If You Can Draw A Straight Line . . .

Well its exited but its not exactly moving as much as 2.5 hours of "cause" would suggest. Lets see if it can attract aggressive selling.

 

No, trendlines are covered in section 15m

 

That's one reason why you don't hear much about VSA anymore.

 

I don't understand your point?

 

"Cause" is a VSA thing, i.e., the "law" of cause and effect. But it has no basis in fact.

 

I always thought it was part of Wyckoff's original material. Thanks for clarifying.

 

Nope. Just scan his course for "law". The only law you'll find is Supply and Demand.

 

DBPhoenix, it's really great that you keep on helping others in such a fantastic manor.

I restarted my journey quite a while ago, but lost quite some time with the usual "short cuts" - all of which you described in the "Developing a plan" sticky at TL.

To really get myself on the right path I have set a few milestones (after I used to overcomplicate things for a long time).

- understand price behaviour by just watching it (1T to 1M)
- develop guidelines which help to increase propabilities
- backtest those guidelines
- put it all together to create a plan
- follow the plan by trading it sim and live
- create an anamnesis routine in terms of trading and market

Of course, this all sounds pretty conventional. The main problem I have is to define guidelines without opening "pandoras box".

Because I believe that a plan has to be more of a philosophy instead of anything fixed and should by purpose frame the behaviour of buyers and sellers - or price in general of course.

Many times you mentioned that with Wyckoff there are no setups - mainly maybe because price movement and the scenarios evolving are unique. In terms of developing tactics or guidelines it means a bit of a dilemma to me.

One time it can be necessary to take the break of a demand line without waiting for a lower high and one time it is wise to wait for it.

I don't know if I'm overcomplicating things again or circle around an issue which is none. The thing is not so much on "not to miss out on profits/opportunities" but more on beeing flexible within the whole context of trading price within a "philosophy" - without only "relying" on what is found on the bottom of pandoras box...which is hope...

 

Whether a plan is "fixed" or not depends in large part on where the trader is with regard to fear. This also touches on the matter of "setups" and changes in the landscape such as demand/supply line breaks. The fearful trader will not only want a fixed plan but require it. The fearful trader will also require "setups" as well as inviolable rules that require him to act without hesitation or thought, such as when a demand line is broken. This isn't therapy, of course, and whatever fear issues you may or may not have are really none of my business. However, I suggest that the key to eventual success lies not in how "rigorous" one is or the level of statistical analysis one applies or the detail with which one defines the features of his map. The key instead lies in addressing and grappling with the issue of fear. This fear can stem from several sources, not necessarily limited to being wrong or to losing money. It can also stem from a basic lack of understanding of how markets work, i.e., not the mechanics of them but the basics of the auction market. If one does not understand the dynamics of demand and supply, for example, much less the motives and desires and fears and drives of others, he won't have the slightest idea of when to let that demand line break and when not. This is why so many traders have to have, for example, a moving average to tell them when price is moving up or down. They look at a chart and see a static, sterile series of price points. They have no idea how those points got there or why they are there. They are simply dots, or series of dots summarized into bars, and not the results of transactions made by buyers and sellers.

Schabacker said back in the 30s that the important thing was not the pattern but the behavior that created the pattern. Wyckoff, who was working at about the same time, focused entirely on the behavior and didn't even try to offer patterns as an option. But they both understood that if one focuses on the pattern, he will almost certainly draw the wrong conclusions and do the wrong thing. This is commonly seen with the so-called "head and shoulders". If one understands why it's being formed, he will be far more likely to trade it profitably than if he sees nothing more than a high followed by a higher high followed by a lower high (ditto with the so-called 2B, 123, Ross Hook, etc).

I've gone into this more times than I care to count and to little effect. Some will see the difference between focusing on the behavior that creates what might be called a pattern and focusing on a "pattern" without regard for the behavior that created it. Most won't. But that is to a large extent why most people can't trade price. I suppose one analogy might be how people interact with each other, and whether they take whatever is said at face value (no pun intended) or if they seek to understand underlying motives. Failing to understand the difference is probably a major characteristic of so many failed managers and supervisors and executives. Anyone who's been in a relationship of some sort for any length of time has learned that what is said is nowhere near as important as how it is said (though when and where can also be important). All but the most clueless will be able to pick up cues from facial expressions and body language that either confirm or belie what's being said. Those who are proficient at reading charts apply the same sort of skill, seeing prices as not just points on a page but seeing why those points are there in the first place and why they're moving as they are.

So what you require in terms of a plan will depend in part on how well you understand this, if at all. But, more practically, what you require will depend on how fearful you are and how much rigidity you require in order to control that fear. That's a question only you can answer.

 

dbphoenix........ I understand what you are saying here.. but is it not true that most all patterns are created based on a collective behavior of the participants? And if that is true... then some "patterns" have a more probable outcome than others based on the collective psychology and probable behaviors of the participants.. Is that not correct?

An example would be a hinge... It is formed by the participants not able to agree on price so they go back and forth in a tug of war.. At some point, one side wins the tug of war and the other side relinquishes the fight for another day or time and joins the movement.. resulting in a breakout... In this example.. all hinges would be patterns that would be patterns to watch closely.. expecting a breakout to ensue in one direction or another...

So .. my real question is.. are you suggesting to totally disregard patterns or to simply understand the behavior of the participants involved in the pattern that develops and putting it into the proper context?

Thanks for your great work here and your valuable insights. I really appreciate it.

Wolf