CHART PATTERNS

&
PRICE ACTION FOREX TRADING

MASON ANDERSON
Copyright © 2022 MASON ANDERSON
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QUANTUM
STONE
CAPITAL
 MARKET STRUCTURE

Standard Market Structure

It's important to note that wicks will change when comparing Trading View data from one
brokerage to another or from one data stream that you're utilizing on Trading View (for
example, Oanda vs. FXCM). Why does it occur, and how? The liquidity pools and fills that
each broker has access to vary, hence the price data feed that each broker offers will change
somewhat from broker to broker. In other words, when you trade with a broker, your
spreads often tend to rise or fall in response to market volatility, which you can typically
see on a chart in the form of wicks. The candle bodies, however, are the one item that
typically holds true when comparing the overall price action across different data providers.
When you're mapping out wicks, you'll notice a little discrepancy when you're looking at
one brazier; one wick may be in the designated location on that brazier, but it may really be
above.

The market structure reveals to us, as institutional traders, where the vast majority of buy
and sell orders are being made. It also shows what positions the banks are now in (net
long/short) and what major orders they could be making in the near future. The initial
'brick layer' of the house is the market structure. Without comprehending these concepts,
your trading has no foundation. You will be at the top of your game when you are able to
comprehend structure from a macro (monthly, weekly) and microscopic (5,3,1 minute TF)
viewpoint since you will know when the banks are going to make their next impulsive
move in accordance with their particular bias. Once you have determined your AOI (area of
interest), we may respond appropriately. To get a pin-point sniper entrance and hold for
lengthy last RR transactions on the micro timeframe.

This will often be utilized for longer timeframes, such as monthly, weekly, daily, and even
four hours. It provides us with a general idea of the direction that price is headed for
impulsive trading. On the daily timescale, if we are making HH's and HL's, we should
anticipate a fresh bullish trend that will continue until we achieve a legitimate AOI.
 Multiplex Market Structure (Bullish)

Internal and exterior structure are the two main sorts of market structures that we
examine. We have something known as a multiplex structure when we have internal
structure.
When trading a multiplex structure, which is an internal structure, the best thing to do is to
always start small. To have a basic picture of how the price is moving, look at the longer
time ranges. Do our movements result in higher highs and higher lows or do they result in
lower highs and lower lows? Once you've made that determination, it becomes much easier
to proceed with determining the market structure on subsequent timescales and correlating
them. If structure is evident on the smaller/microscopic periods and a certain bias is
recognized, we may trade that particular trend. The illustration above accurately depicts
how we would do business outside of a multiplex framework.

Multiplex Market Structure (Bearish)

Although the HTF will always be our major focus, you will be able to employ LTF just as
well because of how fractal the markets are. As a result, we may utilize the multiplex
structure to control the primary bias. This also enables us to hedge our position, indicating
that we have made a profit. Towards both ends of the market.
 Multiplex Structure + hedging
Our multiplex structural trades are often conducted in a counter-trend environment, which is not the
ideal situation. However, by doing multiplex trades at HTF AOI, we can make the multiplex structure
a little bit more counter-intuitive.

Break of Market Structure (3 different types)

