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.

Learning from the Must-Trade Price Sequences

 

Almost all trading sessions will contain one to two price sequences which are absolutely the best.

These can be the difference between an average session where you just grind out a small positive result and a great session where you hit it out of the ballpark.

The price sequences which make your day.

How you define a "must-trade" price sequence will vary from trader to trader. But for most of us they will be the largest and most directional price swings, with smooth price flow at a nice pace. Everything just right!

There can be value in reviewing these post-session.

  • Which were the Must-Trade Price Sequences?
  • Did I capture them?
  • If so, how well did I perform? How did I recognise the opportunity? How could I have done better?
  • If not, was it reasonable to expect that I should have caught them? Why did I fail to capture them? How could I have done better?

 

Let's look at a couple of examples.

Learning from the MUST-TRADE price sequences

Learning from the MUST-TRADE price sequences

Learning from the MUST-TRADE price sequences

Learning from the MUST-TRADE price sequences

Learning from the MUST-TRADE price sequences

Learning from the MUST-TRADE price sequences

 

Another example:

Learning from the MUST-TRADE price sequences

Learning from the MUST-TRADE price sequences

Learning from the MUST-TRADE price sequences

Learning from the MUST-TRADE price sequences

Learning from the MUST-TRADE price sequences

Learning from the MUST-TRADE price sequences

Learning from the MUST-TRADE price sequences

Learning from the MUST-TRADE price sequences

Learning from the MUST-TRADE price sequences

Consider adding this to your post-session review, if you think it will offer value:

  • Which were the Must-Trade Price Sequences?
  • Did I capture them?
  • If so, how well did I perform? How did I recognise the opportunity? How could I have done better?
  • If not, was it reasonable to expect that I should have caught them? Why did I fail to capture them? How could I have done better?

 

Happy trading,

Lance Beggs

 


 

A Simple Alternative Means of Assessing Short-Term Bias & Market Strength/Weakness – Part 2

 

I've long been a fan of Opening Range (OR) theory and the way that it allows us to quickly and easily identify a "bigger picture" session bias.

So last week we played around with that concept and explored it's application in new areas of the chart.

We took the concept of OR theory and applied it not just to the opening bar of the session, but to multiple bars throughout the session as well.

In my own trading, using the 1-minute Trading Timeframe, I apply this to the opening candle for every 30 minute block of data.

This allows me to not only have the "bigger picture" session-wide bias, but to also get a feel for the bias on a shorter timescale as well.

Think of it as being like multiple-timeframe analysis. The standard OR provides a bigger picture session-wide bias. The 30 minute OR’s provide a picture of the shorter-term bias β€œinside” that bigger picture bias.

You can find last week's article here if you missed it – http://yourtradingcoach.com/trading-process-and-strategy/a-simple-alternative-means-of-assessing-short-term-bias/

At the most basic level, analysis of a single 30M OR block can provide us with two primary pieces of information:

  1. A sense for the short-term directional bias. Price movement above the OR is bullish. Price movement below the OR is bearish. And price movement stuck at the OR is neutral.
  2. A feel for the underlying strength or weakness within this directional bias. Fast-flowing price movement with little overlap shows a strong supply/demand imbalance. Whereas overlapping, choppy action suggests a much more balanced market.

 

Let's look at some examples of this information as applied to individual 30M blocks:

Analysis of Individual 30M OR Blocks

Analysis of Individual 30M OR Blocks

Analysis of Individual 30M OR Blocks

Analysis of Individual 30M OR Blocks

The real strength of this method though, is not in analysis of an individual 30M OR block.

Rather it comes through assessing the information from the current OR block within the context of either the overall session bias or the preceding couple of OR blocks.

Resolving Bias Conflict.

Resolving Bias Conflict.

Resolving Bias Conflict.

Resolving Bias Conflict.

Resolving Bias Conflict. 

If you like this, I highly encourage you to play around with the charts and see what other information you can gather, in relating one single OR block to those preceding it.

Again though, to reinforce a point from our prior article…

This is not my primary tool for conducting analysis.

I assess short-term bias through six "rules of thumb" which allow me to project the current trend forward in time, identifying the highest probability path for the next couple of price swings. I share this method in my eBook series (Chapter 3). The same applies for the method I use to assess strength and weakness within the trend. Also Chapter 3.

Short-term OR Theory is something that has crept into my analysis process over time, which acts to nicely complement the existing methods.

Sometimes it acts simply to confirm my other analysis. And other times it provides a slightly different perspective.

Either way, I find it adds value.

If this idea appeals to you, try it alongside your current methods of analysis and see if you find the same benefits.

