Adapting to the market environment….

Hope you are nailing the volatile markets. I talked a lot about entries and stuff but didn’t focus much on trade management, which is one of the important things in the life of a trade. Unfortunately, there is no one rule-based trade management if you want to make it effective. You must take the context of the market and adapt proper trade management rules for that particular trade. This is the only way to make the maximum out of the trade.

I have shared one of my trades in crude yesterday in my FB page, which is the best trade I have ever taken in my trading career. Everything perfect for that trade, the context, the entry and the trade management throughout the life of that trade and it definitely deserves an article in my blog.

Lets talk about that trade in detail. First have a look at the clean chart before I took the trade without any lines .

To trade this, we need to form a structure. As you already know, we use HTF for S/R structure and TTF for trend structure.

HTF structure:-

TTF structure:-

This TTF structure might be the scariest thing you can see in the charts. Ranging environment which sandwiched a structural boundary (which is one of my weak zones), and then it confirmed another range inside the previous range which also sandwiched the structural boundary, On top of that, the price action was overlapping and is like a barbered wire around the HTF S/R. Can’t get worse than this.

Now, how to trade this?

That depends on how aggressive you are. If you are an aggressive trader, you would have taken the TST of the range inside range support and managing by now ( I did). If you are conservative/risk-averse, you can wait until it gives a breakout from this mess and then plan to enter either BPB or BOF. The decision between BPB and BOF will depend on the strength and weakness after the breakout, which you already know by now.

As I have already taken the TST of the range support, my plan was to exit the first trade at the the range inside range resistance (aggressive entry and conservative exit) and then look for a BPB/BOF.

Fortunately, it gave an upside breakout as anticipated. Here is how it looks like after that breakout.

Don’t come to a conclusion that this breakout gonna fail looking at the immediate strong rejection after the breakout. Look the LTF to look inside that big bearish candle to get some idea. Remember, everything in trading fails if you are biased to the wrong side. So, gather every damn information you can before making a conclusion on the bias. For now, look at the LTF chart.

As you can see in the above chart, price is getting weaker while approaching the layered support. So, there might be at least one leg up to retest the high after breakout. To do that, it must first break the broken resistance which will be the first hurdle if taken a long entry.. If broken, it must break the high with strength. Any signs of bull weakness/bear strength at the highs will prompt me to stop and reverse the trade for a BOF.

That means, I must enter long on evidence of weakness at one of these levels and I did exactly that at the second broken resistance from the top, which is 2678, when my feel for the market told me that price is not willing to move down beyond that. My stop was at 2674. I didn’t place the targets, I will explain why later in this article. It’s a limit entry. As expected, market has broken the resistance and also broke the high with strength. This is how the LTF chart looks like.

This is what I wanted to see in this trade. The next structural resistance (which is T2 ) is at 2757, almost 79 ticks from my entry which you can see from the HTF structure I have shared. So, there were no significant levels in between to provide opposing order flow. Unless the market turns into sideways before hitting my target, there is no reason to exit the trade early as market always like to move in the least resistance path. I wanted to get maximum out of this trade as the space is clean above the highs and hence I didn’t place the T1. To get maximum out of this trade, I must eliminate early exits as I have no intention to scratch and re enter this trade unless it turns sideways in between, I immediately need to frame some trade management rules. Trailing stop under TTF candles/ volatility based stops and hoping them not to get hit is not a good idea when there is no room for early exits. So, I decided to use the levels of the market in it’s path towards my targets.There is only one rule to do that. Here is it.

Trade management:-

Use the LTF chart for the trade management and trail the stops under red candle lows when the high set by the previous candles is broken.
To understand it, in the above image, there was a stall/pullback between 2685 and 2690. The high set by previous candle is around 2690. If that high is broken, I will bring my stop below the red candle lows, which is below 2685. There was a red candle formed at the right edge of the above chart. If that high is broken, I will trail my stop to the lows set by that stall/pullback.


It is a loose stop and please don’t use this trade management rule on every trade you take. This particular trade management suits this environment. I personally always prefer to scale out unless an environment like this appears on charts, which is very rare.

Once it is decided, there is nothing I have to do except sticking to this rule and take what ever the market gives without any regrets.

Now, look at the following charts in which I have marked my trailed stop areas at different moments. The blue area is where my trailed stop was at the moment of taking this screenshot.

Now the outcome of the trade is as follows.

Trading is not about forming a set of rules and following them everyday. It will be boring and ineffective. You must always learn to identify the context and environment of the market at the time of trade and use that information to trade. Every trade is unique and you must treat it that way if you want to be successful. Like Lance says, trade, record, review and replay.

user says:
Great article and most important of all..what a super overall trade!
I really like how you trailed the swing lows all the way up and not putting the stops higher quicker! I know how hard this is but as you say..when you look at all information you must trust your read and stick with your decision until there is evidence of that the premise should not hold any longer.

True. It’s really hard to do that in realtime if the focus is on making money as the trailed stop was too far from the market price most of the time and it didn’t move too quickly towards the targets. But I don’t care about the money I get from a trade. Choosing the plan, sticking to that and accepting what I get are the only things in our hand as a trader.