Let’s try and improve your thought process at the time of trade identification and entry.
Will this trade win?
Let’s start by looking at the higher timeframe structure.
And now the trade entry on our Trading Timeframe chart.
Will this trade win?
This is the wrong question!
A better question is, “Is this a good reward:risk opportunity?”
Structurally, a Breakout Pullback LONG at the prior day’s high is in a great trade location. With a low risk entry and multiple-R potential, this is a trade we MUST take. It doesn’t matter if this particular trade wins or not. Your edge exists over a SERIES of trade. Some will lose. Some will win. The winners should overcome the losers.
So at the time of entry, do NOT concern yourself with worrying thoughts such as “will this trade win?”
Instead ask yourself, “Is this a good reward:risk opportunity?”
If it is… you are right to be in the trade.
Now is the time to manage the risk and opportunity.
And let your edge do its job over a series of trades.
Again…
Will this trade win?
Will this trade win?
That is the wrong question!
A better question is, “Is this a good reward:risk opportunity?”
Again, structurally, we are trading in a good location. The market has fallen back below the prior day’s high and retested the level from below setting up a Breakout Failure SHORT.
With a low risk entry and multiple-R potential, this is a trade we MUST take. It doesn’t matter if this particular trade wins or not. Your edge exists over a SERIES of trade. Some will lose. Some will win. The winners should overcome the losers.
So at the time of entry, do NOT concern yourself with worrying thoughts such as “will this trade win?”
Instead ask yourself, “Is this a good reward:risk opportunity?”
If it is… you are right to be in the trade.
Now is the time to manage the risk and opportunity.
And let your edge do its job over a series of trades.
Will any particular trade win? You cannot know!
But we don’t seek winners. We seek good reward:risk opportunities and manage whatever follows.
Happy trading,
Lance Beggs
Very useful article Lance, Thanks. Learning has never stopped with your articles and especially this one was just a rehearsal of yesterdays trade to me.
Thanks Ashish! 🙂
Hi Lance,
thanks for the interesting article. On the second chart you write
“A fakeout lower (D) provides the stop driven order flow necessary to break resistance (E).”
What does that mean? Could you explain more explicit, please?
Thanks in advance, Sven
Sven,
It’s all about orderflow. Short answer: the break lower from the volatility contraction will bring new SHORTS into the market with stops at or just above the contraction. If this movement lower is met by sufficient buying to trigger the stops then we can expect a surge higher from that point. (ie. a trap which triggers stops to provide a surge of orderflow)
Study orderflow. Study auction market theory. Also look up “short squeeze” as it’s basically that same process, although most short squeeze info you’ll find will be talking about stocks on a daily timeframe.
Also, refer to YTC Price Action Trader volume 2: http://www.ytcpriceactiontrader.com/
Cheers,
Lance
Very nice article. thank you
Thanks Martin! 🙂
Hi Lance,
just bumped into this analysis, very educative. Just one question: your very first figure shows an downward trend, so why did you go long in your first two trades? Were they not against a HTF trend?
Thanks,
Jozsef
Hi Jozsef,
Thanks for your great feedback. I’m glad you’re enjoying my writing. Much appreciated.
I do not trade an HTF trend. I trade the TTF trend within an HTF S/R framework. Essentially the HTF defines the potential barriers to the TTF trend. If one was to look at HTF trends it becomes a never-ending source of confusion. The trend you identified on the 30 min chart was down. But if you move out the the next higher timeframe, it’s an uptrend. So we have TTF up, HTF down, next higher HTF up. Which one is relevant? Or at least most significant? So I don’t look for trends in alignment. I trade the TTF trend. The HTF only determines the S/R structure.
Regards,
Lance Beggs
Very educative..as usual..
Thanks Jyoti! 🙂
Thanks, Lance, for the article and comments!
Best Regards.
You’re more than welcome Paul! 🙂
First Long then Short. Happens most of the time and make one to loose confidence. In the end does not end in good gains. Then one is told by those who do not know Tech Analysis that one does not know Stock selection. Very frustrating as one sees them make more money
Hi Lance,
In the 3rd chart on the page where you have shown the first entry, after the breakout above the resistance, every green bar is followed by a equal or slightly bigger red bar. Don’t you think that that was a sign of bears fighting hard? Of course this is easier to say in hindsight and also the idea of the article is totally different, still couldn’t stop myself from knowing your views on this point 🙂
Regards
Mahesh.
Have a look at the inset in the bottom right of that chart, showing the 30 second LTF. The same bearish moves show there, but with no follow through at all. Bearish move -> stall for 3 candles -> Bearish move going maybe only 1-2 ticks lower -> Stall again.
Obviously the trade decision is made in real-time, so it benefits from information that we can’t see in the static historical charts. That is, the feeling and pace of movement.
But we can often get a glimpse at that information through looking at different timeframes. The picture you’ve seen on the TTF is not present at all when taking a lower timeframe perspective.