#BTC || A break down how to catch a trade.
Market structure: We had a clear uptrend which is identified by new highs that are higher than the previous ones. And new lows that are higher than the previous ones.
Higher time frame point of interest: 28.880 on Binance chart is the pivotal point. That level was the previous higher timeframe range we lost. Now that price trades into that level we can expect at least some selling pressure.
Zoomed in on the point of interest we can see a bearish order block on our left. A bearish order block is identified as the last bullish candle(s) before the downtrend. Typically we want to see a displacement after the forming of an order block.
Above this high there are selling orders in the form of stoplosses from traders who are short or limit orders from spot traders. This is significant because the market often reverses after these stoplosses are activated. This liquidity pool of stoplosses we call Buy Side Liquidity
On the 1hour timeframe we can see a market structure shift(MSS). This is when the market reverse from either bullish to bearish or vica versa on the lower timeframe. These are the first indications a market is reversing. It does not necessarily lead to a beartrend on the higher timeframe. You could go short at the pivotal point but if there is no indication (a MSS) then it's a gamble and not a trade.
On the lower timeframe its very clearly that there is a discplacement after hitting the buy side liquidity, pivotal point and higher timeframe order block. We have a confluence that suggest a selling area. Because of this price can get very volatile and create huge wicks, also due to leverage. Because of the leverage element and the 15min ob holding price i wasn't sure this could be counted as a MSS.
We choose to miss the optimal entry. Our next best plan is to wait for a break of structure (BOS). This means in this case price makes another low after MSS. This confirms our bias that the market is indeed reversing. Now we can look for sell positions.
Let's clean the chart and look for a point of interest where price could retrace back into after trading lower. We mark out the bearish order block before the breakdown happens. This is where new supply is introduced into the market in that sponsered the move down
Go unto lower timeframe and monitor price action within or near that higher time frame point of interest and look for a MSS. Extend the line because this is a potential entry point. Also mark out lower timeframe take profits points which usely are the previous lows. And mark out a higher timeframe target where you would exit the trade completely.
Put in the trade and look at the risk and reward. This is crucial because it has to fit your personal risk management. In this trade the risk was 0.62% and the reward was 2.77% for the ultimate target. The Risk Reward Ratio is 4.47. Sounds like an awesome trade.
When the trade is going as planned we can take profit AND move our stoploss. In the case it won't reach our ultimate target we are still in profit that we secured and our stoploss is now beyond our entry. Even if the trade is stopped out, we can not loose.
!If you enjoyed this article, please like, share and follow!