Steemit Crypto Academy Season 03 - Week 02 | Market Structure Break (MSB) Strategy to Trade Reversals

in SteemitCryptoAcademy3 months ago (edited)

Steemit Crypto Academy has started its season 03 by expanding the team of Crypto Professors and making three levels to cater all types who students from Beginner to Advanced Level. It will provide an excellent opportunity to new steemians who want to start their journey in Crypto world and advanced steemians who want to take their crypto journey to another level.

I am extremely excited to be part of the Crypto Academy Team and thankful to Steemit Team who provided me this opportunity to share my knowledge and experience with all the students. As a price action trader, I will try my best to cascade down my practical trading approach towards students so it can benefit everyone in real time.

image.png

Crypto_Academy divider 1.png

You will be learning my favorite price action strategy in my first lecture that is called Market Structure Break Strategy (MSB) which is awesome to spot and trade reversals. I will explain different aspects of the Market Structure Break Strategy and students will be able to understand the following from this lecture;

  • Understanding the Market Structure
  • The Concept of Higher Highs & Lower Highs and Lower Lows & Higher Lows
  • Identify Trend Reversal Early with Market Structure Break
  • Trade Entry Criteria for MSB Strategy
  • Trade Exit Criteria for MSB Strategy
  • Examples of Market Structure Break Trades on Crypto Assets

Crypto_Academy divider 1.png

Understanding the Market Structure

Market Structure in simple price action pattern or movement of price in the market in specific patterns. Price always moves in a specific pattern by making support and resistance points and creating swing highs and swing lows. You need to know that market moves in three ways i.e Uptrend, downtrend and sideways. Market Structure is separate for these three market movements and I am going to focus on Market Structure for Uptrend and Market Structure for downtrend because this is where you need to understand the reversal trades using MSB strategy.

Market Structure for Uptrend

You will see a series of Swing Highs and lows in an uptrend market structure where the next swing high and lows would be higher than the previous ones. In simple words, you will see price moving in an upward zig-zag pattern going up. I am showing you Bitcoin chart by drawing the swing points in an uptrend market structure so you can clearly understand it.

image.png

Market Structure for Downtrend

You will see a series of Swing Lows and Highs in a downtrend market structure where the next swing lows and highs would be lower than the previous ones. In simple words, you will see price moving in a downward zig-zag pattern going down. I am showing you Bitcoin chart by drawing the swing points in a downtrend market structure so you can clearly understand it.

image.png

Crypto_Academy divider 3.png

The Concept of Higher Highs & Lower Highs and Lower Lows & Higher Lows

Many of you might have read these terms but most of you don't know what exactly they are and how they can be used to take maximum benefit from the market. These are very important points to understand because Market Structure Break strategy depends on your understanding of these points. I will try to explain them in a very easy way so you don't feel any confusion if you have from your previous learnings.

Higher High
This is a swing point in an uptrend that is formed higher than the previous swing high. You need to wait for at least 2 or 3 candles close above the previous swing high point to determine it is a new swing point. I am making an illustration to show you exactly how these points will look like.

image.png

Lower High
No uptrend will continue to go up forever and it has to reverse at some point. This is where we need to understand the Lower High. This is a swing high point that will be formed at top of an uptrend but this swing high point will fail to break the previous swing high point and formed lower than the previous swing high. That is why it is called Lower High and I am making an illustration to show you exactly how Lower High will look in the market.

image.png

Lower Low
This is a swing point in a downtrend that is formed lower than the previous swing low. You need to wait for at least 2 or 3 candles close below the previous swing low point to determine it is a new swing point. I am making an illustration to show you exactly how these points will look like.

image.png

Higher Low
No downtrend will continue to go down forever and it has to reverse at some point. This is where we need to understand the Higher Low. This is a swing low point that will be formed at bottom of a downtrend but this swing low point will fail to break the previous swing low point and formed above the previous swing low. That is why it is called Higher Low and I am making an illustration to show you exactly how Higher Low will look in the market.

image.png

Crypto_Academy divider 3.png

Identify Trend Reversal Early with MSB

Now, you understand the concepts of Lower High and Higher Low and these will help you identify the potential trend reversal areas. There are three things you need to focus that will help you identify the Market Structure Break. I will explain these elements by showing the reversal of both uptrend and downtrend on the charts.

