Monthly Archives: January 2015

Good Losses


This trade lost… and I'm completely ok with that.

I'll explain why below. But first, let's look at the trade.

Good losses - I'd take these trades every time

Looking at the left first (daily chart) we see that today's session (A) has broken below the prior day (B) and is closing in on yearly lows (C).

The chart on the right (60 min chart) allows us to see a little more detail.

Today (Friday) opened right at the prior day's low support. After a brief test higher it broke two levels of support (prior day's low plus an intra-day low from the 13th January). Price is now retesting the 1/13 support, now resistance.

Let's look at the trading timeframe chart…


Reader Trade Review – ES Test of Resistance

I received a great email during the week from a trader who trades the E-mini S&P (ES). Let's check out an extract from the email:

Hi Lance,

I am on my second reading of YTC PAT and in the last couple of days read, again, about Increased/Decreased projection being an indicator of potential trend strength/weakness.

As I was trading ES today, I saw an example of Decreased Projection on the one minute chart. I made a perfect entry based on a textbook example from 11:44 CST to 12:10 CST, with entry short at 2035.50 at 12:10 CST. You will see that the trade went for 34 points maximum favorable excursion with only one tick of heat after entry (maximum adverse excursion).

We'll continue the email later. But for now, let's look at the trade. Because 1 tick of heat and 34 points (136 ticks) MFE is a REALLY nice trade entry!   🙂

Let's start by examining the market's S/R structure. The chart below is a 30 minute chart at the time of trade entry, so that we can see where the current day fits within the structure provided by recent sessions. Resistance levels are marked above price in red. Support is marked below in green.


Context Can Also Involve Time… Not Just Price


or… Why I held this trade drawdown longer than I usually would!

On Monday I entered a PB short in expectation of a downtrend continuing lower.

Context can also involve time - the entry

By far the best entry area would occur on a weak pullback to the shaded region (A).

And the last Trading-Timeframe (TTF) green candle certainly makes it seem like that's a possibility.

But the Lower Timeframe (LTF) stalled and offered a double top entry at short-term resistance, so I entered a position as I didn't want to miss the chance of strong continuation lower (B).

The plan was for an immediate reduction of risk should price break the short-term ledge (C) with a stop for the remainder a few ticks higher. I'd then seek another entry opportunity higher in the vicinity of A.


Structural Trades


One thing I love to do over the Christmas & New Year break is to schedule a couple of days for Market Replay learning. Last Sunday & Monday were scheduled for my replay sessions. The ability to speed up the market data in-between key decision making areas means that I can squeeze in half a dozen sessions over a two day period, rather than just one a day.

This is an opportunity for me to address areas of my trading that have underperformed during the previous year, and to experiment with slight tweaks to my trade execution and management style.

One area of underperformance I've identified is the fact that I'm leaving a lot of potential profit on the table whenever gifted a structural trade. My trade management style has drifted over the last couple of years towards having less patience with trades (quicker to close out). This works fine when the environment supports earlier exits. But for a structural trade that offers a much larger than usual potential return, it means I'm leaving a lot on the table if I can't or don't get back in on a subsequent entry.

When identifying a trade in a structural location, I will be aiming for more patience with my trade management.  This will involve slightly longer time-stop. And a wider trailing-stop. The key difference though is in mindset; the biggest challenge for me will be keeping my hands off the trade.

What do I mean by good structural locations?

Essentially, I call it a structural trade when the entry and targets are based upon key higher timeframe market structure features.

This would be areas such as the Prior Day's High or Low, or the current High of Day or Low of Day. Our aim would be to hold at least a partial position from one of these locations to another.

Let's look at an example from one of my replay sessions. These sessions were in the emini's rather than Crude Oil, so I was not completely familiar with the outcome (it's important to make replay as realistic as possible). The following charts will step us through the trade location, entry and management decisions for one of these trades. I like this one as it wasn't a smooth path to the target and involved an exit and subsequent re-entry.

Let's look at the trade:

Structural trades - concept

As mentioned, I call it a structural trade when the entry and targets are based upon key higher timeframe market structure features.

In this case entry in the vicinity of the current Low of Day, targeting the High of Day.

Let's look at the entry.


What Makes Different to Other Trading Educators


(1) My Focus is on the Metagame

Most price action traders are focused on the patterns that result from price movement, in the expectation (hope) that these patterns will lead to further price movement, just as the textbooks say they should.

But what they're missing is the deeper level of understanding.

I don't play this game.

I play the metagame.

A metagame is most simply defined as "the game behind the game". It's the game outside of the obvious rules where the player makes decisions based upon what their opponent is thinking and how you expect them to act.

This is the real game in trading. It's not the technicals which move price. It's not the fundamentals. It's orderflow. And that orderflow comes from the decisions and actions of the other market participants.

Learn to find the times and places on the chart where other market participants will act, through fear or greed, and you've found an edge in the markets.

What I'd like to share today is the very first article I wrote introducing this topic, way back in 2009.

It's also my favourite YTC article of all time.

Check it out here: