Monthly Archives: August 2019

Daily Market Structure & Price Action Study – 7

 

See here if you missed the earlier articles – No. 1, No. 2, No. 3, No. 4, No. 5, No. 6

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 work in newsletter article & blog format. (The real journal rarely needs more than one image and a small handful of notes.)

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

 

Tuesday, 13th August 2019:

What a day this was. Or at least, what a day it started out as!

The opening drive was the feature of two social media posts. I'll copy them here if you missed them.

Post one:

<image: Opening drive post one>

And post two:

<image: Opening drive post one> 

I'm off track though. The opening drive was NOT the focus of my Market Structure & Price Action (MSPA) Journal.

Trades journal – yes.

Post session review – yes.

Because I underperformed.

But for the MSPA study, I found this interesting…

<image: Daily Market Structure and Price Action Study> 

A break of the initial balance area (opening hour) is a high probability occurrence. But despite all of that initial momentum, price could not continue.

Not even just up to retest the initial balance high. 

I was reminded of a previous MSPA entry from 30th of July, which was also shared via social media.

<image: Strong Opening Drives do not always continue> 

So the lesson today was simply a reminder of a pre-existing one. The fact that no matter how strong we see the market moving at the open, this is no guarantee of a trend day.

Sure, it might be. And we act as if it will be until proven otherwise.

But like all market analysis, we need to recognise that at best we're dealing with probabilities.

There is great danger in holding onto a belief in the state of the market, as if it's a certain thing.

Assess the state of the market. Act in accordance with that view. But don't trust it to hold forever.

Lessons:

  • Remain flexible in mindset at all times. There is no certainty. Nothing lasts forever in the markets. And when it changes, it can happen rapidly.
  • A strong opening drive is not always guaranteed to lead to a trend day.

 

Happy trading,

Lance Beggs

 


 

Daily Market Structure & Price Action Study – 6

 

See here if you missed the earlier articles – No. 1, No. 2, No. 3, No. 4, No. 5

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 work in newsletter article & blog format. (The real journal rarely needs more than one image and a small handful of notes.)

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

 

Monday, 12th August 2019:

This was a difficult session. Choppy action. Narrow range (compared to recent sessions).

Definitely a session where you wish you just took a day off.

Of course, there's no way to know that till after the fact.

What is important though is accepting that such days are a normal part of the game. And in quickly recognising any potential for unfavourable conditions.

The sooner you can recognise potential danger, the sooner you can respond and adapt.

This doesn't always mean shutting down for the day. It may well be an option. But more often than not, it's just a warning to slow down a little. Step back and be patient. Wait for the easier opportunity perhaps at the edges of the structure. Don't jump into marginal opportunity just because you "want to" trade.

So that was the focus of today's entry into my Market Structure & Price Action (MSPA) Journal – What signs were present early in the session, which identified potentially unfavourable conditions?

<image: Daily Market Structure and Price Action Study>

This is one of my go-to, most reliable, signals for potentially dangerous conditions.

If the market sentiment was bullish or bearish then price would expand from the opening region. The fact that it can't, indicates either a lack of interest from both sides of the market, or at least roughly balanced commitment from both bulls and bears. Either way, a sign of potential chop ahead.

This is NOT a signal for no trading. But rather one of caution.

Take it slow. You don't have to trade every move. Wait for something that is screaming out to be traded.

<image: Daily Market Structure and Price Action Study>

One structural feature I hate is the presence of two "levels" within close proximity. Sometimes price gets stuck between the two leading to nothing good, unless you like getting caught in a real chop-fest.

And that's where we found ourselves today.

Opening range at the top. And the overnight low at the bottom.

If market sentiment were indeed bearish then this break should have held. It didn't.

Caution is required.

Again, this is not a "no-trade" signal. Just a warning that we're not likely to have an easy trending environment. Be patient and wait for the right opportunity. Maybe something like getting LONG on the retest of the overnight low!

<image: Daily Market Structure and Price Action Study>

Volatility contraction leads to volatility expansion.

Ok, not always.

But it's a good "rule of thumb" expectation.

