Monthly Archives: November 2013

Grinding Channel Break

Email Question:

I'm not quite sure how to manage this situation. My initial thoughts are that shorts will enter on a break below the channel, and that they will realize that they are wrong if price breaks above the last candle. On the other hand, there is weakness in the uptrend which would set my expectations for a CPB instead of entering on this single-leg PB.

Would you see this as a valid long opportunity?

Also, given the choppy price action, there isn't a clear swing low to determine a change of trend to downtrend if price were to break lower.

I'm sure it's mostly subjective, but where is the point when you would change your bias to bearish (given acceptance below the level)?

Response:

(more…)

Wait for the Fakeout

A common complaint I hear from traders is "the broker ran my stop!"

Here's the thing though… it's usually not your broker.

It's your failure to properly recognise the real nature of price movement.

The nature of the markets is one of tests, retests and probes of prior levels.

If you've developed a belief about the markets that does not allow for this you can't complain when your belief is found deficient!

This is the reality.

Expect price to test liquidity beyond a price level.

And adjust your plan to allow for this.

(more…)

Learning – When the Markets are Closed

Even when markets are closed there is great potential to improve as a trader.

Here are a few options, aside from the obvious which is reading trading books (especially this one).

Market Replay – Missed Sessions

We discussed market replay previously (see here).

This is by far the greatest tool available to you for after hours learning.

Here's one way you can use market replay to improve your skills…

I don't like to ever miss a trading session. Sometimes though, life gets in the way and it's unavoidable. This is where market replay helps me out. Later, when time comes available, that session is replayed as if live.

Last week I missed Friday's session. My family and I had to depart early on Saturday morning to travel several hours for a family function later that day. Given that my timezone (Australian east coast, UTC+10) means that Friday's session commences at midnight Friday night, I made the decision that it's wise to miss this session. Travel is never fun after only an hour or two of sleep… plus it's just not safe.

On return home late Sunday, after the family was in bed, I replayed the opening hour from Friday nights emini Russell session.

(more…)

Long at Support

In last week's article we saw a buy in Crude Oil as it tested support.

Check out the article here if you missed it.

Today we examine a very similar setup in the emini Russell.

In this session I was trading with the following timeframe combinations: HTF 5 min, TTF 1 min, LTF 15 sec / 2-range

As always, please note that the timeframes are not important. It's the concepts that we're looking for. If you trade higher timeframes you should simply scale upwards accordingly.

Let's start by looking at the higher timeframe structure at the time of session open. We're looking here at the HTF 5-min chart showing session data only.

(more…)

Buy because there are No More Sellers

From last weeks article (Return to First Principles)…

  • You must aim to BUY at areas where you know others will buy after you, because their buying will create the net orderflow or bullish pressure to drive prices higher, allowing you opportunity to profit.

  • You must aim to SELL at areas where you know others will sell after you, because their selling will create the net orderflow or bearish pressure to drive prices lower, allowing you opportunity to profit.

Or from the opposite perspective, this would be…

  • BUY because there are no more sellers.

  • SELL because there are no more buyers.

Let's look at a trade example.

buy because there are no more sellers

(more…)

Price Action Principles – Timeframe Independent

I just want to take the opportunity here to remind those on higher timeframes that almost everything I write should be thought of as largely timeframe independent.

Most of the examples I provide will come from very low timeframe charts. Why? Because that’s what I trade!

But while the chart images I show in newsletter articles may be from a timeframe that is vastly different from your own trading business, this does not mean there is not value in my writing.

Look beyond the charts to find the ideas, concepts or principles that are relevant to price action traders across all timeframes.

It’s about the principles… it’s not about the timeframe!

The YTC Price Action Trader analysis and trading plan is adaptable to all markets and all timeframes.

The YTC Newsletter articles also have application across all markets and all timeframes.

You just need to think a little to see where it may fit within your own business plan.

We’ve talked higher timeframes on occasion… both through my own examples and through those provided by readers:

But this is clearly not evident to all traders.

Following last weeks article on the first pullback following a structural change, I received a notice of an “unsubscribe” from one trader, who stated the following: “I am into end of day trading. Each week you seem to start off with a 1 minute chart and that is not for me… thanks”.

I have no problems with unsubscribes. I’m happy for people to leave if they’re not getting value or not liking my writing style. But to leave because the timeframe is different to your own… it’s just a shame they couldn’t see the principles beyond the chart. The first pullback following structural change is a concept relevant to all markets and all timeframes.

Interestingly, I also got two emails from other traders discussing higher timeframes. Both these guys get it!

First from RL.

G’day Lance,

Its been a few years since I emailed you, but I continue to read and learn from your weekly updates. Thanks again for taking the time to do that.

I am a longer term trend trader, so I use the weekly charts for my trend identification and the daily for entries. I was reviewing my entries this past Friday morning in the States (before I got your email), and noticed once again that the 1st pullback after a breakout is really the best place for me to enter a trade.

I use stochastics to help identify the pullbacks as my brain tends to get overloaded just looking at a price chart, but that’s just me. I also like pullbacks to the major moving averages (like the 50D), knowing that many traders are looking at this too.

I was excited when I saw your email later in the day about the 1st pullback after a “structure change”. For me, a structure change is something like a Higher High or a new 20D High. And on many of those situations, I now realize that trading the breakout isn’t the optimal play, but waiting for that 1st pullback (if it happens) is really the highest return for $ risk I can make.

I thought it was great that you would write about this on the same day that I re-discovered it and (perhaps) will finally accept it and build it into my trading plan.

Hope all is well, and happy trading

RL

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

It's about the principles... not the timeframe

(more…)

When Struggling – Return to First Principles

Struggling with your trading?

Always return to first principles and confirm that you're trading approach is consistent with these principles.

From a trade entry perspective, this would include the following:

  • You must aim to BUY at areas where you know others will buy after you, because their buying will create the net orderflow or bullish pressure to drive prices higher, allowing you opportunity to profit

  • You must aim to SELL at areas where you know others will sell after you, because their selling will create the net orderflow or bearish pressure to drive prices lower, allowing you opportunity to profit.

(Why… see the YTC Price Action Trader, Chapter 2)

(How… see theYTC Price Action Trader, Chapters 3-5)

Buy before others will buy!

Sell before others will sell!

If you're struggling, ask yourself honestly whether or not your entry method is consistent with these principles. If not… well you've seriously got to reconsider your trading plan.

Buy before others will buy!

Or if it helps, consider it from the opposite perspective… buy because there are no more sellers.

When struggling, return to first principles

(more…)