Yearly Archives: 2018

Simple Session Bias – 2

 

Last week I introduced two quick and simple methods for establishing the "bigger picture" bias for the trading session.

Let's look at this concept one more time, reviewing all sessions since last week's publication.

We will focus this time on the opening range method (my preferred method) and go into a little more detail.

Friday 3rd August 2018

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

Monday 6th August 2018

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

Tuesday 7th August 2018

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

Of note… this session was also the focus of a social media post. You can see it here on either twitter or facebook.

Wednesday 8th August 2018

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

Thursday 9th August 2018

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

Next Step…

Now it's time for you to take action.

If you like the idea, start applying it to your markets for a few weeks to see if it adds value to your own analysis and trade decision making.

Maintaining context is essential for effective price action trading. The "bigger picture" session bias is a key part of this context. And will hopefully have you trading (more often than not) on the right side of the market.

Happy trading,

Lance Beggs

 


 

Simple Session Bias

 

Maintaining context is essential for effective price action trading.

And while that is true for all timeframes, it's especially so in the lower intraday timeframes where you can easily get caught up in the tick-by-tick battle between the bulls and bears.

My primary tools for context are the trend structure which I view on the trading timeframe chart and a support and resistance framework on a higher timeframe chart. All revealed here if you're interested.

But over time I've adopted a slight addition to this plan.

One additional piece of context data.

Very quick to establish. And very simple.

It essentially provides me with an immediate "bigger picture" assessment as to whether the session as a whole should be considered bullish, bearish or neutral.

I don't restrict trading to this session bias direction (although some people may choose to do so). I trade with reference to the trend and S/R structure, as discussed earlier. But the session bias helps to weight my preference slightly to this "bigger picture" direction.

When trading with the session bias I might show a little more patience in letting a trade prove itself. And a little more confidence in holding for larger targets.

Against the session bias, I might prefer to limit myself to A+ quality trades only. I might require them to prove themselves more quickly, or else I'll be scaling back the risk. And I might be satisfied with closer targets.

The method is simple – just display the opening range on a higher timeframe chart. Price holding above the opening range is bullish. Price holding below is bearish. Stuck at the opening range (or in the vicinity) is neutral.

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

VWAP works great as well. Again, price above VWAP is bullish and below is bearish. While price oscillating around the VWAP is more neutral.

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias> 

Interestingly, you will note that both methods produce a slightly different result, at times, in particular immediately following the session open. That's completely normal. And it's fine (we're only getting a feel for a "bigger picture" bias here). Just be consistent in whichever you use.

Play with some charts and explore the use of either the opening range or VWAP. Or find your own method. There are many options.

Whatever you choose, just keep it simple.

No "analysis" required. Just an immediate visual assessment of bullish, bearish, or neutral.

Happy trading,

Lance Beggs

 


 

Patience at the Open

 

Until you have a good read of the market, there is NO TRADE.

  • Confidence in your real-time understanding of the market structure.
  • Confidence in your real-time understanding of the nature of price movement.
  • Confidence in your real-time assessment of market bias.
  • Confidence in your projection of that market bias forward in time and price.

 

And most importantly:

  • An understanding of how future price movement should behave if your forward projection has some validity.
  • And confidence in your ability to adjust your understanding (and your trading decisions) should price movement offer something unexpected.

 

In simpler language… if you don't know what's going on… you have no business trading.

Watch and wait until some clarity appears, in terms of structure, price movement and opportunity.

The market open is one time which has great potential for confusion, doubt and uncertainty.

I remind myself before the open that there is no need to rush the first trade. If it screams out to be taken, then take it. But otherwise, be patient and allow myself time to get in sync with the flow of price.

Here are two of the market opening "warning signs" that have me keeping my trigger finger well clear of the mouse.

1. Bias Conflict

During the session I maintain a sense of the bias through the YTC Price Action Trader rules for trend projection.

At the session open though, I like to complement this with a really simple and objective method – the opening range breakout.

If they're in agreement, it's game on.

But if they conflict, it's a sign to be patient and wait till they come into alignment.

<image: Patience at the Open>

<image: Patience at the Open>

<image: Patience at the Open>

<image: Patience at the Open>

2. Seriously BAD LOOKING Price Action

Not just bad looking price action. We're talking seriously bad looking price action.

<image: Patience at the Open>

<image: Patience at the Open>

Remain Patient. Watch and Wait.

