1/ prob repeated this a million times but theres always newcomers and feel bad when they get rekt utilizing momentum strategies in meanrev environments so.
a thread
a thread
2/ First of all we need to understand that markets are cyclical. we go from imbalances (trend) to balances (range) and pretty much loop it.
Markets tend to trend only 20% of the time and range 80%, this is very important to understand cause they have completely diff approaches
Markets tend to trend only 20% of the time and range 80%, this is very important to understand cause they have completely diff approaches
3/Most kinda 'know' how to trade a trend, irrational actors tend to feel more attracted to aggresive participation so its more intuitive to follow a trend, so we will cover the other one
The bracket, the one that people struggle the most and unironically happens most of the time
The bracket, the one that people struggle the most and unironically happens most of the time
4/ A bracket occurs when it starts trading between two pivots. This simply means that Buyers and sellers established a fair value and none of them is really interested in pushing it forward through a direction.
In a bracket we are going to be looking for Responsive Action.
In a bracket we are going to be looking for Responsive Action.
5/ What is responsive action? Responsive is when buyers respond to price below the value area, and sellers above. Simply because above they are finding a premium and below a discount.
6/ The most common mistake is trying to predict when the bracket is going to break rather than react once it happened.
A rule of thumb is to:
*LOOK FOR REVERSALS NOT CONTINUATION*
A rule of thumb is to:
*LOOK FOR REVERSALS NOT CONTINUATION*
7/ By law of mkt dynamics, once price accepts into a balance area, the most likely scenario is that revert to the other side, and once inside is expected to reject edges until proven otherwise.
Once price accepts outside is likely to become imbalanced (trend)
Once price accepts outside is likely to become imbalanced (trend)
8/ So following such rules, instead of trying to predict when its going to happen, we can respect the range until we have the confirmation that accepted outside
/this is going to save u a lot of money/
note * they wont respect perfectly each extreme so there might be variations
/this is going to save u a lot of money/
note * they wont respect perfectly each extreme so there might be variations
9/ u never want to see biggest delta at extremes if u want to have a succesfull breakout
if u do a building u want a proper foundation not all the blocks at the top or its likely to fall.
mkt becomes very predatory in these situations.
if u do a building u want a proper foundation not all the blocks at the top or its likely to fall.
mkt becomes very predatory in these situations.
10/ or d ones that dont know, the more times we touch a "supp" or "res" the more resting orders we consume so technically the weaker it becomes (Resting orders provide liquidity and liquidity is what stops price from moving)
So the less liq we have, the easier the price travels
So the less liq we have, the easier the price travels
11/ Here is where it gets tricky, simply because we could test a supp/res 2 times and it could break or we might need to test it 50 times before it breaks.
The easiest way to get a hint that is going to break is when Initiative Activity/ Imbalances occur
The easiest way to get a hint that is going to break is when Initiative Activity/ Imbalances occur
12/ How do i detect Imbalances
Imbalances show u where buyers overcame sellers or viceversa. in Footprints its compared diagonally, we need to pay attention to those that are stacked together and in CONTEXTUAL levels where market moved with strength
Imbalances show u where buyers overcame sellers or viceversa. in Footprints its compared diagonally, we need to pay attention to those that are stacked together and in CONTEXTUAL levels where market moved with strength
13 /Its v important to pay attention to how OI and relative volume behave when such imbalances form. a High volume imbalance w increasing open interest will be completely different than a low volume with falling open interest
Jim dalton explaining increasing or decreasing volume
Jim dalton explaining increasing or decreasing volume
14/ Low volume imbalances tend to reverse and fill quickly, while high vol ones tend to continue in the direction of the movement prior to being retested.
15/ But such auctions wont happen often in a Bracket, so we rather need to focus on Absorption and Mousetraps. going to explain what each one means.
16/ Absorption happens when high rel. volume market orders appears at the extremes trying to break but someone is filling w limits
If someone with size shows up and doesnt move the price in that direction.. what doesnt happen sometimes is the most important piece of information
If someone with size shows up and doesnt move the price in that direction.. what doesnt happen sometimes is the most important piece of information
17/ Mousetraps are pretty much SFPS in traditional terms, but here we can actually see if most of the volume is trapped in the wick rather than in the body, if its in the wick theres a high chance of people being trapped
18/ Video about mousetrap
19/ Pretty much we are looking for aggresive breakout traders to position themselves offside (Open interest needs to be increasing so we know new positions are being open) if OI decreases its pretty much shorts closing and has a different impact.
fav strat for a bracket
fav strat for a bracket
20/ This is how it would look in current btc situation.
21/ idk if im missing smth honestly too lazy to review but will add if smth else comes to mind.
massive thanks to @NoPareidolia since most of the images are examples made by him
hopefully it helps someoen!
massive thanks to @NoPareidolia since most of the images are examples made by him
hopefully it helps someoen!
sry if its a mess. i lik to ramble w/o checking if i messed up somewhere
ay!
ay!
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