I always attempt to be as clear as possible in my articles. It doesn't always work out though! 🙂
The following is a question from a YTC newsletter reader regarding what appears to be some contradiction between recent articles.
Excerpt from Email:
Contrast the article in this weeks newsletter (4/10/13), where you say you should focus on and make decisions in the trading timeframe, to the article in last weeks newsletter (27/9/13), where you discuss bypassing the trading timeframe for the lower timeframe to get a feel for the strength or weakness of price movement. I'm sure both are valid concepts, and as an educator you probably have to provide broad education, but I do find it personally confusing. ie – what is lance really saying to me????
Anyway, just putting this forward for some feedback. I do think you do a great job of educating in the broad sense, and I understand it's complex, but I would like to see the content / strategy you put forward be a bit more consistent.
Response:
Ok, let's start by looking at key points from the article on the 4th August. The aim of this article was ensuring that people focus on the right timeframe and do not get caught making trading decisions off the lower timeframe chart. You can find it here if you prefer to review the full article rather than just key points – https://yourtradingcoach.com/trading-process-and-strategy/focus-on-the-right-timeframe/
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Focus on the TRADING TIMEFRAME for trading decisions.
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Each timeframe has a specific role.
- Higher Timeframe – Defines the S/R structure within which the trading timeframe moves.
- Trading Timeframe – This is used to define the trend, market bias and to identify trade opportunity at setup locations.
- Lower Timeframe – This is used to fine-tune my trading timeframe analysis and to time entry and exit decisions.
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Be sure to focus on the right timeframe at the right time. Avoid the temptation to focus solely on the faster and more detailed action of the lower timeframe.
The article included a couple of trade examples, one of which I'll repeat here to demonstrate the concept.
In point 2 above we determined that we would use the trading and lower timeframes in the following way:
- Trading Timeframe – This is used to define the trend, market bias and to identify trade opportunity at setup locations.
- Lower Timeframe – This is used to fine-tune my trading timeframe analysis and to time entry and exit decisions.
In the above chart, the trend was defined on the trading timeframe as down and the bias was determined to be bearish, with an expectation that price would continue to trend lower for at least a second attempt at the lower support level.
The trading timeframe chart was also used to identify the location for potential trade opportunity (area C as it pulled back into area B). This was a strategic decision based upon the structure provided by the market on the trading timeframe.
The trading timeframe is used to make the decision that… "this is the place I want to look for trade opportunity!"
Only then do we look to the lower timeframe, which we use for two purposes.
Firstly, it may be used to fine-tune our trading timeframe analysis. This is not shown in the above example, although you may get some feel for it through seeing how the rally on the 2-range chart weakens towards the top, forming a sort of head & shoulders reversal pattern. Lower timeframe weakness at our trading timeframe decision area is a method of fine-tuning and confirming our trading timeframe analysis, as it signals to us that either the market is running out of buyers, or sufficient sellers are stepping into the market to oppose the rally.
The second use of the lower timeframe is to time our entry & trade management decisions. In this case it was a pattern based decision via a lower timeframe 123 reversal pattern.
Key points… the trading timeframe is for trend, bias and identification of the places that I want to trade! The lower timeframe is for fine-tuning analysis and timing the entry & management decisions.
Let's now look at the article on the 27/9/13 which appears to have caused confusion.
For this one, rather than just provide key points, I feel it may be easier if you review the full article here: https://yourtradingcoach.com/trading-process-and-strategy/dont-confuse-knowledge-with-knowing/
In reviewing the trade examples on this article, I can easily see how the reader came to an assumption that my trading decisions were made on the lower timeframe. But that's not the case at all. I just didn't clearly differentiate the division of task across the different timeframes, as it was not the main point I was trying to get across in that article.
So let's look at the two examples provided in this article, from the perspective of "which tasks were carried out on which timeframe".
Trade 1:
The decision as to where I want to trade is made on the trading timeframe, not the lower timeframe. The lower timeframe can be used to fine-tune the analysis that was made on the trading timeframe. This fine-tuning will at times confirm our trading timeframe decision. And at other times it may raise doubt and have us stand aside to reassess or await further information. But the decision as to where to trade is NOT made on the lower timeframe chart.
What I'm aiming to avoid is having you watch the lower timeframe chart and suddenly see… "OMG… there's a trade entry! Quick… I must BUY!"
If it's not a trade that you saw coming on the trading timeframe, then it's NOT a trade.
A trade should ONLY be a strategic decision based upon the structure provided by the market on the trading timeframe.
I can certainly see how the prior article's description of lower timeframe strength/weakness analysis made it appear that I was making a trade decision on that timeframe. It's not the case at all. The decision was made on the trading timeframe. The lower timeframe analysis simply fine-tuned my trading timeframe analysis and confirmed my trading timeframe trading decision.
Trade 2:
Lance Beggs