Smart money
When selling a retail asset, traders place their stop orders above the nearest swing high.
Stop order of an open short position = potential buy order.
The price reaches the level where “smart money” open a short position due to the liquidity of stop loss orders of retail traders’ positions.
Also
liquidity are
positions of traders buying on a level breakdown.
The price reaches the “support” level, forming a “double bottom”, where retail traders buy the asset and place stop orders below the nearest swing levels.
Stop order of an open long position = potential sell order.
Often the EQH and EQL form in a double or triple top/bottom pattern, causing retail traders to regard it as "resistance"/"support".
EQH and EQL often act as price magnets.
Liquidity is one of the most important components in the smart money concept, along with price structure.
Liquidity >‹ structure.
Often the EQH and EQL form in a double or triple top/bottom pattern, causing retail traders to regard it as "resistance"/"support".
EQH and EQL often act as price magnets.
СТРУКТУРА
Структура цены: HH & HL
HH (higher high)
HL (higher low)
LH (lower high)
LL (lower low)
STRUCTURE
Price structure: HH & HL
In a bullish trend, the structure maintains higher highs and higher lows.
In a bearish trend, the structure will maintain lower highs and lows.
As long as the price is in this sequence, the trend continues.
STRUCTURE
Change in market structure
SMS (shift in market structure) -
renewal at the cost of local highs/loys without breaking the structural high/loy.
It is a sign of BOS on a lower timeframe.
Structure
Price fractality
LTF (lower time frame)
HTF (higher time frame)
BOS on a lower time frame usually leads to
SMS and then to BOS on a higher timeframe.
The price is fractal.
complex correction
Complex correction is a sub-structure
corrective
movements of a higher timeframe after an impulse.
PRICE IMBALANCE
Effective price
Under normal market conditions, price movements do not create gaps
between the shadows of the candles
-
THIS
is defined as the effective price.
PRICE IMBALANCE
Ineffective price
Being in liquidity block the zone (imbalance) completely.
constantly search market strives inefficiency
PRICE IMBALANCE
Ineffective price
Imbalance In most cases, partial covering of the imbalance is sufficient.
The reference level is 0.5 as equilibrium or fair price.
PRICE IMBALANCE
Ineffective price
An example of complete overlap of imbalance and continuation of movement along the trend.
PRICE IMBALANCE
Ineffective price
An example of a reaction from 50% imbalance.
ORDERBLOCK
How to use an order block?
An order block is used as a tool for opening a position.
depending on
trend forces,
synchronization of structures and volatility, the entry should be determined either from the extremum of the order block body or from 50%.
ORDERBLOCK
How to use an order block?
Stop order is usually hidden behind the shadow of a block order.
Each order block can be tested (mitigation) only once.
Each subsequent price return to the block level will put strong pressure on the designated price level.
ORDERBLOCK
How to use an order block?
During price delivery, the smart money is always generating new blocks, which are more likely in the future to represent a certain price level from which the price will receive a backlash.
ORDERBLOCK
How to use an order block?
At the moment of impulse movement with the absorption of an order block, the price leaves a price imbalance (imbalance) - this is a strong indicator of the intention of the smart
capital and a factor in determining the further direction of the trend.
BREAKERBLOCK
Breaker block identification
Technically, a breaker block has the same nature as an order block, except that it gives a reaction after a clean
impulse penetration.
BREAKERBLOCK
Breaker block identification
After forming a BTS/STB movement to manipulate liquidity and break the market structure (BOS), smart capital returns the price
To the zone breaker block for testing (mitigation).
BREAKERBLOCK
How to use breakerblock?
The breaker block is not used to open a position without strong accompanying factors, but is only a magnet for the price.
Often, the reaction from a breaker block is weaker than from its parent.
SPONSORED CANDLE
How to use a sponsored candle?
A sponsored candle is used as a tool to open a position.
As in the case of an order block, the ideal zone is considered to be 0.5 of the sponsored body
candles, but in practice the price often receives a reaction first from the shadow (wick), and subsequently from the body (body).
SPONSORED CANDLE
How to use a sponsored candle?
A secondary test of the SC body can usually be associated with the fact that a large volume of smart capital orders that were used for manipulation cannot be closed (mitigation) the first time.
SWING FAILURE PATTERN
SFP identification
SFP is a candlestick pattern that has related mechanics to what is commonly called a “false breakout” in technical analysis.
