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When the Pullback Hits Harder than Expected

Posted in: Trading Process and Strategy | , by
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Pullbacks… a simple retracement structure depicted in textbooks as smooth flowing and simple to read.

Reality though, is usually not so kind.

Far too often these pullbacks will be a mess. Full of chop, false-starts and stop-outs. Or unexpected and sudden shifts in pace or volatility.

Price action seemingly designed to confuse you and cause you to react emotionally and impulsively. Tempting you to enter too early and stop out. Or hesitate and miss the entry entirely.

In time, with experience, you'll improve your ability to read the market. And your ability to perceive edge.

And develop some rules-of-thumb for how to best manage these situations, when it seems the market is putting up a fight.

Let's look at one example of a rule, which guides me through a pullback that hits harder than expected.

<image: Pullback Entry Timing>

<image: Pullback Entry Timing>

<image: Pullback Entry Timing>

<image: Pullback Entry Timing>

<image: Pullback Entry Timing>

<image: Pullback Entry Timing>

<image: Pullback Entry Timing>

<image: Pullback Entry Timing>

<image: Pullback Entry Timing>

<image: Pullback Entry Timing>

<image: Pullback Entry Timing>

<image: Pullback Entry Timing>

<image: Pullback Entry Timing>

<image: Pullback Entry Timing>

When the pullback hits harder than expected – step aside.

Don't be tempted to chase the first entry. If it v-turns and you miss the trade, let it go. It wasn't yours to catch.

The far better option is to wait for a second push lower and reassess.

Consider whether or not this rule might add value to your trading.

And then when you're comfortable with this, see if you can expand your skill level to find the exceptions to the rule. Those times and places where you might take that first entry. Because they exist as well.

Happy trading,

Lance Beggs

 

 

Until it Breaks and Holds, Exercise Extreme Caution!

Posted in: Trading Process and Strategy | , by
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This image was posted on social media recently, to highlight the way that the opening range can help minimise early damage to your P&L.

<image: Using the opening range to minimse damage in unfavourable opening conditions>

I received a message in response to the post:

This has me curious. Did you trade it? Can you show us the trades? If you did stand aside, at what point did you know to stop?

I did take two trades. Neither went to the targets as planned, but active trade management meant I was not in drawdown. I'm happy with both trades. They were the right decision.

I then stood aside and waited for the break.

So let's look back at the market and discuss my decision making. In particular, when I "called" price as stuck in the opening range. And when I stood aside.

Because it's rarely obvious that there will be opening range chop, until after the fact. And quite often it's only obvious after we've taken a loss or two.

As we work through this price sequence, it might be helpful to think of me as transitioning through three stages:

1. Fully engaged in the price action right from the open. Ready to react to any potential early trade opportunity, should the market drive with strength.

2. Recognising a chop-zone, with price stuck in the opening range, but still allowing limited engagement.

3. Recognising a chop-zone, and standing aside because I see greater potential for damage than profits.

Let's look at the market and work our way from stage 1 through to stage 3.

<image: Using the opening range to minimse damage in unfavourable opening conditions>

<image: Using the opening range to minimse damage in unfavourable opening conditions>

<image: Using the opening range to minimse damage in unfavourable opening conditions>

<image: Using the opening range to minimse damage in unfavourable opening conditions>

<image: Using the opening range to minimse damage in unfavourable opening conditions>

<image: Using the opening range to minimse damage in unfavourable opening conditions>

<image: Using the opening range to minimse damage in unfavourable opening conditions>

<image: Using the opening range to minimse damage in unfavourable opening conditions>

<image: Using the opening range to minimse damage in unfavourable opening conditions>

<image: Using the opening range to minimse damage in unfavourable opening conditions>

<image: Using the opening range to minimse damage in unfavourable opening conditions>

<image: Using the opening range to minimse damage in unfavourable opening conditions>

<image: Using the opening range to minimse damage in unfavourable opening conditions>

<image: Using the opening range to minimse damage in unfavourable opening conditions>

Happy trading,

Lance Beggs

 

 

Adding to a Position

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From time to time I get asked how I add to positions. That is, entering a new trade while the prior trade is still open.

So I thought it might be a good idea to outline my response here. Then I can just link straight to the article in future. (Time management WINNER!)