We will have many opportunities to enter the market by knowing structure, but the way we become
excellent traders is by limiting our losses, or by taking fewer losses since our losses are limited to 1%.
Only the candles with the greatest likelihood of working out should we enter; these are the ones where
the price will tap and respond off immediately.
This is really significant to us. We may get into a lot of terrible positions if we don't know what spike or
candle to make our entry on, particularly on the lower timeframes. Many things that would seem to be
spOnsOr candles on the LTF have already been addressed. Since this would prevent us from moving on
with already-filled Orders, we want to have the highest level of accuracy and search for genuine,
authentic "not yet tested spOnsOr candles" after BMS. Waiting for a clear BMS shows that major banks
and investors support the move and offers us strong persuasion to do it.
1. Minor BMS (mBMS)
This occurs more often on shorter timescales, typically 15 m and below. We'll see a preliminary
movement in the direction that banks are looking to purchase or sell the currency pair. I'll start with a
shorter period.
2. Significant break of the market structure (SBOS)
This takes place between 15 and 1 hours. This denotes a significant buy/sell amount.
Orders are entering the market now. When the market structure is significantly broken
and there is an impulsive bullish or bearish move, we may then choose to go long or short
on a mitigation. This is due to the reasons behind that important market structure breach,
which led huge banks to make that move. As an example, see below.
3. Major Market Structure
This is fOrmed above and on a daily basis. We can determine the locations of the
majority of smart money positions by scaling up to these longer timescales. We can fine-
tune our AOI on lesser timescales (AOI will be addressed on a smaller period) if we are
consistently breaching market structure bullishly on the weekly timeframe and making
HH's and HL's.
For instance, if we are putting in higher highs and lower lows as part of an overall daily
uptrend and we start to notice on the 4 and 1 hour charts that price is making lower lows
and lower highs, we might automatically assume that we are in a downtrend and that we
should only be looking for sells. On an intraday basis, it may be the case. We must bear
in mind the structural implications of what the longer time frame is proposing.
The lower lows we are seeing on those time frame charts are more than likely a pullback
or retracement phase of that daily chart if we know that we are in a strong bull trend and
that the price is more than likely going to go to the upward. It is much easier to lose
ground in these market structures when things are constantly switching from bull to bear,
bear to bull, and vice versa, so when we keep that information in mind we can frame our
trades in a completely different way. This is especially true when we take that one step
further and look at 15 minute, 5 minute, and 1 minute charts.
At that point, you should start looking at charts with larger time frames and keep your
focus on the overall trade concept and the real momentum that you are trading. I hope this
provides some insight into the different methods of mapping market structure and
spotting market structure cracks.

Momentum in the Break of Market Structure

We look for two important factors in particular:

1. A big candle that creates an imbalance
2. Continuing with these candles.

We want a committed push that breaks structure rather than a quick turnaround. Price
breaking the structure and then swiftly retracing the breach indicates poor flow of orders in
that direction. We are attempting to locate the marketplaces' hubs for major orders. If price
reverses after breaching structure, this indicates that there isn't much power behind the move,
and it is thus unlikely to be maintained.
QUANTUM STONE CAPITAL
What should serve as the information base for our trading? What is the most crucial lesson to learn at
first? Is it technical analysis or fundamental analysis? Should you first learn moving averages or
candlestick/chart patterns?
What constitutes a financial market's foundation? Price is it.
After that, learning how to read should be your first step. The foundation of our trading careers will be
laid by being adept at reading prices. Everything else will be built after that.
When learning about price, a trader goes through three stages: what we think pricing looks like; what we
feel price really looks like; and the harsh truth.

It's simple to see a trend, right?

If I draw a line like this from point A to point B..

...is it uptrend Or dOwntrend?

And if I draw a line frOm pOint A tO pOint B like this...

...is it bullish Or bearish? It is easy tO answer, right?

This is how we imagine the pricing to look.

But have you ever witnessed a price go directly from one

point to another? Does this depict a bullish or bearish

trend?

Obviously not.

Now, let's look at what price movement, in our opinion,

looks like.
What type of trend are we in?

HOw abOut now? Is it dOwntrend Or uptrend?

Now we are getting closer to the truth of what we think the price on the chart really looks like. But how
often do we see prices appear that way?
NEVER.
 Price looks more like this in reality.

This is another example what yOu cOuld see on the chart.

This is far more accurate. The truth of how you will view pricing on the chart is difficult to
accept. It might be difficult to determine if you are in an uptrend or a downtrend when you
observe price movement in that manner.
We must introduce guidelines in order to decouple guesswork from pricing analysis. We can avoid
subjectivity and confusion by doing this.
Rule-based trading is the path to consistency in trading.
You should be able to get consistent results if you consistently look at the price chart in the same
manner, do your analysis in the same way, and look for the same kinds of patterns and trading
opportunities.
Let's use pictures to go through the rules.
Initial Structural POint (ISP) is also known as Initial Structural High (ISH) and Break Of Market
Structure (BMS).

Price has moved out of consolation, made a retracement, and set the first structural high.
Is this a trend? NO, it isn't.
 MARKET STRUCTURE 2

Here, we can see how the ISH was broken and a new structural high was created after the first
retracement.

Exists a trend here? It is, indeed.

As you can see, guesswork is no longer necessary.

