Hello guys its the week 2 of the steemit crypto academy season 3. Am glad to be able to participate is this lecture. This week lecture is about how to use market structure trend in trading reversals by professor @cryptokraze
What do you understand about Market Structure?
Market structure is the price action/ movement of market price in a particular trend. The market moves in a way that it create resistance and support in the market trend. The market price moves in three pattern uptrend, downtrend& sideways. This movement create a swing high and swing low in the market. There are ways we use market structure for these trend. We have market structure for uptrend, for downtrend and also sideways trend
MARKET STRUCTURE FOR UPTREND
Here the market moves in a swing but the swing is always in an upward direction. In this swing we will experience both high and low swing. Its just that the new high is always higher than the previous high and the swing low is also higher than the previous swing low. Since the market is moving in an uptrend every swing is always higher than the previous once. Bellow is a screenshot from metatrader4 app
MARKET STRUCTURE FOR DOWNTREND
Here, the market moves in a downward swing. In this swing there will be both high and low swing. Just that the new lower is always lower that the previous low and the new high is also lower than the previous high. This is happening because the market is market structure is in the downward direction. Screenshot to explain this from my metatrader4
MARKET STRUCTURE FOR SIDEWAYS TREND
Here the market structure is not forming in an upward direction or lower direction. The market move to the side. This structure also form a high and low swing in the market but the trend wont move neither in an uptrend nor downtrend. The structure always forms a straight line. Screenshot showing a sideways trend.
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What do you understand about Lower High and Higher Low? Give Chart Examples from Crypto Assets.
The word lower high and higher are not new to me but i don't understand the meaning until the lecture. After reading the professor's post i realised that both lower high and higher are signal for trend reversal. Since no structure will keep their trend forever. There has to be a reverse in the trend.
LOWER HIGH
This is a swing that is formed at the top of an uptrend but this swing will fail to break the high point of the previous swing high and it is formed below the previous high swing. This will bring about a reverse in the market trend leading to a downtrend. That's why it is called a lower High. Below is an image illustrating a lower high swing.
Higher Low
This is formed from a reverse from a downtrend. Since no downtrend will continue forever there has to be a reverse in the market. This is a swing point that is formed at the bottom of a downtrend but this swing refuse to break the low of the previous low. It is formed higher than the previous swing low. This is where the market trend reverse. Image below show illustration of a Higher Low
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How will you identify Trend Reversal early using Market Structure Break?
To identify a trend reversal is easy if we have understood the concept of higher low and lower high. This two swing point ar very important in identify a trend reversal early.
The three main thing you need to understand in trading reverse strategy with market structure are
- Identifying the higher low / the lower high swing point.
- Drawing a neckline
- Waiting for a breakout
Now to identify an uptrend reversal using market structure
We just have to locate the higher low at the top of an uptrend. When we have identified the higher low swing you will then mark a neckline below the swing higher low point. The line shouln't be too distanced from the the higher low point then we wait for the break out. We will wait until the candle stick goes below the neckline leading to a down trend.
Below is a screenshot explaining the above illustration.
To identify downward reversal using market structure
We have to indentify the lower high after the downtrend. When we have identifed the lower high, we will mark neckline above the swing lower high point. We will then wait for the breakout which will lead to an uptrend. Below is a screenshot explaining the above illustration.
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Explain Trade Entry and Exit Criteria on any Crypto Asset using any time frame of your choice
Trade entry criteria
Entry point is the same as buy point. This ia a point when you enter a trade. Now lets consider using market structure to determine our entry point. Note an entry point can either be a buy order or a sell order.
Now to use market structure to determine our buy order we have to consider some certain point before we enter the trade. Lets use a buy order for instance
- we know the trend is a downward trend amd we want to create buy order. When the higher low swing is formed we will then notice the line to be sure
- The next step is to mark a neckline above higher low.
- when we have drawn this line we know that a reversal trend has occured and that our signal. But withmthis we won't enter the trade. We have to be sure that the reverse is a strong one so we wait until it crosses the neckline by a candle or two the we can enter the trade. Thats a strong signal for entry point for a buy order. This process is also applicable for a sell order.
Trade Exit criteria
Talking of how go exit a trade, its a simple step if we follow the right step. Exit point can be in a downward trend or and upward trend depending on our order. Lets use a buy order for example here.
After we have taken the following procedure i stated in entry criteria, the market must have gone up. Now to exit we will also follow the swing higher points as they form. Our take profit point can be our higher high points. When we see the higher low is completely formed then we can close the order. This is our final take profit poin for a buy order. That a signal for exit
Basically, the higher low and lower high are signals for both exit and entry point.
Place 2 demo trades on crypto assets using Market Structure Break Strategy. You can use lower timeframe for these demo trades
For the purpose of this class i will be using the btcusd and ethusd chat to execute a buy order and a sell order on my meta trader4 app
BTCUSD
For the btcusd i placed a sell order on a 1min time frame. I trade. The reverse from the uptrend swing.
- I first determine the trend of the market. I noticed its a uptrend.
- Then i mark a neckline below the trend when i noticed a slight reverse in the trend.
- After the candle stick passed the neckline, then i placed a sell order
- I then modify my order by setting a stop loss and a take profit.
Bellow is a screenshot showing my profit
ETHUSD
I placed a buy order for this example. The steps are also similar to the sell order. The main difference is just the trend of the market. The previous one is a sell order while this is a buy order.
- firstly, I identify the reversal trend in the market trend.
- I mark my neckline above the market price then wait for the candle sticks to cross it.
- After the candle sticks has crossed the neckline , then I placed a buy order
- I Also set my stop loss and takeprofit.
Bellow is a screenshot showing my profit
Conclusion
Lastly, the market structure break is a great strategy for trading reversal trend. This strategy can be used to trade with diffrent time zone depending on the type of trader we are.
Market structure shows the trend of the market, in a way that form resistance and support.
CC @cryptokraze