The plan is nice & easy. Because this is not something I do very often.

<image: Adding to a Position> 

Ok… not always… sometimes I will hold a partial position for a larger move. But mostly that is how I operate. It's how my trading has evolved over time.

All in, scale out.

Wait for the next one.

If you wish to chase larger trends and hold through multiple price swings and retracements, pyramiding into a larger position with numerous entries along the way, then you should seek guidance elsewhere. It's not a part of my plan.

But still… I do add on the rare occasion.

So here's how it works.

Pre-conditions:

  • The existing trade MUST be in profit.
  • The existing trail exit MUST be in a position such that even if both trades stop out immediately, I will still profit overall from the combined sequence. Or at least not lose!
  • And most importantly, the added position MUST be a valid trade in its own right.

 

That last point is critical for me. The added trade MUST be one that I would want to take, even if I missed the original entry. 

Let's look at an example.

<image: Adding to a Position> 

<image: Adding to a Position>

<image: Adding to a Position>

<image: Adding to a Position>

<image: Adding to a Position>

<image: Adding to a Position>

<image: Adding to a Position>

<image: Adding to a Position>

You won't see many examples on my site, where I have added to an existing position.

But all of them will (or should) have the following in common:

  • The existing trade MUST be in profit.
  • The existing trail exit MUST be in a position such that even if both trades stop out immediately, I will still profit overall from the combined sequence. Or at least not lose!
  • And most importantly, the added position MUST be a valid trade in its own right.

 

Happy trading,

Lance Beggs

 

 

The Day After a Bad Performance Day

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Last week we looked at a session that caused me some troubles. See here if you missed it – Good Trading Isn't Just About Winning Trades.

It wasn't a losing day. A "bad" day isn't necessarily a losing day. This one profited. Cycling from negative to positive and back again to negative and then to positive, before I finally called it a day.

What makes it a "bad" day was my poor performance.

My poor decision making. My poor execution.

<image: The Day After a Bad Performance Day

It happens. I just wasn't with it that day.

Sometimes I can brush it off easily. Especially when it didn't lose.

Laugh at myself. Get over it. And move on.

But other times… like this time… that's not so easy.

Perhaps it's the ongoing COVID-19 isolation fatigue? Who knows?

All I know is that I can't let it infect the next session.

So here's the plan for "The Day After a Bad Performance Day":

I can't do anything to influence the market, obviously. So the focus needs to be on me and on my interaction with the market. The things that I can control.

Fixing your Mindset

The problem here is simply that the mind is "stuck". It's anchored to the negative outcome from one single session.

We can fix this with two steps:

(1) Let's shift the mind from its current negative feelings to something more positive.

I recommend you keep a folder containing printouts (charts, trades, stats, whatever) that show examples of you at your absolute best. A "highlights" folder. Best trades. Best sessions. Equity curves overcoming drawdown.

And most importantly for our current situation, include at least one example covering two sessions where poor performance in the first session was followed by good performance in the second.

Keep this in your trading room. It will become your GO-TO tool for shifting focus quickly.

A reminder that the performance yesterday was an aberration. And that you are capable of so much more – because you've done it before.

And if you haven't done it before, then make it up. Because you WILL in time. You just haven't done it yet. Perhaps two printouts of yesterday's performance, one showing actual results and one showing ideal performance. It's something you may not have achieved yet but you know you damn well can next time.

A "highlights" folder. Create one if you don't have one.

And then use it.

(2) Let's shift the mind away from its single-session focus.

Yesterday was one day. If all goes well, I'll be trading a few thousand more days over coming decades. Yesterday is insignificant.

Take a calendar or diary covering at least a year into the future. And skim forward in time and have a look at a whole lot of days to come. And ask yourself, given all those days available to improve on your recent performance, does yesterday really matter?

And then turn today's page. This is the only day that matters now. And it's a blank sheet. And it offers a perfect opportunity to create a new entry in your "highlights" folder, as you follow up yesterday's poor performance with an example of you trading at your best.

Planning your Interaction with The Market

The aim here is to simply ensure you get the session off to a good start. That doesn't necessarily mean a winning trade. The outcome is somewhat out of our control. But it means A GOOD TRADE.

