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.

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

 


 

When Obvious Expectations Fail

 

Take note when the market offers something that many traders will see as obvious.

Because when "obvious expectations" fail, you will often find a clear directional bias and good trade opportunity in the opposite direction.

Monday 30th April 2018

<image: When obvious expectations fail>

And that is a quite reasonable expectation. You SHOULD be seeking opportunity LONG.

At least until the market proves otherwise.

For me though, I always take note of anything I consider to be an "obvious expectation". Because I also know that there is no certainty in the markets. And when obvious expectations fail, that often provides some of my favourite trading conditions in the other direction.

Let's zoom in to Monday's price action (it's the 5 min chart – a little higher than my trading timeframe but it fits the image better!)…

<image: When obvious expectations fail>

Tuesday 1st May 2018

Another example…

<image: When obvious expectations fail>

<image: When obvious expectations fail>

<image: When obvious expectations fail> 

Wednesday 2nd May 2018

And again…

<image: When obvious expectations fail>

<image: When obvious expectations fail> 

Take note when the market offers something that many traders will see as obvious.

Because when "obvious expectations" fail, you will often find a clear directional bias and good trade opportunity in the opposite direction.

Happy trading,

Lance Beggs

 


 

Daily Market Structure & Price Action Study – 4

 

Week 4 of 4 while I'm away from home…

From the original post:

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.

As I'm away from home for the month of April, celebrating my 50th birthday, and unable to prepare any new articles for the YTC newsletter, I though I'd simply preload the email system and blog with a few articles which share some daily market structure and price action study.

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

 

Tuesday 20th March 2018:

The first step in managing difficult trading conditions is to QUICKLY recognise potential for difficult trading conditions.

Let's look at a higher timeframe (15minute chart).

<image: Daily Market Structure and Price Action Study>

Notes:

  • A = A very neutral open. There is no suggestion of any emotion or directional sentiment in the market. Note it's position is approximately the middle of the prior day's range (from B to C). Note also the fact that it has barely moved from the prior day's close at D.
  • E = A sideways narrow range overnight session. Again, there is no suggestion of any emotion or directional sentiment in the market.
  • Review of the scheduled economic news events for the day show nothing of interest.
  • F = Subsequent price action throughout the session displayed no clear or persistent directional bias.

 

Lessons:

  • A neutral open can be a sign of a potentially slow day with potentially difficult trading conditions (non-trending chop).
  • The default option given a neutral open is to expect difficult conditions UNTIL PROVEN OTHERWISE.
  • Prioritise defence over attack. Survive to trade another day. But always remain alert for a change of conditions. Anything can change at any time.

 

Tuesday 20th March 2018:

Sometimes the simplest ideas are the best.

Here's an example which stood out while flicking through other markets. It's from the EUR/USD spot forex 3 minute chart.

(Do not be afraid to extend your Market Structure & Price Action study to markets and timeframes beyond those which you usually trade.)

<image: Daily Market Structure and Price Action Study>

Notes:

  • A = Choppy, narrow-range difficult conditions (yellow shaded region)
  • B = Lower boundary of the sideways chop environment.
  • C = Break from through the boundary level.
  • D =
    BPB opportunity SHORT.

 

Lessons:

  • Sometimes the simplest ideas are the best.
  • When a market is choppy and tough to read, consider standing aside: (a) define the "edges" of the structure, (b) wait patiently for a break from the structure, and (c) only then seek trade opportunity.

 

Happy trading,

Lance Beggs

 


 

Daily Market Structure & Price Action Study – 3

 

Week 3 of 4 while I'm away from home…

From the original post:

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.

As I'm away from home for the month of April, celebrating my 50th birthday, and unable to prepare any new articles for the YTC newsletter, I though I'd simply preload the email system and blog with a few articles which share some daily market structure and price action study.

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

Friday 16th March 2018:

One of my LEAST favourite types of market opening price action:

<image: Daily Market Structure and Price Action Study>

Notes:

  • A = Price drives higher from the open. It pauses (smaller range candle at the top). I'm watching the lower timeframe for potential opportunity to enter LONG for continuation higher.
  • B = Nope… the market drops lower.
  • C = Price drives lower. Again, I'm watching the lower timeframe for early signs of potential opportunity to enter SHORT for continuation lower.
  • D = Nope… the market pushes higher.
  • At this point, we have the start of a broadening formation. Certainly one of my least favourite environments from a market open.
  • At this point, I need to step back from the chart a little to avoid any impulsive action. It could well continue for another few legs. I am NOT ALLOWED to act unless I see some form of partial decline or partial rise.

