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BY ACTUARY FOREX TEACHER C.E.O EXPERT TRADERS
Types of Liquidity
Created July 20, 2021 11 34 AM
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The 3 different types of liquidity that I focus on and that I believe are the most
important to be aware off, is going be trendline liquidity, support and resistance
which I would also classify as a range in some cases, and then EQL and EQH,
otherwise known as double bottom and double top.
Types of Liquidity 1
a down trendline.
So as we can imagine this creates lots of liquidity at this areas, that the
markets will usually manipulate to grab liquidity before a larger move can take
place.
Now this isn´t really a coincidence, because we know people with large pools
of money or large institutions, they know that retail are looking for this sort of
patterns, so they are going to manipulate so that they entice them into the
market.
Types of Liquidity 2
Now if we look at this 3rd tap of the trendline, we can see we had a nice
reaction, retrace candle. So this gives us all the signs for entering.
So this is what retail traders are, they are looking at trading this to continue
with this trend, and stop loss likely going be above this high, which is also
above the trendline.
So this is the trade, let as see how it plays out. So that we get a nice push down,
so they are in profit, but now we can see price now reversed and we have
broken the trendline, and we have broken above this high here.
Types of Liquidity 3
So this is essentially taking that liquidity from the sellers who is in this trade
here, but what we also have with this is the breakout traders, so the traders
that are looking at this as a break of trendline, break of this higher, they have
buy stop orders above the trendline, so something like this and they are
probably looking to target the 90% at this descending channel.
So we know they get triggered in to the buy stops, so whats likely gonna
happen? Well we see retail traders are in a bit profit and then ranging creating a
EQH and then price comes down, and eventually it puts in that new low.
So what we have done here, we have taken liquidity from sellers, and we have
taken liquidity from buyers, so now we have got the fuel, to actually move the
market.
Types of Liquidity 4
Now we are going look at the 2nd type of liquidity, which is going be support
and resistance, so in my opinion this can also be classed as a range in some
cases.
So we have buyers down here, and traders looking to sell up here, so this
generates a large amounts of liquidity above resistance, and below support.
Types of Liquidity 5
Now we usually see from this pattern, a support that we will see a grab of
liquidity, before price then reverses, then taking liquidity from this resistance,
or by side liquidity before then reversing again.
So now backing on the charts, we are gonna put the trendline liquidity and
support and resistance together, and show its manipulated. So we can see we
have an up move in trendline, with 4 touches, which is perfectly meeting with
Types of Liquidity 6
the trendline as we can see, and we have maybe buyers are getting involved
here on 3rd tap, but there is definitely gonna be buyers getting involved as we
tap here on 4th tap, nice retrace candle, stop losses below this low and looking
for them higher prices.
So granted price does come up, we form EQH at this area, price then reverses
so maybe some BE, but then again, price didn´t really break any structure or
any highs.
So then price comes back down takes liquidity from anyone thats in this buyers
from before, so it if we have buyers that got involved here 3rd tap, its likely that
they are gonna be if they are holding their trade, because as we know that
there is liquidity at every high and low in the market, which price tries to move
to in order to get that liquidity needed.
So for anyone sees as a break of trendline, as we can see we wick it here then
pull back, we BOS, and we break this trendline, so we have sell stop traders or
Types of Liquidity 7
people with the breaking retest looking at this to get involved short. Price
comes back up, we form EQH also known as resistance.
So we have sellers getting involved here, and then price pushes off it and then
pushes up. So this here is nothing more than a liquidity sweep of this highs. We
have taken liquidity and then we can see how the next 2 candles are huge
momentum which this 2 candles is the same size as this whole sort of range
here, because price now has a reason to move.
We do have a push down to this low here, we EQL and lets see what happens
next.
Types of Liquidity 8
So price push below that low, and then do push back up, which was likely a
reaction from an area looking left, but what can we also notice about this
reversing price here? Well we have EQL here, so we know there is liquidity at
this area, below it. So price wicks it here, which is just grabbing liquidity and
then we can see price reverse and BOS.
Types of Liquidity 9
So if we see next example, on USDCHF of EQH, we can see previously we had
the series of LLs and LHs, so we BOS, price pullback to mitigate, BOS, price
pullback to rebalance this inefficiency, BOS, and what we can do in LTF from
here is refine this down.
So what we can see is we have this 1h wick, which I have marked off with this
zone, so as we have learnt already, a wick is just a AOI on LTF, so this wick on a
15m would be like an OB or a supply zone, where we can short.
Types of Liquidity 10
But if we zoom in, we can see we are continuing to stay below the LH, so we
are breaking structure, and now we push up and we actually break above this
structure here to mitagating this wick, and we can see the mitigation dont have
any momentum, is just a corrective candles, because price just taking liquidity
from this EQH.
If we go to 15m, we can see is EQH clearly, an then we can see the OB, thats is
the wick on the 1h, price BOS and this is the last candle before the down move.
Types of Liquidity 11
Types of Liquidity 12
Bullish & Bearish Order Blocks
Created July 21, 2021 10 39 AM
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Is the final candle before an impulsive move that leads to a break in market
structure. This basically means the most recent HH gets taken out, or the most
recent LL gets taken out. If a HH or LL is not made, and price proceeds towards
the up/downside, then that final candle is not considered a valid OB. Price must
break structure to be valid.
When we take a look at supply and demand, or bullish and bearish OBs, the
newer is usually the better. So what I mean by this is an untested supply or
demand zone, or an untested OB is more likely to give us the expected reaction
that we are looking for with price, as opposed to one that price has already
come into before, to mitigate.
