Monthly Archives: June 2018

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

 


 

Higher Timeframe Pattern Breakout

 

I don't actively seek to find patterns on my higher timeframe.

But 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.

Of course, in either case the trade idea must make sense from my usual trading timeframe analysis. And also make sense in accordance with my philosophy on price movement and where & how it creates opportunity.

Keep an eye out for them. They can provide good opportunity.

<image: Higher Timeframe Pattern Breakout>

<image: Higher Timeframe Pattern Breakout>

<image: Higher Timeframe Pattern Breakout>

<image: Higher Timeframe Pattern Breakout>

<image: Higher Timeframe Pattern Breakout>

<image: Higher Timeframe Pattern Breakout>

Happy trading,

Lance Beggs