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YTC Price Action Trader (www.ytcpriceactiontrader.com)

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Elite Member
London, UK
 
Futures Experience: Beginner
Platform: NinjaTrader, home-grown Java
Broker/Data: IB/IQFeed
Favorite Futures: EUR/USD
 
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Posts: 1,085 since Dec 2010
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more trapped traders.....


Quoting 
It is not clear to me whether recent posts are on-topic about YTC room or not.

Just a quick FYI @Big Mike: you say "room" - not sure if you meant 'trading room' like Al Brooks's, but YTC PAT is a pdf book and in fact Lance Beggs the author doesn't operate a trading room. There's just a blog, a newsletter and a website with docs and videos.


kulu View Post
I agree, it is kinda hard to pick those setups in a live market. I have not used them in my trading. All I remember was I liked the concept and it made intuitive sense. I have only been able to identify them on static charts.


OK, the concept of trapped traders: definitely a YTC PAT theme and one that sounds great. But I'm going to play Devil's Advocate here, which I don't actually want to play but since no-one else is saying anything, here goes:

Trapped traders are possible to see everywhere and therefore no use.

Since the idea of locating trapped traders to benefit from their stop order flow is only provable (and actually only half provable) once there has been a price surge afterwards that might (or might not) have been their stops being run, does it make sense to try finding them?

I have no experience of locating trapped traders in real time so my analysis is perhaps worthless, but since I can imagine trapped traders in most locations (it's just people getting their trading wrong), why should the method lend me an edge?

This is especially true in forex where there is no volume available. How else can you detect when lots of break-out traders are jumping on the bandwagon?

Here's a chart of the Euro/USD forex in London time showing the morning session start. The blue line is the Asian session high which traditionally break-out traders like to watch, representing resistance.

The theory goes like this:

- the break-out traders watch the market picking up steam after Europe opens for business and it looks bullish. The Asian session was mixed - it went down and came back again, made a high around 5:00am and sold off a bit. Now it's heading back for that Asian high and the break-out traders won't be able to resist leaping in long as soon it makes a tick above that, either ignoring the impending round number at 1.37 or thinking it at least makes a good scalp.

- it's not all bullish though, note that red candle, #111 so there is weakness in the rally.

- the market breaks out (our traders go long hopefully)

- instead of pushing to the upside in a continuation of the rally, the market stutters. So we have weakness and a potential break-out failure which could trap all those longs, and our aim is to get short in order to ride their stops as the failure goes against them.

- now look at the 1 min chart. If you were a break-out trader (our intended victim), presumably being a good trader you would enter long and automatically place a stop behind you. Where would you put it? Automatically probably a good 10 points away. So let's assume that the little retrace back below the resistance didn't stop anyone out yet (the 2nd red candle on the 1min chart after the break-out). That means over the next 5 bars the break-out traders are still hoping that the market will rise up and away, so they'll be busy at this stage pulling up their stops to around probably 1.3685 but essentially anywhere under the resistance line. Plus later newby traders will have entered without stops and they'll bail out later after the pain gets too much, adding to the order flow.

- we either enter short on a stop at the same place, or if we are experienced, we work an entrance above the line when we see a trigger - a stall or a candle formation etc.

- BINGO! The market slumps far enough back under resistance to trap all those longs and hit the stops, and we're in too.

So, did that make sense? Fact or fantasy? If I can make up this kind of story for the interaction of price with any support or resistance level on the chart, I'll probably be wrong just as much as I'm right. So why would it lend me any kind of edge?

You can discover what your enemy fears most by observing the means he uses to frighten you.
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YTC Price Action Trader (www.ytcpriceactiontrader.com)-trapped-5min.jpg   YTC Price Action Trader (www.ytcpriceactiontrader.com)-trapped-1min.jpg  
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