Trading: An Inside Look. Module 11: Top-Down Analysis & Multi-Structure
1. Terminology
2. PD Array Matrix. POI. FTA
3. Timeframe Synchronization. Shift
4. Timeframe combinations for swing/intraday trading
5. Conclusions
1. Terminology
• PD Array Matrix — Premium/Discount matrix. It is expressed in the sequential placement of zones of interest (POI) and problem zones (FTA) within the premium/discount range.
• Point of Interest (POI) — zone of interest. This is a certain price range on the chart, from which a price reaction is expected and a position is entered.
• First Trouble Area (FTA) — the first problem area. In essence, this is also a POI, but formed against the main structural price movement. It is usually an obstacle to price delivery on the way to updating the structure, which leads to a “complex correction”.
• Fractality — the ability of the price to repeat identical price movements on different timeframes.
• Substructure — a full-fledged structural price movement on a younger timeframe, inside an older impulse or corrective movement.
• Long Term — long-term perspective.
• Intermediate Term — medium-term perspective.
• Short Term — short-term perspective.
2. PD Array Matrix. POI. FTA
Premium / Discount PD Array Matrix — Premium/Discount matrix. It is expressed in the sequential placement of zones of interest (POI) and problem zones (FTA) within the premium/discount range.
In the lesson about Fibonacci levels, you have already learned what Premium/Discount is and how to correctly identify these zones on the chart, based on structure and liquidity. You know that the price forms an impulse, on which we stretch the Premium/Discount grid, and then a correction occurs.
If the structure is downward — the correction most often delivers the price to the Premium zone.
If the structure is upward — the correction most often delivers the price to the Discount zone.
But what to do next? We understand that the price should make a correction, but how do we determine where this correction will end? What is the price most likely to react to and turn around to form a new impulse? Where should positions be opened?
The PD Array matrix answers these questions. Let’s look at how we form it.
Schematic example of PD Array matrix:
PD Array Matrix — shows the correct placement of the studied tools, such as: liquidity, inefficiency, blocks — in the context of the structural movement of the price.
In simple words: after we have defined the PD zone, our task will be to search for the studied tools in the following sequence:
1. Internal BSL/SSL (internal liquidity)
2. Mitigation (confirm level test from the other side)
3. FVG (inefficiency)
4. Order Block (OB)
5. Breaker Block (BB)
6. Rejection Block (RB)
7. External BSL/SSL (external liquidity)
These tools will be our zones of interest (POI), or problem zones (FTA):
• Point of Interest (POI) — zone of interest. This is a certain price range on the chart, from which a price reaction is expected and a position is entered. We consider all the above listed tools located inside the PD matrix as a zone of interest.
• First Trouble Area (FTA) — the first problem area. Zones that will be formed already during the correction and will further “interfere” with the price moving according to the structure, forming the so-called “complex” correction. The same tools described above will act as problem zones.
In simple words: we divide the tools into 2 groups: those from which we consider entering a position (will be considered POI) and those on which we will fix an open position (FTA).
Schematic example of placing zones of interest (POI):
Let’s highlight all the zones of interest (POI) in the graphical example given above:
Since there can be quite a lot of zones of interest (POI) and we do not know from which zone the price will definitely give a reaction, we can use some rules for screening out low-probability zones.
1.Internal BSL or SSL (depending on the direction of price movement):
Liquidity is the most important tool for price movement. It is thanks to liquidity that everything we see on the chart is built. For this reason, the first thing you should pay attention to is the internal liquidity of the PD range.
This means that any block or inefficiency is most likely to give no reaction and will be broken by the price if there is internal liquidity behind them, for example, in the form of equal highs/lows (eqh/eql), or compression. Therefore, they will be low probability and should not be used.
In this example, we focus on Internal BSL, which means that everything below — we should not use, because the probability of these POIs working out is low:
Thus, we have excluded one zone of interest in the form of FVG, which is located in the discount. Therefore, we can assume that the price will go to the POI in the form of FVG + Internal BSL.
2. Mitigation — confirm level test from the opposite side.
After updating the structure (conf), this minimum or maximum (depending on the direction under consideration) can act as a support point for the correction, during the test of which the correction will end and the structural movement will continue. Such a test is called Mitigation.
Schematic example of Mitigation:
However, the Mitigation level is less of a priority than liquidity. If there is internal liquidity behind it, it is highly likely that we will not receive a reaction from it.
(In our example, liquidity is above the Mitigation level, which means that we also “exclude” it from our PD matrix).
3. Price inefficiencies (FVG) and its types*
From the lectures on price inefficiencies, you already know that the price always tries to balance itself, forming a balance between purchases and sales.
Accordingly, one of the main tasks of the correction will be to cover the existing inefficiencies.
