Daily Market Structure & Price Action Study – 1

 

I've been writing online for over a decade now. And for that whole time I've been promoting the idea of daily study in both Market Structure and Price Action.

It's a simple task that takes no more than five minutes, but which offers incredible value to your own learning and development.

Sometimes this study fits within certain themes, if there is a particular feature of market structure which I want to focus on for a period of time.

Often though, it's completely unstructured. Simply searching for whatever captures my attention.

Either way, every trading day after the session is over, I look to the charts to find something interesting. Having done this for so long the findings are usually just reinforcing prior lessons. But occasionally, they'll uncover something new which can lead to further exploration, further learning and further growth and development.

As I'm away from home for the month of April, celebrating my 50th birthday, and unable to prepare any new articles for the YTC newsletter, I though I'd simply preload the email system and blog with a few articles which share some daily market structure and price action study.

I hope you find it useful. If you do, consider starting your own Market Structure & Price Action Journal.

Monday 12th March 2018

Studying a high-of-day breakout failure:

<image: Daily Market Structure and Price Action Study>

Notes:

  • Price breaks the high of day (A) right into an area of overnight-high resistance (yellow shading B).
  • Regardless of whether you consider this setup a BOF of A or a TST of B, it's a good reminder that reversals are not always a single-touch V-turn.
  • Entry at C would at best be scratched for breakeven or very small profit. Re-entry would be required at D.
  • Further potential opportunity is available through the engulfing candle (E) or the retest of the breakdown at F.

 

Lesson:

  • If you miss a trade setup, remain patient. There is often (but not always) another chance to enter.

 

Tuesday 13th March 2018

Studying opportunity available after a period of volatility contraction:

<image: Daily Market Structure and Price Action Study>

Notes:

  • Context = down-trending market (G)
  • Price finds some support around 11:30am and settles into a period of sideways contraction (H).
  • The contraction itself offers no real clues in terms of strength or weakness of either side. It can't go up. It can't go down. Wait. Be patient.
  • Seek opportunity SHORT in the yellow shaded region (I), once price has broken the volatility contraction pattern. While there is potential for a trap, all effort should be made to trade these. The risk is often minimal, especially if the breakout occurs very close to the apex of the triangle. And the potential reward is often multiple-R.
  • A trap and reversal to rally through the upper boundary of H could be considered for entry LONG, should that occur.

 

Lesson:

  • Volatility contraction leads to expansion. Always seek opportunity on a break from the area of contraction.

 

Tuesday 13th March 2018

A bonus extra one for today – a place where my expectations were wrong!

Increasing the timeframe up to the 15 minute chart…

<image: Daily Market Structure and Price Action Study>

Notes:

  • The 13th March opened above the prior days high and moved through the full prior day's range to break the low at J.
  • My expectations following an engulfing of a prior day's range are for price continuation lower.
  • Instead, the breakout proved false and price rallied back within the prior day's range, providing very smooth and easy-to-read bullish price movement.

 

Lessons:

  • The market cares little for my expectations. It goes where orderflow tells it to go.
  • As always, some of the best signals come from failed expectations. If I'm stopped on any breakout pullback entry SHORT, get over it. There is potentially now even better opportunity for a breakout failure entry LONG. Find it and take it.

 

More to follow next week!

Happy trading,

Lance Beggs

 


 

Written by

YourTradingCoach - Admin

5 Comments to “Daily Market Structure & Price Action Study – 1”

  1. Bob says:

    Hi
    At first example, entry short at C or D would be against LT area A.
    Shouldn’t we wait for it to break or try to enter at some kind of stall at lower time frame at B area?
    Thanks
    Bob

    • Lance Beggs says:

      Hi Bob,

      The article didn’t really address how we would enter. And the answer of course (as with all setups) is really “it depends upon the context, which should include a wider HTF perspective plus some insight into the LTF price action”.

      Looking at just this single chart though…

      Yes, entry right at C or D is at the same level as A. So if you wanted to place the order a couple of ticks lower in order to confirm the break, then that’s fine, provided that it still meets your R:R needs.

      And yes, if you get some kind of stall in the area of B, then this absolutely could be a signal to short. Noting of course that you would still deem the area at A to be a potential source of support.

      Cheers,
      Lance

  2. Hello Lance,

    Volatility contraction/expansion patterns is a very common topic in your articles. However, I barely be able to relate these opportunities with some of the YTC PAT setups.

    For example, in this particular case, what kind of setup would be? A LTF BPB in the yellow shaded area?

    And other question: Had missed the opportunity at I (shaded region), would you consider the around of 1601 level (two swing lows at 11:30 and 11:35) as a support, now resistance, to enter in the retest (12:05)??

    Thanks.
    Sergio.

    • Lance Beggs says:

      Hi Sergio,

      Yes, correct. A breakout from a period of volatility contraction is always treated as some form of pullback setup.

      You’ll find these often in one of two forms, when viewed from a YTC PAT perspective. A VERY short duration contraction might appear within a single complex pullback. The continuation break from that essentially offers an LTF entry into that CPB, if you hadn’t already entered earlier in the CPB and held through the compression.

      More common though, with longer duration patterns, it will display as some form of sideways trend. The continuation break will either be an “intra-range” PB, or a BPB if it occurs outside the boundary of the sideways trend.

      (I hope all of this makes sense. Email me if it didn’t and I’ll mark up some diagrams for you!)

      Volatility patterns are not “official” YTC PAT. I look at the price structure from the YTC PAT trend perspective. But these triangles just seem to jump out at me, providing greater confidence in trade entry due to both methods supporting the idea.

      And definitely yes, if you don’t get in at the shaded area, the single candle pullback at 12:05 is the most obvious setup.

      Cheers,
      Lance.

  3. Sergio García Trapiello says:

    Hi Lance.
    Your explanation makes a lot of sense, so thank you very much.

    I think I’ll start to seek and study this kind of patterns as a part of my post-session market structure review. No trading them yet, cause I prefer keeping my focus on the very basic and obvious YTC PAT setups for now. But it seems a very interesting area to try to add to my trading in future.

    Cheers,
    Sergio.

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