Tag Archives: Market Structure

First Pullback in a NEW Directional Trend

 

<image: First Pullback in a NEW Directional Trend>

<image: First Pullback in a NEW Directional Trend>

REFERENCE: Definition of a sideways trend – Vol 2, Ch 3, Pages 99-102

<image: First Pullback in a NEW Directional Trend>

<image: First Pullback in a NEW Directional Trend>

<image: First Pullback in a NEW Directional Trend>

<image: First Pullback in a NEW Directional Trend>

<image: First Pullback in a NEW Directional Trend>

<image: First Pullback in a NEW Directional Trend>

<image: First Pullback in a NEW Directional Trend>

<image: First Pullback in a NEW Directional Trend>

<image: First Pullback in a NEW Directional Trend>

Not all trade setups are equal.

You need to collect and review your stats to determine which setups provide your A+ MUST-NOT-MISS potential opportunity of the day.

For me, the first pullback in a NEW directional trend is one of these MUST-NOT-MISS setups.

No, they do not always profit. And sometimes they offer profits, but I mismanage the opportunity.

But when they do run and I perform well enough to catch them, the profits can more than make up for any other failed attempts. As always, we profit over a series of trades. Individual trades are irrelevant.

Check your own charts, in your own market and timeframes. Note any sideways trend environments. Find a breakout which occurs with some strength, which holds the break. And see if you can also find edge on the first pullback into this new directional trend.

Happy trading,

Lance Beggs

 


 

One of the Best Habits I Acquired along my Trading Journey

 

I posted the following image on social media on Tuesday, showing a nice example of a false breakout and reversal from a period of volatility contraction.

<image: One of the best habits I acquired along my trading journey>

The important point though… and the one which offers the most value to you… is not the image itself but rather the text that was posted alongside the image.

  • One of the best habits I acquired in my trading journey – EVERY DAY I find at least one price sequence which I find interesting and STUDY IT. Consider whether or not you might also benefit from actively developing this habit.

I received the following questions on Twitter:

<image: One of the best habits I acquired along my trading journey>

(1) What does my price sequence study involve?

The study relates to observations in price action or market structure. It does not typically involve study of the trades taken during the session. I have a separate part of my review process for trades.

Sometimes it is structured and will focus on a particular topic for a week or so. Maybe I will decide to study transitions from one market environment to another. Or to study price behaviour on the break from a higher timeframe trap. Or maybe… well you get the point. If there is a particular topic of interest to me then I might focus solely on that topic for a period of time.

See here if you want a list of possible "categories" for your Market Structure & Price Action study – http://yourtradingcoach.com/trading-business/market-structure-and-price-action-journal-categories/

But other times, when there is no particular topic of interest, the study will be unstructured and based on any observation which I find interesting. Often this will be a sequence which I didn't read well. Perhaps something I didn't see coming. Or something I didn't react to quick enough.

For example, the shift in sentiment occurring from point B to C in the volatility contraction above, is one that I was too slow to recognise and react to. So it became the focus of my study that day.

(2) How much time do I devote to this study?

Typically no more than 10 minutes. The topic will become obvious during the session. All it typically takes is a quick review, along with identification and recording of lessons learnt.

(3) What are some questions I ask?

That is largely going to depend upon the topic you're studying. And it should be self-evident. But it should relates to (a) how did price behave, (b) how could I have recognised this more quickly, and (c) how should I have responded to this information?

Let's look at a few more examples from Tuesday and Wednesday this week:

Tuesday:

Tuesday offered a brilliant example of the saying, "The market doesn't repeat, it rhymes".

Note the similarity – volatility contraction, expansion, and then opportunity available in the opposite direction as the expansion leg fails.

<image: One of the best habits I acquired along my trading journey>

Let me be perfectly clear – I am NOT a pattern trader. But volatility contraction and subsequent expansion is one pattern that I do often see. And one that I do often take advantage of.

Typically it's through seeking YTC PAT PB opportunity, on the first pullback after the breakout, expecting the expansion leg to continue to drive with momentum.