A quick rule of thumb: The 50% equilibrium point of a particular OB can act as a
strong level where price likes to mitigate to, before continuing in that overall
direction. What I have found to be true in my own testing is, if price comes up
to fill 50% of the OB, the we can now classify that OB as mitigated, and
completed, and for no reason to look at that area for future interest.
The timeframe you are trading, and the market structure you are currently
seeing is important, meaning: Are you seeing bullish market structure? If you
are, then it would make more sense to be looking for long trades at demand
zones and bullish OBs, rather than looking for supply zones and shorting
bearish OBs. Obviously the same concepts apply if you are seeing bearish
market structure.
Usually speaking, the HTF, the more significance the zones, or OBs will have.
Meaning they can be more realiable. Example: Taking a long from a 4h OB that
A bullish order block is the last down candle before a bullish, impulsive move
to the upside that breaks structure. We will see large momentum to the upside,
which usually leaves behind some price imbalance.
Order Blocks are just a fancy word for supply and demand levels, where large
institutions have placed big orders at this areas in the market. The theory, is
that price will eventually gravitate back towards this order blocks, to re-
balance price; fill any liquidity; and for more orders to be placed.
Once we get these OBs form, they normally leaves behind imbalance. So price
needs to return back and make price efficient before continuing up.
We can identify a clear entry, and stop loss with OBs. Entry at the top of the OB
with a stop loss at, or just below the OB.
A bearish order block is the last up candle before a bearish, impulsive move to
the downside that breaks structure. We will see large momentum to the
downside, which usually leaves behind some price imbalance.
Large institutions have placed big orders at these areas in the market. The
theory, is that price will eventually gravitate back towards these OBs, to
rebalance price; fill any liquidity, and more orders to be placed.
We can identify a clear entry, and stop loss with OBs. Entry at the top of the OB
with a stop loss at, or just below the OB.
Now one thing we can do with all the OBs is we can refine it
down and see where that momentum has come into the
market. Now what I mean by this is, if we had this as our OB,
but we had a candle that followed this one and it didn´t
engulf the actual OB. What we can do is refine it down to
that bullish or bearish candle, rather than the last down or up
move.
The reason why refining our OBs down is beneficial to us is because it tighens
our AOI, meaning we can get in more precise with a tighter stop loss, and
usually decrease our drawdown on our trade. It will also give us the chance to
increase our RR on our trade so we can get a better return. The examples
below show an OB refinement. So we can see the bullish OB gave us a last
down move, followed by a small bullish candle which didnt engulf the OB, or
show us any momentum towards the upside. It was in fact the candle after that
showed the momentum. So we can refine our OB down to this bullish candle.
We have the exact same example with the bearish OB on the right.
So here what we have got is the last down move before the up move. So this
would be our OB, but we can see the candle we got that followed this one is
It hasn´t engulfed this OB, meaning it hasn´t closing above showing that
momentum. It was in fact the next candle that showed that momentum
engulfed this candle, so what we can do is we can take our OB which is here,
so this is the last down move, but we can actually take this as our OB.
So here we have a bearish OB, which is exactly the same thing. This is our
bearish OB, but the candle after didn´t show any momentum or it didn´t engulf
the OB. So we can take this as our OB. Refine it down to this, so this is now our
OB, because its the counter before that momentum came in. As we can see
this is large momentum. So with refine we have 15 pips stop loss, which is
including the wick, and the original OB is 25 pips. So is good leave some space
for price breath putting stop loss above wick or in wick.
So once we have BOS to the upside, we are looking for potential longs.
So we can actually refine it down, and when we refine down OB, it won´t
always mean that the AOI is tighter, it means we can be more precise. Usually it
will be tighter, but it won´t always be tighter, because in this example here we
have a large wick, so this is our OB.
Now we can see the imbalance would be from this wick to this wick, because
they are not meeting. So everything in here within this wicks is buying power
and zero sellers.
So what that means is price will in the future come back to fill this imbalance
that was left, before potentially continuing to the upside.
Now this will hapen from time to time, we won´t get a tap into the OB, but the
reason being is because its usually just rebalancing any liquidity or imbalance
from just above the OB.
So now price BOS this EQH, and leave an OB. Now this is our OB, so what we
can do is place on an entry, now we can´t refine that down because this is the
last down move, and the candle after is when the momentum came in. So we
can´t actually refine it down like we did here.
So we have got a large stop loss, but what we can do in this example is actually
drop to a LTF and look to see if we can refine it down.
So we got tapped in, we have got triggered into the trade here, stop loss below
this wick, and this is our trade.
Now price made new BOS, and what we can do at this point is we can place
our stop loss at BE.
And this show me effiency price action, price doesn´t really need to come back
down to mitigate, because its already efficient, so price could just pull back
from here and go. So for that reason, I wouldn´t be looking to get involved in a
trade or look at this as an OB.
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So first thing we need to do with OBs is we can refine them down when
possible. So its important for us to note where that momentum has come into
the market. Meaning where have the institutions previously got in. Because
what happens is wherever that momentum started, price will usually come
back to that area to mitigate and then for price to continue its move, wheter
that be to the upside or to the downside.
Now the examples show and OB refinement. So lets start, this is showing a 1h
bullish OB. So we had this BOS, this is the last down candle before the up move
that BOS. So this would be our OB, we take the high and the low. So here our
stop is 10 pips.
Now what this means for our entry and stop loss?
