Showing posts with label Market Structure. Show all posts
Showing posts with label Market Structure. Show all posts

Wednesday, March 6, 2024

ICT Advanced Market Structure | Darya Filipenka


ICT market structure refers to the way the market behaves and shifts based on various factors such as institutional order flow, imbalances, and key levels. It is represented in a series of either higher lows and higher highs = bullish, or series of lower highs and lower lows = bearish, and the actual turning points that include highs and lows within it (intermediate highs and lows). 
 
The market trades in a generic pattern or rhythm and it is easy to read if one is aware of the basic structure price tends to move in.
  1. Generally, the market trades from short term low (STL) to short term high (STH) back to a new short-term tow (STL). As these STL’s and STH's form, they will develop a 'market structure' of price action.
  2. Any short term low (STL) that has higher short-term lows (STL) on both sides of it is considered an Intermediate term low (ITL).
  3. Any short term high (STH) that has lower short-term highs (STH) on both sides of it is considered an intermediate term high (ITH).
  4. Any Intermediate term low (ITL) that has higher intermediate term lows (ITL) on both sides of it is considered long term low (LTL).
  5. Any Intermediate term high (ITH) that has lower intermediate term highs (ITH) on both sides of it is considered long term high (LTH).
The highest time frame will act as a Long-Term Perspective. This time frame will show you Higher Time Frame (HTF) Levels which will offer Trade Setup Opportunities. Trade ideas will be built upon levels derived from the HTF.
 

The mid-level time frame will act as an Intermediate-Term Perspective.
Following the Trade Setup Opportunity found on the HTF, the mid-level will give you more definition in terms of structure based on that HTF Level. Managing trades will be done via a mid-level time frame.
 
The lowest time frame will act as a Short-Term Perspective. Following the Trade Setup Opportunity found on the HTF and insights given with the mid-level. The Short-Term Perspective will give you even more definition in terms of structure. Timing trades with entries will be done via the lowest time frame.
 
ICT Advanced Market Structure pairs very well with the ICT Market Maker Buy Model and Sell Model.
 
 

Wednesday, February 21, 2024

Turtle Soup Day In Day Out │ Max Singh

The Turtle Soup trading strategy was developed by Linda Bradford-Raschke and published in her 1996 book Street Smarts: High Probability Short-Term Trading Strategies
 

The strategy’s name is a reference to a well-known strategy called Turtle trading, taught by Richard Dennis and William Eckhardt in the 1980s to a group of novice traders called the 'Turtles'. 
 
 

Linda Bradford-Raschke inverted the reasoning behind the original Turtle strategy in order to develop a short-term trading method using false breakout reversals at key levels. The strategy can be used on 1 hour, 4 hour or daily charts. The method is simple but requires understanding of order flow and market structure. 

 
Reference
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Sunday, May 28, 2023

Trading the Pump & Dump Pattern | Cameron Benson

I'm going to show you that pattern that I use every single day on every single trade, whether I'm going long or short. The pattern that I'm referring to is the pump & dump and the dump & pump pattern. Every single market movement is either a pump & dump or a dump & pump pattern, and all trade setups are based on these two patterns.
 
 
Markets are fractal, and this pattern is going to occur on the weekly and the daily time frame, on the 4 hour, the 15-minute, the 30 second chart, etc. It doesn't matter: whatever you're looking at, this pattern is going to occur.


I use larger setups and then I start to break things down: I look at the date and day in the month, I look at the three-week cycle, at the three-day cycle, at what day are we in the week, and I look at the weekly range, what is the high and the low of the week. Are we working the low, are we working the high? 
 

Any unidirectional move – up or down - ends with a consolidation, followed by a break in market structure and a continuation to anther pivot level and/or it is followed by a reversal.
 
 
Three pushes to a high, a sideways consolidation, a break in market structure to the downside, then the dump. A lot of times the market will return down at least to the 50% retracement level or down to the level where the pump started or even below.


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Wednesday, December 21, 2022

Accumulation & Distribution Schematics | Richard D. Wyckoff


An understanding of manipulative procedure in any-event helps us to judge the motives, the hopes, fears and, aspirations of all the buyers and sellers whose actions today have the same net effect upon the market as 30 many pool operations would have. So if we are squeamish about the term "manipulator" we may substitute the words "Composite Operator" with the same force and affect. Some people might object to this statement on the ground that regulation of the stock market has eliminated pool operations. Even though pool operations and old-fashioned manipulation are banned by law, for our purpose in studying, understanding and correctly interpreting market action, we must consider any operation a "manufactured" movement wherein the buying or the selling is sufficiently concerted and coming from interests better informed than the public as to produce the same effects as pure manipulation. 

[...] The market is made by the minds of men, and all the fluctuations in the market and in all the various stocks should be studied as if they were the result of one man’s operations. Let us call him the Composite Man, who, in theory, sits behind the scenes and manipulates the stocks to your disadvantage if you do not understand the game as he plays it; and to your great profit if you do understand it.

