What’s good guys…I am feeling good. I am resting well…Spending time with the family…I take for granted sometimes the beauty of stepping away from the charts, as much as I am always saying to “Take a break” “Don’t Trade Weekends” and all that Jazz.
The above is something for you to study.
Currently in a long with Ethereum that I entered from 2614.
Below I will break down my approach to understanding why I believed the probability of price returning back up would happen.
1) Environment:
This is your first priority. What has happened? How fast has the price moved? What zones have they come back to? What has happened at the zones they have returned to? Establish the vectors, areas of interest where shorts may have been liquidated or longs. What was the USDT.D chart saying?
In this instance, I was watching Ethereum dropping to the downside and was waiting for the calmness to be maintained. When the speed of candles started to slow down, that is when I was paying attention to the price.
The 30 Second time frame was the trigger for me. If you notice the 30second chart there was massive volume coming in, (Two Big Red Volume bars, The main image attached) Some of you may be aware that this was a V play being developed.
Now it was at this point where I said to myself, it’s time to look for entries. Now I was referring to various time frames, however, I was noticing specific movements in the lower time frames that I have encountered before. If you can access the 30Second time frame you will notice that every time there is a volatile move on that time frame, you will notice the volume bars below show high activity. I have attached an image below that shows you the points in the 30s time frame where notable volume comes in and the price ends up doing the reverse.
2) Entry – Now I entered at 2614. After the Fair Value Gap came into play. Now the fair Value Gap at the lows is like a W, at the highs, it looks like an M formation or FTD play.
I entered once I started to see price crawling above the 50 EMA on the 5m time frame.
Now, remember, we have just had a massive drop to the downside…Most retail traders, anticipate further momentum to the downside, so they fear missing out on the drop continuing, so they all go short from this zone. This is what encourages the price to return back up. The market maker has now fully absorbed all the longs liquidation points and to maintain the idea of “normality” in the marketplace, they bring the price back up.
3) Holding the trade – Looking left we can see red vector zones that by principle, the market maker would likely return back towards IF, it fits with the narrative of price going back up…Notice in the charts the 50% zones…Upon entry, we were trading below what we understand to be the “Discount” of the range that price had dropped from.
A word on this concept of Premium and Discount – The idea of this was taken from ICT. Now when we look at it, it’s no different from when the price recovers vector zones. However, it allows us to add more confluence to understanding if the price is above or below the equilibrium of the swing high and low that price forms…again if it’s too much for you to absorb, stick to the idea of the vectors nearby…
We are still below the 50% range for the recovery of the vectors. I am anticipating that the USDT.D chart will show a drop to the downside, given that we have had a very extended move, which would fit as a recovery in both bitcoin and Ethereum. The most I am willing to accept is Ethereum coming back up towards the 2722 zone…That is where I would be prepared to close the trade. However, failure to break further than the previous high from today, I will close the trade…
The main focus for me was the speed of candles. Whilst everything was dropping down, I was able to pick up on the idea that whilst they moved lower, they start to slow it down on the smaller time frames. This is what gave me the reason as to why the price may return back up.
Now we will never know if it will do it or not, however, one thing we need to understand is if the candles are appearing at speed, it’s the market maker running the liquidity of traders in the opposite direction of the move, in this instance, the Longs getting liquidated.
Imagine a room with one door for entry…Once you open the door the room fills with water (Price moving up or down), as the room fills up, you are reducing the amount of oxygen in the room ( More buyers or sellers), the sooner the water enters the sooner the oxygen supply is reduced ( The more orders being absorbed in one direction, results in orders in the opposite direction being reduced, e.g. price dropping, more shorts being opened by retailers). So when the room fills up, no oxygen, ( Price starts to stall at a point, stops aggressively dropping, it starts basing) the only thing we need is to remove the water from the room, so the door slightly opens ( Price starts to develop a pattern) Then when the door starts to lose the strength to hold the water in the room, it swings wide open and all the water rushes out…(Market Maker shifts Out)
My attempt at providing an analogy for you to understand how price behaves at particular points in the chart, may not have been successful, please let me know if you understood what I was trying to convey.
I hope the above helps you understand my logic for entering…
Sometimes there is no magical way to place a trade, because ultimately even if all the odds are stacked in your favor, anything can happen to reverse everything, question is will you be shaken out of your trade before it resumes back to the narrative you favored in the first place.
Mad Love
T