Is we can obviously get in with half the size of a stop loss, meaning more
precision, more RR and potentially less drawdown on a trade. So this is what it
means by LTF refinement.
Now if we entered in purely of this, we would enter at the top with our stop loss
at the bottom, and we had 11 pips.
So we can see we have pretty much what we have doubled our return, just by
understanding refinement and how we can be more precise.
Yep. Well if we look at the next candle, we can see we have this little doji
candle here, it isn´t showing any momentum, and it still hasn´t engulfed the
OB, so we can take it a step further and look at this as our OB here.
Not really, because we have the low that we used before to mark our OB, so we
can still account for the low, but the concept remais, we tapped in where the
momentum began, tapped in perfectly and then we saw the move to the
upside.
So if we can refine it down to this candle, we are looking at 3.5 pips, and our
trade would be running just short 19% in one candle. So thats the power of
refinement and looking to see where that momentum is come into the market.
Now lets go to other example at EU. Taking another look at EU, again we had
the 1h on the left, and the 15m on the right. So starting on the 1h, we had an
impulsive move up above structure, as we can see, we BOS. So that give us a
OB to work with.
So we have this last down move, before the up move, but the next candle didn
´t show any momentum and it didn´t engulf the OB.
So we are gonna take this refined, because this is the last move in this
consolidation, before the expansion out. We can see we BOS and we pulled
back, we tapped in and then we continue to the upside.
Now if we measure from the high and the low we are looking at 17.6 pips and
running around 2.8RR.
Now 15m, what do we have? We have the last down move with this large wick
before expanded out of this consolidation range.
We then tapped back in, but we can refine this down even more. So firstly if we
just say we entered with a limit order as price come back in, stop loss would be
14 pips, but we can still refine it down even more.
So what this allows us to do is reduce our stop loss from 14 pips down to as
little as 6 pips.
Now obviously we wanna account for a couple pips but lets just go with this for
now. So we can see we tapped in perfectly but then continue to the upside.
So we had 4.8RR with previous candle OB, but as we can refine it to 6 pips we
have doubled more than doubled our profit to 10.3RR.
So we can see the power of this refinement, now obviously this are risky
entries, if we are just placing entries without no confirmation once price comes
in.
Now we will get into how we can wait for more information. A quick little tip of
what we look for once price taps in on a 1h or 15m OB into the OB, we can drop
to a LTF like 5m or 1m, or even a 30s and what we are looking for is essentially
priced to tap in just like this and then show us the BOS.
So just like we have here where we know price is BOS, we wanna see it on a
LTF. So just like this we wanna see a nice impulse up which will look like this.
So we can see we broke above structure, so we had this LL, LH, a BOS and lets
just say that this is a HTF POI or OB.
We are waiting for price to show its hand and once get this BOS, we can then
obviously enter.
We have a very tight stop loss and this is how we are able to get involved with
like a one, two, or three pips stop loss, and then obviously have a really good
RR in trades.
So next example we have pretty much the same thing, but I wanna drill this
concept as much as I can because its very powerful. So here we have 1h, we
impulsed up BOS, so this is where the move initiated from.
So we have the last down move here, but we can refine it down to this candle
here, just like that. Which gives us a OB of 15.8 pips.
So once we pushed off, we can set our entry, and we would have got tagged in
on this candle here. Now our stop loss would need to be as high as 15.7 pips.
So we can see tapped in once, twice, again we pushed off, but then we come
back in to push lower, before we then pushed off and BOS.
Now 15.7 pips is a very large stop loss size, so lets see how we can refine it
down on the 15m.
So if we was to set our entry on the 15m OB, we will be looking at our entry
there. We have a 5 pips stop loss, so we can see we are able to reduce our
stop loss size from 1h which was 15pips to 15m which is 5 pips. So 10 pips
reduced from our stop loss which ultimately is gonna give us a lot better RR on
trades.
So we can see the higher up here, we are looking at 11RR and on the 1h we
have 3RR.
So this could be used for a later date. We bos here, so we have the bearish OB,
the last bullish candle, before the down move.
Now if we are looking at entering we would have been tagged in on our limit
order here with our stop loss needing to be 12 pips. Now a good target for us
to be looking at is the low which is here or just below it. So we are looking at
5RR to the low.
So when we have this move to the downside, which bos as well, and we have
the last bullish up move before the down move, but we can refine it to this
candle because we haven´t shown the momentum. So this is our refined OB.
Now as we have refined it down we have nearly 9RR to the low as opposed to
5RR from 1h. So we have nearly doubled our return, just to the low.
Tags
So is a currency pair trending up, trending down? So are we putting in LLs, LHs,
HHs, HLs.
Are we ranging? So a range by market where we are staying within two price
points, not really moving up or down.
Market Structure 1
So as we just said, what we have here is an uptrending market. So an uptrending
market we will get HHs and HLs. So as we see we have a higher here, and price
pullback. Now as soon as we get price break above this high, it confirms this to be
the HL.
So all the time price is trading within this high, so below it we haven´t got a
confirmed HL until we break above.
So once we bos this is the most recent HL and thats HH, we pullback HL. We then
wait for a new higher which confirms the HL and then HH, HL, HH.
Market Structure 2
Now the same is in a downtrending market but obviously its flipped so its the
opposite. So we will get a low, a pullback and this LH is not confirmed until price
breaks this low here. So we get a break below which confirms the LH, LL, pullback,
LL, confirming the LH, LH, LL, confirming the LH.
A HH is not confirmed until we get a bos of the most recent high, and the vice versa
for a downtrend.
