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.

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.   🙂

Happy trading,

Lance Beggs

 


 

Wrong Wrong Wrong Right

 

This was an interesting sequence of trades – three which I got completely wrong, followed by one which I finally got right.

The key takeaways:

  1. You won’t always get it right. Sometimes your timing is out. Other times, like in this sequence, your assessment of bias is just wrong.
  2. Good entry location and good active trade management can ensure that even when you get it wrong, you still don’t lose much. Or, as in this sequence, you don’t lose anything.
  3. One right trade can more than make up for numerous wrong trades.
  4. Profits come from a series of trades. Not from individual trades. In this business, individual trade results are irrelevant (assuming they do not break your money and risk management limits).

 

Market open

The plan

Wrong

Note importantly on the Trading Timeframe that the entry was very much near the low. There was absolutely NO waiting for confirmation of price moving higher. Instead, entry was taken when price showed it could not move lower.

Note also how active trade management allowed the trade to profit, with half taken off at the first target area and the remainder scratched for a smaller loss once it was clear this trade was wrong.

Good decision making with regards to entry and trade management ensured that I did not lose here, despite being wrong about the direction of the market.

Let's try again

Wrong

Again…

Note importantly on the Trading Timeframe that the entry was very much near the low. There was absolutely NO waiting for confirmation of price moving higher. Instead, entry was taken when price showed it could not move lower.

Note also how active trade management allowed the trade to profit, with some risk taken off when I wasn’t happy with the post-entry stall. This turned out premature, but it’s a good decision. Price should have moved quicker. Of the remainder of the position, half is taken off at the next stall area and the remainder scratched for a smaller loss once it was clear this trade was wrong.

Good decision making with regards to entry and trade management ensured that I did not lose here, despite being wrong about the direction of the market.

One more time... cause it's working so well so far!!!

Wrong

Yes, the temptation to not show bad trading is GREAT. But sometimes there are good lessons.

Once more for effect…

Note importantly on the Trading Timeframe that the entry was very much near the low. There was absolutely NO waiting for confirmation of price moving higher. Instead, entry was taken when price showed it could not move lower.

Note also how active trade management allowed the trade to profit, with some risk taken off early (in the area of the prior pullback lows) and the remainder scratched for a smaller loss once it was clear this trade was wrong.

Good decision making with regards to entry and trade management ensured that I did not lose here, despite being wrong about the direction of the market.

A better plan

Right

Repeating the key takeaways:

  1. You won’t always get it right. Sometimes your timing is out. Other times, like in this sequence, your assessment of bias is just wrong.
  2. Good entry location and good active trade management can ensure that even when you get it wrong, you still don’t lose much. Or, as in this sequence, you don’t lose anything.
  3. One right trade can more than make up for numerous wrong trades.
  4. Profits come from a series of trades. Not from individual trades. In this business, individual trade results are irrelevant (assuming they do not break your money and risk management limits).

 

Happy trading,

Lance Beggs

 


 

How Do You Find Time to Plan a Trade on a 1-Minute Timeframe?

 

This is a question I get from time to time.

Quite a reasonable question, I guess, for anyone used to trading on much longer timeframes.

The answer is simple. And if you do it right you'll find that there is plenty of time. Even on a 1-minute chart.

How Do You Find Time to Plan a Trade on a 1-Minute Timeframe?

Let's repeat that for effect…

Lower timeframes require that you see the trade setup in your mind, well before it shows up on the chart.

In fact, I'd suggest that this is good practice, regardless of your trading timeframe.

It's a matter of visualisation – plotting in your mind the most likely path for the next couple of price swings. And becoming clear in your mind about EXACTLY what you need to see if these price swings could offer a trade.

Think of it like a visual form of an IF-THEN statement. "IF price goes here and looks like (this) THEN I will have potential trade opportunity."

How Do You Find Time to Plan a Trade on a 1-Minute Timeframe?

How Do You Find Time to Plan a Trade on a 1-Minute Timeframe?

How Do You Find Time to Plan a Trade on a 1-Minute Timeframe?

How Do You Find Time to Plan a Trade on a 1-Minute Timeframe?

How Do You Find Time to Plan a Trade on a 1-Minute Timeframe?

Focus is always kept AHEAD OF PRICE.

In this case, the trade planning was carried out 2-3 minutes prior to the setup actually occurring. That's quick. Often a trade idea might be visualised 5 or even 10 minutes before price sets up for entry.

Either way, it's plenty of time.

