Monthly Archives: March 2017

The Key to Early Recognition of Potential Change in Structure

 

The key to early recognition of potential change in structure is in observing and identifying "SOMETHING DIFFERENT".

I absolutely love this example which has been building now since the beginning of the year.

The key to early recognition of potential change in structure

This does not mean that the uptrend will end.

It's just a warning sign.

A clue that the sentiment driving the market prior to this date has changed in some way.

A clue that there is "potential" for a change in market structure.

And for those of you who recognise this clue, the potential to more quickly adapt to any change in structure as it happens, or even before the technical change has occurred.

(By the time I publish this article the market may well have made this change. Be sure to check out the charts if you wish to see what happens next.)

For those of you who wish to join the ranks of professional traders, this is a skill you need to build. Quickly recognising and adapting to changes in the market.

And step one in that process is early recognition of "something different".

All markets.

All timeframes.

The key to early recognition of potential change in structure

I'm just stunned by that last fact.

Skip the table below if you wish, but I personally find it amazing!  (Yep… I'm a charting nerd!)

3rd Jan: Mid-Close Range 1st Feb: Mid-Close Bull 1st Mar: Mid-Close Bull
4th Jan: High-Close Bull 2nd Feb: Low-Close Range 2nd Mar: Low-Close Range
5th Jan: High-Close Bull 3rd Feb: Mid-Close Range 3rd Mar: High-Close Range
6th Jan: High-Close Bull 6th Feb: High-Close Range 6th Mar: High-Close Range
9th Jan: High-Close Bull 7th Feb: Low-Close Bull 7th Mar: Low-Close Range
10th Jan: Mid-Close Bull 8th Feb: High-Close Range 8th Mar: Mid-Close Range
11th Jan: High-Close Range 9th Feb: High-Close Bull 9th Mar: High-Close Range
12th Jan: High-Close Range 10th Feb: High-Close Bull 10th Mar: Mid-Close Bull
13th Jan: High-Close Bull 13th Feb: High-Close Bull 13th Mar: High-Close Bull
16th Jan: Low-Close Range 14th Feb: High-Close Bull 14th Mar: High-Close Range
17th Jan: Mid-Close Bear 15th Feb: High-Close Bull 15th Mar: High-Close Bull
18th Jan: High-Close Bull 16th Feb: Mid-Close Range 16th Mar: Mid-Close Range
19th Jan: Mid-Close Range 17th Feb: High-Close Bull 17th Mar: Low-Close Range
20th Jan: Mid-Close Range 20th Feb: High-Close Bull 20th Mar: Mid-Close Range
23rd Jan: High-Close Range 21st Feb: Mid-Close Range 21st Mar: Low-Close Bear
24th Jan: High-Close Bull 22nd Feb: High-Close Range  
25th Jan: High-Close Bull 23rd Feb: Mid-Close Bear  
26th Jan: Low-Close Range 24th Feb: High-Close Range  
27th Jan: High-Close Range 27th Feb: High-Close Bull  
30th Jan: Mid-Close Bear 28th Feb: Mid-Close Range  
31st Jan: High-Close Range    

 

(See here if you're not familiar with this form of candlestick classification – Parts: One Two Three Four Five )

The key to early recognition of potential change in structure is in observing and identifying "SOMETHING DIFFERENT".

In a stable trend, watch for changes in volatility, or in the pace of the trend. Watch for changes in the way that price swings project beyond the previous swing high or low. Or in changes to the depth of pullbacks. Or, as in today's example, watch for a sudden and strong move counter-trend.

In a stable sideways market, watch again for sudden changes in volatility. Or sudden and dramatic increases in volume. Or (one of my favourites) watch for signs of price compression towards either the upper or lower boundaries of the range.

Something different in the way that price has been moving.

Observe it.

Question it. What could it mean? Could this in any way provide a clue to a potential change in structure?

Now… watch and adapt.

The key to early recognition of potential change in structure

The key to early recognition of potential change in structure

The key to early recognition of potential change in structure

Happy trading,

Lance Beggs

 


 

The Key to Effective Active Trade Management

 

Here was the general plan:

The key to effective Active Trade Management

The key to effective Active Trade Management

The key to effective Active Trade Management

The key to effective Active Trade Management

I won't go into detail regarding the wider market environment and context within which the trade occurred. It's not the point of the article.

Truth be told – it was a marginal trade at best.

Ideally such a trade would be taken in a market with a strong bearish conviction.

But that wasn't the case.

The environment was poor. There was no clear trend structure in place. And the bias was uncertain, with price showing no clear dominant strength with either bulls or bears.