However you define them. An A+ Trade.

One that you would be happy to print and put on your wall. One that you would be happy to screenshot and send to me.

Even if it loses. A trade that you know that you HAD to take. It had edge. It was the right thing to do at that time and that place.

To give yourself the best chance of achieving this, you need to slow down. Be comfortable with no trades at all, until sufficient structure is in place such that you have a GOOD READ on the market and are completely in sync with the price movement. No trades at all, until you find one that you'd be happy to take if you were only allowed to take one trade this day.

That's all you need:

  1. Focus on the positives by skimming through your "highlights" folder.
  2. Recognise yesterday as insignificant in the context of a multiple-decade career. And see today as an opportunity to add to your "highlights" folder.
  3. And then slow yourself down. Commit to no trades, until the market is screaming out to be traded with an A+ trade opportunity.

 

So let's trade…

<image: The Day After a Bad Performance Day

<image: The Day After a Bad Performance Day

<image: The Day After a Bad Performance Day

<image: The Day After a Bad Performance Day

Moving forward a few minutes… and compressing the data slightly so that I can fit more price action…

<image: The Day After a Bad Performance Day

<image: The Day After a Bad Performance Day

<image: The Day After a Bad Performance Day

<image: The Day After a Bad Performance Day

There were no real secrets here in managing my performance, on the day after a bad performance day. Just a short process to get my mindset right. And to take my time, happy with no trades at all if conditions were poor. Waiting and watching until a trade set up that I knew I could look back upon in the post-session and say with 100% certainty that it's a good trade. Win or lose, it wouldn't matter.

I guess the obvious comment is: "Shouldn't all trades be like that? And shouldn't all sessions be traded with this patience?"

Yeah, sure!

But let's be real.

They're not all like that. There are always going to be some that are a bit questionable.

The aim on a day after a bad performance day, is to just slow down a little and make sure that the first trades today are NOT questionable at all.

Three simple steps:

  1. Focus on the positives by skimming through your "highlights" folder.
  2. Recognise yesterday as insignificant in the context of a multiple-decade career. And see today as an opportunity to add to your "highlights" folder.
  3. And then slow yourself down. Commit to no trades, until the market is screaming out to be traded with an A+ trade opportunity.

 

Happy trading,

Lance Beggs

 

 

Good Trading Isn’t Just About Winning Trades

Posted in: Trading Process and Strategy | , by
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There were two lines in last week's article, which I want to continue exploring today.

Good trading isn't just about winning trades.

Just as important is managing yourself during those times when you don't have a good read on the market.

This business is HARD. And I tend to perhaps focus on the negatives a little more than some readers like. But this aspect of the game fascinates me.

Anyone can talk about the easy sessions, with directional markets and quick profits. But I want to talk about those times when we struggle. How we make decisions when under pressure. And how we can best manage our performance to safely close out the day and survive to trade again tomorrow.

<image: Managing your performance when it's just not working to plan>

<image: Managing your performance when it's just not working to plan>

<image: Managing your performance when it's just not working to plan>

<image: Managing your performance when it's just not working to plan>

So let's have a look at Wednesday and see how I managed my performance, on a day when fate decreed that very little should go right.

And yet, I somehow managed to get out of it with a slight positive result. I guess, as per the notes in the image above, that makes this a damn good day.

<image: Managing your performance when it's just not working to plan>

<image: Managing your performance when it's just not working to plan>

<image: Managing your performance when it's just not working to plan>

<image: Managing your performance when it's just not working to plan>

<image: Managing your performance when it's just not working to plan>

<image: Managing your performance when it's just not working to plan>

<image: Managing your performance when it's just not working to plan>

<image: Managing your performance when it's just not working to plan>

<image: Managing your performance when it's just not working to plan>

<image: Managing your performance when it's just not working to plan>

<image: Managing your performance when it's just not working to plan>

<image: Managing your performance when it's just not working to plan>

<image: Managing your performance when it's just not working to plan>

Wrong direction entries – they happen.

Neutral openings chopping above and below the opening range – they happen.

Impulsive entries, in places and times you had no intention of trading – they happen.

Your job is to manage your performance such that these things do not destroy you.

Recognise… and adapt.

The key lesson to surviving days like this is simply the following – recognise it happening quickly – and STOP TRADING.

