Category Archives: Trading Process and Strategy

Trading Process and Strategy – In this category we discuss all aspects of the trading process, including: (a) Technical analysis, (b) Trade Strategy, (c) Identification of trade opportunity, (d) Trade entry, (e) Trade management and exit.

When Obvious Expectations Are Wrong

 

There is market opportunity available when "obvious" expectations turn out to be WRONG.

You've no doubt experienced this. Those times when the market provides almost certain evidence that it IS going somewhere… but then it doesn't.

I can promise you – if you sense these "obvious" expectations then you're not the only one. Others will sense it too.

And the stronger the feeling, the better. Because more people will act on it.

And then when it fails… there's your opportunity.

<image: Opportunity exists at the times and places where obvious expectations are wrong.>

<image: Opportunity exists at the times and places where obvious expectations are wrong.>

<image: Opportunity exists at the times and places where obvious expectations are wrong.>

<image: Opportunity exists at the times and places where obvious expectations are wrong.>

<image: Opportunity exists at the times and places where obvious expectations are wrong.>

<image: Opportunity exists at the times and places where obvious expectations are wrong.>

<image: Opportunity exists at the times and places where obvious expectations are wrong.>

<image: Opportunity exists at the times and places where obvious expectations are wrong.>

<image: Opportunity exists at the times and places where obvious expectations are wrong.>

<image: Opportunity exists at the times and places where obvious expectations are wrong.>

Opportunity exists at the places where a lot of people get it WRONG.

So when you sense a sudden shift in the market sentiment… that surely must lead to obvious movement (through a key level or in a new direction), take a pause for a second.

Maybe it will follow through with these obvious expectations. Project ahead and plan how you will react.

But also – keep in the mind the fact that obvious expectations also fail.

And that can provide exceptional opportunity.

Project that forward as well. Visualise where and how that might provide opportunity. And focus. Hopefully you will be ready to act, a little quicker than I was with this one.

Happy trading,

Lance Beggs

 


 

Proving Your Edge in Re-entry!

 

Those who have followed YTC for a while will know that I'm a big fan of re-entry.

It's a personal preference. I much prefer a tight stop and the need for occasional re-entry, over a wider stop that might give a trade a whole lot of room to prove itself.

I typically allow two attempts at a trade. If the first is stopped out and the premise remains valid, I'll often seek a way back in. (NOTE: The premise MUST remain valid. We don't just try to re-enter every stopped out trade!)

I wasn't always comfortable doing this, in the early days.

And I know for a fact that many readers find it difficult as well.

From a mindset perspective, it asks that you put aside the fact that you just lost money on this very same trade idea, and place more money at risk.

And your thought process is probably fixated on the idea of "what if it loses again?"

<image: Proving your edge in re-entry>

<image: Proving your edge in re-entry>

<image: Proving your edge in re-entry>

<image: Proving your edge in re-entry>

<image: Proving your edge in re-entry>

<image: Proving your edge in re-entry>

<image: Proving your edge in re-entry>

<image: Proving your edge in re-entry>

<image: Proving your edge in re-entry>

<image: Proving your edge in re-entry>

Consider this – I could lose on my next four to five re-entry trades and I'd still be in front.

Edge doesn't require that you win on every trade.

There will be winners and losers. Both are fine. As long as your stats prove edge over a larger series of trades.

So if you struggle with re-entry, with thoughts of "what if it loses again" leading far too often to hesitation and doubt, maybe consider the following plan.

For the next twenty re-entry trades, let's try to prove once and for all whether they do provide you with edge.

Like this:

(1) Create a new copy of your Trading Journal Spreadsheet with one setup – "RE-ENTRY". The aim is to initially keep the stats separate from other setups and from other trading.

(2) Do NOT take re-entry trades live. There should no longer be any thoughts of "what if it loses again" because… who cares if it loses… you're not really in the trade.

(3) Take the trade either on sim (if your platform allows switching execution between live and sim) or else just on paper.

(4) Track the results in your separate Trading Journal Spreadsheet.

(5) And prove, over that sample of twenty trades, that you do have edge.

Or prove that you don't. At least then you know for sure. And you can either abandon the idea or use the data you just gathered to find a way to improve and build edge where there currently is none.

Nothing improves trade decision making and confidence like actually SEEING proven edge over a series of trades.

