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.

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

 


 

Daily Market Structure & Price Action Study – 8

 

See here if you missed the earlier articles – No. 1, No. 2, No. 3, No. 4, No. 5, No. 6, No. 7

The concept:

I've been writing online for over a decade now. And for that whole time I've been promoting the idea of daily study in both Market Structure and Price Action.

It's a simple task that takes no more than five minutes, but which offers incredible value to your own learning and development.

Sometimes this study fits within certain themes, if there is a particular feature of market structure which I want to focus on for a period of time.

Often though, it's completely unstructured. Simply searching for whatever captures my attention.

Either way, every trading day after the session is over, I look to the charts to find something interesting. Having done this for so long the findings are usually just reinforcing prior lessons. But occasionally, they'll uncover something new which can lead to further exploration, further learning and further growth and development.

The following are examples of entries in my Market Structure & Price Action Journal; although tidied up and expanded upon slightly to work in newsletter article & blog format. (The real journal rarely needs more than one image and a small handful of notes.)

I hope you find it useful. If you do, consider starting your own Market Structure & Price Action Journal.

 

Wednesday, 14th August 2019

We had a day today which trended lower throughout, although never with any great bearish strength. One which just grinded it's way lower. And one which at times "tempted" entry LONG to catch the reversal.

So I thought I should use my MSPA study to find a few "bigger picture" structural signs which should have had me positioned with bearish sentiment throughout the day.

Let's begin with the prior day, Tuesday 13th August 2019.

<image: Daily Market Structure and Price Action Study>

FTC Reference – YTC Price Action Trader Vol 2, Ch 3, P 143

<image: Daily Market Structure and Price Action Study>

<image: Daily Market Structure and Price Action Study>

<image: Daily Market Structure and Price Action Study>

<image: Daily Market Structure and Price Action Study>

Lessons:

  • When the market provides multiple reasons to favour one direction over another, prior to and leading into the session open, the Opening Range can act as a nice "line in the sand" to give you confidence in holding a bias in that direction.

 

Happy trading,

Lance Beggs

 


 

Daily Market Structure & Price Action Study – 7

 

See here if you missed the earlier articles – No. 1, No. 2, No. 3, No. 4, No. 5, No. 6

The concept:

I've been writing online for over a decade now. And for that whole time I've been promoting the idea of daily study in both Market Structure and Price Action.

It's a simple task that takes no more than five minutes, but which offers incredible value to your own learning and development.

Sometimes this study fits within certain themes, if there is a particular feature of market structure which I want to focus on for a period of time.

Often though, it's completely unstructured. Simply searching for whatever captures my attention.

Either way, every trading day after the session is over, I look to the charts to find something interesting. Having done this for so long the findings are usually just reinforcing prior lessons. But occasionally, they'll uncover something new which can lead to further exploration, further learning and further growth and development.

The following are examples of entries in my Market Structure & Price Action Journal; although tidied up and expanded upon slightly to work in newsletter article & blog format. (The real journal rarely needs more than one image and a small handful of notes.)

I hope you find it useful. If you do, consider starting your own Market Structure & Price Action Journal.

 

Tuesday, 13th August 2019:

What a day this was. Or at least, what a day it started out as!

The opening drive was the feature of two social media posts. I'll copy them here if you missed them.

Post one:

<image: Opening drive post one>

And post two:

<image: Opening drive post one> 

I'm off track though. The opening drive was NOT the focus of my Market Structure & Price Action (MSPA) Journal.

Trades journal – yes.

Post session review – yes.

Because I underperformed.

But for the MSPA study, I found this interesting…

<image: Daily Market Structure and Price Action Study> 

A break of the initial balance area (opening hour) is a high probability occurrence. But despite all of that initial momentum, price could not continue.

Not even just up to retest the initial balance high. 

I was reminded of a previous MSPA entry from 30th of July, which was also shared via social media.

<image: Strong Opening Drives do not always continue> 

So the lesson today was simply a reminder of a pre-existing one. The fact that no matter how strong we see the market moving at the open, this is no guarantee of a trend day.

Sure, it might be. And we act as if it will be until proven otherwise.

But like all market analysis, we need to recognise that at best we're dealing with probabilities.

There is great danger in holding onto a belief in the state of the market, as if it's a certain thing.

Assess the state of the market. Act in accordance with that view. But don't trust it to hold forever.

Lessons:

  • Remain flexible in mindset at all times. There is no certainty. Nothing lasts forever in the markets. And when it changes, it can happen rapidly.
  • A strong opening drive is not always guaranteed to lead to a trend day.

 

Happy trading,

Lance Beggs

 


 

Daily Market Structure & Price Action Study – 6

 

See here if you missed the earlier articles – No. 1, No. 2, No. 3, No. 4, No. 5

The concept:

I've been writing online for over a decade now. And for that whole time I've been promoting the idea of daily study in both Market Structure and Price Action.

It's a simple task that takes no more than five minutes, but which offers incredible value to your own learning and development.

Sometimes this study fits within certain themes, if there is a particular feature of market structure which I want to focus on for a period of time.

Often though, it's completely unstructured. Simply searching for whatever captures my attention.

Either way, every trading day after the session is over, I look to the charts to find something interesting. Having done this for so long the findings are usually just reinforcing prior lessons. But occasionally, they'll uncover something new which can lead to further exploration, further learning and further growth and development.

The following are examples of entries in my Market Structure & Price Action Journal; although tidied up and expanded upon slightly to work in newsletter article & blog format. (The real journal rarely needs more than one image and a small handful of notes.)

I hope you find it useful. If you do, consider starting your own Market Structure & Price Action Journal.

 

Monday, 12th August 2019:

This was a difficult session. Choppy action. Narrow range (compared to recent sessions).

