The action of the whole market tells you when the selling is better than the buying and vice versa. You do not care why insiders are buying or selling, but you should care a lot about the action of their stock on the tape, for that is what tells you the truth.
The action of a single stock is its own best forecaster.
When you know how to read the tape and interpret the action of the whole market and of individual stocks, you will be "on the ground floor" with the insiders, without having anything to do with them. That is because the tape tells the real story. To become a successful trader, you must learn to judge by the action of the market. It is the action of the market which carries the greatest influence with insiders.
--Richard D. Wyckoff
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Markets are not a hobby. They should only be participated in by professionals who know what they are doing. Professionals who know the rules and know how to play to win by the rules.
That's what these guys are doing. They know how to play the game. If you stepped on the court with Kobe Bryant would you complain that it's not fair that he's a better ball handler and shooter than you are? Of course not. You just wouldn't get on the court with them. You wouldn't jump in a pool if you didn't know how to swim.
There is nothing wrong with this, it's the by product of professionals who are extremely good at their craft.
The only difference between now and the 1930's is the computer. What used to take big operators weeks or months to accomplish can now be done in a matter of days (sometimes hours) if they so desire to do so. This is one cause of those 200 point daily swings, yet at the end of the week the markets have barely moved.
Last edited by DbPhoenix; August 11th, 2015 at 07:52 AM.
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Today was a day where strong movements showed up, as far as I am gathering data for set a fix stop that allow me to protect my position in a market environment like this (Analysis MAE), the exit of the first and second trade was taken in the LSL of the RET`s.
In this order of ideas I think that today was not a profitable day in terms of points but it was valuable in terms of gathering data for optimize my trading plan
Last edited by lajx; August 11th, 2015 at 10:58 AM.
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Db, massive thanks for sharing your insights and time. I was blown away from the start, which in my case was reading the article where you advise to "just watch" price, like fish in a tank. Since then I've immersed myself in your material -- and Wyckoff's and Mamis's. Amazing, all of it.
Here are my S & R lines.
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Edit: After looking at this some more, I would make a couple tweaks to my charts. On the 4 hour chart, the first support line I drew should match up with the median of the range that follows -- at around 4542.75. Likewise, on the Daily chart, the first resistance line I drew should move up a bit and become the median of the range that follows at around 4562.5.
Last edited by manraygun; August 11th, 2015 at 01:53 PM.
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I'm in the middle of constructing outbuildings on my property so I won't get to this until later this afternoon, probably after the NY close. So don't think I'm blowing anyone off.
Anyone else who wants to play has 4+ hours
Incidentally, I do this occasionally not to catch anybody or make anybody look or feel stupid; I do it so that I know whether or not the content is getting across and, if so, how. On another site, I asked if anyone could take the rules and apply them to the morning's activity and tell me what the trades should have been and a couple of people were damn near spot on.
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There are several courses to follow, or paths to trod, when learning how to trade.
A: Hear something on the news, read something in a magazine or online, hear somebody talking about it at a party or at work or at school, read a book, whatever, get the bug, open up a brokerage account, select a trading platform, subscribe to a datafeed, and start trading, possibly something micro, with no plan whatsoever beyond buy what looks "good", then lose all your money, refund the account, try again, lose all your money again, try again for a third or fourth or fifth time. Or more, depending on how much punishment you can take.
B. Study the market. Learn how it works. Learn what moves price. And when. And how. And how fast. Formulate hypotheses to explain these movements. Test those hypotheses via back-testing, then forward-testing. Develop a tentative trading plan. Simtrade it. If it doesn't work as expected, go back however far you must and begin again, all at no expense whatsoever. When it simtrades as expected, THEN open up a brokerage account and trade it for real, in small amounts. If the plan develops holes, stop and fix it, then try again until you have a thoroughly-tested and consistently-profitable trading plan and the discipline to follow it, which you will likely do as it's yours and not something you copied from somebody, and as you have nothing to be afraid of, you won't have to waste a lot of time, if any, "controlling your emotions".
Guess which path nearly all beginners take.
There is no going back. While it is possible to unlearn, it ain't easy. And there are residues which can have an extraordinary half-life. Sometimes it's possible to learn something new and/or different that will replace and extinguish the old. Sometimes one has to be satisfied with the new suppressing the old. This will create problems eventually, but with continued success, those suppressed impulses may become nothing more than an itch.
