Learn to identify market structure and how to minimize losses and maximize profits in a range-bound market:
Price action traders check if market is trading in previous period's range and conclude if markets are range bound or trending.
(1/n)
Price action traders check if market is trading in previous period's range and conclude if markets are range bound or trending.
(1/n)
As a volume based trader, apart from price range, I check how is the volume distribution over a period of time.
If most of the volumes (value area) is spread in the middle of a period's range with close inside value area (optional), it is called as a balanced profile.
(2/n)
If most of the volumes (value area) is spread in the middle of a period's range with close inside value area (optional), it is called as a balanced profile.
(2/n)
When volumes are showing that they are in a balanced state, that indicates that buyers are not interested in taking prices up and sellers are not interested in taking prices down.
Balanced profile structure:
(3/n)
Balanced profile structure:
(3/n)
In such a market, it is not so productive to chase breakouts or breakdowns as they have a greater chance of fizzling out.
Now, some can have a query that we do not know if a day is going to have a balanced profile or not until the day is done.
(4/n)
Now, some can have a query that we do not know if a day is going to have a balanced profile or not until the day is done.
(4/n)
To understand the context of the market, we always refer to the previous period's volume structure.
As a day trader, I always check prev day volume profile structure as every trading session is an extension of the previous session.
(5/n)
As a day trader, I always check prev day volume profile structure as every trading session is an extension of the previous session.
(5/n)
Apart from previous day, I also check if the volume structure on a slightly higher timeframe (week)
You can see that the weekly profile shows a balance as well indicating neither buyers or sellers are willing to take control.
(6/n)
You can see that the weekly profile shows a balance as well indicating neither buyers or sellers are willing to take control.
(6/n)
This shows that there is a lack of interest between buyers and sellers from a volume perspective.
In this kind of structure, I prefer to trade pullbacks.
Attempt longs at prev week, prev day Value area low and attempt shorts at prev week and prev day value area highs.
(7/n)
In this kind of structure, I prefer to trade pullbacks.
Attempt longs at prev week, prev day Value area low and attempt shorts at prev week and prev day value area highs.
(7/n)
Apart from this, if you see that consecutive periods have overlapping balanced profile value areas, it also implies that the market is in a range.
Overlapping value areas indicating market is range bound.
(8/n)
Overlapping value areas indicating market is range bound.
(8/n)
As a trader, you need to remember 2 important things:
1. You cannot time the market going into balance or coming out of balance.
A trending market can continue to trend and a range bound market can continue to be range bound.
It can make as many NR candles as it wants.
(9/n)
1. You cannot time the market going into balance or coming out of balance.
A trending market can continue to trend and a range bound market can continue to be range bound.
It can make as many NR candles as it wants.
(9/n)
Do not try to time the change of it. Trade the market as it is in current structure.
2. When market changes its structure, moving from range bound to trend or trend to range bound, you will be taking a loss.
(10/n)
2. When market changes its structure, moving from range bound to trend or trend to range bound, you will be taking a loss.
(10/n)
You have to be focused on changing your stance on time when market changes but not trade a market being afraid that it will change its context.
(11/n)
(11/n)
Do not try to predict the change of the direction of the wind but be ready to change your sails at a moment's notice.
(12/n)
(12/n)
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Also, join my telegram channel where I share my analysis everyday in live markets
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