Course notes
GOOD TRADES ANALYSIS
1. Market structure
a. Market structure refers to the overall trend and pattern of price
movements. There are two main phases:
i. Uptrends: Characterized by higher highs and higher lows
ii. Downtrends: Characterized by lower highs and lower lows
b. Practical application:
i. Identify the current trend by looking at recent price
action.
ii. In an uptrend, look for buying opportunities at higher
lows.
iii. In a downtrend, look for selling opportunities at lower
highs.
iv. Pay attention to trend reversals, which occur when the
pattern of highs and lows changes.
2. Supply and demand
a. This concept focuses on areas where significant buying or selling
has occurred, with the expectation that these areas will be
important in the future.
i. Demand zones: Areas of consolidation before a large
upward move
ii. Supply zones: Areas of consolidation before a large
downward move
b. Practical application:
i. Identify areas on the chart where price consolidated
before making a significant move.
ii. For demand zones, look for a period of sideways
movement followed by a strong upward move.
iii. For supply zones, look for a period of sideways movement
followed by a strong downward move.
iv. Expect price to return to these zones in the future, as they
represent areas of "premium" or "discounted" prices.
3. Market efficiency
a. An efficient market tests every demand and supply zone before
continuing its trend. Inefficient markets create untested areas,
also known as imbalances.
b. An imbalance, also known as FVG (fair value gap) is identified by
3 candles pattern. For a bullish; the first candle’s high don’t
overlap with the 3rd low and this visually creates a gap which
typically market will retrace to fill the gap either partially or
completely before the continuation of the trend.
These gaps often acts as magnets as the market are drawn to
them which we can also refer as draw on liquidity. This can be
our target when we look for a take profit zone or enter a trade
after a valid set up has formed.
i. We can now differentiate between a bullish and a bearish
FVG and we will call them BISI and SIBI.
1. BISI (BuySide Imbalance, SellSide Inefficiency)
a. This is a bullish FVG in an area where we might
look to go long
b.
2. SIBI (SellSide Imbalance, BuySide Inefficiency)
ii. Efficient market: Price retraces to test previous levels
before continuing the trend
iii. Inefficient market: Price leaves gaps or untested areas as
it moves
c. Practical application:
i. Look for areas where price has moved quickly without
retracing.
ii. These untested areas (imbalances) are likely to be filled
in the future.
iii. Use these imbalances as potential entry or exit points for
trades.
ALL THESE CONCEPTS ABOVE ARE FACTAL, MEANING THEY CAN BE
APPLIED IN ANY TIME FRAME
GREAT TRADES ANALYSIS
1. This is the build up of the above example of our trade as laid out
above.
2. Suppose the above analysis was of a 4H time frame and we took the
trade in the same time frame, there is a way to increase the RR and
increasing the probability that the trade will work.
3. This can be achieved through confirmation entries. This is done by
moving to a lower time frame from the one we used to conclude the
analysis. This is done to obtain a tighter entry and tighter stop loss.
This is the same chart which has been zoomed in using a lower time frame.
1. From analysis we note that in the 4H time frame the market is bullish.
2. A change to the 1H time frame, we notice a change to a bearish market
3. The bearish market changed structure to a bullish by breaking the
higher low at the marked line. Now the trend has aligned with that of
the 4H time frame, which is what we want.
Now instead of entering the market at the down circled zone which has a
much wider stop loss, we will enter at the upper circled zone with a tighter
stop loss and less risk but higher reward.
NOW WE WILL INTRODUCE 2 MORE CONCEPTS WHICH ARE LIQUIDITY
AND MARKET MOMENTUM.
1. Liquidity
a. Liquidity refers to areas with a high concentration of orders,
often found at key support and resistance levels, trend lines, and
other significant price points.
b. Practical application:
i. Identify major support and resistance levels, trend lines,
and other key price points.
ii. Watch for price "sweeps" beyond these levels, where price
briefly breaks through before reversing.
iii. These sweeps often trigger stop losses and can provide
trading opportunities.
iv. Consider placing orders just beyond obvious support or
resistance levels to capitalize on liquidity sweeps.
Now lets branch off a go to a real example and reexamine the concepts with
an added liquidity concept in them.
Top down analysis of AUDUSD. First we shall open the weekly time frame. Top
down analysis is the process of moving from a higher TF to a lower TF to
identify certain opportunities across the full board.
1. There isn’t much in terms of trend direction we can deduce from this TF as prices
are going up and down within the zone marked.
