above the mp level of 2984.

S: 2984 (MP of buying wave)
S: 2976 ( Mutiple S over last few days)
S: 2964

R: 2987
R: 2995
R: 3000

Summary:

1: Opening move is down. Breaches S zone of 2984 and falls to 2981. The extent of the breach indicates some weakness but direction is still largely unknown.

2: Most important zone for the day. The S from 1 and the upmove finds R at exactly the same level as the brief exploration during the first few seconds of the open. The next bar then again finds R at this level. Bias is now shifting to short because a) The opening downmove was a significant breach of S. b) The counter move falters quickly and R has now been confirmed thrice.

3: Short on outright Reversal

4: Another opp to short on the RET.

5: The initial breach of the mp falls sharp, indicating weakness. Another attempt at breach is made and this one forms a LH. Bias turns short for a Reversal.

6: The quality of buying at prior S means short bias is finished and range confirmed.

7: The strength of the prior move from 6 and another strong bring back from the ret of the buying wave sets up a long in anticipation of breaking range. The upside since the open has not been explored yet.

8: R found at prior zone. But there is S below and pace has slowed. Bias is neutral.

9: Pace increases and price breaches S zone. Price back inside former range and weakness indicates a trip down to range bottom. Bias short. Entry can be taken during the ret.

10: Low quality action at prior S zone. No significant rally in Rev attempt. Short bias intact for the long haul. Let it run.

http://www.sierrachart.com/image.php?l=1375551706461.png
 
June 4

Price made a new low yesterday, with very little upside exploration. The buying from the lows was just as strong as the selling. Strong hands waited for price to reach this level before coming in. Price has been moving sideways since yesterday's close. Most recent action has been a small buying wave. Price is now just below the high from the 3rd. Despite the strong buying from the lows, the LOLR is down on the daily. PM action is not indicating any significant buying pressure either.

R: 2995
R: 3006

S: 2988 (mp of range from ON
S: 2980


0832 Breaches R. Trend is up.
0836 Breaks free of R. Trend confirmed.
0838 Weakness being shown. The buying wave after the first hesitation was not strong. Bias turning neutral.
0841 Sideways congestion. No clear bias.
0844 Longs must be getting worried as LOLR is turning down. But SL is holding for now.
0845 Thrust above congestion forms a new high but selling is strong as well. LOLR still slightly down, although nothing compelling yet.
0850 Short opp coming up
0852 S is coming in too. A lot of trading here
0854 Buying surge moves price a little away from congestion zone and bias is now slightly long.
0855 Confirmed trend is up. And now there is a lot of S beneath.
0900 The ret resumes up but is quickly stopped by a lot of selling at 3004. Indication that this run may not last much longer.
0902 Bias shifts to neutral.
0905 trend is down but price now back at congestion zone. Will it push through?
0910 mp of prior congestion zone has halted the downwave. But no convincing rally either. LOLR remains down.
0922 S holds, followed by buying. Bias is slightly long, although still in congestion.
0923 breaches flat area. look for long opps.
0924 ret brought back setting up for long in anticipation of crossing HOD
0930 Here is the push. But R comes in and buying not yet strong enough. Will the ret get in enough buyers to break free?
0934 at anticipated R level of 3006
0936 buying faltering at the R zone.
0942 pace flat. action sideways. value found for now. no compelling reason to stay or enter.
0951 upside exploration over and pace increases with price back into prior zone
0955 S has halted the sharp selling. But no convincing rally. LOLR remains down.
0959 Breaches S zone and downtrend continues
1003 technical rally
1007 Selling wave is stopped again after the last hesitation. Things becoming more neutral. Exit.

