The Most Valid CHoCH

Summary

This video explains the concept of trading after a market structure shift, emphasizing the importance of displacement (momentum) in ensuring successful trades. It highlights how shifts in market structure without displacement are often unreliable, leading to unsuccessful trades. The key to trading effectively is identifying shifts that come with strong momentum, as these are more likely to result in profitable moves. The video stresses the need for patience and understanding of displacement when navigating market changes for consistent trading success.

Takeaways

• 😀 A market structure shift occurs when price clears liquidity, either on the buy side or sell side.
• 😀 After price sweeps liquidity, it typically leaves either a breaker block or a mitigation block, which can signal a shift in structure.
• 😀 Not every shift in market structure or change of character is tradable; some lack the necessary momentum.
• 😀 Displacement, or momentum, is crucial for validating a shift in market structure and ensuring a trade is likely to be successful.
• 😀 Displacement is defined as the speed multiplied by the distance of price movement. It represents the momentum behind a shift.
• 😀 A shift in market structure without displacement (momentum) is likely to fail and can result in traders getting stopped out.
• 😀 A valid market structure shift should show a clear and strong momentum, which can be seen in large, fast moves in price.
• 😀 Comparing shifts in market structure can reveal whether momentum is present: strong shifts show more speed and distance.
• 😀 Once momentum is confirmed after a shift, it’s safer to enter a trade with a stop loss placed below the shift's area of momentum.
• 😀 In the case of a retracement after a momentum-driven shift, price is less likely to return to or break below previous levels, offering better trade setups.
• 😀 Always wait for displacement before entering a trade after a market structure shift to ensure the shift has momentum and a higher chance of success.

Q & A

What is the core concept discussed in this video?

The core concept is about identifying and trading after a market structure shift, focusing on the importance of momentum or 'displacement' in ensuring successful trades.

What is a market structure shift?

A market structure shift occurs when price action breaks a previous high or low, indicating a change in market direction. After such a shift, traders often look for new opportunities to enter trades.

What role does liquidity play in market structure shifts?

Liquidity, such as buy-side or sell-side liquidity, is swept or cleared before a market structure shift. After liquidity is cleared, a shift in market structure typically follows, indicating potential trading opportunities.

What are breaker blocks and mitigation blocks?

Breaker blocks and mitigation blocks are price levels formed during a market structure shift. A breaker block refers to a price zone that, once broken, can signal a reversal, while a mitigation block is a level where price is expected to retrace before continuing in the new trend direction.

What is displacement in trading?

Displacement is the momentum or energy seen after a market structure shift. It is defined as the product of speed and distance, representing a strong move in the market that increases the probability of a successful trade.

Why is displacement important in trading?

Displacement, or momentum, is crucial because it shows the strength of the move. A market structure shift without displacement lacks energy and is less reliable, making it riskier to enter trades.

How can displacement affect the outcome of a trade?

When displacement occurs after a market structure shift, it indicates that price has enough momentum to continue in the new direction. Trades taken after such shifts are more likely to be successful, as the market is less likely to retrace deeply.

What happens when there is no displacement after a market structure shift?

If there is no displacement, the market will likely struggle and fail to hold the new direction. Traders may get stopped out as the price retraces, showing that the shift wasn't strong enough to sustain momentum.

How can traders identify a valid market structure shift?

A valid market structure shift is characterized by strong momentum. Traders should look for significant moves that break previous highs or lows, followed by price action that demonstrates a sustained push in the new direction.

What is the relationship between a valid shift in market structure and a trader's stop-loss placement?

When a market structure shift has displacement, the price is less likely to retrace past the key level, making stop-loss placements safer. Traders can place their stop-loss below or above significant levels formed by the shift, depending on the trend direction.