So when we find ourselves stuck between the opening range and the overnight low, I was very interested to see the outcome of the break from this area of compression. If that could break the high of day, and hold the break, I'd be much more comfortable.

But no, it's not to be.

Immediate failure. And straight back into the chop zone.

This is a day for extreme caution. 

Lessons:

  • Price stuck at or within the opening range = CAUTION REQUIRED.
  • Price stuck between two levels in close proximity = CAUTION REQUIRED.
  • An inability for a break from volatility contraction to provide any meaningful expansion = CAUTION REQUIRED.

 

Simple!

As mentioned earlier, this daily activity rarely takes more than about 5 minutes. But I feel that it's been an incredibly important part of my own learning and development.

Often there is nothing earth-shattering, although it can happen. Usually after having done this for so long I find it's just reinforcing prior observations and seeing new instances of prior patterns.

All acting to build upon the mental models which I will use in the future to navigate the unfolding landscape.

If you haven't done so already, consider adopting the same habit. Every day – find something interesting in the markets to add to your Market Structure & Price Action (MSPA) Journal.

And as a side-note… consider doing the same with trades as well. Every day – find one A+ trade opportunity, whether you took it or not. Study it. And add charts and notes to your Trades Journal.

Short-term minimal effort. Long-term massive gain!

Happy trading,

Lance Beggs

 


 

What if you Narrowed Your Focus – 2

 

I want to expand upon an important idea which we covered a bit over a year ago (and which I shared on social media again recently).

That is the idea that while learning and developing as a trader, you may find greater value in narrowing your focus and specialising in just one small segment of the daily trading session.

The prior article was here – http://yourtradingcoach.com/trading-process-and-strategy/what-if-you-narrowed-your-focus/

And the suggestion was that rather than fight through 6.5 hours of a full trading session, leaving little time to focus on replay and review, why not try to specialise in just the opening hour.

One hour of trading… during the time when the market most often (but not always) provides the best hourly range.

And then review!

Find the lessons… replay the sequence… and LEARN.

Get profitable on this short sequence of price action. Ignore the rest. You can always add it back later, if you wish.

Now let's expand upon this idea just slightly!

The opening hour is not the only option.

And the fact is that this type of sequence will not suit all traders.

<image: What if you narrowed your focus?>

<image: What if you narrowed your focus?>

If you like fast pace momentum drives and are comfortable with a little more "uncertainty", then perhaps you will love the open like I do. And enjoy the game of getting into sync with this new and evolving daily structure.

But again, this is not the only option.

If you don't find a liking to the pace and uncertainty of the open, then why not just let the opening structure play out. And then trade off that structure.

The opening hour is often referred to as the Initial Balance (IB) area.

Let the IB form. Let the market give you clues as to what type of day we might be in store for. Is it trending? Is it ranging? Is it volatile? Or is it dull and lifeless? Let the market set up some significant levels for you (IB high and low and any in-between).

And then trade off that already-formed structure.

You don't need to specialise in the opening hour. If you find you're not suited to that type of action, maybe you could specialise in trading from 10:30 through till midday?

<image: What if you narrowed your focus?>

<image: What if you narrowed your focus?>

There is no right or wrong.

The opening hour will sometimes offer incredible opportunity. At other times it will provide a real challenge.

The same applies for those trading after the opening hour. At times the structure and opportunity will be clear. Other times it will make for a very hard day at the office.

The point is that they offer different options for the trader who is struggling to gain some consistency. For someone who might benefit from narrowing their focus. And from specialising in a shorter sequence of price action and allowing greater time for replay, review and learning.

Play with both options and see what best fits your needs and your personality.

I like the opening sequences. They're faster. They offer incredible range at times.

But it's not the only option.

However you choose to do this, it's a simple concept.

Narrow your focus. Build expertise in one smaller sequence. And FIGHT to get off that cycle of continual failure.

Go for it! You can do this!

Lance Beggs

 


 

Traps Just Before RTH Open – 2

 

A few months ago we examined the concept of traps occurring in the price action just before, or immediately after, the RTH Open (RTH = Regular Trading Hours).

I'll place links to the prior articles at the bottom of this one, if you want to review them.

