Not sure on Price Action?
A thread on:
- Market Structure
- Bull & Bear Trends & Reversals
- Price targets / defining an exit
- Where to enter & place a SL (in both bull & bear situations)
A thread on:
- Market Structure
- Bull & Bear Trends & Reversals
- Price targets / defining an exit
- Where to enter & place a SL (in both bull & bear situations)
Market Structure:
Market structure can basically be defined as the series of swing highs and swing lows and all the price action in between that can be found in the following scenarios: upward trend, downward trend, or in a ranging environment.
Market structure can basically be defined as the series of swing highs and swing lows and all the price action in between that can be found in the following scenarios: upward trend, downward trend, or in a ranging environment.
Bear in mind that market structure is fractal and can be found replicating itself across all timeframes (1H chart, 15M chart, 1M chart).
Eg - the 1H chart could be in a downtrend, but the 15M chart is showing signs of a bullish uptrend
Eg - the 1H chart could be in a downtrend, but the 15M chart is showing signs of a bullish uptrend
Swing Highs & Lows
Swing High
Defined as when price makes a clear high, but is flanked by two consecutive lower high candles
Swing Low
Defined as when price makes a clear low, but is flanked by two consecutive higher low candles
Swing High
Defined as when price makes a clear high, but is flanked by two consecutive lower high candles
Swing Low
Defined as when price makes a clear low, but is flanked by two consecutive higher low candles
Up Trends
Where each peak and trough is successively higher than the previous occurences;
Essentially, when higher swing lows and higher swing highs are successively occurring, the trend is considered intact; that is until this structure or continued formation is broken
Where each peak and trough is successively higher than the previous occurences;
Essentially, when higher swing lows and higher swing highs are successively occurring, the trend is considered intact; that is until this structure or continued formation is broken
Down Trends
Where each peak and trough is successively lower than the previous occurences;
Essentially, lower swing lows and lower swing highs that are successively occuring, where the trend is considered intact until this structure or continued formation is broken
Where each peak and trough is successively lower than the previous occurences;
Essentially, lower swing lows and lower swing highs that are successively occuring, where the trend is considered intact until this structure or continued formation is broken
Bullish Reversals:
Where a downtrend has occurred, but after a rally in price, recent market structure is retested, whereby we experience:
Where a downtrend has occurred, but after a rally in price, recent market structure is retested, whereby we experience:
1) A successful test of support;
2) The most recent swing high market structure from said impulse move must also be broken, with price continuing in the new trend direction to confirm that the trend has in fact changed / reversed.
2) The most recent swing high market structure from said impulse move must also be broken, with price continuing in the new trend direction to confirm that the trend has in fact changed / reversed.
Bearish Reversals:
Where a uptrend has occured, where recent market structure is then retested, which we then experience:
Where a uptrend has occured, where recent market structure is then retested, which we then experience:
1) A failed test of resistance;
2) The most recent swing low market structure must also be broken, with price continuing in the new trend direction to confirm that the trend has in fact changed / reversed.
2) The most recent swing low market structure must also be broken, with price continuing in the new trend direction to confirm that the trend has in fact changed / reversed.
Building a Narrative
How do you build a trading narrative to plan your trade?
Use the information provided so far in this thread where we've briefly explored market structure, swing highs and lows, and bullish and bearish reversals.
How do you build a trading narrative to plan your trade?
Use the information provided so far in this thread where we've briefly explored market structure, swing highs and lows, and bullish and bearish reversals.
We use this information to then identify a target / exit to trade to, where we can then identify a reasonable trade entry, determine a suitable stop loss, and then work out our position sizing and risk to take.
Let's explore the below:
Targets / Trade Exit
Entry & SL Placement
Let's explore the below:
Targets / Trade Exit
Entry & SL Placement
Target Identification
Identifying your target is key to building your trade narrative
You need a realistic goal that the market is likely to reach for and respect, rather than an arbitrary 2R or 3R
Identifying your target is key to building your trade narrative
You need a realistic goal that the market is likely to reach for and respect, rather than an arbitrary 2R or 3R
Taking a look at the previous and below examples:
We can see that after a bullish reversal is confirmed, then it makes sense to target just below some recent key resistance levels as a target for price to reach to (if you felt that you wanted to enter a long position).
We can see that after a bullish reversal is confirmed, then it makes sense to target just below some recent key resistance levels as a target for price to reach to (if you felt that you wanted to enter a long position).
Position Entry & SL Placement
Once we have defined where price could look to be heading, based on price action and market structure movements, we can then determine how we want to enter the trade and manage our risk
Once we have defined where price could look to be heading, based on price action and market structure movements, we can then determine how we want to enter the trade and manage our risk
In the example below, we've entered a trade once a bullish trend reversal is confirmed, with a SL placed below support that has just been tested. Please note that the placement of our SL is based on market structure, and again, not an arbitrary location similar to our targets.
Bearish Example:
In the snapshot below, we've entered a more riskier trade just before a trend reversal is confirmed, with a SL placed just above the recent swing high
Our target is some recent resistance which would give us just over a 2.34R if we were successful in this trade
In the snapshot below, we've entered a more riskier trade just before a trend reversal is confirmed, with a SL placed just above the recent swing high
Our target is some recent resistance which would give us just over a 2.34R if we were successful in this trade
This concludes the guide on Market Structure & Building a Trading Narrative
Hopefully you've been able to pick up some ideas and understanding of how price can trend upward or downward, how it can reverse, and what the market structure of these movements looks like
Hopefully you've been able to pick up some ideas and understanding of how price can trend upward or downward, how it can reverse, and what the market structure of these movements looks like
You should now have a fair idea of how to build upon a trading narrative in order to reasonably determine your targets based on some market structure and price action
These targets as we've covered are not arbitrary 2R or 3R targets, but have some reasonable substance
These targets as we've covered are not arbitrary 2R or 3R targets, but have some reasonable substance
You should also now have an idea on where to place a Stop Loss when trading that is based upon market structure, that when invalidated, is a reasonable area to be stopped out at. This is opposed to a random Stop Loss placment
And lastly, thank you for taking the time to go through this quick thread that has hopefully given you some further insight, or if not, hopefully you can pass it on to someone who may be able to find some use from it.
Cheers - Mindset_BTC
Cheers - Mindset_BTC
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