Tag Archives: Environment

High Volatility – Thoughts for Developing Traders

 

We have been blessed with some absolutely amazing markets lately.

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<image: High Volatility - Be Careful Out There>

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<image: High Volatility - Be Careful Out There>

Incredible daily ranges. Incredible opportunity.

And incredible risk, if not played wisely.

So while it's tempting to use today's article as an ego-boosting review of a couple of winning trades, that's not really what motivates me with my YTC writing.

I'm more concerned about your journey. I want you to succeed LONG-TERM. And I'm worried that right now there is more potential for damage than there is good.

So today – something a little different and perhaps unexpected.

For the developing traders… the ones who are still working towards either finding their edge or consistently applying their edge… I'm going to try to talk you out of trading these markets.

This week's action is already gone. But I have a suspicion that there is more volatility to come. And even if I'm wrong and it's all over for now, there will again be times in the future when markets crash and this article can make a timely comeback.

Here is what I'm thinking:

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<image: High Volatility - Be Careful Out There>

<image: High Volatility - Be Careful Out There>

<image: High Volatility - Be Careful Out There>

I'd be impressed if I received this email or private message: "Lance, I've worked my backside off for the last year and managed to grind out wins every week for the last quarter. But this last week – I've stood aside. I'm not ready for that pace yet."

This would not impress me at all: "Lance, these markets are frickin' awesome. My trading has been crap for months, but I just smashed it today. $5000 profits. I think I've finally turned a corner and have got this game worked out."

I'd back the first trader to succeed long term, over the second.

Repeating…

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Trading is never compulsory. At any time if you feel the conditions are beyond your current levels of skill and experience, then the RIGHT decision is to stand aside.

However this does not mean you close up shop for the day. There is still valuable work to be done in building experience and expanding your skill levels, so that when these conditions return again in the future you will be ready and able to thrive in the opportunity they present.

So here's the plan:

  • Put aside any feelings of FOMO. One day these will be your markets, but not today. Let it go.
  • And use these sessions SOLELY as learning opportunities.

 

There are many options for learning:

  • Do not trade at all. Simply follow the market attempting to stay in sync with the price flow. Build confidence in your ability to not only read the current trend but to also keep your mind ahead of the market, through projecting the current trend forward and identifying the most probable future path.
  • Or SIM trade, if you feel you've already advanced beyond that first idea. Build skill in trading at these new levels of pace and volatility, without risking actual funds.
  • Or maybe a combination of the two. Watch price live, but record data so that you can trade key sequences through post-session repay.

 

I'm sure you can come up with numerous other options.

The key point is…

Trading is optional. Learning is not.

Maybe I'm wrong. But I don't think so. You know your own level of skill and experience and are big enough and old enough to make your own decisions. Perhaps you think you'll be fine in these markets. All I ask is you consider the risk. Play these markets wrong, and let them put you into tilt where you start compounding bad decision after bad decision, and these sessions can destroy you.

We often know when we're about to have one of these high volatility days. The gaps overnight and the news leading into the session made it obvious that Monday and Tuesday were going to be highly emotional sessions. There is little to lose by choosing to stand aside. Choose to focus your live trading on more "normal" sessions. And use these higher volatility sessions as a learning opportunity.

It's your choice though.

So having said that, let me add a few thoughts for those who do trade these sessions:

  • Structure your trading so that individual trade risk and session risk still fit within their normal parameters. This will typically require reducing position sizes and widening stops, in order to cater for the greatly increased volatility. Some may also prefer reductions in chart timeframes, noting that this can create its own challenges through speeding up the whole process.
  • Don't get stuck in "prediction mode". The market doesn't care where you think it should be going. Even in a crash, the market can have massive rips higher. Ensure that your game plan is visualised pre-session and you have clear guidelines for how to recognise the ACTUAL direction of the market and how to align with that direction, despite what you feel it should be doing.
  • Recognise that the simpler opportunity is almost always going to be WITH the market direction, not against. If you're a counter-trend trader, consider countering the pullbacks for continuation in the larger session-bias direction.
  • Before placing any trade, KNOW WHERE YOU ARE WRONG. And do not hold beyond that point. Standard practice really, but especially important in these environments.
  • And finally, most importantly of all, never forget that your number one aim each and every day is to SURVIVE TO TRADE ANOTHER DAY.

 

Take care out there,

Lance Beggs

 

PS. At the risk of repeating everything above, let me share the post that was sent out Monday morning prior to the open. (Sign up for YTC social media here)

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It’s Game On! Let’s Trade!

 

I operate with three general levels of engagement – Trading, Trade with Caution, and Stand Aside.

Because not all conditions in the market are the same.

If you haven't done so, I highly recommend adopting a similar practice. Take some time to consider the factors that might trigger each level of engagement in your own trading business.

Today let's look at three factors which had me in "Trading" mode right at the market open. No delays. No hesitation.

With these three factors in play, I wanted to be in the first opportunity I could find.

<image: It's Game On! Let's Trade!>

<image: It's Game On! Let's Trade!>

<image: It's Game On! Let's Trade!>

A gap open, from a strong and persistent overnight uptrend, with a recent trap showing an inability to drop.

