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.

The Key to Effective Active Trade Management

 

Here was the general plan:

The key to effective Active Trade Management

The key to effective Active Trade Management

The key to effective Active Trade Management

The key to effective Active Trade Management

I won't go into detail regarding the wider market environment and context within which the trade occurred. It's not the point of the article.

Truth be told – it was a marginal trade at best.

Ideally such a trade would be taken in a market with a strong bearish conviction.

But that wasn't the case.

The environment was poor. There was no clear trend structure in place. And the bias was uncertain, with price showing no clear dominant strength with either bulls or bears.

But I was aware of this. I was in "trade cautiously" mode. Standing aside mostly. With a plan that if I did take a trade it was to be with a smaller position size. This would continue until there was a clear trend structure and some good directional conviction.

We could argue back and forth all day as to whether or not the trade idea had edge. I will accept it was marginal.

But I took the trade.

And it contains a good lesson on active trade management.

So we will discuss it today.

Here are the charts just prior to my entry:

The key to effective Active Trade Management

Here's the entry:

The key to effective Active Trade Management

Here is what I'd like to see happen:

The key to effective Active Trade Management

But what we want to happen, doesn't always happen.

And that brings us to today's lesson:

The key to effective Active Trade Management is knowing what SHOULD NOT happen.

There are two outcomes that SHOULD NOT happen, if my trade premise is still valid.

(1) Price will immediately smash higher and stop me out. Should that happen, I'll just take the loss. It's unlikely that I will have the opportunity to work a better exit.

(2) Price will stall towards the upper edge of the congestion area and then break higher.

The key to effective Active Trade Management

Here's the outcome:

The key to effective Active Trade Management

The key to effective Active Trade Management

The key to effective Active Trade Management is knowing what SHOULD NOT happen.

Then recognising it.

And acting to contain any damage.

If your edge is gone, GET OUT.

Happy trading,

Lance Beggs

 


 

Studying a Higher Timeframe Trap

 

There are some common themes that run through the articles I produce at YTC. One of these, which has been here since the beginning, is the importance of creating a Market Structure & Price Action Journal.

Every day, find something that amazes you in the charts. Print it out. Cover it with notes. Study it. File it. And review your journal often. It really will be the greatest trading book… EVER!

Over time, I promise you will start to see patterns within the market structure or price action, which repeat themselves again and again and again.

Like this, which we shared via social media way back in 2015:

What doesn't happen... is important information! 

This is a structural feature that I see repeated again and again and again.

Here's another previous example – http://yourtradingcoach.com/trading-process-and-strategy/trading-failed-expectations/

And of course, those with the YTC Price Action Trader should look to Volume 2, Chapter 3, Page 143.

But let's look to an example which occurred last week, on a higher timeframe chart.

Yes… it's an idea which you will find in all markets and all timeframes!

Studying a higher timeframe trap

Studying a higher timeframe trap

Studying a higher timeframe trap

Studying a higher timeframe trap

Studying a higher timeframe trap

Studying a higher timeframe trap

Studying a higher timeframe trap

Studying a higher timeframe trap

Studying a higher timeframe trap

Studying a higher timeframe trap

Studying a higher timeframe trap

Studying a higher timeframe trap

Happy trapping,

Lance Beggs

 


 

Start Your Session With IF-THEN Scenarios

 

Last Sunday I shared one of my old articles via social media.

Start your session with IF-THEN analysis

Click on the image, or this link here, if you wish to read the old article.

This is such an important part of my pre-session preparation.

Why?

It simply aims to get my session off to a good start – so very important for maintaining an effective mindset throughout the trading day.

This is not prediction. This is simply forward planning… developing “IF-THEN” scenarios based upon your assessment of the likely future price action.

If your “read” of price movement proves correct, you will have trade opportunity. If it proves incorrect, you stand aside and reassess.

This will ensure your actions in the market are pre-considered and your trades only occur when the market has confirmed your expectations.

And you will be less likely to be caught in a trap through impulsive reaction to unexpected price movement.

NOTE: What I am doing here with my IF-THEN analysis is NOT the same as the Game Planning / Hypos that you see other traders doing. Typically they're looking at much higher timeframes or Market/Volume Profile tools to determine a likely hypothesis for the WHOLE DAY.

I'm looking at the trading timeframe and where the market opens with respect to key levels, and assessing likely movement for the OPENING FEW PRICE SWINGS ONLY.

There is of course nothing to stop you using both. Whole session, higher-timeframe game planning plus opening sequence trading-timeframe IF-THEN scenarios.

It's just important here for me to point out the difference.

These are not meant to define the whole session. They just aim to get you off to a good start.

And from there, the picture keeps updating bar by bar in accordance with the YTC Six Principles of Future Trend Projection.