 

<image: Daily Market Structure and Price Action Study>

<image: Daily Market Structure and Price Action Study>

Notes:

  • E = Price pushes higher. I'm not interested.
  • F = Price pulls back and stalls. One candle. Two candles. It's finding support. This is a potential partial decline. Now I'm interested.
  • G = Take the PB trade opportunity for continuation. Manage aggressively. It needs to break to new extremes, or you have to get OUT OF THERE.

 

Lessons:

  • A broadening formation is a sequence I have struggled with in the past.
  • I recognise a potential broadening formation through rejection one way and then again the other way.
  • The best way I have found to manage this situation is to stand aside until recognising either a partial decline or partial rise.

 

Monday 19th March 2018:

One of my favourite technical analysis concepts – volatility contraction leads to volatility expansion.

On ALL timeframes.

Let's look at a higher timeframe (60 minute chart) example.

<image: Daily Market Structure and Price Action Study>

Notes:

  • H = Multiple-day volatility contraction
  • I = Gap open (above the prior days high and clearly beyond the boundary of the volatility contraction pattern
  • And again…
  • J = Multiple-day volatility contraction
  • K = Gap open (below the prior days low and clearly beyond the boundary of the volatility contraction pattern
  • In both cases the gap open led to a strong trend for several hours.

 

Lessons:

  • Higher timeframe volatility contraction can lead to highly directional trading sessions, when the open gaps beyond the pattern boundary.
  • Watch the TTF opening range for confirmation of potential continuation.
  • On a confirmed break of the opening range, anticipate a trend day UNTIL PROVEN OTHERWISE.

 

Happy trading,

Lance Beggs

 


 

Daily Market Structure & Price Action Study – 2

 

Week 2 of 4 while I'm away from home…

From the original post:

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.

As I'm away from home for the month of April, celebrating my 50th birthday, and unable to prepare any new articles for the YTC newsletter, I though I'd simply preload the email system and blog with a few articles which share some daily market structure and price action study.

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

Wednesday 14th March 2018:

When obvious expectations fail:

<image: Daily Market Structure and Price Action Study>

Notes:

  • A ridiculously fast and long bearish price swing (A). Price just collapsed.
  • Note also the massive increase in volume (B), proving eventually to be the highest volume of the day.
  • Price then stalls for half an hour (C). Whatever caused the momentum drop is clearly no longer driving sentiment.
  • Price breaks the low at D. Surely expectations are for continuation lower? Well, that's what many will expect. But those familiar with my writing will know that, while I'm ready for that potential, I'm more excited by the potential for the break to fail. Obvious expectations OFTEN fail. And that failure can provide nice opportunity in the opposite direction.
  • Area D offers some beautiful price action to trigger BOF entry LONG. Lower tail rejection. Stall with an inside bar. A tiny break of the low of the inside bar. Then compression against the level and eventual break higher.
  • Step through the candles following the break lower at D and place yourself in the mindset of anyone who might have entered SHORT on the break down. Feel their emotion as price stalls. And stalls. And stalls. This is how you play the metagame – playing against the other traders who find themselves stuck in the market and subject to extremes of emotion.

 

Lessons:

  • Whenever you find any price occurrence which suggests OBVIOUS expectations (especially in accordance with standard technical analysis), pause and ask yourself the following question: "What if it doesn't?"
  • Obvious expectations CAN and DO fail. This failure can provide good trade opportunity and good trade conditions in the opposite direction.

 

Thursday 15th March 2018:

Patterns repeat…

Looking at a higher timeframe (5 minute chart) to get a wider perspective:

<image: Daily Market Structure and Price Action Study>

Notes:

  • F = Strong bullish drive from 11:00 to 11:30
  • G = The strong bullish drive is unable to continue, settling into a tight sideways congestion.
  • H = Strong drive down.
  • I = Opportunity available on a retest of the tight sideways congestion.
  • And again…
  • J = Strong bearish drive from 13:45 to 14:05
  • K = The strong bearish drive is unable to continue, settling into a tight sideways congestion.
  • L = Strong drive up.
  • M = Opportunity available on a retest of the tight sideways congestion.

 

Lessons:

  • Watch for a potential top or bottom when a very strong bullish or bearish drive suddenly stops and fails to continue.
  • If a top or bottom pattern forms as a tight sideways congestion, with a subsequent strong break from that congestion, look for trade opportunity on any retest.

 

Happy trading,

Lance Beggs