Monthly Archives: February 2013

Losing Sessions – Expect Them!

Late last year I had a request for more examples of losing trades, which led to the article series "Winning through Losing Better" (see part one and part two if you missed this popular article series).

Let's take that concept further and look at a losing session, and see if we can find a couple of lessons.

Because losing sessions happen!

Often!

Let's examine my most recent losing session, last Monday. This is the five-minute chart of Crude Oil for the first two hours from session open at 09:00ET (midnight chart time).

losing sessions

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A Better Way to Classify Candlesticks

I received an email during the last week seeking some clarification about a prior series of articles.

I thought it best that I share this with you all, as my experience shows that if I’ve failed to adequately explain a concept to one person then there are likely many others who didn’t get the message either.

This was the prior article series:

Part 1: http://yourtradingcoach.com/trading-process-and-strategy/better-than-candlestick-patterns-part-one/

Part 2: http://yourtradingcoach.com/trading-process-and-strategy/better-than-candlestick-patterns-part-two/

Part 3: http://yourtradingcoach.com/trading-process-and-strategy/better-than-candlestick-patterns-part-three/

Part 4: http://yourtradingcoach.com/trading-process-and-strategy/better-than-candlestick-patterns-part-four/

Part 5: http://yourtradingcoach.com/trading-process-and-strategy/better-than-candlestick-patterns-part-five/

And of course the concept is also a feature of the YTC Price Action Trader, so if you want to explore it further and see a number of related examples, check it out here: http://www.ytcpriceactiontrader.com/

Here’s the relevant part of the email:

I’m a bit confused with the close comparison and close position of some candles on a chart I’m viewing. See attachment please.

So the thing is, I’m looking at these 3 candles, and the first 2 are low close candles, right? But their close position is what gets me because they closed higher than the close or range of the previous candles, which would make them bull candles, but they are bear candles by themselves… I’m not sure what to make of them then?

Same for the last one. It’s a mid-close candle, but it closed above the previous candle which would also make it a mid-close bull candle? But on it’s own it’s also a bear candle?

If you’re not familiar with some of the terms… read the above articles!

Here’s the image that was attached to the email. Please note that this is a “reduced size” version. Click on the image to open a full-size version in your browser.

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Trading Higher Timeframes

A very common question I get (maybe once a week) is whether or not my price action methods are relevant to traders who wish to operate on higher timeframes. That's understandable I suppose. The vast majority of charts shown on my website are focused on lower timeframes, because that's where I currently trade. Plus, my YTC Price Action Trader ebook series is focused on lower timeframes using a combination of 30 min, 3 min, and 1 min. And the YTC Scalper supplement deals with even lower timeframes.

It's been many years since I last traded up around the 1-hour, 4-hour or daily timeframes – those higher timeframes no longer appeal to me for lifestyle and trader-psych reasons.

However, I have no doubt that the concepts underlying my strategy (and all price action lessons on my site) are applicable to these higher timeframes. Ultimately, price action analysis is based upon human decision making and how that creates areas of supply and demand imbalance. This is the nature of markets, and it's applicable in all markets and all timeframes. So yes, I believe the price action lessons on this website and associated ebooks are relevant to higher timeframes. For all examples shown on my site (unless stated otherwise) feel free to ignore the timeframe of the chart and scale up to your preferred timeframe.

I've dealt a little with timeframe selection before (here, here, here and here). The key point being that there is no right or wrong timeframe. There is no "best" timeframe. Rather, the important thing is to find what is best for you. This will largely be dependent on your lifestyle, your personality and to a lesser extent your financial circumstances.

If your trial and error process of timeframe discovery leads you to an interest in higher timeframes, there are some issues you need to consider that will not be featured in my material. In particular working out how to scan the whole universe of stocks, or even the smaller universe of forex pairs, in order to find those that do offer trading opportunity. I don't cover issues like this, as it's not applicable to how I trade.

But the flip-side of this extra work offers you the one advantage that I'll concede higher timeframe traders have over us lower timeframe traders – the ability to specialise in your preferred environment type (or even in one preferred setup within one preferred environment if you wish to take it to even greater degree of specialisation). While I'm left having to manage whatever environment my single market offers that day, a longer timeframe trader can simply scan through all available markets to find that which best suits their style of trading.

For example, any higher timeframe forex traders who wish to specialise in a trending environment, should have had the JPY pairs as their highest priority for the good part of the last six months.

Let's look at some examples (no I didn't trade these… I don't trade this timeframe… they're examples only).

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Every Session Contains Learning Opportunity

Every session contains learning opportunity!

In fact… multiple learning opportunities.

Review EVERY one of your trading sessions. And find something!

Whether it's in something you did poorly, something you did really well, or perhaps even something you missed entirely. There's a lesson. Find it!

Whether it's a new insight. Or reinforcement of the basics. There's a lesson. Find it!

Let's look at this session:

trading - find the lesson

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Avoiding Lower Probability Environments

Late last year I released a popular series of two articles which dealt with the topic of "Winning through Losing Better". You can see them here if you missed them: Part One, Part Two.

I was reminded this week of a comment from Part Two. Here's the relevant text from the article:

Search for market environments which cause you to underperform.

For example:

  • If you don't trade well in ranging environments then you may be better sticking to trending environments only. If your database of losing trades shows difficulty in a ranging environment, find the clues that can alert you to this type of environment, and then learn to stand aside as early as possible.

 

I've mentioned previously that one easy way to do this is to avoid holiday sessions (see here). While they may on occasion offer great opportunity, more often than not they will be lower liquidity, narrow range markets.

The same concept often applies to those sessions that precede potentially volatile and significant news events. Wednesday offered us one example. With the FOMC Statement being released at 1415 ET, most of the day leading up to that time will typically offer a more challenging environment. Again, like the holiday sessions there is no guarantee. Some days can move. But as a general concept these sessions are more often than not lower liquidity and lower than average range markets.

Options:

  • Anticipate a rangebound market and plan trading accordingly (for example, aiming to fade the failed moves at the edge of the range, or through reducing position sizes).
  • Anticipate a rangebound market and sim trade only, in order to improve skills within these more challenging environments.
  • Anticipate a rangebound market and stand aside, but monitor the session with the intention of trading if a directional move does occur.
  • Stand aside till the FOMC release with intention to only trade after the news event has occurred.  (Not a good option in my UTC+10 timezone!)
  • Take a day off. Enjoy life. (Or in my timezone… catch up on some well deserved sleep!)

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