Tag Archives: Market Structure

Don’t Overcomplicate Things – 3

 

Let's go over this key concept one more time.

  • Don't overcomplicate things.
  • Keep in mind a visualisation (or a series of visualisations) which broadly capture the vast majority of your trades.
  • It can help provide confirmation of the trade idea as it's setting up.
  • And more importantly, confidence in execution.

 

We discussed this recently via two articles – part one and part two.

Both articles discussed the fact that the majority of my trades lately seem to fit within one of two broad categories.

<image: Don't Overcomplicate Things>

<image: Don't Overcomplicate Things>

(For those with the YTC Price Action Trader, the first category will include all variations of PB, CPB and BPB trades. The second category will include all variations of TST, BOF and any "reversion to the mean" scalp against an existing trend. For the second category, note that I will rarely be entering against strength. Look within the TTF/LTF to see weakness late in the over-extension, or on a subsequent retest. But the whole sequence should be over-extended.)

The first article in this series shared a type-1 trade.

The second article in this series compared three type-2 trades.

Today I thought we could look at one more type-1 trade.

<image: Don't Overcomplicate Things>

<image: Don't Overcomplicate Things>

<image: Don't Overcomplicate Things>

<image: Don't Overcomplicate Things>

<image: Don't Overcomplicate Things>

Ok, so the trade didn't reach it's ultimate target in this case. But "active trade management" recognised the failure to push lower and scratched the position, locking in some good profits anyway.

Key points:

(1) Note how "a clear directional bias" does not necessarily mean a strong and persistent downtrend. In this case we have a somewhat sideways market, shifting from initial downtrend to uptrend and then back again to downtrend. The "clear directional bias" occurred at the point of failure of the uptrend, when anyone holding a long position would have found themselves trapped. When they knew without doubt that they were sitting on a loser and had no choice but to get out.

It's the trap in this case which creates the "clear directional bias".

And it's the pullback against that bias, towards the point of break of the topping pattern, which offers my trade opportunity.

(2) And most importantly, I want you to take note of the similarity with the trade from the first article in this series.

<image: Don't Overcomplicate Things>

This is one of the key points to take away from this series:

  • They all look much the same.

 

It helps with identifying the setup. And it helps with confidence in execution.

Because I've seen it all before.

So once again:

  • Don't overcomplicate things.
  • Keep in mind a visualisation (or a series of visualisations) which broadly capture the vast majority of your trades.
  • It can help provide confirmation of the trade idea as it's setting up.
  • And more importantly, confidence in execution.

 

Happy trading,

Lance Beggs

 


 

Don’t Overcomplicate Things – 2

 

Just over a month ago we discussed the fact that the majority of my trades lately seem to fit within one of two broad categories.

<image: Don't Overcomplicate Things>

<image: Don't Overcomplicate Things>

(For those with the YTC Price Action Trader, the first category will include all variations of PB, CPB and BPB trades. The second category will include all variations of TST, BOF and any "reversion to the mean" scalp against an existing trend. For the second category, note that I will rarely be entering against strength. Look within the TTF/LTF to see weakness late in the over-extension, or on a subsequent retest. But the whole sequence should be over-extended.)

The prior article offered an example of of the first type of trade. If you missed that article, you can find it here – http://yourtradingcoach.com/trading-process-and-strategy/dont-overcomplicate-things-1/

In the week's since then we have focused on something different. A series of three articles showing breakout failure trades – here, here and here.

The focus of these articles was on using the lower timeframe chart to confirm a lack of buying interest after the break. And for timing the entry at the point where we feel any later buyers have completely given up all hope of their trade working.

But there is another VERY important point from these three breakout failure trades, that I think we need to discuss. You may have noticed it. I HOPE you noticed it.

But just in case you didn't…

  • They all look much the same.

 

They all fit (perhaps loosely) into the broad description for the second type of trade.

<image: Don't Overcomplicate Things>

Let's examine all three from this perspective.

<image: Don't Overcomplicate Things>

<image: Don't Overcomplicate Things>

<image: Don't Overcomplicate Things>

Don't overcomplicate things.

Keep in mind a visualisation (or a series of visualisations) which broadly capture the vast majority of your trades.

It can help provide confirmation of the trade idea as it's setting up.

And more importantly, confidence in execution.

Happy trading,

Lance Beggs

 


 

Don’t Overcomplicate Things – 1

 

The vast majority of my trades lately, maybe 95%, fit within one of two broad categories.

<image: Don't Overcomplicate Things>

<image: Don't Overcomplicate Things>

(For those with the YTC Price Action Trader, the first category will include all variations of PB, CPB and BPB trades. The second category will include all variations of TST, BOF and any "reversion to the mean" scalp against an existing trend. For the second category, note that I will rarely be entering against strength. Look within the TTF/LTF to see weakness late in the over-extension, or on a subsequent retest. But the whole sequence should be over-extended.)

