| What I'd like to do in this very short article is give | | | | level - I can't talk about my entry and exit triggers, |
| you an overview, looking at the strategic level, of | | | | and trade management strategies. It would take a |
| how I trade my favorite setup, which will be the one | | | | whole book because it's not just a simple indicator |
| referred to in most of the analysis on my website. | | | | based entry or exit. It's based on price action - on an |
| We're talking, 'the big picture'. | | | | understanding of the nature of movement of price. |
| Too many people make a critical error in focusing | | | | That takes a long time to develop, and it's something |
| exclusively on their entry triggers, and trying to enter | | | | I'll cover in my website in a lot more detail. |
| on every occurrence of that signal, without ANY | | | | However, for now I can share a very broad |
| consideration for where that trigger is occurring | | | | overview of my strategic level trading concept. At |
| within the bigger picture market structure. | | | | least my favorite one anyway. |
| Too many novice traders spend far too long trapped | | | | The reality of price movement for me is supply and |
| in this stage of learning. They discover a new trigger | | | | demand. And that supply and demand leaves |
| and a part of their mind then becomes excited that | | | | footprints that can be read in a price chart. |
| maybe they've found the holy grail of trading. It | | | | All price movement, all turn points, and all areas of |
| doesn't matter if it's an EMA 10/20 crossover, or | | | | support and resistance are a function of the balance |
| perhaps a MACD crossing above zero, with | | | | or imbalance of supply and demand. |
| stochastic rising, and RSI above 50. It is NOT the | | | | In particular, the key areas which allow for low risk or |
| holy grail. It is just an entry trigger. | | | | high probability entries, are areas of support and |
| The fact is: | | | | resistance. |
| Â- Market Structure tells you where to trade. | | | | I trade within a framework of support and resistance. |
| Â- Entry triggers tell you when to get in and | | | | I define all major support and resistance based on a |
| out of your trades. | | | | higher timeframe, and then look to profit from |
| Focus on defining the structure of the market first, | | | | movement between these areas on a smaller |
| and then look for a trigger. | | | | timeframe. |
| Let's say for example that our entry trigger is a | | | | For me, my markets of choice are forex & |
| candlestick reversal pattern... in this case a Bullish | | | | equity indices. The longer timeframe for defining |
| Engulfing Candle. Where would you find the higher | | | | major support and resistance, is an hourly chart, and |
| probability trade? | | | | the trading timeframe is anywhere from a 1 to 5 |
| Would it be at the top of an extended rally, where | | | | minute chart. |
| the Bullish Engulfing pattern is pushing straight up into | | | | The strategy works with other markets as well, |
| the overhead resistance? | | | | because it's based on the truth of price movement. |
| Or is the higher probability trade where the Bullish | | | | And because markets are largely fractal in nature, |
| Engulfing pattern shows that a major support level | | | | you can adjust the timeframe to suit. Say you |
| has held and there is significant profit potential still | | | | wanted to trade the daily charts - then you just get |
| available from the entry point to a projected target | | | | your major support and resistance off the higher |
| at the overhead resistance level. | | | | timeframes - being weekly or monthly charts. |
| It's exactly the same entry trigger, but obviously the | | | | So, the major support and resistance areas are |
| market structure tells us that the second entry is the | | | | placed on the chart, and I'm looking for any low risk |
| higher probability trade. | | | | or high probability trades (based on my entry triggers |
| REMEMBER: The market structure (in this case | | | | as defined in my trading plan), going long off major |
| Support & Resistance) tells you where you | | | | support or going short off major resistance. |
| should trade. The trigger tells you when to get in or | | | | And for the price movement in-between major |
| out. | | | | support and resistance? |
| Now, market structure doesn't need to be just | | | | If it's an uptrend I look for low risk or higher |
| support and resistance. YOU need to consider, 'what | | | | probability entries at areas of minor support. |
| is the reality of price action as you see it? What do | | | | If it's a downtrend I look to go short at low risk or |
| you believe causes price to move?' | | | | high probability entries off minor resistance. |
| Have a look at a number of charts... What do you | | | | And if it's a sideways trend, then I aim to identify |
| see? | | | | low risk or high probability entries off both minor |
| Is it perhaps a framework of support and resistance | | | | support and resistance. |
| levels defining areas of price stall or reversal in the | | | | Key point though for all entries - It must be a low |
| market? | | | | risk or high probability entry, based on the clearly |
| Do you see a "rubber band" type concept, with the | | | | defined criteria in my trading plan |
| market reaching extremes and then reverting to the | | | | So there you are... It sounds simple when looked at |
| mean, or centerline moving average? Moving back | | | | from this high level overview. The reality is though, |
| and forward between the upper channel line, the | | | | that it's really hard. The statistics of failed traders |
| centerline, and the lower channel line. | | | | clearly show that. Success takes a long period of |
| Do you see swings? Higher highs & higher lows, | | | | time. Whether you relate to my view of the |
| lower highs and lower lows, with impulses of | | | | markets, or prefer some other method of defining |
| momentum in between? | | | | market structure, spend a lot of time just watching |
| Define how you see the bigger picture of market | | | | price movement. Learn to 'read the tape' as it used |
| movement. What is it that you see when you look at | | | | to be called, internalizing the patterns and flow of |
| charts? What is the market structure? And only then | | | | movement of price. It takes time. Be patient, and |
| should you look for an entry trigger that gives you a | | | | embrace the challenge. |
| low risk and/or high probability trade within the | | | | Stop just blindly entering at every occurrence of |
| context of your bigger picture. | | | | your entry trigger. Remember: |
| So, what do I see as the reality of price movement? | | | | Â- Market Structure tells you where to trade. |
| How do I trade? What is my strategy? | | | | Â- Entry triggers tell you when to get in and |
| Well, in this short article I can't go into the tactical | | | | out of your trades. |