SWING FAILURE PATTERN
SFP identification
SFP is formed when formed high/low behind which has accumulated liquidity in the form of stop orders for retail traders.
To remove such liquidity, smart money initiates a BTS/STB movement.
Wick - (English shadow) is the long shadow of the candle that initiated the sweep (liquidity withdrawal).
Often the shadow that formed the SFP tends to be tested in the 0.5 zone.
The main feature of the long shadows that initiated the liquidity sweep is the return of the price to the fair price (equilibrium) from this shadow - Wick 0.5.
Often, on lower timeframes in the area of 50% of the shadow height, you can determine the supply/demand zone, which can become a future RO for opening a trade.
In such cases, a conservative stop is placed behind the shadow.
Extended divergence is very rare, but it wouldn’t hurt to remember it as well.
THREE MOVEMENT PATTERN
Three Drive Pattern
Pattern Three movements or Three Indians is a model from the graphical method of analysis. The essence of this pattern is to search dynamic level support or resistance
built using 3 swings.
THREE MOVEMENT PATTERN
Three Drive Pattern
The mechanical component of the pattern is to remove liquidity from each subsequent swing, where the smart money opens positions by eliminating the stop orders of uninformed traders.
THREE MOVEMENT PATTERN
Three Drive Pattern
When a pattern is formed"three movement" often observed discrepancy (divergence) between price and indicators (RSI/MACD) or volumes.
THREE MOVEMENT PATTERN
Three Drive Pattern
The Three Drive Pattern graphical model allows you to identify a trend reversal in the early stages of its formation.
THREE MOVEMENT PATTERN
Three Drive Pattern
The Wedge and Dragon are derived from the three-move pattern, which in turn is derived from the Wyckoff consolidation.
The Wyckoff method will be discussed in more detail in the corresponding lessons.
An entry is considered conservative after the price returns to the range and consolidates inside.
Besides properties generation opposite deviation, there is a pattern regarding repeated going beyond the range.
The dragon is formed after impulse movements, during correction.
Schematically takes the form of two
descending highs and lows.
The hump is a correction for the downward movement from the head to the first paw.
One of the most favorable options is to work from the zone of interest, which could potentially become the extreme of the second paw.
Because the nature of the control point is adjacent with mechanics of work order block, then its use is recommended in quality confirming factor when choosing a true OB.
Zone of interest in volume profile
is not only the red line indicating ROS, but the entire vertical histogram that forms the price range with peak trading in volume.
The volume profile can be correctly applied to
specific impulse after
the appearance of the first signals for the beginning of the formation of a corrective price rollback (via local BOS/SMS).
WYKOFF
Law No. 1: supply and demand
supply > demand
Demand > supply = price increases
Demand < supply = price falls
Demand = supply = price consolidates
WYKOFF
Logic of consolidation according to Wyckoff
PS (preliminary support / preliminary supply) -
the first stage of the “slowdown” of trend movement and price entry into consolidation.
SC (selling climax) / BC (buying climax) -
selling/buying climax, often characterized by high volume.
RISK MANAGEMENT
Capital Management
What to avoid:
1)Do not rush to achieve a larger profit, either in points or in percentage terms.
2)Don't expose yourself to more risk in hopes of an equally big return.
3)Don't think that taking low risk trades won't increase your account.
4)Don't sacrifice trading capital due to poor or lack of planning.
RISK MANAGEMENT
Capital Management
What to strive for:
1)Define a risk-to-reward ratio model (Risk:Reward) that is realistic for yourself.
2)Learn to respect risk in trading setups more than reward.
3)Identify trading setups with a risk-to-reward ratio of three times or higher (R:R > 1:3).
4)Trade setups that will have little impact on your deposit if they turn out to be unprofitable.
RISK MANAGEMENT
Capital Management
The use of stop loss orders is MANDATORY when concluding any transaction.
Neglecting this rule is gambling and has nothing
common with trading.
RISK MANAGEMENT
Capital Management
The percentage of successful trades to unsuccessful ones (win rate) does not have a direct correlation with the profit received. The main factor in the stable growth of the trading deposit is risk to reward ratio (Risk:Reward).
RISK MANAGEMENT
Capital Management
How to calculate risk?
The risk per transaction is no more than 1-2% of the trading deposit amount.