2. What is of note is that there is a trendline liquidity and we can look at prices taking
out orders beyond the liquidity line and carry on with the downward movement.
3. So we may be biased to BUY in this market as prices are attracted by the trend line.
1. Now we scale down to the DAILY tf.
2. What is now more visible are the imbalances, one at the bottom and one at the top
3. Now the likelihood of the price coming down to the imbalance is quite high and we
may have to wait to take our BUY trade at the imbalance zone.
4. But because there is not apparent trend in this market at the moment, we will
definitely need a confirmation before we can execute a trend as the price can take
both direction at the zone.
1. Now the price has filled the imbalance and there is no more imbalance left below, so
we can safely assume now that the price will react upwards at the zone.
2. Now we have to switch to a 4H for a confirmation. The confirmation will come as a
switch to the market structure
Either we get the confirmation by the price pushing up to create a new higher high and
exceed the marked zone as below OR the price go down to create a new lower low then
push up beyond the marked point above will BOTH confirm our position.
Keep in mind that we are trading with a trend, so we much see a shift in trend direction
which will alight with the direction in the higher time frame.
5. Market momentum
a. Market momentum assesses the strength of buyers or sellers in
the market.
b. Practical application:
i. Analyze candle patterns, particularly the size of bodies and
wicks.
ii. Long wicks indicate rejection of price levels and potential
reversal of momentum.
iii. Strong candles in the direction of the trend indicate strong
momentum.
iv. Look for changes in momentum as potential signs of trend
reversal or continuation.
Q&A
1. What classify a PULL BACK?
a. A proper bull back will consist of atleast 3 candles, where one
close above another in the case of a bullish pull back. There are
situations were the candles form a cluster, in this case you will
only consider a candle that closed below the lower of the
previous low.
Practical Trading Process:
1. Start with a top-down analysis:
a. Begin with weekly charts to identify long-term trends and key
levels.
b. Move to daily charts to refine your analysis and spot medium-
term opportunities.
c. Use 4-hour or 1-hour charts for entry timing and fine-tuning your
trade.
2. Identify the overall market direction in higher timeframes.
3. Look for supply/demand zones and imbalances that align with the
overall trend.
4. Assess market efficiency and look for potential areas where price might
return to fill imbalances.
5. Identify liquidity areas where price might sweep before continuing its
trend.
6. Use lower timeframes to find precise entry points:
a. Look for confirmation of the higher timeframe trend.
b. Wait for market structure shifts that align with your analysis.
c. Enter trades at areas of imbalance or after liquidity sweeps.
d. Set stop losses based on market structure, placing them beyond
key levels or recent swing points.
e. Monitor market momentum for potential trend continuations or
reversals.
f. Manage your trade as it progresses, adjusting stop losses and
taking profits based on ongoing analysis of market structure and
efficiency.
TRADING PLAN
1. Initial Analysis (To be done before the trading day begins)
a. Daily Timeframe Analysis:
i. Identify the current trend (uptrend, downtrend, or ranging)
ii. Mark key supply and demand zones
iii. Identify any significant imbalances
iv. Note important liquidity levels (previous day's high/low,
key round numbers)
b. 4-Hour Timeframe Analysis:
i. Confirm the daily trend
ii. Identify more precise supply and demand zones
iii. Mark any intraday imbalances
c. 1-Hour Timeframe Analysis:
i. Look for potential entry setups aligning with higher
timeframe analysis
2. Trading Session Focus
a. GOLD:
i. Primary Focus: London and New York sessions (8:00 AM -
5:00 PM GMT)
ii. Secondary: Asian session for potential setup formation
(11:00 PM - 8:00 AM GMT)
b. EURUSD:
i. Primary Focus: London and New York overlap (1:00 PM -
5:00 PM GMT)
ii. Secondary: Full London session (8:00 AM - 5:00 PM GMT)
3. Intraday Trading Process
a. Pre-Market Routine (30 minutes before your chosen session
start):
i. Review daily and 4-hour analysis
ii. Identify key levels for the day
iii. Set price alerts at important levels
b. During Trading Session:
i. Monitor 15-minute and 5-minute charts for entry setups
ii. Look for alignments with higher timeframe analysis
c. Trade Execution:
i. Entry Criteria:
1. Price approaching a supply/demand zone on higher
timeframe
2. Presence of an imbalance that aligns with the overall
trend
3. Momentum shift on lower timeframe (15min or 5min)
confirming the trade direction
4. Potential liquidity sweep before entry