Identify Uptrend Reversal Early

1 - Formation of Lower high at top of an uptrend
2 - Marking the Neckline of Market Structure
3 - Waiting for the clear break of Neckline

When these 3 conditions are fulfilled, it is an indication that the trend will reverse from that point. You can see the below chart of Bitcoin where these conditions are met and then the trend reversed with downward move.

image.png

Identify Downtrend Reversal Early

1 - Formation of Higher Low at Bottom of a downtrend
2 - Marking the Neckline of Market Structure
3 - Waiting for the clear break of Neckline

When these 3 conditions are fulfilled, it is an indication that the trend will reverse from that point. You can see the below chart of Ethereum where these conditions are met and then the trend reversed with upward move.

image.png

Crypto_Academy divider 3.png

Trade Entry Criteria for MSB Strategy

There must be rules to take entry into the market for any strategy. Similarly, MSB strategy has its trade entry criteria that have to be met before you take a trade. I will explain the trade entry criteria for both Buy and Sell Positions.

Buy Entry Criteria

1 - Market should be in downtrend that can be short term as well depending upon the time frame. I personally trade on 1 hour and 15 minutes time frame mostly.

2 - Price should make a Higher Low after a series of Lower Lows

3 - Mark the Neckline after Higher Low is formed that will serve as a level that needs a clear break.

4 - Wait for a clear bullish candle that will break through the neckline and close above it. This is called Market Structure Break.

5 - Now, take the Buy Trade where your entry price should be just above the Market Structure Break.

image.png

Sell Entry Criteria

1 - Market should be in an uptrend that can be short term as well depending upon the time frame. I personally trade on 1 hour and 15 minutes time frame mostly.

2 - Price should make a Lower High after a series of Higher Highs.

3 - Mark the Neckline after Lower High is formed that will serve as a level that needs a clear break.

4 - Wait for a clear bearish candle that will break through the neckline and close below it. This is called Market Structure Break.

5 - Now, take the Sell Trade where your entry price should be just below the Market Structure Break.

image.png

Crypto_Academy divider 3.png

Trade Exit Criteria for MSB Strategy

Entering into a trade at the right point is important but it is equally important to exit from a trade at right time. There are two types of exit criteria when we follow any strategy. One is to exit when trade goes in our favor and the other is to exit when trade goes against our direction. I will explain the exit criteria for both scenarios so you can take decisions at right time and avoid emotionals factor.

Trade Exit Criteria When in Loss

1 - We should set a Stop Loss Level in case our trade goes in the wrong direction after entry.

2 - This Stop Loss level should be above the Lower High Point (In case of Sell Trade)

3 - This Stop Loss level should be below the Higher Low Point (In case of Buy Trade)

4 - If price crosses the stop loss levels, it means the trade setup is invalidated and we should exit the trade and wait for another setup.

image.png

image.png

Trade Exit Criteria When in Profit

1 - We Should Set Take Profit level in case our trade goes in the desired direction.

2 - Take profit level should be 1:1 RR (Risk:Reward) at least which means it should be at equal of our stop loss level.

3 - Personally I like to set my take profits at 1:2 RR but I will recommend everyone to use 1:1 RR until they get good practice with this strategy.

4 - When price hits your take profit levels, you can book the profits ar exit from trade.

image.png
Trade Exit Example at 1:1 RR

image.png
Trade Exit Example at 1:2 RR

Crypto_Academy divider 3.png

Examples of MSB Trades on Crypto Assets

I hope you have understood the Market Structure Break Strategy along with its different elements and criteria. I am showing you some examples of the crypto charts where this strategy has worked well.

