Monthly Archives: June 2019

When your Trap Radar needs Recalibration!

 

Let's start with the daily chart for a bit of context…

I know right! When was the last time we looked at a daily chart?

No need to panic. Oxygen masks have not dropped from the ceiling. And we'll only spend a short time at these heights.

<image: When your Trap Radar needs Recalibration>

You know those days where you've got a feeling in your gut that tells you the market is DEFINITELY setting up a trap?

Well my Trap Radar had activated and the alarm was deafening.

My gut feel was "It's a trap! Fade the market!"

<image: When your Trap Radar needs Recalibration>

So let's step down from these heights and get back to the more comfortable Trading Timeframe and watch the opening sequence play out…

<image: When your Trap Radar needs Recalibration>

<image: When your Trap Radar needs Recalibration>

<image: When your Trap Radar needs Recalibration>

Here's the thing…

Way back in the early days I would have shorted this thing at every swing high, grinding my way towards the session stop.

But not now.

I recognise that it's normal to have these strong gut feelings from time to time.

Some people say to ignore them. I don't think we can. Nor do I think we should. Sometimes they're right.

I listen to it. I consider what it's saying. And I plan my trading in case it's right.

BUT… I also have a plan for those times it's wrong.

Having a gut feeling about market bias is fine.

But alongside that you must know the following:

(a) What price action would confirm this bias. And how you will trade it.

(b) What price action would indicate that the bias is wrong. And how you will trade it.

Let's step back to the open:

<image: When your Trap Radar needs Recalibration>

<image: When your Trap Radar needs Recalibration>

So having pre-accepted the potential for my gut feeling to be invalid, I was easily able to drop it and reassess the market structure.

<image: When your Trap Radar needs Recalibration>

For PB and CPB descriptions, see here.

<image: When your Trap Radar needs Recalibration>

<image: When your Trap Radar needs Recalibration> 

<image: When your Trap Radar needs Recalibration> 

Repeating the key points:

Having a gut feeling about market bias is fine.

But alongside that you must know the following:

(a) What price action would confirm this bias. And how you will trade it.

(b) What price action would indicate that the bias is wrong. And how you will trade it.

One of the greatest habits you can get into is always considering, "What if I'm wrong?" 

You are NOT smarter than the market. If it's not confirming your gut feeling, then YOU are wrong. Drop that bias and realign with what is actually happening.

Happy trading,

Lance Beggs

 


 

Trend Change Study

 

Do you ever experience the joy that comes from watching a price sequence develop and feeling that it is just technically "beautiful"?

No? Maybe it's just me.

But I do really love this sequence.

And I think it is a good one for those new to the YTC Price Action Trader methodology who might still be getting used to the ideas of strength and weakness analysis.

Sorry for those who don't have the YTC Price Action Trader. This article won't be relevant. We'll get back to usual programming next week!

Here's the price sequence we're going to study:

<image: Trend Change Study>

Click here if you wish to open a larger chart image in your browser. Or right click to download.

Pattern traders call this a Rounded Top.

For me, it's a transition from Uptrend to Sideways Trend (very briefly) and then into Downtrend.

But what makes it great for review is the fact that the whole transition occurs in slow motion, with gradual changes from swing to swing, rather than a sudden and dramatic break of structure.

Price just rolls slowly over from Uptrend… to Sideways… and to Downtrend.

So… study time!

A primary aim in my own personal trading is to get "in sync" with the price movement. This is not just assessing the trend direction as up, down or sideways. But at a deeper level, aligning myself and connecting with the underlying bullish or bearish sentiment within the trend. The result being a strong sense for whether the trend itself is stable, or perhaps weakening, stalling or at risk of reversing.

The aim of this exercise: To start developing these same skills through studying a reversal price sequence, identifying the signs within the swing structure that could have helped you sense the trend weakening and rolling over eventually into a new downtrend.

Please note: (a) Our concern is NOT with how this structure might be traded. Just with keeping yourself aligned with price as it flows. (b) And while we recognise that we're missing the "feel" that comes from watching this occur live, there is still value for new traders in historical chart study. Knowing what to look for is step one. Then we progress to learning to see it unfold in real-time.

Let's go:

1. Examine the price swings as they move from start to finish, using only one single method of strength and weakness analysis at a time.

(a) Momentum slope – bullish swing comparison

(b) Momentum slope – bearish swing comparison

(c) Projection

(d) Depth

Take note of any signs that each method might offer, alerting you to a weakening of the uptrend and gradual rolling over into a downtrend. (Noting of course that not every swing gives clear evidence of change. You're looking for gradual changes across multiple price swings.)

Now let's try to make it a little more realistic…

2. Real analysis, conducted in real-time at the hard right edge of the charts, actually considers all methods of strength and weakness analysis as a whole. So this time, step through the chart swing by swing and let all four methods create a "picture" in your mind. Allow yourself to feel the uptrend weakening, rolling over to the sideways. And then again rolling over to a downtrend.

If you want to review the text first, refer to sections 3.3.1 and 3.3.2 (pages 113 to 144).

If you have a couple of hours to spare you may feel like replaying the sequence (NQ, 3rd June 2019). But for those of us with better things to be doing on the weekend, simply stepping swing by swing through the chart from left to right should provide sufficient learning opportunity.

Happy trading,

Lance Beggs