Tag Archives: Trading Process

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

 


 

Wait till it’s Clear of Recent Structure

 

I don't know if you're like me, but if you are then you'll have this dark-side of your personality that surfaces from time to time. A side that just WANTS TO TRADE. A side which doesn't so much care about the conditions of the market. Given the slightest hint of opportunity, it wants to get into a position and trade.

And of course, while that will from time to time capture the good moves, it also means you're often stuck in a fight for survival through the all of the market chop that you just KNOW is better avoided.

I'm much better at managing this now. One of the most significant changes to my trading over recent years has been an increasing ability to accept less trades.

But I do need to remind myself of this from time to time. Occasionally that impulsive side of my personality finds itself in control of the mouse, despite my better intentions.

One of these times is the "first day back" after a break. Hence my social media reminder on Monday…

<image: Patience... there is no hurry!>

Yes, often my social media posts are written for me.    🙂

And then again on Tuesday…

<image: Wait till it's clear of recent structure>

But often a simple reminder to be patient is not enough. So here's another of the things I will often do to slow down that impulsive side of my nature.

A tactic I use when first coming back from a break. And also from time to time intra-session if I find myself frustrated and struggling to read the price action.

WAIT TILL IT'S CLEAR OF RECENT STRUCTURE.

Look at either the Trading or Higher Timeframe Charts. Find areas above and/or below recent structure which offer clear space and potential for an obvious directional bias.

Firstly, this gives me permission to "sit on my hands" until an area of the chart with greater potential for ideal trading conditions.

And secondly, this gives me time to just watch price, getting in flow with the movement and the pace, so that when good conditions are present and a trade opportunity sets up, I'm ready to attack.

<image: Wait till it's clear of recent structure.>

<image: Wait till it's clear of recent structure.>

<image: Wait till it's clear of recent structure.>

<image: Wait till it's clear of recent structure.>

<image: Wait till it's clear of recent structure.>

<image: Wait till it's clear of recent structure.>

<image: Wait till it's clear of recent structure.>

<image: Wait till it's clear of recent structure.>

<image: Wait till it's clear of recent structure.>

<image: Wait till it's clear of recent structure.>

<image: Wait till it's clear of recent structure.>

<image: Wait till it's clear of recent structure.>

<image: Wait till it's clear of recent structure.>

Define the places you want to trade, clear of any recent structure. Sit back and relax and enjoy the show. Let price do it's thing. Someone else can trade here. Just watch and get in sync with the movement, so that when price decides to play in YOUR playground, you're ready.

Good trading,

Lance Beggs

 


 

What if you Redefined your Primary Role as a Discretionary Trader?

 

Most discretionary traders see their job like this:

<image: What if you redefined your primary role as a trader?>

What if you switched this around a bit?

What if you redefined your job as follows:

<image: What if you redefined your primary role as a trader?>

Is it possible that relentless focus and commitment to the processes and routines which guide your decision making and behaviour… might just see improvement in the actual trading results?

This doesn't mean we're no longer discretionary traders. Discretion can be built into processes. But how we come about our trade decisions, is standardised and made as consistent as possible.

The following post was shared recently on social media:

<image: What if you redefined your primary role as a trader?>

Essentially, we're expanding upon this idea.

For each of the areas listed in that post, we aim to:

  • Seek excellence in development of routines and processes for carrying out that role, and
  • Seek consistency in implementing the routines and processes.

 

It's said, "That which is measured, improves".

But ONLY if that which is measured is applied consistently.

And consistency will only occur if the process is clearly defined.

So maybe consider a little shift in how you define your role as a trader.

Primary role: Development, out-of-session, of world-best routines and processes for (a) finding and exploiting edge, and (b) reviewing and driving growth.

Secondary role: Trading, for the purpose of implementation, validation and testing of the routines and processes, defined above.

Happy trading,

Lance Beggs

 


 

How Do You Find Time to Plan a Trade on a 1-Minute Timeframe?

 

This is a question I get from time to time.

Quite a reasonable question, I guess, for anyone used to trading on much longer timeframes.

The answer is simple. And if you do it right you'll find that there is plenty of time. Even on a 1-minute chart.

How Do You Find Time to Plan a Trade on a 1-Minute Timeframe?

Let's repeat that for effect…

Lower timeframes require that you see the trade setup in your mind, well before it shows up on the chart.

