My Wyckoff journal

[damnpenguins]

Well - here goes….

Hi everyone; I'm damnpenguins, and I’m a recovering IT Project Manager

I’ve started this journal as a way to move forward with my trading goals.

I intend to post anything that is relevant to that stated goal. Starting with notes from my observation phase, trade plan development, questions / comments about Wyckoff's materials. Then moving on to daily trade plans, notes from trading sessions and trade reviews etc.

I figure the only way I’ll improve is to throw it all out there warts and all and see what others think of my observations, market characterisation, decisions, trade plans etc

This isn’t an easy thing for me to do, but then this can’t be done by half measure if I am to gain anything out of this exercise.

BTW - A big shout out to all the other SLA / Wyckoff traders here on ET that have been brave enough to post their advice, knowledge, trades, successes, failures and frustrations. Thanks. I’ve been a lurker for far too long on boards like these...

Apologies in advance for the long posts to come but this is a sort of confessional

 

[Trapper]

Good luck with your journey! What are you going to be trading and what is your timeframe?

Trapper

 

[damnpenguins]

A bit of History

Whilst I’ve not had the opportunity until recently to trade Full Time, I’ve been obsessed with trading since 2007. I started out in FX, and have migrated slowly to Futures and now with the influence of DBPhoenix and FortyDraws et al specifically the NQ.

Over time I’ve trawled through FX threads on Fibs, Order Flow etc And was intending to trade FX but that slowly morphed into a fascination with all things Wyckoff after stumbling on to the SLA threads here and then the Wyckoff Archive back at TL….

So now that I have the opportunity to focus on this full time, I’m throwing myself into this.

But, and this is where things get murky, I’ve done things incorrectly…...

 

[damnpenguins]

The Problem

Whilst I was still working, I read through the Wyckoff course last year, along with DB’s book, and did a fair amount of observation, backtesting etc I took copious notes etc, filled folders with print outs of charts, forum posts, quotes from Mamis etc

But I didn’t STUDY it. I didn’t make it my own. I was struck last week by this post from fortydraws:

"….the result of you not paying attention, not studying (reading is NOT the same thing as STUDYING). I'll tell you what brother - I studied. I studied my ass off, and I still do. Hardly a day goes by that I don't study a few pages (often far more than a few pages) of the source materials - Wyckoff, DbPhoenix, and some of the authors DbPhoenix has recommended, e.g. Douglas, O'Neil, Mamis. I study."
http://www.elitetrader.com/et/index.php?threads/observations-an-example.288938/page-10#post-4086367

This was essentially what I had done. I had read the materials, I had gone through the motions of learning the materials. I had gone through the motions of observation. I had my playbook trades, and forward tested entries, formed a trade plan etc. I had statistics on MAE and MFE, but I hadn’t studied…

What I was left with was a good looking trade plan, but one I had absolutely no confidence in when push came to shove.

This all came to the fore the other day. I was following along with price, but in all honesty I felt like a dog in a lab coat. I looked the part but I had no clue whatsoever of what I was doing. After a bit of navel gazing I came to the only conclusion I could and that was that I simply hadn’t put the work in.

Wyckoff extolls the virtues of practice, observation and experience leading to competence, DBPhoenix does the same, the quote from fortydraws above highlights the lengths that he goes to. The reason why people struggle with an endeavour like trading to a large extent is that they simply don’t put the work in.

What’s that quote from Eddison? “Opportunity is missed by most people because it is dressed in overalls and looks like work."

So, here we go. Mea Culpa. To this point I haven’t put the work in.

OK so now the public confession is out of the way I’ll get down to business....

 

[damnpenguins]

Good luck with your journey! What are you going to be trading and what is your timeframe?

Trapper

Thanks Trapper!

Up until now I've focussed on the NQ.

Main focus is trading higher timeframe levels off either the 1M or tick chart.

 

[damnpenguins]

Here are my notes for the days trading (first 90M) at any rate. I had originally posted these at the intraday trading thread on TL, but removed them as I feel they are not as professional as they could be and therefore reflect poorly on me. However they do track my thinking at the time, and so therefore will provide context for my review which I'll post soon...

=====

here's mine.

My observation notes are usually a bit more succinct, but today I seemed to have a really bad case of verbal diarrhoea... apologies for the length of it....