Market Structure 3
Now here we have EU, and lets look at this on the charts. So starting from here,
price is pulled back and we have broken, so we have made this low which we could
say kept going lower until here. This is when we actually got a pullback.
So this low, this whole leg down broke below here. So we can clearly see its broken
this low. So we have a LL, we then have a LH. So we can see price pulled back
which is tapped into an OB which would be more visible on a LTF.
So the low that we need to be broken is clearly here which we can see price pulled
down to here, this is one, continuation leg to the downside, then price pulls back but
this is not confirmed as a LH, but we can see what price done, is tried to come down,
but we failed to break below this LL, and instead we come up to test the LH.
We then pullback, but then we eventually we break it with this move, this impulsive
move that bos this LH.
So as the LH was broken and we didn´t get a LL, our bias has flipped from a bearish
market to now a bullish market, because we can see the LH is broken.
Price then pulled back and we get HH, which we can classify this as the highest
point. So we can see this is a new HH, because it broke above this highest point
here. We then pullback and make a HH.
Market Structure 4
Now we have a HH, HL, price then pulls back, we consolidate for a good few days
here, we come up to test this high but we don´t break it until here.
So where we would classify the HL? Well technically the lowest point is here, so we
can mark this as a HL, bearing in mind we have areas here, that we can looks to be
getting long from, this is the HL, we then get a HH which the highest point is
surround here, so thats the most recent HL, HH, HL, HH. This is confirmed once we
got this impulsive move up that broke this high.
Now we could say that this we had is an impulsive move up that made the HH,
pulled back and then we made this HH.
Market Structure 5
We came down to test it, we put pulled off and then we broke it, so essentially we
had a little bos, but this could be grabbing liquidity from people who are in longs on
this HL with stop losses, we didn´t quite tap into any sort of POI.
We just sort of pushed up from here, but the lowest point is here, and then we
actually do put in HH and a HL.
After a BOS we have HH and next we can confirm our HL, and to HL is the lowest
point always. So we have here again a HL and HH. Of course there are several bos
in LTF, but this is the overall how to mark bos.
Market Structure 6
There is a few different variations of market structure breaks, that I want to cover.
Now its important that we choose one of the following market structure breaks as we
go to, and stick with it.
1. So the first type is going to be where price breaks structure with a candle body
closing below the candle body low, and not factoring the wicks.
2. The second type, which is what I personally use, and one that is the most
popular, is a candle body close below the candles wicks.
3. The third and final type is a candle wick close below the candle wicks. In my own
experience this type is the least realiable out of the three, as it does not really
show us any true break.
Market Structure 7
So looking at some examples of bos, what we can on EU 1h, we had a bos here, we
had this higher, we had a little bit of a range, and then this candle broke structure,
and we got a wick, but we did close above and then we can see price pulled back
into a bullish OB, which is here, before we see some huge momentum to the upside.
Now as we broke above and closed above the structure, this would be for me a valid
sort of trade to be looking at as we come back into this 1h OB which we can refine
on a LTF.
But if we look at some of this examples here, we can see we had this bit of a
consolidation range, we pushed down ranged, we had a low, price come down
looking like it was gonna break this low, we wicked it and closed above, and then we
can see price then reversed to the upside.
So for for me this wick to downside is just grabbing some sell side liquidity from this
EQL, before they reverse price up to this highs here, as we can see we also get a
wick above this high, which is taking some more buy side liquidity, price then
reverses, we put in a new low, and then we pullback and then we have a huge wick.
So we at one point price was down here, and then we actually closed bullish, so we
pushed down below this low and then closed above it.
Market Structure 8
If we look left we can also see that this wick tapped into a bullish OB, perfectly
mitigating before continuing. So this is why this is definitely not a valid bos for me
because, this is just generating liquidity, rebalancing this impulsive move here,
tapping into an a bullish OB that has yet to be mitigated before reversing price to the
upside.
Now other example on EU 1h, we was clearly putting in LLs and LHs all the way
down here.
Market Structure 9
We can see at this point here we had price put in this LL and LH, because we can
see this is the LL that broke this low here. So then we can see that price impulsively
broke the structure to the upside.
Now for me this would be a valid bos, because we can see we had a candle body
that closed above the wicks of this LH.
So once we got this we can see, we left imbalance as well, we have a momentous
move showing us a change in market structure.
Market Structure 10
We can then take the last down candle as our OB which we can then obviously
refine down to this candle here, because the momentum came in on the next candle
which broke structure.
So we can see after that we did get a good day or so off a range buy market, we did
bos again, so we have did bos here, price did come down quite impulsively into that
level, we did range, this is building some liquidity which is more seen on LTF. We
have EQL, price come in tapped into our OB which we can obviously refine on a LTF,
but this is what we can be looking at, and then we can see price reacted from this
OB, rebalance bit of price and then we can see the impulsive move to the upside
from here.
Market Structure 11
So this first example I have drawn some diagrams here. So this is gonna be our 1h,
so we can see we have put it in HHs and HLs all the way up. Now this move down
broke the HL. So we have got breaking structure. So what we are gonna be
assuming on this example is this down move here is a calm and corrective bos.
Meaning there is not much momentum behind it, its just a bos with corrective and
low momentum candles.
So when we get this, we are gonna view this as a common corrective bos, meaning
its very likely that price is coming down to sweep liquidity and tap into an unmitigated
demand zone that was previously created, because once we was making this HHs
and HLs we are breaking structures to the upside which is creating demand levels
and OBs.