For whatever reason, I've been slow to react to a failure of the expansion, for two days in a row now. I missed it on Monday. I missed it on Tuesday. Through reinforcing this lesson, I aim to ensure I will NOT miss it again.

Wednesday:

Thankfully, I'm not going to bore you with another example of a false breakout from volatility contraction.

Let's start with a higher timeframe chart:

<image: One of the best habits I acquired along my trading journey>

<image: One of the best habits I acquired along my trading journey>

<image: One of the best habits I acquired along my trading journey>

<image: One of the best habits I acquired along my trading journey>

<image: One of the best habits I acquired along my trading journey>

Ok, so nothing surprising so far. The review basically confirmed my real-time thinking.

But then the review also picked up something that I "should have" been aware of intra-session, but did not consider at all.

Let's look at the overnight data leading into the session open.

<image: One of the best habits I acquired along my trading journey>

Nothing changes here in terms of decision making. The failure of the second break is still the critical point at which I should accept that my "feeling" of a bearish market bias was wrong.

But this additional information does add weight to the earlier analysis. And it's information I should have been aware of intra-session.

If the market sentiment was indeed bearish, then one of these breaks of a key overnight level, SHOULD have held. The fact that they couldn't hold confirms that my "feeling" about market sentiment is likely wrong. Watch for a break to the upside and further dominance by the bulls.

I do take note of key overnight levels pre-session. It's clear though, with hindsight, that this information did not make it into the session (at least not in the forefront of my mind).

Lesson: Greater emphasis is required on pre-session levels.

Bonus Entry:

I'm not going to do another. But I just can't resist sharing this.

From Thursday, on the 3 minute timeframe:

<image: One of the best habits I acquired along my trading journey>

This is one of the key benefits of a Market Structure & Price Action Journal. Over time you start to see familiar patterns of price behaviour. All of which builds skill in real-time assessment of market bias and real-time recognition of opportunity.

Now it's your turn:

I received this request on Facebook, following the original social media post: "Please post something on Indian markets like NIFTY or BANKNIFTY. Thanks".

My response: "I don't trade the Nifty so can't help you with that market. But I highly recommend you commence creation of your own Market Structure & Price Action Journal. You'll achieve far greater value from that daily practice, than from anything I could provide."

Re-emphasising the point from the original social media post:

  • One of the best habits I acquired in my trading journey – EVERY DAY I find at least one price sequence which I find interesting and STUDY IT. Consider whether or not you might also benefit from actively developing this habit.

Regardless of your market, your timeframe, or your strategy. Give it a try and see if you get the same benefit that I received.

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

 


 

First Pullback after Significant Structural Change

 

I don't often trade after midday Eastern Time. It's the middle of the night here and I'd much prefer to get some sleep.

But from time to time I'm alert and awake and there is no chance I'd be able to sleep even if I tried.

So I'll complete some of my post-session review and then go on with other work, while keeping an eye on the markets.

The default intent is to NOT trade… unless it's screaming out to be traded.

What does that look like?

Here's one example. A trade that is so damn obvious I would have been kicking myself if I missed it.

It's a YTC PB trade. But what is important is not so much the trade itself, but WHERE it happens in the "bigger picture" market structure.

<image: First Pullback after Significant Structural Change>

<image: First Pullback after Significant Structural Change>

<image: First Pullback after Significant Structural Change>

<image: First Pullback after Significant Structural Change>

Dropping down to the Trading Timeframe to see the outcome:

<image: First Pullback after Significant Structural Change>

<image: First Pullback after Significant Structural Change>

1. Structure!!!

2. Break of structure.

3. First pullback against the break of structure.

It's no Holy Grail. Sometimes there will be losses. And sometimes you'll miss the trade.

But it's opportunity I do NOT want to miss.

Happy trading, 

Lance Beggs

 


 

Trading the Price Spike High or Low

 

Let's start with a little disclaimer – I didn't trade this price sequence. I took a break on Friday 18th of January in an effort to manage my fatigue levels. But this does not mean that I don't review the session. The next day I scheduled some time to look over the charts in a number of markets in order to (a) see how I would have traded them, and (b) complete an entry in my Market Structure & Price Action Journal.

