The Gartley Pattern indicates a potential trend reversal at the D point, where the price is expected to reverse direction after completing the pattern. What it Indicate Types Bullish ,BuyL K Occurs at the end of a downtrendA K D point is a potential buy zone, signaling a reversal to the upsideA K Traders look for confirmation (e.g., bullish candlestick patterns, RSI divergence) before entering a long trade. Bearish Gartley (Sellx K Occurs at the end of an uptrendA K D point is a potential sell zone, signaling a reversal to the downsideA K Traders wait for confirmation (e.g., bearish candlestick patterns, RSI divergence) before entering a short trade. Entry: At point D, after confirmation (e.g., candlestick patterns, RSI divergence). Stop Loss: Below (for bullish) or above (for bearish) the D point. Take Profit: At Fibonacci retracement levels of the CD leg (e.g., 38.2%, 61.8%). How to use 100
38.2% - 88.6% 161.8% - 224% 127% - 141% 78.6% X A B C D Bearish Butterfly X A B C D 38.2% - 88.6% 161.8% - 224% 127% - 141% 78.6% Bullish Butterfly is a highly regarded tool in technical analysis, utilized by traders to identify potential reversal points in the financial markets. This pattern is distinguished by its reliance on Fibonacci ratios and geometric configurations, which aid in predicting price movements with remarkable precision. C. Butterfly Pattern The XA wave The initial price move, either up or down. AB wave: Retraces 78.6% of the XA wave, making a deep pullback. BC wave: Retraces 38.2% or 88.6% of the AB wave. CD wave Å If BC retraces 38¹2% of AB → CD extends 161¹8% of BC¸ Å If BC retraces 88¹6% of AB → CD extends 261¹8% of BC¹ Å should be 127% - 161.8% extension of XA, marking the potential reversal zone (PRÆ) for trade setups. 1î1
indicates a potential trend reversal at the D point, where price is expected to change direction. What it Indicate Types Bullish Butterfly (BuyH G Appears at the end of a downtrend< G The D point is a potential buy zone, signaling a reversal to the upside< G Traders look for confirmation (e.g., bullish candlestick patterns, R&I divergence) before entering a long trade. Bearish Butterfly (SellH G Appears at the end of an uptrend< G The D point is a potential sell zone, signaling a reversal to the downside< G Traders wait for confirmation before entering a short trade. Entry: At point D, after confirmation (e.g., price action, volume spike). Stop Loss: Below (for bullish) or above (for bearish) the D point. Take Profit: At Fibonacci retracement levels of the CD leg (38.2%, 61.8%, or 100%). How to use 102
is a simple XABCD harmonic pattern that consists of four price swings and five pivot points — X, A, B, C, and D. One of the harmonic patterns, the pattern consists of the XA, AB, BC, and CD price swings. is a normal price swing in the upward or downward direction. X A B C D 38.2% - 50% 161.8% - 261.8% 88.6% 38.2% - 88.6% Bullish Bat X A B C 38.2% - 50% D 161.8% - 261.8% 88.6% 38.2% - 88.6% Bearish Bat D. Bat Pattern The XA wave: is a 38.2% or 50.0% retracement of the XA wave. AB wave: w can be either a 38.2% or 88.6% retracement of the AB wave. The BC wave: the BC correction wave: Overall, the CD wave w is 38.2% of the AB swing, the CD wave should be a 161.8% extension of the BC wave. But if the BC wave is 88.6% of the AB wave, then, the CD wave must be around a 261.8% extension of the BC wave. w should be 88.6% retracement of the XA move. 10Á
What it Indicate identify potential trend reversals with precise entry and exit points. It relies on Fibonacci retracements and extensions to form a high-probability setup. Types Bullish Bat (BuyC B Forms aH Hhe end of a downHrendG B The D poinH is a poHenHial buy zone, indicaHing a Hrend reversal Ho Hhe upsideG B Traders waiH for confirmaHion ,such as bullish candlesHick formaHions) before enHering a long Hrade. Bearish Bat (SellC B Forms a{ {he end of an up{rendG B The D poin{ is a po{en{ial sell zone, signaling a {rend reversal {o {he downsideG B Traders look for confirma{ion before en{ering a shor{ {rade Entry: AH poinH D, when reversal confirmaHion appears. Stop Loss: Below ,for bullish) or above ,for bearish) Hhe D poinH. Take Profit: AH Fibonacci reHracemenH levels of Hhe CD leg ,e.g., 38.2%, 61.8%). How to use 104
