Wyckoff's Monster

G

green.green

This is my first attempt at a trading journal.

I guess my specific story is really unimportant. The short version is I became obsessed with trading. I read everything I could get my hands on. I was drawn to a lot of the older writings immediately. Wyckoff in particular resonated with me. So did a quirky little book called the Taylor Trading Technique.

I have read and studied several other trading techniques including Al Brooks' price action stuff, Ichimoku and pitchforks. I was fortunate enough to have a very brief indicator phase. I've settled on using Taylor for day biases and areas where reversals are likely. For day trading I use simple tools - price action is king but also supply and demand lines and channels and horizontal support and resistance levels based on previous pivot highs and lows. I do use a wave volume indicator on some of my charts and will also look at volume for price action confirmation on the 3 minute chart.

On all of my charts (daily, hourly, 3 minute, 133 tick) I only plot the day session data. It has worked well for me in back testing. I have found that the "gaps" this creates makes it easier to identify the day type.

I've been trading profitably in sim for two months. I'm still in sim until I tighten up my rules a little. My biggest problem currently is a way to not trade during the choppy days or at least shut it down early. I have not figured that out. I also still have some control issues. I will occasionally allow a position to go past my mental stop. I want to make sure I can follow my rules all the time before I put real money on the line.

Lastly - I want to invite anyone who is reading this to comment in this thread if it compels you. I am not in any way an expert in price action, the price volume relationship, trend lines or anything else - all thoughts are welcome. I'll get some charts up soon.
 
I'm not sure how many people here have read Taylor or even heard of him but he was a trader in the 40s and 50s who developed a method for swing trading whose point of departure is that markets are manipulated and the shorter-term professionals use a 3-day cycle to complete there buying and selling. Unfortunately Taylor was not a talented writer but his book contains some advice that has been essential to my trading. Here is how the basic cycle works.

Everything starts with the buy day. On an ideal buy day price dips below a previous day's low and then recovers. Taylor called this a penetration and would go long near the previous low. On an ideal sell day price would continue higher before violating the buy day's high. Taylor would take his profit at this high. After breaching the buy day high price typically would range for the remainder of the sell day. On the ideal sell short day price climb above a previous day's high and then reverse and sell off for the majority of the day. Taylor typically would get short around the high of the previous day and take profits around the sell day low. The picture I drew below might be helpful. Taylor had plenty of other rules that I can get into later if there is any interest.

I've also included my daily day only chart. You can see we have been riding the top of the channel for about two weeks. I think the rest is self-explanatory.

Next up is my hourly day only chart. You can see price has tired as the angle of assent leveled off (illustrated by the channels). Today we gapped below the blue channel, made one attempt at closing the gap before falling through support. (You can actually see three levels of support stacked near each other. We found support just below the last swing low and rebounded nicely. We are in a range until either sellers get it below 3640 or buyers take it above 3680. You can see the 5 support and resistance levels I have marked for tomorrow's trading.

I had a really good day in sim on the NQ. I felt completely in control and almost bored for most of the day. The market opened with an almost 40 point gap. When the third swing took out the high of the previous I was looking for a pullback long. My expectation was for an attempt to close the gap. Buyers stalled pretty quickly, I took profit and I used a simple horizontal line to get short. Sellers took control until buyers attempted to defend the day's low. Price rebounded strongly but given the failure to close the gap I kept my short bias and got in after all the shorts were washed out. When I saw the trend line break and the volume on the 3 minute chart I switched my bias to long and waited for a spot I liked. Most of it was just using simple trend lines and then looking to volume for confirmation.

I've included two versions of my tick chart. One is split in half for more detail - one is a single screen. If you have a preference please say so now. If anyone has any questions or comments go at it...
 
One more comment about the NQ's price action today. The gap makes for an obvious line in the sand for a lot of traders. I would expect a rally into the gap but if it remains open I would expect a larger corrective more down. If it is filled I would expect another high. Of course anything can happen.
 
Score another one for Taylor. He would have held his long position from yesterday's low overnight and taken profit near the high. As is also expected on a Sell Day price didn't do much directionally today. We did make a new high but after the first slow push up price noodled between the morning high and low for the rest of the day. All of this can best be seen on the hourly chart provided.

On a typical sell-short day (tomorrow) Taylor would be looking for a more up through the previous day's high (3723.25) before reversing and moving lower for the rest of the day. I think Taylor would expect both a test of the highs (or an upthrust) followed by a move down into the gap. We are in a wide range from 3723 to 3637.

On the tick chart you can see the trades I took today. I was clumsy with my exit from the first trade and probably cost myself 1.5 points there. I also think the first trade was early. When a move back into the gap was rejected I should have been waiting for a play at the high if looking short. You can see the trade location is better on the next two trades.

I still need a way to keep me on the sidelines on days like this.
 
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