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Market Structure and Valid Ranges

Valid range description

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Raja Arunchunaimuthu
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106 views

Market Structure and Valid Ranges

Valid range description

Uploaded by

Raja Arunchunaimuthu
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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VALID RANGES - INTRODUCTION

• What are Valid Ranges?


• Specific rules for determining Valid Structural Formations – HH, HL, LL, LH.
• Why do we need Valid Ranges?
• To ensure we draw structure correctly and flow with the most recent shifts and breaks in structure.
• To ensure we always have the same market structure mark-ups and remain systematic with our analysis.
• To remove any doubt and confusion when it comes to picking major HLs and LHs.
• What are the main aspects of a Valid Range?
• Having an Opposite Candle – candle that closes in the opposite direction of the current trend.
• Having a Pullback Candle – candle that does not break the previous candle’s high.
• The amount of Pullback candles needed can be tweaked based on timeframes OR your requirements.
THE CANDLE ANATOMY
OPPOSITE CANDLES THEORY

• Opposite Candle:
• Candle in the opposite direction of the current trend/range.
Simply – Bearish candle in a Bullish trend and Bullish candle in a Bearish trend.
• This signifies that there is a real pullback and that the opposite side is entering the market.
An opposite body close also makes the Line chart create a pullback.
• Important here is the Candle Closure – it must be an Opposite Body.
• For the opposite candle, the Wicks or the type of candlestick do not matter. It’s just important for it to be an opposite color.
OPPOSITE CANDLES THEORY
OPPOSITE CANDLES EXAMPLES
OPPOSITE CANDLES EXAMPLES
PULLBACK CANDLES THEORY

• Pullback Candle:
• Candle that DOES NOT break the previous candle’s High/Low (dependent on the direction).
• This signifies that there is no continuous buying/selling pressure and the market is actually pulling back.
• Important here are the WICKS of the candles.
• Look at the OHLC (Open, High, Low, Close) Values of the candles on Trading View. The High and Low stats are important.
• The color of the candle DOES NOT matter. Only the Wick matters for a PB Candle.
• The PB candle’s High/Low is compared with the Highest/Lowest candle in the current range. Pretty much – it must not break it.
PULLBACK CANDLES THEORY
PULLBACK CANDLES THEORY
PULLBACK CANDLES THEORY
THE RULES
• The main variable are the Pullback Candles.
• You can decide to use One PBC on 15M and Two PBC on 4H and Daily for example.
• For simplicity, we will only use 1xPBC.
• As for the Opposite Candles – all you need is One of them.
• A Valid Range ALWAYS causes a Structure Break (SB) or a Trend Change (TC).
• For Simplicity – utilize WICKS as Breaks.
• Wick breaks are a lot easier to track, especially while learning the Valid Ranges.
• Later on, you can shift to Body Breaks.
• And we will cover in another video Fakeouts and Breakout rules.
• The Process:
• All you need is to get your rules ticked – 1xPBC and 1xOC.
• The order at which they occur can vary.
• Sometimes, the OC appears first, other times the PBC.
• Other times, one candle can fulfill both variables – being an OC and PBC simultaneously. (examples later)
• Become a master of Candle Anatomy and keep tracking the candles, until you fulfill your rules.
THE RULES - DETAILS

• Use the OHLC values when in doubt for PBC.


• Equal Highs/Lows are NOT PBC.
• 1 pip difference can be a PBC.
• Use the Highlighter Tool on Trading View to mark your Valid Ranges!
• This is a MUST, because the biggest mistake traders make is to draw Internal Structure.
• Any price movements inside of a Valid Range is internal. Only the Major High and Major Low matter.
• When you learn and master both OC and PBC – you can easily change your valid range preferences.
• For example, sometimes on 15M, instead of 1 PBC, you can use 2 PBC to increase the probability in choppy markets.
• Or you can use 1xPBC on 15M and 2xPBC on 4H.
• Mastering the Valid Ranges will immediately make S&D zones easier.
• There’s an S&D Zone within every valid range. (more on that in another lesson)
TEXTBOOK EXAMPLES
TEXTBOOK EXAMPLES
INVALID RANGES
SHIT WICKS
SHIT WICKS
EXAMPLES & PRACTICE
EXAMPLES & PRACTICE

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