Trade entry should not be a 100% reactive process. It should be forward looking. Pre-considered and pre-planned. And only acted upon if price should subsequently prove your forward planning to be correct.

The same goes for trade management. Keep your focus and planning ahead of price.

Where is price going if the trade premise is still valid? How will this look on the charts? How will you manage your stop and target orders if this happens?

And where is price going if the trade premise is no longer valid? How will this look on the charts? How will you react if that happens?

Keep your focus and planning ahead of price.

If you can do that, then there is PLENTY of time to plan your trades, well before price actually gets to the entry point.

Happy trading,

Lance Beggs

 


 

The Key to Early Recognition of Potential Change in Structure

 

The key to early recognition of potential change in structure is in observing and identifying "SOMETHING DIFFERENT".

I absolutely love this example which has been building now since the beginning of the year.

The key to early recognition of potential change in structure

This does not mean that the uptrend will end.

It's just a warning sign.

A clue that the sentiment driving the market prior to this date has changed in some way.

A clue that there is "potential" for a change in market structure.

And for those of you who recognise this clue, the potential to more quickly adapt to any change in structure as it happens, or even before the technical change has occurred.

(By the time I publish this article the market may well have made this change. Be sure to check out the charts if you wish to see what happens next.)

For those of you who wish to join the ranks of professional traders, this is a skill you need to build. Quickly recognising and adapting to changes in the market.

And step one in that process is early recognition of "something different".

All markets.

All timeframes.

The key to early recognition of potential change in structure

I'm just stunned by that last fact.

Skip the table below if you wish, but I personally find it amazing!  (Yep… I'm a charting nerd!)

3rd Jan: Mid-Close Range 1st Feb: Mid-Close Bull 1st Mar: Mid-Close Bull
4th Jan: High-Close Bull 2nd Feb: Low-Close Range 2nd Mar: Low-Close Range
5th Jan: High-Close Bull 3rd Feb: Mid-Close Range 3rd Mar: High-Close Range
6th Jan: High-Close Bull 6th Feb: High-Close Range 6th Mar: High-Close Range
9th Jan: High-Close Bull 7th Feb: Low-Close Bull 7th Mar: Low-Close Range
10th Jan: Mid-Close Bull 8th Feb: High-Close Range 8th Mar: Mid-Close Range
11th Jan: High-Close Range 9th Feb: High-Close Bull 9th Mar: High-Close Range
12th Jan: High-Close Range 10th Feb: High-Close Bull 10th Mar: Mid-Close Bull
13th Jan: High-Close Bull 13th Feb: High-Close Bull 13th Mar: High-Close Bull
16th Jan: Low-Close Range 14th Feb: High-Close Bull 14th Mar: High-Close Range
17th Jan: Mid-Close Bear 15th Feb: High-Close Bull 15th Mar: High-Close Bull
18th Jan: High-Close Bull 16th Feb: Mid-Close Range 16th Mar: Mid-Close Range
19th Jan: Mid-Close Range 17th Feb: High-Close Bull 17th Mar: Low-Close Range
20th Jan: Mid-Close Range 20th Feb: High-Close Bull 20th Mar: Mid-Close Range
23rd Jan: High-Close Range 21st Feb: Mid-Close Range 21st Mar: Low-Close Bear
24th Jan: High-Close Bull 22nd Feb: High-Close Range  
25th Jan: High-Close Bull 23rd Feb: Mid-Close Bear  
26th Jan: Low-Close Range 24th Feb: High-Close Range  
27th Jan: High-Close Range 27th Feb: High-Close Bull  
30th Jan: Mid-Close Bear 28th Feb: Mid-Close Range  
31st Jan: High-Close Range    

 

(See here if you're not familiar with this form of candlestick classification – Parts: One Two Three Four Five )

The key to early recognition of potential change in structure is in observing and identifying "SOMETHING DIFFERENT".

In a stable trend, watch for changes in volatility, or in the pace of the trend. Watch for changes in the way that price swings project beyond the previous swing high or low. Or in changes to the depth of pullbacks. Or, as in today's example, watch for a sudden and strong move counter-trend.

In a stable sideways market, watch again for sudden changes in volatility. Or sudden and dramatic increases in volume. Or (one of my favourites) watch for signs of price compression towards either the upper or lower boundaries of the range.

Something different in the way that price has been moving.

Observe it.

Question it. What could it mean? Could this in any way provide a clue to a potential change in structure?

Now… watch and adapt.

The key to early recognition of potential change in structure

The key to early recognition of potential change in structure

The key to early recognition of potential change in structure

Happy trading,

Lance Beggs

 


 

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