We may see something that is left behind and untested, unmitigated, imbalance left
behind as well. So this breaking structure could be grabbing liquidity from anyone
who is in the bias and trading stop losses at the lows. Because we know that there is
liquidity at every low and high in the market.
So this could be a bos taking liquidity, tapping into an OB which is unmitigated before
continuing with the overall bias, which is bullish.
Market Structure 12
So this would be our 1h demand, the price tapped in.
Now what we can see from this on a LTF, this is 1m perspective. So this blue box
here is 1h OB. So the move that coming down that bos on 1h, will look like this on a
LTF, se we would be seeing LLs and LHs. As price taps in to the 1h demand, we can
look for where is the LL and the LH.
Well we have a LL here and this is the most recent LH, we can look for price to bos
that will create a bullish OB, which we can look to get long from.
Now with targets we can look for previous 1h highs, because the anticipation for us
is to still see bullish order flow. We have swept liquidity, so we wanna see price put in
new HHs.
Agressive bos
So we have the same thing than corrective one, HHs and HLs, this is now gonna be
an impulsive bos. So an agressive bos meaning we would see some large
momentum candles which would ultimately leave behind price imbalance.
So on this down move, once price bos we can classify this as the market shifting
from bullish to bearish, because we have seen large momentum. So the bos, once
we get that we form a supply zone and OB which we can look to get short from as
we can anticipate a pullback into that zone, and for future LLs and LHs to take place.
Bearish order flow.
Market Structure 13
So once we get an impulsive bos this will be our supply zone, somewhere up here,
we may have areas below it which we can refine on a LTF, but for this example we
are gonna be saying this is where we wanna get short from.
So again we can look at the 1m perspective, this is what we could look to see as we
tap into the 1h supply. So prices forming HHs and HLs coming into it, we wanna see
a nice bos below the most recent HL, which will give us an OB, which we can look to
short from and the same goes for targets.
At a minimum as we have switched our bias from bullish to bearish, we wanna be
looking for price to put in 1h LLs and LHs, so this 1h low would be the most recent
low, we wanna see take out this low.
So this is a good place to target for a first target at a minimum.
Market Structure 14
So we shouldn´t be afraid of buying before the longer term sell, so what I mean by
this is lets say price bos to the downside, as we can see here, whether that was a
calm or agressive move that bos the structure.
We can still look to take longs from an area if there is an area there to long from. So
if we have a demand level which was untested then dependent on how the LTF
confirmation is showing us, as we come into this level, we can take long from here
where we can target a supply zone which was recently created from this bos to the
downside.
So we buy from here and target up there before a longer term sell, which we can
then expect for price to make new lows and then LLs, LHs from there.
Now this move from here as we can use the LTF to our advantage, we can obviously
get in with a very tight stop loss and this move from demand to supply zone could be
30pips, 20pips, 60pips, whatever.
We can still make some nice percentage in this move here, before we look to sell. So
we can buy to sell. Now the reason why this is also higher probability is because
once price comes into this level, we are essentially mitigating this move, taking
Market Structure 15
liquidity from anyone who is in buyers or even trading some form of breakout in this
structure break, whatever the case maybe, liquidity is being taken.
So people are getting stopped out to then see price come in to a supply zone. So
basically it clears the way for liquidity and price can tap into a supply zone and then
we can shorten from here.
So this move now has been mitigated, this demand zone, we have seen a push off
so we can now classify this as a completed sort of move.
We have pushed off once price comes down. There is not much real reason why this
demand zone will hold again, because its been mitigated already from this move
here. So we can see price come down and take out lows.
An example of buy to sell or in this example is gonna be a sell to buy, we are gonna
talk about, when we bos we can sell and then we can look for a longer term buyer
from an untested area. So this is also a trade that I took.
So if we look the price we had this high and price come up, we see a bit of a range.
We did form EQH and this is the high that took some buy side liquidity. So once we
had this high, we had a HL here. So range, and this is the move that broke to a new
HH, this is the HL. We can then see price after sweeping buy side liquidity, we came
down to bos, and candle closed below so is a valid bos.
Market Structure 16
This is also seen on a LTF, the 15m, 5m where we did it actually close below, but this
for me would be on the 1h, its a calm bos, as we have closed below, we can still look
to sell from this supply zone before a longer term buyer from this areas down here.
So once we bos, we have the last up move before the down move that bos, we can
then also refine it from this last up move to this candle here, because we can see
this candle has not engulfed the OB. So this is our supply zone and OB which we
can look to get short from.
Market Structure 17
So as we came down, we did get some wicks which for me is just taking liquidity
from this HL prior to this one. So we can see we had this wick that come down, so
anyone who is in buys, who is holding from this uptrend, would likely have stop
losses at this low.
Sp we can see price come down to take that liquidity reversed and then reversed
again. So this happens every single day.
So here we can take a sell on a LTF, so once we tap in we move to LTF, looking for
reactions and bos which leaves imbalance. So once we tap in OB we need to look
left, we could look to see if we have any demand levels that have been unmitigated,
and left for a later date.
So lets have a look, so we had this HH, and a HL, price come up to form this EQH
and then we see some huge momentum that essentially broke this high here. So we
can mark it as bos, we wicked it but we can see this is a range, and then we expand
Market Structure 18
it out quite momentously leaving behind imbalance. So for this example Im gonna
put on this demand level.
We do have an OB, so this is OB, but lets just mark on the actual range, from the
high end to the low, so as price come in we can note that we have seen some heavy
momentum coming into this level. So price has taken out this low, rebalance this
move that was made previously, but price is impulsive.