Inefficiencies should be considered immediately after determining internal liquidity. It is inefficiencies that will act as the main zones of interest (POI).
- FVG is not the only tool that indicates inefficiency, there are other types of inefficiencies, we will talk about them in the next lessons of the Advanced module.
(In our example, all the specified FVGs are relevant from the point of view of rebalancing).
4. Support Blocks. OB/BB/RB
Support blocks are the last in terms of priority. Most often, we consider blocks in conjunction with inefficiencies.
The rule of structural movement.
• During an uptrend, we need to look for POIs located in the Discount zone, closer to the OTE zone. Thus, all POIs located in the Premium zone will be low probability.
• During a downtrend, we need to look for POIs that are located in the Premium zone, closer to the OTE zone. Thus, all POIs located in the Discount zone will be low probability.
Of course, even low-probability zones of interest can give reactions and form a price reversal, you should not completely forget about them. But in general, since we are working with probabilities, our main task is to weed out such “weak” zones of interest and look for zones that will work out with the highest probability.
As a result, after all the manipulations with screening out low-probability zones of interest, we have the following type of chart:
We are left with those zones of interest that we can consider highly probable, namely:
1. FVG + Internal BSL
2. FVG
3. OB
Further, the task is simple — wait for the price to reach the zone of interest (POI) and consider entering the position aggressively or through confirmation on a younger timeframe (conservatively).
Note how the price came to the first POI (FVG + Internal BSL) and got a reaction. Therefore, in this zone we should have considered entering a position.
Can we say that the price has finished the correction and will now continue to move, updating the Weak Low (potential Conf)?
Of course we can. The price does not have to cover all zones. It can leave some zones untested (in this case, the upper OB and FVG).
However, note that we now have two zones below (FVG and RB) that formed during the correction against the structural movement of the price. These zones will be considered problem zones in the future — FTA.
FTA zones can act as zones where we will partially or fully fix the position. Working with these zones is actively used in position management and target formation (take profit).
Not all FTAs will react. It is important to be able to correctly correlate them with the context and the structural movement of the price. Sometimes FTA zones can give small corrections, and then the price continues to move, breaking through these zones.
We cannot say for sure which of the FTA zones will hold the price, we can only assume based on probabilities. In order to understand whether the FTA zone will be broken or will hold the price, it is necessary to use the rules for working with FVG, OB (50% levels) learned in previous lessons.
Further, you can notice how the price stopped in the FTA zone and formed an RB, where it received a reaction in an upward direction. For this reason, we can expect an upward movement back to the POI.
From the point of view of retests, we can assume that, most likely, the price will go to POI №2 (FVG) or №3 (OB), which are located higher, since they were not previously tested, unlike POI №1 (FVG).
The price reaches POI №2 (FVG), where we see a reaction, therefore, we can assume a downward movement to Internal SSL or an update of the main structure (Conf).
In simple words: the price moves from liquidity to liquidity, from POI to FTA, from FTA to POI. Our task is to track these movements and make money on them.
You can consider positions both from POI (relative to the structural movement of the price, which will be a highly probable entry into the position) and from FTA zones (moving against the structure during the corrective movement). However, such trades (from FTA) will be counter-trend and will be considered low probability.
The bulk of trades should be carried out according to the trend. Counter-trend trades are made only in case of a complete understanding of the situation, therefore, only experienced traders use this approach.
3. Timeframe Synchronization. Shift
Entries into a position from POI and FTA zones will be considered aggressive and have an average probability of working out. An entry will be considered conservative if certain patterns are applied on a younger timeframe within the POI and/or FTA zones. That is, during the test of the zone of interest, we need to switch to a younger timeframe and find an entry model, which we will study in the following lectures.
However, which timeframe to switch to? How to understand which timeframe to use? The concept of multistructure (timeframe synchronization) will help us with this.
The market is fractal. Processes on younger timeframes are repeated on older ones. Each wave has its own substructure, which can be clearly seen on a younger timeframe. The waves of this substructure will have their own substructure, which can be seen on even younger timeframes.
In this example, we see a classic schematic example of a market structure break during liquidity capture. On the right is an example of a violation of the structure of a younger timeframe, which is denoted as Shift.
Market Structure Shift — an identifier of a change in market movement on a younger timeframe, formed by breaking the nearest Swing High/Low, which forms the movement. It is the primary signal of a potential reversal during a test of a zone of interest or liquidity removal.
Unlike a structural break (BOS), Shift does not indicate a complete reversal of the market structure on a given timeframe, however, it indicates that the nearest Swing on a younger timeframe has been broken. The tool can be used in the context of unidirectional structural price movement.
Shift has specifics when forming and is used in a certain context of building a substructural movement, and BOS is a general idea of a structural break. It is very important not to confuse these concepts.