<image: Patience at the Open>

<image: Patience at the Open>

<image: Patience at the Open>

<image: Patience at the Open>

Happy trading,

Lance Beggs

 


 

The Mindset of a Champion

 

This social media post from last Sunday is just SO IMPORTANT, I thought we should expand upon it and get the ideas out to the whole YTC audience.

<image: The Mindset of a Champion>

This is just a perfect example of a growth mindset, viewing losses as feedback that serve to drive further improvement and growth.

There are two things that I love about this.

1. It is SO ACTIONABLE.

Look to your own post-session procedures and ensure that you are approaching your review in the same way.

Serena Williams:

  • "I'm already deciphering what I need to improve on, what I need to do, what I did wrong, why I did it wrong, how I can do better…"

 

Let's make this relevant to our job:

  • What decisions were less than ideal? (Consider all aspects of today's trading, including your physical, mental and emotional state, your work environment, your ability to analyse the market, to get in sync with the price action, to recognise opportunity and to execute on that opportunity.)
  • Why did I make these decisions?
  • What alternate decisions would have improved my performance?
  • What can I do to ensure I make better decisions in the future?

 

2. It finishes with POSITIVE ENCOURAGEMENT.

After the review is complete and steps for improvement have been identified…

Serena Williams:

  • "OK, I do improve with losses. We'll see how it goes."

 

"I do improve with losses."

Beautiful!

Zero baggage carried forward into the next game.

Consider adding that to your own post-session procedures:

  • "I do improve with losses. Let's see how it goes tomorrow."

 

But Wait… Let's Make this Even Better…

Sunday's post also featured some great points from Nicholas…

<image: The Mindset of a Champion>

<image: The Mindset of a Champion>

If you want to be great you cannot settle for "good enough". You need to CONSTANTLY PUSH TO BE GREATER.

So let's improve the earlier post-session review items, ensuring they consider all sessions regardless of whether we outperformed or underperformed.

Step 1:

  • What decisions were less than ideal? (Consider all aspects of today's trading, including your physical, mental and emotional state, your work environment, your ability to analyse the market, to get in sync with the price action, to recognise opportunity and to execute on that opportunity.)
  • Why did I make these decisions?
  • What alternate decisions would have improved my performance?
  • What can I do to ensure I make better decisions in the future?

 

Step 2:

  • What decisions were excellent? (Consider all aspects of today's trading, including your physical, mental and emotional state, your work environment, your ability to analyse the market, to get in sync with the price action, to recognise opportunity and to execute on that opportunity.)
  • Why did I make these decisions?
  • What can I do to ensure I continue to make similar decisions in the future?

 

If you want to be great you cannot settle for "good enough". You need to CONSTANTLY PUSH TO BE GREATER.

Growth will be found at and beyond the edge of your comfort zone.

Welcome the frustration!

Welcome the pain!

Welcome the challenge!

And use it to DRIVE YOURSELF TO HIGHER LEVELS OF PERFORMANCE.

Happy trading,

Lance Beggs

 


 

Slow, Steady, Incremental Progress

 

Excerpt from an email from J.L.

  • Finally, do you have any articles that could be helpful going from sim to live?

 

Let's write one now…

Do NOT rush.

The markets will always be there, ready and waiting for when YOU are ready.

The journey takes as long as it takes. And the psychological challenge is different at each level of risk.

So aim for slow, steady, incremental progress.

Let's break the journey into stages, noting that this is for discretionary traders. Systems traders will use a different process.

 

Stage 1 – Historical Chart Study

Stage 1 involves study of past data in order to achieve the following two aims:

  • Understanding the strategy – HOW to trade it and WHY it should work.
  • Confirming potential for edge through study of historical chart sequences.

 

This stage takes as long as you need it to take, until the point at which you you understand the strategy and believe it has potential for edge.

The key word above is "potential". Any edge you perceive through historical study is only a potential edge. It needs to be proven at the hard right-hand side of the screen, with real-time data. This will be done in the following stages. For now – just confirm that all evidence appears to show edge.

The more thorough your work at this stage, the greater the likelihood that you'll not be wasting your time in the following stages with a strategy that does not offer any real long-term sustainable edge.

 

Stage 2 – Simulation – Proving Edge

Stage 2 involves operating the strategy in a simulated environment in order to confirm the edge is real.

Some people are tempted to skip this stage, through concern that a simulated environment does not offer the same psychological challenge of a live environment. But that is exactly the reason why you should start on the sim – keep it simpler. Why risk actual funds when the edge is not yet proven. Take the time to prove the edge in the simpler and safer environment, without this higher degree of psychological challenge. Then, once proven, you can advance to the live environment with a greater degree of confidence in the strategy and your ability to trade it.