E. Crab Pattern signals a potential trend reversal at extreme price levels. It allows traders to enter trades at precise reversal points with a high risk-to-reward ratio. X A B C D 38.2% - 88.6% 261.8% - 361.8% 161.8% 38.2% - 61.8% Bullish Crab 38.2% - 88.6% X A B C D 261.8% - 361.8% 161.8% 38.2% - 61.8% Bearish Crab XA wave The initial price move, either up or down. AB wave: Retraces 38.2% - 61.8% of the XA wave. BC wave: Retraces 38.2% - 88.6% of the AB wave. CD wave ® Extends 22¯% - 361.8% of the BC wave² ® Should be a 161.8% Fibonacci extension of the XA wave, forming the potential reversal zone (PRZ). 105
The Crab pattern is recognized as a reversal pattern in technical analysis, utilizing Fibonacci numbers and percentages for chart analysis. This pattern can predict suitable price reversal areas on charts using Fibonacci ratios. What it Indicate Bullish Crab (Buy< ; Forms at the end of a downtrend@ ; Indicates a strong reversal to the upside at the D point@ ; Traders look for buying opportunities when confirmation appears. Types Bearish Crab (Sell< ; Forms at the end of an uptrend@ ; Signals a strong reversal to the downside at the D point@ ; Traders look for selling opportunities when confirmation appears. Entry: At point D, after confirmation (e.g., candlestick patterns, RSI divergence, or momentum indicators). Stop Loss: Below (for bullish) or above (for bearish) the D point. Take Profit: At Fibonacci retracement levels of the CD leg (e.g., 38.2%, 61.8%, or 100%). How to use 106
X A B C D 113% - 161.8% 161.8% - 224% 88.6% - 113% Bullish Shark 113% - 161.8% 161.8% - 224% 88.6% - 113% Bearish Shark X A B C D F. Shark Pattern helps identify trend reversals by using specific Fibonacci ratios. It is considered a more aggressive pattern, often signaling rapid market changes. XA wave AB wave: BC wave: CD wave The initial price movement, either upward or downward. Retraces 0% - 88.6% of the X-A leg. The price moves in the opposite direction of A-B and can be around 113% - 161.8% of the A-B leg¶ The final leg, which extends to 224% - 361.8% of the B-C leg, forming the potential reversal zone (PRZ). 107
Bullish (Buffi fl Formation: Occurs at the end of a downtrend fl Indication: Signals a potential upward reversal at the D point fl Pattern: he pattern appears after a sharp decline in price and typically shows a sharp upward move after the D point is reached. What it Indicate Bearish Shark (Sellffi fl Formation: Occurs at the end of an uptrend fl Indication: Signals a potential downward reversal at the D point fl Pattern: Appears after a strong rally and marks the point where the price may reverse sharply downward. Types Entry: At the D point (PRZ), after confirmation (e.g., candlestick patterns, RSI divergence). Stop Loss: Below (for bullish) or above (for bearish) the D point. Take Profit: At Fibonacci retracement levels of the CD leg (e.g., 38.2%, 61.8%). Hwo to use he Shark Pattern indicates a potential trend reversal at the D point, where the price is expected to change direction sharply after completing the pattern. 108
Part - 4 Price Action School
1. Price Action School