Anyway, let's look at my opening IF-THEN scenarios for the week to date, in the emini-NASDAQ (NQ) market:

Monday – 13th February 2017

Start your session with IF-THEN analysis

Start your session with IF-THEN analysis

Start your session with IF-THEN analysis

Tuesday – 14th February 2017

Start your session with IF-THEN analysis

Start your session with IF-THEN analysis

Start your session with IF-THEN analysis

Wednesday – 15th February 2017

Start your session with IF-THEN analysis

Start your session with IF-THEN analysis

Start your session with IF-THEN analysis

Thursday – 16th February 2017

Start your session with IF-THEN analysis

Start your session with IF-THEN analysis

Start your session with IF-THEN analysis

So as we head towards the open on Friday, why not consider creating your own IF-THEN statements for the opening couple of price swings.

They won't always be right.

But when they are, it means that your actions in the market are pre-considered and your trades only occur when the market "makes sense".

And when the market offers something different, you simply stand aside and reassess.

It's all about getting your session off to the best start possible, through minimising emotional reaction to surprising and unexpected price movement.

Give it a try. You may just like the idea.

Happy trading,

Lance Beggs

 


 

A BOF Trade with Many YTC Concepts

 

Let's look over a trade I particularly like, from earlier this week.

It's nothing special in terms of returns. But it took an otherwise dull session from breakeven into profits.

And it displays many of the concepts that we have discussed here in the newsletter over the last few years.

So I particularly like this one. And I thought it's a good one to share to reinforce some of these key lessons.

The trade is a Breakout Failure trade following price interaction with the Prior Day's High resistance.

Breakout Failure Review 

Let's see what I liked about this trade…

Breakout Failure Review

Breakout Failure Review

Breakout Failure Review

Breakout Failure Review

Breakout Failure Review

Breakout Failure Review 

Let's see the outcome…

Breakout Failure Review

Breakout Failure Review 

Happy trading,

Lance Beggs

 


 

Leaning Your Entry Against Other Price Action

 

Sometimes you're just not 100% sure.

Not quite ready to pull the trigger.

At these times it's best to wait.

Remember this – "If I could only take one trade this hour, would I be happy to make it this one? If not, pass."

Clearly if you're hesitating then the trade does not meet this criteria.

Let it pass.

And maybe… just maybe… the next couple of price bars will offer up something that makes the decision easier.

Like this…

Leaning your entry against other price action

Leaning your entry against other price action

Leaning your entry against other price action

Leaning your entry against other price action

Leaning your entry against other price action

Leaning your entry against other price action

Leaning your entry against other price action

Leaning your entry against other price action

If I'm unsure about a trade then I'm happy to pass.

If I miss the trade, so be it. I don't have to take every trade. I plan to trade for several more decades. My career is unlikely to be defined by this one potential trade. Let it go. And prepare for the next.

But sometimes just another few candles is all it takes. If it offers some price action structure to lean against, I'll attack that opportunity. And manage whatever follows.

Consider watching for this in your charts.

Happy trading,

Lance Beggs

PS. The following were some earlier articles "loosely related" to this idea, although exploring the concept on the Trading Timeframe chart rather than the Lower Timeframe chart. Either way, it's all about letting the market turn first and then entering on a slight retest, with other price action at your back. Enjoy…

 


 

If you find yourself out of your trade, the reality is that you won’t always find a way back in!

 

Hindsight analysis is always suspect. Our normal human biases have us believing that we would have made the optimal trade decisions. After all, they always look so simple with the benefit of hindsight.

So I'm always hesitant to provide my thoughts on someone else's trade review.

But it's the Christmas / New Year week and I'm feeling too lazy to think up a new article, so sharing some email Q&A solves that problem for me.

And it provides a good lesson – if you find yourself out of a trade, for whatever reason, the reality is that you won't always find a way back in.

If you've scratched a trade to reassess and decide that there is still potential, unless you're just willing to enter at market then and there, or place a limit order at some point closer to the stop area, you might not find a way to re-enter. Pattern triggers may not eventuate.

And that's fine. Review the decision that led to the initial scratching. And move on.

I scratch trades a lot. If I doubt a trade, I'll reduce risk through either a partial or full exit, and then reassess. If I'm happy with the premise, I'll look to get back in. But sometimes… there is no good way to get back in.

In developing as a trader and discovering whether you better fit the passive set and forget trade management style, or a more active style such as I use, this is a factor that you need to consider. If you find yourself out of your trade, the reality is that you won't always find a way back in.

Anyway, here's the Q&A from a trader who recently asked me to review one of their EUR/USD trades, in which they took profits early but then were unable to get back in.

The question was sent to me in image chart form. It's displayed here in smaller format, in order to fit. If you click on the image it will open a full-size version in your browser. All following images are already full size.

