Continuing a theme from previous articles – here and here.
- Keep your focus ahead of price
- Never let price action take you somewhere your brain didn’t get to five minutes earlier.
This is not just a concept to apply during the trading session.
It also applies at session open.
Start the session with some thought as to likely expectations for the type of environment and for likely initial price action sequences.
This can be done for markets which have a defined pit-session opening time and for 24 hour markets at the time of major session openings (eg. UK, US forex session opening times).
- Where is price going?
- How is it likely to act? Why?
- Will that provide trade opportunity?
- What will it look like if my analysis is correct?
- What will price look like if I’m wrong?
- What else could it do?
This is not prediction. This is simply forward planning… developing “IF-THEN” scenarios based upon your assessment of the likely future price action.
If your “read” of price movement proves correct, you will have trade opportunity. If it proves incorrect, you stand aside and reassess.
This will ensure your actions in the market are pre-considered and your trades only occur when the market has conformed to your expectations.
And you will be less likely to be caught in a trap through impulsive reaction to unexpected price movement.
(** Important Note: This is only our initial expectation. Ongoing bar-by-bar analysis will adjust our expectations if price provides something different from our initial analysis. Don’t rigidly stick to your initial expectations against all evidence to the contrary.)
We saw an example of an opening IF-THEN scenario in last week’s article where we discussed an early-session trade opportunity in the SPI futures.
See here if you wish to review that article in full: http://yourtradingcoach.com/trading-process-and-strategy/late-session-breakout-early-session-opportunity/
But let’s look at another example.
This time from the Crude Oil market as it opened today, Monday 9th June 2014.
We’ll start with the Higher Timeframe in order to get a picture of the structure of the market.