Happy trading,

Lance Beggs

 


 

A Simple Alternative Means of Assessing Short-Term Bias & Market Strength/Weakness

 

I highly recommend spending some time every now and then just playing with your charts.

Try something new.

Or see if you can apply old ideas in new ways.

Just occasionally, you may find something useful.

Today I'd like to share a simple tool that I've been using for the last few years, alongside my existing approach to assessing short-term market bias and the strength or weakness within the price action.

IMPORTANT NOTE: This is not my primary tool for conducting analysis.

I assess short-term bias through six "rules of thumb" which allow me to project the current trend forward in time, identifying the highest probability path for the next couple of price swings. I don't share this in the newsletter or blog (sorry!). If you're interested you'll need to see my ebook series (Chapter 3). The same applies for the methods I use to assess strength and weakness within the trend. Also Chapter 3.

What we discuss today is something that has crept into my analysis process over time, which acts to nicely complement the existing methods.

Sometimes it acts simply to confirm my other analysis. And other times it provides a slightly different perspective.

Either way, it adds value.

This discovery came about through "playing" with Opening Range theory and seeing where else it could be applied.

We've discussed the Opening Range previously in a few articles if you want some background reading – http://yourtradingcoach.com/tag/opening-range/.

Here is the general concept:

Standard Opening Range theory 

So now, let's apply this in a new way.

I first hinted at this idea way back in 2013 via a series of two facebook posts:

First this one…  (and I guess I've kind of given away the answer!!!)

An Alternative Use for Opening Range theory

 

And then the next day, this post:

 

An Alternative Use for Opening Range theory

I've never seen anyone else do this. I'm not sure why? I think it's an absolutely brilliant method of maintaining an intra-session bias. And it works just beautifully as an additional method to support other YTC Price Action Trader analysis.

The hourly open is a significant occurrence, visible to traders on all timeframes from 1H down to 1M. As such, opening range theory applied to the first Trading Timeframe candle at this point works well in giving a quick indication of current bias as either bullish, bearish or neutral.

The same applies for 30 minute opens, if you prefer to look at this even more short-term. My preference has shifted to using the opening 1 minute candle, each 30 minutes. I find this works well for the 1 minute trading timeframe. If your trading timeframe is higher then just increase the size of the segment as appropriate. Those trading 3 or 5 min charts will likely find one hour segments better than 30 minute segments. Higher trading timeframes may even find value with 2H or 4H groups.

Again… I'm not sure why we don't see this used more often. Give it a try! I love it!

I'm not going to reveal all I've found in using this approach. I want you to play with it. Explore the idea on some charts. Run it alongside your current methods. If it adds no value, drop it. But maybe… and I suspect this will be the case for many… it will become a quite useful tool in your trading toolkit.

A quick starting point though:

Within the context of the "bigger picture" session bias and other analysis information available from standard opening range theory, we now have a method of assessing the same information on a shorter timescale.

So as with the standard approach, price movement from the 1H or 30M Opening Range gives us insight into either bullish or bearish or neutral bias. And the ease with which price moves away gives insight into the strength and weakness.

But now, instead of just being able to reference price to the Opening Range, we also have the ability to:

(a) Reference the shorter-term 1H or 30M bias information to the longer-term session bias information, as the shorter-term acts to move with or against the longer-term bias.

(b) Reference the current 1H or 30M bias information to that obtained from the previous one or two 1H or 30M segments.

That is, we get information into the way that price is moving. Is it stable, maintaining previous direction, pace and volatility? Or is something changing?

I might leave this here for now.

Again, rather than provide examples, I'd like you to play with this idea and see what you think.

Plot an opening range box around the first "trading timeframe" candle each 30 minutes (or one hour).

If there seems to be any interest then I'll follow up with a part-two in coming weeks, looking at the short-term 30M Opening Range on a few price charts.

Happy trading,

Lance Beggs

 


 

Momentum Doesn’t Always Continue

 

I love these patterns so much. Let's do it one more time.

Momentum doesn't always continue

I know… we've done this a couple of times already – see here – and here.

And of course, those with the YTC Price Action Trader should look to Volume 2, Chapter 3, Page 143, for the same idea expressed on the Trading Timeframe.

But I want to do it one more time, just to really emphasise the point.

In the right context these Test/Breakout Failures of momentum extremes can provide GREAT opportunity.

Regardless of your chosen market and timeframe, if this idea appeals to you then I highly recommend you look through your charts (both trading and higher timeframes) and study some historical examples. You may then want to keep an eye out for them in future.

So to look at yet another market, let's see one that occurred in the emini Dow (YM) futures earlier this week.

