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.

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

 


 

Traps Just Before RTH Open – 4

 

Traps immediately before the open… we've discussed them a number of times over the last year.

Here are some of the previous discussions, if you missed them:

 

And you'll probably find a few more examples if you scroll back through the social media feeds.

The thing is though – the market keeps presenting us with this great opportunity. And they do say that repetition is the mother of all learning. So let's look at another example, from last Monday.

<image: Traps Just Before RTH Open>

<image: Traps Just Before RTH Open>

<image: Traps Just Before RTH Open>

<image: Traps Just Before RTH Open>

From a YTC Price Action Trader perspective, it's simply a first PB in a new trend. But as the last image states – it was caught because I recognised the trap before RTH open, which had me primed, ready and waiting for the opportunity LONG.

Trades like this ONLY happen because of my Market Structure & Price Action (MSPA) Journal. If you don't have one, then I highly recommend you start. Every day – make at least one entry into the journal. Find something interesting within either the structure of the chart, or the way price moves, and document it.

Over time, you'll start to notice repetition of ideas.

And that is where you find opportunity.

Study them inside and out. Set up rules or guidelines for ways to exploit that opportunity. Implement, test and develop.

Today's article gives you two areas of exploration, in starting your own MSPA Journal.

(1) Traps before (or immediately after) RTH Open.

(2) Opening Momentum Drives.

If you follow me on social media, you will recall the following two posts in recent weeks:

<image: Opening Drive Study>

<image: Opening Drive Study>

Well now you have a third opening drive to study. And I promise you the market will provide more.

This is the path to learning.

Every day – find something interesting. Document it. Study it. And then when you start to see repetition of ideas – dig deeper and find a way to exploit that opportunity.

Happy trading,

Lance Beggs

 


 

Recognise the Current Conditions. And Adapt.

 

I'm displaying charts without any trade markers here, so that you can focus on the price action without any distraction.

Because there is a very important fact that not everyone gets. And rarely is it displayed in such a simple and obvious manner, as it is with the two charts we'll discuss today.

That fact is that NOT ALL DAYS ARE EQUAL.

Regardless of your approach to trading, some sessions will provide structure and conditions which are highly favourable. In these sessions you want to actively and aggressively engage the markets. You want to press your advantage.

Some sessions will be highly unfavourable. In these sessions you want to step back and limit engagement. Your primary aim is to minimise any damage and survive to trade another day.

And of course the majority of sessions will fit somewhere in-between – at times slightly more favourable – and at times slightly more unfavourable.

Your job is to recognise the current conditions. And adapt.

Most people focus far too much on their setups. And focus far too little on the context of the market – the background structure and conditions within which they're seeking to trade their setups.

The following two charts display the E-mini NASDAQ (NQ) 1-minute chart from 09:30 till midday. This is my primary trading period. The two charts cover Monday the 2nd and Tuesday the 3rd of December. Of note, the vertical price scale (RHS) is the same on each chart.

<image: Recognise the Current Conditions. And Adapt.>

<image: Recognise the Current Conditions. And Adapt.>

Perhaps what you consider favourable and unfavourable will differ from my preferences Perhaps if you have a preference for counter-trend mean-reversion scalping, then you'll prefer Tuesday's action to Monday's.

Regardless… the same point still applies.

Most people focus far too much on their setups. And focus far too little on the context of the market – the background structure and conditions within which they're seeking to trade their setups.

Spend some time identifying the structure and conditions in which you're most in sync with the market and most easily able to trade. And also, the structure and conditions which cause you problems.

Set up "rules" to allow quick recognition of the current state of the market. And guidelines for how you will trade.

The sooner you can recognise the current state of the market, the sooner you can adapt.

And perhaps you can stop giving back all of your "favourable day profits" when you find yourself chopped up in an unfavourable session.

Happy trading,

Lance Beggs

 


 

Traps Just Before RTH Open – 3

 

This has been a favourite topic of mine throughout the last year. We explored the idea here and here, along with a bunch of other examples on social media.

But then the market just keeps providing more examples.

So let's look one more time.

The general concept is a trap that occurs through failure of a significant break, very late in the pre-session market and just before RTH Open (RTH = Regular Trading Hours; ie. the pit session).

