Avoid Market Traps and filter best trading setups.Hey whats up guys,
Let's have a look to the market narrative and building the potential scenarios of next outcome. It's not about predicting the market, but I would say rather about filtering out next potential outcomes of price action based on fixed criteria and price action laws.
📌 Basic Market Phases
But if that is so simple what is not everyone making money?
📌Its not that straight forward and every transition from range to expansion comes with manipulation's and false break outs.
to understand market dynamics we need to understand how the smart money operator works.
📌 Smart Money CLS company
This one institution trade over 6.5 Trillions daily volume on forex. Which is almost all the volume, they are Smart money trader and they trading for most of the central banks and investment banks. So these smaller players instead of trading against each other they make settlements via CLS and CLS finds the liquidity on the markets. How I know ? It's on their website. Just google it Now you know where comes my name for CLS Ranges. It's basically big range, high volume candles made by market maker which is CLS. Hence CLS range or range, name doesn't matter really.
🧪Smart money trader cant just simply press Buy or Sell Button like we do. If they do it, they will move the price without getting a fill at requested price for the all their orders the y need. In other words they will not have liquidity for their large operations. Hence they must follow specific framework to create liquidity and then load it.
🧩 For understanding more about a Liquidity visit the post below.
🔗Click to the picture to open learn more 👇 📌 Accumulation - Manipulation - Distribution
it is what help them to get liquidity. Its also called stop hunt, but they really dont care about your or mine stop loss. We are to small and mostly our brokers are B-book anyway.
Let's say they need to fill 1000 contracts (example number) futures contracts on the 6E1 Euro contract. But they can get just 600 at the current market, hence they need to accumulate in the range as much as they can. The rest they will buy bellow / above the range.
🧪 Bullish scenario AMD
Accumulating contracts in the range happening above the key level. False break up, will suck other market participants to the market and they will have liquidations bellow the range, thats is new liquidity created below the range. By hedging the positions, they manipulate price below the range to get the rest of contracts need by forcing early buyers to sell for the worse price. Then they close the hedge shorts in a profit and they start to move price up. If price is in the range you can spot it accumulation by seeing high volume on the lows.
❎ Action of less informed traders - bought early - stopped out, Sold the break of the low - wrong side of the trade. These traders were used as a liquidity. 🧪 Bearish scenario AMD
Accumulating contracts in the range happening below the key level. False break down, will suck other market participants to the market and they will have liquidations above the range, thats is new liquidity created below the range. By hedging the positions, they manipulate price above the range to get the rest of contracts need by forcing early buyers to buy for the worse price. Then they close the hedge longs in a profit and they start to move price down If price is in the range you can spot it accumulation by seeing high volume on the highs.
❎ Action of less informed traders - sold early - stopped out, Both the break of the top - wrong side of the trade. These traders were used as liquidity. 📌 H ow to avoid being caught in these traps?we need to focus on the basics which is buying lows and selling highs and not to fomo to the running market moves. Im not saying you cant be profitable with break out strategies. But with buying lows in uptrend and selling highs in downtrend is better idea.
🧩 How to do Buy low / Sell highs is explained this post below . 🔗Click to the picture to open lean more 👇 from the post above you understand market structure.
each phase of the structure has specific market dynamics. We don't want to trade every up and down move. Just expansions are giving best risk rewards. and vice versa for bearish scenario. 📌 How to know if there will be manipulation or not?
everything comes from the key level. Any pattern whatever we trade if there is no key level than its all invalid. Lets put the ranges and key levels together.
🧪 Bullish Scenario
if you see range just above the key level. Smart money are building liqudity and there will be manipulation. If price is already on key level deep manipulation is not necessary. 🧪 Bearish Scenario
if you see range just below the key level. Smart money are building liqudity and there will be manipulation. If price is already on key level deep manipulation is not necessary.
📌E xpansion + Key Level
if range occurs not just right above the key level but is a bit more far, we can expect expansion to reversal profile. Expansion to the key level is tradable and reversal also if there was range. This. knowledge give us possible expansion trade towards key level.
🧪 Bearish scenario 🧪 Bullish scenario there are also tricks with false reversal just below / above key level, market maker often leave double top and bottom , just round a key level and make it looks like ar reversal. Dont fall for this trap. Its done on purpose to put you early in to trade and you will put SL exactly where you they need liquify - followed by expansion to the key level and reveal. Targeting double top / bottom is high probability trade.
🧪 Bearish Scenario 🧪Bullish Scenario 📌 Summary of Key Level and Profiles
Avoid trading range , manipulation and retracements
Trade only expansion and Reversal profiles
This might sound complicated, but if you spend time with this. You will be filtering just best trade setups , trading less and more accurately.
David Perk aka DaveFXHunter