Great activity and breadth induces trading in large quantities by big operators on the floor and outside. Such a market enables the manipulator to unload a large line of stock. When he wishes to accumulate a line, he raids the market for that stock, makes it look very weak, and gives it the appearance of heavy liquidation by sending in selling orders through a great number of brokers.

You say all this is unethical, if not unscrupulous. You say it is a cruel and crooked game. Very well. Electricity can be very cruel, but you can take advantage of it; you can make it work for your benefit. Just so with the stock market and the Composite Man. Play the game as he plays it. I am giving you the inside view.

 

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Tuesday, September 27, 2022

The Bullish & the Bearish Market Maker Cycle

  


The weekly pattern does not imply the use of a weekly time frame. It refers to the pattern that is seen in a 15, 60 or 240 minute chart over a period of a week. However, market makers also have seasonal variations of price movement and so it can be seen on longer time frames, though it is probably too slow to be traded effectively.
 
 
A typical pattern of behaviour particularly when examining the Three Day Cycle is to be able to identify a peak high followed by three moves down and a reversal which forms the peak low. Each time price moves down a level they can be referred to as achieving or making either a Level I, Level II or a Level III move. Level I and Level II have relatively similar patterns of behaviour (1-2-3 stop hunt). However Level III tends to be choppy with a wide range and represents an area of profit-taking for the institutions and signifies the beginning of an accumulation period for another cycle. 
 
The reasons for this behaviour can be understood if you consider what happens during the rundown:
  1. On day one the retail traders are selling and the institutions buying from the retail traders.
  2. On day two the retail traders are selling and again the institutions are buying.
  3. However, on day three the retail traders are again interested in selling and the institutions are buying up heavily.
  4. Now price moves up aggressively triggering stops and taking a profit. (In effect, the market makers are using a scaling-in method to book their profit).
  5. Following a Level III pullback price becomes choppy and continues because of what happens with the trader’s psychological adaptation to loss. After the market has run down for three days and traders have taken losses, these individuals react by pulling away from the market quite literally and having a few days off before coming back to trade. During this period the market is choppy and relatively stagnant until the traders have returned to play in the game again.
To remember the patterns the following phrases are useful:
  1. "After a big drop the market must chop"
  2. "After three days of drop the market must chop"
  3. "After a big rise the market needs more guys"
  4. "After three days of rise the market needs more guys"
These patterns are similar in different time frames. The areas of reversal are often synchronized so that they occur at the same time in different time frames. Using this knowledge it is possible to convert a spot trade into a swing trade when you enter it from a peak formation high to a peak formation low

Count the levels to know what part of the cycle price is currently in. Entering trades at peak reversals is best. One should only take a long position when the Low of the Day (LOD) or High of the Day (HOD) is clear. This is the only place that has a high level of certainty in directional movement. Look for a midweek reversal which will generally correlate with one or both of the intraday reversals. With an awareness of the longer cycle and assuming one is in the correct place within the cycle, it is possible to convert a spot trade to a swing trade from one of the 3 day cycle peaks to the other given an appropriate entry. This would involve going from one peak formation high to the next peak low and may take several days.

On an intraday trade, it is still important to understand the current position within this larger cycle. This will help to make a judgement about how far a run may last. For example, if price has just passed the peak high and is at a Level I accumulation then an intraday long trade after a bearish stop hunt, while valid, will not be likely to produce consistent results. Hence, it is a good idea to not take trades against the longer trend at a Level I accumulation.
 

The Accumulation Phase: This phase commences with the resetting of a daily high/low. It occurs at 5pm ET which is the beginning of the “Dharma” period. The Dharma period occurs after the US markets have closed and before the London markets have opened. During this period there tends to be little activity and the market just cycles back and forth between two price points. This occurs because Bank A will buy a quantity of currency from Bank B [1]. This causes price to rise. This is followed by bank B selling the same currency to Bank C [2] and this causes price to fall. This process goes around in circles and so the price simply oscillates back and forth. After a while, the range begins to widen [3]. This has the effect of triggering pending orders placed by breakout traders. So positions become committed and gradually accumulate as more and more traders begin to ‘take the bait’. However, when they are triggered, price is quickly pulled away and they will often be stopped out on the other side of the range which is also widening. 

 
The Stop Hunt - also defining the HOD and LOD: Sometimes between 1 – 4am ET, the market makers make a stop hunt. The stop hunt involves a deliberate movement outside of the range to what will become the high or low of the day. The move usually occurs in three pushes which can be as simple as three candles though you will sometimes see a small pause in the form of a pullback in the middle of this. The stop hunt has two main objectives:
  1. Take out existing stops, that is: collecting buy side and sell side liquidity.
  2. Encourage traders to commit to positions in a direction that is opposite to where the real trend is going to be.
This represents the high/low of the day (HOD/LOD). Once the HOD/LOD has been hit:
  1. The spread is opened up by a few pips. This allows traders orders to be triggered outside their normal boundaries and they will be holding negative positions from the outset.
  2. It is common to see price undergo a further period of accumulation lasting 30 to 90 minutes which encourages traders to take further positions. When there are enough positions, the price is moved in the direction of the true trend and their stops will be triggered.
  3. There is often a second move to the HOD/LOD though most of the time it will fail to take it out (so as to not give those who got in a profitable position to escape from). This forms the typical W or M pattern.
This is the preferred point of entry for most of these trades, particularly the second leg of the M or W. It is relatively slow moving and so there should be no reason to rush or impulsively take a trade. 
 