Example on 15 Minute Time Frame

Litecoin has broken the market structure down on 15 minute time frame and given more than 1:1 profit. I am just sharing the example with 1:1 RR so you can calculate your positions correctly in your task.

image.png

Example on 1 Hour Time Frame

Steem has made a perfect Buy setup and performed perfectly. It has given more than 1:1 profit but I am just sharing the example with 1:1 RR so you can calculate your positions correctly in your task.

image.png

Example on Daily Time Frame (I knew it early than most Traders)

I am showing this example because I knew it early than most of the traders and you will also want to know the reason. The reason was obvious Market Structure Break on this Bitcoin Daily Chart for a Sell. This is the power of MSB strategy that will make you stand out from other traders.

image.png

Crypto_Academy divider 3.png

Final Words

  • Market Structure is price action pattern that can be used to identify and trade the reversals early.

  • Lower Highs and Higher Lows are key areas that you should notice because that can be start of Market Structure Break.

  • You can identify the trend reversal early by monitoring the formation of Lower Highs/Higher Lows, Neckline and Clear break of Neckline.

  • There are certain criteria that you should monitor before taking Market Structure Break Trades.

  • You should understand the trade exit criteria for both scenarios i.e. profit and loss.

  • You can spot and trade Market Structure Break trades on any time frame. Shorter time frame will provide you more setups but it needs quick decision making. My personal favorite time frame to trade MSB strategy are 1 hour and 15 minutes.

  • Market Structure Break Strategy is very powerful and it will make you a better trade with time that will relieve you from the need of any indicators and you will still know the potential reversals early.

Crypto_Academy divider 2.png

Homework Task

1 - What do you understand about Market Structure?

2 - What do you understand about Lower High and Higher Low? Give Chart Examples from Crypto Assets.

3 - How will you identify Trend Reversal early using Market Structure Break? (Screenshots Needed)

4 - Explain Trade Entry and Exit Criteria on any Crypto Asset using any time frame of your choice (Screenshots Needed)

5 - Place 2 demo trades on crypto assets using Market Structure Break Strategy. You can use lower timeframe for these demo trades (Screenshots Needed)

Crypto_Academy divider 2.png

Rules

  • Your homework post should have at least 300 words. You can write more but I want you to be specific about your answers and do not write super lengthy paragraphs.

  • You must post your homework post in SteemitCryptoAcademy Community.

  • Plagiarism of any kind will not be tolerated and result in severe actions against the offenders.

  • Create your own charts and use only copyright-free images with proper reference if you have to use them.

  • You can submit your homework post by 10th July 23:59 UTC. Any post submitted after the deadline will not be entertained.

  • You must include #cryptokraze-s3week2 and #cryptoacademy among the first 5 tags.

  • Members who are doing power down will not be considered for evaluation and grading.

  • To be eligible for participating in Advanced Tasks, you must have 60 reputation and minimum 500 SP.

Crypto_Academy divider 1.png

Publisher : @cryptokraze
Discords : FxKraze#2451

CC:
@steemitblog
@steemcurator01
@steemcurator02

Sort:  

excellent explanation dear brother ,,,

Thank you yousaf bro

To be frank Prof. @cryptokraze, I really appreciate this lecture and you really explained it in a simple way.

You need to know that market moves in three ways i.e Uptrend, downtrend and sideways.

But I'm really interested in the sideways. Thanks

You will get too many fakeouts in sideways market. You can use simple support and resistance levels in sideways market.

I will also teach another strategy where we will learn how to use sideways market structure to trade.

This marke structure break strategy is specifically good to trade the reversals.

Wow, dear sir @cryptokraze. A super fantastic lecture dear professor and you have explained all the points in a very impressive manner. I was just waiting for your lecture. Thanks a lot. I will surely submit my homework very soon.

Thanks.

@cryptokraze Well explained lecture.

Congratulations on publishing your first lecture as Crypto Professor.

I will read it later attentively. Really hoping to learn something.

You will definitely learn something great.

Had been waiting for your lecture in this academy and finally its here. A thoroughly explained lecture.

It will help you in practical trading if you do practice this strategy.

Hello professor @cryptokraze, please here is a link to my assignment

Thank you.

Simple and perfect explanation. Thank you so much professor for making our concepts clear.

