Tag Archives: Price Action

Daily Market Structure & Price Action Study – 3

 

Week 3 of 4 while I'm away from home…

From the original post:

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.

As I'm away from home for the month of April, celebrating my 50th birthday, and unable to prepare any new articles for the YTC newsletter, I though I'd simply preload the email system and blog with a few articles which share some daily market structure and price action study.

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

Friday 16th March 2018:

One of my LEAST favourite types of market opening price action:

<image: Daily Market Structure and Price Action Study>

Notes:

  • A = Price drives higher from the open. It pauses (smaller range candle at the top). I'm watching the lower timeframe for potential opportunity to enter LONG for continuation higher.
  • B = Nope… the market drops lower.
  • C = Price drives lower. Again, I'm watching the lower timeframe for early signs of potential opportunity to enter SHORT for continuation lower.
  • D = Nope… the market pushes higher.
  • At this point, we have the start of a broadening formation. Certainly one of my least favourite environments from a market open.
  • At this point, I need to step back from the chart a little to avoid any impulsive action. It could well continue for another few legs. I am NOT ALLOWED to act unless I see some form of partial decline or partial rise.

 

<image: Daily Market Structure and Price Action Study>

<image: Daily Market Structure and Price Action Study>

Notes:

  • E = Price pushes higher. I'm not interested.
  • F = Price pulls back and stalls. One candle. Two candles. It's finding support. This is a potential partial decline. Now I'm interested.
  • G = Take the PB trade opportunity for continuation. Manage aggressively. It needs to break to new extremes, or you have to get OUT OF THERE.

 

Lessons:

  • A broadening formation is a sequence I have struggled with in the past.
  • I recognise a potential broadening formation through rejection one way and then again the other way.
  • The best way I have found to manage this situation is to stand aside until recognising either a partial decline or partial rise.

 

Monday 19th March 2018:

One of my favourite technical analysis concepts – volatility contraction leads to volatility expansion.

On ALL timeframes.

Let's look at a higher timeframe (60 minute chart) example.

<image: Daily Market Structure and Price Action Study>

Notes:

  • H = Multiple-day volatility contraction
  • I = Gap open (above the prior days high and clearly beyond the boundary of the volatility contraction pattern
  • And again…
  • J = Multiple-day volatility contraction
  • K = Gap open (below the prior days low and clearly beyond the boundary of the volatility contraction pattern
  • In both cases the gap open led to a strong trend for several hours.

 

Lessons:

  • Higher timeframe volatility contraction can lead to highly directional trading sessions, when the open gaps beyond the pattern boundary.
  • Watch the TTF opening range for confirmation of potential continuation.
  • On a confirmed break of the opening range, anticipate a trend day UNTIL PROVEN OTHERWISE.

 

Happy trading,

Lance Beggs

 


 

Daily Market Structure & Price Action Study – 2

 

Week 2 of 4 while I'm away from home…

From the original post:

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.

As I'm away from home for the month of April, celebrating my 50th birthday, and unable to prepare any new articles for the YTC newsletter, I though I'd simply preload the email system and blog with a few articles which share some daily market structure and price action study.

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

Wednesday 14th March 2018:

When obvious expectations fail:

<image: Daily Market Structure and Price Action Study>

Notes:

  • A ridiculously fast and long bearish price swing (A). Price just collapsed.
  • Note also the massive increase in volume (B), proving eventually to be the highest volume of the day.
  • Price then stalls for half an hour (C). Whatever caused the momentum drop is clearly no longer driving sentiment.
  • Price breaks the low at D. Surely expectations are for continuation lower? Well, that's what many will expect. But those familiar with my writing will know that, while I'm ready for that potential, I'm more excited by the potential for the break to fail. Obvious expectations OFTEN fail. And that failure can provide nice opportunity in the opposite direction.
  • Area D offers some beautiful price action to trigger BOF entry LONG. Lower tail rejection. Stall with an inside bar. A tiny break of the low of the inside bar. Then compression against the level and eventual break higher.
  • Step through the candles following the break lower at D and place yourself in the mindset of anyone who might have entered SHORT on the break down. Feel their emotion as price stalls. And stalls. And stalls. This is how you play the metagame – playing against the other traders who find themselves stuck in the market and subject to extremes of emotion.

