Here's a great question I received recently from another trader.
Let's start by defining the terms, as it's obvious that any decision to enter must be a reaction to some "decision making input". But that is not what was meant.
The question is asking:
- Do I anticipate every setup, meaning that it's pre-considered and pre-planned ahead of time before price gets to the area? For example… "The rally is slowing. If we get weakness on a break of the next swing high I'll be looking to enter SHORT."
- Or do I sometimes just react emotionally to the current price bar without any pre-considered thought and planning? For example, "Wow… that's a huge red bar… I'm getting in SHORT!".
As I mentioned in response to the question… I always anticipate.
Let's look at a recent example. It's a sequence from last week which nicely illustrates the concept of "Anticipate – Don't React", showing how keeping my focus ahead of price ensures I don't chase or emotionally over-react to any sudden movement.
As a bonus it also demonstrates the idea that "sometimes a trade idea requires more than one entry attempt!"
We pick up the sequence with price rallying up towards area F.
We'll view this sequence via the 30 second chart rather than the 1 minute (trading timeframe) chart. It provides a little more feel for the internal movement of the TTF and will make the article a little shorter than if I shared a combination of TTF and LTF each time (I'm all about saving time & effort!).
You may not trade the same markets that I trade.
You may not trade the same timeframes that I trade.
It doesn't matter though. Trade on your terms, meaning that all action is pre-considered and pre-planned ahead of time before price gets to the area, rather than an emotional over-reaction to sudden price movement.
Anticipate – Don't React!
Thanks a ton for the effort you put in preparing those images to explain the concept. I am glad to tell you that it is crystal clear now. Thanks again. 🙂
Thanks Jagadeesh! Glad you enjoyed the article! 🙂
Another great article Mr Beggs, much appreciated
Hi Marcus, thanks for explaing this concept, I was having these days a lot of trouble when I reached this zones. I came here because a youtube video about how to trade resistance breaks.
I have one question about the targets you choosed in your trades, do you do this using fibonacci or how? Also, can you point me to an article about target selection? I think you make a great work explaining complex stuff, thanks!
Hi Lance, by the way :L
Hi again, I founded a treasure, thanks Lance:
Yes, be sure to look for the two follow-up articles to this series as well.
If you use the search box and/or the tags on the RHS of the blog page you might also be able to find more related to exit strategy & targets. The full details though are in the YTC Price Action Trader – http://www.ytcpriceactiontrader.com/
But for starters, work through this Importance of Exit Strategy series. That will give you the basics.
Further to my last comment… here’s a link to all the blog posts with the tag “exit strategy” – https://yourtradingcoach.com/tag/exit-strategy/
So very good. TYVM
Thank you for such a wonderful article.
Its an old article so I am not sure if you will notice this comment, still trying.
In the 3rd chart, you say there is weak projection at G and you are looking for one more weaker projection for entry short. I am sure you might not have any such rule as 2 weak projections, but still wondering why you waited for one more weaker projection? May be you wanted to get sure that bulls are exhausted?
In the 5th chart, you have shown 2 swings in the upmove. Does that mean you had to have 2 upswings?
In the same chart, suppose if there was a bearish engulfing of the last green candle, would you enter short below that or let it go as it is not according to your anticipation?
Again just like my first question, in the 8th chart (the one with converging trendlines)
you again say that you want to see another weak retest of high before you would consider a short. So please explain.
It’s difficult to recall my thoughts from just a day or two ago, let alone over two years. So I’ll talk in general terms.
3rd chart – Why wait for an extra push higher? There are no rules here, except for the general concept of waiting till the bulls have exhausted themselves. Given that it’s a TST rather than a BOF they can be very tricker to time. You ideally want price stretched and then stalling out at the highs. Something which has the last bulls entering LONG to be getting a bit concerned. So if I decided I wanted to wait for another leg higher, it’s only because it didn’t feel overstretched yet.
BOF is much easier. You know when it’s broken the level. For a TST, a lot of feel is involved. Always keep “the other trader” in mind. When are they feeling stressed? When are they doubting their trade? That is when you want to enter.
5th chart – Do I require two swings higher like in the image? No, this is just a visualisation. The important information in the image is not the number of swings, but rather the fact that it shows some sign of weakness.
5th chart – Bullish Engulfing candle – No, I do not enter short if it’s not something I have anticipated. Let it go. And keep attention ahead for the next trade opportunity.
8th chart – Why wait for the entry? Volatility contraction will often lead to volatility expansion. Although in this case it’s not a very tight contraction, so it’s not a major issue, I’d still want to be sure that there is no potential to push higher with strength. Wait till you have no doubt at all. Ideally I’d like to see price break to new highs, stall and then fail. It didn’t quite get there. But note how entry did still provide a trap in that it broke the most recent high (dashed line). In any case, the idea is (as above and in every trade) delaying entry till I am sure the bulls have given all they’ve got and have nothing more available.
Also just wanted to know that out of say 10 set ups you anticipate, roughly how many really happen?
Hard to say in that (a) I don’t track this. And (b) the “forward projection” of price is constantly adjusting depending upon the new data that unfolds with every price bar. But certainly less than half of them are traded.
Thank you for replying to a question about an old article.
And you speaking in general terms is more helpful 🙂
And about your last reply, I think that since you are trading lower time frames, you would be letting go of more than half the anticipated trades that dont materialise. Would it be same for someone trading 3 or 5 minutes timeframe? I believe that timeframes dont make much difference as one cant tell which timeframe a chart belong to if theres no data on the time and price axis, but this point of letting go of trades had me thinking.
I imagine it should be much the same for someone on the 3 or 5 minute timeframes. Although the higher we go with timeframes, the more time the trader has to make decisions. This could result in more trades taken through talking yourself into them.