Let's look at an example and see how it fits within one of these categories.

Today… category 1 (the bearish version).

<image: Don't Overcomplicate Things>

<image: Don't Overcomplicate Things>

<image: Don't Overcomplicate Things>

<image: Don't Overcomplicate Things>

 

Let me highlight two key points.

<image: Don't Overcomplicate Things>

<image: Don't Overcomplicate Things>

Happy trading,

Lance Beggs

PS. On Tuesday I posted a repeat of an old 2015 Facebook post. You can see it here. Note the similarity in concept. Don't overcomplicate things. Simpler is better.

 


 

Seeking Entry on the Wholesale Side of the Market Structure

 

I absolutely LOVE IT when people send me charts and emails full of excitement at new discoveries or new ways of "seeing" the price movement.

I received one last week that I just had to share.

It's such a great example of seeking entry on the wholesale side of the market structure. I love it.

An email came from G.N. with the following chart. Of interest was the upthrust pattern allowing entry short, in line with the ideas discussed in prior articles – Professionals Traded Here and Confirmation is Risk.

(Note: The image here is compressed to fit the page. If you click on the image it will open an original-size image in your browser. Or refer to GBP/USD on the 2nd November, 1 min chart, if you wish to look at your own charting platform.)

<image: Seeking Entry on the Wholesale Side of the Market Structure>

Actually, let's zoom in a little to identify the upthrust area.

<image: Seeking Entry on the Wholesale Side of the Market Structure>

So here is what I ABSOLUTELY LOVED about receiving this image and email from GN:

<image: Seeking Entry on the Wholesale Side of the Market Structure>

<image: Seeking Entry on the Wholesale Side of the Market Structure>

<image: Seeking Entry on the Wholesale Side of the Market Structure>

This chart provides an awesome example of entry on the wholesale side of the market structure. Here's what I love about this particular trade idea:

<image: Seeking Entry on the Wholesale Side of the Market Structure>

<image: Seeking Entry on the Wholesale Side of the Market Structure>

<image: Seeking Entry on the Wholesale Side of the Market Structure>

<image: Seeking Entry on the Wholesale Side of the Market Structure>

<image: Seeking Entry on the Wholesale Side of the Market Structure>

<image: Seeking Entry on the Wholesale Side of the Market Structure>

Just beautiful!

It's been one of my favourite concepts for years.

The idea of watching breakouts against market bias for failure. And using that to trigger entry back in the direction of the original market bias.

Keep an eye out for it in your markets and your timeframes.

Happy trading,

Lance Beggs

 


 

Reverse Trendline Breakout Failure

 

The market opened and settled quickly into an uptrend.

It was an environment I found difficult to trade for some reason. Decision making was poor. And I just couldn't get in sync with the price movement.

This was a fact that became clearly obvious after two suboptimal trades (small profit so it's all good).

So here's the plan on recognising the fact that I'm out of sync with the market:

  • Stand aside until price breaks from the current structure.

 

Here's what I mean:

The current structure was an uptrend. But not a nice one. Small swings, getting smaller.

I don't use trendlines, but they will help show what I was seeing within the structure, as the trendlines above and below price both converge on each other.

(Reverse Trendline Breakout Failure)

This is what I wait for:

(Reverse Trendline Breakout Failure)

(Reverse Trendline Breakout Failure)

This time we got a break of the reverse trendline.

(Reverse Trendline Breakout Failure)

From a strength/weakness perspective, an acceleration of price like this gives an appearance of strength, but it's not usually the case. Such a steepening of price is unsustainable and will exhaust itself. Any strength is actually short-lived and will often (but not always) provide opportunity back to the last area of congestion prior to breakout.

(Reverse Trendline Breakout Failure)

Here is the outcome:

(Reverse Trendline Breakout Failure)

Lessons:

1. Two suboptimal trades are an indication that you're potentially out of sync. Pause. Step back from the charts. And reassess.

2. When you recognise yourself being out of sync with the market, consider standing aside until price breaks from the current structure.

3. A reverse trendline breakout is usually played initially for reversion to the mean, with the remainder held for potential reversal (until proven otherwise).

Happy trading,

Lance Beggs

 


 

Clues to a Quiet Trading Session

 

Some days the market offers complete rubbish.

Monday was one of those days.

Clues to a quiet trading session 

Clues to a quiet trading session

Clues to a quiet trading session

Clues to a quiet trading session

Clues to a quiet trading session

Clues to a quiet trading session

Clues to a quiet trading session

Clues to a quiet trading session

Clues to a quiet trading session

So far we mentioned the following price action clues which helped form my decision to stand aside and watch and wait for better conditions.

