Let me cherry-pick a perfect textbook example of the concept I want to discuss today.
This was the opening sequence from Monday’s NQ futures, 1 minute chart:
Brilliant uptrend, right?
Ok, maybe a downtrend then?
My hope is that 100% of you had resistance to the idea of this being an uptrend.
I don’t care what method you use for trend definition. From the open, on this timeframe, this market was trending DOWN. 100% certainty. No doubt at all.
Step through this chart bar-by-bar and you should have been biased SHORT, from the third candle.
When the market actually trends… you can read it.
But it’s not always that easy. There are some days when it’s tough to get a good read.
One of the more common questions I get through email Q&A involves some form of this question:
- “Lance, I struggled to read the trend at this point on the attached chart. Should I have seen it as uptrend or downtrend? Was my trade wrong?”
My immediate thoughts…
- Why the hell were you trading if you don’t have a clear read of the trend? Step back from the charts. Be ok with not knowing. And wait till the structure is more favourable.
- And also, why do you not consider the possibility of a sideways trend. But that’s another issue.
Too many traders (without proven edge) think you need to know everything at all times. And that you need to trade all market sequences.
It is ok to be uncertain.
And it is ok to limit your opportunity.
Simplify. Seek quality over quantity. And focus on those times and places where conditions are highly favourable and you have a good market read.
One day you will learn to manage the more challenging conditions. Where it fakes you out and chops you up. Where edge exists only briefly, if at all.
But that does not need to be today!
Do not make this game any more difficult than it needs to be.
You’re here to profit. You’re not here for action.
Do not forget that.
Nugget of wisdom ther in your last chart: “Limit opportunity to those times when market condictions are within your experiecne level.”
Cannot aggree more. High volatility even highly trending market may not be tradeable by all traders.
Great article as usual.
High volatility or fast pace markets provide great learning opportunity for developing traders. But not trading opportunity. Sim only – until these conditions have been experienced sufficient times, proving safety and confirmation of edge.
Do you see the terms “market structure” and “market context” to be the same thing?
Market structure for me is a combination of trend structure and S/R structure. For others this may involve different elements such as volume profile features, pivot points etc.
Context is bigger, encompassing all elements that can influence the environment within which you’re trading. It includes market structure and the meaning that provides to traders. But also the way that price moves within the structure (pace, volatility etc). And also elements beyond structure, such as the time an event is occurring, the underlying sentiment, news effects etc.
That’s a great response. Thank you very much.
You’re more than welcome, Chris. Best of luck with your trading.