One of our aims in trading the financial markets is to make sure that we’re trading in the right places on the price chart.
Places which make sense when viewed from the perspective of the psychology of the market participants.
Places which make sense when viewed from the perspective of the structure of the market.
Today we look at one of these places – the retest of a point of structural change.
We’ve addressed this concept briefly in the past. If you haven’t seen this prior article you may wish to review it first.
https://yourtradingcoach.org/trading-process-and-strategy/retesting-the-point-of-structural-change/
The prior article summarised the concept as follows:
All examples in that article dealt with structural patterns on the trading timeframe.
But the same concept can be applied across a much larger time scale, with trade opportunity found as markets retest a point of higher timeframe structural change.
That was the idea behind the following trade.
We’ll start by examining a much higher timeframe in order to see the structure develop over the prior four days.
Volatility contraction is never fun to trade. Monday was slow and boring. Tuesday was worse.
But in the back of my mind at these times is an expectation that this volatility contraction must end at some stage.
And the expansion of volatility on a break from these patterns can provide great
trading conditions.
So let’s move forward to Wednesday to see how the breakout eventually occurs. And to see whether or not it then offers us a nice BPB setup entry long.
Damn! We missed it.
Or maybe not?
Let’s move ahead 30 minutes into Wednesday’s session.
From a structural perspective, this is a beautiful place to be seeking opportunity long. Previous resistance often provides support once broken and retested.
From the metagame perspective, it’s also a beautiful place to be seeking opportunity long.
Anyone with a bullish bias who missed the overnight breakout has now been gifted an ideal “second chance” entry opportunity.
Those already holding a long position have been provided an ideal scenario to add to their position.
And for those who managed to get short from the open on Wednesday, the market is at the ideal area for profit taking (ie. buy orders).
There is good reason to be buying here.
Let’s look to the trading timeframe to see how it played out.
One place I always look for trade opportunity is on a retest of a point of structural change.
Happy trading,
Lance Beggs