By now , you know
1. What the structure is,
2. What are Support and Resistances,
3. What are Pivot highs and Pivot lows
4. What is a Trend, Three possible directions of trend and Trend violation Pivots.
If you are clear with the above 4 points, you are ready to hit the charts.
How will these be identified on a chart?
How can we use them to extract profits out of the markets?
Before going into the details of the above two questions, first let me talk about the different charts you need to perform your analysis. Here, I mean charts of the same stock in different timeframes .
Triple Timeframe Analysis
(HTT) Higher Timeframe - To define the structural framework of support and resistances,(60 minutes)
(TTF) Trading Timeframe - To identify the trend and Low risk High probable (setup) areas.(3 or 5 Minutes)
(LTF) Lower Timeframe - To fine tune the analysis and to find the better entries and exits, (1 Minute)
you have to decide the timeframe you trade as per your decision taking speed. Its always better to start with the larger timeframes, as you get enough time to take a decision. You can jump to smaller timeframes once you are comfortable with the process of interpreting the information fast and taking decisions accordingly. This is how I use these three timeframes.
1. Defining the Structural Framework of support and resistances
Recall the two principles I have written while explaining the structural framework,
Price moves in a structural framework of support and resistances.
If the framework is broken, price moves to the new framework of support and resistance using the concept of polarity change of support/resistance.
So, we need to draw the support and resistance lines to define our structural framework. It is the battlefield that we are going to lay our plans to make profit. Define the battlefield, wave the plan as a spider web inside that batllefield, let the losers fall into the web we have made, then attack them. This is how profits are made. We are at the first step , i.e defining the battlefield.
Drawing Support/Resistance Framework
Every pivot is a potential support or resistance for the future price movement. We are using higher time frame to define our framework. As per the ytc price action book, you have to consider all the swing highs and lows as structural support and resistances.
I have modified it slightly with my observations, and you can use whatever works for you. First I will explain what’s written in the book and later I will explain how I define the framework in my trading.Its always better to draw two supports and two resistances below and above the current price respectively. The more recent the levels, the more effective they are.
Step 1 – Open your higher timeframe chart. 60minute chart in my case.
Step 2 – Identify the current market price,
Step 3 – Identify two recent pivot high/lows above the current market price and two recent pivot highs/lows below the current market price.
Step 4 – Draw horizontal lines at those points.
You are done with the framework construction. Open the trading timeframe (3minute chart in my case) with those levels drawn on it.
How I am defining the market structure in my trading
Open your higher timeframe chart.
Mark recent pivot highs and lows on the chart.
Identify those pivots, the movement from which has broken the previous pivot of opposite polarity.(Courtesy - JCK)
1. What the structure is,
2. What are Support and Resistances,
3. What are Pivot highs and Pivot lows
4. What is a Trend, Three possible directions of trend and Trend violation Pivots.
If you are clear with the above 4 points, you are ready to hit the charts.
How will these be identified on a chart?
How can we use them to extract profits out of the markets?
Before going into the details of the above two questions, first let me talk about the different charts you need to perform your analysis. Here, I mean charts of the same stock in different timeframes .
Triple Timeframe Analysis
(HTT) Higher Timeframe - To define the structural framework of support and resistances,(60 minutes)
(TTF) Trading Timeframe - To identify the trend and Low risk High probable (setup) areas.(3 or 5 Minutes)
(LTF) Lower Timeframe - To fine tune the analysis and to find the better entries and exits, (1 Minute)
you have to decide the timeframe you trade as per your decision taking speed. Its always better to start with the larger timeframes, as you get enough time to take a decision. You can jump to smaller timeframes once you are comfortable with the process of interpreting the information fast and taking decisions accordingly. This is how I use these three timeframes.
1. Defining the Structural Framework of support and resistances
Recall the two principles I have written while explaining the structural framework,
Price moves in a structural framework of support and resistances.
If the framework is broken, price moves to the new framework of support and resistance using the concept of polarity change of support/resistance.
So, we need to draw the support and resistance lines to define our structural framework. It is the battlefield that we are going to lay our plans to make profit. Define the battlefield, wave the plan as a spider web inside that batllefield, let the losers fall into the web we have made, then attack them. This is how profits are made. We are at the first step , i.e defining the battlefield.
Drawing Support/Resistance Framework
Every pivot is a potential support or resistance for the future price movement. We are using higher time frame to define our framework. As per the ytc price action book, you have to consider all the swing highs and lows as structural support and resistances.
I have modified it slightly with my observations, and you can use whatever works for you. First I will explain what’s written in the book and later I will explain how I define the framework in my trading.Its always better to draw two supports and two resistances below and above the current price respectively. The more recent the levels, the more effective they are.
Step 1 – Open your higher timeframe chart. 60minute chart in my case.
Step 2 – Identify the current market price,
Step 3 – Identify two recent pivot high/lows above the current market price and two recent pivot highs/lows below the current market price.
Step 4 – Draw horizontal lines at those points.
You are done with the framework construction. Open the trading timeframe (3minute chart in my case) with those levels drawn on it.
How I am defining the market structure in my trading
Open your higher timeframe chart.
Mark recent pivot highs and lows on the chart.
Identify those pivots, the movement from which has broken the previous pivot of opposite polarity.(Courtesy - JCK)