  • Overlapping price bars with little directional conviction
  • Plus narrow range price swings
  • Both combining to form a narrow range channel which just drifts slowly in one direction

 

In addition, a big part of the decision is the following:

  • "Feel" – The price movement itself intra-candle just "feels" slow and sluggish. And while it's present through all price movement, it's particularly felt when sitting in a position and it's just NOT moving the way you like.

 

However, there is another quite important input into my decision, which I haven't mentioned yet. (This was actually the whole point of the article when I conducted my planning… yes, I've digressed again!!!)

It's a factor which gradually became clear between 5 and 30 minutes after the session open.

So let's get to the whole point of my article and check this out.

We'll begin by looking at the DAILY chart.

Clues to a quiet trading session

Of note is the fact that the volume of the day (with hindsight) turned out to be the lowest volume in a LONG TIME (excluding holiday sessions). I don't know how long. I'm not a stats person. If you are, feel free let me know how long!  ๐Ÿ™‚

But it was a long time since we've seen the daily volume so low.

And low volume is often (not always) an indication of a dull, lifeless session. Just the kind of session I prefer to avoid.

Of course, the exchange does not publish the end-of-day volume before the session starts.

But it's not all bad.

Here's a tip I learnt many years ago:

  • The opening 30 minute volume gives a clue as to the kind of day we'll get. A very low opening 30 minute volume suggests low participation and (in the absence of any reason for this to change) a higher likelihood of a lower volume day.

 

In other words, if the 30 minute volume is really low, expect dull, lifeless conditions ahead.

So here's the opening 30 minute volume. Again, very low compared with recent historical averages.

Clues to a quiet trading session

And rather than wait till 30 minutes, we can take a quick peek at 5 and 15 minutes into the session.

Clues to a quiet trading session

Clues to a quiet trading session

There is no need to build and display these chart templates which show only the first 5, 15 and 30 minutes of data. Just glance at the volume after 5, 15 and 30 minutes and you'll get a feel for whether it's low, about average or high.

A low opening five minute volume is a warning sign. Participation is low. Interesting! Take note.

If it continues after 15 minutes, this is a bigger warning sign. Take care in these markets.

And if the volume remains low at the 30 minute mark, when compared with historical averages, expect a potentially dull and lifeless session. At least until something shocks the market out of it's slumber and shifts the sentiment of the market participants.

TRADE WITH CAUTION.

A+ SETUPS ONLY.

Or not at all.

Sometimes it feels good to take hold of your small profits and call it a day. There is a life to be lived out there, away from the charts.

On this particular Monday, the volume was low after 5 minutes. And again at the 15 minute mark. Price action had felt slow and sluggish. In particular when in a trade. Price structure had the appearance of potential grind – one of my least favourite trading environments. And then at the 30 minute mark, volume was clearly the lowest for at least the last few months.

There was no need to trade any further.

Tomorrow will be a whole new day and a chance for much more favourable trading conditions.

Happy trading, 

Lance Beggs

 


 

Trading an Uncertain Trend

 

The YTC Price Action Trader provides clear definitions for a trend – uptrend, downtrend and sideways trend.

But despite this, there will be times where price action offers something that is not so easy to read.

One of these times can be immediately following a news release:

 

Trading an Uncertain Trend

Trading an Uncertain Trend

Trading an Uncertain Trend

Trading an Uncertain Trend

It would be great if the market was always smooth and easy to read. But it's not.

And that's fine.

The plan at times like this is simple:

  • WAIT until it is clear.

 

If you wish to make "Uncertain" an additional trend type for your trading, alongside up, down and sideways trends, then by all means do so.

But either way, the plan is to wait until it is clear.

STAND ASIDE completely. At least until price reaches the edges of the structure.

What do I mean by "the edges of the structure"?

It's the place where the market has potential to transition into something that is more readable. Something that does fit more nicely into the definitions of up, down or sideways trend.

Like this:

Trading an Uncertain Trend

Trading an Uncertain Trend

Trading an Uncertain Trend

Trading an Uncertain Trend

Trading an Uncertain Trend

Trading an Uncertain Trend

 

An important news release has the potential to completely shift the sentiment of the market. Sometimes the new trend structure is not completely clear, immediately following the news release.

If the trend is uncertain, WAIT until it is clear.

STAND ASIDE completely.

At least until price reaches the edges of the structure, where the trend will (hopefully) become more readable.

The same applies at any other time, outside of news releases. If the market is choppy and you just don't have a good read, it's fine to declare it uncertain. Zoom out on the chart and identify the edges of the structure. Where are the upper and lower zones which might offer some clarity as to what is happening from then on. And stand aside until price reaches these zones.