Daily Notes:- 20 February 2015

Notes
0826 - Minutes before the Open and we've been balancing for roughly an hour around 11
0828 - breaking down now prior to the Open Buyers left holding the bag as Sellers withdraw
0829 - testing lower @ the Open
0830 - BP comes in and gets chewed up
0831 - tight OR as with yesterday
0831 - Buyers test higher into LSH prior to the Open
0833 - Buyers look like they want it more. $ pops up
- no follow through
0835 - $ makes it back down to 09 before trying to recover but the bounce isn't strong.
0836 - another dip lower but Buyers step in here.
- and fail.
0838 - Sellers push into the GlobexLo and Buyers defend it, but SP overpowers them.
0840 - and the rout starts
0840 - Next SUP I have is at 75 - still a way away.
Bouce @ 95 or so
0841 - $ holds below the 00 round number
0842 - Sellers having a bit more trouble getting through 95
0844 - back up to 00 on decent BP
0845 - Buyers step back in after a small RET signalling intent to get higher
0846 - and then the floor falls out from under them....
back under 00
and above.
0848 - HL as Buyers come in. Do they have enough juice to get back higher ?
0848 - Sellers pressing lower again.
0849 - LSL under threat
0849 - Hinge? kinda looking thingy as Buyers and Sellers have differeing ideas as to value
0850 - lets try short....
0851 - moving back towards DB and RTH Lo
0851 - failure to move higher is as much a signal of intent to head short....
0852 - looking heavy
0853 - slams into the Lo and bounces on good BP
0854 - back above 00
0854 - testing LSH @ 04 / int 50% @ 05
0855 - smallish RET not much intensity from the Sellers
0855 - and we're up to the 50%, first peak above not very successful
0857 - no massive SP coming in here yet.... there it is
0857 - REJECTION here confirms RNG between 96 - 05 presently @ the ML ~ 01
0858 - Buyers stepping in here @ the 50% of this mini RNG. Let's see how interested they are...
0859 - hmmmm not really. OK now the Sellers have a go, lets try for the Lo @ 96 then....
0900 - hmmmph maybe, maybe not.
0901 - btw that semi Hinge ML is the same as the RNG 50% - 00 round number strikes again
0901 - ok we might be testing the Lo's now..... but we might've just found a few Buyers that are interested
0902 - test of the ML from the underside meets with renewed selling
0903 - which the Buyers try to stall. If Buyers capitulate are we heading further south now?
0904 - that's if they capitulate that is....
0904 - 1T looks thin in terms of transactions short
0904 - Buyers might have this... yup
0905 - Looks like the Buyers decide they like $ better higher up. so we are back to testing the RNG Hi @ 05
0906 - Now do they have enough in the tank to get higher?
0907 - Should Sellers stop pressing lower theres only one way for $ to go
0907 - 1T compressing at the Hi
0908 - no interest south on that test lower,
0910 - now there is, but no follow through, in either direction it has to be said. Still we have a HL and Sellers haven't come in numbers yet...so we leak upwards still.
0912 - stalled just under this RNG Hi @ 05
Buyers look to test higher after this failed test lower.
0912 - Sellers are waiting at the Hi, but $ isn't dropping..
0913 - POP and we are back to the GlobexLo @ 06 but no real follow through
0914 - once again... test higher but no interest and no great progress, until we can gather some support for this move higher or Sellers come in to the MKT in numbers
0917 - pre open LSH @ 14 next stop?
0919 - stuck just below this congestion area @ the Open
0922 - a couple of points away from the main SL of the last few hours action
0923 - testing higher now, up to the SL
0925 - where the Sellers mount an exceptionally bland and uninspired defense, failing any real oppositon the Buyers might just have a peak higher until the Sellers decide $ is high enough
0927 - ho hum
0927 - Wyckoff would be talking about how the Buyers haven't been able to progress, but on the same side neither have the Sellers . Seems to be a battle of indifference vs laziness.
0929 - Sellers drop their offer looking for anyone interested....
0930 - back to GlobexLo and int50%
0932 - lacklustre bounce thus far
0935 - but then someone wakes up and decides to have a go....and we are back up @ the main SL
0936 - where we leak back lower,
0938 - not progressing lower yet
0939 - and we pop higher through the GlobexLSH @ 14 and back up the YHi @ 17
0942 - having trouble sustaining the move above the YHi. Profit taking?
0944 - now we get some activity as $ attempts to rise out of the trough. Sellers capitulate on the 1T
0945 - back to the YHi attempting to break the LSH
first attempt fails, but then Buyers step in with intent and the way is open to the GlobexHi
0948 - but only if Buyers step in to support this. Otherwise the big boys are potentially offloading and we jump on lower, still making HH and HL , but be on guard?
0949 - an attempt at SUP under $. Is it going to hold? Still around the YHi
0952 - no real demand up here for higher $ and we leak back lower.... technically a LL is forming despite the rebound higher
0955 - BP comes in and we look to test the LSH - look for a DT or failure..... remember fish face from Star Wars.... It's a trap !!!!!!
0958 - LH
0959 - are the Buyers going to step back in?
0959 - back to LSL
1000 - fails at the LSL
and the first 90m are over....
1002 - are we going to try for the GlobexHi? or is $ just going to fade away.....
1002 - DT FISH FACE WAS RIGHT!!!!!

