Tag Archives: Context

Recognise the Current Conditions. And Adapt.

 

I'm displaying charts without any trade markers here, so that you can focus on the price action without any distraction.

Because there is a very important fact that not everyone gets. And rarely is it displayed in such a simple and obvious manner, as it is with the two charts we'll discuss today.

That fact is that NOT ALL DAYS ARE EQUAL.

Regardless of your approach to trading, some sessions will provide structure and conditions which are highly favourable. In these sessions you want to actively and aggressively engage the markets. You want to press your advantage.

Some sessions will be highly unfavourable. In these sessions you want to step back and limit engagement. Your primary aim is to minimise any damage and survive to trade another day.

And of course the majority of sessions will fit somewhere in-between – at times slightly more favourable – and at times slightly more unfavourable.

Your job is to recognise the current conditions. And adapt.

Most people focus far too much on their setups. And focus far too little on the context of the market – the background structure and conditions within which they're seeking to trade their setups.

The following two charts display the E-mini NASDAQ (NQ) 1-minute chart from 09:30 till midday. This is my primary trading period. The two charts cover Monday the 2nd and Tuesday the 3rd of December. Of note, the vertical price scale (RHS) is the same on each chart.

<image: Recognise the Current Conditions. And Adapt.>

<image: Recognise the Current Conditions. And Adapt.>

Perhaps what you consider favourable and unfavourable will differ from my preferences Perhaps if you have a preference for counter-trend mean-reversion scalping, then you'll prefer Tuesday's action to Monday's.

Regardless… the same point still applies.

Most people focus far too much on their setups. And focus far too little on the context of the market – the background structure and conditions within which they're seeking to trade their setups.

Spend some time identifying the structure and conditions in which you're most in sync with the market and most easily able to trade. And also, the structure and conditions which cause you problems.

Set up "rules" to allow quick recognition of the current state of the market. And guidelines for how you will trade.

The sooner you can recognise the current state of the market, the sooner you can adapt.

And perhaps you can stop giving back all of your "favourable day profits" when you find yourself chopped up in an unfavourable session.

Happy trading,

Lance Beggs

 


 

Step Back – Define the Edges – and Wait

 

Let's talk about recovery from a poor start to a trading session.

Like this one…

<image: Step Back - Define the Edges - and Wait>

<image: Step Back - Define the Edges - and Wait>

<image: Step Back - Define the Edges - and Wait>

<image: Step Back - Define the Edges - and Wait>

So here's the plan in three stages…

<image: Step Back - Define the Edges - and Wait>

<image: Step Back - Define the Edges - and Wait>

<image: Step Back - Define the Edges - and Wait>

<image: Step Back - Define the Edges - and Wait>

<image: Step Back - Define the Edges - and Wait>

Whenever you step away from a chart and miss a sequence of price action, you can almost always look back at it with hindsight and see opportunity that you could have taken.

Ignore it.

It wasn't yours to take.

When you've started a session poorly and have struggled to get in sync with the price movement, your job is to step back and clear your mind. Any opportunity you miss during that period of recovery is irrelevant. Let it go.

Step back. Clear your mind.

Define the edges of the structure which caused you problems.

And then wait until price has broken that structure and the market has shown you the directional bias.

Only then is it time to trade.

Happy trading,

Lance Beggs

 


 

One Winner One Loser

 

A question received last Monday: "Are you trading today? It's a holiday but the market is open."

For future readers… Monday was 11th November 2019. Veterans Day.

And yes, the economic calendar which I use also has this listed as a US holiday. But the market is definitely open all day (or at least the index futures which I trade).

Here's my plan for holidays, because as the question noted, there are different kinds of holidays:

  • Holidays where the market is closed – no trading!  (Duh!)
  • Holidays where the market is open for one of those "half day" sessions – no trading! I don't care if it does move. That's the low probability outcome. More likely it will be dull, lifeless, narrow range chop.
  • Holidays where the market is open all day – My preference is to avoid it, but if I've got nothing better to do then let the opening structure play out and then make an assessment.

 

I had nothing better to do. So I let the opening structure play out. And then assessed.

How much opening structure? There's no rule here. Make an judgment call as to how much is necessary to see if there is sufficient liquidity, pace, volatility etc.

If the market opens with a gap outside the prior day's range, and outside any higher timeframe congestion, I might be satisfied just with the opening TTF price swing, or just waiting a short time period like 5-15 minutes. Then assessing.

Or on days like today, where the market opened within the prior days range, I will wait a bit longer.

<image: One Winner One Loser>

 

I was completely comfortable with no trades. But if I could see edge, then let's play.

<image: One Winner One Loser>

<image: One Winner One Loser>

 

For readers of the YTC Price Action Trader – The Principle being applied here, and in fact the reason for the whole trade, should be obvious. If not, email me.