 

Lessons:

  • Whenever you find any price occurrence which suggests OBVIOUS expectations (especially in accordance with standard technical analysis), pause and ask yourself the following question: "What if it doesn't?"
  • Obvious expectations CAN and DO fail. This failure can provide good trade opportunity and good trade conditions in the opposite direction.

 

Thursday 15th March 2018:

Patterns repeat…

Looking at a higher timeframe (5 minute chart) to get a wider perspective:

<image: Daily Market Structure and Price Action Study>

Notes:

  • F = Strong bullish drive from 11:00 to 11:30
  • G = The strong bullish drive is unable to continue, settling into a tight sideways congestion.
  • H = Strong drive down.
  • I = Opportunity available on a retest of the tight sideways congestion.
  • And again…
  • J = Strong bearish drive from 13:45 to 14:05
  • K = The strong bearish drive is unable to continue, settling into a tight sideways congestion.
  • L = Strong drive up.
  • M = Opportunity available on a retest of the tight sideways congestion.

 

Lessons:

  • Watch for a potential top or bottom when a very strong bullish or bearish drive suddenly stops and fails to continue.
  • If a top or bottom pattern forms as a tight sideways congestion, with a subsequent strong break from that congestion, look for trade opportunity on any retest.

 

Happy trading,

Lance Beggs

 


 

Daily Market Structure & Price Action Study – 1

 

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.

As I'm away from home for the month of April, celebrating my 50th birthday, and unable to prepare any new articles for the YTC newsletter, I though I'd simply preload the email system and blog with a few articles which share some daily market structure and price action study.

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

Monday 12th March 2018

Studying a high-of-day breakout failure:

<image: Daily Market Structure and Price Action Study>

Notes:

  • Price breaks the high of day (A) right into an area of overnight-high resistance (yellow shading B).
  • Regardless of whether you consider this setup a BOF of A or a TST of B, it's a good reminder that reversals are not always a single-touch V-turn.
  • Entry at C would at best be scratched for breakeven or very small profit. Re-entry would be required at D.
  • Further potential opportunity is available through the engulfing candle (E) or the retest of the breakdown at F.

 

Lesson:

  • If you miss a trade setup, remain patient. There is often (but not always) another chance to enter.

 

Tuesday 13th March 2018

Studying opportunity available after a period of volatility contraction:

<image: Daily Market Structure and Price Action Study>

Notes:

  • Context = down-trending market (G)
  • Price finds some support around 11:30am and settles into a period of sideways contraction (H).
  • The contraction itself offers no real clues in terms of strength or weakness of either side. It can't go up. It can't go down. Wait. Be patient.
  • Seek opportunity SHORT in the yellow shaded region (I), once price has broken the volatility contraction pattern. While there is potential for a trap, all effort should be made to trade these. The risk is often minimal, especially if the breakout occurs very close to the apex of the triangle. And the potential reward is often multiple-R.
  • A trap and reversal to rally through the upper boundary of H could be considered for entry LONG, should that occur.

 

Lesson:

  • Volatility contraction leads to expansion. Always seek opportunity on a break from the area of contraction.

 

Tuesday 13th March 2018

A bonus extra one for today – a place where my expectations were wrong!

Increasing the timeframe up to the 15 minute chart…

<image: Daily Market Structure and Price Action Study>

Notes:

  • The 13th March opened above the prior days high and moved through the full prior day's range to break the low at J.
  • My expectations following an engulfing of a prior day's range are for price continuation lower.
  • Instead, the breakout proved false and price rallied back within the prior day's range, providing very smooth and easy-to-read bullish price movement.

 

Lessons:

  • The market cares little for my expectations. It goes where orderflow tells it to go.
  • As always, some of the best signals come from failed expectations. If I'm stopped on any breakout pullback entry SHORT, get over it. There is potentially now even better opportunity for a breakout failure entry LONG. Find it and take it.