The odds are that the longer you continue to trade in these conditions, the greater the likelihood that you'll grind your way down to your daily drawdown limit. That is not a good outcome for your account. And not a good outcome for your mindset.

You've got to stop.

You don't have to trade every market sequence. And you don't have to trade a full session every day.

If the market is offering crap conditions or if you're just out of sync with the flow of the price action, get out of there.

Come back tomorrow, when everything is new and you're ready to start again with a clear mind and a positive attitude..

<image: Managing your performance when it's just not working to plan>

Good trading isn't just about winning trades.

Just as important is managing yourself during those times when you don't have a good read on the market.

Recognise that it's not working. And STOP.

Tomorrow is a new day.

Happy trading,

Lance Beggs

 

 

Recognise when it’s not working – and ADAPT

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The plan was simple. Catch the opening drive. And bask in the glory of a winning start to the new session!

<image: When you're out of sync with the market - recognise it and ADAPT!>

<image: When you're out of sync with the market - recognise it and ADAPT!>

<image: When you're out of sync with the market - recognise it and ADAPT!>

<image: When you're out of sync with the market - recognise it and ADAPT!>

<image: When you're out of sync with the market - recognise it and ADAPT!>

<image: When you're out of sync with the market - recognise it and ADAPT!>

<image: When you're out of sync with the market - recognise it and ADAPT!>

<image: When you're out of sync with the market - recognise it and ADAPT!>

<image: When you're out of sync with the market - recognise it and ADAPT!>

Three failures… compulsory time-out!

Note that this doesn't necessarily mean three losses. The first two were small wins. The last was a small loss.

I'm still in front.

And now have some important information.

THE MARKET IS NOT IN AN OPENING DRIVE.

So it's time to put the mouse down. Step away and clear my mind (it doesn't take long – I was gone for maybe 30 seconds at most).

And then reassess.

There are generally two ways I'll play this.

Option 1 is to just pack up for the day. Today is too early for this. But if I hit a stretch where I'm out of sync with the market, say as it's approaching midday, I see no problems with just calling it a day and making sure that the small profit does not turn into a loss.

Option 2 is to bracket the whole area and then wait for price to break clear and show improved conditions. In particular smoother price flow! Then it's game-on. Reassess the trend, project it forward and identify the next trade opportunity.

<image: When you're out of sync with the market - recognise it and ADAPT!>

<image: When you're out of sync with the market - recognise it and ADAPT!>

Good trade.

Unfortunately this was the extent of the directional move and the market settled into some sideways ranging action.

<image: When you're out of sync with the market - recognise it and ADAPT!>

I'm actually quite happy with this trading.

Six trades. Only ONE went to plan.

Of the other five, one was a loss but the other four all provided partial small wins.

When you're not reading the market well, anything positive is a winner.

Lessons today…

Good trading isn't just about winning trades.

Just as important is managing yourself during those times when you don't have a good read on the market.

Because they DO happen.

Recognise when it's not working. And ADAPT.

Protect any profits, if you're lucky enough to have them. Or if you're on a loss, stop the bleeding.

Step aside. Clear your mind.

And if you want to continue, do so on YOUR terms.

Bracket the area which is causing your problems. And visualise. When price eventually breaks clear of this current chop, what conditions do you need to see before you will engage the market again?

Recognise when it's not working. And ADAPT.

Happy trading,

Lance Beggs

 

 

Opening Structure Trap

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I do very much like a large Gap Open with a strong Opening Drive.

<image: Opening Structure Trap>

But do you know what's better than a large Gap Open with a strong Opening Drive?

How about a large Gap Open with Opening Drive failure and reversal to the opposite direction!

<image: Opening Structure Trap>

We have discussed traps at (or just before) the RTH Open quite a lot over the last year.

<image: Market Open Traps>

But if I recall correctly, the vast majority of these trap examples occur within the opening 1-5 minutes, or so.

The concept today is the same. The reason it works so well is the same.

IT TRAPS SOMEONE IN A LOSING POSITION.

It just happens over a slightly longer time period.

