When it comes to trading, at the very top of your list should be swing structure. Swing trading and swing structure are the cornerstone “Eb and Flow” of all markets, in all time frames. yes its true price can rocket in one direction or another at times but for the most part the things you look for MARKET REVERSALS and CONTINUATIONS are defined and preceded by and Ill just say it swing structure will pinpoint these areas on a chart and allow you to develop a strategy for identifying low risk, high odds trade entry.
To really understand and begin to apply the principles of identifying low risk entries through swing structure one must look at and study a typical (or not so typical) market reversal. By studying the swings that make up a reversal you are able to see where the trend began to slow, where it confirmed its act of reversing and ultimately where it reversed. Keep in mind this “reversing” doesn’t constitute a trade entry by any means its simply being observant of a reversal at hand.
As I said your understanding of this doesn’t constitute a trade entry. There is still much more involved in identifying a low risk high odds entry. See my article for more information about that. This is the beginning of a solid highly profitable trading strategy, its the core of all market movement. Understand and apply swing structure to your trading and you will make less mistakes and better trades. Apply my principles of low risk high odds and you are off to the races so to speak.
Swing lows in this image are denoted by SL, and swing highs by SH. Notice where I have marked the double bottom with the word CLUE. That second SL failed to make it lower as did all the other SL’s – you see that? This is the first clue that the downtrend might be over.
Good confirmation of this was when the next swing high (SH) exceed the prior.
This isnt exactly how price prints a reversal all the time, in fact its rare that its this pretty and this easy, but in order for you to understand the components of a reversal simplicity is necessary.