I watch for this on both higher timeframes AND on the trading timeframe. This example actually occurs on both. Let's start with a higher timeframe, using the 15 minute as it provides a good "fit" on the image.

Momentum doesn't always continue

Momentum doesn't always continue

Momentum doesn't always continue

Momentum doesn't always continue

Momentum doesn't always continue

Momentum doesn't always continue

I mentioned earlier that this momentum drive also offered a Trading Timeframe example. That would be for those on the 1 minute YTC Scalper timeframes. You'll note if you look at the 15 minute charts above you'll see the momentum low actually included two candles with bottoming tails. On the lower timeframe chart this is yet another example of this same pattern. Let's look at the 1 minute chart showing the "internal detail" comprising these bottoming tail lows.

Momentum doesn't always continue

Keep an eye out for large momentum moves. Those on the trading timeframe can offer nice movement for a swing or two. Those on the higher timeframe structure can offer a clear directional bias for a longer period of time, often a whole session.

  1. A strong momentum drive.
  2. The first pullback does not lead to immediate continuation.
  3. An eventual break of the momentum extreme, which rapidly fails.
  4. Potential opportunity!

 

Happy trading,

Lance Beggs

 


 

Higher Timeframe Forex – When The Market Can’t Push Lower

 

One of the key tasks I was looking forward to this last week, having recently overcome my long-term internet outage, was in catching up with Aaron Fifield's Chat With Traders podcast.

And I must say it was AWESOME to come across episode 117 with Larry Alintoff.   (Yeah… I'm a long way behind!!!)

The reason…

Despite the fact that we likely trade very different timeframes, markets and methods, I was really pleased to hear Larry describe one way that he seeks trade opportunity – when things that "should" happen, don't happen.

That is one of the themes I've shared through YTC over the last few years.

To have a trader of such high regard validate this idea… well I must say I felt just a little pleased with myself!   πŸ™‚

You'll find dozens of references to this idea if you search back through the archives, in either the blog or my social media posts.

The most recent, from memory, would probably be this one – http://yourtradingcoach.com/trading-process-and-strategy/studying-a-higher-timeframe-trap/

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

So I thought, why not look at another example of this idea.

GBP/USD offered an interesting example during the last week. One which is perhaps not as obvious as some of the prior examples.

Let's look to the 4 hour chart at the close last Friday, 9th March.

Higher Timeframe Forex - When the Market Can't Push Lower

Higher Timeframe Forex - When the Market Can't Push Lower

Higher Timeframe Forex - When the Market Can't Push Lower

Higher Timeframe Forex - When the Market Can't Push Lower

So let's look at Monday's data, still on the 4 hour chart.

Higher Timeframe Forex - When the Market Can't Push Lower

And now Tuesday…

Higher Timeframe Forex - When the Market Can't Push Lower

Ha ha!

Ok, it's not all bad.

This is why I wanted to share this one. It makes a nice difference from the previous one which I linked to above (here again if you missed it).

In that prior article, price did break the swing low.

This was the setup in that prior article.

Higher Timeframe Forex - When the Market Can't Push Lower

As we've seen though, it doesn't always happen this nicely.

Sometimes price doesn't quite break that low.

But it doesn't matter.

Often, just trying to break that low is sufficient.

YTC Price Action Trader readers – see Figure 3.78 on page 143 for another example.

Higher Timeframe Forex - When the Market Can't Push Lower

Higher Timeframe Forex - When the Market Can't Push Lower

Higher Timeframe Forex - When the Market Can't Push Lower

Let's drop down to a typical trading timeframe chart, the 5 Min chart, to see how we could have recognised this failure to continue lower.

Higher Timeframe Forex - When the Market Can't Push Lower

In fact, just the day before, on Monday, I'd shared this example from the emini Nasdaq futures, via social media:

Higher Timeframe Forex - When the Market Can't Push Lower

Here is the outcome…

Higher Timeframe Forex - When the Market Can't Push Lower

A strong momentum drive often leaves an expectation in many traders of continuation, should price break the momentum drive extreme. Any failure of that break, or an inability to even quite get that far, can provide a reasonable move back in the opposite direction.

I'm a big fan of this concept – when things that "should" happen, don't happen.

Keep an eye out for it in your markets and your timeframes. Archive and study a few examples. And consider adding it to your trading toolkit, should you also find them to offer great opportunity.

Higher Timeframe Forex - When the Market Can't Push Lower

Happy trading,

Lance Beggs

 


 

Metagame Entry – After You’ve Made a Dumb Trade!

 

I often talk about identifying the areas where "other traders" are trading in really dumb places. Places where they've found themselves trapped in a really low odds trade. Or trapped out of a position they wished they were in.