Understanding the concept of Price Action Price Action analysis is one of the oldest and simplest methods of technical analysis, which relies mainly on analyzing historical price movement without the use of additional indicators or tools. In short, it is the study of price action on a chart to understand market actions and elicit future trends. In this type of analysis, traders focus on the current and past price of currencies or stocks to see what patterns and trends may emerge. How does Price Action work in trading? Price Action traders use price patterns and timeline breakouts to determine the best moments to enter or exit the market. Price Action is the basis on which all other technical analysis methods such as trend lines, support and resistance levels are built. In fact, traders often rely on these patterns to make a quick and accurate assessment of the market in order to make their decisions in a timely manner. Price Action Trading Nowadays, Nowadays, Price Action is often combined with candlestick theory, as candlestick patterns provide additional insights into market sentiment and potential reversals, enhancing the accuracy of Price Action analysis. This integration allows traders to make more informed decisions by leveraging both price patterns and candlestick signals. It is also often combined with Volume analysis, however it can stand alone without volume or candles. 111 Price Action Trading School
A. The Main Tools used in Price Action trading? There are many tools used in Price Action, foremost of which are: such as highs and lows that show continuous or reversed trends in the market. A) Price patterns: B) Support and resistance lines: which help identify critical points that may be an indication of a halt or reversal of trends. C) Multi-Time Frame analysis: which focuses on specific periods to analyze market movements, such as periods of day or week Popular examples include§ Head & Shoulder Triangle Rectangles 112
D) Candlestick Theory & Candlestick Patterns: Popular patterns within candlestick theory have been integrated into recent price action trading strategies, such patterns include: Recently, Candlesticks and Candlestick Theory have become very popular among traders. Their use can be integrated with many schools and types of trading, so it is no surprise that it is included in price action trading. 113
Candlestick Basics The Structure of a Candlestick - A candlestick consists of the following components: YX BodyD F Gepresents the difference between the opening and closing prices during the time periodI F A bullish candle (typically green or white) forms when the closing price is higher than the opening priceI F A bearish candle (typically red or black) forms when the closing price is lower than the opening price. yX Wicks (Shadons)D F The vertical lines above and below the bodyI F The upper wick represents the highest price reachedI F The lower wick represents the lowest price reached. Upper Wick Lower Wick Body Open Price Close Price 114
Common Candlestick Patterns SinKle-3andle Patterns5 2$ 6ojiM J Open %nd close prices %re ne%rly identic%l$ J Sign%ls m%rket indecision; c%n indic%te % revers%l or continA%tion depending on context$ @$ H%mmerM J Sm%ll body ne%r the top with % long lower wick$ J ndic%tes potenti%l bAllish revers%l %fter % downtrend$ $ Shooting St%rM J Sm%ll body ne%r the bottom with % long Apper wick$ J ndic%tes potenti%l be%rish revers%l %fter %n Aptrend. Two-3andle Patterns5 2$ BAllish EngAlfingM J A sm%ll be%rish c%ndle is followed by % l%rge bAllish c%ndle th%t "engAlfs" the previoAs one$ J Sign%ls potenti%l bAllish revers%l$ @$ Be%rish EngAlfingM J A sm%ll bAllish c%ndle is followed by % l%rge be%rish c%ndle$ J Sign%ls potenti%l be%rish revers%l. C%ndlestick P%tterns c%n be Ased to %nticip%te the direction of price, they c%n be groAped %sN 115
Three-Candle Patterns! Mo"ning St"' A be"i(h cnde, fooed by (m indeci(ive cnde, then "ge bui(h cnde Indicte( bui(h "eve"( Evening St"' A bui(h cnde, fooed by (m indeci(ive cnde, then "ge be"i(h cnde Indicte( be"i(h "eve"( Applications of Candlestick Analysis in Price Action 1rading0 v| Trend Analysis! Cnde(tick( hep identify t"end(, momentum, nd "eve"(( R| Support and Resistance! Cnde(tick ptte"n( t key eve( enhnce the "eibiity of the(e Ione( H| Entry and Exit Signals! T"de"( u(e ptte"n( to time thei" t"de( effectivey 11}