<image: Traps Just Before RTH Open>

<image: Traps Just Before RTH Open>

Our most recent example fits in the second category – a break to new overnight highs, failing on or shortly after the session open, giving us opportunity to enter SHORT.

Let's begin… with the NQ 1 minute chart on Friday 15th November, 2019.

<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>

<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

 


 

One Winner One Loser

 

A question received last Monday: "Are you trading today? It's a holiday but the market is open."

For future readers… Monday was 11th November 2019. Veterans Day.

And yes, the economic calendar which I use also has this listed as a US holiday. But the market is definitely open all day (or at least the index futures which I trade).

Here's my plan for holidays, because as the question noted, there are different kinds of holidays:

  • Holidays where the market is closed – no trading!  (Duh!)
  • Holidays where the market is open for one of those "half day" sessions – no trading! I don't care if it does move. That's the low probability outcome. More likely it will be dull, lifeless, narrow range chop.
  • Holidays where the market is open all day – My preference is to avoid it, but if I've got nothing better to do then let the opening structure play out and then make an assessment.

 

I had nothing better to do. So I let the opening structure play out. And then assessed.

How much opening structure? There's no rule here. Make an judgment call as to how much is necessary to see if there is sufficient liquidity, pace, volatility etc.

If the market opens with a gap outside the prior day's range, and outside any higher timeframe congestion, I might be satisfied just with the opening TTF price swing, or just waiting a short time period like 5-15 minutes. Then assessing.

Or on days like today, where the market opened within the prior days range, I will wait a bit longer.

<image: One Winner One Loser>

 

I was completely comfortable with no trades. But if I could see edge, then let's play.

<image: One Winner One Loser>

<image: One Winner One Loser>

 

For readers of the YTC Price Action Trader – The Principle being applied here, and in fact the reason for the whole trade, should be obvious. If not, email me.

<image: One Winner One Loser>

<image: One Winner One Loser>

<image: One Winner One Loser>

<image: One Winner One Loser>

<image: One Winner One Loser>

<image: One Winner One Loser>

 

One winner. And one loser. Just a small day, but it is a "holiday" session and I'm happy with nothing.

Of great importance though – the loser is much smaller in size than the winner.

Which reminds me of one of the most important points I've shared over the years at YTC, accepting of course that a two trade sample size is way too small (but the concept is what is important)… what if you could be happy with a 50% win rate, and learn to profit from a positive Win/Loss Size Ratio?

Ok, so back to the main point of the article:

Here's my plan for holidays, because as the question noted, there are different kinds of holidays:

  • Holidays where the market is closed – no trading!  (Duh!)
  • Holidays where the market is open for one of those "half day" sessions – no trading! I don't care if it does move. That's the low probability outcome. More likely it will be dull, lifeless, narrow range chop.
  • Holidays where the market is open all day – My preference is to avoid it, but if I've got nothing better to do then let the opening structure play out and then make an assessment.

 

Happy trading,

Lance Beggs

 


 

Pre-Session Analysis Starts with the Daily Chart

 

I was recently asked on Twitter about my pre-session analysis. My response was simply that I've outlined the process in detail in the YTC Price Action Trader.

However, since publication, I have added a couple of minor steps. Let's look at one today.

It occurs just once a day, right at the beginning of my analysis process.

It involves the daily chart. And about 5 to 10 seconds of work.

Not for levels, or structure, or trend. We get those from our normal Higher Timeframe (HTF) and Trading Timeframe (TTF) charts.

The daily is used to provide a "best guess" as to the potential range of movement we can expect in the upcoming session.

There is no great accuracy required. I don't need to get it right within a small number of ticks. It's just a quick assessment based upon experience. Part of building our bigger-picture contextual awareness.

It allows me to operate throughout the day with some sense for whether the market has more room to move, or whether the market is possibly close to it's expected range already.

This is the chart layout I use:

<image: Pre-Session Analysis Starts with the Daily Chart>

 

Let's have a look at how it is constructed.

<image: Pre-Session Analysis Starts with the Daily Chart>

<image: Pre-Session Analysis Starts with the Daily Chart>

<image: Pre-Session Analysis Starts with the Daily Chart>

<image: Pre-Session Analysis Starts with the Daily Chart>

<image: Pre-Session Analysis Starts with the Daily Chart>

 

And the Three Step process for using this data.

