Trading Price:Phase One:Observation

[eminiman414]

So bars 21, 22,23 sellers lower their asking price in order to find buyers and they do find buyers at higher prices than bar 18 showing a sign of strength since sellers are now able to find trades at higher than previous prices.

I know the point of observation is not to look for entries etc. but...in terms of behavior, sellers do lower the prices however in terms of entries and exits it's the behavior of the buyers during the lowering of the price by the sellers that we should be interested in? That would essentially tell us to enter, exit, stay in etc and vice versa for buyers raising prices????

As per Wyckoff when we want to buy we look at the down wave and when we want to sell the up wave.

 

[dbphoenix]

As per Wyckoff when we want to buy we look at the down wave and when we want to sell the up wave.

Well, no. To do so results in counter-trend trading. Buyers buy on both upwaves and downwaves just as sellers sell since each transaction requires both. Their motives, however, will be different according to circumstances. Professionals, for example, will buy declining prices in order to support them. Amateurs will buy in an effort to catch a falling knife. But whereas professionals will tend to hold onto what they've bought and accumulate a position, amateurs will more often panic and throw their shares back onto the market as sellers. This helps fuel the cascade.

There are all sorts of misconceptions about supply and demand and buying pressure and selling pressure. I've attempted to correct a couple. But for the purposes of this phase of plan development, let's just say that the idea of demand overwhelming supply does not mean that buyers are beating sellers into submission and wresting the shares or contracts from their death grips; it means rather that buyers are more than happy to pay whatever sellers are asking because they anticipate being able to sell what they've bought at a higher price. Why else would they buy in the first place? Sometimes buyers are manipulated into paying ever-higher prices. Sometimes sellers sell too soon and smack themselves for having done so. There's really no way of knowing until the music stops and you have a sort of Wile E. Coyote moment where there's nothing under buyers to support them.

This is much easier to see on a 1t chart. Those plunges you see so often, such as the one after the Fed announcement, can literally consist of empty space. If one is plotting a bar chart or a line chart, it looks like there are trades all the way down, but this is not necessarily the case. One transaction may be far below the last, but, again, unless one is looking at a 1t chart, this will be masked. This becomes not a matter of buyers supporting the price all the way down but rather there being no buyers at all.

 

[niko]

There's really no way of knowing until the music stops and you have a sort of Wile E. Coyote moment where there's nothing under buyers to support them.

 

[green.green]

the idea of demand overwhelming supply does not mean that buyers are beating sellers into submission and wresting the shares or contracts from their death grips; it means rather that buyers are more than happy to pay whatever sellers are asking because they anticipate being able to sell what they've bought at a higher price. Why else would they buy in the first place?

After reading this its completely obvious but I've missed it for a while now. In my head I've been stuck on a boxing match analogy where each wave is some sort of blow (jabs , crosses, uppercuts) between buyers and sellers.

Did you crash ET?

 

[eminiman414]

This is much easier to see on a 1t chart. Those plunges you see so often, such as the one after the Fed announcement, can literally consist of empty space. If one is plotting a bar chart or a line chart, it looks like there are trades all the way down, but this is not necessarily the case. One transaction may be far below the last, but, again, unless one is looking at a 1t chart, this will be masked. This becomes not a matter of buyers supporting the price all the way down but rather there being no buyers at all.

I guess I meant when entering the market not so much buying vs. selling as I understand there needs to be a buy and a sell. If entering as a buyer waiting for the downwave. Isn't that the point of waiting for the retracement etc?

As per the action you described above I feel as if I noticed that even in a 1m bar. Is it where price jumps up or down lets say from 2700 to 2701 skipping the 1/4 points in between?

 

[dbphoenix]

I guess I meant when entering the market not so much buying vs. selling as I understand there needs to be a buy and a sell. If entering as a buyer waiting for the downwave. Isn't that the point of waiting for the retracement etc?

But you're not buying the downwave; you're buying the continuation of the upwave. And even though this thread is not necessarily about the SLA, I should point out that the SLA takes care of this upwave/downwave business automatically. If one wants to short, price has to fall from somewhere, such as a double top. One then shorts the first retracement. If the retracement isn't confirmed, then the probability of a continuation upward and a higher swing high has increased. If the retracement IS confirmed, then the trader has nothing to do until the SL is broken. Once that occurs, he automatically looks for a long. If there is a retracement and he attempts the long but it's not triggered or it's not confirmed, then his attention turns south again. Concerning oneself with what wave he's in or how its length compares to some other wave is unnecessary and may even be a distraction. If you look at a 1m chart of today's NQ from 1220 to 1300, you'll see what I mean.

Promo over.

As per the action you described above I feel as if I noticed that even in a 1m bar. Is it where price jumps up or down lets say from 2700 to 2701 skipping the 1/4 points in between?

Yes

 

[dbphoenix]

93 views but only 6 replies. I'll have to find something more interesting.

 

[eminiman414]

Ahhh I see I see. Good stuff. I have noticed that if like in your example we don't get a signal in the opposite direction and price gets to around the 50% mark it usually leads to a continuation, even more so when that 50% area is rejected.

 

[dbphoenix]

93 views but only 6 replies. I'll have to find something more interesting.

I do have a suggestion, though, that may make the way easier. The understanding of supply/demand and the auction market is a bit, well, skimpy. If one stops casting every movement in terms of eager buyers and crafty sellers, he may find it easier to focus on price movement rather than the drama behind it. Granted I'm guilty of this myself. It makes the trading more fun. But it can't be allowed to interfere with trading decisions, not unlike pilots who kid around when there's nothing to do but watch the plane fly itself but who snap to when the need arises.

The business of traders is trading. Whether buyer or seller or short-seller, everybody's looking for a trade. Buyers don't try to "push" price higher, even though it seems that way; they are merely paying the ask, and if sellers quote the ask at ever-higher prices, buyers aren't "pushing" anything, they're just paying the ask. And if sellers can't find any buyers to take the ask, they have to lower their prices in order to get rid of whatever it is they're trying to get rid of. So price turns.

Unless buyers are stupid, and many of them are, they don't want to pay high prices for something unless they're convinced -- or have convinced themselves -- that they can sell it later at a higher price. On the other hand, sellers don't want to take any less than they're asking. So to say that sellers want price to fall and buyers want price to rise makes no sense, unless you're the sort who goes to the grocery store and wishes that bananas were more expensive (if you own shares in a banana plantation, sure; otherwise, no). Go check out some garage sales this weekend and see how many buyers push the sellers into taking more money than they've asked for.

Therefore, rather than look at this as buyers and sellers, look at it in terms of "traders" and focus primarily or even exclusively on price movement. The buyer/seller thing can be addressed later.

 

[dbphoenix]

Ahhh I see I see. Good stuff. I have noticed that if like in your example we don't get a signal in the opposite direction and price gets to around the 50% mark it usually leads to a continuation, even more so when that 50% area is rejected.

This has to do with entries, though. I hesitated to bring it up since it's off-topic, but it was the only way to answer your question about waves without being vague. If you're eager to get into it, your journal can address whatever you want it to address.