Tag Archives: Context

Trading the Retest of a Point of Structural Change

 

One of our aims in trading the financial markets is to make sure that we're trading in the right places on the price chart.

Places which make sense when viewed from the perspective of the psychology of the market participants.

Places which make sense when viewed from the perspective of the structure of the market.

Today we look at one of these places – the retest of a point of structural change.

We've addressed this concept briefly in the past. If you haven't seen this prior article you may wish to review it first.

http://yourtradingcoach.com/trading-process-and-strategy/retesting-the-point-of-structural-change/

The prior article summarised the concept as follows: 

Retesting the point of structural change

All examples in that article dealt with structural patterns on the trading timeframe.

But the same concept can be applied across a much larger time scale, with trade opportunity found as markets retest a point of higher timeframe structural change.

That was the idea behind the following trade.

We'll start by examining a much higher timeframe in order to see the structure develop over the prior four days.

Retesting the point of structural change

Volatility contraction is never fun to trade. Monday was slow and boring. Tuesday was worse.

But in the back of my mind at these times is an expectation that this volatility contraction must end at some stage.

And the expansion of volatility on a break from these patterns can provide great
trading conditions.

So let's move forward to Wednesday to see how the breakout eventually occurs. And to see whether or not it then offers us a nice BPB setup entry long.

Retesting the point of structural change

Damn! We missed it.

Or maybe not?

Let's move ahead 30 minutes into Wednesday's session.

Retesting the point of structural change

From a structural perspective, this is a beautiful place to be seeking opportunity long. Previous resistance often provides support once broken and retested.

From the metagame perspective, it's also a beautiful place to be seeking opportunity long.

Anyone with a bullish bias who missed the overnight breakout has now been gifted an ideal "second chance" entry opportunity.

Those already holding a long position have been provided an ideal scenario to add to their position.

And for those who managed to get short from the open on Wednesday, the market is at the ideal area for profit taking (ie. buy orders).

There is good reason to be buying here.

Let's look to the trading timeframe to see how it played out.

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Stop Fighting an Obvious Market Bias

 

Charts this week come courtesy of a trader who contacted me seeking some help.

This is something he finds himself doing time and time again.

And in my experience he's certainly not alone.

This is such a great example. I'm really pleased I can share it.

The original images were too large to fit here, so I've included two smaller segments of the larger chart. The market and timeframe have been removed. Examine the charts as if they're your own market and your own timeframe.

In case it's not obvious, all trades here are SHORT.

Stop it. Seriously... just STOP IT!!!!

The key point…

STOP FIGHTING AN OBVIOUS MARKET BIAS!

If you consistently trade like this you are NOT on the right path.

This is not the way to win.

And it doesn't always need to be such an extreme trend. 

The pain continues… a little bit later in the same session…

All SHORT except for the second last trade.

Stop it. Seriously... just STOP IT!!!!

STOP FIGHTING AN OBVIOUS MARKET BIAS!

If you have this problem of continually fading an obvious market bias, here's a starting point for correcting the problem:

First, gather some chart evidence which highlights the problem.

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I’d Take These Trades EVERY TIME. Here’s Why…

 

Win, lose or draw!

I'd be happy to take these trades EVERY TIME.

Let's start with some much higher timeframes to give you some context.

I'd take these trades EVERY time.

I'd take these trades EVERY time.

I'd take these trades EVERY time.

So there is good potential for strong directional movement below prior lows.

Any break to new lows… I'll be all over any BPB weakness.

And even better… if the market sets up right I'll try to enter short pre-break (above the low of day) to profit as price breaks lower. 

Let's look to the Trading Timeframe chart to see what the market offered.

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Fading the Edges of the Market Structure

 

Fading the edges of the market structure requires that you see the markets in a different way to the usual retail trader.

Strength in price movement towards a range boundary or an S/R level is not necessarily going to continue with strength following a breakout.

In the right context, this apparent strength can produce a nice trap at the edge of the market structure, providing breakout failure opportunity for anyone willing to fade the move back into the prior range.

Fading the Edges of the Market Structure

Fading the Edges of the Market Structure

Fading the Edges of the Market Structure

Fading the Edges of the Market Structure

Fading the Edges of the Market Structure

Fading the Edges of the Market Structure

Fading the Edges of the Market Structure

Fading the Edges of the Market Structure

Fading the Edges of the Market Structure

Happy trading,

Lance Beggs

 


 

False Breakout Trap Review

 

I received an email last week from a student of the YTC Price Action Trader, which I ABSOLUTELY LOVE.

Actually, I receive a lot of email which I absolutely love. But sometimes they just stand out immediately as something really special.

It was a simple email, containing just one image (shown below).

And the only text was in the subject line: Thank You

Yeah, that made my day! 🙂

False Breakout Trap

Let's look at the trade, using this 1 minute timeframe as the Trading Timeframe (noting that this is more a YTC Scalper timeframe than YTC Price Action Trader). If you use a higher timeframe, that's fine. Don't discount the lesson. Look to the ideas and concepts and apply them to your own trading timeframe.

What I love is the simple fact that to most newbies, or most traders of simple text-book style technical analysis, there is no obvious reason to short.

The newbies have a limited view of price movement and opportunity

Let's look at how I see this price movement.

What immediately excited me was WHEN this trade occurred. So we'll start with that.

