Tag Archives: Setup

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

 


 

Metagame Entry – After You’ve Made a Dumb Trade!

 

I often talk about identifying the areas where "other traders" are trading in really dumb places. Places where they've found themselves trapped in a really low odds trade. Or trapped out of a position they wished they were in.

Places of emotion – fear, anger, regret!

These areas of the chart often provide us with great trade opportunity.

But one thing I don't recall discussing is the obvious fact that sometimes we find ourselves taking these dumb trades.

We all do it!

The trapper… becomes trapped.

But that's fine. It's information. We read the market wrong. Now we've got feedback that helps correct our bias. And sometimes, if we've maintained a calm mindset, we might still find trade opportunity as price retests the area of our dumb trade.

Let's look at an example…

Metagame Entry - After You've Made a Dumb Trade!

Metagame Entry - After You've Made a Dumb Trade!

Metagame Entry - After You've Made a Dumb Trade!

Metagame Entry - After You've Made a Dumb Trade!

Metagame Entry - After You've Made a Dumb Trade!

Metagame Entry - After You've Made a Dumb Trade!

Metagame Entry - After You've Made a Dumb Trade!

Metagame Entry - After You've Made a Dumb Trade!

Metagame Entry - After You've Made a Dumb Trade!

Metagame Entry - After You've Made a Dumb Trade!

Metagame Entry - After You've Made a Dumb Trade!

Metagame Entry - After You've Made a Dumb Trade!

Too often we let a losing trade get to us. Especially when it's immediately clear that it's a dumb trade.

We can't allow any negativity to remain for long though.

It is IMPERATIVE that you have some kind of routine in place to briefly get away from the charts and clear your mind.

YTC Price Action Traders, refer to the FOCUS and REGROUP sections in Volume 4, Pages 49-50. Maybe consider printing out those two pages and sticking them on your wall.

Shake off that loss. It's small. It will be overcome by one good trade. Now focus. And prepare yourself for the next trade.

If the context suggests potential for a second chance entry, it could be coming up VERY SOON.

Happy trading,

Lance Beggs

 


 

Trade Review – Should He Have Exited?

 

I received a question from a reader who made an exceptional trade but was concerned that he should have exited the trade much earlier, scratching for a small loss and then possibly seeking re-entry.

I love this!

I would typically expect most traders to be ecstatic about a win.

But it's a sign of someone much more advanced along the journey, who is more concerned about developing good process than in just celebrating the win.

Here is the trade, along with their question. I've had to shrink the image a bit to fit here.

I'll discuss the question below so it's not essential to be able to read the text. But if you are interested, click on the image and it will open a full-size copy in your browser.

The trade... and question...

The Trading Timeframe is the 5 minute chart, shown in the small insert to the upper left. The main part of the image shows the 1 minute Lower Timeframe.

But let's take a look through my charts, starting with the 60 minute timeframe for some wider context and then stepping down through both the 5 and 1 minute charts.

Higher Timeframe

Trading Timeframe

Lower Timeframe

Awesome!

I love it. That is a very nice BPB trade.

But here's the question, courtesy of the trader who we'll just call M.I.

The question...

M.I. is correct in his understanding of my style of trading. Over the years I've developed a preference for active management of my positions, in particular around the entry point. My preference is to not just hold and HOPE. But rather to be taking off risk if I feel the position is threatened. And re-entering if the trade premise does remain intact.

It's always impossible to say exactly how I would have traded something live, when I wasn't actually there to experience the price action. Hindsight knowledge of the outcome DOES alter the way we believe we would have traded.

So taking this with a grain of salt, here is what I "believe" I would have done:

My entry and active management style

Here is the thing though – IT DOESN'T MATTER.

There is no right or wrong method of trade management.

Either way is fine – completely passive set and forget, or quite active like I prefer. Or in fact anything in-between.

What is important is finding and developing your own style and then using that consistently.

Sometimes passive management will have outperformed. Quite likely in this case, M.I.'s management method would have resulted in greater profits than mine. At other times though, active management will be far more profitable (such as here).

Find what fits your personality. And just be consistent.

Here is the IMPORTANT THING TO REMEMBER, regardless of which style you choose:

Know where the trade is invalid

We both have the same area at which we deem the trade invalid.

A passive style.

An active style.

Either way is fine. Find what best fits your personality and just be consistent. Active, passive, or any blend in-between.

Your style will likely develop over time, regardless of which you start with. Track your results. And work to improve.

Even better, if you can afford the time, track both methods and compare the results over time.

Most likely though, personality will play a greater part in the ultimate style, rather than which offers the greater profitability.

A little tip though, if you're unsure where to start. Look at the worst case for each scenario and see which offers the maximum regret. Then avoid that option.