Fifteen years ago, the sort of things I talk about would not have created much hubbub. There was still a tradition of trading price, of reading the tape, and there were plenty of people who knew how to do it. Now there's almost no one, at least among amateurs (the professionals aren't talking). Back then, what we now take for granted was all new: digital charts, streaming data (even real-time, though it cost an arm), discount brokers, candlesticks, and tons of indicators. But by now, it's accepted among beginners that this is how it's done, that indicators are not only desirable but necessary. To suggest some other way borders on heresy. We have computers. We have Renko charts. We have clouds and bands and envelopes and so forth and so on. We have colors and plug-ins and coded this and that. And the courses and the dvds and the software bloom like crocuses in the spring.
And yet the failure rate is pretty much what it's always been.
Some of this is addressed in the pdf in post 1, but I delve into it a bit here because I don't want to upset anybody with what I have to say about support and resistance as it will be very different from what you're heard or read elsewhere, some of which comes from people who claim to be traders and really ought to know better.
Support and resistance, I'm sorry to say, have nothing to do with lines (or bands or MAs or Fibs or "pivot points" or any other sort of line). The market knows nothing about your lines. And even if it did, it wouldn't care. The market has other things with which to concern itself, and you and your lines are among the least of these. Nothing personal. That's just the way it is. The universe doesn't care about you, either (sorry about that). The market doesn't care about anything that's in your head, not only lines but also settings for all those indicators to which you cling. Nor does it care how you display the information it provides, whether candle, bar, line, mountain, tick, red, green, blue, aubergine. One must therefore distinguish between what is in one's head, which is most likely irrelevant to the task at hand, and what is in the market, what requires no settings or drawing or futzing or anything at all from the observer. This can be tough, because hardly anyone thinks this way anymore, except for a relatively few professionals (the guys in Market Wizards don't lie awake at night worrying about their MACD settings).
So. If support and resistance are not lines, what are they? Support is an area where buying pressure overwhelms selling pressure. More specifically, support is the zone or level at which those who have enough money to make a difference are willing to show their support by retarding, halting, and reversing the decline by buying. Resistance is an area where selling pressure overwhelms buying pressure. More specifically, resistance is the zone or level at which those who have enough money to make a difference attempt to retard, halt, and reverse a rise by selling. Or, put even more simply, resistance is that level beyond which buyers refuse to pay the ask. Support is that level below which sellers refuse to lower it. And, yes, that may be too simple, but it's an important hook on which to hang one's assessments when trading in real time: if other traders aren't willing to pay the ask, why should you be?
So, having said all that, and hoping that I haven't shaken anyone's foundations too hard, look at these charts again, without the lines, and try to detect those levels at which the roadblocks are erected, at which the tide turns. For example, when I woke up this morning, too early, the first thing I noticed on the hourly was that buyers turned back six ticks away from the level at which sellers refused to lower their asks last Thursday (at which point they found willing buyers). Curious. I had said several days ago that the LOLR was down, and though the rally was nice, that didn't change the LOLR. So the rejection by buyers at that same level was something to take seriously. Not that I'm suggesting that anyone short that level yesterday evening then curl up for a good night's sleep. But there were other opportunities, more easily available to somebody in Paris, but available nonetheless. At 0415, for example, why did price reverse at 72? If one recognized this as a trading opportunity, how could he exploit it? And would he be willing to pay the Price of Admission? And if he missed that one, what about the rally at 0700? Why did it reverse at 64.5? Is that a trading opportunity? If so, how can it be exploited? (And no lines so far) What's the price of admission?
All of which may appear to be completely irrelevant as the open is still an hour away. But, as I've said elsewhere, the trade must be approached. One must enter the pool from the shallow end and work one's way forward, not just cannonball into the deep end hoping to make a big splash and impress onlookers. The thought is father to the deed, and without thought, the deed is not likely to generate much applause.
It's all old news by now, of course, but it will have to be done again tomorrow. And the next day. And the day after that. Learning a new way of seeing takes practice. And practice makes perfect.
There are several courses to follow, or paths to trod, when learning how to trade . . .
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