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.

Simple Session Bias – 2

 

Last week I introduced two quick and simple methods for establishing the "bigger picture" bias for the trading session.

Let's look at this concept one more time, reviewing all sessions since last week's publication.

We will focus this time on the opening range method (my preferred method) and go into a little more detail.

Friday 3rd August 2018

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

Monday 6th August 2018

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

Tuesday 7th August 2018

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

Of note… this session was also the focus of a social media post. You can see it here on either twitter or facebook.

Wednesday 8th August 2018

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

Thursday 9th August 2018

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

Next Step…

Now it's time for you to take action.

If you like the idea, start applying it to your markets for a few weeks to see if it adds value to your own analysis and trade decision making.

Maintaining context is essential for effective price action trading. The "bigger picture" session bias is a key part of this context. And will hopefully have you trading (more often than not) on the right side of the market.

Happy trading,

Lance Beggs

 


 

Simple Session Bias

 

Maintaining context is essential for effective price action trading.

And while that is true for all timeframes, it's especially so in the lower intraday timeframes where you can easily get caught up in the tick-by-tick battle between the bulls and bears.

My primary tools for context are the trend structure which I view on the trading timeframe chart and a support and resistance framework on a higher timeframe chart. All revealed here if you're interested.

But over time I've adopted a slight addition to this plan.

One additional piece of context data.

Very quick to establish. And very simple.

It essentially provides me with an immediate "bigger picture" assessment as to whether the session as a whole should be considered bullish, bearish or neutral.

I don't restrict trading to this session bias direction (although some people may choose to do so). I trade with reference to the trend and S/R structure, as discussed earlier. But the session bias helps to weight my preference slightly to this "bigger picture" direction.

When trading with the session bias I might show a little more patience in letting a trade prove itself. And a little more confidence in holding for larger targets.

Against the session bias, I might prefer to limit myself to A+ quality trades only. I might require them to prove themselves more quickly, or else I'll be scaling back the risk. And I might be satisfied with closer targets.

The method is simple – just display the opening range on a higher timeframe chart. Price holding above the opening range is bullish. Price holding below is bearish. Stuck at the opening range (or in the vicinity) is neutral.

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

VWAP works great as well. Again, price above VWAP is bullish and below is bearish. While price oscillating around the VWAP is more neutral.

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias>

<image: Simple Session Bias> 

Interestingly, you will note that both methods produce a slightly different result, at times, in particular immediately following the session open. That's completely normal. And it's fine (we're only getting a feel for a "bigger picture" bias here). Just be consistent in whichever you use.

Play with some charts and explore the use of either the opening range or VWAP. Or find your own method. There are many options.

Whatever you choose, just keep it simple.

No "analysis" required. Just an immediate visual assessment of bullish, bearish, or neutral.

Happy trading,

Lance Beggs

 


 

Patience at the Open

 

Until you have a good read of the market, there is NO TRADE.

  • Confidence in your real-time understanding of the market structure.
  • Confidence in your real-time understanding of the nature of price movement.
  • Confidence in your real-time assessment of market bias.
  • Confidence in your projection of that market bias forward in time and price.

 

And most importantly:

  • An understanding of how future price movement should behave if your forward projection has some validity.
  • And confidence in your ability to adjust your understanding (and your trading decisions) should price movement offer something unexpected.

 

In simpler language… if you don't know what's going on… you have no business trading.

Watch and wait until some clarity appears, in terms of structure, price movement and opportunity.

The market open is one time which has great potential for confusion, doubt and uncertainty.

I remind myself before the open that there is no need to rush the first trade. If it screams out to be taken, then take it. But otherwise, be patient and allow myself time to get in sync with the flow of price.

Here are two of the market opening "warning signs" that have me keeping my trigger finger well clear of the mouse.

1. Bias Conflict

During the session I maintain a sense of the bias through the YTC Price Action Trader rules for trend projection.

At the session open though, I like to complement this with a really simple and objective method – the opening range breakout.

If they're in agreement, it's game on.

But if they conflict, it's a sign to be patient and wait till they come into alignment.

<image: Patience at the Open>

<image: Patience at the Open>

<image: Patience at the Open>

<image: Patience at the Open>

2. Seriously BAD LOOKING Price Action

Not just bad looking price action. We're talking seriously bad looking price action.

<image: Patience at the Open>

<image: Patience at the Open>

Remain Patient. Watch and Wait.

