Monthly Archives: July 2013

Post-Session Chart Review

We recently shared some post-trade reviews from Josh, who is doing exceptional work in creating a trade review journal for his longer timeframe forex trading (daily charts).

See the trade reviews here if you missed them:

But a trade review journal is not the only option you have.

Today I'd like to share a chart that came to me with some email Q&A, from Greg, who also operates in the forex markets but on much shorter timeframes.

What I like about this is the fact that Greg produces a chart like this after EVERY session. He keeps them in a personal blog; but you could do the same via any journaling application or even printouts stored in a binder. 

Greg displays the trading timeframe chart overlayed with the following information:

  • Key support and resistance levels

  • One or two key price action or market structure observations (eg. something that stands out with regards strength / weakness analysis, traps or price interaction with key levels)

  • Setup opportunity (with a hindsight bias)


Establishing a Bias From the Open (Part 1 of 2)

My method of establishing a bias, or an expectation for the future trend direction, is done through six basic principles of price movement, as listed in my YTC Price Action Trader ebook series.

This requires prior price action as it's based partly upon analysis of previous bullish and bearish price swings and trends.

So what do we do when the market initially opens and we don't yet have sufficient price swings to determine our bias?

I'll attempt to demonstrate below using the open from a Crude Oil session earlier this week. As you'll see, there are no fixed rules and there is a lot of uncertainty. The charts provide little information. Analysis, as well as confident and decisive action, relies upon judgment and experience. And effective trade management relies upon your ability to drop or change a bias as soon as opposing information comes to light. Often you'll be required to adjust your bias as price behaves somewhat differently to your expectations.

While lacking experience in the early days, by far the better option is to simply avoid this period of time. Delay your first trade until the market has had time to establish sufficient swing highs and lows to confirm a trend and market bias.

But until you have the requisite experience, don't just blindly wait for the trend. Use this time to watch price movement and make your best call on the bias. You'll get it wrong a lot. But each time you do it you're learning and gaining the experience that is necessary for expert judgment.

Here we have the market opening on Monday, July 22nd, 2013.

Price opens the pit session at 108.52. Let's see what we know already. The following two charts show different views of price at the open; the first being the higher timeframe 5-min chart showing the pit session data only, and the second being the trading timeframe 1-min chart which includes the pre-session (overnight) data.

establishing a bias at the market open


Should I Avoid the First 10 Minutes?

An excerpt from a reader email:

How should one trade when the market opens?

I have found that it's somewhat a guessing game which way the market will trend during the first 10 mins as it sometimes gaps down & then reverses & trends up for the rest of the day.

Do you avoid the first 10 mins of trading as it is very unpredictable & highly volatile?



Gaining Confidence in Taking the Trap Entries

Last week I shared a short article on trap entries and how they're applicable in all markets and all timeframes.

It was essentially just based on the following image:

This led to a comment on facebook as follows:  "When you show an example like that it seems to be so easy, but to get in the trade is actually quite hard."

My facebook response was: "Confidence builds with time and experience. If these entries cause problems then spend a period of time reviewing hundreds of examples… trending market, break against the trend which pauses & reverses. ie. study CPB's or Wyckoff springs. Study those that work. Study those that fail. It's a learning process. Also… work on your expectations for individual trades. Could this trade have failed? Absolutely. But the risk was small compared to potential reward. So taking it is the right thing to do. Think profit over a series of trades, not on individual trades."

Let's add to that comment now with something a little extra!


What Were They Thinking?

I love trading in places where other traders have got it all wrong!

There are many ways to see these areas. This article will focus on one method. It's certainly not my primary method but if you like it you may want to look out for these opportunities:

  • Identify breaks of significant price levels which occur just prior to a major market event such as a news release or a new session open.

Who would trade a break of a level just prior to an event which can change the sentiment of the market? What were they thinking?

I love to see this. When it occurs I then watch for potential failure of the breakout. Of course, the breakouts don't always fail. Sometimes the "sentiment changing event" acts to support the breakout and move these traders to further profit. But when they do fail, they often provide us with an entry area offering low risk compared with potential reward.

That's the important point here!Let's look at a couple of examples to see how this shows up on the charts. Take note of the way that the failed break offers a clear position for our stop and an exceptional reward:risk opportunity.