Monthly Archives: July 2015

Pullback Test of Short-Term Resistance

 

Context is far MORE IMPORTANT than the trade entry trigger.

One of the dangers that newer traders face is too much obsession with Lower Timeframe or Trading Timeframe entry trigger patterns.

I've been there myself. We all seem to get stuck there. Entry trigger patterns are exciting. They're simple to see. And most importantly, they satisfy our "need" for certainty.

And so when I post a trade with a shooting star trigger entry, or a spike & ledge, or a spring or upthrust, I get people emailing me with a dozen examples of these same trigger entry patterns that they've just found on a chart.

But typically…. they're forgetting context.

Never forget context. It comes first!

What do I mean by context?

Context means the surrounding conditions or circumstances within which the trade is occurring.

There are many ways to look at context. My preference is to consider where the trade is occurring within the Higher Timeframe S/R framework and the Trading Timeframe trend structure, plus whether or not the "behaviour of price movement" matches my future-trend projection (See YTC Price Action Trader Vol 2 Chapter 3 for the Principles of Future-Trend Direction!).

There are other ways. Some traders gain a feel for context through market profile, or intermarket correlations, or… well there are many ways.

The point is simply that a trade does not occur in isolation from the surrounding market conditions. And those conditions are important.

Let's look at a trade:  (Note: I've purposely left off the timeframes as it doesn't matter. Just think in terms of Lower, Trading and Higher Timeframes)

Lower Timeframe Chart - Nice Entry Trigger - But that's not the important part!

As you can see… it's a really nice Shooting Star pattern. But that's not the important part.

Let's look instead to see the conditions surrounding the trade.

We'll start with the Higher Timeframe Chart:

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Trader Motivation Hacks – Number One

 

Look back... be amazed at how far you've come.

It's normal from time to time (often even) to get frustrated at the overwhelming task that lies ahead.

At these times, I find it incredibly helpful to pause and reflect on exactly where I've come from and how far I've progressed.

Yes… way back in the early days… I bought into Croesus Mining near a top and held it way below my stop loss… because I knew I was right!

Look back... be amazed at how far you've come.

I've certainly come a long way!

And like we all do, I served more than my fair share of time in the indicator and systems hell.

Look back... be amazed at how far you've come.

There are shelves full of folders documenting my progress.

Looking through these folders, I can clearly see just how far I've come.

I used to try to put together indicator based systems, without any appreciation or consideration as to what makes price move and why it should move at that time in that direction. Now every decision I make in the markets is taken with consideration of "other traders" and how their decisions and actions may influence orderflow.

I used to fear loss. Now I see it as a part of the business and work to manage and minimise it.

I used to be obsessed with finding the perfect way to trigger into a trade. I now recognise that there is no one perfect entry trigger and instead we should focus on ensuring we trade in the right area with respect to higher timeframe context and bias and then just enter as best we can within that area.

I used to wait for price confirmation through movement in my trade direction. Now I recognise confirmation as risk and aim to enter as close to the start of the move as possible, ensuring a much greater potential reward.

I used to be frustrated with suboptimal exits. I now recognise that such precision is impossible. I manage my exits as best I can given the information I have at the time and forgive myself any imperfection.

I have come so far!

All those roadblocks, which seemed at the time to mark the potential end of my journey, were in fact just temporary obstacles which forced me to become a better trader, improving in knowledge, skill and attitude.

And perhaps my current challenges are also temporary, prompting me to achieve new levels of understanding and to take the next steps along my path of trader evolution.

Perhaps in coming months I will look back at my current challenges, smile at my naivety and grow further in confidence when considering again just how far I have come.

I've come a long way. I look forward to seeing what comes next!

ACTION TASK:

  • This weekend… schedule some time to pause… look back… and see how far YOU have come. You might just be amazed at how far it is.

 

Happy trading,

Lance Beggs


Why Do We Create and Regularly Review our Market Structure and Price Action Journal?

 

Last Sunday I shared the following image on YTC Facebook and Twitter.

It's such a beautiful example of the benefits of journaling, I just had to expand upon this in a newsletter article.

From YTC Facebook and YTC Twitter - why we create a Market Structure and Price Action Journal

Here's the thing…

Finding and exploiting market opportunity

Ok, I know!

The markets don't always back up the very next day with a repeat of key price sequences.

The real benefit builds over time. As you populate your journal with more and more examples of key price action sequences (and ensure regular reviews) you will come to see repeated patterns or themes within the data.

Some of these patterns or themes lead to documented improvements to your trading plan.

But most are simply internalised, improving your situational awareness as real-time data unfolds in future trading sessions. You have improved your ability to perceive shifts in the supply/demand dynamics of the market. You have improved your ability to understand what that shift means in terms of risk and opportunity in the near future. And you have improved your ability to exploit that opportunity for profits (or minor losses when wrong).

Similar benefits apply when journaling market structure features, in particular the points of transition from one environment to another.

There was another recent article related to the topic of journaling, in which we discussed the journal-identified hypothesis that "A Day After a Monster Trend Day, which shows no follow through overnight and a weak open, is likely to remain rangebound within prior session S/R levels". You can see the article here if you missed it: http://yourtradingcoach.com/trading-business/day-after-monster-trend-day/

This article attracted the following comment:

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My Thoughts Pre-Entry

 

Let's examine a recent emini-Dow trade from Thursday 2nd July 2015 which resulted in only a partial entry. We'll look at my decision making and see if perhaps it could have been improved in some way, allowing for a full-size position.

First, let's start with the higher timeframe to get some context.

higher timeframe context

You'll note that the market opened within the prior day's range, just below the high and flirted with this level for the first 20 or so minutes before settling into a nice downtrend for the next several hours.

However, while the session at the time of trade entry was trending with a downwards bias, it was certainly lacking in any real bearish strength as seen by the significant overlap between candles. This will be obvious on the trading timeframe as well, as we see below, where the trend structure is more a series of stair-step ranges rather than a nice stable downtrend.

In fact, the trend when using the standard method of definition is just downright messy:

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Watch Breaks Against Bias for Failure Opportunity

 

Within hours of publishing last week's article, I received contact from two readers who both had identified similar opportunity within other forex pairs.

First, see last week's article here if you missed it: http://yourtradingcoach.com/trading-process-and-strategy/feeling-joy-when-i-look-at-this-price-action/

And let's check out the followup…

First was a twitter message from AC:

@YTCtrading Aussie/USD this morning 🙂 Same same but different! 🙂

 

I'm not 100% sure of the timeframe that AC was looking at. I assume it was the 1H; the same as in the article. And upon opening the AUD/USD 1H chart it just stands out beautifully.

Watch breaks against bias for failure opportunity

 

And following shortly after was an email received from PK. Here's an extract from the email:

Funny thing, timing.

I read your email this morning and a few hours later I noticed cable had climbed back up to resistance (prior day high) and quickly retraced, into this weeks down trend.

A few bars later, it's there again and I note:

1. Market is struggling to find any more buyers

2. If price has failed to do something twice (break the resistance), then it’s probably going to do the opposite

3. Not a bad 'sell signal' trigger to use (1 hour candle bar format)

Time to put in a sell order, as there is multiple reward potential, if price can get back to the low of yesterday

There is a 1:1 or thereabouts, if it only makes it down to today's lows (see attached)

 

Here's a cropped version of the attached image, with some added notes:

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