I've long been an advocate of the importance of a Market Structure and Price Action Journal. There is no shortage of material on this topic if you want to search the YTC article archives. The best place to start might be with anything tagged "journals", which you'll find here.
So I'm pleased to have received this email question from a YTC reader.
- "Sir, I have started a market structure journal but would be most grateful for some suggestion for topics or categories for journal entries."
No problems at all.
Some people prefer to make their journals completely free-form. That is, no categories at all. Just finding one item of interest each trading day and studying it in depth. That's great.
Others will prefer to pick a topic or two for intense study. Each day they'll find and study a market structure or price action sequence related to that topic. This will allow for quicker discovery of "rules of thumb" regarding how to identify and manage these particular market structure features or price action sequences. And when you're "done"… move on to a new category.
Just pick whichever approach you want. There is no right or wrong.
Ok… so the email question assumes you've chosen the second approach and want to focus on one particular category of journal entry at a time.
What should you chose?
Again, there is no right or wrong. Just make sure it's something relevant to your own approach to trading.
But let's list some categories to help you get started if you're new to journaling. Or if you already have a journal underway, perhaps the list will help you identify a new area for future exploration.
Support & Resistance Structure
This is the obvious starting point – the S/R Structure. Print examples and study them in detail. What makes a good level? When do they lose relevance? How does price interact with the level?
- Level Definition – Which Levels Remain Valid For Further Touches?
- Level Definition – When Do Levels Lose Relevance?
- Resistance – Successful Break
- Resistance – Failed Break
- Resistance – Tested But Not Broken
- Resistance – Becomes Support
- Support – Successful Break
- Support – Failed Break
- Support – Tested But Not Broken
- Support – Becomes Resistance
Specific Key Levels
You may wish to expand upon the basic S/R structure and study some specific levels in a little more detail.
- Interaction with the Prior Day's High – from above the prior day's range
- Interaction with the Prior Day's High – from within the prior day's range
- Interaction with the Prior Day's Low – from below the prior day's range
- Interaction with the Prior Day's Low – from within the prior day's range
- Interaction with the Prior Week's High – from above the prior week's range
- Interaction with the Prior Week's High – from within the prior week's range
- Interaction with the Prior Week's Low – from below the prior week's range
- Interaction with the Prior Week's Low – from within the prior week's range
- Interaction with the Opening Range – Successful Break
- Interaction with the Opening Range – Failed Break
- Interaction with the Opening Range – Tested But Not Broken
- Interaction with a very wide Opening Range
- Interaction with the Key Overnight Levels
Success at trading any particular environment requires that you recognise it's nature quickly and adapt tactics to suit. Find multiple examples of each environment type. Study them to find the common characteristics which will allow for quick recognition and adaptation. There are many ways you can classify the environment. Here is one such way that you might find useful:
- Trending Market (Non-Volatile)
- Trending Market (Volatile)
- Ranging Market (Non-Volatile)
- Ranging Market (Volatile)
You may also wish to explore specific types of days as follows:
- Inside Day
- Day After Inside Day (opening within the prior day's range)
- Day After Inside Day (opening outside the prior day's range)
- Outside Day
- Day After Outside Day (opening within the prior day's range)
- Day After Outside Day (opening outside the prior day's range)
What market conditions are best suited to your trading style? What conditions should be avoided?
- Conditions – Favourable
- Conditions – Non-Favourable
Strength / Weakness Analysis
Classic YTC Price Action Trader stuff here! Find and study the textbook perfect examples.
- Swing Strength Increasing (With Trend)
- Swing Strength Decreasing (With Trend)
- Swing Strength Increasing (Counter Trend)
- Swing Strength Decreasing (Counter Trend)
- Projection – Increasing
- Projection – Decreasing
- Depth – Increasing
- Depth – Decreasing
- Failure to Continue
- Climactic Acceleration
Study changes in the nature of the TTF Trend and what that means for future trend projection and identification of trade opportunity.
- Trend – Strengthening
- Trend – Weakening
- Trend – False Break
- Trend – Transition to Range
- Trend – Transition to Reverse Trend
- Trend – Uncertain (because there will be times it's messy and unreadable!)
Study changes in the nature of a TTF Sideways Trend and what that means for future trend projection and identification of trade opportunity.
- Range – False Break
- Range – Partial Rise
- Range – Transition to Trend
Effective trading requires that we adapt to changing conditions. Quickly recognising reducing volatility allows us to stand aside through much of the contraction, while also remaining focused for opportunity once volatility rapidly expands.
- Volatility – Recognising Reducing Volatility
- Volatility – Contraction to Expansion
- Volatility – Retest of Point of Contraction
Study how market internals provide clues to continuation of current conditions, or warn of an upcoming change.
- NYSE Tick
- Advance / Decline Line
Trend traders will REALLY want to focus here. Examine hundreds of pullbacks to identify clues as to the expected depth and duration and the best way to manage them.
- Pullbacks – Deep
- Pullbacks – Shallow
- Pullbacks – Single Leg
- Pullbacks – Multiple Leg
- Pullbacks – First After a Change of Trend
- Pullbacks – Last Before a Change of Trend
And in case you want to extend this idea to include trades and trade related topics…
Note: These are not just trade reviews. Rather they would be a study of textbook-perfect trade conditions and setups.
Of course, setups are the obvious inclusion. Study textbook-perfect examples. What conditions provided an A+ setup? Examine context in depth… not just the setup.
Again… textbook-perfect examples with a focus on the context within which they occur. How do these triggers provide an orderflow surge that will provide your trade with a positive start?
- Entry – LTF – 123 Pattern
- Entry – LTF – 3 Swing Retrace
- Entry – LTF – Candlestick Pattern
- Entry – LTF – DB or DT
- Entry – LTF – Expansion Bar
- Entry – LTF – Spike and Ledge
- Entry – LTF – Spring or Upthrust
- Entry – LTF – Test of Breakout Point
- Entry – LTF – Narrow Range Bar
- Entry – LTF – Scalper Limit
- Entry – LTF – Scalper Pattern Breakout
- Entry – TTF – LWP
- Entry – TTF – NR Bar
Again… learning to adapt to the conditions is essential if you wish to play with the professionals.
- Order Types – Conditions Suggesting Limit Order Entry
- Order Types – Conditions Suggesting Stop Order Entry
- Order Types – Conditions Suggesting Market Order Entry
- Order Types – Conditions Suggesting a Scaled In Approach (Working entry in an area)
Use this section to learn to adjust your trade management style to suit whatever the market throws at you.
- Trade Management – Conditions Favouring Targets
- Trade Management – Conditions Favouring Trailing Stops
- Trade Management – Conditions Suggesting a Scratch & Reassessment
- Trade Management – Conditions Suggesting Re-entry After an Initial Stop Out
Ok! That list is not complete. I'm sure with a little thought both you and I could come up with more. But it's a good starting place.
If you're new to journaling, pick a topic of interest and focus solely on that topic for the next month. Every day, find one example. Print it out. Add notes. And file it away.
Just imagine what a valuable resource you'll have on your hands if you do this each trading day for the next year!