This week, professor @cryptokraze gave very important information about the market structure breakdown. He talked about the strategies we need to implement in this regard in trade.
1 - What do you understand about Market Structure?
There is a constant volatility in prices in financial markets. There is no forever up, forever down, or forever flat. Sometimes the price of assets can rise very quickly for a while. Sometimes, the asset price can drop as much as we can't imagine. Sometimes, the asset price can stay flat for a long time without fluctuating too much. We call all of these changes in the markets the market structure.
This year, most of the cryptocurrencies started to rise a lot after the new year, but after a certain time, the rise stopped. After that, a decline began. But this decline did not last long. After that, cryptocurrencies started to watch sideways.
Traders make various moves by looking at the market structure. Different levels are formed on the charts after price movements. These are support and resistance levels. Traders make their moves according to these levels when trading.
Price moves in 3 ways. We can group them as uptrend, downtrend and sideways trend.
Market Structure for Uptrend
(tradingview Steem /USDT chart)
It is an upward movement of price action. When price action moves upwards, the previous high price is surpassed. Resistance levels are exceeded. Previous resistance levels now become support levels. A resistance level is formed at the current highest price. While the uptrend is taking place, the price drops a little and starts to rise again. Price increase dominates against price decrease.
Market Structure for Downtrend
(tradingview Steem /USDT chart)
The direction of the price is downward. The price drops further below the previous low price. Support levels now turn into resistance levels. While the downtrend is taking place, the price rises a little, then the downtrend starts again. Price fall dominates against price rise.
Market Structure for Sideways
(tradingview Steem /USDT chart)
The direction of the price is fixed or stable. Sometimes the price goes up and sometimes it goes down. Price fails to cross the resistance level, it will revert back to the support level. At the same time, the price does not go down from the support level, it rises towards the resistance level. The decline begins again. The asset price fluctuates between support and resistance levels.
2 - What do you understand about Lower High and Higher Low? Give Chart Examples from Crypto Assets.
Various price levels occur with the movement of the asset price. Here, support, resistance levels and ultimately the market structure are formed. Different levels occur in an uptrend and a downtrend. In an uptrend, Higher are high and high lows, in downtrend Lower are low and lower highs.
Higher High
(tradingview BTC /USDT chart)
It is a level in an uptrend that provides a higher price formation than the previous high. This triggers the asset price to rise excessively. Resistance levels are overcome, new resistance levels begin to form. Previous resistance levels become support levels.
Higher Low
(tradingview BTC /USDT chart)
Apart from Highs highs in an uptrend, there are higher lows levels. In short, we can call it HL. They are the lows that occur during an uptrend. At least two HL from an uptrend are needed. The latest HL level must be higher than the previous HL level. Having at least 3 HL levels on a chart confirms an uptrend.
Lower Lows
(tradingview BTC /USDT chart)
In a downtrend, it is the formation of a lower price level than the previous low. In this case, the support levels are broken one by one. Multiple lows confirm the low level of the bear period.
Lower Highs
(tradingview BTC /USDT chart)
In a downtrend, the price does not go down directly. It first falls, then continues to rise a little. The high levels that occur in this downtrend are called lower highs. The lowest lower high point is lower than the previous lower high point.
3 - How will you identify Trend Reversal early using Market Structure Break? (Screenshots Needed)
A break in the market structure causes a reversal of the direction of the trend. It is possible to spot a trend reversal early. Both uptrend and downtrend are possible early on. Now I will try to explain them.
Identify Uptrend Reversal Early
No entity will ascend forever. After a certain rise, a decrease in prices will begin. There are multiple HH points in an uptrend. If HH points start to take LH points instead, the trend starts to reverse.
(tradingview BTC /USDT chart)
As you can see in the chart, the Lower High point has started to form at the top of the uptrend.
As can be clearly seen in the chart, there is a neckline in the market structure.
There is something very clear in the graph again. The neckline is clearly broken.
In the event that these 3 events occur, it can be said that the uptrend is now completed and the downtrend is transitioned.
Identify downtrend Reversal Early
Financial markets are constantly changing. Like an uptrend, a downtrend also has an end. There are some cases that indicate the end of the downtrend. Identifying the trend in advance gives traders huge profits. It is possible to buy the asset price at the lowest levels.