 

More to follow next week!

Happy trading,

Lance Beggs

 


 

Inside Bars at the End of a Price Swing

 

By far the majority of my trading decisions are based upon TTF setup areas and LTF pattern-based execution (or scalper-channel execution).

Very rarely do I enter based upon the TTF price action alone, without any real reference to the lower timeframe chart.

When I do though, it's almost always due to the presence of a narrow-range Inside Bar.

<image: Inside Bars>

The concept is simple – volatility contraction leads to volatility expansion. And yes, an inside bar is an example of volatility contraction. It's simply occurring over a very short time scale.

Look to the context of the market and decide – avoid it, take a breakout long, breakout short, or bracket it for either direction.

You can't just trade them all. If they appear in the middle of any extended sideways chop, then just stand aside.

And you've always got to watch for a fake-out, where they break one direction and then immediately turn to move out the other side.

Where I like them best is in a smooth-flowing market, at the end of a price swing. They can often provide a simple trigger to enter into the next price swing.

And more importantly – good Reward:Risk potential.

Let's look at a couple of examples…

<image: Inside Bars>

The market is flowing nicely.

YTC PAT traders – note the weakening trend via reducing projection just after 10:00 (two occurrences both with nice lower-tail rejection). Note also the strength of the price swing off the lows.

For these reasons, the Second Principle applies and I'm not interested in SHORT here. I'll wait for a complex correction.

Normally, this wouldn't imply entry LONG. However, the inside bar has tempted me. Given it's nature (volatility contraction leads to volatility expansion) any push higher will not only provide the second swing that is needed for my complex pullback, but also potentially break the prior swing high (and the trend definition as well). It could get quite a nice pop higher.

From a setup name perspective, it's pretty far from being a textbook perfect example. But it is a very shallow (single bar) pullback LONG pre-empting a change of trend. Yeah, not something we would take every day. But in a smooth flowing market, with strength off the lows and expectation for a second leg higher, with potential to break the trend change point, let's give it a go.

<image: Inside Bars>

Moving on…

<image: Inside Bars>

<image: Inside Bars>

<image: Inside Bars>

<image: Inside Bars>

As always, context is essential.

And the market "should" be flowing nicely.

Given these conditions, if you get a TTF narrow-range Inside Bar in the right area, consider whether any short-term volatility expansion might offer trade potential.

Happy trading,

Lance Beggs

 


 

Structure within Structure

 

The following image was sent out via social media on the 14th of February.

And shared again in last week's newsletter (23rd of February).

<image: Emotion can be a great driver of the market>

In response to these postings, I received the following question via email:

  • "Wondering about today's FB post about emotion driving the market. In the chart example you have given, is there any entry for YTC traders at all?"

 

Great question!

And very applicable, not just to this example, but to ANY TIME when a news reaction completely disrupts the normal price structure.

The quick answer is yes, there are YTC trades here.

Firstly, let's note that this was a 5 minute chart, in order to fit all the data on one picture. Those trading lower timeframes will have additional structure to work with.

As I trade the 1 minute timeframe, I'm going to use that timeframe for all further charts. However, the same concept applies no matter what timeframe you use.

Here's the structure at the time of RTH open (09:30am ET).

<image: Structure within Structure>

<image: Structure within Structure>

<image: Structure within Structure>

<image: Structure within Structure>

<image: Structure within Structure>

<image: Structure within Structure>

<image: Structure within Structure>

<image: Structure within Structure>

Happy trading,

Lance Beggs

References:

(a) Sideways Trend Definition – Page 101 (and Fig 3.44) of Chapter 3 of the YTC Price Action Trader.

(b) Uptrend Definition – Page 92 (and Fig. 3.34) of Chapter 3 of the YTC Price Action Trader.

 


 

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

 


 

Focus on the Obvious Moves First

 

A reader recently sent me a question which I think we can all learn from.

Let's start with the higher timeframe first to get a bit of context. It's the YM (emini Dow) on the 24th of January 2018, if you wish to look at your own charts.

