Monthly Archives: August 2018

Simple Session Bias – 3 (Spot Forex)

 

I had no plans to continue this recent topic on use of the opening range to provide a quick and simple assessment of "bigger picture" session bias.

But I had a few traders ask how it should be applied to the forex markets.

You can see the two prior articles here, if you missed them. The first introduces the concept. The second expands upon the concept with some additional detail.

 

All examples from these prior articles were from the futures markets, with the opening range defined by the first 5 minute candle from the 0930 open.

So what do we do in the 24 hour spot forex markets?

Simple…

Set the opening range at whatever point is most relevant to the dataset you're trading.

Let's look at some examples. As we do so though, please note that I will not be marking up these charts beyond simple positioning of the opening range. This will allow YOU to analyse the charts to identify the directional bias (if any) plus assess the ease with which price moves from the opening range (if at all). And put some thoughts towards how tactics might vary to best suit these conditions. If you missed the prior articles, again I recommend you refer to them first, via the links above.

The plan again –

Set the opening range at whatever point is most relevant to the dataset you're trading.

Those trading daily or 4-hour charts might like to use a monthly opening range.

Simply take the first daily candle of the month and extend it forward.

<image: Simple Session Bias - Forex Monthly Opening Range>

Those trading 4-hour, 1-hour or 15-minute charts might like to use a weekly opening range.

Simply take the first 4-hour candle of the week and extend it forward.

<image: Simple Session Bias - Forex Weekly Opening Range>

Those trading 1-hour charts or lower might like to use a daily opening range.

Simply take the first hourly candle of the day and extend it forward. I've chosen to start the day from the Asian Session open. Adjust to whatever might be relevant to your trading.

<image: Simple Session Bias - Forex Daily Opening Range>

Lower timeframe traders (maybe 5M or 1M) might like to break the day down even further, into individual sessions.

Again, take the first 5-minute candle of the session and extend it forward.

<image: Simple Session Bias - Forex Asian Session Opening Range>

<image: Simple Session Bias - Forex European Session Opening Range>

<image: Simple Session Bias - Forex US Session Opening Range>

So yes… the opening range concept can be applied to 24 hour markets.

Set the opening range at whatever point is most relevant to the dataset you're trading.

Happy trading,

Lance Beggs

 

PS. You might also be interested in this old article from 2009 – Forex Opening Range Breakout Strategy

PPS: Intraday traders might also want to consider this idea shared in a couple of social media posts a few years ago:

<image: Displaying only EUR UK Session Data>

<image: Displaying only EUR UK Session Data>

 


 

Trade When You See Edge. Stand Aside When You Don’t!

 

A few weeks back we discussed a quick and simple method for identifying a "bigger picture" directional bias.

See here if you missed it and want to review the idea – Part 1, Part 2.

The second article generated quite a bit of good email conversation, with several traders now adding this to their current trading process.

One email included a brief question, which I feel it is important to discuss with all of you today.

  • "I always looked at the opening range as something that worked some times (when the market did move) and didn't work other times (when the market didn't move). So you taught me a great lesson here. It works all the time, because that failure of price to move from the opening range is the information we need to identify a lack of directional bias. What I would love to see though is how you traded one of these days that were neutral bias throughout the whole day. Like on the Tuesday for example, you said "My preference is to stand aside". Does that mean you didn't trade at all? Or at what point did you stop? Or if you did trade at any time, what was the reasoning at the time?"

 

Nice question!

Let's look back at the session on that Tuesday. This was the higher timeframe chart, with the opening range, as discussed in the prior article series.

<image: Trade when you see edge. Stand aside when you don't.>

Clearly a neutral bias throughout the vast majority of the session.

But yes, I DID make some trades.

Before we examine the trades, there are two key points I want to make.

Firstly, we need to remember that the image above is the HIGHER TIMEFRAME chart. Trading decisions and actions are based upon the Trading Timeframe chart, within the context of the structure provided by the Higher Timeframe chart.

And secondly, we need to remember that the session bias is something which gradually reveals itself over time.

<image: Trade when you see edge. Stand aside when you don't.>

<image: Trade when you see edge. Stand aside when you don't.>

<image: Trade when you see edge. Stand aside when you don't.>

<image: Trade when you see edge. Stand aside when you don't.>

<image: Trade when you see edge. Stand aside when you don't.>

<image: Trade when you see edge. Stand aside when you don't.>

Let's look at the Trading Timeframe Chart…

<image: Trade when you see edge. Stand aside when you don't.>

<image: Trade when you see edge. Stand aside when you don't.>

<image: Trade when you see edge. Stand aside when you don't.>

<image: Trade when you see edge. Stand aside when you don't.>

With hindsight there will ALWAYS be a ton of opportunity you can see.