 
Other behaviors at the HOD and LOD Reversal: Market makers induce traders to take the wrong direction by using sharp and aggressive moves near the high or low of the day. One of the ways of identifying that you are in the right place is that the market will seem to be quiet, in consolidation and make a sharp move out of the range, faking "the breakout".

If a trade is taken in the area of the HOD/LOD one might notice that price is moving around but the position changes little. Looking at the price board one will see that it is "flickering red and blue" with lots of changes suggesting that there is lots of activity but in fact there is little and a reversal is imminent. Another observation during this period is that the spread widens. This is done so that a broader range of orders can be collected and accumulated during this period, making it even more difficult for traders to take profit as they are in a losing position right from the outset. The diagram below demonstrates what happens to the spread during this period.
 

But these patterns do fail sometimes. This occurs when there has not been enough volume to make it worth their while to take a reversal. In these situations that price is moved to the next level to further induce positions to be taken in the wrong direction, against what is to become true trend. This is called the extended stop hunt.
 
Extended Stop Hunt: When price is pushed outside of the Asian range and comes to rest 25 to 50 pips beyond the range, the market makers' motivation is to generate a stop hunt. However, if as a result of this move the accumulation of positions is inadequate for their purposes, then the stop hunt will be extended. This means that price will be pushed beyond this Level in the direction of the technical trend in an effort to induce more traders to enter positions and build up the positions required.

Like before, this move will be in the 25 – 50 pip range and be comprised of 3 candles or 3 pushes. But also like before this is not necessarily the case and more or less are also possible. Again the trader must use their own judgement and discretion. Therefore, identifying that after a period of time the stop hunt has not led to a reversal one should scratch the trade. An appropriate period of time is 2 hours following the second leg of an M or W pattern. It the trader has not moved in the expected direction by this time, something is wrong and they have not been able to build up enough volume to make it worthwhile to reverse the market.

 
The True Trend: The stop hunt is followed by a reversal and a slower trend that continues against the ‘faked’ trend toward the opposite high/low for the day. This trend tends to move in three waves, the pause between each wave representing a new opportunity to fake out traders by reversing direction and then moving against them again. These pauses are often characterized by sideways movement rather than a significant retracement though both are possible.
 
 
The Opposite LOD / HOD and Reversal: Ultimately the opposite LOD/HOD will be reached and there will be another reversal. This often occurs in the NY session, called the NYC Reversal Trade. This trade is likely to return a smaller profit than the initial stop hunt reversal trade though it is still worth taking particularly if you are not able to enter a trade following the London open.
 
 
Return to Accumulation: Once the reversal has occurred, price tends back toward the center, often not far from the starting point and recommences a new period of accumulation to lead into the new Dharma period and tomorrow’s cycle.
 

Quoted from:
Anonymous - The Market Maker Method
 
See also:

Sunday, July 10, 2022

3 Bar Patterns | The Smallest Fractals of Market Structure

"Any time there is a daily low with higher lows on both sides of it, that low will be a short-term low. We know this because a study of market action will show that prices descended in the low day, then failed to make a new low, and thus turned up, marking that ultimate low as a short-term point. A short-term market high is just the opposite. Here we will see a high with lower highs on both sides of it. What this says is that prices rallied up to the zenith of that middle day, then began to move back down, and in the process formed a short-term high. For our purposes in identifying short-term swing points, we will simply ignore inside days and the possible short-term points they produce." This is how Larry Williams defined market structure. His concept is universal and applies to all bars of all time frames.

  • A Short-Term High (STH) is a bar with a high greater than or equal to the high of the bar to the left and greater than the bar high to the right. Neighboring bars should not be inside. If they are inside bars, the bars that follow them should be analyzed.
  • A Medium-Term High (MTH) has Short-Term Highs to the left and and to the right that are below the high of this bar.
  • A Long-Term High (LTH) has Medium-Term Highs to the left and and to the right that are below the high of this bar.

And for the lows it’s all vice versa: 

  • Short-Term Low (STL) = bar with higher lows on both sides
  • Intermediate-Term Low (ITL) = higher STL on both sides
  • Long-Term Low (LTL) = higher ITL on both sides

In other words: 3 bar patterns are the smallest fractals and building blocks of market structure. Since price is always either in consolidation, in an uptrend or in a downtrend 3 successive price bars must form either a directional pattern (higher highs, higher lows or vice versa), a continuation pattern (inside bar) or a reversal pattern (outside bar, pin bar, head & shoulder, M&W patterns) (see also HERE):

  
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