<image: One Winner One Loser>

<image: One Winner One Loser>

<image: One Winner One Loser>

<image: One Winner One Loser>

<image: One Winner One Loser>

<image: One Winner One Loser>

 

One winner. And one loser. Just a small day, but it is a "holiday" session and I'm happy with nothing.

Of great importance though – the loser is much smaller in size than the winner.

Which reminds me of one of the most important points I've shared over the years at YTC, accepting of course that a two trade sample size is way too small (but the concept is what is important)… what if you could be happy with a 50% win rate, and learn to profit from a positive Win/Loss Size Ratio?

Ok, so back to the main point of the article:

Here's my plan for holidays, because as the question noted, there are different kinds of holidays:

  • Holidays where the market is closed – no trading!  (Duh!)
  • Holidays where the market is open for one of those "half day" sessions – no trading! I don't care if it does move. That's the low probability outcome. More likely it will be dull, lifeless, narrow range chop.
  • Holidays where the market is open all day – My preference is to avoid it, but if I've got nothing better to do then let the opening structure play out and then make an assessment.

 

Happy trading,

Lance Beggs

 


 

Pre-Session Analysis Starts with the Daily Chart

 

I was recently asked on Twitter about my pre-session analysis. My response was simply that I've outlined the process in detail in the YTC Price Action Trader.

However, since publication, I have added a couple of minor steps. Let's look at one today.

It occurs just once a day, right at the beginning of my analysis process.

It involves the daily chart. And about 5 to 10 seconds of work.

Not for levels, or structure, or trend. We get those from our normal Higher Timeframe (HTF) and Trading Timeframe (TTF) charts.

The daily is used to provide a "best guess" as to the potential range of movement we can expect in the upcoming session.

There is no great accuracy required. I don't need to get it right within a small number of ticks. It's just a quick assessment based upon experience. Part of building our bigger-picture contextual awareness.

It allows me to operate throughout the day with some sense for whether the market has more room to move, or whether the market is possibly close to it's expected range already.

This is the chart layout I use:

<image: Pre-Session Analysis Starts with the Daily Chart>

 

Let's have a look at how it is constructed.

<image: Pre-Session Analysis Starts with the Daily Chart>

<image: Pre-Session Analysis Starts with the Daily Chart>

<image: Pre-Session Analysis Starts with the Daily Chart>

<image: Pre-Session Analysis Starts with the Daily Chart>

<image: Pre-Session Analysis Starts with the Daily Chart>

 

And the Three Step process for using this data.

 

<image: Pre-Session Analysis Starts with the Daily Chart>

<image: Pre-Session Analysis Starts with the Daily Chart>

<image: Pre-Session Analysis Starts with the Daily Chart>

<image: Pre-Session Analysis Starts with the Daily Chart>

<image: Pre-Session Analysis Starts with the Daily Chart>

<image: Pre-Session Analysis Starts with the Daily Chart>

<image: Pre-Session Analysis Starts with the Daily Chart>

<image: Pre-Session Analysis Starts with the Daily Chart>

Summary:

  1. My expectation for today's potential range starts as the Average Daily Range.
  2. I increase this slightly in an expansion environment, and decrease slightly during contraction.
  3. And adjust again as required, if a quick assessment of daily price action suggests good potential for either a wide-range trend day or narrow-range consolidation.

 

And of course, update throughout the day as more data unfolds.

Don't expect perfection.

It's just "background" contextual information that can be used as an input to your trade selection and trade management decisions.

Happy trading,

Lance Beggs

 


 

It’s Game On! Let’s Trade!

 

I operate with three general levels of engagement – Trading, Trade with Caution, and Stand Aside.

Because not all conditions in the market are the same.

If you haven't done so, I highly recommend adopting a similar practice. Take some time to consider the factors that might trigger each level of engagement in your own trading business.

Today let's look at three factors which had me in "Trading" mode right at the market open. No delays. No hesitation.

With these three factors in play, I wanted to be in the first opportunity I could find.

<image: It's Game On! Let's Trade!>

<image: It's Game On! Let's Trade!>

<image: It's Game On! Let's Trade!>

A gap open, from a strong and persistent overnight uptrend, with a recent trap showing an inability to drop.

There is emotion in the market.

And I want to trade.

(See here for prior articles on traps just before the open – here and here).

<image: It's Game On! Let's Trade!>

(NB. YTC Price Action Trader concepts – The First Principle is in play, PB setup)

<image: It's Game On! Let's Trade!>

<image: It's Game On! Let's Trade!>

<image: It's Game On! Let's Trade!>

I don't want to trade all market opens.

There are many that I classify as "Trade with Caution". Think of the opposite of today's example – a market opening in the middle of the prior day's range, following a dull and lifeless sideways overnight session. There is no emotion driving the market. And so I have no business in taking a position until something changes. Wait patiently. Let the opening structure form (5 minutes, 15 minutes, 30 minutes… or as long as it takes). And then trade off that structure.