Passive management – the worst case scenario is when the trade does fail and you could clearly see that it had lost it's edge, having tons of time to scratch the trade for a small profit or small loss, but instead hold the trade for a full-size loss just because someone told you "that's how you're meant to do it!".

Active management – the worst case scenario is when the trade idea works, but you've scratched the position for a small profit or small loss, and then can't find any way back in, watching the market move to your original targets without you.

Visualise placing a trade. And then work through both scenarios. Which feels the worst? Now, avoid that method and start with the other.

For me, I'm quite comfortable missing a trade. I'm happy to let it go. It wasn't mine to catch. And I'll just move on to the next.

But holding a position for a loss, when I could see it coming well ahead of time. That's just stupid (IMHO).

I choose active trade management.

But it's not the only way. And it's not necessarily the right option for you.

M.I., you chose a passive style of management for this trade. And it was a GREAT TRADE. Perhaps that is the style that suits your personality the most at this stage of your development? If so, don't worry about how I would have traded the position. Take notes on your trade. Keep your stats. And continue to monitor and grow over time, allowing your trade management style to naturally evolve over time.

That was a great trade. Well done. Keep it up.   🙂

Happy trading,

Lance Beggs

 


 

A BOF Trade with Many YTC Concepts

 

Let's look over a trade I particularly like, from earlier this week.

It's nothing special in terms of returns. But it took an otherwise dull session from breakeven into profits.

And it displays many of the concepts that we have discussed here in the newsletter over the last few years.

So I particularly like this one. And I thought it's a good one to share to reinforce some of these key lessons.

The trade is a Breakout Failure trade following price interaction with the Prior Day's High resistance.

Breakout Failure Review 

Let's see what I liked about this trade…

Breakout Failure Review

Breakout Failure Review

Breakout Failure Review

Breakout Failure Review

Breakout Failure Review

Breakout Failure Review 

Let's see the outcome…

Breakout Failure Review

Breakout Failure Review 

Happy trading,

Lance Beggs

 


 

The Other Trader (4)

 

Let's continue with the metagame concepts discussed in recent months.

Here – The Other Trader
Here – The Other Trader (2)
Here – The Other Trader (3)
Here – Metagame Trading

And of course based upon concepts from here: YTC Price Action Trader

Here is the basic idea…

If I can't feel someone on the other side of the market getting it really wrong, there is no trade.

Here's how we do it.

 

1

Identify a potential trap

 

Identify a potential trap

Identify a potential trap

Identify a potential trap

Identify a potential trap

Identify a potential trap

 

1

Feel the pain

 

Feel the pain

Feel the pain

Feel the pain

 

1

Spring the trap

 

Spring the trap

For those with the YTC Price Action Trader:

  • Setup – See Volume 3, Chapter 4, Pages 28 to 31
  • Entry trigger – See Volume 3, Chapter 4, Page 87, Figure 4.63 (third entry in the table)

 

If you're not achieving the results you wish to achieve, consider placing more thought towards who is on the other side of your trade.

It may be the paradigm shift you're seeking to take your trading to new levels.

Happy trading,

Lance Beggs

 


 

Using Pre-Session Data to Confirm Levels

 

The following text and image were shared recently through both the YTC facebook and twitter pages.

  • My first action on Monday mornings upon opening my charting platform…

 

My first action on Monday mornings upon opening my charting platform...

Actually, it's one of the first things I do every day.

This is the key part we're discussing today:

Using pre-session data to confirm levels

Let's stick with the same timeframe but move forward to the market open at 09:30am.

Using pre-session data to confirm levels

Sometimes analysis of pre-session data offers nothing at all to confirm the relevance of previous session levels.

Sometimes it will allow us to invalidate these levels, when we see price slice through them with absolutely no reaction at all.

And sometimes, like in this case, it helps to validate a level as being still "potentially" significant.

Friday's low will be on my mind as I commence trading today.

Let's see how the opening sequences played out on the trading timeframe.

Using pre-session data to confirm levels

Using pre-session data to confirm levels

(If you're not sure what I'm looking for, see here to find out how I trade!)

Using pre-session data to confirm levels

Using pre-session data to confirm levels

Sometimes analysis of pre-session data offers nothing at all to confirm the relevance of previous session levels.

Sometimes it will allow us to invalidate these levels, when we see price slice through them with absolutely no reaction at all.

And sometimes, like in this case, it helps to validate a level as being still "potentially" significant.

If you prefer to trade with RTH data (pit session data) in order to take advantage of opening gaps, that is absolutely fine.

But at least take a quick look at the ETH data (overnight). See where it has traded with respect to the prior day. Where did it find movement quite easy. And where did it find did it find support or resistance.