<image: Patience at the Open>

<image: Patience at the Open>

<image: Patience at the Open>

<image: Patience at the Open>

Happy trading,

Lance Beggs

 


 

The Other Trader (6)

 

Let's continue with an old article series – the metagame – trading AGAINST other traders who find themselves on the wrong side of the market.

Because…

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

You can see the prior articles here if you missed them – OneTwoThreeFourFive.

Here is the general concept for today's trade…

<image - metagame trading - the other trader 5> 

In playing the metagame, we aim to place ourselves in the mindset of any trader who bought late in the move, at or soon after the breakout. Feel their stress build as price stalls. And stalls. And stalls. Feel their pain as their "sure thing" collapses back below the stall region. And find a way to profit from their pain.

Yes, trading is a predatory game!

Let's see some charts.

We'll be seeking BOF Setup opportunity at this point here:

<image - metagame trading - the other trader 6>

 

The key part I want to emphasise today is the following:

<image - metagame trading - the other trader 6>

<image - metagame trading - the other trader 6>

<image - metagame trading - the other trader 6>

<image - metagame trading - the other trader 6>

<image - metagame trading - the other trader 6>

<image - metagame trading - the other trader 6> 

 

Let's play the metagame and put ourselves in the mindset of those who entered LONG on the breakout.

<image - metagame trading - the other trader 6>

<image - metagame trading - the other trader 6>

<image - metagame trading - the other trader 6>

<image - metagame trading - the other trader 6>

<image - metagame trading - the other trader 6> 

 

Trading the metagame…

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

Let someone trap themselves in a low-probability position.

Place yourself into their mindset.

Feel their pain.

And when it gets to the point where they've lost all hope, STRIKE.

Go get 'em,

Lance Beggs

 


 

Daily Market Structure & Price Action Study – 5

 

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

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 make them more "educational".

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

 

Monday 25th June 2018:

I'm a big fan of the concept of "volatility contraction leads to volatility expansion".

Usually when I show examples of this it's in the form of a triangle pattern.

But there are other ways to see it, such as identifying very narrow range bars on a much higher timeframe.

I trade the 1-minute chart. The following is the 15-minute chart, so it's quite a bit higher in timeframe. Note the narrow range bar, in this case also an inside bar which makes it even better.

<image: Daily Market Structure and Price Action Study>

<image: Daily Market Structure and Price Action Study>

<image: Daily Market Structure and Price Action Study>

Obviously what is important here is the concept.

But let's see the outcome for this one particular example.

<image: Daily Market Structure and Price Action Study>

Lessons:

  • Volatility contraction leads to expansion.
  • While contraction is most-often seen through a triangle pattern, it can also be identified through an unusually narrow-range bar on any higher timeframe.
  • Context is important though – my personal preference is for a smooth-flowing directional market.
  • Look for entry either preempting the breakout or on the first pullback after the breakout.

 

Tuesday 26th June 2018:

One of my favourite topics of study is any blindingly obvious traps at the edges of the structure.

<image: Daily Market Structure and Price Action Study>

The reason for this structure – see Chapter 3, page 99, "Sideways Trend – Definition".

<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:

  • In a sideways market environment, primary trade opportunity is sought on price interaction with the range high and low boundaries.
  • Two potential features of a quality breakout failure are (a) price having to stretch to reach the breakout level, and (b) almost immediate lack of continuation following the breakout.

 

Happy trading,

Lance Beggs

 


 

Higher Timeframe Pattern Breakout – 2

 

Last week we looked at the following chart sequence showing an obvious symmetrical triangle pattern within my higher timeframe chart.

<image: Higher Timeframe Pattern Breakout>

See here if you missed the recent article – http://yourtradingcoach.com/trading-process-and-strategy/higher-timeframe-pattern-breakout/

I don't know if I was somehow influenced by that article. I don't usually look for patterns on the higher timeframe chart. It's primary purpose is for establishing an S/R framework.

But since putting that article together, I'm seeing them everywhere!  🙂

As I said last week… sometimes they just stand out as so obvious that you can't miss them. So I watch them for potential trade opportunity around the edges of the pattern structure. Usually for two alternatives – a breakout failure or a breakout pullback. 

So let's do one more example. A little different this time in that the breakout extends much further before commencing the pullback. The same concept applies though – take the first pullback against the edges of the structure.