And if you want to continue to monitor this going forward, as you start taking them live, maybe you could continue to track re-entry trades separate from other setups. Make "RE-ENTRY" its own setup. This allows you to continue to monitor the edge over further samples of data. And hopefully, if the edge is proven, continue to build confidence in this highly valuable trading skill.

If you lack confidence in your re-entry edge, the best way forward is to test that edge. Commit to a full series of re-entry trades on sim, alongside your normal trading. Record results. And review.

Twenty re-entries minimum.

Go for it.

Lance Beggs

 


 

Market Open Traps

 

Market Open Traps are by far my favourite opening play right now.

I've demonstrated these quite a bit over the last year or two. Sorry for the repetition – but they're just working so well lately.

Not always for massive profits. The two shown today are definitely singles, rather than home runs.

But they're reliable. And while they keep working, I'll keep watching every open to see if I can catch one.

Here's the general concept.

<image: Market Open Traps>

<image: Market Open Traps>

<image: Market Open Traps>

The opposite applies as well. Price approaching a level of significant overnight resistance, breaking it just prior to or immediately after the open, and then smashing lower and trapping any LONGS in a losing position.

My plan of action upon seeing this set up is to prepare for either BOF or first PB trade opportunity, as taught here.

Let's start with Monday 24th February 2020…

<image: Market Open Traps>

<image: Market Open Traps>

<image: Market Open Traps>

<image: Market Open Traps>

<image: Market Open Traps>

And again the very next day…

<image: Market Open Traps>

<image: Market Open Traps>

<image: Market Open Traps>

<image: Market Open Traps>

<image: Market Open Traps>

Simple PB setup opportunity… but within the unique context of a trap setting up just before or immediately after the market open.

They're not always home run trades, as we've seen. But they're reliable. And right now, they're certainly my favourite opening play.

Review your charts and see whether you can apply this concept in your own markets and your own timeframes.

And if so, be ready, watching and waiting prior to the open.

Market open traps are a great way to get a quick and early entry into the market's opening trend.

Happy trading,

Lance Beggs

 


 

When the Pullback moves TOO DEEP TOO FAST

 

Let's look at a trade from Tuesday which was quite challenging to take.

One in which the pullback moves too deep… and WAY TOO FAST.

One which triggers the question in your mind – "Is this a pullback or is it the start of a complete reversal?"

Every trader is familiar with this feeling! It's NOT nice.

Let's look at how I timed the entry.

First though – a little context via the 15 minute timeframe:

<image: When the Pullback moves too deep too fast...>

I love an open like this. A real shock to the system. And potential for emotion to drive price with strong directional conviction.

I am secretly hoping for strong continuation lower. Blood in the water. Panic selling driving a massive trend day lower.

But I've been around long enough to know that this is not the only option from a large gap down.

Social media posts on Tuesday and Wednesday covered this. (Facebook: Tuesday, Wednesday. Twitter: Tuesday, Wednesday)

So let's look to the 1 minute Trading Timeframe chart to see the opening price sequence.

<image: When the Pullback moves too deep too fast...>

<image: When the Pullback moves too deep too fast...>

<image: When the Pullback moves too deep too fast...>

<image: When the Pullback moves too deep too fast...>

<image: When the Pullback moves too deep too fast...>

<image: When the Pullback moves too deep too fast...>

<image: When the Pullback moves too deep too fast...>

<image: When the Pullback moves too deep too fast...>

<image: When the Pullback moves too deep too fast...>

<image: When the Pullback moves too deep too fast...>

For readers of the YTC Price Action Trader, please refer to Volume 3, Chapter 4, page 81.

Note the very first item listed under the title "Entry Preconditions".

Candlesticks A to C do NOT satisfy this entry precondition requirement.

Following the pop higher with D, price then attempts a second push lower at E.

This candle (E) DOES satisfy the entry precondition requirement.

Take the trade!

Also – Page 89, Figure 4.65 (part 3 of 4). The third diagram is the LTF entry pattern.

<image: When the Pullback moves too deep too fast...>

Our plan is to understand the trend structure, project it forward and identify potential trade opportunity (should subsequent price movement confirm our projection).

Often though, price will decide to present us with something a little different.

No problem!

PAUSE & REASSESS.

If you find you're out of sync with the price movement and it doesn't make sense, then stand aside and wait for further price structure to develop.

But otherwise, you have processes in place. Carry them out again with this new information. Recognise the changes. Adapt. And take action.