I have kept it simple so that everyone can get their mind clear about this price action concept. Most of the mentors make these Swing points concepts so much complicated that new traders just get confused and end up learning nothing.

Was eagerly waiting for your lecture. Well explained!
Working on Assignment!

Looking forward

Our web scraping Services provides high-quality structured data to improve business outcomes and enable intelligent decision making,
Our Web scraping service allows you to scrape data from any websites and transfer web pages into an easy-to-use format such as Excel, CSV, JSON and many others

 3 months ago 

Thanks so much for this trading strategy. It's very well explained. Market structure break is indeed a great unique strategy. I am so privileged to learn it from you. Let me get to work on this task.

This strategy has made me the most profit in both crypto and forex market. You will definitely find it useful in your trading.

In simple words, you will see price moving in an upward zig-zag pattern going down.

This should be downward zig-zag pattern, am I correct prof?

Another question prof. @cryptokraze

Can Lower High formed on downtrend too?

On downtrend lower highs are formed along with lower lows.

We focus on the 1st lower high at top of uptrend so we get ready to trade the reversal on market structure break. 1st lower high is very important to get trade entry at right time.

Understood.

However, can we recognize these points as Lower highs?

image.png

Yes these are lower highs

Got it, Thanks prof.

hello professor @cryptokraze good day to you

here is my assignment link. Hope you have a good read
Thank you

Excelente cátedra, con el favor de Dios estare presentando mi participación Muchas Gracias.

Respected Professor @cryptokraze,

It is a wonderful lecture about Price Action strategy. I have learned many new things and tried to write them down in my homework post. Please review my homework post and let me know if there are any shortcomings. Thanks

https://steemit.com/hive-108451/@mawattoo8/crypto-academy-season-3-week-2-or-or-homework-post-for-cryptokraze-or-or

 3 months ago 

Sir you have perfectly explained all the points. There could be no betrer
and simple explanation than this.
Thank you.

I am glad you liked it. The idea is to mentor students of everything I know so that they can become better traders.

Looking forward for your homework task

 3 months ago 

Looking forward for your homework task

I am working on it.

Hey professor @cryptokraze, a nice and easy to understand lecture from you.

But I have a doubt about neckline.

How and where to set a neckline?

Please reply

Thank you.

It should be the level from where price bounced and then gave a lower high. There can be 1 to 3 points. These act as little support in case of sell entry and act as resistence in case of buy entry. That is why we need the break of this neckline to have the market structure broken.

Hola profesor mi tarea

Saludos estimado Profesor @cryptokraze, de antemano felicitarlo por tan valioso aporte educativo. A continuación adjunto el link de mi participación:

https://steemit.com/hive-108451/@madridbg/steemit-crypto-academy-temporada-03-semana-02-or-estrategia-de-ruptura-de-la-estructura-de-mercado-msb-para-reversiones

Hello professor @cryptokraze

I'm not sure I understand what you stated here

2 - This Stop Loss level should be above the Lower High Point (In case of Sell Trade)

image.png

What do you mean by Sell Trade entry and Sell Trade exit?

We can also sell any crypto asset on margin or perpetual trading.

So these are sell criteria in such case.

Most of the crypto holder think that they can only buy a crypto asset but that is not true. We can do both thing. Buy and sell.

So you mean you're not lecturing on Spot trading in this course?

It is a price action strategy. Not about spot trading.

If you consider spot trading you can give examples of buy trades only.

Sells are just the opposite of buys.

So if you understand buy only that happens in crypto spot trading, you should be able to explain sells as well.

I hope it makes sense.

I hope it makes sense.

Not really.

You put a lot of confusion when you didn't state the kind of trade, if it was spot or derivatives. You can't be talking about both in the same explanation and not confuse me.

I'll reserve further comments and let this course pass. It's vague.

Thanks for your time.

 2 months ago 
 2 months ago 

Hello there. This is my task for your lecture in this week. I've learned something new thanks to this:

https://steemit.com/hive-108451/@alegnita/crypto-academy-season-3-week-2-homework-post-for-cryptokraze-or-msb
#venezuela #affable