Here's the higher timeframe chart…

<image: Higher Timeframe Pattern Breakout>

Zooming in now to the Trading Timeframe chart at the time of entry.

<image: Higher Timeframe Pattern Breakout>

<image: Higher Timeframe Pattern Breakout>

<image: Higher Timeframe Pattern Breakout>

Two steps:

(a) Higher Timeframe pattern

(b) Trade BPB / BOF around the edges of the structure.

It's not how I typically trade, but I expect a whole strategy could be based around the idea.

Happy trading,

Lance Beggs

 


 

Higher Timeframe Pattern Breakout

 

I don't actively seek to find patterns on my higher timeframe.

But sometimes they just stand out as so obvious that you can't miss them.

So I watch them for potential trade opportunity around the edges of the pattern structure. Usually for two alternatives – a breakout failure or a breakout pullback.

Of course, in either case the trade idea must make sense from my usual trading timeframe analysis. And also make sense in accordance with my philosophy on price movement and where & how it creates opportunity.

Keep an eye out for them. They can provide good opportunity.

<image: Higher Timeframe Pattern Breakout>

<image: Higher Timeframe Pattern Breakout>

<image: Higher Timeframe Pattern Breakout>

<image: Higher Timeframe Pattern Breakout>

<image: Higher Timeframe Pattern Breakout>

<image: Higher Timeframe Pattern Breakout>

Happy trading,

Lance Beggs

 


 

What if you Narrowed Your Focus?

 

For those day traders who might be stuck in a cycle of continual failure… what if you narrowed your focus?

<image: What if you narrowed your focus?>

<image: What if you narrowed your focus?>

<image: What if you narrowed your focus?>

Some days there might be no opportunity. That's fine.

Other days there might only be one trade opportunity. Again that is fine.

The idea is that this is not necessarily a permanent change to your trading.

It's simply a narrowing of focus to ONE key segment of the trading session.

Master this one key segment – the opening hour.

Prove you have edge in managing the opening sequences of your trading session.

And only then expand to further opportunity.

Let's look at another session:

<image: What if you narrowed your focus?>

<image: What if you narrowed your focus?>

<image: What if you narrowed your focus?>

And again:

<image: What if you narrowed your focus?>

<image: What if you narrowed your focus?>

<image: What if you narrowed your focus?>

For those who trade differently, whether through higher timeframes or multiple markets or in fact any other difference, see if you can adapt the same general concept to your own trading.

Narrow your focus. Build expertise and prove edge in ONE key sequence at a time, or ONE market at a time, or ONE A+ setup type. Whatever works for you.

Narrow your focus.

And fight to get off that cycle of continual failure.

Best of luck,

Lance Beggs

 


 

A Failed Break of One Side Leads to…

 

In preparing my daily entry for my Market Structure & Price Action Journal, I sometimes venture away from my usual market and timeframe if there is an example that REALLY catches my interest. This was one of them.

We're looking here at the Crude Oil 30 minute chart.

<image:A failed break of one side of a range will often lead to a test of the other side.>

Why did this interest me?

Because breaks from a structure like this can lead to some really nice trading opportunity.

<image:A failed break of one side of a range will often lead to a test of the other side.>

Sometimes!

But not always!

Sometimes the market will present me with one of my favourite rules of thumb. If you've been following me for a few years you will have no doubt heard this one before.

  • A failed break of one side of a range will often lead to a test of the other side.

 

<image:A failed break of one side of a range will often lead to a test of the other side.>

And that's exactly what we got the next day.

<image:A failed break of one side of a range will often lead to a test of the other side.>

Let's zoom in to the 3 and 1 minute charts and look at the price action from the session open.

<image:A failed break of one side of a range will often lead to a test of the other side.>

<image:A failed break of one side of a range will often lead to a test of the other side.>

I didn't trade this. It's not my current market. It's just a great example of one of my favourite rules-of-thumb, which caught my attention and made it into my Market Structure and Price Action Journal.

But have a look over the 3 Min TTF chart and the 1 Min LTF chart. See if you can identify the places you might have caught entry short.

In particular the BOF entry short from the top.

And keep an eye out for this scenario in your own markets.

  • A failed break of one side of a range will often lead to a test of the other side.

 

It may just provide some nice trading conditions as you profit from the move that occurs after the breakout traders are stopped out of their position.

Happy trading,

Lance Beggs