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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

 


 

Targeting the Overnight High or Low

 

I've become rather fond of targeting either the overnight high (ONH) or overnight low (ONL) during early session trading.

If you're new to this idea, schedule some time to look back at the last few weeks of charts and take note of how many times they hit. For the ten sessions leading up to today's trading, nine sessions have hit either the ONH or ONL. Six of these occurring in the opening 30 minutes of the trading session. Seven within the opening hour.

So not only can we use the ONH/ONL as levels to trade off. But they also offer a price target for PB/CPB trade opportunity early in the session.

Of course, some happen too quickly to offer any opportunity. But otherwise, if the bias is clear and a valid setup is in place with sufficient room to the level, take the trade.

Let's start with a 30 minute chart to get some "bigger picture" context.

<image: Targeting the Overnight High or Low>

Dropping to the 1 minute trading timeframe:

<image: Targeting the Overnight High or Low>

<image: Targeting the Overnight High or Low>

<image: Targeting the Overnight High or Low>

<image: Targeting the Overnight High or Low>

<image: Targeting the Overnight High or Low>

Before you even consider looking for a trade entry, you need a target. You should have some sense of WHERE the market is going.

The ONH and ONL are two levels which I like to use as a price target in the opening 30-60 minutes of a session.

Have a look at recent sessions in your preferred markets. How many times has the market hit the ONH or ONL? How soon within the session?

Perhaps you'll also find they act as good initial price targets for early session trades.

Happy trading,

Lance Beggs

 


 

Pre-Accept All Possible Losses

 

Last week we discussed a simple technique that helps keep my mindset focused on the price action, rather than on my P&L, after suffering a trade loss.

<image: Pre-Accept All Possible Losses>

You'll find last week's article here if you missed it – http://yourtradingcoach.com/trader/its-how-you-choose-to-react-that-makes-all-the-difference/

So this week… I want to go a little deeper.

Because there is something that needs to be in place BEFORE this technique is applied, if I really want to gain maximum benefit from its use.

A belief system.

At the core of my approach to engaging and acting in the markets.

And that is…

Accept all possible losses before entering the battle!

We have talked about pre-acceptance of individual trade risk before – http://yourtradingcoach.com/trader/pre-acceptance-of-trade-risk/

But today's idea goes well beyond that.

It is about ALL possible losses.

It is about establishing a mindset during pre-session preparation, before the market is open, where I am completely at ease with the idea of MULTIPLE trade losses and closing out the day at the maximum loss limit.

Complete acceptance!

Of all possible losses.

This is the first of six parts of Richard McCall's ACTION Plan, from "The Way of the Warrior-Trader", for developing an effective performance mindset. I highly recommend this book if you're into the idea of applying lessons from samurai philosophy to the trading arena. And of course to get the final five parts of his ACTION Plan.

Accept all possible losses before entering the battle!

In fact, I take it a little beyond acceptance.

I EXPECT it.

It's like acknowledging that the default future is for a full session loss… decreed by the Trading Gods as inevitable unless I can demonstrate sufficient skill to prevent it.

Most traders operate like this:

<image: Pre-Accept All Possible Losses>

And the result is performance anxiety, doubt, hesitation, FOMO and all myriad of other problems.

My plan is to operate like this:

<image: Pre-Accept All Possible Losses>

This doesn't mean I want to end in drawdown. I will do everything in my power to defy the Trading Gods and finish the day somewhere to the right of that line.

It simply means that I'm absolutely fine with the day ending at a complete loss. I've pre-considered the outcome. And accepted that this is something I can manage. Something I can survive. And something that I can overcome.

<image: Pre-Accept All Possible Losses>

Maybe it's just me? Maybe I'm wired a bit strange?

But I don't think so.

If you struggle with the idea of loss, maybe you need to reconsider your relationship to risk. And maybe you could give this a try. I believe it helps me. Maybe it will help you too.

Pre-session… I cast my mind forward several hours and imagine a full session loss. How does that feel? Can I accept that?