There are two key components that must be identified for a new trend to exist:
1. A newly constructed high
Retracement prior to the most recent structural peak.
These 2 key components will serve as our decision-making criteria. Depending on which
point breaks first, we will either confirm or refute the pattern.

Now that you know the guidelines, you can see that we are in a bullish trend on the graphic
below.

Setting guidelines for the confirmation and invalidation of the trend is crucial. Given the

guidelines, you should feel more confident in your ability to predict trend direction
 Where is liquidity found in the market
1. Retail traders should put their sell stops below lows and buy stops above
highs; however, we should be monitoring this region rather than
trading off of it. We are anticipating a response. Because retail traders
perceive equal highs and equal lows as support and resistance, they
place pending orders at these levels or enter trades early at these levels
as a result of retail traders observing a previous reaction off those
levels and then selling from there. This reaction is what we are
waiting for. This increases market liquidity, which banks may employ
to drive prices down. More liquidity will be available there the longer
a "support Or resistance" has been in place, which causes banks to
make an impulsive move..
 Liquidity pool
2. Liquidity pool is a level of market establishment where trades
and orders would normally be resting, leaving these places
exposed for smart money to search these locations, accepting
trade losses and initiating new buy/sell Orders that may be
present in that area. The sources of liquidity above and below
short- and long-term highs and lows include buy and sell options.
In order to produce liquidity, banks might artificially establish an
equal-length high/low and then withdraw that liquidity to use to
move prices in the other way. This process is known as
"engineering" liquidity.

Buy and sell side liquidity

2. Buy and sell side liquidity are the price ranges where buy and
sell side traders are mostly found. When we comprehend the
longer period, we can see where "smart money" may go long
and where it may go short owing to locations where the price
is establishing "support and resistance." To find liquidity and
either reverse or continue its expansion move, Price will
utilise these locations.
Retail traders see price creating a double top at a resistance as a signal to
sell; in most circumstances, however, a majority of retail traders join the
market too early. Price moves in the desired direction after taking out the
Equal Highs, which causes the stop losses on early sellers and, most
importantly, causes the buy stops to build up liquidity. The opposite is true
in the case of double bottoms.
Now consider how often you have been stuck or forced to flee from a
situation that is comparable to these examples. Retail traders experience it
often since they do not get the reasoning behind the setups. The majority
of retail traders are instructed to purchase a double bottom and sell a
double top. Once the manipulation is over and you have confirmations to
join the market, you will be able to watch these manipulated moves occur
since you now understand these patterns and how market makers employ
them.
An example is illustrated belOw:
LIQUIDITY DIAGRAM
 LIQUIDITY LIVE EXAMPLE

Examples of Liquidity Pools

Swing high/lOw
Equal highs/lOws (EQH, EQL)

Session (Asian, LOndOn, NY)

high/lOw Daily/Weekly/MOnthly high/lOw.
QUANTUM STONE CAPITAL
 SPONSOR CANDLE

What is a Sponsor Candle

A "Sponsor Candle" is a collection of orders to buy or sell, as appropriate, that are
strongly driven in the direction of the trend and are established by an institutional price to
make the opposite. The Sponsor candle represents a certain price level and is a particular
candle.
This concept's value lies in its ability to provide very accurate inputs. A Sponsor candle
informs you of areas with a strong probability of a price reversal. It's a method for
catching trend reversals with high accuracy input, thanks to inputs with a low risk to high
reward ratio.
There are two different sorts of SC: bearish and bullish. A red bearish candle that appears
before the rising movement is a bullish SC. The bullish SC is the last negative candle
before the bullish movement that raises the market structure. This shows a strong
likelihood of holding price when the price goes back to it.
The similar technique is used to highlight a bearish SC, however instead of an up move
coming before a down move, a bearish SC is generated by an up move coming before a
down move that restarts the downtrend, sets new lows, and/or violates market structure.
Institutional short sellers will drive the price higher to provide liquidity for breakout at
these levels.
Here is a diagram Of a bullish SpOnsOr candle:

Here is a diagram Of a bearish SpOnsOr candle:

Below are some samples of pillar candles:
 Sponsor Candle Observations
A SC may remain in effect for a very long period if not previously mitigated or
exhausted. Keep in mind that a SC is established when there is not enough liquidity to
complete all the orders before to a structural break. Price will want to go back and pick
up those unfilled orders so that the movement may continue.
Higher time frame spikes or candles are sometimes treated with more regard than those
on a lower time frame. Additionally, candles that point in the general direction of the
HTF trend will be more effective.
Asking the following questions can help you gauge SC's strength:
How quickly did the price leave SC?
Has the price movement caused significant imbalances?
Has the price broken the market's major or minor structure ?
 INSTITUTIONAL CANDLE

QUANTUM STONE
CAPITAL
 INSTITUTIONAL CANDLE

What Is a Institutional candle

The future order flow is based on certain levels of the previous trading range, which the
banks take into account when establishing their pricing structure and ranges within any
currency pair.
Due to Orders being too strOng and/or cap levels not being maintained, critical thresholds
might sometimes be overshoot. The one-time creation of thin liquidity that occurs when
price plunges deeply or sells off into a significant low, shattering prior lows without
responding or bouncing after the liquidity was targeted, usually prompts a fast turnback to
the point of origin. However, if the market makers show interest in the new repricing range,
they can simply reduce their losses or restructure their losses in order to close out those
earlier lows at the point where the liquidity was tapped in.
The Backbone
The difficulty in obtaining the ideal entrance closely resembles the previously discussed concepts of
support and resistance. A downward move that comes before an upward move that restarts the trend,
hits new highs, and/or violates market structure results in a bullish "institutional candle." This is a move
by bigger/institutional market players in which the price is pushed down to not only shake out
competitors but also to acquire the currency at a lower price. When the market returns to that range the
next time, the institutional players protect this stock because they want to sell it for more money than
they paid when they first bought it. By emphasizing that particular candle with a certain color that
indicates institutions are in the market, we want to draw attention to this downward move. Then, after
placing a horizontal ray and noting the period the candle formed, we will show the open and center of
the candle, with the middle of the candle being captioned MTH (stands for "mean thresh hold"). We are
able to continuously operate these institutional candles by placing these horizontal lines.
Theses Any timeline may be used to draw institutional candles, however for stronger influences it is
recommended to start at the highest timeframe possible. This will increase the overall influence in that
sector. We may see a larger response the longer the institutional candle has been formed.
Additionally, if price responds to an institutional candle but then returns to the same location again, this
shows that the institutional candle's power is waning. This is because the powers that be are
"protecting" these levels with the necessary money to prevent price declines below the institutional
candle. The bullish Institutional candle will then function as resistance when price breaks below it,
same as when support switches resistance.
Live Example:
 ENTRY TYPES

QUANTUM STONE CAPITAL

 ENTRY TYPES

Entries may be categorized using a variety of criteria.

Let's look at entries first that are based on SC refinement and LTF confirmation.

Entry 1 - Risk entry

The ideal risky entrance is when your trade is going against the trend and momentum. You
discovered a SC on the HTF and improved it on the LTF. Therefore, a 4H SC tuned to the
15m would be an example. You may create a limit order on a refined 15m SC for entry
when all the various confluences you need to make a trade are present. Because entrance
requires little confirmation, the likelihood of getting kicked out rises.
 Entry 2 - Justification entry

When price is moving strongly back toward your SC, you're looking to place a countertrend
trade, or there are numerous SCs to choose, a justification entry is the ideal course of action.
Instead of just putting a limit order, you may conduct that trade more securely by waiting for
a BMS to occur on an LTF in the trend's direction. This entry type's drawback is that you can
miss certain trades since the price will reach your region of interest before quickly leaving it
without giving you the chance to enter.
Let's now examine entries depending on whether or not the HTF trend has been confirmed.
We are looking at entrance 1 - a risk entrance - after reversal when we get the first BMS
(new trend hasn't been confirmed yet). When a new trend has been confirmed by more BMS,
we are looking at Entry 2 - the rationale entry. That is shown. On the following illustrations
are scenarios for a bullish and a bearish market.
We are aware that markets are fractal and that what you see on longer time horizons also
appears on shorter time horizons. You may select how much confirmation you need by
looking at the graphic below. To take a trade on many time periods.
Even if you see BMS on HTF and that LTF also has BMS within of your AOI, you could still
think it is unsafe to place a trade in this area. You might wait for trend confirmation on LTF
to increase your confidence before making a transaction. You would use Entry 1 in this
situation, which is a risk entry with rationale.

