Market Structure Shift vs Change In State Of Delivery - ICT

Summary

In this video, the speaker compares two important concepts in trading: market structure shifts and changes in the state of delivery. Market structure shifts signal a trend change when price displaces over or below a swing high or low, while changes in the state of delivery focus on price closing and displacing below the opening price of up-close candles. The video also covers inversions and their role in identifying order flow changes. By using real chart examples, the speaker demonstrates when each method works best, emphasizing the importance of backtesting to find the strategy that suits individual trading styles.

Takeaways

• 😀 A market structure shift indicates a change in trend, from bullish to bearish or vice versa, triggered by displacement and closure above or below a swing high or low.
• 😀 The change in the state of delivery is focused on the displacement and close below the opening price of an up-close candle, typically used to identify a potential reversal before a market structure shift.
• 😀 In the context of a market structure shift, the trend change occurs only after a significant price move beyond a key swing high or low.
• 😀 The change in the state of delivery often happens earlier than the market structure shift and can offer earlier entries for trades.
• 😀 Market structure shifts confirm a trend change only after price action shows significant displacement and closes beyond a swing point.
• 😀 Inversions are used to identify a change in order flow, indicating potential shifts in the market, and often occur before market structure shifts and changes in delivery.
• 😀 Using the change in the state of delivery provides a quicker entry, but it may sometimes result in false signals or less reliable trades.
• 😀 Market structure shifts tend to provide more confirmation and certainty, but they happen later compared to the change in the state of delivery.
• 😀 Backtesting different methods like order blocks, inversions, and market structure shifts is recommended to see which strategy aligns best with your trading style.
• 😀 Each trader should find what works best for them—whether that’s inversions, market structure shifts, or order blocks—based on personal comfort and system compatibility.

Q & A

What is a market structure shift?

A market structure shift is a change in trend, which occurs when the market moves from bullish to bearish or from bearish to bullish. It is identified by displacement over or below a swing high or swing low.

How is the change in the state of delivery different from a market structure shift?

The change in the state of delivery focuses on a close and displacement below the opening price of a series of up-close candles, indicating a potential order block. In contrast, a market structure shift involves a displacement and close beyond a swing high or low, signifying a trend change.

What does it mean to validate an order block in trading?

Validating an order block involves confirming that a certain price level, typically a swing high or low, has been displaced and closed below, indicating a potential area for price reversal or continuation.

When does the change in the state of delivery occur in relation to the market structure shift?

The change in the state of delivery typically occurs before the market structure shift. This means that the change in order flow is identified earlier, which can provide earlier entries in a trade.

What is the advantage of using the change in the state of delivery over a market structure shift?

The primary advantage of using the change in the state of delivery is that it can provide an earlier entry point in a trade, allowing traders to enter the market before the market structure shift is confirmed.

What is a potential downside of entering a trade using the change in the state of delivery?

A downside of entering based on the change in the state of delivery is that it may result in premature entries, which could lead to losing trades if the market doesn't fully confirm the trend shift.

How do inversions factor into market analysis?

Inversions are used to indicate a change in order flow. They can happen before a market structure shift or the change in the state of delivery, providing early indications of potential trend reversals.

What is the difference between an inversion and a market structure shift?

An inversion occurs when a bullish or bearish fair value gap gets closed, suggesting a change in order flow. A market structure shift, on the other hand, requires a displacement and close below or above a swing high or low, signaling a more confirmed trend change.

Why is it important to backtest different strategies such as the change in the state of delivery and market structure shifts?

Backtesting allows traders to evaluate which strategy works best for their individual trading system and preferences, helping to build confidence and consistency in their approach.

Can market structure shifts occur without retracements? If so, what does this mean for traders?

Yes, market structure shifts can occur without retracements. This means that price may continue in the new direction without returning to prior levels, which could leave traders with fewer opportunities to enter positions based on retracements.