Trade Opportunity Is Found Where Expectations Fail to Meet Reality

 

  1. Find a structural feature or price action sequence that will lead to "reasonable" expectation for a certain price outcome. For example, a REALLY obvious break of a pattern, level or trendline.

  2. Ask yourself, "But what if it doesn't?". What if price does not behave in the way expected by those who rely on standard TA methods? How will price look if the expectations should prove correct? How will price look if the expectations prove wrong? And will that provide trade opportunity?

  3. Why? Because trade opportunity is found where expectations fail to meet reality.

 

Let's look at a sequence I absolutely love, which made it into my Trades Journal last week.

It's Wednesday, 5th August 2015. But let's step back to the start of the session first to get some context. We'll begin with the daily chart, to give you a really "big picture" view.

Daily Chart - Context

Daily Chart - Common Expectations

Daily Chart - But What if it Doesn't?

Let's zoom in a little to see the same idea on the 30 minute chart.

30 Min Chart - Context

Let's check out what happened on the Trading Timeframe, after the Crude Oil Inventories report provided the orderflow necessary to break the level.

1 Min Chart - The outcome

1 Min Chart - The first break

1 Min Chart - The second break

1 Min Chart - Rule of Thumb

Let's look at the breakout using two different lower timeframe views (15 sec chart and then 2-range chart), to see if weakness was evident on the second break. And to see if there was some way to trigger an entry.

15 Sec Chart - Weakness following the breakout

2-Range Chart - Weakness following the breakout

  1. Find a structural feature or price action sequence that will lead to "reasonable" expectation for a certain price outcome. For example, a REALLY obvious break of a pattern, level or trendline.

  2. Ask yourself, "But what if it doesn't?". What if price does not behave in the way expected by those who rely on standard TA methods? How will price look if the expectations should prove correct? How will price look if the expectations prove wrong? And will that provide trade opportunity?

  3. Why? Because trade opportunity is found where expectations fail to meet reality.

 

Happy trading,

Lance Beggs

 


Written by

YourTradingCoach - Admin

6 Comments to “Trade Opportunity Is Found Where Expectations Fail to Meet Reality”

  1. pat says:

    The sell for me was about 10.40. What is really interesting here, surprisingly, is the daily timeframe. Re gameplay, the daily candles lerhaps were primed to create supply for the smart money for a move down lower.
    for me thus illustrates the difference between really trading with detailed info from what is actually happening on smaller timeframes as opposed to just buying or selling a level. This daily tf illustrates to me perfectly the difference between the two.
    10.40 was the sellfor me as there just was not enough support breaking yntil that point. Dynamic anx lld horizontao supports were still in place. I do see the logic of working off the fact that it could no go higher and will use this more in my thinking. Ty Mr.Beggs!

    • Lance Beggs says:

      Hi Pat,

      10:40 means you’re selling right into the Low of Day support (see the data to the left hand side on the 1 min chart). Certainly with hindsight we can see that it worked out ok in this case, but typically selling into support is not wise. Plus… where would you put your stop? Waiting for confirmation often does little for your win%, but it will almost always worsen your R:R.

      Perhaps you meant the 10:49 candle that breaks to new daily lows? Again, it’s not where I’d trade as I’m not interested in breakouts. But it seems a better option than 10:40.

      Cheers,
      Lance.

  2. pat says:

    Well at 10.39 the supports are still in place. Yes i agree r.r worsens. Best strat wld have been to sell at your point, take partial.profits at 10.39 then add again on supp breaks? Until that supp breaks price is actually rangebound? There is another aspect about my sell at 10.40 that would give me more confidence but that is another story!

  3. pat says:

    Also good point about sl. If i cannot get in within 5 from the top i would with some discipline leave the trade alone.

  4. mohamed says:

    Hello Lance ,
    Nice article and it is really helpful, from my side if I had chance to trade this setup I will take the retest of the high of inside day after the engulfing candle in the 1 min chart which long trader trapped , is this good entry for you too? because i can’t see or feel the stall on the 15 second chart may be it need more experience.
    Thanks
    Mohamed

    • Lance Beggs says:

      If you miss an entry, always look for retest opportunity.
      I’m not 100% sure exactly where you’re looking for re-entry? Is it on the 6th candle from the swing high / engulfing candle? The one that breaks above and then below the very narrow range inside candle? If so, I like that one.

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