Some words of wisdom from back in my days as a pilot…

"Never let an aircraft take you somewhere your brain didn’t get to five minutes earlier."

It’s essential as a pilot to stay ahead of the aircraft. This means projecting your awareness ahead of your current location. Anticipating what is coming, considering what that means and determining appropriate actions while there’s still time to do so.

Ideally you want no surprises.

In the Black Hawk, when we had a high intensity mission that felt like constant crisis management and last minute decision making, we’d refer to our performance as ‘hanging onto the stab’; the stabilator being the tail end of the chopper. In other words, we struggled to keep up.

The exact same principle applies to effective trading.

"Never let price action take you somewhere your brain didn’t get to five minutes earlier."

Stay ahead of the price action.

In conducting your analysis, think several candles ahead.

  • Where is it going?
  • How is it likely to act?
  • Why?
  • What price action will confirm this?
  • How should I react?
  • What will price look like if I’m wrong? What else could it do?

Let’s look at a chart.

Where’s GBP/USD going right now?

As I write this, the UK session is just commencing (2 mins ago), with the following chart…

Yesterday’s UK session breakout point at A was tested at the end of yesterday’s US close at B. Where we are now is that price has clearly rallied during the Asian session, to once again test this AB level.

My longer term bias is bearish; nothing surprising there given the six months of downtrending action. However on an intraday basis I’m a little more range-bound at the moment. My initial plan is to look for price to retest our area of AB resistance. This is a critical point for me, in setting up either a bullish or bearish bias.

Ideally I’ll be looking for a further rejection of that area, via lower timeframe signals as follows:

  • a slight break of the 4480 level which fails to carry through, offering an entry short on failure of the breakout; or
  • a test of the level which doesn’t break through, stalling before 4480. Given the momentum of the rally though, I’ll prefer to see at least two lower timeframe pushes at the area before trading any failure.

Alternate scenarios:

  • a continuation of the momentum in which a break of the level holds. This has limited opportunity long due to possible further resistance in the vicinity of 4500 and 4520 (swing high F). Pass on any long signals here and reassess, preferring possible shorts at next resistance 4500 (zero level) or 4520 (swing high F). Break of these levels indicates stronger than anticipated bullish pressure and a need to reassess for long opportunities.
  • Immediate break downwards to test supports C, D and E. Watch for E to hold this session.

Who knows if it’ll be right? It doesn’t really matter. Either way, any opportunity will be appropriately managed in order to limit risk and to maximise potential profits.

Plus the expectation for future price action and opportunity will be constantly updated, bar by bar, as price action unfolds on the RHS of the chart.

What is important though is that my awareness is remaining ahead of the price with a clear plan of action regardless of what eventuates. I’m not predicting. I’m reacting to what price does in a planned and controlled manner.

Stay ahead of the price action.

"Never let price action take you somewhere your brain didn’t get to five minutes earlier."

Happy trading,

Lance Beggs

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