HTF Context and the Bias..
Before going further into the article, let me tell you where we can use the bias and the context of the HTF (hourly in my case).
For placing the targets.
While anticipating whether the setup has some room for the aggressiveness (in terms of picking levels and taking entries).
This is for the intermediate traders. Those who are at least break even over a series of trades for the last two months. If you are not there yet, I suggest you stick to the TTF context for taking trades and don’t let HTF bias to complicate things for you.
If you ask me what’s the biggest mistake majority of the traders do while using multiple timeframes, this is my answer.
Forming a bias from HTF and keep on trying to take trades in TTF without considering the bias and the trend structure of the TTF. It is a bad strategy. They can never ever make in the long run.
So make sure your bias and the trend first comes from the TTF (5min. chart in my case). Whatever you bring from the HTF chart, that information must be used only to optimize yo. But not for forming a bias directly in the timeframe you trade.
Alright. So what’s next?
So far so good. But there is one more important thing I want to emphasize.
While analyzing the HTF chart, don’t try to find the exact entry point in that chart. The whole point of analyzing the higher timeframe is to look at what market is doing in it. So finding bias in it is good enough.
Confused ?? Let me give another chance to explain it a bit.
Suppose if the market is trending up in the HTF, don’t try to mark a demand level from the last impulsive to find out where the pullback might end like the way we do to time PB trades. Just keep in mind that the market is trending up in HTF and move on. Plan the trades in your TTF charts playing conservative against that HTF trend and aggressive when the TTF trend/bias strongly aligns with the HTF bias.
Similarly, if the market is ranging in HTF, don’t try to mark the range boundaries in it and use them as structural levels in TTF. Stick to the process of defining the structural boundaries I mentioned or any other method that’s working for you. Just keep in mind that the market is ranging and play conservatively on both sides until it breaks a boundary and shows acceptance in one of the directions in HTF.
I hope you got the point. If it’s still not clear, drop your doubt in the comment box and I will try to clarify it.
I will move onto the example now.
Yesterday’s crude session (12th Sept 2016) is a great example of that. The idea for this article has come into my mind while trading it.
HTF Chart Analysis :-
The market is ranging in the higher timeframe, broken the range resistance and got accepted above it giving a long bias in it. Then it gave a strong BPB and the expectation is for a BOFF as the bias is up. That’s good enough to know.
Note it down in the market commentary notebook (if you maintain one like me) or take a screenshot of it and keep it aside.
Remove all the lines from the HTF chart. Draw the HTF structural level and continue with the rest of the procedure as before. The HTF chart now looks like this.
If you notice, there are no lines related to the trend structure of the HTF chart.
Now see the post-market analysis chart of this session to give you an idea where I used this HTF context.
I want you to focus on the long trade at T. There is a minor demand level at the top, but there was no confirmation of the correctness when the market is testing that level. I was also watching the price behaviour at the green candle high which confirmed acceptance in the TTF (which is lined in the direction of the HTF bias). That gave me some room for the aggressive play and took a chance after the confirmation of the correctness which resulted in the following trade.
Let’s look at another example related to the expectation of a runner before wrapping up this article. Look at the following trade
So I play aggressive everytime TTF bias aligns with the HTF bias?
No. I emphasize the word “Strongly aligns” here. The TTF trend structure, the TTF bias and the TTF price action must align strongly in the direction of the HTF bias for me to play it aggressively.
Can we expect runners everytime the trade we take is in the direction of the HTF bias?
No again. And the answer is the same. The TTF trend structure, the TTF bias and the TTF price action must align strongly in the direction of the HTF bias for me to expect a runner. Keep the concepts of acceptance and non-acceptance in mind while the market is interacting with supply and demand levels from TTF chart and manage the trades wisely rather than keeping a strict limit exit order in these scenarios.
I know this is a bit vague topic and that’s the exact reason why I suggested the beginners stay away from this till they reach at least breakeven as they might mess up things when the HTF bias comes into play. It’s just an add on to optimize the edge when used properly.
If I made my point clear to at least one person with this article, it served its purpose. 🙂 See you all next time. Happy trading and play it safe as we are entering into the volatile phase.
Thanks again for another nice article. Like HTF, could you please write about how you mark the LTF demand/supply level for taking entry in both trending and ranging market. It seems I am marking it wrong, wherein, the price even does not reach the level before turning back. For example, in a trending market do you mark the broken swing point as the demand/supply level or the start of the impulsive move which broke the swing point as demand/supply level. I am seeing most of the time, price does not reach the start of the impulsive move but reaches between broken swing point and the impulsive move and turns back.
I hope, my query is making some sense to you.
Have a look at this article in case you missed it.
I only use levels from LTF to time the pullbacks. I consider levels from the last impulsive swing. Let us say the last impulsive swing in TTF is marked as AB, I look to take PB entries at the LTF trap levels and the LTF swing lows (for long) or LTF swing highs (for shorts) between A and B.