Waiting for trend confirmation on HTF is an option if employing risk entry with reason is
still dangerous for you. Once the trend has been confirmed and we have received more BMS
on HTF, you choose your AOI. Then you enter LTF and watch the price activity as it
approaches your area of interest. You have two options here. First Option is riskier, and once
you notice BMS, you place a trade. The second option is to wait for LTF trend confirmation.
When the pattern is confirmed after further BMS, you may place the entry. You would use
Entry 2 - Justification entry with justification in this situation.
 IMBALANCE

QUANTUM STONE
CAPITAL
 IMBALANCE

What is Imbalance
When prices move too quickly and leave inefficiencies behind, there is an imbalance in the
market. To demonstrate how to locate the imbalance on the chart, let's use the figure below.
Price was originally moving upward, but five consecutive bearish candles, which indicate
strong selling, can be seen after that. I've assigned the numbers 1, 2, and 3 to the first three
bearish candles of this move downward. The second candle, which is often the biggest,
indicates that sellers were in control and that there were few buyers eager to enter the market
and prevent the price from dropping further. Candle No. 2 must burn down to the height of
Candle No. 3. We are now marking candle numbers 1 low and 3 high. 'Imbalance' is the gap
between these two points.
When examining price disparity, we often focus to the higher time frames — 1 hours and
above. In contrast, if you choose a lower time frame imbalance, it could just be a few pips,
which isn't really useful. This provides the optimum range. Unbalance is more of an extra
influence and reference point where price may return, it should be noted.
If you dive down low enough and see imbalance on the 1 hour, for instance, you're likely to
observe effective price movement overall. However, you may sometimes see correlating
inefficiency, which can be a strong indicator of where the price is headed if it correlates with
a longer-term point of imbalance.

MOnthly imbalance inline with yOur AOI On the mOnthly TF

We responded after rebalancing at the prior imbalance pricing. Of that monthly AOI, which
snuck into earlier monthly contrived lows.
 PREMIUM AND DISCOUNT

QUANTUM STONE CAPITAL

 PREMIUM AND
DISCOUNT
We prefer to shop around to discover the lowest price or the greatest deal when we are
purchasing anything. When attempting to sell anything, we search for a buyer who will pay
the maximum price conceivable so that we may maximize our profit. The same holds true for
those who trade on the financial markets.

For instance, you wait for the price to come down while purchasing gold in order to obtain
the greatest deal. When selling gold, you should wait for the price to increase in order to
maximize your potential profits when the price begins to decline once again.

But how can we tell whether something is affordable for purchase and pricey enough for
sale? The financial markets have a large number of players, and each of them is analyzing
the charts differently. Some people are sellers at the same price while others are purchasers.
Whether deciding whether to exit the market, they consider various time periods and have
various time or price goals.

We choose the impulsive price swing on the time frame we employ to examine the trend in
order to discover premium and discount levels. We often use Fibonacci theory. The 50%
level reflects the Equilibrium (EQ) after we applied it to the impulsive price fluctuation. The
Premium range is above EQ, while the Discount range is below EQ. We'll be looking to
purchase opportunities in the discounted levels and sell opportunities in the premium levels.
As an example, see below:

This example demonstrates that a bullish trend is now in place. When liquidity was removed
from the previous low, the bullish trend got underway. As the price had broken the market
structure, this liquidity was then leveraged to propel the GBP/USD pair in a positive
direction. However, as of right now, the price has reversed. We may now begin searching
for entry on a retracement. In this illustration, we have a retracement into a range of
"discount prices" and into an institutional candle, so banks are simultaneously buying at
discount prices, mitigating with an institutional candle, and adding further buy positions at
that particular point.
As we can see, the market structure is negative at the moment. Look for a climb over 50% equilibrium
when a market makes a run down and starts to retrace upward. Price is presently in a Premium if it has
increased by more than 50% or reached equilibrium. In this illustration, we have equal highs and a
spherical candle above. So we may anticipate a bearish reaction off the OB when price liquidates these
identical highs.
As we can see in this illustration, we were able to raid the equal highs and responded
bearishly. In order to get the greatest value on GBPUSD to sell price much lower, off the SC
and banks took price into a premium pricing, as we have seen in this case.