Yes… just because you skip a session it doesn't mean you get to skip the study!

One of the very first things to jump out of the screens at me, upon opening the 1-minute Emini-Dow futures chart, was an awesome price spike at 10:19am. This became the focus of some extra study, for my journal. And I thought I should discuss it with you here today as well.

I love price spikes – a sudden and dramatic expansion in price range and volume. Because they often create a shift in the market structure. And they allow you to immediately identify two potentially great trade locations.

Let's have a look at the charts.

<image: Trading the Price Spike High or Low>

<image: Trading the Price Spike High or Low>

<image: Trading the Price Spike High or Low>

<image: Trading the Price Spike High or Low>

<image: Trading the Price Spike High or Low>

<image: Trading the Price Spike High or Low>

<image: Trading the Price Spike High or Low>

<image: Trading the Price Spike High or Low>

<image: Trading the Price Spike High or Low>

<image: Trading the Price Spike High or Low>

<image: Trading the Price Spike High or Low>

<image: Trading the Price Spike High or Low>

<image: Trading the Price Spike High or Low>

<image: Trading the Price Spike High or Low>

<image: Trading the Price Spike High or Low>

Happy trading,

Lance Beggs

 


 

Trading the Edges of a Sideways Market

 

When the market is stuck in a sideways trading range, the primary place to look for opportunity is at the upper and lower edges.

<image: Trading the edges of a Sideways Market>

<image: Trading the edges of a Sideways Market>

<image: Trading the edges of a Sideways Market>

<image: Trading the edges of a Sideways Market>

<image: Trading the edges of a Sideways Market>

<image: Trading the edges of a Sideways Market>

<image: Trading the edges of a Sideways Market>

<image: Trading the edges of a Sideways Market>

When the market is stuck in a sideways trading range, the primary place to look for opportunity is at the upper and lower edges.

Important References:

Sideways Trend definition: Volume 2, Chapter 3, Pages 99-102

3rd & 4th Principles of Future Trend Direction: Volume 2, Chapter 3, Pages 145, 149, 150

BOF Setup: Volume 3, Chapter 4, Pages 28-31

LTF Pattern entry: Volume 3, Chapter 4, Pages 86-93

Happy trading,

Lance Beggs

 


 

Find Your A+ Trades

 

Let's continue this recent theme…

  • Focus on the areas of the market structure that jump out at you. The sequences that are so obvious, so easy, that you'd be kicking yourself if you missed the trade.
  • Identify them. Study them. Learn from them.
  • And then trade ONLY them… until you've got a proven edge.

 

These are potentially your A+ Trades. The ones you will aim to master.

In last weeks article, I shared what I consider to be one of my A+ trades – http://yourtradingcoach.com/trading-process-and-strategy/focus-on-catching-these-trades-first/

This was followed up with a social media post on Tuesday, comparing the trade sequence from that article with another from a previous article.

Note the similarity…

<image: Your favourite trades should all look the same>

The key point, repeated for emphasis:

These trades come easy to me. The ones that come easy to you might differ from this. Your job is to find YOUR OWN A+ opportunity and get to know it in detail. There are more trades coming soon. You need to be ready.

Do you want another one?

<image: Your favourite trades should all look the same>

<image: Your favourite trades should all look the same>

<image: Your favourite trades should all look the same>

Note again how similar it looks in structure to the prior two trades. Your favourite trades will all share similar qualities.

And this first pullback after a change in structure IS one of my favourites.

It might not be one of your favourites. And that's fine. The idea is not that you should start trading these setups.

You need to find your own.

  • Focus on the areas of the market structure that jump out at you. The sequences that are so obvious, so easy, that you'd be kicking yourself if you missed the trade.
  • Identify them. Study them. Learn from them.
  • And then trade ONLY them… until you've got a proven edge.

 

If you're struggling, then please note that this could be the key insight you need. 

I received some great feedback from a YTC reader, TK, in response to last weeks article. Here's an excerpt from his email:

Hi Lance,

I just wanted to thank you for the last Friday's article and let you know that I find articles on this theme of great value.