In fact, I'd suggest that this is good practice, regardless of your trading timeframe.

It's a matter of visualisation – plotting in your mind the most likely path for the next couple of price swings. And becoming clear in your mind about EXACTLY what you need to see if these price swings could offer a trade.

Think of it like a visual form of an IF-THEN statement. "IF price goes here and looks like (this) THEN I will have potential trade opportunity."

How Do You Find Time to Plan a Trade on a 1-Minute Timeframe?

How Do You Find Time to Plan a Trade on a 1-Minute Timeframe?

How Do You Find Time to Plan a Trade on a 1-Minute Timeframe?

How Do You Find Time to Plan a Trade on a 1-Minute Timeframe?

How Do You Find Time to Plan a Trade on a 1-Minute Timeframe?

Focus is always kept AHEAD OF PRICE.

In this case, the trade planning was carried out 2-3 minutes prior to the setup actually occurring. That's quick. Often a trade idea might be visualised 5 or even 10 minutes before price sets up for entry.

Either way, it's plenty of time.

Trade entry should not be a 100% reactive process. It should be forward looking. Pre-considered and pre-planned. And only acted upon if price should subsequently prove your forward planning to be correct.

The same goes for trade management. Keep your focus and planning ahead of price.

Where is price going if the trade premise is still valid? How will this look on the charts? How will you manage your stop and target orders if this happens?

And where is price going if the trade premise is no longer valid? How will this look on the charts? How will you react if that happens?

Keep your focus and planning ahead of price.

If you can do that, then there is PLENTY of time to plan your trades, well before price actually gets to the entry point.

Happy trading,

Lance Beggs

 


 

Start Your Session With IF-THEN Scenarios

 

Last Sunday I shared one of my old articles via social media.

Start your session with IF-THEN analysis

Click on the image, or this link here, if you wish to read the old article.

This is such an important part of my pre-session preparation.

Why?

It simply aims to get my session off to a good start – so very important for maintaining an effective mindset throughout the trading day.

This is not prediction. This is simply forward planning… developing “IF-THEN” scenarios based upon your assessment of the likely future price action.

If your “read” of price movement proves correct, you will have trade opportunity. If it proves incorrect, you stand aside and reassess.

This will ensure your actions in the market are pre-considered and your trades only occur when the market has confirmed your expectations.

And you will be less likely to be caught in a trap through impulsive reaction to unexpected price movement.

NOTE: What I am doing here with my IF-THEN analysis is NOT the same as the Game Planning / Hypos that you see other traders doing. Typically they're looking at much higher timeframes or Market/Volume Profile tools to determine a likely hypothesis for the WHOLE DAY.

I'm looking at the trading timeframe and where the market opens with respect to key levels, and assessing likely movement for the OPENING FEW PRICE SWINGS ONLY.

There is of course nothing to stop you using both. Whole session, higher-timeframe game planning plus opening sequence trading-timeframe IF-THEN scenarios.

It's just important here for me to point out the difference.

These are not meant to define the whole session. They just aim to get you off to a good start.

And from there, the picture keeps updating bar by bar in accordance with the YTC Six Principles of Future Trend Projection.

Anyway, let's look at my opening IF-THEN scenarios for the week to date, in the emini-NASDAQ (NQ) market:

Monday – 13th February 2017

Start your session with IF-THEN analysis

Start your session with IF-THEN analysis

Start your session with IF-THEN analysis

Tuesday – 14th February 2017

Start your session with IF-THEN analysis

Start your session with IF-THEN analysis

Start your session with IF-THEN analysis

Wednesday – 15th February 2017

Start your session with IF-THEN analysis

Start your session with IF-THEN analysis

Start your session with IF-THEN analysis

Thursday – 16th February 2017

Start your session with IF-THEN analysis

Start your session with IF-THEN analysis

Start your session with IF-THEN analysis

So as we head towards the open on Friday, why not consider creating your own IF-THEN statements for the opening couple of price swings.

They won't always be right.

But when they are, it means that your actions in the market are pre-considered and your trades only occur when the market "makes sense".

And when the market offers something different, you simply stand aside and reassess.

It's all about getting your session off to the best start possible, through minimising emotional reaction to surprising and unexpected price movement.

Give it a try. You may just like the idea.