So what we could do on a LTF is we can wait for price to slow down, show us they
actually want us to respect this area and actually go long from here to potentially
back up to this highs.
But if we get another candle, something like this that just completely destroys this
demand level, then it hasn´t holded, so we can just classify it or we can just deny it
and just move on, and look for bearish sort of structure, and look to get short but the
next candle, Im not gonna go LTF and look at the entries but we see we wicked
below it, but we closed back up.
Now for me this is not invalidating the demand zone, because its about how it
breaks, is it breaking mementously or is it breaking correctively with wicks? And we
can see it is breaking with wicks.
Market Structure 19
So on a LTF, firstly, when we get wicks, if we get a wick on a 1h, it will be an OB on a
LTF. So wicks just show us OB basically on LTF. So there is entries here on a LTF
like the 5m or the 1m which I won´t go into but we can see what happens next.
We do respect the demand zone and we do correct but then we can see we come up
to rebalance this candle here from wick to wick, we then break above it and we can
see then do come up to previous highs and back up to test this wick here, which we
know as an OB on a LTF.
Market Structure 20
And thats where price then reverses again. So we can see this wick up here that we
know is an OB on LTF, and look at how price respects it.
Now we do wick above it, which its likely because we want us price wants to
generate liquidity before reversing. But ultimately it respects it and then we bos back
down to the low.
So this is where price currently is, but this is just the concepts of buying to sell,
selling to buy. Now as we have already tapped into this demand zone, its likely we
could now see lower prices and we can look for sells.
Market Structure 21
Price Action Imbalance
Created @July 30, 2021 10:14 PM
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So the same is true for when we see a bullish imbalance, buyers take control
and the sellers don´t get involved in the majority of that move.
So imbalances occur on every single timeframe. So from the monthly all the way
down to even a seconds timeframes, we will see it happen on every timeframe.
And once we go through the chart just to se how this works, we will start to view the
markets differently and realise how price refills this imbalances sometimes perfectly
before continuing in the other direction.
Price imbalance is when we either get a large momentous candle or where wicks are
not meeting. So the easiest way for me to show this is with the example below where
we are gonna look at 3 bullish or bearish candles in a row.
2. Now an imbalance would be here, so we have the exact same thing with 3
candles, but we can see how the bottom of the first wick here is not meeting with
the top of the 3rd wick, so this whole move from this wick to this wick, this bit of
trading in here, this selling pressure is called and imbalance. So we can see
where the wicks are not meeting. So thats basically what an imbalance is. This is
inefficient.
3. Now we have the bullish example here, so we have 3 bullish candles in a row.
This is a balanced bit of price action, because the top of the first wick is meeting
with the bottom of the 3rd wick, so its balanced and another word for it is
efficient. So its efficient price action.
4. Now and the imbalance, we can see same thing, we have a gap from the top of
the first wick to the bottom of the 3rd wick. So this is the imbalance in here.
So zoom in right into this bit of price action, we can see we have the 3 candles
coming down, bearish push, and if we take the low from the first candle which is
here, and the high, we can see this is an imbalance, and I have put it on, so the line
here from this wick to this wick, we can see so from here to here, this is an
imbalance, so price is likely to refill that before continuing, but if we also see this
push down bos and we have an OB, which will be the last up move refined down to
this candle, price tapped in, before then we are continuing.
We can see we tapped in, we rebalance that bit of inefficiency, and then we continue
after tapping into the OB.
So next we have a bos, we have 3 bearish candles, so if we look at the low of this
candle then the higher of the third, this would be the imbalance.
Now with imbalances it won´t always refill price completely to like 100%, what I have
seen from my testing is if we get an imbalance, and it comes down to refill it by at
least 50% then that can be enough for price to then continue in that direction that we
are looking at.
So it won´t always refill price all the way.
And we have the exact same thing with price here. So we bos, last down candle
refined to this candle here, and then we tapped in, respect the OB, and bos.
Now this move is efficient and have low momentum, but still OB, and we ca see we
are on this pair, we are clearly bullish, so we are not coming below the HLs, and we
So again we bos to the upside, we have the high of this candle to the low, which is
an imbalance. Price comes back down to rebalance, we tap into the OB and we can
see we tap in 3 or 4 times, we push off and then we come back down to mitigate to
the 50% or just around 75% of the OB, before continuing.
So moving on we bos, the high and low price comes down to mitigate, pushes back
up and then we do see price move to the downside, but as we bos to downside, we
could take the last up move, refine it down to this candle, price tapped into an OB,
and is we wanna say we had an imbalance, we could argue from this low to this
high, a little imbalance, only little but we still come up to refill that.
We have a bit of imbalance here, price wicked it, and we had an OB that was
formed, because we bos, more seen on a LTF, and then we have a lot of sellers
coming into the market. So the lowest of the candle to the high, its all imbalance.
Price comes back up, we fall just short of the OB, but again we can refine down on a
15m where we can get involved in this trade.
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What is mitigation?
In simple terms, mitigation is a close of current positions from banks and institutions.
The market makers will return price to an OB, to collect their orders, close out, and
then stact more orders which is why we usually see price reverse from these OBs.
Price will get manipulated, in order to close their positions before reversing price.
Here we have a chart of gold, which is showing a great example. So if we start from
the bottom and just work all the way up from this whole move, we can see we are
completely trending to the upside HHs and HLs.
If we just move on we can see we push up but then we do pullback, then we do bos
thats a valid bos for me, so I mark it. So whats mean? Once we bos we have the last
down candle which is here, so price is likely to come back, it doesn´t have to, it can
be left unmitigated and then price can continue.