<image: Focus on the Obvious Moves First>

And now let's examine the 1 minute Trading Timeframe where I'll explain the question:

<image: Focus on the Obvious Moves First>

Great question!

But one I didn't properly answer.

The reason is that they are in early stages of their development and not yet capturing the OBVIOUS and SIMPLE moves.

There is a common error I see in price action traders in their early stages of development.

They often have a belief that they should AT ALL TIMES know what is happening in the market.

And they often have a belief that they should be able to capture EVERY MOVE in the market.

Neither of these is true.

You do NOT have to know what is happening in the market at all times.

And you absolutely do NOT have to be able to capture every move in the markets.

By all means… learn from every sequences that offers learning potential. This is a never-ending process of skill development.

But almost every session contains price moves that, when viewed with the benefit of hindsight, are OBVIOUS and SIMPLE to see.

Priority ONE in developing is learning to see and capture these obvious and simple moves first. Get profitable on them. And then later, if you wish to target the more complex moves, go for it. But work on the simpler opportunity first.

If you need to ask someone how a move could have been caught, then it's not an obvious and simple one. Focus on those which jump out of the chart and scream at you, "Why didn't you see me? Why didn't you capture me?"

The reader asked how they could have identified the shorting opportunity from point (E) in the above image. I responded with, "Looking at the whole chart, there is one absolutely OBVIOUS short. Can you identify that for me please?"

They correctly identified the following area:

<image: Focus on the Obvious Moves First>

Exactly right!

Nice work.

Simple and easy.

This is where they should have been focusing, aiming to discover why they did NOT capture this short.

You don't have to foresee the initiation of EVERY move. Especially those which break some form of price structure. Often in these cases the simpler option is to seek entry on the first pullback.

Here are some of the key points from the remainder of my response, in image form:

<image: Focus on the Obvious Moves First>

<image: Focus on the Obvious Moves First> 

<image: Focus on the Obvious Moves First>

<image: Focus on the Obvious Moves First>

<image: Focus on the Obvious Moves First>

Repeating:

You do NOT have to know what is happening in the market at all times.

And you absolutely do NOT have to be able to capture every move in the markets.

Improve to the point where you are capturing as much of the obvious and simple stuff as possible. Only then, worry about those moves which are more complex and difficult to see.

Personal opinion only, of course!  🙂

Best of luck,

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

 


 

Watch Post-Breakout Behaviour – 3

 

This is what I like to see in a breakout…

<image: Watch Post-Breakout Behaviour>

<image: Watch Post-Breakout Behaviour> 

This is a prime target for a breakout failure.

But I don't ever just jump in and fade the break.

There is never any certainty in this game. It may well rally.

Instead, I watch post-breakout behaviour and CONFIRM that there are no signs of strength.

<image: Watch Post-Breakout Behaviour> 

<image: Watch Post-Breakout Behaviour>

<image: Watch Post-Breakout Behaviour>

<image: Watch Post-Breakout Behaviour>

<image: Watch Post-Breakout Behaviour> 

Don't ever just jump in and fade the break.

There is never any certainty in this game. It may well rally.

Instead, watch post-breakout behaviour and CONFIRM that there are no signs of strength.

Happy trading,

Lance Beggs

 


 

Watch Post-Breakout Behaviour – 2

 

This is what I like to see in a breakout…

<image: Watch Post-Breakout Behaviour>

<image: Watch Post-Breakout Behaviour> 

This is a prime target for a breakout failure.

But I don't ever just jump in and fade the break.

There is never any certainty in this game. It may well rally.

Instead, I watch post-breakout behaviour and CONFIRM that there are no signs of strength.

<image: Watch Post-Breakout Behaviour> 

<image: Watch Post-Breakout Behaviour>

<image: Watch Post-Breakout Behaviour>

<image: Watch Post-Breakout Behaviour>

<image: Watch Post-Breakout Behaviour> 

Don't ever just jump in and fade the break.

There is never any certainty in this game. It may well rally.

Instead, watch post-breakout behaviour and CONFIRM that there are no signs of strength.

Happy trading, 

Lance Beggs