Today, let's look at another example of a breakout very late in the pre-session market, just before the RTH Open.

This is something which I absolutely LOVE to see. Because if that breakout fails, then it often sets up quite favourable conditions from the open. And so I'm keen to get a trade on as soon as I can.

No patience. No delays. It's game on!

Here's the general concept:

<image: Traps just before RTH Open>

<image: Traps just before RTH Open>

This concept can be applied in any market which offers pre-session trading leading into a clearly defined "regular" day session. Spot forex traders might apply it at the UK open, or the US open.

Today's example set up a break of the overnight high. That is, the same concept as the second image above.

Let's start by looking at a higher timeframe chart, to get some wider context.

<image: Traps just before RTH Open>

And the breakout on the Trading Timeframe chart:

<image: Traps just before RTH Open>

<image: Traps just before RTH Open>

<image: Traps just before RTH Open>

<image: Traps just before RTH Open>

<image: Traps just before RTH Open>

<image: Traps just before RTH Open> 

I've written a lot about displaying patience at the open. About waiting till the bias is clear and trading conditions are favourable.

But there are some situations where I don't display patience.

Where I'm keen to get a trade on as soon as I can.

No patience. No delays. It's game on!

One of these situations is when the market sets up a trap just before or just after the RTH Open.

Keep an eye out for similar opportunity in your own trading.

Happy trading,

Lance Beggs

 

Prior Articles:

Traps Just Before RTH Open – http://yourtradingcoach.com/trading-process-and-strategy/traps-just-before-rth-open/

Traps At The Open – http://yourtradingcoach.com/trading-process-and-strategy/traps-at-the-open/

Traps At The Open 2 – http://yourtradingcoach.com/trading-process-and-strategy/traps-at-the-open-2/

 


 

Targeting the Overnight High or Low – 2

 

Last week we discussed one of my current favourite plays for the first 30-60 minutes of the session – targeting the overnight high (ONH) or overnight low (ONL).

You can review last week's discussion here.

Just a few hours after sending out that email the market opened again. And the same concept played out once more. Let's check it out.

<image: Targeting the Overnight High or Overnight Low>

<image: Targeting the Overnight High or Overnight Low>

<image: Targeting the Overnight High or Overnight Low>

You don't have to manage your trades like this. It's just the way that makes most sense to me. If there is any threat of a trade moving into negative territory, I prefer to scratch it and reassess, rather than holding and hoping for it to recover.

Sometimes that works to my advantage. Other times it doesn't.

This method of trade management does require you to be completely comfortable with re-entering.

If you're not able to easily re-enter, you'll be better operating with a wider stop and a more passive set & forget style. On this particular day, your trade would have worked out fine.

Back to the trade…

<image: Targeting the Overnight High or Overnight Low>

<image: Targeting the Overnight High or Overnight Low>

As mentioned in the prior article, there is a very high probability that the overnight high or overnight low will be hit at some point during the session.

And a good probability that it will occur within the opening hour of the session.

I could give you stats for the last few months. But I'd rather you find them yourself. You'll learn more this way.

If it interests you, spend some time over the weekend to review the prior two to three months to get an idea of just how high these probabilities are.

And then monitor the concept in coming weeks in your own markets. Perhaps you'll also find the overnight high or overnight low provide nice targets for early trade opportunity.

Please realise though – this is NOT the setup. The concept we're discussing here is simply selection of a high probability target. Take whatever setups you normally take from the open. Manage risk as you normally would, because they won't all work. But when they do work, the fact that the target is backed by some really high probability stats, can make it quite easy to hold.

Sometimes they work really well:

<image: Targeting the Overnight High or Overnight Low>

But occasionally, not so well.

The very next day fails to reach both the ONH and ONL. If you held a trade for either of these targets, it would have fallen well short.

<image: Targeting the Overnight High or Overnight Low>

There are NEVER certainties. No matter how high the probability, some targets will fall on the losing side of the stats. So manage risk, as per normal. And expect a challenge. If it hits the target quickly, as it sometimes will, consider it a bonus.

Happy trading,

Lance Beggs