Tag Archives: Market Structure

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

 


 

Traps Just Before RTH Open – 3

 

This has been a favourite topic of mine throughout the last year. We explored the idea here and here, along with a bunch of other examples on social media.

But then the market just keeps providing more examples.

So let's look one more time.

The general concept is a trap that occurs through failure of a significant break, very late in the pre-session market and just before RTH Open (RTH = Regular Trading Hours; ie. the pit session).

<image: Traps Just Before RTH Open>

<image: Traps Just Before RTH Open>

Our most recent example fits in the second category – a break to new overnight highs, failing on or shortly after the session open, giving us opportunity to enter SHORT.

Let's begin… with the NQ 1 minute chart on Friday 15th November, 2019.

<image: Traps Just Before RTH Open>

<image: Traps Just Before RTH Open>

<image: Traps Just Before RTH Open>

<image: Traps Just Before RTH Open>

<image: Traps Just Before RTH Open>

<image: Traps Just Before RTH Open>

<image: Traps Just Before RTH Open>

<image: Traps Just Before RTH Open>

<image: Traps Just Before RTH Open>

I've written a lot about displaying patience at the open. About waiting till the bias is clear and trading conditions are favourable.

But there are some situations where I don't display patience.

Where I'm keen to get a trade on as soon as I can.

No patience. No delays. It's game on!

One of these situations is when the market sets up a trap just before or just after the RTH Open.

Keep an eye out for similar opportunity in your own trading.

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

 


 

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

 


 

Daily Market Structure & Price Action Study – 8

 

See here if you missed the earlier articles – No. 1, No. 2, No. 3, No. 4, No. 5, No. 6, No. 7

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 work in newsletter article & blog format. (The real journal rarely needs more than one image and a small handful of notes.)

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

 

Wednesday, 14th August 2019

We had a day today which trended lower throughout, although never with any great bearish strength. One which just grinded it's way lower. And one which at times "tempted" entry LONG to catch the reversal.

So I thought I should use my MSPA study to find a few "bigger picture" structural signs which should have had me positioned with bearish sentiment throughout the day.

Let's begin with the prior day, Tuesday 13th August 2019.

<image: Daily Market Structure and Price Action Study>

FTC Reference – YTC Price Action Trader Vol 2, Ch 3, P 143

<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:

  • When the market provides multiple reasons to favour one direction over another, prior to and leading into the session open, the Opening Range can act as a nice "line in the sand" to give you confidence in holding a bias in that direction.

 

Happy trading,

Lance Beggs

 


 

Daily Market Structure & Price Action Study – 7

 

See here if you missed the earlier articles – No. 1, No. 2, No. 3, No. 4, No. 5, No. 6

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 work in newsletter article & blog format. (The real journal rarely needs more than one image and a small handful of notes.)

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

 

Tuesday, 13th August 2019:

What a day this was. Or at least, what a day it started out as!

The opening drive was the feature of two social media posts. I'll copy them here if you missed them.

Post one:

<image: Opening drive post one>

And post two:

<image: Opening drive post one> 

I'm off track though. The opening drive was NOT the focus of my Market Structure & Price Action (MSPA) Journal.

Trades journal – yes.

Post session review – yes.

Because I underperformed.

But for the MSPA study, I found this interesting…

<image: Daily Market Structure and Price Action Study> 

A break of the initial balance area (opening hour) is a high probability occurrence. But despite all of that initial momentum, price could not continue.

Not even just up to retest the initial balance high. 

I was reminded of a previous MSPA entry from 30th of July, which was also shared via social media.

<image: Strong Opening Drives do not always continue> 

So the lesson today was simply a reminder of a pre-existing one. The fact that no matter how strong we see the market moving at the open, this is no guarantee of a trend day.

Sure, it might be. And we act as if it will be until proven otherwise.

But like all market analysis, we need to recognise that at best we're dealing with probabilities.

There is great danger in holding onto a belief in the state of the market, as if it's a certain thing.

Assess the state of the market. Act in accordance with that view. But don't trust it to hold forever.

