Summary
Highlights
An indication occurs when price breaks above a high or below a low level, suggesting the start of a new trend or direction. This typically happens after a period of price ranging. The speaker personally looks for these indications on the 4-hour and 1-hour timeframes, as they represent significant swing highs and lows. These swings are crucial because they dictate the movement of price and help define trends (uptrends or downtrends) for effective trading.
Indications primarily happen when price breaks above or below swing highs and lows, commonly found on the 1-hour and 4-hour timeframes. The speaker often uses the 1-hour timeframe, scaling to 4-hour if clarity is needed. A broken swing signifies momentum in that direction, indicating the start of a trend. This answers key questions like 'What is the trend?' and 'Where is price headed?'. Higher swings suggest an uptrend, while lower swings indicate a downtrend.
An indication serves as the starting point of a trend. For example, if price breaks above a 500 level (a previous swing high), it indicates bullish momentum that could push price to a higher level, like 600. This also helps in strategizing entry and exit points. However, following an indication, price often undergoes a 'correction' or 'liquidity grab', which is a temporary reversal designed to shake out traders. This is why it's advised not to trade immediately on the indication itself.
Using a 30-minute chart example from the current week, the speaker illustrates an indication where price breaks a swing high, corrects (taking out some traders), and then continues to make new highs, confirming an uptrend. The video points out that after a new high, a correction or liquidity grab often occurs, which can be strong or subtle. It's crucial to wait for these corrections to play out to avoid being liquidated, as trading solely on breakouts can be risky. The goal is to capitalize on the entire trend, not just a small part, by understanding market structure.
The main takeaway is to view indications as information rather than direct trading signals. They act as a blueprint, providing insight into potential entry and exit points after corrections. Trading immediately after an indication is risky due to potential fakeouts or liquidity grabs designed to remove traders from the market, especially after new highs. The strategy should involve understanding the trend's direction and waiting for appropriate entry points after the initial indication and subsequent market adjustments.