It's ok to not know. "Uncertain" can be a valid trend type.

Happy trading,

Lance Beggs

 


 

Learning from the Must-Trade Price Sequences

 

Almost all trading sessions will contain one to two price sequences which are absolutely the best.

These can be the difference between an average session where you just grind out a small positive result and a great session where you hit it out of the ballpark.

The price sequences which make your day.

How you define a "must-trade" price sequence will vary from trader to trader. But for most of us they will be the largest and most directional price swings, with smooth price flow at a nice pace. Everything just right!

There can be value in reviewing these post-session.

  • Which were the Must-Trade Price Sequences?
  • Did I capture them?
  • If so, how well did I perform? How did I recognise the opportunity? How could I have done better?
  • If not, was it reasonable to expect that I should have caught them? Why did I fail to capture them? How could I have done better?

 

Let's look at a couple of examples.

Learning from the MUST-TRADE price sequences

Learning from the MUST-TRADE price sequences

Learning from the MUST-TRADE price sequences

Learning from the MUST-TRADE price sequences

Learning from the MUST-TRADE price sequences

Learning from the MUST-TRADE price sequences

 

Another example:

Learning from the MUST-TRADE price sequences

Learning from the MUST-TRADE price sequences

Learning from the MUST-TRADE price sequences

Learning from the MUST-TRADE price sequences

Learning from the MUST-TRADE price sequences

Learning from the MUST-TRADE price sequences

Learning from the MUST-TRADE price sequences

Learning from the MUST-TRADE price sequences

Learning from the MUST-TRADE price sequences

Consider adding this to your post-session review, if you think it will offer value:

  • Which were the Must-Trade Price Sequences?
  • Did I capture them?
  • If so, how well did I perform? How did I recognise the opportunity? How could I have done better?
  • If not, was it reasonable to expect that I should have caught them? Why did I fail to capture them? How could I have done better?

 

Happy trading,

Lance Beggs

 


 

A Simple Alternative Means of Assessing Short-Term Bias & Market Strength/Weakness – Part 2

 

I've long been a fan of Opening Range (OR) theory and the way that it allows us to quickly and easily identify a "bigger picture" session bias.

So last week we played around with that concept and explored it's application in new areas of the chart.

We took the concept of OR theory and applied it not just to the opening bar of the session, but to multiple bars throughout the session as well.

In my own trading, using the 1-minute Trading Timeframe, I apply this to the opening candle for every 30 minute block of data.

This allows me to not only have the "bigger picture" session-wide bias, but to also get a feel for the bias on a shorter timescale as well.

Think of it as being like multiple-timeframe analysis. The standard OR provides a bigger picture session-wide bias. The 30 minute ORโ€™s provide a picture of the shorter-term bias โ€œinsideโ€ that bigger picture bias.

You can find last week's article here if you missed it – http://yourtradingcoach.com/trading-process-and-strategy/a-simple-alternative-means-of-assessing-short-term-bias/

At the most basic level, analysis of a single 30M OR block can provide us with two primary pieces of information:

  1. A sense for the short-term directional bias. Price movement above the OR is bullish. Price movement below the OR is bearish. And price movement stuck at the OR is neutral.
  2. A feel for the underlying strength or weakness within this directional bias. Fast-flowing price movement with little overlap shows a strong supply/demand imbalance. Whereas overlapping, choppy action suggests a much more balanced market.

 

Let's look at some examples of this information as applied to individual 30M blocks:

Analysis of Individual 30M OR Blocks

Analysis of Individual 30M OR Blocks

Analysis of Individual 30M OR Blocks

Analysis of Individual 30M OR Blocks

The real strength of this method though, is not in analysis of an individual 30M OR block.

Rather it comes through assessing the information from the current OR block within the context of either the overall session bias or the preceding couple of OR blocks.

Resolving Bias Conflict.

Resolving Bias Conflict.

Resolving Bias Conflict.

Resolving Bias Conflict.

Resolving Bias Conflict. 

If you like this, I highly encourage you to play around with the charts and see what other information you can gather, in relating one single OR block to those preceding it.

Again though, to reinforce a point from our prior article…

This is not my primary tool for conducting analysis.

I assess short-term bias through six "rules of thumb" which allow me to project the current trend forward in time, identifying the highest probability path for the next couple of price swings. I share this method in my eBook series (Chapter 3). The same applies for the method I use to assess strength and weakness within the trend. Also Chapter 3.

Short-term OR Theory is something that has crept into my analysis process over time, which acts to nicely complement the existing methods.

Sometimes it acts simply to confirm my other analysis. And other times it provides a slightly different perspective.

Either way, I find it adds value.

If this idea appeals to you, try it alongside your current methods of analysis and see if you find the same benefits.

Happy trading,

Lance Beggs