Places of emotion – fear, anger, regret!

These areas of the chart often provide us with great trade opportunity.

But one thing I don't recall discussing is the obvious fact that sometimes we find ourselves taking these dumb trades.

We all do it!

The trapper… becomes trapped.

But that's fine. It's information. We read the market wrong. Now we've got feedback that helps correct our bias. And sometimes, if we've maintained a calm mindset, we might still find trade opportunity as price retests the area of our dumb trade.

Let's look at an example…

Metagame Entry - After You've Made a Dumb Trade!

Metagame Entry - After You've Made a Dumb Trade!

Metagame Entry - After You've Made a Dumb Trade!

Metagame Entry - After You've Made a Dumb Trade!

Metagame Entry - After You've Made a Dumb Trade!

Metagame Entry - After You've Made a Dumb Trade!

Metagame Entry - After You've Made a Dumb Trade!

Metagame Entry - After You've Made a Dumb Trade!

Metagame Entry - After You've Made a Dumb Trade!

Metagame Entry - After You've Made a Dumb Trade!

Metagame Entry - After You've Made a Dumb Trade!

Metagame Entry - After You've Made a Dumb Trade!

Too often we let a losing trade get to us. Especially when it's immediately clear that it's a dumb trade.

We can't allow any negativity to remain for long though.

It is IMPERATIVE that you have some kind of routine in place to briefly get away from the charts and clear your mind.

YTC Price Action Traders, refer to the FOCUS and REGROUP sections in Volume 4, Pages 49-50. Maybe consider printing out those two pages and sticking them on your wall.

Shake off that loss. It's small. It will be overcome by one good trade. Now focus. And prepare yourself for the next trade.

If the context suggests potential for a second chance entry, it could be coming up VERY SOON.

Happy trading,

Lance Beggs

 


 

Trade Opportunity at Spike Highs

 

The market has opened and rallied. Not with great strength. In fact it's quite slow. But it rallies with a clear bullish bias.

It's clear of all S/R levels, above the prior day's high resistance (now support) and well short of the next higher timeframe resistance level.

Trade Opportunity at Spike Highs

Trade opportunity in such a case is ideally sought in the bullish direction.

YTC Price Action Trader readers – the first and second principles apply here and we're looking ideally for PB/CPB opportunity, with the trend.

However, there are times when I'll also look to take counter-trend opportunity, within this market environment.

Not always. But sometimes it's just screaming out to be traded. This is one of those times.

And not with any intention of catching a reversal. Just a scalp from the edges back to the mean.

Here's what I was seeing. We'll look at the TTF first, but we'll follow that up with the HTF chart, because it stands out better there and is much easier to see.

Trade Opportunity at Spike Highs

Trade Opportunity at Spike Highs

Trade Opportunity at Spike Highs

Trade Opportunity at Spike Highs

Trade Opportunity at Spike Highs

Trade Opportunity at Spike Highs

Trade Opportunity at Spike Highs

Keep watch on the charts for anything unusual. Anything that is different.

It may just provide trade opportunity.

Happy trading,

Lance Beggs

 


 

Opportunity Exists where you find Frustrated Traders – Part 2

 

Feedback suggests that people got a lot out of last week's article, so let's continue with that topic one more time.

Check it out here if you missed it – http://yourtradingcoach.com/trading-process-and-strategy/opportunity-exists-where-you-find-frustrated-traders/

This was the general idea though –

I'm always looking at the market from the perspective of "the other trader".

In particular, seeking out the places on the chart where others might become frustrated.

Where is someone stuck out of a trade they wished they were in?

Where is someone stuck in a trade they wished they weren't in?

That's where I want to trade!

This concept can be applied on any timeframe. You can use it on the Trading Timeframe to find quality trade locations. You can use it on the Lower Timeframe to time your entry.

It's this Lower Timeframe application that I want to look at today.

Timing an entry at the point of maximum frustration for our poor friend, "the other trader".

Let's start with the general trade idea.

Opportunity exists where you find frustrated traders

And so let's now step through the data to see how this trade idea unfolded.

Opportunity exists where you find frustrated traders

Opportunity exists where you find frustrated traders

Opportunity exists where you find frustrated traders

Opportunity exists where you find frustrated traders

Opportunity exists where you find frustrated traders

Opportunity exists where you find frustrated traders

Opportunity exists where you find frustrated traders

Opportunity exists where you find frustrated traders

Opportunity exists where you find frustrated traders

Opportunity exists where you find frustrated traders

Opportunity exists where you find frustrated traders

Opportunity exists where you find frustrated traders

Opportunity exists where you find frustrated traders

Happy trading,

Lance Beggs

 


 

Opportunity Exists where you find Frustrated Traders

 

I'm always looking at the market from the perspective of "the other trader".