But there are other days when I don't want to wait. Market sentiment appears to be strong and potentially one-sided. This is not a time to wait. This is not a time to "Trade with Caution".

Today was not one for waiting. It's game on. Let's trade.

Again, if you haven't done so, I highly recommend adopting a similar practice of classifying three general levels of engagement – Trading, Trade with Caution, and Stand Aside.

Take some time to consider the factors which might trigger each level of engagement in your own trading business.

Happy trading,

Lance Beggs

 


 

Overnight Range Double Break

 

There were three NQ sessions in the last two weeks which broke both sides of the overnight range. Let's check them out.

The following are all Higher Timeframe 15 minute charts. I chose this timeframe simply because it fits on the image quite nicely. Whatever higher timeframe you use, is fine. The concept here is the same.

<image: Overnight Range Double Break>

<image: Overnight Range Double Break>

<image: Overnight Range Double Break>

<image: Overnight Range Double Break>

<image: Overnight Range Double Break>

<image: Overnight Range Double Break>

<image: Overnight Range Double Break>

<image: Overnight Range Double Break>

<image: Overnight Range Double Break>

Does this always happen?

No.

Does this mean that when it does happen that the trend always will be smooth and easy to trade?

No.

But you can bet your whole account on the fact that when it does happen, I'll be prepared, focused and ready to exploit any trend that does develop.

YTC Price Action Trader with-trend setups ONLY.

Until the market proves otherwise.

Have a look through some of the charts in your own markets and see if you can identify a similar feature. Forex traders will want to use a break of both sides of a narrow range Asian session.

Happy trading,

Lance Beggs

 


 

Choose YOUR Playing Field

 

One of the most obvious changes in my own trading over the last decade is a willingness to take fewer trades.

It used to be that if there was a price swing… I wanted to trade it.

On the plus side this meant that I was there for everything that did move to good profits. But it also meant that I had to suffer through many sequences where the market went nowhere and the best I could hope for was to grind out a breakeven result.

Now, I'm quite content to let the market play without me. If I miss opportunity, so be it.

I don't need to trade everything that moves.

Instead, I aim to stick to the easier sequences. The times in the market that typically have greater range. And the places within the structure that are more likely to offer favourable conditions.

I choose MY playing field. And I play MY game. What the market does outside of this game, is of no concern at all.

Let's start by looking at a Higher Timeframe chart to get some context:

<image: Choose YOUR playing field>

<image: Choose YOUR playing field>

<image: Choose YOUR playing field>

<image: Choose YOUR playing field>

<image: Choose YOUR playing field>

<image: Choose YOUR playing field>

<image: Choose YOUR playing field>

<image: Choose YOUR playing field>

<image: Choose YOUR playing field>

<image: Choose YOUR playing field>

<image: Choose YOUR playing field>

<image: Choose YOUR playing field>

<image: Choose YOUR playing field>

<image: Choose YOUR playing field>

<image: Choose YOUR playing field>

You don't have to trade every price sequence.

Choose YOUR playing field.

And make sure you're playing YOUR game, not the markets.

Happy trading,

Lance Beggs

 


 

Higher Quality Breakout Failure Trades

 

One of the aims of your journaling process is to build a collection of near textbook-perfect examples of each of your trade setups.

And from these, develop awareness of the factors which lead to increased odds of success.

Friday, 21st June, offered an absolutely beautiful Breakout Failure setup.

Let's start with a 5 minute chart to get some context:

<image: Higher Quality Breakout Failure Trades>

The important factor that I wish to highlight today is not where the trade occurred.

But rather – how price got there.

One of the key features I like to see, which suggests potentially increased odds of success, is price not only having to travel a long way to reach the level, but to have also STRETCHED to do so.

<image: Higher Quality Breakout Failure Trades>

Looking at the 1 minute chart (my preferred Trading Timeframe in this market):

<image: Higher Quality Breakout Failure Trades>

This is a Breakout Failure that I DO NOT want to miss.

Additional study for those with the YTC Price Action Trader:

<image: Higher Quality Breakout Failure Trades>

<image: Higher Quality Breakout Failure Trades>

<image: Higher Quality Breakout Failure Trades>

Happy trading,

Lance Beggs

 


 

When your Trap Radar needs Recalibration!

 

Let's start with the daily chart for a bit of context…

I know right! When was the last time we looked at a daily chart?

No need to panic. Oxygen masks have not dropped from the ceiling. And we'll only spend a short time at these heights.

<image: When your Trap Radar needs Recalibration>

You know those days where you've got a feeling in your gut that tells you the market is DEFINITELY setting up a trap?