Summary:

1: Breaks anticipated R. This is trend.
2: Selling of the thrust gives information about weakness and bias turns long to neutral.
3: Since S holds, the thrust above the congestion area shifts bias to long.
4: Selling of thrust forms HH. Bias still on the the long side as there are a lot of trades below.
5: Downwave retests S at the mp zone of prior congestion area.
6: Now that S has been tested, any thrust above the congestion zone shifts bias to long. The ret and the bring back sets up a long in anticipation of reaching for new high of day.
7: Pace flattens at anticipated R zone of 3006. Exit and remain neutral.
8: The sharp selling hesitated at prior S zone. But no significant rev. This shows weakness. Stay in trade or add to position.

http://www.sierrachart.com/image.php?l=1375561713634.png
 
June 5

Price been moving sideways and down since yesterday's close. Found S during ON at yesterday's S of 2961. But no significant buying waves. Daily keeps making LH's and the LOLR is down.

R: 2969
R: 2975

S: 2961
S: 2954

Summary:

1: Has crossed S level. Trend is down. Pre opening action was little weak. Short taken on ret has to be exited on break of DS line. Since S has been tested twice and the quality is good, Long could be taken on break of DS line as a REV trade.
2: Upwave retraces and sets up an opp to go long in anticipation of testing anticipated R level.
3: First meeting against R retraces but there is good quality S shown. Prior long may have been exited earlier. But bias again turns long as S is being confirmed.
4: Re-entry opp on long bias.
5: ret never breaches S (former R level). Bias is still long
6: Pace has slowed and re-test confirms R. Bias shifts to neutral.
7: S shown at expected level. Surge attempt north is quickly brought down confirming weakness. Bias short.
8: Despite earlier weakness, price makes another attempt north but falls short forming a LH.
9: Rev opp on short bias in anticipation of breaking through S level the third time.
10: S found at Opening Low zone. Pace has slowed. Bias turning neutral.
11: Pace has suddenly increased and long opp in anticipation of break through mp zone of prior downwave
12: Strong R at mp zone and bias turns neutral again.
13: Long term S of 54 zone stops the decline.


It seems that the first few mins after the open offer the best opps to position oneself for anticipated direction. Things are more volatile and losing trades may be more expensive. But once an attempt to explore the upside or downside has been rejected with good quality confirmation, it is likely that traders will explore the other side. Once one side has been rejected with good quality confirmation, it is likely that the other end will be tested. Seldom do traders create narrow range chop during the open.

http://www.sierrachart.com/image.php?l=1375635978375.png
 
June 6

Created a new low and found S at 2933. Drifted sideways and up during ON with a small buying wave during PM that has now sold down 12 points quite fast. Price is getting close to yesterday's low.

R: 2950
R: 2945
R: 2942

S: 2935

0831 Opening explored up and sold down. So did next min. Bias down.
0832 Exploration down finds some S at 35 level and starts counter move.
0834 Goes past R of 42 and shows strength with little ret so far.
0835 at R level of 45 which is mp zone of range from ON and PM. No significant opposition to the buying yet.
0838 R increasing at 47 zone. Buying pressure still slightly more than selling, but pace slowing.
0839 12 point run starts the ret.
0841 ret turns into a surge north but then sells down. Can scale out some here. But no significant Rev indicated.
0842 A LH and first REV exploration down crossing prior SL. Bias neutral.
0846 sideways action in a 2 pt range. No compelling direction.
0847 Breakdown from congestion. Bias shifts to short.
0850 Price down to mp zone of 42
0855 Sharp fall to Opening Low zone. Expected to lose pace and encounter S here. Still short bias.
0857 Good rally off S. Can scale out here.
0900 Climbs sharp past mp zone of 42

Summary:

0: Down pressure as price makes LH's. Short bias.
1: Quality S + surge north shift bias to long in anticipation of testing R of 42
2: First significant Rev move breaching SL and making LH. Bias neutral with some scale out.
3: Breach of consolidation. Bias short.
4: ret does not go back into consolidation zone. Short opp entry.
5: Strong Rev off S
6: Buying loses pace at former R zone
7: After meeting R, price falls back below mp zone and then tries one more time creating a LH. Bias short. Short opp on ret.

http://www.sierrachart.com/image.php?l=13756700311000.png
 
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