To calculate the number of lots for Forex trading, use the Myfxbook calculator.
To calculate the number of contracts for trading cryptocurrencies, use the built-in calculator of the Binance exchange.
Transaction management will be discussed in more detail in a separate lesson.
RISK MANAGEMENT
Capital Management
It is common for a professional trader to close positions at a loss.This Fine. It's part of the job.If you take risks correctly, in the long term your deposit will grow and your skills will improve.
Trading is a marathon, not a race.
RISK MANAGEMENT
High R:R concept
Using the entry refinement technique on lower timeframes allows you to significantly narrow the stop loss order zone and thus increase
Risk: Reward ratio.
RISK MANAGEMENT
High R:R concept
The same setup can be traded in different ways. It all depends on what entry technique the trader uses. A trading system based on the concept of high risk to reward ratio (high R:R) shows stunning results.
Accumulation, Manipulation, Distribution: price forms a price range (range), the liquidity of which is subsequently removed from both sides, which provides the possibility of manipulation in the POI, from where smart capital initiates the breakdown of the market structure. Login is carried out at the time of the test demand/supply zones for mitigation.
POSITION MANAGEMENT
Entering a position
Before opening a position, you must determine where you will close it. All possible closing options are important: closing at a loss (stop loss/manual closing in order to limit the loss from a stop order); At breakeven (with a stop loss order or market hands):
For profit (partial/full/mixed).
POSITION MANAGEMENT
Entering a position
It is also worth understanding that in some cases a position may be partially closed in profit, or be partially unprofitable.
POSITION MANAGEMENT
Entering a position
In addition to market structure, it is important to observe the momentum of price movements.
At any moment, momentum can change to the opposite, thereby showing you the weakness of the trend.
POSITION MANAGEMENT
Entering a position
In addition to the main targets of an open position, you should have secondary ones
goals.Similar zones of partial position fixation can be considered: FTA / PDO / PDC / Breakerblock / Imbalance / EQL/EQH.
POSITION MANAGEMENT
Entering a position
FTA - First trouble area. This is a price zone where, along the path of its directed impulse movement, the price received a reaction of support (for a downward movement) or resistance (for an upward movement).
POSITION MANAGEMENT
Breakeven
A competent trader always tries to minimize the risk of a transaction by
moving the stop order to the breakeven zone.Main factor allowing Moving the stop to Boo is a confirmation of the breakdown of the structure in the direction of your trade.
Hedging a partial profit taking position. is an alternative This method of position management allows you to maintain a high R:R and at the same time insure against situations of market uncertainty.
It is carried out by opening a reverse position (hedge) against the initially open position. If one of these is closed by a stop order at a loss, then the stop on the second one moves to the 1R profit level - in this case, even with the most unfavorable outcome, the trader remains at breakeven and retains his capital.
PSYCHOLOGY OF A SUCCESSFUL TRADER
Trading should be perceived as a creative process. Of course, its goal is to gain financial freedom and stability, but the perception of trading as a way
self-realization will make it even more effective and successful.
The best trading is an art taken to the level of a science.
ALGORITHM FOR INTERBANK DELIVERY PRICES
Opening price
The opening price of the day/week/month (DO/WO/MO) is the level at which the volume of orders placed by market participants is placed.
Acts as an important liquidity zone to which the price tends to return during the period.
The price interacts with the opening level in 4 forms:
Accumulation below level
Distribution above the level
Level Flip
Level sweep
It is recommended to be used in combination with trading algorithm models (discussed in the next topic).
ALGORITHM FOR INTERBANK DELIVERY PRICES
Opening price • Distribution above DO level
Price distribution above the DO level, as a rule, occurs in the Asian and London sessions. In the New York session, the price is delivered to the opening level or below. In this case, distribution occurs without a DO level test. Entry is considered for London or New York session.
Often, price delivery to DO and possibly lower to the discount of the older TF is carried out on time - before closing
London session.
ALGORITHM FOR INTERBANK DELIVERY PRICES
Opening price • DO level sweep
DO level sweep - the price consolidates below/above DO, after which an aggressive liquidity sweep from the level occurs DO.
As a rule, it takes place during the London and New York sessions.
The entry is considered after the DO sweep and structure break at the price correction.
Often price delivery after a DO sweep is carried out on time - before the close of the London session.