But I was aware of this. I was in "trade cautiously" mode. Standing aside mostly. With a plan that if I did take a trade it was to be with a smaller position size. This would continue until there was a clear trend structure and some good directional conviction.

We could argue back and forth all day as to whether or not the trade idea had edge. I will accept it was marginal.

But I took the trade.

And it contains a good lesson on active trade management.

So we will discuss it today.

Here are the charts just prior to my entry:

The key to effective Active Trade Management

Here's the entry:

The key to effective Active Trade Management

Here is what I'd like to see happen:

The key to effective Active Trade Management

But what we want to happen, doesn't always happen.

And that brings us to today's lesson:

The key to effective Active Trade Management is knowing what SHOULD NOT happen.

There are two outcomes that SHOULD NOT happen, if my trade premise is still valid.

(1) Price will immediately smash higher and stop me out. Should that happen, I'll just take the loss. It's unlikely that I will have the opportunity to work a better exit.

(2) Price will stall towards the upper edge of the congestion area and then break higher.

The key to effective Active Trade Management

Here's the outcome:

The key to effective Active Trade Management

The key to effective Active Trade Management

The key to effective Active Trade Management is knowing what SHOULD NOT happen.

Then recognising it.

And acting to contain any damage.

If your edge is gone, GET OUT.

Happy trading,

Lance Beggs

 


 

How to Kick-Start Your Growth and Development

 

If your progress has stalled in any way, it is just SO IMPORTANT to realise the following truth:

Progress comes from your growth and development plan, not from your strategy.

This just won't work:

The typical failed process

Hoping, wishing and praying doesn't work.

Just trying harder doesn't work.

You need something ACTIONABLE.

Let's fix it NOW:

STEP ONE: Implement a growth and development plan based upon GROUPS OF TRADES.

Here is the concept. Review the following articles:

(a)  http://yourtradingcoach.com/trading-business/its-time-to-fight-to-get-to-the-next-level/ 

(b)  http://yourtradingcoach.com/trading-business/its-time-to-fight-to-get-to-the-next-level-examples/

(c)  http://yourtradingcoach.com/trading-business/you-can-do-this/

(d)  http://yourtradingcoach.com/trading-business/consistency-its-a-necessary-part-of-the-process/

(e)  http://yourtradingcoach.com/trading-business/before-making-changes-to-your-strategy/

A GROUP OF TRADES Growth and Development Process

Also… any changes you're making…  consider making them the stretch goal for your next group.

See here – http://yourtradingcoach.com/trading-business/stretching-to-the-next-level/

A stretch goal - just a little stretch beyond current capabilities

Most importantly, major process changes can only occur at the end of each group. And they must be based upon proper review and analysis of your group stats and journal entries.

STEP TWO: Intra-group, monitor daily to ensure consistent implementation of your process.

No major process changes occur here.

Only tweaks or minor changes to how you execute your processes.

A daily review to improve implementation of your processes

Now move the response to question three to tomorrow's pre-session planning.

Remember:

Progress comes from your growth and development plan, not from your strategy.

If you're not progressing, then something HAS TO CHANGE.

Something actionable.

Something concrete.

Between groups, you MUST identify a concrete, actionable improvement to process.

Within groups, you MUST monitor consistency in implementing process, and tweak as required to improve implementation.

Hoping, wishing and praying that somehow this time it will be different, doesn't work.

Just trying harder, doesn't work.

Find something REAL that you can implement.

It won't always be easy. In fact it will rarely be easy. But damn it, you can't progress by just continuing on the same treadmill.

Fight to find an actionable change that progresses you in the right direction. Implement it. Repeat.

You can do this, 

Lance Beggs

 


 

Employing a Self-Distancing Strategy to Improve Journaling and Review

 

Close your eyes and imagine a really bad trading session. You might have a recent example you can use. Or if not, just make one up.

The details don't matter. They'll vary for each of us. Just make it bad.

Maybe this:

"I drag myself into the office and throw my bag on the floor. Feeling crap with a hangover and too little sleep due to last night's celebrations. It's 10 minutes till market open. No problems. I'll catch up on the pre-session admin later and just wing it. I'm on my third coffee already – this should help me make it through ok."

The market opens and drives higher with strength. "Suckers… it's right into resistance. I'll short here and catch the move back down to the market open."

Of course, it loses!

As does the second attempt. And the third. And the fourth, which had the stop pulled even higher, because "this damn thing is so overbought".

Or maybe your example is something much worse.

Whatever it is, close your eyes and visualise it. And feel every feeling that such a session would bring.

Disgust! Anger! Frustration!

Now, the session is over. You've smashed your keyboard and it's time for review. Close your eyes and imagine yourself critiquing your performance.