<image: Opening Structure Trap>

There's a key point here related to trading success. A big part of success comes from minimising damage during those times when your plan is out of sync with the actual market conditions. Conduct your analysis and trade accordingly. But always keep in mind the following: (a) What do I need to see to know I'm right? (b) What conditions will confirm I'm wrong, or at least raise some doubt and allow me to contain risk?

And by minimising damage I mean not just to your account, but also to your mindset. Both are essential for profiting from the subsequent momentum drive, once the trap is sprung.

Let's step through the trade sequence.

<image: Opening Structure Trap>

<image: Opening Structure Trap>

<image: Opening Structure Trap>

<image: Opening Structure Trap>

<image: Opening Structure Trap>

<image: Opening Structure Trap>

What is better than a large Gap Open with a strong Opening Drive?

A large Gap Open with Opening Drive failure and reversal to the opposite direction!

But only if you don't destroy your account or mindset, during the times when you're wrong.

Happy trading,

Lance Beggs

 

 

Don’t Chase the Missed Entry… Unless Price does This…

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The session begins…

<image: Don't chase the missed entry>

<image: Don't chase the missed entry>

<image: Don't chase the missed entry>

<image: Don't chase the missed entry>

<image: Don't chase the missed entry>

<image: Don't chase the missed entry>

<image: Don't chase the missed entry>

<image: Don't chase the missed entry>

<image: Don't chase the missed entry>

<image: Don't chase the missed entry>

<image: Don't chase the missed entry>

<image: Don't chase the missed entry>

<image: Don't chase the missed entry>

Don't chase the missed entry.

But remain focused.

Because sometimes, while price has still not reached the expected target area, it might offer a nice lower timeframe structure. Something that you can lean an entry against, which offers an acceptable level of risk. Something that still offers potential rewards, sufficient to justify the risk, should price break from that structure.

And if not… too bad. Let it go. There will be more opportunity available shortly. Always is!

Happy trading,

Lance Beggs

 

 

You Don’t Have To Trade EVERYTHING

Posted in: Trading Business | , by
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This chart is from Thursday 19th March 2020. A couple of quick trades and then STOPPED. Done for the day.

<image: Two winners - and stopped. Why?>

Why stop?

Because today was a Hit & Run day!

Trading is a performance activity. And it's our job to manage ourselves in an attempt to get as close to peak performance as possible.

Good sleep routines, healthy eating, exercise. And some degree of separation of "life issues" from our trading day.

All good… and fairly easy… until a pandemic is unleashed across the world.

I expect most of us will be operating with heightened levels of anxiety and stress at the moment. I'll be the first to admit that this period of time has been harder on me than I expected. Having two daughters working as nurses provides an interesting mix of pride and anxiety right now.

The markets of course do not care at all how we're feeling. So it's up to us to manage ourselves. Limiting exposure at times when we're unlikely to be on our game. And pushing hard when we are feeling at our best.

Here's how I've chosen to manage my trading over the last few weeks.

Pre-session preparation includes an assessment of my current physical, mental and emotional state. And selection of one of three ways I need to approach the markets today.

1. NO TRADING

My physical state require strict adherence to my 5/12 fatigue management rules. If I have not had sufficient sleep, then there is NO trading.

And for my mental and emotional state, if there are any serious and unresolved problems or anxiety or any other type of distraction, impacting either myself or any member of my immediate family, then there is NO trading.

It's time to step back. Sort myself out. And come back again tomorrow.

The fact is that we don't have to trade EVERYTHING. Let today go.

I'm here for the long haul. I expect to be trading for decades to come. If I miss one day, who cares. It will not make or break my career.

2. FULL TRADING

The majority of days though, I'm completely fine. Sufficient sleep, feeling fit and healthy. And feeling in control of the current crisis (at least as it relates to my extended family).

It's time to trade.

Pre-COVID-19 routine: 0930 to 1100 compulsory trading, 1100 to 1200 optional trading.

Current routine: 0930 to 1100 compulsory trading, 1100 to 1600 optional trading but compulsory engagement with the markets, watching and learning.

It's time to trade.

FOCUS.

Press hard when in sync with the market. Step back a little when out of sync.

But make sure you're fully present and attacking whatever opportunity comes your way.

3. HIT & RUN

This is for those in-between situations. The shades of grey that fit somewhere in-between "obviously unfit to trade" and "hurry up and open the damn markets because I want to trade".

