Tactics while dealing with Pullback trades (PB, CPB) and Structural trades (BPB,BOF,TST)
Let’s divide our five setups namely PB, CPB, BOF, BPB, TST into two categories. PB and CPB belong to one category and BOF, BPB and TST belong to the second category.
Now try to guess on what basis I have categorized them before proceeding further. Don’t worry if you didn’t get that, I will give the answer below. 😀
In the case of BOF, BPB, and TST the setup areas are fixed. As we consider our entries in these setups around the structural/range boundaries (which are fixed), we don’t need to take a lot of mental pressure while looking for these setups. With a solid risk and money management rules, we can make decent profits in the long run in these setups. The price will validate or invalidate our premise around these areas and we can easily know what price is likely to do by reading bars around the boundaries.
But, this is not the case in PB and CPB setups. There are no fixed places to initiate these trades as no one knows where a pullback is likely to end. We can identify the possible areas as I said in the previous article about pullbacks, but we cannot say that the pullback gonna end there except in hindsight. In fact identifying the LWP, working on for a better entry with limit orders, placing the stop loss if entered with a limit order is not that easy in this PB and CPB setups. This makes our life a bit tough while hunting for PB and CPB setups. We can master the skill of identifying the pullback tops and bottoms only with experience and there is no short cut to it.
Let me share my own tactics while dealing with these two types of setup categories. Feel free to modify them according to your trade plan.
Tactics while dealing with Pullback setups:-
Validate the PB and CPB setups with the help of the checklist I have provided here.
Focus more on the trading timeframe. Try to avoid the lower time frame as it gives a lot of early entries and whipsaws while looking for PB or CPB setups.
Don’t go for Limit entries if you are not a seasoned trader. Try to play with limit entries in these setups when you are fully comfortable in identifying the areas that I have talked about in the 5th point of the previous article.
Be flexible while dealing with the LWP. It might change when a new candle is printed on the chart with some features of candle strength in the direction of pullback.
If the pullback is clearly weak with respect to the trend, give some room for the trade. Managing the trade aggressively will cause an early exit.
Tactics while dealing with the Structural Trades:-
We trust the structural boundaries very blindly in taking trade entries and that causes taking trades against a strength which is a disaster. When the price is showing strength while approaching the boundary, don’t look to fade it. So, make a habit of finding the strength in the move approaching boundary before considering a trade against it.
Breakout entry technique is not a great idea in these setups. Try to enter as close to the boundary as possible on the evidence of weakness. Go for a breakout entry if you don’t have an option of entering with a limit order in structural trades.
BOF and BPB trades must move fast. Stand on your toes to take action if price shows hesitation to move in the direction of these trades after LWP is triggered. TST takes some time to move towards the target, so take necessary action to decrease the initial risk in this setup.
While taking a counter-trend trade like TST or BOF after a prolonged move, it’s better to exit the second unit at the trend violation pivot rather than the structural boundary. Most of the time, price turns choppy after touching the trend violation pivot after a parabolic move. You can re-enter with a pullback setup if it provides any after the exit.
Luckily, I have found this in today’s trading after I published this article. 😀 This is what I meant in this 4th point.
BOF trades which are taken before price enters the broken range/framework must be managed aggressively until it enters into the broken range/framework. Look for a stop and reverse trade if the price is showing weakness in the direction of the trade at the broken boundary.
Last but not least, maintain a feel for the accumulation of stop orders around the boundaries as almost all the price action traders take decisions around the boundaries…
Tactics while dealing with the sideways range:-
When the market is in a sideways range, structural setups are always the high probability ones. Stay calm and relaxed when market dances withing the range boundaries and stand on your toes to react when it approaches the boundaries. You need to observe the following things when the market is approaching the range boundary.
a) First, identify the momentum of the swing and compare with that of the previous swing in the same direction and form an opinion on the strength of the swing.
b) Look whether the movement from the other boundary to the one that you are concerning now is following a trend like structure or not. If it is like an uptrend or downtrend, look at the projection and depths and make an opinion on strength. If there is no trend like structure, skip this step.
c) Check whether the price is hesitating to approach the boundary or not using the LTF.
c) Look whether the swing is overextended or not. If it is overextended, look to fade it on the evidence of weakness.
d) While trying to make a fade entry like TST or BOF at the boundary, look how many times price has bounced backtesting the boundary that you are looking to place the entry. If it tests more than three times and bounced back earlier, there might be a chance of pressure play. Make your trade decisions keeping this in mind.
If the range is wide enough and there is no overlapping of candles in the swings within the range, you can look for PB or CPB setups, but these must be managed aggressively. PB and CPB are still low probable trades in the sideways market.
I will update this article whenever I frame new tactics.
P.S :- These are just the tactics that I have framed with my observations and not fixed rules. Feel free to modify them according to your psychology, risk tolerance and of course with your own observations..
I need some spoon feeding on reading the reluctance of price to move near Range boundaries/SR lines.
I checked up a few successful breakouts and TST reversals. What I understand is:
In an up move, as price tries to hit the Range High, there should be low close bear candles for that to become a high probability TST. ..If there are no low close bear candles, it may become a breakout. We can wait till BO happens and then make a decision on whether to go for BPB or BOF entry.
Similarly, in a down move, we have to focus on the presence or absence of high close bull candles in 1 min chart, as price hits Range Low.
Would like to know, how your inputs on gauging the reluctance near Range boundaries/SR lines.
You don’t need to make it more complicated like this. Fixed rules don’t work in trading. The decrease is momentum is a sign of reluctance. Decelerating swing, decreasing projections, a steady decrease in candle ranges, presence of more number of red candles in an upswing and green candles in downswing etc. are signs of reluctance. You will know when you maintain the feel for the order flow with active trade management. There are successful breakouts after low close bear candles and your hypothesis might not be true I guess…