- some MS points
- using stats to help my bias
- directional bias through liquidity
market structure
2 timeframes
- 1h
- 15m
(depending on the type of trader you are)
uptrending
downtrending
rangebound
identifying swing points can be done either using manual lookback or via williams fractal indicator (set to 2 on either side of the swing high)
market structure (2)
notes -
majority of the time price will be within the "rangebound" category.
breaking that "rangebound" environment then deciphers the trending move you are given
high hit rate levels
- level(s) that reset after a certain period (generally daily) which gives me some form of directional bias whether they are below or above price when printed.
high hit rate levels (2)
confluence
the most powerful thing is to use this with is Market structure, below is an exact example of how I would do so.
on a day as such my directional bias would be to look for longs.
liquidity
resting liquidity is important
if I see there is more resting liquidity on one end of a range over another I would favour that direction for my bias.
poor highs/lows
routine check - simply I check my 50tick BTC/USD TPO chart
if there are more than 2 or more blocks at either a high/low then i classify that as a poor H/L
This is typically part of my liquidity routine and these levels have a higher likelihood of being tested.
combination
resting liquidity - below price
high hit rate level - below price
poor highs/lows - below price
I would be favoring shorts that day
and visa versa
finding high hit rate levels
in the future, I will share some of mine, currently they do give me too much of an edge to release
what I suggest is to think about levels you generally feel would be revisited then put the work in and get direct figures on a trial-and-error basis
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- the last up/sideways movement before an illiquid down move
- the last down/sideways movement before an illiquid up move.
illiquid typically can just mean a strong one time-framing move where there are no pullbacks.
example ↓
how orderblocks work (theory):
orderblocks are where there has been a clear sign of significant previous market activity, meaning a revisitation of this area could act as a stop gap.
for example:
the last down move before a significant up move is being revisited.
there are multiple reasons for price to react from this:
- offside shorts from this zone → closing positions at breakeven
- any new longs who entered here → defending their existing position
these zones are primed with liquidity (thicker books), allowing for larger players coming into the market to increase the chance they get orders filled.
when new positions enter and are placed in an offside position, they will naturally want to close, squeezing the market in the opposite direction.
this natural outburst of breakout traders being caught offside can be a great reason to look for a reversal.
example ↓
identifying trapped traders:
requires an understanding of open interest and delta, as open interest will categorically tell you if the majority of positions entering are new ones.
open interest increasing = new positions
open interest decreasing = positions closing
positive delta = longs
negative delta = shorts
breakout traders only appear when there's an increase in open interest; otherwise, most positions you see will be closing.
1) identify the candle in which new positions have largely entered 2) identify a level in which those new positions would be offside 3) trade in the direction of the new positions unwinding
engulfing candles - I look for a candle to wick below the previous candle and close at least beyond the 50% mark the previous candle (bullish engulfing).
I find this to be as effective as waiting for the entire previous candle to be engulfed.
the following day will be biased towards the direction of the previous day engulfing candle.
shooting star - my favourite daily formation, these often result in better entries to much larger moves, failure to extend above/below previous day and end up mean reverting.
example ↓
one time-framing:
the most basic thing I always check for - an aggressively trending move.
daily timeframe, for a bullish example - is the daily candle printing 3 or more consecutive daily highs in a row whilst not wicking below previous day.
yes = I will only follow that direction for the remainder of the day should i take any trades.
no = move to next step
Its a simple and effective way to not get caught offside against an aggressively trending market.