So what we can see is we bos, we put in a new HH which really was up here, new
HL, last down candle before the up move, this is a bullish OB, price came back in
and this is a mitigation.
So money came into the market here, you know larger orders, price then came back
into that level, mitigated their orders or any sell positions that they had prior, came
back into that area, we had a bit of imbalance in price that was mitigated basically
This is not just happening by luck, its all calculated and that is a mitigation.
So if we carry the next valid bos would be here, now again it wasn´t with that candle
but the move did start from here, because we pullback, then we had a quite an
impulsive move up, we had a doji here, but then we had another candle
momentously breaking that high there.
So bos which is that high, so prior to this we had a HH, HL, a mitigation of that OB,
HH, HL and the exact same thing here, have a bullish OB which is the last down
candle, but we can refine it to that candle, because this hasn´t actually engulfed the
OB, so thats the candle that we can look at.
Then we bos, we had a wick mitigation, so is that by change that we come back into
fill at least 50% of that OB or their orders closing out some orders and then stacking
more and then continuing price.
So its just textbook and this is basically how the need to move,
so this is just market makers manipulating price, closing previous
So if we just carry on this is the most recent HH so where did price bos, where it was
on this move here. We broke that wick, we put in a new HH, we have a clear range
or a consolidation here so price is moving sideways.
What we can see is we have this move that is moving up, so we can sort of
disregard this and then we can look at moves from here, because this is where price
is moving sideways, so we can see a clear demand level, this is just building liquidity
and price is getting ready to initiate out.
So what we have here is a range or consolidation, price then initiates out which
basically means moving away and bos, and then we have a mitigation which is as
Well we could look at this but thats the move that was continuing up, is sort of from
here. So we can take the sort of highest point and the lowest point of the range,
before price moves out.
Now of course we do have an OB which would be this little candle refined to that
candle there, but in this example thats quite a small area to be looking at, so what
we can do is take the range from the higher to the low and then look for long
opportunities within that area on the LTF.
Now we could be asking, well this is the last down candle here, before some clear
momentum which to some degree is correct but is hasn´t really broken structure, or it
isn´t a valid break for me, because its just one candle and the move has started from
here, this is where price initiated out that broke the high and also another thing to
look at is how price came into this level here, we can see a lot of momentum, a lot of
bearish pressure and there is no entries on a LTF in this area here.
So its better to wait for LTF confirmation and look to see where our actual areas are,
where price will more than likely need to mitigate before continuing and we can see
its here clear demand and we know thats what happened.
So one thing we can see on the 1h is price came in but then closed above the
demand, so what this wick basically means is he is just bos on LTF, because at one
point price was down here, but then it closed up here, so what does that say on a
LTF?
Well that basically means we have got bullish candles on a LTF, thats bos and one
thing to look at as well.
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So when we are looking at the HTF, so it could be the daily, 4h, or 1h, now for me I
use 1h as my highest, which gives me a lot of opportunity and its just a great
timeframe to sort of base our trades around. Now for you can be the daily or the 4h,
it comes down to your own preference and could be the 4h or even a daily as your
highest timeframes.
But when we look at this diagram here, this is gonna be a HTF, so we are gonna call
this the 1h. So this diagram here.
Now a lot of smc traders would call that type of entry as a risk entry, but for me its
not something that I want to risk my money on, especially when we are trading on a
large sums of money.
What I would prefer to wait to see how price comes into that zone, and what I have
seen a lot more success with, is to wait to see how price comes into that zone, and
look for our entries on LTF.
So if we get into the different types of entries, we can see once we bos here, we
have this as our first demand level. So we are looking for longs within this sort of
demand level here. Now this on a LTF would look something like this. So this is
gonna be our LTF, so for me I execute trades on a 1m, and sometimes I go down to
the 30s. But we are gonna stick to the 1m.
So what we will be waiting for is for price to push in and then we wanna see intent
for bullish movement. So we wanna see a nice bos. Now this would then give us and
entry as it would create an OB down here.
Now this is entry type 1 which is a single bos which basically means a single bos
and a single confluence, which means we are trading the first bos on a HTF, as we
can see on 1h, is the first bos. Now this could have previously been a downtrend
with then bos showing intent tapped into a demand level, so its a single confluence
and its a single bos on the LTF.
Thats still considered a double bos for me, so that is a double bos and its a single a
confluence, because we are still trading at this 1h demand level, but we have double
confirmation on a LTF.
So one thing I would say for anyone who struggles with entries or takes too many
losses, definitely try avoid this entry here (type 1), because when price bos now
obviously it depends how it breaks, but it could be just a fake out and then to head
lower.
Its not too much confirmation, but it all comes down to how it breaks as well, but
what I would say for like the newbies or beginners is definitely wait for a double bos
if you are struggling with entries, as we will get into some more better trades as we
are waiting for more confluence, and we are actually starting to see bullish order flow
on our LTF, and we can see that we are being respected from the 1h demand level.
Price again trading back down into it, and we will see LLs and LHs, we wanna wait
for a nice bos as we can see, and this would be our single bos, but with double
confluences, as we trade in the second demand.
Now entry type 4 we wanna wait for a double bos as we can see one bos, pullback,
second bos. Double bos and double confluence as we are trading at this second
demand.
This type 4 is taking to the extreme and waiting for a lot of confirmation, but if we are
waiting for this, then we are gonna get involved in some great trades, but we won´t
always get involved in the trade.