I think I'm still in the practice of recording my inner monologue rather than writing for public consumption, so I'll smarten it up for public purposes next session, but I said yesterday I'd start posting these so true to my word...

=======

 

[damnpenguins]

Just a quick note about how I'm going about this...

Each day I spend from 9am until the market opens @ 1430 or so divided between study, backtesting, market replay..

I write up my premarket analysis, noting levels of interest, and have a trade plan ready for the session ahead.

Finally I conduct daily trade reviews after I've finished for the day.

edit: Just wanted to put this out there to make it clear that I'm not just turning up to the market unprepared @ the open and expecting to make millions without any prep or study etc I'm not gloating about the hours I can spend on this, merely pointing out my level of commitment.

 

[fortydraws]

Good luck, damnpenguins.

One thing that helped me, and still helps me is that I try to think of the market this way: Buyers fearfully chase price higher as often as, and probably more often than they gleefully watch its rise. Sellers fearfully chase price lower as often as, and probably more than they gleefully witness its fall. Not all sellers are short or flat, and not all buyers are long or flat. A rally is in part caused by sellers happily and greedily raising their offers (holding out for higher prices) and declines are in part caused by buyers happily and greedily lowering their bids (holding out for lower prices). I think some Wyckoff apprentices may fail in the observation phase in part due to this simple "buyers driving it/higher sellers jamming it lower" assumption. This is where watching time & sales or the order book, even if just for a day or so, might be helpful. I always try to frame what I am observing in terms of supply and demand (supply outstrips demand, or demand outstrips supply, or supply and demand are nearing equilibrium).

Buyers don't fail to "push prices higher" so much as sellers fail to entice more demand at those levels. Buyers are often very happy to see prices fail at the highs. Buyers and sellers are not uinilateral armies opposing one another. And any trader can be at once one, and moments later find himself the other. I started out this morning short, so I was a seller, yes, but moreso I became a potential buyer but a buyer expecting lower prices. I did then become a buyer, thus becoming a potential seller, but a seller expecting potential higher prices. Funny how that works, supply and demand.

DbPhoenix posted an analogy a few weeks back about buyers at a garage sale - buyers are bargain hunters too - they want to buy that lawn mower on the cheap. The seller might have a $50 tag on it, but our buyer who just wandered in only wants to pay $40. The seller offers it at $48, and before our buyer can get a bid of $45 out, three more buyers suddenly show up, having seen the little back and forth between the garage sale seller and our bargain looking buyer. Now, each want the same lawn mower, and they indeed "push" the price higher as an impromptu auction ensues, especially because one of the bidders had borrowed his Uncle Chuck's lawn mower and it was stolen from his garage and now he suddenly has found himself short one lawn mower and he really needs to cover it for his Uncle Chuck. Finally, our original buyer places the winning bid, willing to pay more for that mower than the other buyers (poor Uncle Chuck). Much to his chagrin, he realizes that he has just paid $70 for a mower he wanted at $40 and could have had at $50 or even $48 if he had just hit the offer. The seller, of course, is happy, because the last thing he wanted to do was have to drive the price down to make a sale. He was quite happy not to lower his price.

Funny how that works, supply and demand.

 

[damnpenguins]

Many thanks for that post Fortydraws.

I'd hate to leave a poor impression by responding with a glib one liner about taking this on board etc

Instead I'll respond by saying that I've printed out your post and will do some market replay tonight with that front of mind.

Much appreciated.

Have a great weekend everyone!

 

[damnpenguins]

My intention with this post is to journal some thoughts that came to mind based on fortydraws post.

I started this journal with the intention of starting over properly, so if I have any of the fundamentals wrong, they need to be corrected.

By putting it out there people can comment and if necessary highlight errors of judgement etc.

The other possibility is that I am simply overthinking everything and just need to have a break and take the kids to the park this afternoon

Buyers fearfully chase price higher as often as, and probably more often than they gleefully watch its rise. Sellers fearfully chase price lower as often as, and probably more than they gleefully witness its fall.

FEAR as a determinant of price movement, in this case fear of missing out.

