Monthly Archives: April 2010

Another Breakout Pullback Example

Feedback from the last article (Breakout Pullbacks – Sometimes They Come Fast) was very positive. Thanks! It seems that people want more examples of setups.

Ok. So, here’s another, this time with a more ‘normal’ breakout pullback.

I don’t often get an opportunity to trade the UK open but did so this last Tuesday, and it provided a great setup from the Asian session range breakout.

 

 

Looking at the chart…

A = possible resistance formed by the high of the Asian session price action.

B = possible support formed by the low of the Asian session price action.

C = a retest of the support area.

D = breakout.

E = pullback to the point of the breakout. Note the upper tail showing rejection of prices above this level.

F = the subsequent candle, once again unable to push to new highs, and in fact closing back down on its lows. Bullish demand appears unable to sustain this pullback and force price back into the range.

G = point of entry either on the break of candles E & F, or if you prefer on the break of the swing low.

 

The entry on the break of candles E & F provides a risk of 12 pips, with a potential reward of around 30 pips down to the next support level, H.

Beautiful stuff.

Breakout pullbacks – one of my favorite setups.

Happy trading,

Lance Beggs

 


The Most Important Trading Stats

Last week we looked at key components of the daily session review process (If you missed it, refer to last weeks article Part 1 and Part 2). This week we’ll look at another key aspect of your review process – but longer term – some of the key stats you should monitor to measure the profitability of your trading business.

These stats should be monitored over a series of trades, at the very least nothing less than 20. So, it’s something you’ll want to schedule as a part of your longer term review processes, maybe weekly or monthly, depending on your frequency of trades.

So, what stats…

Firstly…

  • win% = number of winning trades / total number of trades in the sample

This is simply the percentage of winning trades. Nice and simple.

Secondly…

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Breakout Pullbacks – Sometimes They Come Fast

Unlike most Support & Resistance traders, I prefer not to automatically enter on a breakout (although I won’t absolutely rule it out, such as when price bases before the breakout to allow a good low-risk position for a stop).

Instead, I watch the breakout for signs of one the following opportunities – a breakout failure trade or a breakout pullback trade. The following is an example of a breakout pullback, demonstrating the fact that sometimes, they come really fast.

In fact, on the trading timeframe below, the pullback is not even visible. It occurs within the breakout candle.

 

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How to Conduct an Effective Trading Session Review – 2 of 2

Trade Session Review Example

Following on from Part One at this link: http://yourtradingcoach.com/trading-business/how-to-conduct-an-effective-trading-session-review-1-of-2/, let’s look at an example of a missed trade.

The example is the open of the UK session on April 6th, 2010, which provided us with a beautiful Asian session breakout failure trade.

The three blue horizontal lines represent pre-session support and resistance, the upper two bracketing the Asian session price action. The green bullish breakout candle was actually the last minute PRIOR TO the commencement of the UK session (07:59 GMT). And it was failure of this breakout that set up the best opportunity of this session. Assuming then that we missed the trade, let’s conduct a review to see how we should have seen it.

We’ll look at the one minute chart for detail. (NOTE: I’m using timeframes that I trade, but of course when you do it the principles should be applied to whatever timeframes and markets you personally trade)

And we’ll work through the Q&A that we used as an example in Part One:

  • What signals did the market provide that should have alerted me to the trade setup?
  • What was the ideal entry point? What signals (if any) did the market provide, which could have led to identify this ideal entry?
  • Where, with the benefit of hindsight, should the stop have been placed? What signals (if any) did the market provide to identify that location?
  • What was the optimal trade management strategy, in order to minimize risk when wrong or maximize gain when right? What signals (if any) did the market provide for moving the stop to breakeven, or beyond?
  • What was the optimal exit location or locations, in order to minimize risk when wrong or maximize gain when right? What signals (if any) did the market provide to identify these ideal exit locations?

 

What signals did the market provide that should have alerted me to the trade setup?

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How to Conduct an Effective Trading Session Review – 1 of 2

One of the greatest processes you have at your disposal, for maximizing your learning and fast-tracking your development as a trader, is your review process.

Let’s have a look at how I recommend you carry out this often-neglected part of your daily trading routine…

For too many traders, the review process is simply entering their trading results into their trading journal spreadsheet and then looking at their daily P&L. While that is important, as part of your daily admin and longer-term strategy review processes, it’s not a session-review process.

The important principle behind an effective daily review process, in my opinion, is carrying out a comparison between your performance and perfect performance. That is, looking at the session with the benefit of hindsight and asking some hard questions about both your read of the market environment and your ability to trade that environment.

The following are some examples of session review Q&A which you may wish to consider, based on a discretionary trading strategy. Of course, you’ll need to adjust, add or delete as required to suit your own trading style.

Market Environment

  • With hindsight, how would you define the market environment?
  • How successful were you in identifying the market environment during the trading session?
  • What signs were present to indicate this environment?
  • What key pattern features were present and how could they have been used to identify the market trend and bias?
  • Step manually through the chart bar by bar, or use a market replay feature to step through the chart at high speed, observing the market environment and the signals that identify that environment, trend and bias.
  • Print the chart and add appropriate notes to your Market Structure Journal.

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