Market Structures + ZigZag [TradingFinder] CHoCH/BOS - MSS/MSB

1 ביולי

🟣Introduction


🔵Market Structure

Grasping market structure entails examining market behavior. Essentially, market structure refers to the formation and progression of the market within its trends.

Market structures are generally fractal and nested, leading us to classify them into internal (minor) and external (major) structures. There are several definitions of market structure, with differing perspectives such as Smart Money and ICT offering their own interpretations.

🔵Zig Zag

The Zigzag indicator is a lagging tool that identifies points on a price chart where significant changes occur compared to the previous wave. By connecting these points, it helps traders detect trends.

This indicator minimizes random price fluctuations, aiming to clarify the primary price trend.
Pivots are points on a price chart where the direction changes. Also known as reversal points, pivots form when supply and demand forces overpower one another.

There are various types of technical analysis pivots, which can be divided into two categories: minor pivots and major pivots, each with distinct significance in analysis.

Major Pivot: These pivots signify substantial changes in the chart's direction and occur at the end of trends. Analysts focusing on primary analysis prioritize major pivot points. In fact, most technical analysis tools are evaluated and based on major pivots.

Minor Pivot: These pivots highlight smaller, subsidiary points and directions, appearing at the end of corrections. Analysts who focus on minor pivots represent small trends. It's important to note that minor pivots are not suitable for use in primary technical tools.

Identifying Minor and Major Pivots:

• Minor pivots are formed between two major pivots and do not break the opposing major pivot. (Internal Pivot)
  
• Major pivots are those that either successfully break the opposing pivot or move beyond the previous pivot of the same type. (External Pivot)
  

🟣How to Use

🔵Identifying Break of Structure (BOS)

In a given trend, such as a downtrend, a Break of Structure occurs when the price drops below the previous low and forms a new low (LL). In an uptrend, a BOS (MSB) happens when the price rises and exceeds the last high.

To confirm a trend, at least one BOS is required. The break above or below the previous high or low must be validated by the closing of at least one candle beyond that level.


🔵Identifying Change of Character (CHOCH)

Change of Character (CHOCH) is an essential concept in market structure analysis, indicating a trend change. In other words, a trend concludes with a CHOCH (MSS). For example, in a downtrend, the price declines with BOS.

While BOS highlights the trend's strength, a CHOCH occurs when the price rises and surpasses the last high, signaling a transition from a downtrend to an uptrend.

This does not imply immediately entering a buy trade; instead, it is prudent to wait for a BOS in the upward direction to confirm the uptrend.

Unlike BOS, confirming a CHOCH does not require a candle to close; simply breaking above or below the previous high or low with the candle's wick is sufficient. The following examples illustrate bearish and bullish CHOCH.

Terms:
Market Structure Shift = MSS
Market Structure Break = MSB





🔵Zig Zag

Based on identifying pivots and drawing zigzag lines, you can have different uses of this indicator.
Including:

• Identifying pivot types along with major and minor recognition.
  
• Identifying internal and external breakouts.
  
• Identifying support and resistance levels.
  
• Identifying Elliott Waves.
  
• Identifying classic patterns.
  
• Identifying pivots with higher validity.
  
• Identifying trends and range areas.
  

🟣Settings

Pivot Period Market Structure and ZigZag Line: Using this input, you can determine the pivot period for identifying swings.

Through the settings, you can customize the display, visibility, and color of each line as desired.