Trading with the Trend and Identifying Market Direction

Importance of Following the Trend

• Trading with the trend increases chances of success.
• Beware of reversals as they can negate profits.
• Deep retracements can stop you out even if your overall direction is correct.
• Saying: "The trend is your friend until it ends."

Identifying Market Direction and Reversals

• Market moves through impulsive and corrective phases.
  • Impulsive Moves: Same colored candles, large bodies, large distances.
  • Corrective Moves: Mixed candles, sideways wicks, smaller distance.
• Trend continuation is signaled by price breaking above structure levels.
• Trend reversal is signaled by price breaking below structure levels.

Challenge in Identifying Moves

• Difficulty distinguishing pullbacks from valueless internal volatility.
• Use Fibonacci retracement to identify valid pullbacks.
  • Valid pullbacks retrace to at least 38.2% level.
  • Shallow moves below 38.2% are considered noise.

Validating Market Moves with Fibonacci Levels

• Example of using Fibonacci to determine pullbacks and market structure.
• Bearish Scenario: Pullback must reach 38.2% of previous bearish leg.
• Breaking below swing lows signals trend continuation.

Market Direction and Structure Confirmation

• Three Moves: Breaking above structure confirms a trend.
• Only after a structure break is a swing low confirmed.

Application in Bearish and Bullish Scenarios

• In bearish, identify valid corrections and structure breaks.
• In bullish, confirm uptrend by seeing continuous structure breaks.

Valid Break of Structure

• Requires a full-bodied candle through structure level.
• A wick can indicate liquidity grab, not valid structure break.

Change of Character

• Indicates market sentiment shift.
• Valid when there is a clear break with a full-bodied candle.

Avoiding False Signals

• Liquidity Hotspots: Be wary of breaks in major swing levels where liquidity pools exist.
• Fair Value Gaps (FVGs): Price often retraces to fill these gaps before true reversals.

System of Market Sentiment

• Supply and Demand Zones: Price mitigates these zones, indicating control shifts.
• Uptrend forms demand zones; downtrend forms supply zones.
• Market consolidates when supply equals demand.

Trading Tips

• Don't chase the market; let the market come to you.
• Be patient, trust analysis, and wait for mitigation to occur.

Trading Tools

• Mention of a new futures program for traders.

• Note: Always conduct your own analysis and ensure that trades align with your strategy and risk management plan.