Happy trading,

Lance Beggs

 


 

Enter LONG When it Can’t Go Lower

 

Today let's look at the art of entry timing… with one of my favourite ways to get into the market.

<image: Enter LONG when it can't go lower>

<image: Enter LONG when it can't go lower>

<image: Enter LONG when it can't go lower>

<image: Enter LONG when it can't go lower>

<image: Enter LONG when it can't go lower>

<image: Enter LONG when it can't go lower>

<image: Enter LONG when it can't go lower>

<image: Enter LONG when it can't go lower>

<image: Enter LONG when it can't go lower>

<image: Enter LONG when it can't go lower>

<image: Enter LONG when it can't go lower>

<image: Enter LONG when it can't go lower>

It's not the only way to enter. But it's one I love.

If the market can print a candle (or sequence of candles) which strongly suggest that "it's moving lower".

But then can't.

Enter LONG when it can't go lower!

Happy Trading,

Lance Beggs

 


 

Step Back and Reassess

 

Let's start with a daily chart to get some "bigger picture" context…

<image: Step back and Reassess>

<image: Step back and Reassess>

And now down to the trading timeframe…

<image: Step back and Reassess>

A little side note regarding the entry: While it may not be immediately obvious, this trade is a variation on the YTC Price Action Trader PB Setup. The pullback is all occurring within the one single TTF candle (in this case the green one prior to entry). While that is not ideal and we would prefer to see an actual pullback of at least 2 or 3 candles on the TTF, the fact remains that in an opening momentum drive this is often all you will get. So we either miss out entirely, or adapt. In an opening drive, I'll be looking to the LTF data for the first pullback. Everything else (eg. LWP entry timing) is as per normal.

<image: Step back and Reassess>

<image: Step back and Reassess>

<image: Step back and Reassess>

<image: Step back and Reassess>

<image: Step back and Reassess>

<image: Step back and Reassess>

<image: Step back and Reassess>

<image: Step back and Reassess>

<image: Step back and Reassess>

If you've lost all feel for what is happening in the chart…

(1) Step back.

(2) Define the edges of the structure.

(3) And wait.

Whatever happens within that no-trade zone, is none of your concern.

Let it break and then reassess.

Only then, if the market structure and price movement makes sense, is it game on.

Assess the trend structure. Project it forward. Identify your opportunity. And strike!

Happy trading,

Lance Beggs

 


 

Traps Just Before RTH Open – 5

 

Last Friday at 9:28am, just two minutes before the Regular Trading Hours (RTH) Open, the market suddenly jumped.

<image: Traps Just Before RTH Open>

<image: Traps Just Before RTH Open>

<image: Traps Just Before RTH Open>

That's right – it's a trap RIGHT BEFORE the regular session open.

See here if you missed the prior articles:

 

Here is the general idea, in both bullish and bearish form:

<image: Traps Just Before RTH Open>

<image: Traps Just Before RTH Open>

Well today we got the second version – a trap through overnight resistance which rapidly fails.

And so we'll be looking for opportunity to enter SHORT.

<image: Traps Just Before RTH Open>

Let's try something different though…

Rather than sharing my trading, I'd like to share a chart from a trader who has recently been making good progress with the YTC Price Action Trader methodology.

Having read the recent "trap before RTH open" articles he's been aware of this opportunity, but hasn't managed to catch one prior to this session.

This time was different.

His email:

Hi Lance,

I hope you've had a great week.

I just wanted to follow up again to say THANK YOU! I've come so far in my trading since I purchased your book back in October. I read all of your Twitter posts and newsletters and the topic that kept standing out was the BOF just before the open and how to trade it. I kept watching it happen and would miss the opportunity to get involved. Consequently, that lead to me trying to find another BOF or TST in the opposite direction of the opening drive, which resulted in small losses that were frustrating. I finally decided that when I see this again, I will get involved on a PB or CPB and if I miss the trade then I miss the trade…put it behind you and move on.

Today I saw a BOF just prior to the open on the NQ (I'm still trading the MNQ). I was ready and I executed without hesitation. In hindsight I could've managed the trade a little better but I'm very happy the process I went through to execute this trade. I have you to thank for this. Please know that your posts and newsletters are more helpful than you can imagine…and I know I'm not the only one who feels that way. I attached my chart and this will definitely be one that I will reference regularly.

Thanks again for all you do…have a great weekend!