The location is more important than the price action itself In other words, the “where” is more vital than the “what.” Even the worst possible prie ation at the right loation an lead to a profitable signal. D Price action will always follow the path of least resistance, aka the trend. This suggests the idea that one should always consider the preEailing trend. l Price action follows three phases: A) Accumulation B) Markup C) Distribution £ Price action mo¡es from small price ranges to big price ranges. This rule suggests considering the ranges of price according to the time frame. Å The siÆe of the price action is more important than you think. This emphasizes the main idea of analyzing price action as the most important indicator. B. General Rules in Price Action trading: 117
Step #1: Start by Analyzing the Swing Highs and Swing Lows Whenever you open a chart, start by studying the relationship between the swing highs and swing lows. If the market is in an uptrend, the price action will post a series of higher highs and higher lows. On the other hand, if the price action posts a series of lower lows and lower highs, we’re in a downtrend. However, if there is no clear direction or you’re unable to spot a clear trend, then we’re in a ranging market. Price Action Trading can be explained in 4 practical steps: C. Steps in Price Action trading: 118
Step #2: Measure the Distance Between the Swing Highs and Swing Lows Step two is to measure the distance between these swing points. What we’re concerned with is whether the distance between these swing points is increasing during the development of a trend. If the wave distance is increasing, it suggests a strong momentum. On the other hand, if the wave distance is shrinking, we know that the momentum is fading. By combining wave analysis with price action, you can make much more sense of what is going on in the market. 119
Step #3: Real Support and Resistance Occur with Big Candle Wicks Another trading principle to follow is that real support and resistance usually develop where we have price action with long wicks. By observing the long wicks, we can find price levels that line up to form powerful support and resistance levels. The long wicks usually show strong rejections of prices. As a general rule, we want to draw our support and resistance levels near price action with long wicks, as seen in the figure below. 120
Step #4: Combine Price Action with Indicators An example of combining price action with indicators is to combine pin bars, engulfing bars, inside bars, etc., with technical indicators such as moving averages, stochastic, RSI, and more. Technical Indicators are great to filter out some of the bad signals. In technical analysis, most indicators fall into one of the three categories, as followsD pm LeadVng VndVcaqons (PanabolVc SAR, RSI, SqochasqVcU Sm LaggVng VndVcaqons (RovVng AvenagesU Qm ConfinmVng VndVcaqons (On-Balance VolumeT We can identify four types of indicators to understand the marsetD ¡ Romenqum VndVcaqons (RSI, SqochasqVc, CCI, WVllVams RU ¡ Tnend VndVcaqons (RovVng Avenages, RACD, PanabolVc SARU ¡ VolaqVlVqy VndVcaqons (BollVngen Bands, Envelopes, ATRU ¡ SenqVmenq VndVcaqons on FX volume VndVcaqons (OBV, ChaVkVn Roney FlowT 121
D. Advantages and Disadvantages in using Price Action Advantages 8 Simplicity and clarity: Price Action is one of the simplest methods of analysis that does not require complex indicators or additional data. Disadvantages 8 Personal interpretation: Price Action requires a high level of experience, as the interpretation of price action can vary between traders. 8 ~epeated Analysis : The analysis period chosen by a trader significantly influences his decisions. For example, the same price movement may mean something different in the short term compared to the long term. 8 High risk: Due to the predictive nature of this analysis, forecasts may not always be accurate. 122 8 °lexibility: It can be applied to any time frame from minutes to months. 8 Interactive: Interacts directly with the market and reflects the actual price movements.