Slow and steady!

Incremental progress!

We will be analysing our trade performance in groups of trades. So you need to start by determining a suitable group size for analysis of stats, ensuring that groups will contain no less than twenty trades. It doesn't really matter whether your groups contain a variable number of trades (perhaps weekly groups, or daily for more active traders who complete dozens per day), or whether your groups contain a fixed number of trades (20 or 50 or 100 trades). Pick something that makes sense for your frequency of trading. Just ensure it's no less than 20 trades. And be consistent.

Trade a complete group, recording your individual trade results in your Trading Journal Spreadsheet. While trading a group your concern is not profitability but rather consistency of process and quality of execution. Your trading should be carried out with minimum size, simulating the EXACT processes you will follow when you first transition to the live environment.

Only when the whole group is complete should you concern yourself with performance. Analyse the stats for the group, in particular the win percentage and win/loss size ratio. Confirm whether you have proven edge across this sample of trades.

If edge is not proven, determine which group statistic is underperforming. And then study the component trades to identify (a) one potential cause of this underperformance, and (b) a plan to improve performance over the next group. Now document the changes and start again with the next group.

If edge is proven, congratulations. Now do it again.

Repeat the process until you can prove edge in terms of profitability and consistency, maybe five times in a row. Only then should you consider transitioning to a live environment.

 

Stage 3 – Live Environment – Proving Edge

Stage 3 takes you live, with the ABSOLUTE MINIMUM exposure to risk that your strategy and your market allows. That is, the smallest position sizes possible.

The aim is to trade in exactly the same manner as just carried out in the simulated environment. The only change should be live execution and the additional psychological challenge of having money at risk.

Be completely clear regarding your maximum acceptable drawdown during this stage. And commit to dropping back to the sim again, should this limit be hit.

Slow and steady!

Incremental progress!

Performance will again be assessed in groups of trades, using the same group size as when sim trading.

Trade a complete group, recording your individual trade results in your Trading Journal Spreadsheet. While trading a group your concern is not profitability but rather consistency of process and quality of execution.

Only when the whole group is complete should you concern yourself with performance. Analyse the stats for the group, in particular the win percentage and win/loss size ratio. Confirm whether you have proven edge across this sample of trades.

If edge is not proven, determine which group statistic is underperforming. And then study the component trades to identify (a) one potential cause of this underperformance, and (b) a plan to improve performance over the next group. Now document the changes and start again with the next group. If performance is completely unacceptable then consider dropping back to the sim.

If edge is proven, congratulations. Now do it again.

Repeat the process until you can prove edge in terms of profitability and consistency, maybe five times in a row. Only then should you consider increasing risk.

 

Stage 4 – Live Environment – Improving Edge

Stage 4 is a never-ending process of stretching yourself to new levels of performance.

Identify the change you wish to make, ensuring that it is in ONE PART of the process.

The obvious example here is an increase in size. Make it a small and incremental increase.

But this may also be any changes to process. Keep it small and incremental. One change at a time.

Performance will again be assessed in groups of trades, using the same group size as in previous stages.

Trade a complete group, recording your individual trade results in your Trading Journal Spreadsheet. While trading a group your concern is not profitability but rather consistency of process and quality of execution.

Only when the whole group is complete should you concern yourself with performance. Analyse the stats for the group, in particular the win percentage and win/loss size ratio. Confirm whether you have proven edge across this sample of trades.

If edge is not proven, determine which group statistic is underperforming. And then study the component trades to identify (a) one potential cause of this underperformance, and (b) a plan to improve performance over the next group. Now document the changes and start again with the next group. If performance is completely unacceptable then consider rolling back the changes in order to return to something that was working, before again attempting change at some point in the future.

If edge is proven, congratulations. Now do it again.

Slow and steady!

Incremental progress!

Two final points here.

Firstly you should never completely trust an edge. Maintain constant vigilance. Continue to monitor the stats for your groups of trades, in order to confirm not just profitability but also some degree of consistency from group to group.

And secondly, if you're not growing as a trader, then the problem is that your review processes are not driving any growth. Fix your review processes.

<image: If you are not growing as a trader, this is the problem...>

Best of luck with your journey.

Remember, there is no hurry.

Slow and steady!

Incremental progress!

Lance Beggs

 


 

The Other Trader (6)

 

Let's continue with an old article series – the metagame – trading AGAINST other traders who find themselves on the wrong side of the market.

Because…

If I can't feel someone on the other side of the market getting it really wrong, there is no trade.

