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1.1 - Pivot points, market structure & the three phases of major trends

The three phases of a trend

  1. Accumulation
  2. Public participation
  3. Excess

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Accumulation

  • Occurs after a prolonged decline or bear market
  • Smart money starts buying UNDERVALUED assets (just because something is down bad, doesn't mean it can't go down more)
  • Sentiment is usually pessimistic
  • Low trading volumes

Public participation

  • Momentum builds as more investors recognise the trend
  • Media and public interest increases
  • Prices rise significantly due to higher demand
  • Positive sentiment

Excess

  • Can be in the form of a blow off top or sideways distribution
  • Smart money begins selling at high prices
  • Overvaluation concerns
  • Sentiment is overly optimistic or euphoric
  • Declining trade volume dispite higher prices

Pivot points

  • Identified by
    • 3 candles going in the opposite direction
    • "V" or "U" shaped pivot reversal

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The 3 Types Of Market structure

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Bullish (HH / HL)

  • The market is going up
  • Marked by consistent higher highs and higher lows
  • Pivot peaks are higher then the previous highs
    • Signals increased demand and optimism
  • Pivot lows are higher then previous low
    • Signals resiliance as traders prevent the price from dropping significantly

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Consolodation (EH / EL)

  • Market moving sideways
  • No clear trend

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Bearish (HH / HL)

  • Market is down down down
  • Can be good for shorting

 

 

 

 

 

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