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