Lessons:

  • Remain flexible in mindset at all times. There is no certainty. Nothing lasts forever in the markets. And when it changes, it can happen rapidly.
  • A strong opening drive is not always guaranteed to lead to a trend day.

 

Happy trading,

Lance Beggs

 


 

Daily Market Structure & Price Action Study – 6

 

See here if you missed the earlier articles – No. 1, No. 2, No. 3, No. 4, No. 5

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 work in newsletter article & blog format. (The real journal rarely needs more than one image and a small handful of notes.)

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

 

Monday, 12th August 2019:

This was a difficult session. Choppy action. Narrow range (compared to recent sessions).

Definitely a session where you wish you just took a day off.

Of course, there's no way to know that till after the fact.

What is important though is accepting that such days are a normal part of the game. And in quickly recognising any potential for unfavourable conditions.

The sooner you can recognise potential danger, the sooner you can respond and adapt.

This doesn't always mean shutting down for the day. It may well be an option. But more often than not, it's just a warning to slow down a little. Step back and be patient. Wait for the easier opportunity perhaps at the edges of the structure. Don't jump into marginal opportunity just because you "want to" trade.

So that was the focus of today's entry into my Market Structure & Price Action (MSPA) Journal – What signs were present early in the session, which identified potentially unfavourable conditions?

<image: Daily Market Structure and Price Action Study>

This is one of my go-to, most reliable, signals for potentially dangerous conditions.

If the market sentiment was bullish or bearish then price would expand from the opening region. The fact that it can't, indicates either a lack of interest from both sides of the market, or at least roughly balanced commitment from both bulls and bears. Either way, a sign of potential chop ahead.

This is NOT a signal for no trading. But rather one of caution.

Take it slow. You don't have to trade every move. Wait for something that is screaming out to be traded.

<image: Daily Market Structure and Price Action Study>

One structural feature I hate is the presence of two "levels" within close proximity. Sometimes price gets stuck between the two leading to nothing good, unless you like getting caught in a real chop-fest.

And that's where we found ourselves today.

Opening range at the top. And the overnight low at the bottom.

If market sentiment were indeed bearish then this break should have held. It didn't.

Caution is required.

Again, this is not a "no-trade" signal. Just a warning that we're not likely to have an easy trending environment. Be patient and wait for the right opportunity. Maybe something like getting LONG on the retest of the overnight low!

<image: Daily Market Structure and Price Action Study>

Volatility contraction leads to volatility expansion.

Ok, not always.

But it's a good "rule of thumb" expectation.

So when we find ourselves stuck between the opening range and the overnight low, I was very interested to see the outcome of the break from this area of compression. If that could break the high of day, and hold the break, I'd be much more comfortable.

But no, it's not to be.

Immediate failure. And straight back into the chop zone.

This is a day for extreme caution. 

Lessons:

  • Price stuck at or within the opening range = CAUTION REQUIRED.
  • Price stuck between two levels in close proximity = CAUTION REQUIRED.
  • An inability for a break from volatility contraction to provide any meaningful expansion = CAUTION REQUIRED.

 

Simple!

As mentioned earlier, this daily activity rarely takes more than about 5 minutes. But I feel that it's been an incredibly important part of my own learning and development.

Often there is nothing earth-shattering, although it can happen. Usually after having done this for so long I find it's just reinforcing prior observations and seeing new instances of prior patterns.

All acting to build upon the mental models which I will use in the future to navigate the unfolding landscape.

If you haven't done so already, consider adopting the same habit. Every day – find something interesting in the markets to add to your Market Structure & Price Action (MSPA) Journal.

And as a side-note… consider doing the same with trades as well. Every day – find one A+ trade opportunity, whether you took it or not. Study it. And add charts and notes to your Trades Journal.

Short-term minimal effort. Long-term massive gain!

Happy trading,

Lance Beggs

 


 

Traps Just Before RTH Open – 2

 

A few months ago we examined the concept of traps occurring in the price action just before, or immediately after, the RTH Open (RTH = Regular Trading Hours).

I'll place links to the prior articles at the bottom of this one, if you want to review them.