This is exactly what makes all the difference for me. The shift in mindset that made me focus on the moves that I find obvious and easy has greatly improved my trading. I regularly come back to the article "Focus on the obvious moves first" that was the first article that made me review my trading and think about whether I take mostly the obvious trades or not. This has helped me to get rid of many marginal trades.

Last week's article reinforced this practice for me. I think that this may be a key thing that developing traders need to focus on. If I may, I would suggest that you follow up with more articles like this, that would be great.

This is the article he referred to, as being originally responsible for the new and better understanding – http://yourtradingcoach.com/trading-process-and-strategy/focus-on-the-obvious-moves-first/

Be sure to read it.

Why?

Repeating the key point from the email: "This is exactly what makes all the difference for me. The shift in mindset that made me focus on the moves that I find obvious and easy has greatly improved my trading."

Could this be the difference you need as well?

Happy trading,

Lance Beggs

 


 

Focus on Catching These Trades First

 

There are some trade ideas you look at with hindsight which are quite complex and which may have been difficult to execute.

And there are others which jump out at you as being really simple.

If you're not yet profitable, then focus on the SIMPLE trade ideas.

Identify them. Study them. Learn from them. And then trade ONLY them… until you've got a proven edge.

What you see as simple may be different to what I see as simple. But essentially, we're talking about those you would call your A+ trades.

Look at any historical chart. They're the trades which your eyes go straight to. The ones that are immediately obvious. The ones that you'd be kicking yourself if you missed.

They're the simple ones.

They're the ones you need to focus on first.

For me… one of my favourites is the first pullback following a significant change in structure.

<image: Focus on catching these trades first>

This trade… and every trade like it… jumps out of the chart at me.

If there is a "first pullback after a change of structure" trade that I miss, I'm seriously not impressed with myself.

Here's what I was seeing as it unfolded:

<image: Focus on catching these trades first>

<image: Focus on catching these trades first>

<image: Focus on catching these trades first>

<image: Focus on catching these trades first>

<image: Focus on catching these trades first>

<image: Focus on catching these trades first>

<image: Focus on catching these trades first>

What trade opportunities jump out of the chart to you?

Identify them. Study them. Learn from them. And then trade ONLY them… until you've got a proven edge.

They're the simple ones.

They're the ones you need to focus on first.

Happy trading,

Lance Beggs

Additional Notes:

1. YTC Price Action Trader readers – From the YTC PAT perspective the trade is simply the first PB opportunity after a transition from uptrend to downtrend. The classification of uptrend is not immediately obvious due to the lack of structure this early in the session. In the absence of any pre-session data, I will usually make use of any opening gap and also an opening range bias. With both being bullish in this case, I'm happy to call an uptrend.

2. Note the similarity with the trade in this post. Even though it's pattern sets up on the higher timeframe chart, the concept is exactly the same. You'll start to notice that after a while – all your good trades share similar qualities.

3. The reference to 11:30 is of course my timezone (UTC+10). The time at the exchange is 09:30. This is the time that stocks commence trading on the Hong Kong Stock Exchange.

 


 

Simple Session Bias – 3 (Spot Forex)

 

I had no plans to continue this recent topic on use of the opening range to provide a quick and simple assessment of "bigger picture" session bias.

But I had a few traders ask how it should be applied to the forex markets.

You can see the two prior articles here, if you missed them. The first introduces the concept. The second expands upon the concept with some additional detail.

 

All examples from these prior articles were from the futures markets, with the opening range defined by the first 5 minute candle from the 0930 open.

So what do we do in the 24 hour spot forex markets?

Simple…

Set the opening range at whatever point is most relevant to the dataset you're trading.

Let's look at some examples. As we do so though, please note that I will not be marking up these charts beyond simple positioning of the opening range. This will allow YOU to analyse the charts to identify the directional bias (if any) plus assess the ease with which price moves from the opening range (if at all). And put some thoughts towards how tactics might vary to best suit these conditions. If you missed the prior articles, again I recommend you refer to them first, via the links above.

The plan again –

Set the opening range at whatever point is most relevant to the dataset you're trading.

Those trading daily or 4-hour charts might like to use a monthly opening range.