You can see the prior articles here if you missed them – OneTwoThreeFourFive.

Here is the general concept for today's trade…

<image - metagame trading - the other trader 5> 

In playing the metagame, we aim to place ourselves in the mindset of any trader who bought late in the move, at or soon after the breakout. Feel their stress build as price stalls. And stalls. And stalls. Feel their pain as their "sure thing" collapses back below the stall region. And find a way to profit from their pain.

Yes, trading is a predatory game!

Let's see some charts.

We'll be seeking BOF Setup opportunity at this point here:

<image - metagame trading - the other trader 6>

 

The key part I want to emphasise today is the following:

<image - metagame trading - the other trader 6>

<image - metagame trading - the other trader 6>

<image - metagame trading - the other trader 6>

<image - metagame trading - the other trader 6>

<image - metagame trading - the other trader 6>

<image - metagame trading - the other trader 6> 

 

Let's play the metagame and put ourselves in the mindset of those who entered LONG on the breakout.

<image - metagame trading - the other trader 6>

<image - metagame trading - the other trader 6>

<image - metagame trading - the other trader 6>

<image - metagame trading - the other trader 6>

<image - metagame trading - the other trader 6> 

 

Trading the metagame…

If I can't feel someone on the other side of the market getting it really wrong, there is no trade.

Let someone trap themselves in a low-probability position.

Place yourself into their mindset.

Feel their pain.

And when it gets to the point where they've lost all hope, STRIKE.

Go get 'em,

Lance Beggs

 


 

Daily Market Structure & Price Action Study – 5

 

See here if you missed the earlier articles –
No. 1, No. 2, No. 3, No. 4

The concept:

I've been writing online for over a decade now. And for that whole time I've been promoting the idea of daily study in both Market Structure and Price Action.

It's a simple task that takes no more than five minutes, but which offers incredible value to your own learning and development.

Sometimes this study fits within certain themes, if there is a particular feature of market structure which I want to focus on for a period of time.

Often though, it's completely unstructured. Simply searching for whatever captures my attention.

Either way, every trading day after the session is over, I look to the charts to find something interesting. Having done this for so long the findings are usually just reinforcing prior lessons. But occasionally, they'll uncover something new which can lead to further exploration, further learning and further growth and development.

The following are examples of entries in my Market Structure & Price Action Journal; although tidied up and expanded upon slightly to make them more "educational".

I hope you find it useful. If you do, consider starting your own Market Structure & Price Action Journal.

 

Monday 25th June 2018:

I'm a big fan of the concept of "volatility contraction leads to volatility expansion".

Usually when I show examples of this it's in the form of a triangle pattern.

But there are other ways to see it, such as identifying very narrow range bars on a much higher timeframe.

I trade the 1-minute chart. The following is the 15-minute chart, so it's quite a bit higher in timeframe. Note the narrow range bar, in this case also an inside bar which makes it even better.

<image: Daily Market Structure and Price Action Study>

<image: Daily Market Structure and Price Action Study>

<image: Daily Market Structure and Price Action Study>

Obviously what is important here is the concept.

But let's see the outcome for this one particular example.

<image: Daily Market Structure and Price Action Study>

Lessons:

  • Volatility contraction leads to expansion.
  • While contraction is most-often seen through a triangle pattern, it can also be identified through an unusually narrow-range bar on any higher timeframe.
  • Context is important though – my personal preference is for a smooth-flowing directional market.
  • Look for entry either preempting the breakout or on the first pullback after the breakout.

 

Tuesday 26th June 2018:

One of my favourite topics of study is any blindingly obvious traps at the edges of the structure.

<image: Daily Market Structure and Price Action Study>

The reason for this structure – see Chapter 3, page 99, "Sideways Trend – Definition".

<image: Daily Market Structure and Price Action Study>

<image: Daily Market Structure and Price Action Study>

<image: Daily Market Structure and Price Action Study>

<image: Daily Market Structure and Price Action Study>

Lessons:

  • In a sideways market environment, primary trade opportunity is sought on price interaction with the range high and low boundaries.
  • Two potential features of a quality breakout failure are (a) price having to stretch to reach the breakout level, and (b) almost immediate lack of continuation following the breakout.

 

Happy trading,

Lance Beggs

 


 

Learning from Baseball’s “Mental Reset”

 

I recently sent out the following two posts via social media, discussing the importance of having a plan in place to quickly clear your mind and get back into the game, whenever you sense frustration of any kind:

<image: Learning from Baseball's "Mental Reset">

<image: Learning from Baseball's "Mental Reset">

In response to these posts, I received the following exceptional email:

Hi Lance,

I liked your recent Twitter post about your "Regroup Procedure" after losses and thought I'd share something I learned while playing college baseball that I have applied in my trading.