If not, then I have no business trading today.

But if I can accept this outcome, then it's game on. Because while the Trading Gods might be planning a full session loss, I'll be damned if I'm going to go there without a fight.

Happy trading,

Lance Beggs

 


 

It’s How You Choose To React That Makes All The Difference

 

I love it when we can start off a session with a nice winner.

<image: It's how you choose to react that makes all the difference>

<image: It's how you choose to react that makes all the difference>

<image: It's how you choose to react that makes all the difference>

<image: It's how you choose to react that makes all the difference>

<image: It's how you choose to react that makes all the difference>

<image: It's how you choose to react that makes all the difference>

<image: It's how you choose to react that makes all the difference>

<image: It's how you choose to react that makes all the difference>

<image: It's how you choose to react that makes all the difference>

It would be nice to always start off a session with a winner.

But that's not how this works. You WILL start off some days with a losing trade.

And it's how you choose to react that makes all the difference.

You have two primary options:

1. You can take the negative path. The path where you are not in control. The victim mindset where you personalise the loss and make it all about you. "Here we go again. I'm such a loser."

2. You can take the positive path. The path where you remain in control. The mindset where you take the loss as information and use it to drive yourself to higher levels of performance.

The first will increase the likelihood of poor decision making in the next trade sequence.

The second will heighten your level of focus and increase the likelihood of quality decisions and actions.

You do have a choice. And while your subconscious reaction will at times tip you towards a negative outcome, this is a skill which can be developed and improved over time.

Yes, how you react to a setback IS a skill. And you can improve it.

I want to share with you today one technique that I have found useful in shifting my reaction away from the negative and more towards the positive.

It's an initial and immediate conscious recognition of respect for my opponent (the market).

A little smile, a nod, a tip of my hat.

It takes the focus off me. And onto the market.

In a sporting context, it's a bit like pitching a ball to a much younger kid, who not only connects with it but smashes it out of the park. You're not getting down on yourself. Instead, there's a smile. And a nod of the head. And a "Damn! This kid's got some skills!". There is sudden, increased respect. And motivation to get yourself back into the game with increased focus and awareness.

In a market context, you've just taken a loss. Get the focus off yourself and onto the market, through a conscious recognition of respect for your opponent.

Smile. Nod your head. "Damn! Nicely done. I'll give you that one!".

And then focus. There are more trades coming and they need your full attention.

Give it a try.

<image: It's how you choose to react that makes all the difference>

<image: It's how you choose to react that makes all the difference>

Happy trading,

Lance Beggs

 


 

Choose YOUR Playing Field

 

One of the most obvious changes in my own trading over the last decade is a willingness to take fewer trades.

It used to be that if there was a price swing… I wanted to trade it.

On the plus side this meant that I was there for everything that did move to good profits. But it also meant that I had to suffer through many sequences where the market went nowhere and the best I could hope for was to grind out a breakeven result.

Now, I'm quite content to let the market play without me. If I miss opportunity, so be it.

I don't need to trade everything that moves.

Instead, I aim to stick to the easier sequences. The times in the market that typically have greater range. And the places within the structure that are more likely to offer favourable conditions.

I choose MY playing field. And I play MY game. What the market does outside of this game, is of no concern at all.

Let's start by looking at a Higher Timeframe chart to get some context:

<image: Choose YOUR playing field>

<image: Choose YOUR playing field>

<image: Choose YOUR playing field>

<image: Choose YOUR playing field>

<image: Choose YOUR playing field>

<image: Choose YOUR playing field>

<image: Choose YOUR playing field>

<image: Choose YOUR playing field>

<image: Choose YOUR playing field>

<image: Choose YOUR playing field>

<image: Choose YOUR playing field>

<image: Choose YOUR playing field>

<image: Choose YOUR playing field>

<image: Choose YOUR playing field>

<image: Choose YOUR playing field>

You don't have to trade every price sequence.

