Tag Archives: Bias

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

 


 

Is this Market Bullish or Bearish?

 

For all those times I'm asked by email, "Why were you selling today when the market is bullish?" or "Why were you buying today when the market is bearish?"

Bullish or bearish?

Bullish or bearish?

Bullish or bearish?

So when someone says that a market is bullish… or that a market is bearish… that actually means nothing without some idea of time scale.

Cheers,

Lance Beggs


Context Can Also Involve Time… Not Just Price

 

or… Why I held this trade drawdown longer than I usually would!

On Monday I entered a PB short in expectation of a downtrend continuing lower.

Context can also involve time - the entry

By far the best entry area would occur on a weak pullback to the shaded region (A).

And the last Trading-Timeframe (TTF) green candle certainly makes it seem like that's a possibility.

But the Lower Timeframe (LTF) stalled and offered a double top entry at short-term resistance, so I entered a position as I didn't want to miss the chance of strong continuation lower (B).

The plan was for an immediate reduction of risk should price break the short-term ledge (C) with a stop for the remainder a few ticks higher. I'd then seek another entry opportunity higher in the vicinity of A.

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Buy Because There Are No More Sellers (with lower timeframe)

 

A fortnight ago we looked at a few trades which were entered using the concept of "buying because there are no more sellers"… or "buying because the market can't go down".

I've received some requests for another example. And two people asked to see what I'm looking at on the lower timeframe.

So let's look at a couple more trades.

First though, we've discussed this idea a few times over the last six months or so. If you want to review some of the earlier material, try some of the following. There may be more if you search through the archives as well.

For one more example, let's look to the emini Russell (TF) on yesterday's session, Tuesday 26th of August.

buy because there are no more sellers

buy because the market can't go down

Let's back up to the start of the session and get some context from a slightly higher 5-Minute timeframe.

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Establishing a Bias From the Open (Part 2 of 2)

Establishing a bias intra-session is a simple process of following our 6 principles for future trend direction.

It's a little more difficult at the session open though, when the lack of prior data adds to the uncertainty.

Last week we worked through an example in which we established a bias from the open. Essentially it's a process of "best guess" based upon judgment and experience, as we reconcile the often conflicting information provided by pre-session trend, position of the open with respect to the prior day's close and range (high-low), position of the open with respect to support or resistance, width of the new opening range price bar, the direction of break of the new opening range high or low, and of course the strength or weakness of the opening price bars.

Read that article first if you missed it: http://yourtradingcoach.com/trading-process-and-strategy/establishing-a-bias-from-the-open-part-1-of-2/

Today, let's work through another example, offering a variation on the initial opening conditions and the subsequent attempts to determine bias.

We'll start again by looking at two different views of the market at the time of pit-session open.

The first is the pit-session only higher-timeframe chart, which shows the position of the open with respect to the prior day's close and prior day's range. This is followed by a trading timeframe chart showing the position of the open with respect to the pre-session trend.

establishing a bias at the market open 

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Establishing a Bias From the Open (Part 1 of 2)

My method of establishing a bias, or an expectation for the future trend direction, is done through six basic principles of price movement, as listed in my YTC Price Action Trader ebook series.

This requires prior price action as it's based partly upon analysis of previous bullish and bearish price swings and trends.

So what do we do when the market initially opens and we don't yet have sufficient price swings to determine our bias?

I'll attempt to demonstrate below using the open from a Crude Oil session earlier this week. As you'll see, there are no fixed rules and there is a lot of uncertainty. The charts provide little information. Analysis, as well as confident and decisive action, relies upon judgment and experience. And effective trade management relies upon your ability to drop or change a bias as soon as opposing information comes to light. Often you'll be required to adjust your bias as price behaves somewhat differently to your expectations.

While lacking experience in the early days, by far the better option is to simply avoid this period of time. Delay your first trade until the market has had time to establish sufficient swing highs and lows to confirm a trend and market bias.

But until you have the requisite experience, don't just blindly wait for the trend. Use this time to watch price movement and make your best call on the bias. You'll get it wrong a lot. But each time you do it you're learning and gaining the experience that is necessary for expert judgment.

Here we have the market opening on Monday, July 22nd, 2013.

Price opens the pit session at 108.52. Let's see what we know already. The following two charts show different views of price at the open; the first being the higher timeframe 5-min chart showing the pit session data only, and the second being the trading timeframe 1-min chart which includes the pre-session (overnight) data.

establishing a bias at the market open

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Where is the Bias after a Strong Impulse Move?

Excerpt from email received at YTC:

Lance,

I have attached a couple of 5 min charts for you to take a look at. Both charts show a strong quick move, one is 60 pips, the other 80 pips. (I trade using 60/30 min, 5 min, and 1 min charts… so 5 min is my trading timeframe)

I am often very hesitant to trade after a move like this. Could you share with me your thoughts and the process you would go through in assessing the market after this type of move?

By the way, the second chart does form a complex pullback and then breaks the low by 12 pips or so at the time of this writing.

Lastly, I would like to again thank you for all you do. I’ve been following your web site for about 4 years now, and purchased your YTC Price Action Trader book just after Christmas. I’m well on my way to realizing my dream of trading for a living. I’m not there yet, but on my way!

Thanks again,

CR

fast impulse move 1

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