One of the most important skill that you need as a trader is the ability to read the market structure, it is a critical skill that will allow you to use the right price action strategies in the right market condition. You are not going to trade all the markets the same way; you need to study how the markets move, and how traders behave in the market. The market structure is the study of the market behavior. And if you can master this skill, when you open your chart, you will be able to answer these important questions: What the crowds are doing? Who is in control of the market buyers or sellers? What is the right time and place to enter or to exit the market and when you need to stay away? Through your price action analysis, you will experience three types of markets, trending markets, ranging markets, and choppy markets. In this chapter, you will learn how to identify every market, and how to trade it.
SFP - swing failure pattern
The SFP is hinged on the basic idea that large players need equivalently large liquidity to fill their orders and avoid slippage by buying at the current market prices. Once they fill their orders, price usually reverts back.
When the market fails to record a new high in an uptrend, or vice versa, it could be translated in two ways: the buyers took profits and were unwilling to buy again, or a huge group of sellers (bears) entered the market where it forced the price to go down. A lot of different reasons could cause these actions.
From a technical point of view, we can assume that a significant technical level coincided slightly below the previous top, where the buyers predicted that the price could struggle to break above it, alongside with a combination of a bearish moving average cross or an indication or a bearish cross from a technical indicator/oscillator. Another reason which could force the market to move down at this point could be an economic event or release which came out and affected the selected instrument. Following the economic event, a huge group of sellers probably entered the market while at the same time some stops were triggered as the price was falling, adding to the downward momentum. In both cases, if the group of sellers exceeds the group of buyers then the odds for the market to move lower are very high.
COUNTER TRENDLINE
As you can see the btc respects the trend line, and when price approach it, the market reverse and continue in the same direction. When the market moves this way, trend lines help us to anticipate the next impulsive move with the direction of the market. Look at another example of an uptrend market. The illustration above shows us a perfect shooting star with a real small body and an upper long shadow, when this pattern occurs in an uptrend; it indicates a bearish reversal signal. The psychology behind the formation of this pattern is that buyers try to push the market higher, but they got rejected by a selling pressure. When this candlestick forms near a resistance level. It should be taken as a high probability setup.
PINBAR
The illustration above shows us a perfect shooting star with a real small body and an upper long shadow, when this pattern occurs in an uptrend; it indicates a bearish reversal signal. The psychology behind the formation of this pattern is that buyers try to push the market higher, but they got rejected by a selling pressure. When this candlestick forms near a resistance level. It should be taken as a high probability setup.
LONG LEG LOWER SHADOW PINBAR
As you can see the market was trending down, the formation of the hammer (pin bar) was a significant reversal pattern. The long shadow represents the high buying pressure from this point. Sellers was trying to push the market lower, but in that level the buying power was more powerful than the selling pressure which results in a trend reversal.
PURE BREAKOUT
Trending markets are characterized by two important moves, the first move is called, the impulsive move, and the second one is called the retracement move. here we got clear breakout with required volume & impulsive move now.
DECISIVE CANDLE
This candle forms when sellers push the market lower after the open, but they get rejected by buyers so the market closes higher than the lowest price and we can see here bitcoin retesting counter trendline before parabolic move start.
HIGHER PROBABILITY RETEST AREA
as you can see btc breaking out previous double top structure with high volume & making new high we can expect pullback & retest to double top area.
SFP - swing failure pattern
The SFP is hinged on the basic idea that large players need equivalently large liquidity to fill their orders and avoid slippage by buying at the current market prices. Once they fill their orders, price usually reverts back.
When the market fails to record a new high in an uptrend, or vice versa, it could be translated in two ways: the buyers took profits and were unwilling to buy again, or a huge group of sellers (bears) entered the market where it forced the price to go down. A lot of different reasons could cause these actions.
From a technical point of view, we can assume that a significant technical level coincided slightly below the previous top, where the buyers predicted that the price could struggle to break above it, alongside with a combination of a bearish moving average cross or an indication or a bearish cross from a technical indicator/oscillator. Another reason which could force the market to move down at this point could be an economic event or release which came out and affected the selected instrument. Following the economic event, a huge group of sellers probably entered the market while at the same time some stops were triggered as the price was falling, adding to the downward momentum. In both cases, if the group of sellers exceeds the group of buyers then the odds for the market to move lower are very high.
COUNTER TRENDLINE
As you can see the btc respects the trend line, and when price approach it, the market reverse and continue in the same direction. When the market moves this way, trend lines help us to anticipate the next impulsive move with the direction of the market. Look at another example of an uptrend market. The illustration above shows us a perfect shooting star with a real small body and an upper long shadow, when this pattern occurs in an uptrend; it indicates a bearish reversal signal. The psychology behind the formation of this pattern is that buyers try to push the market higher, but they got rejected by a selling pressure. When this candlestick forms near a resistance level. It should be taken as a high probability setup.
PINBAR
The illustration above shows us a perfect shooting star with a real small body and an upper long shadow, when this pattern occurs in an uptrend; it indicates a bearish reversal signal. The psychology behind the formation of this pattern is that buyers try to push the market higher, but they got rejected by a selling pressure. When this candlestick forms near a resistance level. It should be taken as a high probability setup.
LONG LEG LOWER SHADOW PINBAR
As you can see the market was trending down, the formation of the hammer (pin bar) was a significant reversal pattern. The long shadow represents the high buying pressure from this point. Sellers was trying to push the market lower, but in that level the buying power was more powerful than the selling pressure which results in a trend reversal.
PURE BREAKOUT
Trending markets are characterized by two important moves, the first move is called, the impulsive move, and the second one is called the retracement move. here we got clear breakout with required volume & impulsive move now.
DECISIVE CANDLE
This candle forms when sellers push the market lower after the open, but they get rejected by buyers so the market closes higher than the lowest price and we can see here bitcoin retesting counter trendline before parabolic move start.
HIGHER PROBABILITY RETEST AREA
as you can see btc breaking out previous double top structure with high volume & making new high we can expect pullback & retest to double top area.