INITIAL QUESTION:

You won't always find a way back in

 

REPLY:

You won't always find a way back in

You won't always find a way back in

You won't always find a way back in

You won't always find a way back in

You won't always find a way back in

You won't always find a way back in

You won't always find a way back in

You won't always find a way back in

You won't always find a way back in

You won't always find a way back in 

Happy trading,

Lance Beggs

 


 

“But it’s scary!” “What if it fails?”

 

I received some interesting comments about a trade in a recent article – http://yourtradingcoach.com/trading-business/the-good-the-bad-and-the-ugly/

Here's an image from the article, showing the entry SHORT against a single wide-range bullish candle.

Single candle pullback

Review the original article if you want to see the context behind the trade.

For now though, I want to discuss some concerns that a few people expressed. Because I imagine there are a whole lot more who felt the same thing.

The feedback was quite varied in nature.

A couple of people really "got it". They understood that while the candle appears to show great bullish strength, the internal movement didn't necessarily suggest that was the case.

But many more expressed concern, either commenting on the post or via email. Some short extracts:

  • "I don't understand, how you are comfortable to take up the 2nd setup"
  • "But it's scary."
  • "What if it fails?"

 

I get it!

Here's the thing…

YES…

It is scary if all you see is the strong bullish candle.

BUT…

It's in a good contextual location. It has a good R:R. And I don't just place a limit order and let it get overrun. I'm watching and waiting to see some inability to continue further before placing the entry order.

SOME IMPORTANT POINTS:

  • These are some of the toughest trades that I do take (from a psychological perspective).
  • They're simple in concept. But they are not easy.
  • They're not for new traders.
  • If you're not comfortable with them, don't take them. Stick to the easier ones. But learn from them. Maybe take note of them when you do see them and then study them post-session. As you gain experience it might be something you one day add to your game plan.
  • Again… let me reinforce the last point. You don't have to trade these if your skill level is not ready for them. There are much easier setups available.

 

I went looking for something similar over the last fortnight, so that we could work through another example. But there hasn't really been a great example since then.

But then I thought maybe this one will help.

The context is different. But the fear is much the same.

Whenever I've posted these type of trades in the past I tend to get much the same feedback – "There is no way you can enter here!", "You're stepping in front of a freight train!", "It's too scary!", "But what if it fails?"

One other thing I like about this example is that it slows the process down, with the end of the pullback occurring over 3 candles. This might make things a little easier to see.

So anyway… here it is…

But it's scary! What if it fails?

But it's scary! What if it fails?

But it's scary! What if it fails?

But it's scary! What if it fails?

But it's scary! What if it fails?

But it's scary! What if it fails?

But it's scary! What if it fails?

As we discussed here in these articles, until I see evidence of the break lower holding these levels, I'm expecting a break like this to fail.

 

It's a simple shift in mindset that makes these traps easier to enter.

Of course, it's never completely comfortable.

The move down to the level does display some bearish strength. And as readers of my ebook series will note, I'm not a fan of fading strength.

But in the case of a break of a level like this, at the end of a long move, it's the behaviour of price AFTER THE BREAK that really matters.

Will price show continued bearish strength and drop like a ton of bricks? Or will it stall and then break back higher?

As I noted earlier, I do NOT just place a limit order in a situation such as this and hope that it all works out ok.

I watch. I wait. And if I see evidence that the selling is perhaps all done, only then will I consider entry.

Let's move forward and see what happens.

But it's scary! What if it fails?

But it's scary! What if it fails?

Here's the outcome:    (clearly underperforming when you see the TTF eventually break to new highs… but still it's a good trade!)

But it's scary! What if it fails?

I mentioned earlier…

It's in a good contextual location. It has a good R:R. And I don't just place a limit order and let it get overrun. I'm watching and waiting to see some inability to continue further before placing the entry order.

This applied with the trade two weeks ago.

And it applied with today's trade.

This is what gives me confidence to enter.

And if it fails?

So what? It's one trade.

If it loses, I'll keep the loss small.

This is not a game of certainty. The market environment is uncertain. Some trades will win. Some will lose. Work to keep the average loss smaller than the average win.

But it's scary! What if it fails?

Let's wrap up…

Yes, it's hard to enter against a break. Or against a strong single candle pullback.

If you're not comfortable with this, stand aside and wait for something easier. But observe them. Make decisions as you watch them live. And take notes. Study them post-session. As you gain confidence, you might want to consider sim trading a few. And eventually trying them live (small size).

But if it's in a good contextual location. And if the R:R is acceptable. Then watch. And wait. And if price shows that it's given all it's got, and appears unable to move any further in the pullback direction, then take the trade.

Manage it.

Keep the losses tight. And if it wins, then squeeze it for all the profits you can get.

Happy trading,

Lance Beggs

 


 

The Other Trader (4)

 

Let's continue with the metagame concepts discussed in recent months.

