Traps Against Bias

There are a few concepts that I tend to repeat often. “Traps against market bias” is one of these concepts. Not just because they form a key part of my trading approach. But also because traps are difficult to trade for many traders. Psychologically, they can feel really uncomfortable. But in my opinion, when the context is right, these are setups that you should be taking. It’s my hope that repetition will breed some familiarity and help you somewhat along the way to making them an integral part of your trading approach.

See here for a review: https://yourtradingcoach.org/trading-process-and-strategy/Gaining-Confidence-in-Taking-the-Trap-Entries/

And here: https://yourtradingcoach.org/trading-process-and-strategy/Gaining-Confidence-in-Taking-the-Trap-Entries-2/

But let’s summarise…

The concept:

• A common reason for difficulty in taking trap entries is your faulty expectations.
• You’re expecting breakout success. I’m anticipating breakout failure!

 

Why is this the case?

• Standard TA teaches us that a breakout of a key level or a significant swing high or low is a potential sign of a new trend.
• This leads to people expecting breaks to work.
• The reality is that it’s only a potential sign of a new trend… at least up until price acceptance in the new area and signs of strength in this new direction.
• The reality is that breaks against bias often do fail.
• So, if you can gain an entry on a break against your bias, with acceptable reward:risk parameters, then this is a trade that you SHOULD be taking.

 

When a breakout occurs against a larger market bias, anticipate a failure.

Trending markets… find breaks of swing highs/lows against the trend.

Ranging markets… find breaks around the edges of range support and
resistance.

 

Any market… any timeframe!

So let’s look at a market I haven’t shown very often in the YTC newsletter. I’m currently experimenting with the emini S&P (chasing more liquidity… but that’s another story)!

Let’s look at Monday’s very nice trending session and study a trap against market bias.

All markets… all timeframes.

When a breakout occurs against a larger market bias, anticipate a failure.

Trending markets… find breaks of swing highs/lows against the trend.

Ranging markets… find breaks around the edges of range support and resistance.

Study your charts. Question your prior beliefs and consider amending them to something more useful – when a breakout occurs against a larger market bias, anticipate a failure.

Happy trapping,

Lance Beggs