Simply take the first daily candle of the month and extend it forward.

<image: Simple Session Bias - Forex Monthly Opening Range>

Those trading 4-hour, 1-hour or 15-minute charts might like to use a weekly opening range.

Simply take the first 4-hour candle of the week and extend it forward.

<image: Simple Session Bias - Forex Weekly Opening Range>

Those trading 1-hour charts or lower might like to use a daily opening range.

Simply take the first hourly candle of the day and extend it forward. I've chosen to start the day from the Asian Session open. Adjust to whatever might be relevant to your trading.

<image: Simple Session Bias - Forex Daily Opening Range>

Lower timeframe traders (maybe 5M or 1M) might like to break the day down even further, into individual sessions.

Again, take the first 5-minute candle of the session and extend it forward.

<image: Simple Session Bias - Forex Asian Session Opening Range>

<image: Simple Session Bias - Forex European Session Opening Range>

<image: Simple Session Bias - Forex US Session Opening Range>

So yes… the opening range concept can be applied to 24 hour markets.

Set the opening range at whatever point is most relevant to the dataset you're trading.

Happy trading,

Lance Beggs

 

PS. You might also be interested in this old article from 2009 – Forex Opening Range Breakout Strategy

PPS: Intraday traders might also want to consider this idea shared in a couple of social media posts a few years ago:

<image: Displaying only EUR UK Session Data>

<image: Displaying only EUR UK Session Data>

 


 

Trade When You See Edge. Stand Aside When You Don’t!

 

A few weeks back we discussed a quick and simple method for identifying a "bigger picture" directional bias.

See here if you missed it and want to review the idea – Part 1, Part 2.

The second article generated quite a bit of good email conversation, with several traders now adding this to their current trading process.

One email included a brief question, which I feel it is important to discuss with all of you today.

  • "I always looked at the opening range as something that worked some times (when the market did move) and didn't work other times (when the market didn't move). So you taught me a great lesson here. It works all the time, because that failure of price to move from the opening range is the information we need to identify a lack of directional bias. What I would love to see though is how you traded one of these days that were neutral bias throughout the whole day. Like on the Tuesday for example, you said "My preference is to stand aside". Does that mean you didn't trade at all? Or at what point did you stop? Or if you did trade at any time, what was the reasoning at the time?"

 

Nice question!

Let's look back at the session on that Tuesday. This was the higher timeframe chart, with the opening range, as discussed in the prior article series.

<image: Trade when you see edge. Stand aside when you don't.>

Clearly a neutral bias throughout the vast majority of the session.

But yes, I DID make some trades.

Before we examine the trades, there are two key points I want to make.

Firstly, we need to remember that the image above is the HIGHER TIMEFRAME chart. Trading decisions and actions are based upon the Trading Timeframe chart, within the context of the structure provided by the Higher Timeframe chart.

And secondly, we need to remember that the session bias is something which gradually reveals itself over time.

<image: Trade when you see edge. Stand aside when you don't.>

<image: Trade when you see edge. Stand aside when you don't.>

<image: Trade when you see edge. Stand aside when you don't.>

<image: Trade when you see edge. Stand aside when you don't.>

<image: Trade when you see edge. Stand aside when you don't.>

<image: Trade when you see edge. Stand aside when you don't.>

Let's look at the Trading Timeframe Chart…

<image: Trade when you see edge. Stand aside when you don't.>

<image: Trade when you see edge. Stand aside when you don't.>

<image: Trade when you see edge. Stand aside when you don't.>

<image: Trade when you see edge. Stand aside when you don't.>

With hindsight there will ALWAYS be a ton of opportunity you can see.

By all means learn from it post-session if it's opportunity you want to catch in future.

But when you're operating LIVE at the hard right hand edge of the screen, it can help to remind yourself that you don't have to trade every price sequence.

When price is moving nicely and you feel in sync with the movement… when you see edge… only then do you trade.

All other times… when you don't see edge… shift that chair back so that you're out of reach of the mouse. Watch and wait for something better.

Or call it a day.

You don't have to trade every sequence. Trade when you see edge. Stand aside when you don't.

Happy trading,

Lance Beggs