Definitely a session where you wish you just took a day off.

Of course, there's no way to know that till after the fact.

What is important though is accepting that such days are a normal part of the game. And in quickly recognising any potential for unfavourable conditions.

The sooner you can recognise potential danger, the sooner you can respond and adapt.

This doesn't always mean shutting down for the day. It may well be an option. But more often than not, it's just a warning to slow down a little. Step back and be patient. Wait for the easier opportunity perhaps at the edges of the structure. Don't jump into marginal opportunity just because you "want to" trade.

So that was the focus of today's entry into my Market Structure & Price Action (MSPA) Journal – What signs were present early in the session, which identified potentially unfavourable conditions?

<image: Daily Market Structure and Price Action Study>

This is one of my go-to, most reliable, signals for potentially dangerous conditions.

If the market sentiment was bullish or bearish then price would expand from the opening region. The fact that it can't, indicates either a lack of interest from both sides of the market, or at least roughly balanced commitment from both bulls and bears. Either way, a sign of potential chop ahead.

This is NOT a signal for no trading. But rather one of caution.

Take it slow. You don't have to trade every move. Wait for something that is screaming out to be traded.

<image: Daily Market Structure and Price Action Study>

One structural feature I hate is the presence of two "levels" within close proximity. Sometimes price gets stuck between the two leading to nothing good, unless you like getting caught in a real chop-fest.

And that's where we found ourselves today.

Opening range at the top. And the overnight low at the bottom.

If market sentiment were indeed bearish then this break should have held. It didn't.

Caution is required.

Again, this is not a "no-trade" signal. Just a warning that we're not likely to have an easy trending environment. Be patient and wait for the right opportunity. Maybe something like getting LONG on the retest of the overnight low!

<image: Daily Market Structure and Price Action Study>

Volatility contraction leads to volatility expansion.

Ok, not always.

But it's a good "rule of thumb" expectation.

So when we find ourselves stuck between the opening range and the overnight low, I was very interested to see the outcome of the break from this area of compression. If that could break the high of day, and hold the break, I'd be much more comfortable.

But no, it's not to be.

Immediate failure. And straight back into the chop zone.

This is a day for extreme caution. 

Lessons:

  • Price stuck at or within the opening range = CAUTION REQUIRED.
  • Price stuck between two levels in close proximity = CAUTION REQUIRED.
  • An inability for a break from volatility contraction to provide any meaningful expansion = CAUTION REQUIRED.

 

Simple!

As mentioned earlier, this daily activity rarely takes more than about 5 minutes. But I feel that it's been an incredibly important part of my own learning and development.

Often there is nothing earth-shattering, although it can happen. Usually after having done this for so long I find it's just reinforcing prior observations and seeing new instances of prior patterns.

All acting to build upon the mental models which I will use in the future to navigate the unfolding landscape.

If you haven't done so already, consider adopting the same habit. Every day – find something interesting in the markets to add to your Market Structure & Price Action (MSPA) Journal.

And as a side-note… consider doing the same with trades as well. Every day – find one A+ trade opportunity, whether you took it or not. Study it. And add charts and notes to your Trades Journal.

Short-term minimal effort. Long-term massive gain!

Happy trading,

Lance Beggs

 


 

What if you Narrowed Your Focus – 2

 

I want to expand upon an important idea which we covered a bit over a year ago (and which I shared on social media again recently).

That is the idea that while learning and developing as a trader, you may find greater value in narrowing your focus and specialising in just one small segment of the daily trading session.

The prior article was here – http://yourtradingcoach.com/trading-process-and-strategy/what-if-you-narrowed-your-focus/

And the suggestion was that rather than fight through 6.5 hours of a full trading session, leaving little time to focus on replay and review, why not try to specialise in just the opening hour.

One hour of trading… during the time when the market most often (but not always) provides the best hourly range.

And then review!

Find the lessons… replay the sequence… and LEARN.

Get profitable on this short sequence of price action. Ignore the rest. You can always add it back later, if you wish.

Now let's expand upon this idea just slightly!

The opening hour is not the only option.

And the fact is that this type of sequence will not suit all traders.

<image: What if you narrowed your focus?>

<image: What if you narrowed your focus?>

If you like fast pace momentum drives and are comfortable with a little more "uncertainty", then perhaps you will love the open like I do. And enjoy the game of getting into sync with this new and evolving daily structure.

But again, this is not the only option.

If you don't find a liking to the pace and uncertainty of the open, then why not just let the opening structure play out. And then trade off that structure.

The opening hour is often referred to as the Initial Balance (IB) area.

Let the IB form. Let the market give you clues as to what type of day we might be in store for. Is it trending? Is it ranging? Is it volatile? Or is it dull and lifeless? Let the market set up some significant levels for you (IB high and low and any in-between).

And then trade off that already-formed structure.

You don't need to specialise in the opening hour. If you find you're not suited to that type of action, maybe you could specialise in trading from 10:30 through till midday?

<image: What if you narrowed your focus?>

<image: What if you narrowed your focus?>

There is no right or wrong.

The opening hour will sometimes offer incredible opportunity. At other times it will provide a real challenge.

The same applies for those trading after the opening hour. At times the structure and opportunity will be clear. Other times it will make for a very hard day at the office.

The point is that they offer different options for the trader who is struggling to gain some consistency. For someone who might benefit from narrowing their focus. And from specialising in a shorter sequence of price action and allowing greater time for replay, review and learning.

Play with both options and see what best fits your needs and your personality.

I like the opening sequences. They're faster. They offer incredible range at times.

But it's not the only option.

However you choose to do this, it's a simple concept.

Narrow your focus. Build expertise in one smaller sequence. And FIGHT to get off that cycle of continual failure.

Go for it! You can do this!

Lance Beggs