 

<image: Pre-Session Analysis Starts with the Daily Chart>

<image: Pre-Session Analysis Starts with the Daily Chart>

<image: Pre-Session Analysis Starts with the Daily Chart>

<image: Pre-Session Analysis Starts with the Daily Chart>

<image: Pre-Session Analysis Starts with the Daily Chart>

<image: Pre-Session Analysis Starts with the Daily Chart>

<image: Pre-Session Analysis Starts with the Daily Chart>

<image: Pre-Session Analysis Starts with the Daily Chart>

Summary:

  1. My expectation for today's potential range starts as the Average Daily Range.
  2. I increase this slightly in an expansion environment, and decrease slightly during contraction.
  3. And adjust again as required, if a quick assessment of daily price action suggests good potential for either a wide-range trend day or narrow-range consolidation.

 

And of course, update throughout the day as more data unfolds.

Don't expect perfection.

It's just "background" contextual information that can be used as an input to your trade selection and trade management decisions.

Happy trading,

Lance Beggs

 


 

It’s Game On! Let’s Trade!

 

I operate with three general levels of engagement – Trading, Trade with Caution, and Stand Aside.

Because not all conditions in the market are the same.

If you haven't done so, I highly recommend adopting a similar practice. Take some time to consider the factors that might trigger each level of engagement in your own trading business.

Today let's look at three factors which had me in "Trading" mode right at the market open. No delays. No hesitation.

With these three factors in play, I wanted to be in the first opportunity I could find.

<image: It's Game On! Let's Trade!>

<image: It's Game On! Let's Trade!>

<image: It's Game On! Let's Trade!>

A gap open, from a strong and persistent overnight uptrend, with a recent trap showing an inability to drop.

There is emotion in the market.

And I want to trade.

(See here for prior articles on traps just before the open – here and here).

<image: It's Game On! Let's Trade!>

(NB. YTC Price Action Trader concepts – The First Principle is in play, PB setup)

<image: It's Game On! Let's Trade!>

<image: It's Game On! Let's Trade!>

<image: It's Game On! Let's Trade!>

I don't want to trade all market opens.

There are many that I classify as "Trade with Caution". Think of the opposite of today's example – a market opening in the middle of the prior day's range, following a dull and lifeless sideways overnight session. There is no emotion driving the market. And so I have no business in taking a position until something changes. Wait patiently. Let the opening structure form (5 minutes, 15 minutes, 30 minutes… or as long as it takes). And then trade off that structure.

But there are other days when I don't want to wait. Market sentiment appears to be strong and potentially one-sided. This is not a time to wait. This is not a time to "Trade with Caution".

Today was not one for waiting. It's game on. Let's trade.

Again, if you haven't done so, I highly recommend adopting a similar practice of classifying three general levels of engagement – Trading, Trade with Caution, and Stand Aside.

Take some time to consider the factors which might trigger each level of engagement in your own trading business.

Happy trading,

Lance Beggs

 


 

Overnight Range Double Break

 

There were three NQ sessions in the last two weeks which broke both sides of the overnight range. Let's check them out.

The following are all Higher Timeframe 15 minute charts. I chose this timeframe simply because it fits on the image quite nicely. Whatever higher timeframe you use, is fine. The concept here is the same.

<image: Overnight Range Double Break>

<image: Overnight Range Double Break>

<image: Overnight Range Double Break>

<image: Overnight Range Double Break>

<image: Overnight Range Double Break>

<image: Overnight Range Double Break>

<image: Overnight Range Double Break>

<image: Overnight Range Double Break>

<image: Overnight Range Double Break>

Does this always happen?

No.

Does this mean that when it does happen that the trend always will be smooth and easy to trade?

No.

But you can bet your whole account on the fact that when it does happen, I'll be prepared, focused and ready to exploit any trend that does develop.

YTC Price Action Trader with-trend setups ONLY.

Until the market proves otherwise.

Have a look through some of the charts in your own markets and see if you can identify a similar feature. Forex traders will want to use a break of both sides of a narrow range Asian session.

Happy trading,

Lance Beggs