So now that we have gone through this continuation trades, its important to know
that this is just drawings and this is textbook setups. They are not always gonna be
as clean as this.
So its about using own initiative to asking ourself what is price actually doing?
And then look for our entries from there, but this is textbook continuation trades.
So once we start seeing HTF bullish or bearish order flow, just like this, we wanna
look for the bos.
This is where price is likely to come back to mitigate it before continuing, so its
important to understand where price broke from, where did the move initiate from.
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Now we have gone through continuation entry types on our LTF. What we are gonna
do now is get into a slight variation, but there is still considered continuation entry
types with the trend.
So we are on EU on the 1h. Now this was a trade that I took, with a very good return.
So what are basically looking for, is still are our OB are most recent LH or in an
uptrend a HL.
In this example we are looking at a sell trade, so we have a LL, which was formed
with this move down. This is the move that bos this most recent LL.
So if we just mark it on, so we can see it, that was the low that was broken with that
move there.
So once we had that, we had our new LH, which would be up here, but then what we
know is we have OBs that we can trade from and refine which is exactly what we
So what we can see is we put in that new LL with that move there, so we have our
AOI, our LH which we wanna look for sells if price comes to trade in.
But if price does one of this two things, so what we seen is we had this LL, price
pulled back and then it actually broke structure again with that move there.
So we can see price before coming into the LH, we had a second bos from the most
recent LL which is here.
So one this what Im always saying and is really important is its about how price
breaks. So is price breaking in the form of seeking liquidity or is it breaking with
momentum showing us that price doesn´t necessarily need to come back up to this
level and we are breaking with momentum. So we see an entry lower down or is it
liquidity seeking.
In this example what we can see is we have broken with wicks zero momentum, so
we can see corrective candles there is nothing behind it, apart from breaking the low
and then retracing, because we can see it is a corrective move, there is nothing
being left behind, there is no real supply zone or valid OB.
Its breaking the low and as we already know, the highs and lows always get
manipulated and they always get taken out by ever so slightly before price reverses.
Now the reason for that is just seeking liquidity and there is nothing much else to it
apart from that. So what we can see is we had a corrective and a liquidity break.
So thats what we call it, so a liquidity break of that low and we still have this area up
here (OB) that we really need to be looking at, to look for shorts.
Because we can see prior to this move coming back up, we had the seeking of
liquidity and if we also wanna be extra what we can have on is this higher.
Now is not perfect, we have one higher and a second. So we do have EQH to some
degree, so some maybe looking to sell from here on EQH, so we have sell side
liquidity from the low and by side liquidity from the highest as well.
So people who are looking at this as trend LL, LH, they are looking to sell from the
most recent LH, but we can see as its liquidity, we have this supply zone up here,
and an unmitigated OB up here, which price is likely going to need to mitigate a
close of positions from larger interests and a stack of more orders at OB area.
So that is exactly what happened here, which is why price respected that area.
So this is one of my favourite entries, or entry types, because its plain liquidity,
understanding liquidity and how we can use it in our favour, and get involved in this
trades which is what myself and the other community members did. We get involved
in this trade, I believe I banked +20RR on this move here to the LL.
So just a recap this is still a continuation trade and that on LTF as we have seen in
part 1, we would get involved in this trade by LTF bos, whether that is gonna be a
double or single bos.
It would be a double confluence, because we have been bos, LL, LH, mitigation,
continuation. We are seeing clear order flow.
We left this supply zone unmitigated before, but everything else is pretty much
mitigated and clear downtrend.
We took liquidity, tapped into that area and then we continued to the new LL and as
we was saying about lows and highs getting manipulated, what we can see here we
did push down, further breaking that low then we had NFP I believe that was, whip
down and then we did reverse, but what I was saying a minute ago, about price only
coming into 10% of that area, that in some degree is not mitigated.
I will still trade it and we can still trade and with price coming into just this area here.
But what it basically means is we don´t really need to void this area for a future date
in price.
Well if I look at this area, look how price come in again say, what is that? So first of
july to not even a week, so 5 days later that area is still respected, because they
more than likely had orders or still in the market which needed to be closed out, say
a bit of price, which is why a price then mitigated perfectly to the target literally to the
pip, and then we see a massive sell of down, which also bos, we can see that.
So if price was to come back in here as we have, I wouldn´t really be looking for
entries, because its already been mitigated to at least the 50%, but what we can see
is price didn´t mitigate to the 50%. So we can in this example still look for entries
once price comes in to the 50% as it did exactly here.
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Im just going to go through GU, and go through some little tips, on liquidity and the
asian session.
Now 1h, we know that we are looking at this bos, and this area here, now I have
marked on this candle here, which shows the sort of consolidation range, before
price bos, and we can see price didn´t come back in, but then what we have done
was pulled back and then bos again.
So we can see that bos and the last down candle refined to that candle. Simple stuff,
we all know this we tapped in, and once we tapped in we go on the 1m.
So we went a bit messy, but then we got into asia. Now back to 15m, this zone here
is showing asia session. So what I have got is set on is from midnight to around 6am
which is uk time.
Now what we can see is we had a lot of liquidity in this area, we have a low and a
second low, so we have EQL here.
And if I go to 1m, we can see that liquidity sweep there and then what happened
next? Well we bos to the upside, we came back in to that range or where that move
started that caused the bos, and then we went long from here.
And I wouldn´t be surprised if we go long from here, and start attacking some of this
highs or even here, but what we may see is now we bos on the 15m, we may get a
tap back into this area here, and if that is the case then I will be for longs from this
area as we have bos, and I will be targeting highs up here.