SERIOUSLY!

Close your eyes, visualise this scenario. And then critique your performance.

Now let's shift the scenario slightly.

This time the session went exactly the same, but you weren't the trader. The trader was the person you most love in life. Your partner. Your Mum. Whoever you care the most for.

And you're their coach. The person they come to after each session to discuss their performance and to plan the way forward.

Close your eyes and imagine how you would handle their performance review.

Visualise it.

Feel it.

If you've been honest with yourself, it's likely that the first scenario would have been far more emotional. Quite likely an explosive, self-critical and self-deprecating review.

Whereas the second, while still noting that the performance was unacceptable and must lead to change, would likely be more calm and rational. With a more considered review of both the reasons for the poor performance and the solution that is necessary to prevent recurrence.

This simple shift in the scenario has created some space, or distance, between our rational mind and the emotion associated with the trade performance.

 

Self-Distancing Strategies

I absolutely love this article by Brad Stulberg in NYMag.com:

http://nymag.com/scienceofus/2017/02/self-distancing-will-help-you-make-smarter-deciions.html

Please read it. It will take about 10 minutes, tops.

Some key excerpts:

  • Collectively referred to as “self-distancing,” practices like those outlined above and Rusch’s “pretend you’re talking to a friend” allow us to remove our emotional selves from intense situations, paving the way for more thoughtful insight and subsequent decision-making.
  • Employing a self-distancing strategy allows you to evaluate activities or situations that are rife with passion from an entirely different perspective, one that includes logic alongside emotion.
  • “I talk to myself all the time,” says Rusch. “It’s just that when I talk to myself as myself, I tend to be negative and not so helpful. But when I talk to myself as if I were talking to a friend, my words are motivating, forgiving, and far more productive.”

 

Employing Self-Distancing Strategies to Improve Journaling and Review

I will be employing these ideas in two ways:

(1) Journaling

Here's another excerpt from the article:

  • Similar studies show that when individuals think, or journal, in the third person rather than in first person — for example, “John is running into challenges with his business that seem insurmountable” versus “I am running into challenges with my business that seem insurmountable” —they, too, evaluate themselves and their situations more clearly and with more wisdom.

 

I now journal in the third person.

Give it a try for a month. You can always go back to normal if you don't like it.

(2) Reviews

All reviews (session reviews and longer term reviews) will now be conducted as if I am the "Performance Coach" reviewing a trader within my firm.

Again, give it a try for a month. You've got nothing to lose.

And if you can separate your rational and logical side from the emotion of the session, just a little, there is a WHOLE LOT to potentially gain.

 

Why Not Get Started Right Now?

That trading you did so far this year is no longer yours. It was done by your best friend, your partner, or some other loved one.

You are now the performance coach.

And it's time for you to honestly review their trading business.

Close your eyes and imagine the review session. And answer the following questions.

  1. Did they approach these recent months with clear and realistic goals for growth and development?
  2. Did their performance drive them successfully towards achievement of their goals?
  3. Are the goals still appropriate, or do they need amending?
  4. What action must be taken in the coming months to take decisive steps forward?

 

Calmer. More rational. More logical.

And far more likely to lead to practical and effective decision making.

Give it a try!

Happy trading,

Lance Beggs

 


 

Studying a Higher Timeframe Trap

 

There are some common themes that run through the articles I produce at YTC. One of these, which has been here since the beginning, is the importance of creating a Market Structure & Price Action Journal.

Every day, find something that amazes you in the charts. Print it out. Cover it with notes. Study it. File it. And review your journal often. It really will be the greatest trading book… EVER!

Over time, I promise you will start to see patterns within the market structure or price action, which repeat themselves again and again and again.

Like this, which we shared via social media way back in 2015:

What doesn't happen... is important information! 

This is a structural feature that I see repeated again and again and again.

Here's another previous example – http://yourtradingcoach.com/trading-process-and-strategy/trading-failed-expectations/

And of course, those with the YTC Price Action Trader should look to Volume 2, Chapter 3, Page 143.

But let's look to an example which occurred last week, on a higher timeframe chart.

Yes… it's an idea which you will find in all markets and all timeframes!

Studying a higher timeframe trap

Studying a higher timeframe trap

Studying a higher timeframe trap

Studying a higher timeframe trap

Studying a higher timeframe trap

Studying a higher timeframe trap

Studying a higher timeframe trap

Studying a higher timeframe trap

Studying a higher timeframe trap

Studying a higher timeframe trap

Studying a higher timeframe trap

Studying a higher timeframe trap

Happy trapping,

Lance Beggs