Choose YOUR playing field.

And make sure you're playing YOUR game, not the markets.

Happy trading,

Lance Beggs

 


 

Higher Quality Breakout Failure Trades

 

One of the aims of your journaling process is to build a collection of near textbook-perfect examples of each of your trade setups.

And from these, develop awareness of the factors which lead to increased odds of success.

Friday, 21st June, offered an absolutely beautiful Breakout Failure setup.

Let's start with a 5 minute chart to get some context:

<image: Higher Quality Breakout Failure Trades>

The important factor that I wish to highlight today is not where the trade occurred.

But rather – how price got there.

One of the key features I like to see, which suggests potentially increased odds of success, is price not only having to travel a long way to reach the level, but to have also STRETCHED to do so.

<image: Higher Quality Breakout Failure Trades>

Looking at the 1 minute chart (my preferred Trading Timeframe in this market):

<image: Higher Quality Breakout Failure Trades>

This is a Breakout Failure that I DO NOT want to miss.

Additional study for those with the YTC Price Action Trader:

<image: Higher Quality Breakout Failure Trades>

<image: Higher Quality Breakout Failure Trades>

<image: Higher Quality Breakout Failure Trades>

Happy trading,

Lance Beggs

 


 

The Hardest Trade

 

<image: The hardest trade>

<image: The hardest trade>

<image: The hardest trade>

<image: The hardest trade>

<image: The hardest trade>

<image: The hardest trade>

<image: The hardest trade>

What do we do here?

Well there's not a lot we can do. It's missed opportunity.

And yes, I know that with hindsight we can look at the lower timeframes and find ways we "could" have got in. But we're not hindsight traders!

It's missed opportunity. It's gone. And our job is now to get on with the business of being a trader.

We've covered this scenario before.

See here for example, where we discussed an effective mindset hack through affirming – "It was never mine to take. If it was, I would have taken it. Let it go!"

So I did this.

I let it go.

I took a quick walk and cleared my head. And came back to the screens.

But let's be realistic here.

This next trade… is NOT going to be easy.

The first trade after missed opportunity can be one of the hardest trades.

The last thing I want to do is get smashed twice. Following up the missed opportunity with a losing trade.

I know… this shouldn't be any concern… every trade is independent and our edge plays out over a series of trades!

But I'm human… and even having carried out my regroup & focus routines… I recognised residual emotion.

So what to do?

Here were my actions:

1. Extend the break – NO TRADING. Let this whole price swing play out with no intentions to trade.

2. Use this time to absorb myself in the price movement. Watch and feel the bullish and bearish pressure play out within each candle.

3. When this price swing is complete AND I feel in sync with the price movement, it's GAME ON. Define the new trend structure. Project it forward. And seek the next trade opportunity.

The intent here is to get myself "out of my own head" and focused back on the price movement.

<image: The hardest trade>

Be careful in the pullback from here. Initial strength in the rally was news driven. But note how it weakened into the top of the swing. YTC PAT readers – this is a Second Principle scenario. Not First Principle. Be patient here.

And if it goes too deep, consider the possibility of this eventually transitioning into a sideways trend.

Until then though, I'm still looking for buy opportunity for continuation higher.

<image: The hardest trade>

<image: The hardest trade>

<image: The hardest trade>

<image: The hardest trade>

<image: The hardest trade>

<image: The hardest trade>

Well done to anyone who might have traded something like an opening range breakout strategy, off the first 5 minute candle. You got a home run trade today.

For me though – it's one of those days with missed opportunity.

That happens. It's part of the game.

What is important though, is how we respond.

Take a break. Remind yourself – "Let it go. It wasn't mine to catch. If it was, I would have caught it."

And if there is still residual emotion, just watch and wait and let the next swing (or two or three) play out. There is no hurry to trade. Absorb yourself in the price movement. And then… when the structure becomes clear and you feel in sync with the price movement… only then is it time to trade.

Happy trading,

Lance Beggs

 


 

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