Sit down – anytime – and find these easy-to-spot price action trades
I’ve been doing some work on the scalping stuff over recent days – remember I promised to share something with you in the New Year?
Much of this material needs to be worked through in order, with one piece building on another, but I have got one technique that you might like to mull over, and maybe even give a little test-run.
The strategy is called ‘TMT’ (Ten-Minute Toeholds) and I’m going to tell you all about it in today’s eletter…
Why use ‘Ten Minute Toeholds’ to trade like a scalper?
These TMT levels can keep you busy if you just want to sit down at the screen and trade live for an hour or two. They’ll also let you spot the very latest intraday opportunities if you’re just ‘poking your head around the office door’ to see what the market’s up to.
They let you find opportunities from ‘free-trade’, so there isn’t the formal, rigid framework like with some of the other set-ups we’ll use. With this, you simply open your eyes, look at what the market is showing you, drop your orders in, and see what you get. Rinse and repeat.
The TMT set-up occurs with quite high frequency: you can take trades both with and against the intraday trend. This means you can always find action if you’re an aggressive trader but you can also filter the trades according to your own personal appetite…
For example, you might decide only to take trades to the long-side on a particular day, because your analysis of the markets has highlighted strong bullish sentiment or vice-versa.
So you’re getting quite a bit of flexibility here but you mustn’t abuse it.
As with all of my methods I don’t expect every trade to work out for you. I can’t stress enough how important it is to have a realistic outlook. You will have losing trades – I absolutely guarantee it – so your job is simply to identify the opportunities, take what the market gives you, and move on to the next trade, with a clear and unflustered mind.
How TMT trades let you stalk the intraday markets
The TMT set-up involves taking trades off retests of the minor retracements, as liquid markets (like EURUSD) make their progress through the trading day.
It’s the price action of the market that’s important here, rather than the timeframe we view it on – although we do defer to a ten-minute chart here to help us rise above the ‘noise’ of the very short-term charts.
This is a set-up that pretty much guarantees action every day. The market can’t really move without leaving behind the opportunity to scalp with retracement retests, and the premise we’re working on here is enough buying or selling pressure coming into the market at a particular point to halt a retracement –we’re looking to participate when the market RETESTS that area…
Now I must be clear, we’re not looking for full-on market reversals and we’re not trying to pick tops and bottoms. We’re just waiting for the little window of opportunity to open and let us get involved for a handful of pips; taking advantage of the little lumps and notches the market will have difficulty in flowing over without stalling to some degree.
Think of a rock-climber scaling a sheer cliff face: these are like the little toe and finger holds that let him pull himself further up the rock to make progress.
Scalping the TMT Levels step-by-step:
Here’s the quick overview of the 3-step system for finding and trading the TMT set-up, followed by the detailed step-by-step process:
1) Examine your 10-minute candlestick chart (liquid markets only!) and locate the latest untested intraday intermediate highs & lows.
2) Isolate the 3-bar formation that formed the climax of the high/low move and identify the dominant candlestick real-body. (Make sure you’ve seen the market put in a movement of at least 15 pips away from the candlestick real body high/low before placing an entry order.)
3) Place a LIMIT SELL order to enter a trade one pip below the real-body low where you’re looking to enter a short trade. Place a LIMIT BUY order to enter a trade one pip above the real-body high where you’re looking to enter a long trade.
Once filled on your entry, use the ‘If, Then OCO’ bracket order to automatically place your exit orders. The default trade is a 12-pip target with a 12-pip stop loss.
N.B. For best results you’ll need to work with a broker that allow orders to be placed in close proximity to the market.
The detailed process:
1) Examine your 10-minute candlestick chart of and locate the latest untested intraday intermediate highs & lows.
Here we are at the European open. We’ve just seen a little 30-pip pop to the downside. When we look for the untested intermediate highs and lows we see that little peak highlighted blue above the current market which gives us a high to work from.
2) Isolate the 3-bar formation that formed the climax of the high/low move and identify the dominant candlestick real-body.
You can see that the bar at the centre of the highlighted area provided the climax of that gradual upward movement (although it ended up more of a congestion area).
N.B. The ‘dominant’ candlestick real-body is usually the ‘peak’ or ‘trough’ bar, i.e. the bar that provides the extreme high/low of the move.
3) Place a LIMIT SELL order to enter a trade one pip below the real-body low where you’re looking to enter a short trade. Place a LIMIT BUY order to enter a trade one pip above the real-body high where you’re looking to enter a long trade.
We project a level off the candlestick real body low and place a SELL LIMIT order one pip below it.
A 40-pip move to the upside gives us a fill on our entry at 1.3079 – we only get an 8-pip reaction off our level however, a losing trade on this occasion…
As the latest 10-minute bar closes, we look back down below our trade to calculate the TMT level off this new intraday low…
Again, we use the 3-bar formation that gives the low (the ‘trough’ bar itself; the bar immediately preceding it; and the bar immediately following it). The real-body of the trough bar gives us our level at 1.3074 and we place a BUY LIMIT order working one pip above the level at 1.3075.
We get a fill on our entry order – exit orders go in 12 pips either side of entry. We also note the new intraday high that printed, and get ready to place a new short-entry order (if trading from both sides today)…
The next 10-minute bar gives us a simultaneous profitable exit on our long trade and a new entry to the short-side off the 1.3086 Sell order…
And the target is hit on our short trade on the next 10-minute bar…
Now the set-up is very simple as you can see. It relies on visual identification of the trading levels and there’s nothing complicated to it at all. In fact, the risk is that it can be overused and abused precisely because it is so simple.
So… give it a test run yourself. Make sure you find good liquid markets that are currently displaying the range of motion the strategy needs: it’s no use trying to force it to work in a flat listless market!
Your broker doesn’t offer 10-minute charts? Try it on the 15-min or even the 5-min. Or you could open a demo account with a broker that does offer the 10-min timeframe.
And you might apply just a little bit of longer-term analysis before you start hitting the order button (the secret is to get yourself pointing the right way around to begin with – looking for buying opportunities in bullish markets and selling opportunities is bearish markets).
The beauty of the TMT set-up is that keeps you nimble and in a position to change your scalping bias as you watch the price action develop, but you must have a good reason to start scalping against the prevailing intraday trend. Don’t fall into the trap of trying to catch a falling knife.
Give it a whirl and let me know what you think.
And lots more still to come on the scalping front of course…
Be Prepared: Market Moving Data Coming This Week (London Time)
Wednesday 2nd December
09:30 GBP Construction PMI
10:00 EUR CPI
13:15 USD Nonfarm employment change
13:30 USD Fed Chair Yellen Speaks
17:25 USD Fed Chair Yellen Speaks
Thursday 3rd December
09:30 GBP Services PMI
12:45 EUR Interest Rate Decision ECB
15:00 USD Fed Chair Yellen testifies
15:00 USD ISM non-manufacturing PMI
Friday 4th December
13:30 USD Employment numbers!!
17:00 EUR ECB Draghi speaks
Monday 7th December
– no big reports
Tuesday 8th December
09:30 GBP Manufacturing production
So a busy week on the central bank rhetoric (US Federal Reserve and European Central bank) – watch out for ripples being made there. And, of course, be on your guard Friday afternoon for US job numbers.
Until next time, happy trading!