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Retesting the Point of Structural Change

 

I posted the following on social media a few weeks ago…

  • The first pullback after a strong and decisive break from an obvious structural pattern, should be considered a MUST-TRADE scenario.

 

Retesting the point of structural change

There was a comment made to the post which I absolutely love. I've copied it here:

Social media comment

Now, I don't advocate trading just one pattern.

But this one… should definitely be in your trading arsenal.

Note the three points displayed in the social media post above. The key is ensuring you have these in place.

  1. An obvious structure!
  2. A decisive break!
  3. A pullback towards the point of breakout!

 

From a metagame perspective...

Let's look at this idea play out in a few other charts.

And why not mix it up a little as well… with a completely different market and timeframe.

Here's the AUD/USD spot forex pair on a four hour chart.

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You Don’t Have To Catch The Absolute Top

 

You don't have to catch the absolute top. If you miss it, or can't see it occurring till it's over, be patient. There is often opportunity available on a retest.

Let's start by looking at two images shared a few weeks back on YTC Facebook and Twitter, and then expanding upon this idea with a further example.

First, from the 3rd of August, 2015, we have two separate examples both shown via Trading Timeframe chart sequences:

You don't have to catch the absolute top - example 1 and 2

And then again the very next day… one single example shown here via both Trading Timeframe and Lower Timeframe charts:

You don't have to catch the absolute top - example 3

I see too many traders get frustrated by missing a trade entry. And more often than not this puts them into a negative mindset that creates further problems as the session goes on.

So it's important to discuss this idea – you don't have to catch every opportunity.

In fact… you won't catch every opportunity… so it's essential that you get used to this idea.

I probably miss more than I catch. And that's absolutely fine. Brush it off. Keep focused. The next opportunity might be just around the corner.

That's why I love these examples. A retest can come around quite quickly. If you miss an entry at a top… relax and maintain focus… there is quite often a retest.

Let's check out one more example, this time from the 13th of August, 2015, in the Emini Dow.

Let's start by taking a "big picture" look at the 30 minute chart… and we'll follow that by zooming in to the actual Higher Timeframe chart:

You don't have to catch the absolute top - bigger picture

You don't have to catch the absolute top - higher timeframe

The Trading Timeframe chart displays price shortly after commencing this rally towards resistance, and discusses my expectations for the likely future-path and areas of trade opportunity.

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Reviewing a 50 Tick Winner

 

I love getting feedback from people experiencing success with the YTC Price Action Trader method.

This one was awesome; from YTC reader Nathan:

Last night was a little tough but still positive…. but tonight I have just got a 50 ticker!! It’s been a little goal of mine for a while..

These 30m S/R levels are freakin awesome.. your simple approach to market analysis is great. Previous education covered so many S/R options and possibilities it wasn’t funny… scratched part 1 at +1 as it just wasn’t moving as quick as I wanted.

Pushed my target down further thinking it might break that S/R but I locked in 50 with the stop so I could cross that off my to-do list.  🙂

And on that note I’ll go to bed with an awesome trade.

Here's the image that was embedded with the email:

50 tick winner

While it's great to see people experience some success, even in the early days of their growth and development, there are two other reasons I absolutely love this sequence.

(1) It gives us the opportunity to review the trade and discuss my thoughts about trading before the regular pit session hours (that's when this trade occurred).

(2) It ties in beautifully with the idea I was planning on sharing this week in Motivation Hacks #2.

You can see point two addressed at this link here: http://yourtradingcoach.com/trader/trader-motivation-hacks-number-2/

For now, let's review the trade and discuss trading in the pre-session market.

For those not familiar with the futures environment, you'll notice on the following 60 minute chart that it comprises periods of clearly defined regular trading hours (RTH), which are essentially the pit-session hours. Trading occurs outside this time as well, via the extended / electronic trading hours (ETH). Note how the volume is significantly lower during this time period.

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Pullback Test of Short-Term Resistance

 

Context is far MORE IMPORTANT than the trade entry trigger.

One of the dangers that newer traders face is too much obsession with Lower Timeframe or Trading Timeframe entry trigger patterns.

I've been there myself. We all seem to get stuck there. Entry trigger patterns are exciting. They're simple to see. And most importantly, they satisfy our "need" for certainty.

And so when I post a trade with a shooting star trigger entry, or a spike & ledge, or a spring or upthrust, I get people emailing me with a dozen examples of these same trigger entry patterns that they've just found on a chart.

But typically…. they're forgetting context.

Never forget context. It comes first!

What do I mean by context?

Context means the surrounding conditions or circumstances within which the trade is occurring.

There are many ways to look at context. My preference is to consider where the trade is occurring within the Higher Timeframe S/R framework and the Trading Timeframe trend structure, plus whether or not the "behaviour of price movement" matches my future-trend projection (See YTC Price Action Trader Vol 2 Chapter 3 for the Principles of Future-Trend Direction!).

There are other ways. Some traders gain a feel for context through market profile, or intermarket correlations, or… well there are many ways.

The point is simply that a trade does not occur in isolation from the surrounding market conditions. And those conditions are important.

Let's look at a trade:  (Note: I've purposely left off the timeframes as it doesn't matter. Just think in terms of Lower, Trading and Higher Timeframes)

Lower Timeframe Chart - Nice Entry Trigger - But that's not the important part!

As you can see… it's a really nice Shooting Star pattern. But that's not the important part.

Let's look instead to see the conditions surrounding the trade.

We'll start with the Higher Timeframe Chart:

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