By phrasing it that way the suggestion is that the “Composite Man” can be taken aback by price movement just as the retail trader is, and at times therefore acts out of the same emotion - FEAR - throwing orders at the market to take whatever price he can now in order to avoid taking a worse price later. OR, even worse - missing out on the move entirely.

Not all sellers are short or flat, and not all buyers are long or flat.

And any trader can be at once one, and moments later find himself the other. I started out this morning short, so I was a seller, yes, but moreso I became a potential buyer but a buyer expecting lower prices. I did then become a buyer, thus becoming a potential seller, but a seller expecting potential higher prices. Funny how that works, supply and demand.

I’m thinking Short Covering, Profit Taking etc. Closing out a losing position. Reversing a position…. There are a number of reasons.

To me the point is to broaden ones viewpoint to include the above and the impact they might have on the market.

As you say later in your post that yesterday your were a Seller with the intention of becoming a Buyer in order to buy back your position at a lower price.

A rally is in part caused by sellers happily and greedily raising their offers (holding out for higher prices) and declines are in part caused by buyers happily and greedily lowering their bids (holding out for lower prices).

As with the above response regarding FEAR. This has to do with GREED now, as sellers determine they are in control they can raise their prices until such time as the buyers refuse to transact. This can only take place with the agreement of buyers as they are still happy to transact at the higher prices.

Same as a “buyers market” in real estate, why sell your house for 500k when the market will sustain a sale at 550k? If the buyers are at the auction bidding it up, what reason does a seller have to accept a lower price? None.

I think some Wyckoff apprentices may fail in the observation phase in part due to this simple "buyers driving it/higher sellers jamming it lower" assumption. This is where watching time & sales or the order book, even if just for a day or so, might be helpful.

This is a big one, and I’ll probably end up writing another post on this to highlight where my thoughts are. Needless to say this is a crutch, a somewhat inevitable one, but one that I need to definitively move past in order to see the market properly.

I always try to frame what I am observing in terms of supply and demand (supply outstrips demand, or demand outstrips supply, or supply and demand are nearing equilibrium).

+1

Buyers don't fail to "push prices higher" so much as sellers fail to entice more demand at those levels.

Buyers are often very happy to see prices fail at the highs.

+1

To me this comes back to the base motivations for a trader to step in to the market and transact at a certain price. Buyers will transact on the assumption that they will be able to offload their inventory at a profit, and will continue to do so until price has risen to the point whereby they don’t see the opportunity for profit. Thus “Sellers run out of buyers” at swing highs etc. vice versa for shorts.

With regards to Buyers being happy to see price fail at the high, I am assuming that this is refrerring to them anticipating price returning to a level that more closely resembles “value” to them and therefore provides another opportunity to buy and sell later at a profit.

Its funny but I can still see my bias here, in that I am generalising from the buyers standpoint rather than the sellers standpoint….. More work to be done there

Buyers and sellers are not uinilateral armies opposing one another.

To me this requires less effort to move past. Meaning that once I am viewing the market as a continuous auction process negotiated between buyers and seller, the whole conflict bias melts away..

Now to say this requires less effort, that is not being glib, merely just anticipating that this bias melts away if one is viewing the market from the correct perspective.

Prices rise or fall due to the law of Supply and Demand.

A transaction represents an agreement between two parties - a buyer and a seller, there is no conflict. It is a projected bias.

DbPhoenix posted an analogy a few weeks back about buyers at a garage sale - buyers are bargain hunters too - they want to buy that lawn mower on the cheap. The seller might have a $50 tag on it, but our buyer who just wandered in only wants to pay $40. The seller offers it at $48, and before our buyer can get a bid of $45 out, three more buyers suddenly show up, having seen the little back and forth between the garage sale seller and our bargain looking buyer. Now, each want the same lawn mower, and they indeed "push" the price higher as an impromptu auction ensues, especially because one of the bidders had borrowed his Uncle Chuck's lawn mower and it was stolen from his garage and now he suddenly has found himself short one lawn mower and he really needs to cover it for his Uncle Chuck. Finally, our original buyer places the winning bid, willing to pay more for that mower than the other buyers (poor Uncle Chuck). Much to his chagrin, he realizes that he has just paid $70 for a mower he wanted at $40 and could have had at $50 or even $48 if he had just hit the offer. The seller, of course, is happy, because the last thing he wanted to do was have to drive the price down to make a sale. He was quite happy not to lower his price.


Funny how that works, supply and demand.

And this is back to the the big one.

As I mentioned above, there is a lot here and I’m not able at present to fully articulate what I am wanting to get out, so I’ll cogitate on this for a bit and post it later….