A few weeks back we discussed a quick and simple method for identifying a "bigger picture" directional bias.
The second article generated quite a bit of good email conversation, with several traders now adding this to their current trading process.
One email included a brief question, which I feel it is important to discuss with all of you today.
- "I always looked at the opening range as something that worked some times (when the market did move) and didn't work other times (when the market didn't move). So you taught me a great lesson here. It works all the time, because that failure of price to move from the opening range is the information we need to identify a lack of directional bias. What I would love to see though is how you traded one of these days that were neutral bias throughout the whole day. Like on the Tuesday for example, you said "My preference is to stand aside". Does that mean you didn't trade at all? Or at what point did you stop? Or if you did trade at any time, what was the reasoning at the time?"
Let's look back at the session on that Tuesday. This was the higher timeframe chart, with the opening range, as discussed in the prior article series.
Clearly a neutral bias throughout the vast majority of the session.
But yes, I DID make some trades.
Before we examine the trades, there are two key points I want to make.
Firstly, we need to remember that the image above is the HIGHER TIMEFRAME chart. Trading decisions and actions are based upon the Trading Timeframe chart, within the context of the structure provided by the Higher Timeframe chart.
And secondly, we need to remember that the session bias is something which gradually reveals itself over time.
Let's look at the Trading Timeframe Chart…
With hindsight there will ALWAYS be a ton of opportunity you can see.
By all means learn from it post-session if it's opportunity you want to catch in future.
But when you're operating LIVE at the hard right hand edge of the screen, it can help to remind yourself that you don't have to trade every price sequence.
When price is moving nicely and you feel in sync with the movement… when you see edge… only then do you trade.
All other times… when you don't see edge… shift that chair back so that you're out of reach of the mouse. Watch and wait for something better.
Or call it a day.
You don't have to trade every sequence. Trade when you see edge. Stand aside when you don't.