There is emotion in the market.

And I want to trade.

(See here for prior articles on traps just before the open – here and here).

<image: It's Game On! Let's Trade!>

(NB. YTC Price Action Trader concepts – The First Principle is in play, PB setup)

<image: It's Game On! Let's Trade!>

<image: It's Game On! Let's Trade!>

<image: It's Game On! Let's Trade!>

I don't want to trade all market opens.

There are many that I classify as "Trade with Caution". Think of the opposite of today's example – a market opening in the middle of the prior day's range, following a dull and lifeless sideways overnight session. There is no emotion driving the market. And so I have no business in taking a position until something changes. Wait patiently. Let the opening structure form (5 minutes, 15 minutes, 30 minutes… or as long as it takes). And then trade off that structure.

But there are other days when I don't want to wait. Market sentiment appears to be strong and potentially one-sided. This is not a time to wait. This is not a time to "Trade with Caution".

Today was not one for waiting. It's game on. Let's trade.

Again, if you haven't done so, I highly recommend adopting a similar practice of classifying three general levels of engagement – Trading, Trade with Caution, and Stand Aside.

Take some time to consider the factors which might trigger each level of engagement in your own trading business.

Happy trading,

Lance Beggs

 


 

Resume the Fight at a Time of YOUR Choosing

 

I sent the following post out via social media on Tuesday, prompted by some discussion with a trader who dug himself into quite a hole through doubling down on losses.

This message is so important I thought I'd share it with my larger audience here in the newsletter. And also take the opportunity to expand upon the idea a little.

<image: Resume the Fight at a Time of YOUR Choosing>

This is one of the key advantages you have as a discretionary trader.

YOU get to decide when and where you will play this game.

If the current conditions are not to your liking, NO-ONE is forcing you to play.

Get out of there.

Take a break. Clear your mind.

And come back at a time of YOUR choosing, when the conditions are more suited to your style of trading.

<image: Resume the Fight at a Time of YOUR Choosing>

<image: Resume the Fight at a Time of YOUR Choosing>

<image: Resume the Fight at a Time of YOUR Choosing>

I have clear guidelines in my own trading plan:

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<image: Resume the Fight at a Time of YOUR Choosing>

<image: Resume the Fight at a Time of YOUR Choosing>

<image: Resume the Fight at a Time of YOUR Choosing>

<image: Resume the Fight at a Time of YOUR Choosing> 

 

ACTION ITEM:

Schedule some time to review or amend your Trading Plan.

Make sure to include guidelines or rules for the following:

(a) At what point intra-session will you stand aside and force a break from trading? What changes need to occur before you will allow yourself to resume trading?

(b) At what level of intra-session drawdown will you force a stop for the day?

And longer term:

(c) At what level of drawdown will you force a break from all trading, in order to review your performance and reconsider your plan?

Happy trading,

Lance Beggs

PS: For those concerned that trading should never be a fight… it's simply an analogy that I find particularly useful. See here – https://yourtradingcoach.com/trading-process-and-strategy/trading-is-a-fight/ . The concept is still relevant even if you prefer to not view the game in this manner. If you're out of sync with the market, step away. Come back and play at a time of your choosing, when the conditions are more suited to your style of trading and your preference for market conditions.

 


 

Start Your Session With IF-THEN Scenarios

 

Last Sunday I shared one of my old articles via social media.

Start your session with IF-THEN analysis

Click on the image, or this link here, if you wish to read the old article.

This is such an important part of my pre-session preparation.

Why?

It simply aims to get my session off to a good start – so very important for maintaining an effective mindset throughout the trading day.

This is not prediction. This is simply forward planning… developing “IF-THEN” scenarios based upon your assessment of the likely future price action.

If your “read” of price movement proves correct, you will have trade opportunity. If it proves incorrect, you stand aside and reassess.

This will ensure your actions in the market are pre-considered and your trades only occur when the market has confirmed your expectations.

And you will be less likely to be caught in a trap through impulsive reaction to unexpected price movement.

NOTE: What I am doing here with my IF-THEN analysis is NOT the same as the Game Planning / Hypos that you see other traders doing. Typically they're looking at much higher timeframes or Market/Volume Profile tools to determine a likely hypothesis for the WHOLE DAY.

I'm looking at the trading timeframe and where the market opens with respect to key levels, and assessing likely movement for the OPENING FEW PRICE SWINGS ONLY.

There is of course nothing to stop you using both. Whole session, higher-timeframe game planning plus opening sequence trading-timeframe IF-THEN scenarios.

It's just important here for me to point out the difference.

These are not meant to define the whole session. They just aim to get you off to a good start.

And from there, the picture keeps updating bar by bar in accordance with the YTC Six Principles of Future Trend Projection.