Today, let's look at another example of a breakout very late in the pre-session market, just before the RTH Open.

This is something which I absolutely LOVE to see. Because if that breakout fails, then it often sets up quite favourable conditions from the open. And so I'm keen to get a trade on as soon as I can.

No patience. No delays. It's game on!

Here's the general concept:

<image: Traps just before RTH Open>

<image: Traps just before RTH Open>

This concept can be applied in any market which offers pre-session trading leading into a clearly defined "regular" day session. Spot forex traders might apply it at the UK open, or the US open.

Today's example set up a break of the overnight high. That is, the same concept as the second image above.

Let's start by looking at a higher timeframe chart, to get some wider context.

<image: Traps just before RTH Open>

And the breakout on the Trading Timeframe chart:

<image: Traps just before RTH Open>

<image: Traps just before RTH Open>

<image: Traps just before RTH Open>

<image: Traps just before RTH Open>

<image: Traps just before RTH Open>

<image: Traps just before RTH Open> 

I've written a lot about displaying patience at the open. About waiting till the bias is clear and trading conditions are favourable.

But there are some situations where I don't display patience.

Where I'm keen to get a trade on as soon as I can.

No patience. No delays. It's game on!

One of these situations is when the market sets up a trap just before or just after the RTH Open.

Keep an eye out for similar opportunity in your own trading.

Happy trading,

Lance Beggs

 

Prior Articles:

Traps Just Before RTH Open – http://yourtradingcoach.com/trading-process-and-strategy/traps-just-before-rth-open/

Traps At The Open – http://yourtradingcoach.com/trading-process-and-strategy/traps-at-the-open/

Traps At The Open 2 – http://yourtradingcoach.com/trading-process-and-strategy/traps-at-the-open-2/

 


 

Targeting the Overnight High or Low – 2

 

Last week we discussed one of my current favourite plays for the first 30-60 minutes of the session – targeting the overnight high (ONH) or overnight low (ONL).

You can review last week's discussion here.

Just a few hours after sending out that email the market opened again. And the same concept played out once more. Let's check it out.

<image: Targeting the Overnight High or Overnight Low>

<image: Targeting the Overnight High or Overnight Low>

<image: Targeting the Overnight High or Overnight Low>

You don't have to manage your trades like this. It's just the way that makes most sense to me. If there is any threat of a trade moving into negative territory, I prefer to scratch it and reassess, rather than holding and hoping for it to recover.

Sometimes that works to my advantage. Other times it doesn't.

This method of trade management does require you to be completely comfortable with re-entering.

If you're not able to easily re-enter, you'll be better operating with a wider stop and a more passive set & forget style. On this particular day, your trade would have worked out fine.

Back to the trade…

<image: Targeting the Overnight High or Overnight Low>

<image: Targeting the Overnight High or Overnight Low>

As mentioned in the prior article, there is a very high probability that the overnight high or overnight low will be hit at some point during the session.

And a good probability that it will occur within the opening hour of the session.

I could give you stats for the last few months. But I'd rather you find them yourself. You'll learn more this way.

If it interests you, spend some time over the weekend to review the prior two to three months to get an idea of just how high these probabilities are.

And then monitor the concept in coming weeks in your own markets. Perhaps you'll also find the overnight high or overnight low provide nice targets for early trade opportunity.

Please realise though – this is NOT the setup. The concept we're discussing here is simply selection of a high probability target. Take whatever setups you normally take from the open. Manage risk as you normally would, because they won't all work. But when they do work, the fact that the target is backed by some really high probability stats, can make it quite easy to hold.

Sometimes they work really well:

<image: Targeting the Overnight High or Overnight Low>

But occasionally, not so well.

The very next day fails to reach both the ONH and ONL. If you held a trade for either of these targets, it would have fallen well short.

<image: Targeting the Overnight High or Overnight Low>

There are NEVER certainties. No matter how high the probability, some targets will fall on the losing side of the stats. So manage risk, as per normal. And expect a challenge. If it hits the target quickly, as it sometimes will, consider it a bonus.

Happy trading,

Lance Beggs