The content in this blog should not be considered as financial advice, but rather as a personal opinion.
Market Structure : Learn how to use Liquidity and Trends
Table of Contents
How to Identify a trend
Understanding market structure (MS) would help you as a trader to spot bullish or bearish trends.
Bullish MS is a continuos series of HH (Higher High) and HL (Higher lows) on a trend.
And LH (Lower high) and LL (Lower Low) on a Bearish MS.
Market structure is relevant on all TF, but depends the TF, the structure may change.
Its really important in what TF are you looking at. HTF is more accurate than LTF.
There are 2 types of trends: Bullish and Bearish.
Bullish MS
Is a succession of HH and HL as you can see on the illustration.
We can identify a bullish trend by watching 2 or more HH’s on chart and HL.
Bearish MS: is a succession of LH and LL. When we identify 2 or more LH and LL on chart, we usually on a downtrend.
How to chart from 0
This was $ETH in 4H. Before you start drawing the R/S, always pay attention to the MS.
It’s bearish or bullish? Start drawing from the supports to the top. It’s easier to identify a bottom than a top.
Charts are ALWAYS read from left to right.
How to draw a chart from 0
As you can see in $PYR the market structure is totally different.
This time we find a bullish PA. This is how I would draw it.
Pay attention to how the price moves between the ranges.
Therefore, a chart from 0 has to be draw following this steps:
- Identify the support. You have to identify invalidation
- Identify the possible resistance. Where the price must retrace
- Identify the current trend in the chart. Appreciate the PA after that bullish trend
As you can see in these two examples, the supports and resistances have already been drawn.
To create a range in which to trade, you will only need to draw a support and a resistance.
Complementing it with indicators such as the RSI and MACD, can help you identify a new trend.
Trading range
A trading range is the range between the high and low price of a security within a given period.
Breakouts and breakdowns are more reliable when they are accompanied by a large volume.
A trading range is a good indicator of relative riskiness.
Trading range:
After finding major support and resistance levels and connecting them with horizontal trendlines, a trader can:
Buy a security at the lower trendline support (bottom of the channel) and sell it at the upper trendline resistance (top of the channel)
Traders can enter in the direction of a breakout or breakdown from a trading range.
To confirm the move is valid, traders should use other indicators, as confirmation, such as volume, MACD, RSI.
Although the most important thing is always PA.
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Thanks to CryptoSoulz for all the trading information ( follow on X )