We practiced what we called our "Mental Resets" while batting. A mental reset is required whenever anything "shocks" you and gets you off your plan at the plate. Every time you walk up to the plate, you should have a pre-meditated plan of the pitch you are looking to hit and anything that can dissuade you away from that plan has to be combated with a mental reset to get you BACK to your plan.

The physical act of mentally resetting is to: Step out of the batters box, focus on a small spot on your bat (we call it our "zero point"… We want to get back to zero emotionally), and take a slow deep breath. You then reaffirm your plan in your head, and step back into the box with confidence.

Our 5 Automatic Mental Resets were:

1) Swinging at a pitch that doesn't match your plan… – Swung at a bad pitch… step out of the box and RESET.

2) NOT swinging at the pitch that you were looking for… – You had a plan and for whatever reason you didn't pull the trigger on your pitch… RESET.

3) Bad call by the umpire… – You didn't think it was a strike and your upset. The umpire is out of your control… Step out and RESET.

4) Brush back… – You almost just got hit by a pitch. Your heart rate is too high and you aren't in a good state to be confident stepping back into the box… Step out and take a MENTAL RESET to bring you back to zero.

5) Changing of plan… – Something happened that requires a quick change of your plan (the most often one being moving to a 2 strike approach once you get 2 strikes on you)… – Change of plan… Environment has changed, we need to RESET here.

You don't have much time in between pitches to cool off, so if something upsets you, it is extremely important that you use a Mental Reset to keep your focus and get back to your plan. I think it is the same thing with trading… especially shorter time-frame trading. You don't have a lot of time to sit there and be upset. You have to RESET.

I thought you might find this parallel of Trading to Baseball interesting.

Cheers,

Alex

Thanks Alex. That is EXACTLY what I was talking about. Except your baseball analogy explains it just SO MUCH BETTER.

I called it a regroup (based on a term from my military days where a unit facing attack might drop back in order to reset and reorganise, in order to continue fighting).

Baseball calls it a mental reset.

The concept is the same.

When something has put your mindset on tilt then you need to step back away from the charts and reset or reorganise yourself, in order to return to the game with a clearer and more highly-focused mindset.

I've found this most effective when it involves a predefined and practiced ritual, such as my regroup checklist or Alex's routine for focus on the bat, slow breathing and reaffirmation of the plan.

To continue with the baseball theme, I'm reminded of a video which I shared a few years back.

The whole video is worth watching from a trading mindset perspective. But take note at 7:55 and you will see Evan Longoria complete his version of a mental reset.

(If the video is not playing here, click on this link to go direct to YouTube.)

Do you have a regroup or reset procedure?

If not, develop one now. Start with mine. Or adapt the baseball mental reset shared by Alex.

And then over time, amend it and make it your own.

As they say in the video, you need to have something to go to when the garbage hits the fan. Because the garbage will hit the fan. So let's be ready for it.

Happy trading,

Lance Beggs

 


 

Higher Timeframe Pattern Breakout – 2

 

Last week we looked at the following chart sequence showing an obvious symmetrical triangle pattern within my higher timeframe chart.

<image: Higher Timeframe Pattern Breakout>

See here if you missed the recent article – http://yourtradingcoach.com/trading-process-and-strategy/higher-timeframe-pattern-breakout/

I don't know if I was somehow influenced by that article. I don't usually look for patterns on the higher timeframe chart. It's primary purpose is for establishing an S/R framework.

But since putting that article together, I'm seeing them everywhere!  🙂

As I said last week… sometimes they just stand out as so obvious that you can't miss them. So I watch them for potential trade opportunity around the edges of the pattern structure. Usually for two alternatives – a breakout failure or a breakout pullback. 

So let's do one more example. A little different this time in that the breakout extends much further before commencing the pullback. The same concept applies though – take the first pullback against the edges of the structure.

Here's the higher timeframe chart…

<image: Higher Timeframe Pattern Breakout>

Zooming in now to the Trading Timeframe chart at the time of entry.

<image: Higher Timeframe Pattern Breakout>

<image: Higher Timeframe Pattern Breakout>

<image: Higher Timeframe Pattern Breakout>

Two steps:

(a) Higher Timeframe pattern

(b) Trade BPB / BOF around the edges of the structure.

It's not how I typically trade, but I expect a whole strategy could be based around the idea.

Happy trading,

Lance Beggs