This might just provide important information that can help once the opening bell has rung and trading has commenced.

Happy trading,

Lance Beggs

 


 

Wait till the Reversal Trader is Trapped

 

I am quite a fan of Al Brooks' first book, "Reading Price Charts Bar by Bar", despite the fact that we trade very differently.

Out of close to 400 pages, there is the one idea which has stuck with me more than any other. From page 384:

"Countertrend setups in strong trends almost always fail and become great With Trend setups…"

The idea is simple.

In a strong trend you will find all manner of reasons to suspect that the trend is ready for reversal. And you'll find yourself easily tempted to enter counter-trend.

But more often than not, it's a trap.

When you feel this strong desire to trade counter-trend, do NOT trade. Be comforted by the fact that others will notice it as well. And that they'll enter.

Then watch their position, waiting patiently until they're trapped.

The failure of their counter-trend position will often provide a great entry for you, back in the with-trend direction.

Those who trade the YTC Price Action Trader methodology will be very familiar with this concept – timing our entry off the failure of "the other trader".

This concept came to mind on Tuesday, as I felt a strong desire to enter counter-trend against a strong bearish trend in NQ.

Let's look at the charts.

Don't fade a strong trend... wait for the trap and enter with-trend.

Don't fade a strong trend... wait for the trap and enter with-trend.

Don't fade a strong trend... wait for the trap and enter with-trend.

Don't fade a strong trend... wait for the trap and enter with-trend.

Don't fade a strong trend... wait for the trap and enter with-trend.

Don't fade a strong trend... wait for the trap and enter with-trend.

Don't fade a strong trend... wait for the trap and enter with-trend.

Don't fade a strong trend... wait for the trap and enter with-trend.

Don't fade a strong trend... wait for the trap and enter with-trend.

Don't fade a strong trend... wait for the trap and enter with-trend.

Actually, I'm not happy with the exit decisions. But that's something for me to explore in my trade review process.

In terms of setup and entry… I love this one.

"Countertrend setups in strong trends almost always fail and become great With Trend setups…"

Keep this in mind next time the price bars scream out for you to fade a strong trend.

Is it actually a trap?

And is better opportunity perhaps available if you stand aside and wait for the "other traders" to be caught?

Happy trading,

Lance Beggs

 


 

Open Drive – First Pullback

 

When the market drives in one direction straight from the open, I’m ALWAYS watching the first pullback for trade opportunity.

Open drive - first pullback

Open drive - first pullback

Open drive - first pullback

Open drive - first pullback

Open drive - first pullback

Open drive - first pullback

Open drive - first pullback

Open drive - first pullback

Open drive - first pullback

Open drive - first pullback

A strong open drive might only happen a couple of times a month.

But when it happens, I'm ALWAYS watching the first pullback for trade opportunity.

Happy trading,

Lance Beggs

 


 

Where Price Can’t Go

 

I'm always VERY interested in these places on the chart – the places where price can't go. The places where it tries… it pushes… but it just can't go there.

This is opportunity.

Let's start with the Higher Timeframe chart…

Where Price Can't Go...

Where Price Can't Go...

Where Price Can't Go...

Where Price Can't Go...

Where Price Can't Go...

Where Price Can't Go...

Where Price Can't Go...

Where Price Can't Go...

Where Price Can't Go...

Where Price Can't Go...

Let's switch now to the trading timeframe… 

Where Price Can't Go...

Where Price Can't Go...

Where Price Can't Go...

Where Price Can't Go...

Reference… this is a BOF Setup as described in YTC Price Action Trader Volume 3, page 28.

Happy trading,

Lance Beggs

 


 

The Other Trader (3)

 

In recent months we looked at a number of metagame examples – trading at places where the "the other trader" feels extreme stress or fear.

You'll find some of these articles, if you missed them, here, here and here.

Today, I thought we could look at another one. Because I just LOVE these setups.

You might recall this general concept from prior articles:

Trading based upon feeling the stress and fear of "the other trader"

Things don't always go according to plan though.

Trading based upon feeling the stress and fear of "the other trader"

If you missed the entry… no problems.

Let it go. It wasn't yours to catch.

There will be MANY other trade opportunities. Stay focused.

In fact… sometimes that next opportunity comes along VERY quickly.

Trading based upon feeling the stress and fear of "the other trader"

Trading based upon feeling the stress and fear of "the other trader"

Let's look at an example, a BOF setup on break of the high of day.

We'll start with the higher timeframe chart to get some context. And then move on to the trading timeframe and lower timeframe charts to discuss the trade opportunity.

Trading based upon feeling the stress and fear of "the other trader"

Trading based upon feeling the stress and fear of "the other trader"

(more…)