Okay, so im going to try, to break down the meaning of the market structure for you guys. I will try to keep it simple becouse it really is simple. You allready know about it but never though about it this way.
So, how is market made? What does it do?
We all know, it's mooving up and down all the time, and we know it doesn't moove in straight lines (if it would, we would all be millionares).
But if we think of pullbacks as flags and we know that flags are continuation patterns would it make any difference to you?
IT DID TO ME. It opened my eyes. The market was suddenly full of flags and a lot easier to understand what is happening.
I started to make a lot easier analysis, with a lot less crap on my charts and my trades start to hit a lot more profits.
It helped me a lot when I was a novice trader, so I hope, it will help you guys too.
Let me show you what I mean by pullback = flag.
THE FLAG THEORY
Here's a 1h chart pullback.
And now here is a 15min chart(same part)
So take some time now, go and close up some pullbacks on smaller charts. It's the same on other timeframes too.(ex. daily pullback is a flag on a 4h chart, or in another look, a 4h trend). By the way, pullback is a non-avoidable thing. It allways happens. You get a bigger moove, then you get a flag, again a bigger moove, flag and so on... Pullbacks occur by breaking the zones, trendlines. When the zone is broken, price usually pulls back before continuing the trend.
Okay, there is another thing that I need to break down before proceeding the flag theory. And it is the shift of momentum.
THE SHIFT OF MOMENTUM
Okay so we have market trending in a sell direction and suddenly a big bullish moove appears.(I will show it on a 1h chart, but it looks the same on every timeframe)
So we are selling.
And BOOM, this moove appears.
Are you going to look for a sell after that moove? NO.
Big mooves in shorter time mean THE SHIFT OF MOMENTUM.
It usually indicates, that the market is changing direction and will be trending in the other way from then on.
This is not a 100% thing. There is allways a chance it will change direction again and end up in the wrong direction for you. But i wouldn't be looking for a sell after this moove.
So what if we take the FLAG THEORY and SHIFT OF MOMENTUM, and use them togather?
Just let me show you another thing first.
That is a 15min shift of momentum.
And that's how it looks on a 1h chart.
You see? There is a big 1h candle. After this big 1h candle closed, I would of entered a buy position and put a stop loss below the low of the flag.(but ofcourse only if it would appear on a zone and fibo lvl) So now you can moove to your charts and observe what kind of mooves happen after a pullback. It's usually a bigger candle indicating a shift of momentum and market showing you, it's ready to jump in a trade.
Another example on a daily and monthly chart.
That is a daily EURJPY chart.
And that's monthly.
I will be looking for a long term sell after a big daily flag.
And you allso want to know, that if you are a trend trader, you never want to counter the trend direction by selling an up trend for example.
On an up trend you search for buys, on a downtrend you search for sells on a timeframe you prefer. If there's a downtrend on a 4h chart and you like the 4h chart you want to be selling the pair. Same for the other direction.
I hope i helped you but now it's your turn to test it out. Like and follow for more posts:)
So, how is market made? What does it do?
We all know, it's mooving up and down all the time, and we know it doesn't moove in straight lines (if it would, we would all be millionares).
But if we think of pullbacks as flags and we know that flags are continuation patterns would it make any difference to you?
IT DID TO ME. It opened my eyes. The market was suddenly full of flags and a lot easier to understand what is happening.
I started to make a lot easier analysis, with a lot less crap on my charts and my trades start to hit a lot more profits.
It helped me a lot when I was a novice trader, so I hope, it will help you guys too.
Let me show you what I mean by pullback = flag.
THE FLAG THEORY
Here's a 1h chart pullback.
And now here is a 15min chart(same part)
So take some time now, go and close up some pullbacks on smaller charts. It's the same on other timeframes too.(ex. daily pullback is a flag on a 4h chart, or in another look, a 4h trend). By the way, pullback is a non-avoidable thing. It allways happens. You get a bigger moove, then you get a flag, again a bigger moove, flag and so on... Pullbacks occur by breaking the zones, trendlines. When the zone is broken, price usually pulls back before continuing the trend.
Okay, there is another thing that I need to break down before proceeding the flag theory. And it is the shift of momentum.
THE SHIFT OF MOMENTUM
Okay so we have market trending in a sell direction and suddenly a big bullish moove appears.(I will show it on a 1h chart, but it looks the same on every timeframe)
So we are selling.
And BOOM, this moove appears.
Are you going to look for a sell after that moove? NO.
Big mooves in shorter time mean THE SHIFT OF MOMENTUM.
It usually indicates, that the market is changing direction and will be trending in the other way from then on.
This is not a 100% thing. There is allways a chance it will change direction again and end up in the wrong direction for you. But i wouldn't be looking for a sell after this moove.
So what if we take the FLAG THEORY and SHIFT OF MOMENTUM, and use them togather?
Just let me show you another thing first.
That is a 15min shift of momentum.
And that's how it looks on a 1h chart.
You see? There is a big 1h candle. After this big 1h candle closed, I would of entered a buy position and put a stop loss below the low of the flag.(but ofcourse only if it would appear on a zone and fibo lvl) So now you can moove to your charts and observe what kind of mooves happen after a pullback. It's usually a bigger candle indicating a shift of momentum and market showing you, it's ready to jump in a trade.
Another example on a daily and monthly chart.
That is a daily EURJPY chart.
And that's monthly.
And you allso want to know, that if you are a trend trader, you never want to counter the trend direction by selling an up trend for example.
On an up trend you search for buys, on a downtrend you search for sells on a timeframe you prefer. If there's a downtrend on a 4h chart and you like the 4h chart you want to be selling the pair. Same for the other direction.
I hope i helped you but now it's your turn to test it out. Like and follow for more posts:)