Happy trading,

Lance Beggs

 


 

Keep It Simple

 

It's very easy in this business to bury ourselves in complexity. Typically leading to nothing but feelings of extreme overwhelm and doubt.

It can help at these times to "step back" a little and look at the bigger picture.

At a simpler level, what exactly are we trying to achieve here?

I would suggest that many of us could describe our trading by the following "simplified" flowchart.

Higher level simpler overview of the trading process

When you get one wrong, work to contain the damage as much as possible.

When you get one right, work to take as much profit as you can out of the move.

Aim to keep the losses smaller than the wins, on average.

Record data on your decisions and performance.

Identify what adds to your edge across a large sample of trades. Seek to understand why. And do more of it.

Identify what reduces your edge across that same large sample of trades. Seek to understand why. And aim to avoid it or reduce the damage.

And improve over time.

Essentially, that's how I run my trading business.

But perhaps the best use for this "simplified" flowchart is in it's ability to help us find the way forward when we're stuck.

Because the same flowchart can be used to guide our learning process. And to narrow our focus to ONE AREA OF IMPROVEMENT at a time.

Using the simplified flowchart to guide our learning

We won't get it right in every trade, of course. But our aim must be to learn to do so with sufficient frequency to provide an edge across a series of trades, assuming acceptable trade entry and management.

Using the simplified flowchart to guide our learning

Again, we won't always get this perfect. But we must get it right sufficiently often to ensure that our edge remains, assuming acceptable trade management.

Using the simplified flowchart to guide our learning

And once more, we don't expect to get this perfect every time. But across a large enough sample, we need to get this right enough to maintain our edge.

Using the simplified flowchart to fix a failure to provide edge.

Are you trading in the right area? Or do you need to work more on your strategy?

Are you entering well enough? Or are you getting chopped up as you try to consistently pick the exact turn point?

Are you holding for a reasonable portion of the move? Or are you regularly failing to manage the opportunity that is available.

Success requires that you first identify the source of current failure. So simplify! And then narrow your focus to one area at a time.

Do you need to work on your trade areas? Or trade entry? Or trade management.

There's work to be done.

Best of luck,

Lance Beggs

 


 

If I Could Only Take One Trade

 

This is a VERY useful question to ask yourself as a trade is setting up:

  • If I could only take one trade this hour, would I be happy to make it this one?

Of course, adjust the time to suit your style of trading. One trade per half-hour, per 4 hours, per day, per week… whatever suits your trade frequency is fine!

This question forces you to step back away from the excitement of the price action and the nervous tension associated with entry, and to briefly consider the quality of the trade.

If I could only take one trade this hour, would I be happy to make it this one?

If the answer is an obvious YES… take the entry.

But if there is any doubt… consider passing or waiting for more information.

You don't have to take every trade. A question like this can be useful in filtering out the lower quality trades. Give it a try!

If I could only take one trade this hour, would I be happy to make it this one?

If I could only take one trade this hour, would I be happy to make it this one?

YTC Price Action Trader references:

So would I take this trade?

If I could only take one trade this hour, would I be happy to make it this one?

ABSOLUTELY YES… EVERY TIME!!!

(more…)

Buy Because There Are No More Sellers (with lower timeframe)

 

A fortnight ago we looked at a few trades which were entered using the concept of "buying because there are no more sellers"… or "buying because the market can't go down".

I've received some requests for another example. And two people asked to see what I'm looking at on the lower timeframe.

So let's look at a couple more trades.

First though, we've discussed this idea a few times over the last six months or so. If you want to review some of the earlier material, try some of the following. There may be more if you search through the archives as well.

For one more example, let's look to the emini Russell (TF) on yesterday's session, Tuesday 26th of August.

buy because there are no more sellers

buy because the market can't go down

Let's back up to the start of the session and get some context from a slightly higher 5-Minute timeframe.

(more…)

One Trade Can Make a Session

 

Not every session trades as you wish it would have traded.

Not every opportunity will be caught.

Not every trade will work.

But remain patient.

Sometimes all it takes is one trade to make a session.

Let's look at one session that with hindsight MASSIVELY underperforms what was available; but still provided a positive result when I finally caught one decent trade.

And that's ok.

That's trading.

You can't catch every move.

Review all sessions to see how you could have traded them better. Learn from the experience. And move on to the next session.

One trade can make a session

(more…)