Anyway, let's look at my opening IF-THEN scenarios for the week to date, in the emini-NASDAQ (NQ) market:

Monday – 13th February 2017

Start your session with IF-THEN analysis

Start your session with IF-THEN analysis

Start your session with IF-THEN analysis

Tuesday – 14th February 2017

Start your session with IF-THEN analysis

Start your session with IF-THEN analysis

Start your session with IF-THEN analysis

Wednesday – 15th February 2017

Start your session with IF-THEN analysis

Start your session with IF-THEN analysis

Start your session with IF-THEN analysis

Thursday – 16th February 2017

Start your session with IF-THEN analysis

Start your session with IF-THEN analysis

Start your session with IF-THEN analysis

So as we head towards the open on Friday, why not consider creating your own IF-THEN statements for the opening couple of price swings.

They won't always be right.

But when they are, it means that your actions in the market are pre-considered and your trades only occur when the market "makes sense".

And when the market offers something different, you simply stand aside and reassess.

It's all about getting your session off to the best start possible, through minimising emotional reaction to surprising and unexpected price movement.

Give it a try. You may just like the idea.

Happy trading,

Lance Beggs

 


 

Be Water My Friend

 

Last Sunday I shared this great video on YTC Facebook and YTC Twitter:

It led to an email discussion with a YTC newsletter reader who accepts the value of motivation to a trader, but couldn't see the relevance of the Bruce Lee quote in the middle.

The quote commences at 1:37, if you wish to skip forward in the video to listen to it.

But I'll copy it here anyway…

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IF-THEN Analysis at Session Open

 

Continuing a theme from previous articles – here and here.

  • Keep your focus ahead of price
  • Never let price action take you somewhere your brain didn’t get to five minutes earlier.

This is not just a concept to apply during the trading session.

It also applies at session open.

Start the session with some thought as to likely expectations for the type of environment and for likely initial price action sequences.

This can be done for markets which have a defined pit-session opening time and for 24 hour markets at the time of major session openings (eg. UK, US forex session opening times).

  • Where is price going?
  • How is it likely to act? Why?
  • Will that provide trade opportunity?
  • What will it look like if my analysis is correct?
  • What will price look like if I’m wrong?
  • What else could it do?

This is not prediction. This is simply forward planning… developing “IF-THEN” scenarios based upon your assessment of the likely future price action.

If your “read” of price movement proves correct, you will have trade opportunity. If it proves incorrect, you stand aside and reassess.

This will ensure your actions in the market are pre-considered and your trades only occur when the market has conformed to your expectations.

And you will be less likely to be caught in a trap through impulsive reaction to unexpected price movement.

(** Important Note: This is only our initial expectation. Ongoing bar-by-bar analysis will adjust our expectations if price provides something different from our initial analysis. Don’t rigidly stick to your initial expectations against all evidence to the contrary.)

We saw an example of an opening IF-THEN scenario in last week’s article where we discussed an early-session trade opportunity in the SPI futures.

late session breakout provides early session opportunity

See here if you wish to review that article in full: https://yourtradingcoach.com/trading-process-and-strategy/late-session-breakout-early-session-opportunity/

But let’s look at another example.

This time from the Crude Oil market as it opened today, Monday 9th June 2014.

We’ll start with the Higher Timeframe in order to get a picture of the structure of the market.

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Late Session Breakout – Early Session Opportunity – Email Q&A

 

Last week we examined an early-session opportunity in the Australian SPI futures market.

See here if you missed the article: https://yourtradingcoach.com/trading-process-and-strategy/late-session-breakout-early-session-opportunity/

Over the weekend I received an email from a reader asking an excellent question. I thought I should share it with you all.

Question:

Hi Lance,

You mentioned that there were 2 opportunities to go long.

Would you have taken the first one?

The pullback “B to Open” was weak, then the impulse move “Open to BOF” appears quite bearish, though you do get the BOF set up.

Image from Prior Article:

late session breakout provides early session opportunity

Reply:

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Late Session Breakout – Early Session Opportunity

 

Every day you should look for one quality trade opportunity and study it. Print it out, review it, learn from it and file it in your Trades Journal.

It doesn’t have to be one you traded.

If it is, that’s great.

But it doesn’t have to be. There is still opportunity to learn.

It doesn’t even need to be in the markets you trade.

I look at several markets for my daily “trade” lesson. Primarily CL and TF because they’re my current focus for trading. But I also have a quick scan through ES, SPI and GBP/USD. And any others that may have significant news influence.

Here’s one from last Monday which I particularly love, from the Australian SPI futures market.

late session breakout provides early session opportunity

What do I love about this?

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Would Re-Entry Improve Your Edge?

I had an opportunity this week to review and comment on some trades, from a trader who is using the YTC Price Action Trader strategy in the emini-Russell futures markets.

While not yet achieving consistent profitability, there are very strong signs of this potential in the future.

One strength that was clear from the start was that, in the vast majority of trades, this trader is clearly identifying the right market bias and generally reasonable trade locations.

He is picking areas in the chart that in most cases offer follow through of at least two times risk.

But there is also a weakness that was clearly evident. These multiple-R opportunities were not being captured.

Trades were typically stopped out or scratched early, leaving the trader to watch from the sidelines as price moves on to profits without him.

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