Tag Archives: Trade Management

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

 


 

If you find yourself out of your trade, the reality is that you won’t always find a way back in!

 

Hindsight analysis is always suspect. Our normal human biases have us believing that we would have made the optimal trade decisions. After all, they always look so simple with the benefit of hindsight.

So I'm always hesitant to provide my thoughts on someone else's trade review.

But it's the Christmas / New Year week and I'm feeling too lazy to think up a new article, so sharing some email Q&A solves that problem for me.

And it provides a good lesson – if you find yourself out of a trade, for whatever reason, the reality is that you won't always find a way back in.

If you've scratched a trade to reassess and decide that there is still potential, unless you're just willing to enter at market then and there, or place a limit order at some point closer to the stop area, you might not find a way to re-enter. Pattern triggers may not eventuate.

And that's fine. Review the decision that led to the initial scratching. And move on.

I scratch trades a lot. If I doubt a trade, I'll reduce risk through either a partial or full exit, and then reassess. If I'm happy with the premise, I'll look to get back in. But sometimes… there is no good way to get back in.

In developing as a trader and discovering whether you better fit the passive set and forget trade management style, or a more active style such as I use, this is a factor that you need to consider. If you find yourself out of your trade, the reality is that you won't always find a way back in.

Anyway, here's the Q&A from a trader who recently asked me to review one of their EUR/USD trades, in which they took profits early but then were unable to get back in.

The question was sent to me in image chart form. It's displayed here in smaller format, in order to fit. If you click on the image it will open a full-size version in your browser. All following images are already full size.

INITIAL QUESTION:

You won't always find a way back in

 

REPLY:

You won't always find a way back in

You won't always find a way back in

You won't always find a way back in

You won't always find a way back in

You won't always find a way back in

You won't always find a way back in

You won't always find a way back in

You won't always find a way back in

You won't always find a way back in

You won't always find a way back in 

Happy trading,

Lance Beggs

 


 

Order Entry Error – Immediate Actions & Working an Exit

 

I thought it would be good to expand upon some of the ideas discussed on YTC social media last weekend.

Here are the three social media posts first…

26th March:

Order Entry Error - Immediate Actions - Post 1

27th March:

Order Entry Error - Immediate Actions - Post 2

28th March:

Order Entry Error - Immediate Actions - Post 3

There are two main points that I'd like to examine in a little more detail.

  1. Immediate Actions
  2. Working an Exit

 

Immediate Actions

So let's say you've traded the sequence above, and just recognised the entry error. What are your actions?

The obvious advice is to scratch immediately. It's what most educators will suggest. And often it is good advice. Immediately take responsibility for the error and take your loss.

I won't ever have a problem with someone who does this.

Especially in the following cases:

  • Your trading session is in drawdown and has reached your daily loss limit. You're clearly not in sync with the market today. Take the loss. And get away from the screen for a while.
  • Your mindset is already a mess. You're frustrated! You're angry! Whatever the reason, take the loss. And get away from the screen for a while.

 

For these occurrences, immediately scratching is likely the best option. Take the loss. And review the whole session at a later time (or even the next day) when it can be looked at with an objective and clear mind.

But in all other cases, I think we can improve on this.

Here's the thing… there is often no need to panic.

You will often have sufficient time to make a quick assessment and determine whether or not the position is an immediate threat… or not.

That is… does the current situation have a high probability of rapidly getting worse? Or is it maybe not so bad? Can you maybe even recover the situation?

Let's change the context a little. We'll start with some very simple examples.

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Trade Management Requires a Constant Reassessment of Probability

 

The path from entry to profit target is rarely a straight line. Especially when market structure gets in the way.

In today's example we have an area of resistance, right in the way of our trade. Given the potential for some reaction off this area of resistance, we have two options. We could hold a much wider stop and accept the potential for trade failure back at breakeven. Or we could accept a need to scale in and out in accordance with our assessment of short-term bias.

There's no right or wrong. It's rather just a matter of choosing the style that best matches "who you are as a trader!"

For me, the second option is clearly my preference.

The key, for those of you interested in actively managing trades like this, is to maintain a constant reassessment of probability throughout the life of the trade.

Trade management requires a constant reassessment of probability throughout the life of the trade

Trade management requires a constant reassessment of probability throughout the life of the trade

Trade management requires a constant reassessment of probability throughout the life of the trade

Trade management requires a constant reassessment of probability throughout the life of the trade

Trade management requires a constant reassessment of probability throughout the life of the trade

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You’ve GOT to Target Multiple-R Winners

 

Most trades will typically fall in the range from -1R to +1R… hopefully more on the positive side of that range.

But for most of us this does not mean you should be targeting 1:1 trades all day, every day.

By all means take them if you assess them as being a higher probability play. But you'll need to maintain a 70% or more win-rate if you want to achieve any decent long-term profits with ONLY 1:1 trades.

That's a tough ask!

It's far better, in my opinion, to aim to break up that stream of -1R to +1R trades with the occasional large multiple-R profit.

When market structure and price action suggest the potential for a multiple-R trade, target those higher returns.

 

You've got to target multiple-R winners

You've got to target multiple-R winners

You've got to target multiple-R winners

 

So the obvious question is, "When should we be more patient with a trade and hold it for a larger runner?"

There is a recent amendment to my pre-session routine which can help answer this question.

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Context Can Also Involve Time… Not Just Price

 

or… Why I held this trade drawdown longer than I usually would!

On Monday I entered a PB short in expectation of a downtrend continuing lower.

Context can also involve time - the entry

By far the best entry area would occur on a weak pullback to the shaded region (A).

And the last Trading-Timeframe (TTF) green candle certainly makes it seem like that's a possibility.

But the Lower Timeframe (LTF) stalled and offered a double top entry at short-term resistance, so I entered a position as I didn't want to miss the chance of strong continuation lower (B).

The plan was for an immediate reduction of risk should price break the short-term ledge (C) with a stop for the remainder a few ticks higher. I'd then seek another entry opportunity higher in the vicinity of A.

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Reader Session Review

 

I received an email recently from trader MK which I want to share, as it contains a few good lessons.

MK has kindly provided permission to share his session review. (His words… “You can use the email and the charts, that is why I sent them. It is important for traders to know that if you put the time in you will get to a point where you will trust your skills are up to the task.”)

 

Email Received:

Hey Lance,

Here is a picture of where I am at on one of my better days. I am constantly working on my weaknesses but they are now finally in a minority of sessions.

Thanks for all your help and guidance over the past. wow, almost 5 years. Your weekly insights and of course your Ebook (Read the first three sections more times than I can count) have been instrumental in my development as a trader.

You Lance are, the “Real Deal” and I would highly recommend YTC for anyone who aspires to be a trader.

MK

2 Things I learned from Lance that helped a ton.

1. Forgive your self for your mistakes, you will make many, and move on.

2. If you can not do it on the simulator you will never do it in the real world.

🙂

 

Charts:

(NB. Click on the images to open a full-size copy in your browser!)

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Feeling Joy When I Look at this Price Action

 

I absolutely love this email I received recently, from a trader who is making tremendous progress in his growth and development.

It's nice and simple. Just one single line…

Feeling joy when I look at this PA.

And here's the attached image:   (It's a large one so I've reduced the size. Click on the image if you wish to open a full-size version in your browser!)

Click on the image to open a full size version in your browser

 

I also feel great joy when looking at this. Here's what I see…

Trapped traders

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