I've had a few of those days lately. I satisfy the fatigue rules. And I'm not overly consumed by current events of the world.

But I feel a little down. A little flat and deflated.

The plan here is for a shortened session. Hype myself up. Get in and attack the market. And then get out.

Hit and run.

And then take some time out for personal rest and recovery.

There are many ways to do this.

I've informally adopted the following plan:

(a) Trade the opening sequence.

(b) If I'm sitting on a loss then stop. Take the hit. Don't risk making it worse.

(c) If I'm sitting on greater than 2R profits then stop. Take the money and don't risk giving it back.

(d) But if somewhere in-between, I'll allow myself to make a call here based upon how I feel. Either take what I've got, or push on for one hour maximum to see if I can get to the 2R target.

Why one hour? Through personal experience I know I can hype myself up to focus sufficiently for about an hour. But beyond that, motivation starts to drop. Maybe you can do more?

The important point here… again… is that you don't have to trade everything.

If the market offers tremendous opportunity after that opening sequence, or opening hour, who cares.

It's not going to make or break my career. And given my low motivation I probably would have stuffed it up anyway.

So let it go. Take a break. And have a little "personal time".

Typically I find this is sufficient to have me back to 100% the following day. A short break from the markets can do wonders for reigniting the passion and having me eager to get back into the ring for another round of action.

Let's revisit the earlier chart…

<image: Two winners - and stopped. Why?>

<image: Two winners - and stopped. Why?>

The obvious thought here is "But Lance, you missed so much opportunity!"

<image: Two winners - and stopped. Why?>

Another "Hit & Run" day, on Tuesday 24th:

<image: You don't have to trade everything>

You might recall this opening trade from the social media post on Wednesday. If you were wondering how that trade turned out… now you know!

<image: You don't have to trade everything>

<image: You don't have to trade everything>

<image: You don't have to trade everything>

There are days when it is obvious that you shouldn't be trading. Stand aside. Let it go.

There are days when you're feeling great. Keen to get into the action and face the challenge of the markets head on. Go for it. Trade.

But there are also in-between days. When you're just… ok. A little flat. A little lacking in motivation. The last thing you probably need in such a situation is a full session of trading. So shorten it. Reduce the session length. Accept smaller profit targets. And get in there for a quick hit and run. Smash and grab. Two or three trades. Get a profit if you can. And get out of there.

You don't have to trade EVERYTHING. Let it go. And take some time out for YOU.

Take care of yourself. We're in this for the long haul.

Lance Beggs

 

 

When Obvious Expectations Are Wrong

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There is market opportunity available when "obvious" expectations turn out to be WRONG.

You've no doubt experienced this. Those times when the market provides almost certain evidence that it IS going somewhere… but then it doesn't.

I can promise you – if you sense these "obvious" expectations then you're not the only one. Others will sense it too.

And the stronger the feeling, the better. Because more people will act on it.

And then when it fails… there's your opportunity.

<image: Opportunity exists at the times and places where obvious expectations are wrong.>

<image: Opportunity exists at the times and places where obvious expectations are wrong.>

<image: Opportunity exists at the times and places where obvious expectations are wrong.>

<image: Opportunity exists at the times and places where obvious expectations are wrong.>

<image: Opportunity exists at the times and places where obvious expectations are wrong.>

<image: Opportunity exists at the times and places where obvious expectations are wrong.>

<image: Opportunity exists at the times and places where obvious expectations are wrong.>

<image: Opportunity exists at the times and places where obvious expectations are wrong.>

<image: Opportunity exists at the times and places where obvious expectations are wrong.>

<image: Opportunity exists at the times and places where obvious expectations are wrong.>

Opportunity exists at the places where a lot of people get it WRONG.

So when you sense a sudden shift in the market sentiment… that surely must lead to obvious movement (through a key level or in a new direction), take a pause for a second.

Maybe it will follow through with these obvious expectations. Project ahead and plan how you will react.

But also – keep in the mind the fact that obvious expectations also fail.

And that can provide exceptional opportunity.

Project that forward as well. Visualise where and how that might provide opportunity. And focus. Hopefully you will be ready to act, a little quicker than I was with this one.

Happy trading,

Lance Beggs