Directional Bias Explained - Thread

1. What is DB?
- explicit expectation of a direction in the market
- probability enhancer; longs superior success rate in bullish DB, shorts superior success rate in bearish DB
- helps improve target selection & trade management (confluent with DB)
2. Constant vs. Situational DB
Constant DB = trading system virtually always offers a
directional preference (deriving price from moving average)
Situational DB = ts only offers a directional bias under specific circumstances (price decisively closes below a daily support)
3. Affect of DB on Trade Selection & Trade Management
- long when DB bullish; short when DB bearish
- disallow all trades against DB unless there are extremely unusual circumstances (sig. news, tremendous R:R)
- helps silence intraday noise
- adjust TP when DB is strong
4. Affect of DB II
A. Target should be derived from high time frame charts (not intraday)
B. Intraday trouble areas (ITA) still useful for trade management (adjusting stop loss etc.)
C. ITA anticipated to fail as DB unfolds
D. broken ITA provides excellent compounding opp.
5. Tools to derive DB
- moving average crossover
- price relative to moving average/ trend tools

--> all work best in trending conditions, otherwise might provide false signals
--> no perfect tool
--> clear understanding of price action and market structure vital to success
6. Market Structure (will make own thread eventually)
HTF shifts in market structure often cause trending environments & set clear DB bias

- formation of higher high (HH) --> bullish DB (buy dips)
- formation of lower low (LL) --> bearish DB (sell rallies)
7. Support/ Resistance Structure Break
- price breaking sig. resistance or support offers clear DB
--> price closing below HTF support/ above HTF resistance
- bias forms ONCE structure is broken
- price under no obligation to retest
- Clear Break: momentum > retracement entry
8. Support/ Resistance Structure Flip Failure
--> Broken Support anticipated to act as resistance
--> Broken Resistance anticipated to act as support

- broken S failing to act as resistance = bullish DB
- broken resistance failing to act as support = bearish DB
Summary:
1. good trading system offers a DB
2. great benefits of trading with HTF bias
3. TS offers either constant or situational DB
4. Indicators/trend tools offer DB (no magic indicator)
5. basic price action stuff works very well (market structure, R/S continuation, etc.)

More from All

MASTER THREAD on Short Strangles.

Curated the best tweets from the best traders who are exceptional at managing strangles.

• Positional Strangles
• Intraday Strangles
• Position Sizing
• How to do Adjustments
• Plenty of Examples
• When to avoid
• Exit Criteria

How to sell Strangles in weekly expiry as explained by boss himself. @Mitesh_Engr

• When to sell
• How to do Adjustments
• Exit


Beautiful explanation on positional option selling by @Mitesh_Engr
Sir on how to sell low premium strangles yourself without paying anyone. This is a free mini course in


1st Live example of managing a strangle by Mitesh Sir. @Mitesh_Engr

• Sold Strangles 20% cap used
• Added 20% cap more when in profit
• Booked profitable leg and rolled up
• Kept rolling up profitable leg
• Booked loss in calls
• Sold only


2nd example by @Mitesh_Engr Sir on converting a directional trade into strangles. Option Sellers can use this for consistent profit.

• Identified a reversal and sold puts

• Puts decayed a lot

• When achieved 2% profit through puts then sold

You May Also Like

Department List of UCAS-China PROFESSORs for ANSO, CSC and UCAS (fully or partial) Scholarship Acceptance
1) UCAS School of physical sciences Professor
https://t.co/9X8OheIvRw
2) UCAS School of mathematical sciences Professor

3) UCAS School of nuclear sciences and technology
https://t.co/nQH8JnewcJ
4) UCAS School of astronomy and space sciences
https://t.co/7Ikc6CuKHZ
5) UCAS School of engineering

6) Geotechnical Engineering Teaching and Research Office
https://t.co/jBCJW7UKlQ
7) Multi-scale Mechanics Teaching and Research Section
https://t.co/eqfQnX1LEQ
😎 Microgravity Science Teaching and Research

9) High temperature gas dynamics teaching and research section
https://t.co/tVIdKgTPl3
10) Department of Biomechanics and Medical Engineering
https://t.co/ubW4xhZY2R
11) Ocean Engineering Teaching and Research

12) Department of Dynamics and Advanced Manufacturing
https://t.co/42BKXEugGv
13) Refrigeration and Cryogenic Engineering Teaching and Research Office
https://t.co/pZdUXFTvw3
14) Power Machinery and Engineering Teaching and Research