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UNIT 3
MARKET PHASES
MARKET CYCLES
DRIVE
- Clear market direction
- Clean pushes and range fill
- Predictable price action
RANGE
- Uncertain direction
- Expecting liquidity
- Trade the range
LIQUIDITY
- Price manipulation
- Choosing direction
- React to price action
LTF VS HTF
The same market cycles can be seen on both the HTF and LTF. To get a better understanding of what price wants to do, we need to use the combination of both, i.e., being able to identify a HTF drive with a LTF liquidity grab and taking the right entry for each specific situation
DRIVE
HUNTING OPPORTUNITIES
When price is driving, there are more hunting opportunities. Price has likely found its direction and jumping on the trend usually is the way to go
A word of caution is to not get easily persuaded into trades in the opposite direction. If price has chosen its direction for the day, it is usually best to not be the 'hero'
WHEN TO BE PATIENT
Price usually is driving because the HTF has grabbed liquidity and is driving in its HTF range. Because we are always in a HTF range, what we have to be careful of is when the HTF has already filled the range. Once that has happened, it makes price much less predictable
Because of this, we usually target the HTF range fills, and once that has happened, we start being more patient
On the HTF, we may just see strong bearish candles and wickfills, but on the LTF we will see structure being formed as price is coming down
The only worry here is whether or not price has enough liquidity to continue pushing
HTF DRIVE
DRIVE
Price movement during this phase is often clear. Price typically continues to make (in this example) lower lows and lower highs
setups to look for
breakouts / fakeouts
RANGE
RANGE
Price will eventually find a place to consolidate. This can be because there is a lack of volume outside of the 3 main sessions, but usually is a sign that price requires more liquidity to continue its push
setups to look for
breakouts / fakeouts
HUNTING OPPORTUNITIES
When the market is ranging, it is typically more difficult to find clean positions. Price needs to show direction but when its ranging, we have no confirmation that price will stay in the range, nor do we have confirmation that a breakout is truly a breakout
Watch out for all types of positions (fakeouts, onions and breakouts) and wait for a proper liquidity grab before following price's direction and continuation
WHEN TO BE PATIENT
Because price is in a range, there is a lack of direction, and a lack of direction usually will mean we have to be patient and wait for direction to form
Usually a spike in volume is also required to break out of the range, so a liquidity grab is what we can look for
Additionally, be careful of taking positions immediately after the fakeout. A fakeout could turn into a continuation and market structure shift
Depending on how long it ranges for, price may look like it is still pushing through on the HTF, but on the LTF, a range can be established
HTF RANGE
LIQUIDITY
LIQUIDITY - FAKEOUT
When we talk about liquidity, often we are looking for price to reach a certain price point that it has tapped in the past
HUNTING OPPORTUNITIES
Liquidity comes in two phases. For the Liquidity grab itself, hunting opportunities may be found when price closes back into the range when it follow the direction of the HTF
For further confirmation, wait until the re-breakout following the liquidity grab, and usually this position will have a higher win-rate
Overall, the market cycle of liquidity is a good time to hunt for positions
WHEN TO BE PATIENT
In the case that price doesn't start driving soon after the liquidity grab, it could mean that price is more uncertain
It could be looking for liquidity in the opposite direction for a market structure shift, or it could just be delayed price action. Either way, this is when we should exercise patience and wait for further confirmations such as breakout closures
This point is typically found through previous price action and mirrors we can see by looking at price action history
HTF FAKEOUT
setups to look for
breakouts / fakeouts
LIQUIDITY - CONTINUATION
After grabbing liquidity, price can make a decision. Either the liquidity grab is the start of a market structure shift, or it is liquidity for price to continue pushing down
By waiting for a further confirmation in the form of a breakout closure, we can enter knowing that price is more likely to drive further down
setups to look for
breakouts / fakeouts
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