Market Structure for Trade Confirmation

Market Structure for Trade Confirmation

  • Using market structure to enter and confirm trades for higher probability.
  • Advanced technique to be used after mastering the market structure and order flow series.

Legend

  • Swing market structure: Red
  • Internal structure: Purple
  • Fractal structure: Orange
  • Fractal Level 2 structure: Deeper orange

Downtrend Example

  • A downtrend approaching a demand zone (green box). This zone:
    • Had produced a significant move in the past.
    • Had inducement.
    • Was unmitigated.
    • Was the only demand zone remaining nearby.
  • React, don't predict; wait for confirmation.

Confirmation with Market Structure

  • Downwards structure in red.
  • Price moves up, showing upwards internal structure (purple).
  • Internal Break of Structure (iBOS) suggests a lower high was formed.
  • Price reacts from the demand zone.

Break of Internal Structure

  • Breaking an internal level of structure often targets the swing structure.
  • However, price doesn't always reach the swing high.
  • Observe for transitions of structure against the trade and react accordingly.
  • A bullish transition justifies a long position, especially in an area of demand.
  • Without demand, longing on one break is insufficient.

Increasing Probabilities with Reconfirmation

  • Watch for fractal (orange) structure from the high point.
  • Breaking structure leads to a pullback to grab liquidity.
  • Mitigation within the demand range may occur for continuation.
  • Reconfirming refines entry for a better trade.

Refining Entry with Fractal Structure

  • Without fractal confirmation, long position requires covering the entire demand range.
  • Fractal structure helps refine the entry and improve risk-reward.
  • Waiting for structural change from downward fractal structure.
  • Entry on the break of the refined order block with imbalance.

Confirmation Levels

  • Double confirmation is sufficient.
  • Triple confirmation is even better, using fractal level 2 or 3 structure.
  • Additional retest may not always occur; observe volume for confirmation.
    • High volume from low to high suggests retest may not occur.
    • Otherwise, wait for the retest or scale in.

Risk Reward Improvement

  • By waiting for additional confirmation:
    • Better risk reward.
    • Entering on the candle body close after the break.
    • Stop loss under the low.
  • More confirmations increase probability.

Scenarios and Considerations

  • Fractal level 2 confirmation is not always available.
  • Focus on the red (swing), purple (internal), and orange (fractal) structures.
  • If the break is poor, then consider waiting for further confirmation.

Trade Individuality

  • Each trade is unique; there are no identical trades.
  • Don't assume all confirmation opportunities will be available.

General Format Summary

  • This is the format for entering any trades with any strategy being used.
  • Understand and practice this format.

Practice

  • Review past charts.
  • Identify transitions.
  • Use bar replay tool.
  • Practice in a live environment.