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Advance mkt structure ITH STH STL

Oct 17, 2024

Lecture Notes: Immediate Rebalances and Advanced Market Structure

Immediate Rebalances

  • Objective: Expect explosive delivery within minutes after entering a play.
    • Price should take off immediately; if not, expect consolidation or reversal.
    • Purpose: Quickly rebalance the area and move away from it.

Major Elements in Trading

  • Market Context and Time:
    • Understand the purpose behind each market movement.
    • Use multiple time frames to frame your trading thesis.
      • Example: Bullish on a two-minute frame might just be a retracement on an hourly frame.

Trading for Liquidity and Inefficiencies

  • Key Focus: The market trades for liquidity and inefficiencies.
    • Understand the hourly draw to set expectations across time frames.
    • Identifying bearish or bullish conditions on various time frames can guide short-term trading decisions.

Advanced Market Structure

  • Traditional Structures: Higher high, higher low, lower high, lower low are too basic.
    • Focus on liquidity and inefficiencies.
    • Recognize market shifts beyond traditional change of character.

Intermediate and Short-Term Highs/Lows

  • Intermediate Term Highs/Lows (ITH/ITL):
    • More important than short-term swings.
    • Identify these to understand real market sentiment.
  • Short-Term Highs/Lows: Used for liquidity generation but do not balance gaps.

Identifying Important Market Levels

  • Understanding which price levels (highs/lows) are important for predicting market moves.
  • Rejection Blocks and Mitigation Blocks: Indicators for where price might reverse or retrace.

Application of Market Structure

  • Recognize inefficiencies and liquidity to make informed trading decisions.
  • Price Legs: Observe how price interacts with fair value gaps to determine market direction.

Practical Example: NASDAQ

  • Using live chart examples to apply concepts.
  • Recognize short-term highs/lows in a live market context.
  • Price Objectives: How intermediate and external draws on liquidity inform market direction.
  • Market Structure in Action: Example of applying lessons to the NASDAQ market chart.

Order Flow and Trade Entries

  • Bullish Order Flow: Down close candles supporting price indicate bullish sentiment.
  • Bearish Order Flow: Green candles acting as resistance indicate bearish sentiment.

Inefficiencies in Price Movement

  • No Fair Value Gaps: Indicate potential for aggressive reversals or retracements.

Conclusion

  • Focus on inefficiencies and liquidity, observe market objectives and structure for informed trading decisions. Advanced understanding of market structure is necessary for effective trading.

This lecture focused on understanding market dynamics through the lens of liquidity, inefficiencies, and advanced market structure concepts. It emphasized the importance of contextualizing trade decisions within multiple time frames and recognizing significant market levels for successful trading.

Full transcript