Monthly Archives: August 2013

Don’t Break the Chain – A Simple Tool to Improve Consistency

Successful traders do a lot of work away from the charts.

Over the last five years I've been asking you to join their ranks.

I've asked you to create and use a Market Structure Journal – http://www.yourtradingcoach.com/products/ebooks/the-greatest-trading-book-ever.pdf

For YTC Price Action Trader readers, I've expanded that to include a Motivation Journal, a Lessons Learnt Journal and a Trades Journal – http://www.ytcpriceactiontrader.com/

I've asked you to approach your pre-session routines in a professional manner – http://yourtradingcoach.com/trading-business/my-pre-session-routine/

I've asked you to approach your post-session routines in a professional manner – http://yourtradingcoach.com/trading-business/my-post-session-routine/

I've asked you to drive your learning and development through the use of targeted monthly, weekly and daily focus goals – http://yourtradingcoach.com/trading-business/3-simple-steps-to-accelerate-your-learning/

I'll be the first to admit that this is a whole lot of work. But the fact remains… it's essential if you want to improve.

So for those of you who struggle to maintain consistency in your process and routines, the following tool may help.

** Click on the image to open or download a larger PDF copy. Be sure to save it!

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Simple Pullback or Complex Pullback? Look to Past Price Action for Clues!

The following article comes courtesy of an email I received from an equities trader (daily timeframe) who was working to improve his pullback entries within a trending environment.

His challenge was that while the market was maintaining a steady state trend with no real signs of weakness or topping action, how exactly should he be timing the entry?

Attempts to get in on the first pullback entry were typically being run over as the pullbacks went on to produce a more complex (multiple-leg) pullback.

So his question was, "How do you know if this pullback is a simple pullback or a complex pullback?"

He went on state the following:

"So I know not to try and seek perfection but I seem to be having trouble in real time. Here is a chart. I was expecting Pullback trades and would have traded accordingly!!"

(*** Click on the image to open a larger copy in your browser)

simple pullback or complex pullback?

And…

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Gaining Confidence in Taking the Trap Entries – 2

Recently I posted an article that smashed the record for the most feedback so far in 2013 – Gaining Confidence in Taking the Trap Entries.

It seems that a lot of people got great value from this article. I’m very happy with that! One of my primary goals is to help people see the markets and the trading game from a new perspective. And that’s exactly the result that was achieved.

So let’s take another look at this concept with two more recent chart examples. If you missed the first article though, please go and read it first.

The concept:

  • A common reason for difficulty in taking trap entries is your faulty expectations.
  • You’re expecting breakout success. I’m anticipating breakout failure!

 

Why is this the case?

  • Standard TA teaches us that a breakout of a key level or a significant swing high or low is a potential sign of a new trend.
  • This leads to people expecting breaks to work.
  • The reality is that it’s only a potential sign of a new trend… at least up until price acceptance in the new area and signs of strength in this new direction.
  • The reality is that breaks against bias often do fail.
  • So, if you can gain an entry on a break against your bias, with acceptable reward:risk parameters, then this is a trade that you SHOULD be taking.

 

gaining confidence with trap entries

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Trading the Edges

A term you'll hear me use occasionally is "trading the edges".

What I'm referring to here is:

  • In a sideways market with no particular bias either direction, taking trades only in the vicinity of the outer edges of the trading range; in particular when it traps a "breakout" trader. Trades may be taken long from the vicinity of the lower range support or short from the upper range resistance.

  • In a sideways market with a slight directional bias, taking trades only in the vicinity of the range edge that is against the bias. This may be either a long in the vicinity of lower range support, if the market has a bullish bias. Or a short in the vicinity of the upper range resistance when the market has a bearish bias. Again my preference is to be patient and wait for someone to be trapped against the bias.

Here's an example:

trading the edges - trading timeframes

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Establishing a Bias From the Open (Part 2 of 2)

Establishing a bias intra-session is a simple process of following our 6 principles for future trend direction.

It's a little more difficult at the session open though, when the lack of prior data adds to the uncertainty.

Last week we worked through an example in which we established a bias from the open. Essentially it's a process of "best guess" based upon judgment and experience, as we reconcile the often conflicting information provided by pre-session trend, position of the open with respect to the prior day's close and range (high-low), position of the open with respect to support or resistance, width of the new opening range price bar, the direction of break of the new opening range high or low, and of course the strength or weakness of the opening price bars.

Read that article first if you missed it: http://yourtradingcoach.com/trading-process-and-strategy/establishing-a-bias-from-the-open-part-1-of-2/

Today, let's work through another example, offering a variation on the initial opening conditions and the subsequent attempts to determine bias.

We'll start again by looking at two different views of the market at the time of pit-session open.

The first is the pit-session only higher-timeframe chart, which shows the position of the open with respect to the prior day's close and prior day's range. This is followed by a trading timeframe chart showing the position of the open with respect to the pre-session trend.

establishing a bias at the market open 

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