To determine high-probability trading setups with HTF context and a better understanding of market dynamics when working with a chart, it is first of all important to learn how to correctly separate timeframes. Everything we do on a younger timeframe should be based on the context of the older timeframe.
We divide market analysis into long-term, medium-term and short-term periods.
• Long Term: needed to understand the context of price movement of older periods and macro analysis. Now we will omit this period and talk about it in more detail in the PRO module.
• Intermediate Term: medium-term period, needed to search for the main structural price movement, as well as to search for important liquidity and zones of interest (POI) within which we will search for setups.
• Short Term: needed to search for synchronization with the medium-term period, to search for entry patterns into a position and its management (stop loss/take profit).
“The short-term perspective is always subject to the medium-term, the medium-term is always subject to the long-term.”
You must remember this expression as a rule. All your analysis should start with older timeframes.
Schematic example of LT-IT-ST synchronization:
In these examples, we see that relative to LT, the price is in a correction after breaking the structure from an upward to a downward movement.
IT, within the LT correction, forms an uptrend and key nearest POIs.
ST synchronizes with LT to find an intraday entry point with the nearest price movement targets.
4. Timeframe Combinations for Swing/Intraday Trading
Different timeframe combinations are used for different trading styles, divided into the above periods for structuring the analysis.
• M1 — W1 (Long term) — determining the context. Market movement directions.
• D1 (Intermediate term) — search for the main structure, PD matrix, zones of interest (POI).
• H4/H1 (Short term) — search for synchronization with the medium-term period in the direction of movement and opening a position using certain entry patterns.
• W1 — D1 (Long term) — determining the context. Market movement directions.
• H4 (Intermediate term) — search for the main structure, PD matrix, zones of interest (POI).
• m15 (Short term) — search for synchronization with the medium-term period in the direction of movement and opening a position using certain entry patterns.
Graphical example of timeframe synchronization:
D1 (daily timeframe, long term period):
Upward structure. As part of the correction, the price approaches the POI test in the form of FVG + OB. Thanks to this, we can expect a price reversal in an upward direction in the younger perspective (medium-term).
H1 (hourly timeframe, medium-term period):
Two liquidity levels BSL/SSL are formed in the FVG 0.5 D1 zone. So far, we do not have an initial break (shift) or a full-fledged structure break (BOS). Therefore, we do not have to wait for the hourly timeframe to break the structure. We already know that the price is more likely to go up due to the daily POI test. We can use SSL as the zone of interest for this period and wait for confirmation already on the short-term period (5-minute timeframe).
m5 (5-minute timeframe, short-term perspective):
After removing the SSL defined on the hourly timeframe, the formation of an initial break (Shift) with the OB zone follows, where we could already open a position.
So, the sequence of actions looked like this:
1. analysis of the daily timeframe, fixing the fact that the price is in the POI (FVG)
2. switching to the hourly timeframe, searching for POIs from which the price can start an upward movement. In this case, SSL.
3. When removing 1h SSL — search for Shift on the m5 timeframe and enter a position.
Thus, our position would be confirmed by the synchronization of as many as 3 periods, and the probability of it working out would be very high.
Such entries into a position are conservative due to the fact that they are confirmed by the logic of the movement of all timeframes, unlike aggressive positions, where the entry is made simply from the zone of interest. Of course, it is not necessary to synchronize all timeframes to find an entry point. In some cases, it will be enough to analyze only 2 periods — medium-term and short-term.
On the medium-term, we wait for the price to enter the POI, and on the short-term, we consider the initial break (Shift) and enter the position through certain entry patterns (we will study further).
The price is in POI (FVG) + removes the internal BSL, we switch to a younger timeframe (in this case, we use the D1 + H1 link).
Being inside the daily POI (FVG), the price makes an initial break (Shift), which can become an entry point for us. There are many different entry patterns, but we will study them in the following lessons.
5. Conclusions
In this lesson, we learned how to clearly combine the studied tools into one integral system in the form of a Premium / Discount (PD) Array Matrix.
The PD Array Matrix expresses the priority of the studied tools in the form of liquidity, inefficiencies, blocks in the context of the structural movement of the price.
Each of these tools can act as both a zone of interest for opening positions (POI) and a problem zone (FTA) — an “obstacle” on the way to the goals of structural movement.
The priority in choosing zones of interest in the PD matrix is very important:
1. Internal liquidity.
2. Inefficiency.
3. Blocks.
It is important to follow these rules. First, we analyze liquidity zones, then inefficiencies, and only after that — blocks, which allows us to “weed out” low-probability zones of interest.
For a more accurate understanding of the dynamics of the market and its movements, we studied the logic of timeframe synchronization according to the trading style.
In general, timeframe combinations can be different, but you should always have a division into 3 periods. This is your structuring, the “grail” of collecting all the puzzles into a complete picture of the market.