Conflicting Trends on Different Timeframes – How I Read This Chart!

Here is some great email Q&A with a YTC Newsletter reader Thomas…

Question:

Hey Lance,

Hope you are well!

Got one question for you. Looking at the below 3-minute chart when would you say we went from uptrend to downtrend? I often have a hard time reading the market after a large move in one direction which then slowly starts grinding in the opposite direction. At first I look for pullback opportunities because the trend has not technically changed, but at some point in time it becomes obvious the sentiment has changed.

Your thought much appreciated.

Thomas

Chart:

(CLICK ON THE CHART TO OPEN A LARGER COPY IN YOUR BROWSER)

Reply:

Hi Thomas,

Yes… conflicting trends on different timeframes… this can cause lots of confusion, but does become much easier with experience.

In this case, you’re correct that the market appears to have established a downward grinding trend, within the context of the larger time period uptrend.

These are certainly easier to trade by dropping down to a lower timeframe (1 min), YTC Scalper style. But let’s remain on the 3 min timeframe only and see how I read it.

(CLICK ON THE CHART TO OPEN A LARGER COPY IN YOUR BROWSER)

The uptrend was easy, and gave some great setups. Looking beyond that though, price formed swing L/H at A, B, C and D. During this phase, I would have looked for pullback and complex-pullback entries at A (scratched most likely) and C (maybe scratched, maybe small profit depending on how it was managed). Beyond the red vertical line I define a sideways trend (trading range, with upper and lower limits defined by the yellow shaded area.

Trade opportunity is then sought in price response to these areas. Trades are only sought within the area IF a clear directional bias is established. That downwards directional bias becomes visible at E, after price tested higher and was slammed back lower and then continued lower. Any trades taken here would be with expectation of support in the vicinity of, or just above, the shaded area. So there would be no expectation of a runner – take profits on both parts.

I’d then look for pullback shorts in the area of F, G & H.

Followed by test-of-support long at I & J. And breakout-failure long at K and L.

I’m not saying that I’d take all of these. This is just identifying where the setups exist on the chart with the benefit of hindsight. In reality, if I’d taken K long for example, there might be no need for L if I held the trade.

Overall, in this grinding intra-range trend, there were quite a few opportunities available, but all being only for small targets. And in reality quite a few would likely be scratched at or around breakeven.

Ultimately… K and L were the start of the next leg uptrend. They were the ones to catch.

Once again… this is all with the benefit of hindsight, but that does not mean it’s without value. This is the primary concept behind effective post-session review in my opinion. A hindsight identification of perfect trading… then comparing with actual trading… and identifying what you did good at the time, and what could have been done better.

Hope that helps,

Lance Beggs

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YourTradingCoach – Admin

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