Tag Archives: Targets

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

 


 

Targeting the Overnight High or Low

 

I've become rather fond of targeting either the overnight high (ONH) or overnight low (ONL) during early session trading.

If you're new to this idea, schedule some time to look back at the last few weeks of charts and take note of how many times they hit. For the ten sessions leading up to today's trading, nine sessions have hit either the ONH or ONL. Six of these occurring in the opening 30 minutes of the trading session. Seven within the opening hour.

So not only can we use the ONH/ONL as levels to trade off. But they also offer a price target for PB/CPB trade opportunity early in the session.

Of course, some happen too quickly to offer any opportunity. But otherwise, if the bias is clear and a valid setup is in place with sufficient room to the level, take the trade.

Let's start with a 30 minute chart to get some "bigger picture" context.

<image: Targeting the Overnight High or Low>

Dropping to the 1 minute trading timeframe:

<image: Targeting the Overnight High or Low>

<image: Targeting the Overnight High or Low>

<image: Targeting the Overnight High or Low>

<image: Targeting the Overnight High or Low>

<image: Targeting the Overnight High or Low>

Before you even consider looking for a trade entry, you need a target. You should have some sense of WHERE the market is going.

The ONH and ONL are two levels which I like to use as a price target in the opening 30-60 minutes of a session.

Have a look at recent sessions in your preferred markets. How many times has the market hit the ONH or ONL? How soon within the session?

Perhaps you'll also find they act as good initial price targets for early session trades.

Happy trading,

Lance Beggs

 


 

Applying a Degree of Confidence to Price Targets

 

I don't care how good your analysis is. There are NEVER any certainties that a target will be hit.

So let's look at a little technique which can help your decision making during both the trade planning and trade management phases.

This article idea was prompted by some great email Q&A I received recently.

Let's start with the email question and response. I'll then expand upon part of my reply, as I think it's an important topic that deserves further discussion.

EMAIL IMAGES:

The email included a 30-minute Higher Timeframe chart. It's not reproduced here. It's sufficient to know that the higher timeframe is in an uptrend.

The following is the 3-minute Trading Timeframe chart showing the prior day in the left half and the current day to the right.

Click on the image if you want to open a larger copy in your browser… or just skip down lower to where I've zoomed in to the current session.

<image: Email Trade Image>

Let's zoom in now to show just the current session:

<image: Email Trade Image>

The question is quite clear from the text on the image, but just to be sure I'll include the email text as well:

EMAIL TEXT:

As per chart on 17th I was long on the days range low also the price was above the previous day close. So decided to go long on range low (865 with sl 862) as the major trend in 30min was in up trend. So I was right in my analysis however and kept my position open even though price hit the range high of the day with the expectation of reaching the target of 874. However it didn't went as per the expected and my SL got hit and post my SL hit , price went till 875 and hit achieved my TGT. Sir if I m wrong and my SL get hit I can understand that, however if I m right and my SL space is right and my Sl get hit and post that TGT is achieved . How to handle these kind of situation?

SO HERE'S THE SITUATION:

<image: Email Trade Expectation and Outcome>

I must say… I love the trade entry. From a YTC perspective it's aBOF of the low of day support, coinciding with the prior day's high resistance, in the direction of a longer-term uptrend.

Very nice trade idea!

The following was my response:

EMAIL RESPONSE:

You ask, "How to handle this kind of situation?"

There is no "situation" here. What has happened is completely normal in the markets. The nature of price is that it often involves tests, retests, probes, spikes and all manner of action that traps people and stops them out before going on to the target. This is completely common.

How I would handle it (accepting that this is hindsight analysis and I didn't actually trade this market):

(a) The market on this trading timeframe is ranging. You entered beautifully. But I would have taken at least partial profits at the range high. It's the nature of ranging markets that they will continue to range, until orderflow triggers the breakout. There are no certainties in the market. So while you identified a good target much higher than the upper range boundary, surely you MUST have in mind the potential for the range resistance to hold. In that case, take part of the position off.

(b) And then being stopped out on the remainder, why did you not get back in? There's a beautiful re-entry just after 14:00.

Look back through my site. There are numerous articles along the theme of sometimes trades take multiple attempts. Here's one of the recent ones – http://yourtradingcoach.com/trader/how-i-think-on-trade-exit/

Sometimes a trade takes two attempts!

LET'S EXPAND UPON ONE KEY POINT

This is the point of today's article.

As mentioned earlier… I don't care how good your analysis is. There are NEVER any certainties that a target will be hit.

So here's a little tip which can improve your decision making regarding targets. After selecting your target, apply a degree of confidence.

For the example above, instead of saying "the price target is 874", the trader might have said "the price target is 874, with a 70% degree of confidence".

Or whatever other percentage they thought was appropriate.

The thing is – it's NEVER 100%.

In fact, I'd go as far as to say you should never select more than maybe 80%.

How does this benefit you?

It forces your mind to accept the possibility that the target may not be hit. If we selected the target with a 70% degree of confidence, then this means there is a 30% chance it won't be hit. So in planning out the trade we might consider alternate IF-THEN scenarios involving possible exits at the range highs, should they fail to break.

Give it a try. See if this helps improve both your trade planning and your subsequent trade management decisions.

And for more advanced application… continue to update that degree of confidence as more data unfolds in real-time.

Good trading,

Lance Beggs