Weekly Market Structure and Trade Execution Recap

Weekly Performance Overview and Friday Reflection

• Weekly Record: The trading week concluded with a record of $4$ wins and $1$ loss.
• Daily Breakdown:
  • Monday: Win.
  • Tuesday: Win.
  • Wednesday: Win.
  • Thursday: Win.
  • Friday: Loss.
• Primary Objective: The purpose of this recap is to review the successful trades, analyze the mistakes made on Friday, and identify preventative measures to avoid similar losses in the future.

Monday Analysis: Weekly Fair Value Gaps and SMT Divergence

• Higher Timeframe Context:
  • The weekly timeframe revealed a Fair Value Gap ($FVG$) created during the previous week.
  • The bias coming into Monday was to see the market open and tap into this weekly gap.
• Daily and Four-Hour Perspective:
  • On the daily timeframe, a specific low was identified that price was expected to target for the entire week.
  • On the $4H$ timeframe, price had swept out significant lows and begun a rejection to the upside.
  • An $SMT$ (Smart Money Tool) divergence was noted where $ES$ (S&P 500) put in a specific movement that $NQ$ (Nasdaq) did not mirror.
• One-Hour Timeframe Execution:
  • At $09:00$, $ES$ had not yet taken out a particular high.
  • The strategy involved analyzing the last price action on the one-hour chart: price had taken out previous lows and bounced off a specific imbalance.
  • There was no initial inducement to the lower end; instead, price created equal lows.
• Trade Logic: The Failure Swing and Order Block:
  • Price created a "failure swing," which typically indicates an impending sell-off toward opening lows.
  • However, a key Order Block ($OB$) was present. A trade was executed at the Consequent Encroachment ($CE$) of this order block.
  • The trade resulted in a "bottom tick" entry for a move of $150 - 170\,pts$ to the upside.
• Lower Timeframe Confirmation ($5M$):
  • High probability trades are identified via "engineered liquidity" or "low resistance liquidity" situated above or moving into entry points.
  • Market opening: Price dropped, tapped the entry level to the tick, and displaced upward for $176\,pts$.

Tuesday Analysis: Midnight Openings and Multi-Day Holds

• Market Bias:
  • The objective was to see a specific low taken out on the $4H$ timeframe before price moved higher.
  • A key area of interest was identified: an Order Block ($OB$) underneath the target low.
• Trade 1: Midnight Open Play:
  • An initial trade was taken from the midnight open level on the $1M$ timeframe.
  • Metrics: $15\,pt$ stop loss, yielding approximately $55\,pts$ before the stop loss was moved to breakeven and subsequently hit.
• Trade 2: Consequent Encroachment Entry:
  • Price ran up to the $CE$ of the hourly Order Block, rejected, and then dumped.
  • The primary entry was taken at the opening/$CE$ of the $5M$ Order Block with a $20 - 25\,pt$ stop loss.
  • The entry was triggered by $ES$ taking out its low, which confirmed the Nasdaq entry.
  • Duration: This position was held from Tuesday through Thursday.

Wednesday Analysis: The Low of the Week and Engineered Liquidity

• Technical Framework:
  • Wednesday was identified as the potential "Low of the Week."
  • The Sequential Rule: Liquidity sweep occurs first, followed by inducement second.
  • Price swept liquidity, established a high, and then induced the low.
• The Wick Entry:
  • Price reached the $6.01\,8$ (likely referring to the $0.618$ Fibonacci level) of a specific wick and began buying up.
  • At the $09:00$ open, price took out both a high and a low; because the low was taken first, the expectation was a secondary drop before moving higher.
• Execution in Fair Value Gaps:
  • Key Area: A $5M$ Fair Value Gap ($FVG$) combined with engineered liquidity (failure swings).
  • The trade was entered at the $CE$ of the $FVG$ with a stop loss placed below the gap.
  • Alternative Entry: If a student missed the first move or was stopped out by a tight stop, the "protective low" logic applied. An entry at the Order Block opening or $CE$ provided a recovery trade of about $82\,pts$.

Thursday Analysis: Failure Swings and Rejection Blocks

• Higher Timeframe Setup:
  • The $4H$ chart showed highs were swept, but failure swings remained.
  • A rejection block on the $4H$ was identified to hold the price.
• Execution Strategy:
  • Inducement of highs occurred on the $1H$ timeframe before price moved lower into the engineered liquidity at $06:00$.
  • At the $09:30$ open, price rushed upward toward a $1H\,FVG$.
  • A limit order was placed in the $5M$ refined gap within that $1H\,FVG$ with a $20\,pt$ stop loss, targeting the lows.
• Reversal to the Upside:
  • Following the move to the downside, $ES$ swept a low (SMT divergence with $NQ$) providing an inducement play.
  • The entry was a retest of the $CE$ of the Order Block that provided the inducement. It was tapped to the tick, leading to a significant upside move.

Friday Analysis: The "Devil's Mark" and the Rookie Mistake

• The $17,000 Trade Recap:
  • A successful trade was executed prior to the loss, yielding $\$17,000$.
  • Bias: Bullish due to failure swings left on Monday.
  • Execution: Limit order at the $CE$ of an hourly Order Block with a $20 - 25\,pt$ stop loss.
  • Target: The $CE$ of an inversion gap.
  • Heuristic: If an inversion gap on an hourly or $4H$ timeframe is run through quickly by a single candle, always expect price to return to at least the $CE$ of that inversion candle.
• Review of the Loss:
  • The Error: Lack of patience and mismatching timeframe inducements.
  • Specific Mistake: Looking for an inducement on the $1M$ timeframe that did not align with a $5M$ inducement.
  • Market Context: The candle opened with a "Devil's Mark" (no wick on the daily candle bottom).
  • Process Error: At $09:30$, price rushed up immediately. The instructor "rushed" the trade instead of waiting for the drop to the entry area. Inducement was sought on the $1M$ without the necessary $5M$ liquidity grab established first.
  • Result: News at $10:00$ caused a crash that hit the stop loss.
  • Corrective Action: If the instructor had waited for the $5M$ inducement/liquidity grab, the entry would have been a perfect "to the tick" tap for a $60 - 65\,pt$ gain.

Questions & Discussion

• Question from Student: Why mark a low on the hourly timeframe if it is not a swing point?
• Response: While the primary swing point might be elsewhere, there is always liquidity on lower timeframes ($15M$ and $30M$). The instructor uses these timeframes to locate additional valid swing points that are not visible on the hourly chart alone.