Here – The Other Trader
Here – The Other Trader (2)
Here – The Other Trader (3)
Here – Metagame Trading

And of course based upon concepts from here: YTC Price Action Trader

Here is the basic idea…

If I can't feel someone on the other side of the market getting it really wrong, there is no trade.

Here's how we do it.

 

1

Identify a potential trap

 

Identify a potential trap

Identify a potential trap

Identify a potential trap

Identify a potential trap

Identify a potential trap

 

1

Feel the pain

 

Feel the pain

Feel the pain

Feel the pain

 

1

Spring the trap

 

Spring the trap

For those with the YTC Price Action Trader:

  • Setup – See Volume 3, Chapter 4, Pages 28 to 31
  • Entry trigger – See Volume 3, Chapter 4, Page 87, Figure 4.63 (third entry in the table)

 

If you're not achieving the results you wish to achieve, consider placing more thought towards who is on the other side of your trade.

It may be the paradigm shift you're seeking to take your trading to new levels.

Happy trading,

Lance Beggs

 


 

Using Pre-Session Data to Confirm Levels

 

The following text and image were shared recently through both the YTC facebook and twitter pages.

  • My first action on Monday mornings upon opening my charting platform…

 

My first action on Monday mornings upon opening my charting platform...

Actually, it's one of the first things I do every day.

This is the key part we're discussing today:

Using pre-session data to confirm levels

Let's stick with the same timeframe but move forward to the market open at 09:30am.

Using pre-session data to confirm levels

Sometimes analysis of pre-session data offers nothing at all to confirm the relevance of previous session levels.

Sometimes it will allow us to invalidate these levels, when we see price slice through them with absolutely no reaction at all.

And sometimes, like in this case, it helps to validate a level as being still "potentially" significant.

Friday's low will be on my mind as I commence trading today.

Let's see how the opening sequences played out on the trading timeframe.

Using pre-session data to confirm levels

Using pre-session data to confirm levels

(If you're not sure what I'm looking for, see here to find out how I trade!)

Using pre-session data to confirm levels

Using pre-session data to confirm levels

Sometimes analysis of pre-session data offers nothing at all to confirm the relevance of previous session levels.

Sometimes it will allow us to invalidate these levels, when we see price slice through them with absolutely no reaction at all.

And sometimes, like in this case, it helps to validate a level as being still "potentially" significant.

If you prefer to trade with RTH data (pit session data) in order to take advantage of opening gaps, that is absolutely fine.

But at least take a quick look at the ETH data (overnight). See where it has traded with respect to the prior day. Where did it find movement quite easy. And where did it find did it find support or resistance.

This might just provide important information that can help once the opening bell has rung and trading has commenced.

Happy trading,

Lance Beggs

 


 

Wait till the Reversal Trader is Trapped

 

I am quite a fan of Al Brooks' first book, "Reading Price Charts Bar by Bar", despite the fact that we trade very differently.

Out of close to 400 pages, there is the one idea which has stuck with me more than any other. From page 384:

"Countertrend setups in strong trends almost always fail and become great With Trend setups…"

The idea is simple.

In a strong trend you will find all manner of reasons to suspect that the trend is ready for reversal. And you'll find yourself easily tempted to enter counter-trend.

But more often than not, it's a trap.

When you feel this strong desire to trade counter-trend, do NOT trade. Be comforted by the fact that others will notice it as well. And that they'll enter.

Then watch their position, waiting patiently until they're trapped.

The failure of their counter-trend position will often provide a great entry for you, back in the with-trend direction.

Those who trade the YTC Price Action Trader methodology will be very familiar with this concept – timing our entry off the failure of "the other trader".

This concept came to mind on Tuesday, as I felt a strong desire to enter counter-trend against a strong bearish trend in NQ.

Let's look at the charts.

Don't fade a strong trend... wait for the trap and enter with-trend.

Don't fade a strong trend... wait for the trap and enter with-trend.

Don't fade a strong trend... wait for the trap and enter with-trend.

Don't fade a strong trend... wait for the trap and enter with-trend.

Don't fade a strong trend... wait for the trap and enter with-trend.

Don't fade a strong trend... wait for the trap and enter with-trend.

Don't fade a strong trend... wait for the trap and enter with-trend.

Don't fade a strong trend... wait for the trap and enter with-trend.

Don't fade a strong trend... wait for the trap and enter with-trend.

Don't fade a strong trend... wait for the trap and enter with-trend.

Actually, I'm not happy with the exit decisions. But that's something for me to explore in my trade review process.

In terms of setup and entry… I love this one.

"Countertrend setups in strong trends almost always fail and become great With Trend setups…"

Keep this in mind next time the price bars scream out for you to fade a strong trend.

Is it actually a trap?

And is better opportunity perhaps available if you stand aside and wait for the "other traders" to be caught?

Happy trading,

Lance Beggs