Hunter

The "BOF" that he refers to is the YTC Price Action Trader name for the trap. The PB is the first setup short.

Hunter has included the following 30 second chart showing his trade entry and management. If you click on the chart it should open a full-size copy in your browser.

<image: Traps Just Before RTH Open>

Awesome!

Hunter – well done! That is a great trade.

The only thing better than catching a trap before the open, is seeing someone else learn from my prior articles and actually catch one themselves.

Some final words from Hunter:

I really enjoy reading about other traders' experiences and I hope that my experience can help others as well. Just as a reference, in case anyone asks, I use Interactive Brokers for my charts and as my broker. I'm only trading 3 contract lots of the micro futures MNQ, MES, and M2K. I started with 2 contracts and will increase my contract size as I continue to progress. Again, thank you for your encouragement and for all that you do for the trading community. Have a great weekend!

Happy trading,

Lance Beggs

 


 

Confidence in the Trend

 

I've been discussing this idea for quite a while now. The idea that there is GREAT VALUE in studying your charts post-session to identify the price sequences which offered the best trading conditions. And then… the structural features which might help you identify similar trading conditions next time they occur.

Just last week in our newsletter I shared the following social media post

<image: Where does price move best?>

This is not just something we do for fun.

The exercise has clear and obvious benefits.

One of them being – when I see these patterns set up again they give me CONFIDENCE in the subsequent trend.

The image above gives one of these patterns.

Tuesday's trading gave us another…

Let's start with the 15 minute higher timeframe at the time of session open.

<image: Where does price move best?> 

<image: Where does price move best?>

<image: Where does price move best?>

<image: Where does price move best?>

<image: Where does price move best?>

<image: Where does price move best?>

<image: Where does price move best?>

<image: Where does price move best?>

<image: Where does price move best?> 

Not all trading conditions are equal. There will be times when the markets provide conditions that best suit our strategy. At these times we need to be focused. We need to know what we want to see to confirm these favourable conditions. And we need to be confident and ready to act decisively when they appear.

And there will be times when the market provides conditions that are less suited to our strategy. At these times we need to step back a little. Be happy to pass on anything that is not screaming out to be traded. If we miss opportunity, so be it. Let it go. And wait for something more favourable.

Post-session study lets you identify those sequences which best suit your style of trading. And to identify the structural features or patterns which might suggest a repeat of these conditions, should they set up again in the future.

For my own personal trading, I perform better in directional markets with nice smooth stable trends. The overnight volatility contraction is one pattern that has me primed and ready for potentially good trading conditions from the open. A pattern which provided me with confidence to TRUST the trend, should it develop from the open.

Are you aware of the conditions which you find most favourable? And the structural features or patterns which might help you identify these conditions again in the future?

If not, you have work to do. Study the charts for those areas where you see that "price moves best". And make sure that next time the market offers similar conditions, you're ready and focused, with the confidence necessary to attack that market opportunity.

Happy trading,

Lance Beggs

 


 

Metagame Entry

 

Metagame Entry – Recognising that entry is not just about price or patterns, but about the people behind the price and patterns.

And in particular the times when they're experiencing frustration, pain and disappointment.

Because the best opportunity comes when I can feel someone on the other side of the market getting it REALLY wrong.

This was one of my favourite trades of the week. Partly because it wasn't in my original plan. But when it set up, it screamed out to be traded.

<image: Metagame Entry>

<image: Metagame Entry>

But then this happened…

<image: Metagame Entry>

<image: Metagame Entry>

<image: Metagame Entry>

<image: Metagame Entry>

<image: Metagame Entry>

<image: Metagame Entry>

<image: Metagame Entry>

<image: Metagame Entry>

<image: Metagame Entry>

<image: Metagame Entry>

<image: Metagame Entry>

For those with the YTC Price Action Trader, the setup should be obvious. Refer to Volume 3, Chapter 4, Pages 28-31.

And you'll note that the entry is exactly at the point I define as the LWP. Refer to Volume 3, Chapter 4, Pages 72-77 for discussion on the LWP concept.

 

This trade was not part of my plan at the market open. I was keen to trade once price broke the overnight chop-zone, either higher or lower.

But until then… watch and wait.

Remain focused!

Because sometimes… price will set up right to sucker someone into a trap.

And when you see that trap, and feel their pain, you may well have found yourself some opportunity.

Happy trading,

Lance Beggs