YTC Price Action Trader - Setup Examples
A little about the strategy to answer some email Q&A...
The YTC Price Action Trader is a swing trading strategy, ideally for short-timeframe intra-day traders in the forex, fx futures and emini futures markets.
It is a technical, discretionary strategy.
It aims to operate within a framework of higher timeframe support and resistance, identifying and fading weakness within the market, in particular at areas of S/R or pullbacks within a trend.
It can be adapted to ANY market and ANY timeframe, provided it contains sufficient liquidity and sufficient price swing to allow for profits greater than costs. What do I mean by sufficient liquidity? Avoid markets which show gaps all through the data, where trading has not occurred, such as this:
Price action analysis is conducted bar by bar in order to identify strength and weakness within the market; projecting that forward to identify most likely future trend direction and areas of potential trade opportunity.
Opportunity is sought in five areas of our charts - TST, BOF, BPB, PB and CPB.
Comprehensive examples are shown, covering the whole process from commencement of analysis to bar-by-bar ongoing analysis, setup identification, trade entry, management and exit. These are not just me picking the best examples I could find, which all run for massive profits. That's not the reality of the markets so would not serve you well. Examples therefore include quite messy price action and difficult conditions. Some go to their target, some are scratched earlier. There's even a loser in there for you!
The examples shown throughout the ebook series are primarily based upon the following market and timeframes:
The strategy is a multiple-timeframe approach to the markets. Using the above timeframes, we aim to trade the 3 min price swings, within a 30 min structure, using the 1 min to fine-tune analysis and time our entry and exit.
The reason for using these timeframes in the book is simply due to them being the timeframes which I have traded the most throughout the last few years.
However, as I said, the strategy is applicable to any market and any timeframe.
I currently use it on shorter timeframes (5 min, 1 min, 20 tick) trading the emini-futures (YM and TF), as this allows me to trade for only 1-2 hours at the session open, leaving plenty of time for the YTC website.
The ebook has a chapter devoted to alternate markets and alternate timeframes, providing examples of its application in emini-futures, forex and stocks, across multiple timeframes from 1 min up to daily.
So... let's have a look at some setups from the markets this week, to give you an idea of the kind of areas you'll be entering the markets using the YTC Price Action Trader strategy. In viewing these examples, remember that a higher timeframe is used to create structure in the markets, and a lower timeframe is used to trigger the actual entry and exit (so don't worry if you can't see how the entry trigger would work in these examples).
Example... YM 1 min chart, October 13th, 2010 (the chart says 14th as that's my timezone... yes, lucky me. I get to trade in the early hours of the morning!!!)
Looking at key areas marked on the chart...
(1) Session open
(2) Slowing momentum into the area of the prior day's high, an indication of buying entering the market.
(3) TST setup; entry long off a shorter timeframe trigger (in this case 20 tick)
(4) Higher momentum move into the session highs; anticipate breakout and watch for breakout failure or breakout pullback opportunities
(5) Really nice BPB setup. As before, the entry long is triggered off a shorter timeframe pattern
(6) Slowing momentum approaching the overnight highs. Was waiting for one further thrust higher towards the level (to trap more longs), before taking a short here.
(7) No short opportunity. Premise changed due to breakout on strength (to be expected due to all the breakout orders which should have accumulated above the overnight highs, along with the obvious place for stops for the shorts). Watch for a breakout pullback.
(8) No BPB opportunity due strength of collapse back below overnight high. Premise changed again.
(9) BPB opportunity short.
(10) Failure to continue lower; reverse the BPB into a CPB setup long.
(11) That's what we were looking for back at (8). This time we get our BPB long.
Example... GBP/USD 5 min chart, October 12th, 2010
(a) UK session open
(b) Initial thrust higher fails, producing a CPB setup short back down to prior support. As before, entry triggers are on the lower timeframe (1 min in this case).
(c) Failed break below prior support offering a BOF entry long.
(d) Trade scratched before target due to failure to continue. Reversal offered into BPB setup. This was not taken due to the pending CPI news release.
(e) Post news momentum down, followed by weaker pullback, offering a PBP opportunity short.
(f) Quite aggressive counter-trend move, but lower timeframe shows clear failure to continue below the large red candle. Two failures to break lower offer a BOF entry long as the breakout shorts are forced to cover.
(g) CPB opportunity short at the point of previous breakout.
And an example for the stock traders:
Example... Stocks - RIMM 5 min chart, October 13th, 2010
A nice gap up; an initial attempt to close the gap; weakness showing on the break below the initial opening range; producing a great BOF entry long as the shorts were forced to cover. If you missed that, it was followed by a nice PB setup a short while later. As mentioned earlier, entry triggers are not shown here, occurring on the 1 min chart. (Entry triggers are fully explained in the ebook).
My preference is the emini-futures, fx futures and forex markets. But the strategy is adaptable to any market... any timeframe.
Oh... and no it's never as easy as it looks in the examples above. The challenge is not in seeing these setups in hindsight, but in learning to anticipate them at the right hand edge of the chart, having the confidence to act as you see them unfolding, being comfortable in taking losses when you get it wrong, and in having the ability to forgive yourself again and again when you make mistakes. This takes TIME and EXPERIENCE, the whole reason for Volume 5 - Trader Development, where we discuss deliberate practice and implement a plan for progressing through the four stages of your learning and development.
Sorry... it's not easy. But that challenge is a part of what I love so much about this game.
Any further questions... just ask!