There are three rules that form the foundations of technical analysis. Firstly, the market discounts everything. Secondly, prices move in trends. And lastly, history repeats itself. Build confidence in investing before spending real money. It is said that every investment has risks, but a risk-free investment is an investment in knowledge which decrease the risk of losing capital.

In this series of analysis you’ll learn the real analysis of market to predict the next market moves. Remember, nobody can predict the market 100% accurately. If your perdition goes 55% right, Congratulations you’re a trader. Anyone else saying I can predict 100% accurate signals is just scamming you. The most accurate prediction can be up to 75% right & the next things you’re going to learn will make your analysis up to 75% accurate & a professional trader. So let’s explore the REAL ANALYSIS:

MARKET STRUCTURE

Market Structure is identifying the price trends. Price trends can be divided into three categories: uptrend, downtrend, and sideways. One of the important tasks of technical analysis is to use charts to analyze price trends to apply appropriate trading tools and strategies. If the trend can be accurately read, it increases the chances of successful trading. Uptrend and downtrend consists of the following important components:

• Highs & Lows

Whenever price moves in trend whether Uptrend or downtrend, it makes highs & lows. In uptrend it’s called higher highs (HH) & higher lows (HL), & in downtrend it’s called lower highs (LH) & lower lows (LL).

• Break Of Structure (BOS)
 ad space

Whenever price breaks previous Higher High(HH) in uptrend or previous Lower Low(LL) in downtrend, this break is called Break Of Structure (BOS). It indicates the continuation of trend.

• Change Of Character (ChoCh)

Whenever price breaks previous Higher Low(HL) in uptrend or Lower High(LH) in downtrend, this break is called Change Of Character (ChoCh). It indicates the reversal of trend from uptrend to downtrend or from downtrend to uptrend.

• Order Block (OB)

Order Block is a candle or area which is created during an impulsive upside or downside move. After Bos or ChoCh price takes a pullback up to this region. Generally it is considered that the last bearish candle before upside is called Bullish Order block & the last bullish candle before downside move is called Bearish Order Block. But in reality, the last candle before upside or downside move which is untapped or unmitigated and have a proper Fair Value Gap(fvg) whether bullish or bearish is called Order Block.

• Fair Value Gap (fvg)

A Fair Value Gap (FVG) is a price action phenomenon that is usually illustrated using three consecutive candles when the wicks of the two candles sandwiching the third candle fail to meet or overlap. It is thus formed by at least 3 candles in sequence. Just like Order Block it is the region where price tends to move after a Bos or ChoCh to fill this gap.

• Breaker Block

Breaker Block is just simply of failed order Block. Whenever price breaks the Order Block and doesn’t gets reversal, this Order block becomes a breaker Block whick works as a support becoming resistance or resistance becoming support.

• Inducement(X)

The first low in up move or last high in down move is called Inducement. It is the area up to which minimum market makes a pullback before the continuation of trend & confirmation of high or low.

• Engineering Liquidity (Eng.Liq)

Just like inducement, the last low in up move or last high in down move is called Engineering Liquidity. It is the area up to which maximum market makes a pullback before the continuation of trend & confirmation of high or low.

• Mapping Out Of Market Structure

Now with all above concepts we will try to map out a correct market structure.

Bos & ChoCh

➢ Continuation of a pattern is called Bos & change in market behavior is called ChoCh.

➢ Higher high or lower low is confirmed only if market takes a deeper pullback & takes recent low or high (inducement).

➢ Higher low or lower high is only confirmed after Break of Structure.

Point Of Interest(POI)/ Order Block(OB)

POI / OB are the areas upto where a markets get a pullback. Mainly there are so many POIs or OBs but the only two POIs or OBs are important, the first after the Inducement & second after the Engineering Liquidity. In between these two points any POIs or OBs are useless or traps.

Related Queries:

  • Market Structure
  • Highs & Lows
  • Break Of Structure (BOS)
  • Change Of Character (ChoCh)
  • Order Block (OB)
  • Fair Value Gap (FVG)
  • Breaker Block
  • Inducement (X)
  • Engineering Liquidity (Eng.Liq)
  • Mapping out market structure
  • Point Of Interest (POI)

Prev    Next