In particular, seeking out the places on the chart where others might become frustrated.

Where is someone stuck out of a trade they wished they were in?

Where is someone stuck in a trade they wished they weren't in?

That's where I want to trade!

Opportunity exists where you find frustrated traders

Opportunity exists where you find frustrated traders

Opportunity exists where you find frustrated traders

Opportunity exists where you find frustrated traders

Opportunity exists where you find frustrated traders

Opportunity exists where you find frustrated traders

Opportunity exists where you find frustrated traders

Opportunity exists where you find frustrated traders

Opportunity exists where you find frustrated traders

Happy trading,

Lance Beggs

 


 

Trade Review – Should He Have Exited?

 

I received a question from a reader who made an exceptional trade but was concerned that he should have exited the trade much earlier, scratching for a small loss and then possibly seeking re-entry.

I love this!

I would typically expect most traders to be ecstatic about a win.

But it's a sign of someone much more advanced along the journey, who is more concerned about developing good process than in just celebrating the win.

Here is the trade, along with their question. I've had to shrink the image a bit to fit here.

I'll discuss the question below so it's not essential to be able to read the text. But if you are interested, click on the image and it will open a full-size copy in your browser.

The trade... and question...

The Trading Timeframe is the 5 minute chart, shown in the small insert to the upper left. The main part of the image shows the 1 minute Lower Timeframe.

But let's take a look through my charts, starting with the 60 minute timeframe for some wider context and then stepping down through both the 5 and 1 minute charts.

Higher Timeframe

Trading Timeframe

Lower Timeframe

Awesome!

I love it. That is a very nice BPB trade.

But here's the question, courtesy of the trader who we'll just call M.I.

The question...

M.I. is correct in his understanding of my style of trading. Over the years I've developed a preference for active management of my positions, in particular around the entry point. My preference is to not just hold and HOPE. But rather to be taking off risk if I feel the position is threatened. And re-entering if the trade premise does remain intact.

It's always impossible to say exactly how I would have traded something live, when I wasn't actually there to experience the price action. Hindsight knowledge of the outcome DOES alter the way we believe we would have traded.

So taking this with a grain of salt, here is what I "believe" I would have done:

My entry and active management style

Here is the thing though – IT DOESN'T MATTER.

There is no right or wrong method of trade management.

Either way is fine – completely passive set and forget, or quite active like I prefer. Or in fact anything in-between.

What is important is finding and developing your own style and then using that consistently.

Sometimes passive management will have outperformed. Quite likely in this case, M.I.'s management method would have resulted in greater profits than mine. At other times though, active management will be far more profitable (such as here).

Find what fits your personality. And just be consistent.

Here is the IMPORTANT THING TO REMEMBER, regardless of which style you choose:

Know where the trade is invalid

We both have the same area at which we deem the trade invalid.

A passive style.

An active style.

Either way is fine. Find what best fits your personality and just be consistent. Active, passive, or any blend in-between.

Your style will likely develop over time, regardless of which you start with. Track your results. And work to improve.

Even better, if you can afford the time, track both methods and compare the results over time.

Most likely though, personality will play a greater part in the ultimate style, rather than which offers the greater profitability.

A little tip though, if you're unsure where to start. Look at the worst case for each scenario and see which offers the maximum regret. Then avoid that option.

Passive management – the worst case scenario is when the trade does fail and you could clearly see that it had lost it's edge, having tons of time to scratch the trade for a small profit or small loss, but instead hold the trade for a full-size loss just because someone told you "that's how you're meant to do it!".

Active management – the worst case scenario is when the trade idea works, but you've scratched the position for a small profit or small loss, and then can't find any way back in, watching the market move to your original targets without you.

Visualise placing a trade. And then work through both scenarios. Which feels the worst? Now, avoid that method and start with the other.

For me, I'm quite comfortable missing a trade. I'm happy to let it go. It wasn't mine to catch. And I'll just move on to the next.

But holding a position for a loss, when I could see it coming well ahead of time. That's just stupid (IMHO).

I choose active trade management.

But it's not the only way. And it's not necessarily the right option for you.

M.I., you chose a passive style of management for this trade. And it was a GREAT TRADE. Perhaps that is the style that suits your personality the most at this stage of your development? If so, don't worry about how I would have traded the position. Take notes on your trade. Keep your stats. And continue to monitor and grow over time, allowing your trade management style to naturally evolve over time.

That was a great trade. Well done. Keep it up.   πŸ™‚

Happy trading,

Lance Beggs