Well my Trap Radar had activated and the alarm was deafening.

My gut feel was "It's a trap! Fade the market!"

<image: When your Trap Radar needs Recalibration>

So let's step down from these heights and get back to the more comfortable Trading Timeframe and watch the opening sequence play out…

<image: When your Trap Radar needs Recalibration>

<image: When your Trap Radar needs Recalibration>

<image: When your Trap Radar needs Recalibration>

Here's the thing…

Way back in the early days I would have shorted this thing at every swing high, grinding my way towards the session stop.

But not now.

I recognise that it's normal to have these strong gut feelings from time to time.

Some people say to ignore them. I don't think we can. Nor do I think we should. Sometimes they're right.

I listen to it. I consider what it's saying. And I plan my trading in case it's right.

BUT… I also have a plan for those times it's wrong.

Having a gut feeling about market bias is fine.

But alongside that you must know the following:

(a) What price action would confirm this bias. And how you will trade it.

(b) What price action would indicate that the bias is wrong. And how you will trade it.

Let's step back to the open:

<image: When your Trap Radar needs Recalibration>

<image: When your Trap Radar needs Recalibration>

So having pre-accepted the potential for my gut feeling to be invalid, I was easily able to drop it and reassess the market structure.

<image: When your Trap Radar needs Recalibration>

For PB and CPB descriptions, see here.

<image: When your Trap Radar needs Recalibration>

<image: When your Trap Radar needs Recalibration> 

<image: When your Trap Radar needs Recalibration> 

Repeating the key points:

Having a gut feeling about market bias is fine.

But alongside that you must know the following:

(a) What price action would confirm this bias. And how you will trade it.

(b) What price action would indicate that the bias is wrong. And how you will trade it.

One of the greatest habits you can get into is always considering, "What if I'm wrong?" 

You are NOT smarter than the market. If it's not confirming your gut feeling, then YOU are wrong. Drop that bias and realign with what is actually happening.

Happy trading,

Lance Beggs

 


 

Trading a Massive Increase in Emotion

 

I want to write a short followup to last week's article – First Pullback After Significant Structural Change.

Email feedback during the week made it clear to me that some information which I'd assumed was obvious, was not actually obvious to all readers.

And as with most assumptions, it's actually INCREDIBLY IMPORTANT.

The article dealt with a trade taken well after my usual "stop trading" time of 12:00ET. This is normally time for my post-trading routines before heading off to bed.

But on this day I wasn't tired, so I went on with other work while keeping one eye on the markets. Not with any real intent to trade. Just to follow along. Unless of course an A+ trade opportunity came along, screaming out to be traded, and then it's game on.

So here's what happened (from a higher timeframe chart perspective)…

<image: Trading a massive increase in emotion>

If you want to see the trade, check out the original article – First Pullback After Significant Structural Change.

So this led to a reader asking why I didn't trade LONG from the obvious level of support?

<image: Trading a massive increase in emotion>

Great question!

My error last week was in approaching the trade and surrounding context purely from the technical charting perspective.

1. Obvious structure.

2. Break from obvious structure.

3. Trade the first pullback.

I didn't sufficiently explain the underlying reason WHY I consider this an A+ opportunity. And why opportunity LONG from the obvious level of support was something I was happy to pass on.

An excerpt from my response:

I think the cause of the misunderstanding here is that you're failing to appreciate how little I wanted to be trading. My trading was over. I had almost zero interest in trading. I had better things to be doing. UNLESS something absolutely amazing set up.

So yes, had I been trading from 12:00 I would have been seeking entry LONG, as you've suggested. Price held that level nicely.

But this is not the kind of action I want to take after a trading session is over. Can you see the difference between the two sequences? The sequence from 12:00 to 15:00 is just a continuation of the earlier session bias. But the move after support was broken is different. Suddenly A WHOLE LOT of traders are wrong. Everyone who is still holding a longer-term long position, established at any time in the last 3 hours, is suddenly in a drawdown. This is the kind of action I want to trade. Something that traps a whole lot of people. Something that shocks the market. Otherwise, I'll pass.

 

The break of support is something which SHOCKS the market.

Something that results in a massive increase in emotion.

<image: Trading a massive increase in emotion>

<image: Trading a massive increase in emotion>

<image: Trading a massive increase in emotion>

<image: Trading a massive increase in emotion>

<image: Trading a massive increase in emotion>

Viewing charts from the perspective and emotion of "the other trader" is the key premise underlying my whole trading approach in the YTC Price Action Trader. Outlined in Chapter Two and then evident in the whole analysis and trade process.

The same applies with every trade you see within my newsletter and blog posts. Even, as in the case of last week's article, where the discussion focused solely on the technical aspects of charting. Look to my charts from the perspective of "the other trader". It will be there somewhere.

Happy trading,

Lance Beggs