By all means learn from it post-session if it's opportunity you want to catch in future.

But when you're operating LIVE at the hard right hand edge of the screen, it can help to remind yourself that you don't have to trade every price sequence.

When price is moving nicely and you feel in sync with the movement… when you see edge… only then do you trade.

All other times… when you don't see edge… shift that chair back so that you're out of reach of the mouse. Watch and wait for something better.

Or call it a day.

You don't have to trade every sequence. Trade when you see edge. Stand aside when you don't.

Happy trading,

Lance Beggs

 


 

What’s Going On when you Hold Past the Stop

 

I'm always fascinated to hear from traders who have trouble exiting a trade at the stop loss. The ones who move the stop loss further away to avoid the exit. And then move it further. And further.

Until eventually, they can't take the pain any more, so they get out of the trade and destroy several days, weeks or even months of profits.

Personally, I don't recall ever holding past the stop, although I have found evidence of having done it once in the past while reviewing old charts.

Hopefully this was a one-off occurrence. Either way, I've clearly learnt from that at some point.

No-one likes a loss. Me included. But you need to be quite comfortable taking them.

For those of you who have yet to learn how to take a loss, let's discuss what is happening when you hold past the stop.

(Noting of course that this is not always the only issue. Maybe not even the primary issue. Everyone's situation is somewhat unique. But it is a significant factor that I see in a whole lot of cases. So if you're letting price run through you're stops, give this some consideration. It may just be the pathway you need to explore to find your way to greater success.)

This is what we're talking about…

<image: What's going on when you hold past the stop?>

<image: What's going on when you hold past the stop?>

<image: What's going on when you hold past the stop?>

<image: What's going on when you hold past the stop?>

<image: What's going on when you hold past the stop?>

<image: What's going on when you hold past the stop?>

<image: What's going on when you hold past the stop?>

In many cases the primary issue is NOT that you fear losing any money.

Often instead, the problem is that you don't want to be wrong.

YOU DON'T WANT TO BE WRONG!

You rationalise that if you just give it a little more room, and a little more time, price will turn around and prove you right.

It's all ego!

What does it mean to be wrong?

Every trade you get wrong is a dagger in the heart, reminding you of every time you've been painfully wrong in the past. Every time you've failed at something. Every time you fell short of your hopes, dreams and prayers.

Every wrong trade is one small step closer to the ultimate failure of your trading business.

And when you're no longer worthy… what will your family think of you? What will your friends say about you? What will your own mind say about you as you desperately try to fall asleep each night to forget the pain?

You don't want to be wrong!

So you move the stop to give it a little more room. But the fear only increases as price continues to move against you.

You give it more room. Again the fear increases.

And then again… you give it more room.

Until finally… acceptance… you know you're wrong.

And now it's about the money.

The loss is big, but fear of it getting even bigger lets you get out. Because you KNOW you're wrong.

Again, please note that this is not always the only issue. Maybe not always the primary issue. Everyone's situation is somewhat unique. But it is a significant factor in a whole lot of cases.

So if you're letting price run through you're stops, give this some consideration. It may just be the pathway you need to explore to find your way to greater success.

Here's the problem, as I see it.

You're playing the wrong game.

You're playing a game of individual trades.

But this business is not about individual trades.

The outcome of any one trade is irrelevant.

We profit over a series of trades.

You need to accept that this game is not one of being right. But rather one of managing a sequence of wins and losses so that over a large enough sample we can produce a profit.

Wins!

And losses!

They're just a part of the game.

What if you accepted that half your trades would win and half will lose. And you made it your aim to ensure that over any series of trades (20+) your average win was greater than your average loss?

To do this, you absolutely CANNOT let your losses run larger than they need to be.

Take your losses, quickly and decisively. Keep them small. It's only one in 20+ trades in your current series. You've got a whole lot of trades still to come. And some of them will more than compensate for the small loss.

By all means, aim for as high a win rate as you can achieve. But seriously… a 50% win rate IS enough. Just aim to ensure your average win is greater than your average loss.

Happy trading,

Lance Beggs

PS. If this article was useful, you might want to read this as well – http://yourtradingcoach.com/trading-process-and-strategy/Winning-Through-Losing-Better-1-of-2/

 


 

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