(tradingview BTC/USDT chart)
As you can see in the chart, there is a High Low formation in a downtrend. This is an important signal that the downtrend is over.
As you can see in the graphic, there is a neck formation.
As you can see in the graphic, the neckline makes it clear.
If these 3 events occur, it is possible to realize early that the downtrend has come to an end.
4 - Explain Trade Entry and Exit Criteria on any Crypto Asset using any time frame of your choice (Screenshots Needed)
Trade Entry Criteria for MSB Strategy
In order to use the market structure breaking strategy efficiently, it is beneficial to follow some rules. Applying the rules in a disciplined way allows him to earn more. In addition, in case of damage, it makes less damage.
Buy Entry Criteria
There is a very simple logic in trading. It is buying the asset price low and selling it high. Everyone wants to buy at the lowest price, but does not know when the lowest price occurs. Now I will show you how to buy the asset for the lowest price.
(tradingview ETH /USDT chart)
The market should be in a downtrend. While examining the charts, I observed that the buy signals were formed more clearly on the 1-hour and 15-minute charts. Long-term thinkers can look at longer-slice charts.
As you can see in the chart, the price should make a high low after a few low lows.
We need to mark the neckline after seeing the high low on the chart.
We come to the most important part. Wait for the price to break the neckline strongly. The situation will become clear with a candle that will form above the neckline. This situation is called market structure breakout.
This is where we make our purchase.
Sell Entry Criteria
It doesn't make sense to hold an asset for long. We need to sell the asset price at an appropriate time. There are rules about when to sell our assets.
(tradingview BTC /USDT chart)
- We need to understand that the market is in an uptrend.
- Price should form a lower high after a few higher highs
- After the lower high is formed, we determine the neckline.
- The neckline is broken. Below that, a clear candle forms. This situation is called market structure breakdown.
- We are trading below the market structure breakout.
Trade Exit Criteria for MSB Strategy
It is very important in trading to enter the market at the right time. It is just as important to exit after reaching a sufficient profit rate. If things go the way we want, there are some criteria we have to follow in order to exit when things go as we do not expect.
Trade Exit Criteria When in Loss
Things may not go as expected. That's why we need to set the stop loss level well.
As I have shown in the chart, we should put the stop loss on the lower high point.
If the price exceeds the stop loss level, we need to understand that the strategy we followed was wrong.
(Tradingview ETH/USDT chart)
- The stop loss on a buy should be below the highest low.
Trade Exit Criteria When in Profit
(tradingview ETH/USDT chart)
(tradingview BTC/USDT chart)
- If everything goes in our favor, we should adjust the take profit level.
- Our take profit ratio must be at least 1:1 Risk/Reward.
- When the price reaches the level we set, we need to exit the trade in order to realize our profit.
5 - Place 2 demo trades on crypto assets using Market Structure Break Strategy. You can use lower timeframe for these demo trades (Screenshots Needed)
To tell the truth, I never wanted to deal with demo accounts. I had some USDT in my Huobi account. I started to examine the charts of cryptocurrencies in decline.
The SNX/USDT chart caught my attention. There was a market breakdown and I wanted to evaluate it by making a purchase.
(tradingview SNX/USDT chart 30-minutes)
(purchase and sale details)
SNX/USDT Purchase price: 11,529
Stop Loss level: 11.43
Sale price: 11,707
On the 30-minute SNX/USDT timeframe, the market structure has broken down. I have made more profit than 1:1.
(tradingview WICC/USDT chart 30 minutes)
WICC/USDT Purchase price: 0.1794
Stop Loss level: 0.174
Sale price: 0.185
I detected a Higher Low on the WICC/USDT chart after consecutive low lows. I drew the neckline. Market structure breakdown occurred. I made a purchase. I completed the sale transaction after the 1:1 R/R ratio was realized.
Conclusion
There is a constant change in the prices of financial assets. There is no rise or fall forever. After the markets complete an uptrend, they switch to a downtrend. They give some signals before going downtrend. Being able to get these signals early allows traders to make a profit.
In this lesson, we learned the subject of the breakdown of the market structure. I thank the professor for his work and contributions.
Twitter sharing
https://twitter.com/Steemtht/status/1412789169827586049
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