Son of If You Can Draw a Straight Line . . .
- Thread starter dbphoenix
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40D,
Nice trade yesterday. I had similar entry, but exited on trendline break. Price then retraced more than 50% of previous thrust.
What were you watching that kept you in, or did you exit and
re-enter when price went back above the 50% level?
Nice trade yesterday. I had similar entry, but exited on trendline break. Price then retraced more than 50% of previous thrust.
What were you watching that kept you in, or did you exit and
re-enter when price went back above the 50% level?
I don't know if he will be here today and I don't know what he was looking at, though I can guess. However, the halfway level is of the entire rally, not of each wave. If one used the latter, he'd be out as much as in. In this case, the rally is measured from the V bottom, at 3179. It doesn't end until that leg of the rally ends, just after 1100.
Thanks db, I guess I was trying to go by this, apparently I missed something. I will re-read.
I don't know that you "missed" anything. But recall that those charts from the first few posts are targeted at the fearful, particularly the pathologically fearful. This is why I go on to explain that one can exit at the break of a supply/demand line, wait for a breach of the last swing low/high, wait for a 50% retracement of the most recent rally/reaction, wait for a 50% retracement of the entire rally/reaction. Any of these as opposed to just sitting there and waiting for price to return all the way back to the beginning.
Note also that the drop to 90 is also a test of the 0830 swing low. If one has tunnel vision, these movements are far more likely to shake him out of an otherwise legitimate trade. In Wyckoff terms, you have preliminary support, a climax, a technical rally, and a test. Both the climax and the test are legitimate entries for those who don't have fear issues. For the rest, it's like Indiana Jones stepping off the ledge in The Last Crusade.
Ah. That's one for the advanced class. This requires concentrated study of Wycoff's charts and commentaries, a lot of replay (and I mean a LOT of replay), a thorough understanding of support and resistance, and egoless and fearless trading. Without that, better to enter on the test. In this case, that would be almost a half hour later (I think you can see where this is going
).While we're on the subject, I should also take the opportunity to point out that those who write books and teach courses and so forth on this subject don't have a very clear understanding of support and resistance -- if any at all -- and are therefore forever "calling" climax tops and bottoms that aren't anything of the sort. This can be embarrassing for them but hardly damaging since everybody's already paid their money. But it can be funny to watch them tapdance away from their silly calls.
Anyone who wants to understand climaxes should study Wyckoff's course in the original (http://www.traderslaboratory.com/fo...85-getting-started-wyckoff-lite-glossary.html). It's free. Paying some putz hundreds or thousands of dollars for misinformation is not a winning strategy.
I can see what you mean, bmwhendrix. I think that two things were working for me yesterday. The first was the awareness of the context of what the immediate trend has been and where price was relative to that trend. In this case, price became extremely oversold and that raised the probability of a rally. I was therefore looking to stay in as long as the rally did not show signs of real weakness. Real weakness would be retracing more than 50% of the whole rally, not merely 50% of a wave within the rally.
Second, where you were measuring off a second and separate wave, I saw that as more of a pause. I guess it might be mincing words to try to make a distinction between a "pause" and a "retrace." I cannot really define the difference except in the context of a wave. I can say that I have a sort of "3 minute rule" which is not really a rule but is more of a guide - If a retrace lasts three minutes or less and retraces less than half of the wave it is retracing, then I do not count the resumption as a new wave, but just the continuation of the initial wave. It is just something I have come to notice over time. So for me, the wave that started from the 78.25 low did not end at 9:35 EST, as the retrace lasted only 9:36 - 9:38 and retraced less than half the rally to that point. The first wave ended at 9:42, as the retracement lasted nearly 10 minutes and retraced nearly 50% of the first wave.
Here is my chart below with the same straight lines and channel as I posted yesterday morning, and you can see price has travelled from very oversold to within a point or so of the top of its short term channel during the overnight.
PS Did you catch the long entry just now at 3218?
Which is, not to beat a dead horse, what study via replay is all about. There are no shortcuts here, and those who try to create rules for the sole purpose of getting through it more quickly always end up spending far more time in this phase because they have to keep going back and starting over.
I should also point out with regard to the trade 40d mentions and the chart he posted that this provides a good example of the entry which "anticipates" a breakout that Wyckoff talks about but doesn't provide much guidance on. Whether it's "high risk" or not depends I suppose on the trader. It's not something I recommend to anyone who hasn't done the work.
In this case, if one plots a 1m chart of the morning, he will see a trend that begins at 0300, second point at 0400, third at 0530. If he then plots the lower limit line, he will see that price makes a higher low off that at 0910. If one sees this as a signal, he can then act accordingly regarding a long entry.
Is this hindsight? Yes. So what? The Snidelys can deal with it or not. But this is how the "anticipatory" trade is initiated, and, as I said earlier, it's only for the advanced class. Anyone who tries it who hasn't done the work is ripe for developing some very bad habits, particularly if he has ego problems to start with, which is practically everybody.
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