Summary
This video explains the concept of a trading 'indication', which is a price break above or below a swing high or low, signaling a potential start of a new trend. It emphasizes waiting for these indications on higher time frames (like 1-hour or 4-hour) after consolidation, rather than trading the break itself. The indication serves as a blueprint for future entries and exits after a subsequent correction.
Key Insights
Consolidation periods should not be traded; wait for indications after price breaks established swings.
Consolidation phases are not traded because traders should wait for indications to play out. Indications confirm the direction price is likely to head after consolidation.
Indications exclusively occur when price breaks established swing highs or lows.
Indications can only happen when price breaks above or below established swing levels, which are swing highs and lows. The most common time frames to monitor for these are the 1-hour and 4-hour charts.
An indication signifies the start of a trend, providing a blueprint for entry and exit points.
An indication serves as the starting point of a trend, answering questions about the current trend and price direction. It shows where momentum started and provides a blueprint for future entries and exits, especially after a correction.
Avoid trading the initial indication; instead, use it as information for future trade setups after a correction.
Traders should avoid trading the initial indication itself but use it as information. The subsequent correction will offer better entry points for capitalizing on the trend.
The indication serves as a blueprint for identifying potential entry and take-profit levels.
The primary purpose of an indication is to provide a blueprint for where entries and take-profit levels might be established, especially after a subsequent correction.
Sections
Understanding Indications in Trading
An indication is a price break above a high or below a low, signaling a potential trend direction.
An indication occurs when price breaks above a high level or below a low level, which signals that price is moving in a certain direction or that a trend is starting in that direction. Price can range for a while and then an indication occurs; it can be big or small.
Indications are sought on 4-hour and 1-hour time frames for trend confirmation.
The speaker personally prefers to look for indications on the 4-hour and 1-hour time frames. These levels are considered important for identifying trend movements.
Swings are price points where the direction reverses, forming swing highs and lows.
Swings are points where price goes up to a certain point and then rejects, heading in the opposite direction. These form swing highs and swing lows, similar to higher highs/lows and lower highs/lows but during consolidation.
Consolidation periods should not be traded; wait for indications after price breaks established swings.
Consolidation phases are not traded because traders should wait for indications to play out. Indications confirm the direction price is likely to head after consolidation.
Indications are confirmed by price momentum, higher time frame trends, and volume during market sessions.
Indications are primarily driven by price momentum, the overall trend on higher time frames, and trading activity during market sessions with volume.
Indications exclusively occur when price breaks established swing highs or lows.
Indications can only happen when price breaks above or below established swing levels, which are swing highs and lows. The most common time frames to monitor for these are the 1-hour and 4-hour charts.
An indication signifies the start of a trend, providing a blueprint for entry and exit points.
An indication serves as the starting point of a trend, answering questions about the current trend and price direction. It shows where momentum started and provides a blueprint for future entries and exits, especially after a correction.
Identifying trend direction involves observing if swing highs and lows are progressively getting higher or lower.
The best way to understand the trend is to observe if swing highs are getting higher or if swing lows are getting lower. Higher swings suggest an uptrend, while lower swings indicate a downtrend.
Breaking previous swing highs signifies the start of an uptrend or bullish momentum.
When price breaks above established swing highs, it creates new swing highs, indicating the start of an uptrend or that price has bullish momentum.
An indication reveals the starting point of momentum, confirming potential for continued movement.
An indication shows at what price level momentum started. For example, if price breaks above 500, it means anything above 500 has the potential to continue moving upward, similar to the momentum that drove it to 600.
Avoid trading the initial indication; instead, use it as information for future trade setups after a correction.
Traders should avoid trading the initial indication itself but use it as information. The subsequent correction will offer better entry points for capitalizing on the trend.
New market structure, like a new high, often precedes a liquidity grab and a potential correction.
After price makes a new high or new market structure, it typically grabs liquidity, which can sometimes shake traders out before continuing its move.
Trading breakouts without considering market structure can lead to losses due to fakeouts and liquidity grabs.
It is crucial to avoid trading solely based on breakouts, as price can liquidate traders. Trading based on market structure provides better positioning to capitalize on the entire trend.
Focus on catching larger portions of trends rather than repeatedly seeking small day trades within them.
The goal should be to position oneself to capitalize off the whole trend, potentially holding trades for multiple days to maximize profits, rather than constantly looking for small entry opportunities.
A new indication can cause dramatic price drops due to market liquidity grabs.
A new indication can lead to significant price drops as the market attempts to grab liquidity from traders who entered on the initial breakout, often before a continuation.
The indication serves as a blueprint for identifying potential entry and take-profit levels.
The primary purpose of an indication is to provide a blueprint for where entries and take-profit levels might be established, especially after a subsequent correction.
Chart Example: Identifying an Uptrend Indication
On a 30-minute chart, price broke above a swing high, indicating bullish momentum.
The example shows a 30-minute timeframe where price had a swing high. An indication occurred when the price pushed above this established swing high, signaling bullish momentum.
Following the indication, price experienced a minor correction before making a new high and continuing the uptrend.
After breaking the swing high, price corrected slightly, potentially shaking out some traders, before continuing upwards to make a new swing high, confirming the uptrend.
Previous swing highs can act as subtle support levels during uptrends, confirming structure.
The chart example illustrates how previous swing highs, once broken, can act as subtle support levels. Price retested these levels, not breaking structure to suggest otherwise than an uptrend.
Breaking a marked support level needs a second confirmation to avoid fakeouts, as price may return above it due to prior indication.
If price breaks a level marked as support, it might seem like a trend reversal. However, if it immediately comes back above that level, especially due to a prior indication, it's a fakeout and not a trend change.
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