Part - 5 Volume Spread Analysis & Market Profile Theories
1. Volume Spread Analysis
Study o& price movement in reltion to its corresponding volume. It trcs the pro&essionl ctivity nd moves o& smrt money prticipnts (bns, hedge &unds, &inncil institutions). There re three big nmes in VSA’s development Jesse Livermor$ Richrd Wyco&% Tom Williams (1970s) about volume spread analysis Tom Williams Eventhough Jesse Livermore nd Richrd Wyco&& were &irst to emphsize this reltionship, Tom willims is recognized s the &irst to de&ine these concepts s school o& trding. 125 1. He was first to use the term “Volume Spread Analysis” 2. Helped propel VSA concepts with his books and softwares Key Contributions:
126 How It Work ! Wh"n "and is Gr"at"r than Supply ! Wh"n Supply is Gr"at"r than "and F If more people want to buy an asset (such as stocks, commodities, or currencies) than there are sellers willin> to sell, buyers compete by offerin> hi>her prices= F This results in price increases as buyers are willin> to pay more to secure the asset= F Example: If a company releases stron> earnin>s, investors rush to buy its stock, increasin> demand and pushin> the stock price up= F If there are more sellers than buyers, sellers lower their prices to attract buyers= F This leads to price decreases until the excess supply is absorbed= F Example: Durin> winter sales, stores lower prices to clear out unsold inventory, encoura>in> buyers to step in and purchase. The Law of Supply and Demand – Explained The Law of Supply and Demand is a fundamental principle in financial markets, determinin> how prices move based on the balance between buyers (demand) and sellers (supply). A. The Law of Supply and Demand
127 Understanding Cause and Effect in V $ Th! fflaus!ffi $ Th! Eff!ctffi D ThE accumula>ion or dis>ribu>ion of an assE> by profEssional >radErs, smar> monEy, or ins>i>u>ional invEs>ors= D This phasE is of>En hiddEn from >hE gEnEral public, bu> VSA hElps dE>Ec> i> >hrough volumE and pricE sprEad analysis= D ThE subsEquEn> pricE movEmEn>, Ei>hEr a bullish or bEarish >rEnd, rEsul>ing from >hE prior accumula>ion or dis>ribu>ion phasE= D ThE biggEr >hE causE %>hE >imE and volumE spEn> in accumula>ion/ dis>ribu>ion), >hE biggEr >hE EffEc> %>hE pricE movEmEn> >ha> follows). The Law of Cause and Effect in VSA (Volume Spread Analysis) In VolumE SprEad Analysis (VSA), >hE Law of CausE and EffEc> is a fundamEn>al concEp> >ha> Explains how pricE movEmEn>s arE no> random bu> rEsul> from undErlying markE> forcEs. This principlE, influEncEd by Wyckoff's mE>hodology, s>a>Es >ha> EvEry pricE movEmEn> %EffEc>) has a prEcEding causE, which is >ypically rEflEc>Ed in volumE and pricE ac>ion. B. The Law of Cause and Effect
128 Understanding Effort vs. Result in V ! Effort"="Volume" ! Result"="Price" (THe energy used to move tHe marketG Spread & Movement (How much the price moves in response to that effort) A HealtHy market sHould sHow a proportional relationsHip between effort and result. However, wHen tHe effort (volume) does not matcH tHe result (price movement), it indicates potential manipulation or weakness in tHe trend. The Law of Effort vs. Result in VSA (Volume Spread Analysis) In Volume Spread Analysis (VSA), tHe Law of Effort vs. Result Helps traders understand tHe relationsHip between volume (effort) and price movement (result). THis principle is crucial for identifying potential reversals, trend confirmations, and Hidden weaknesses or strengtHs in tHe market. C. The Law of Effort vs Result
129 (esistance occurs when sellers prevent prices from rising. If a rally starts and selling pressure appears, it signals that the floating supply has not yet been absorbed. For a stock to move higher, this resistance must be removed Once an uptrend begins, traders tend to follow like a herd. This herd mentality makes market movements predictable. Professional traders take advantage of this behavior, buying when the crowd panics and selling when the crowd rushes in ' When prices drop sharply, most traders sell in fear ' If professionals absorb this selling, it indicates underlying strength ' After a strong rally, the crowd rushes in to buy, often on good news ' If professionals sell into this demand, it signals market weakness. Key Market Reaction65 UV Panic Selling (Sign of Strength if AbQorbe?P >V FOMO BWying (Sign of WeakneQQ if ProfeQQionalQ SellP A professional trader avoids emotional reactions, ignores news hype, and follows supply and demand dynamics. Success in the market comes from thinking like smart money—buy when others panic, sell when others chase. D. Resistance & Crowd Behavior
130 The stock market operates on the fundamental principles of accumulation and distribution, where professional traders (market-makers, syndicates, and specialists) hold a major advantage due to their ability to see both sides of the market. Understanding Strong and Weak Holders is key to refining your market strategy. E. Strong & Weak Holders Who are Strong Ho8ders7 d Strong Holders trade on the right side of the market and avoid emotional decisionsb d They do not panic during sudden down-moves or get trapped into buying at market topsb d Typically, they have a large capital base and a high level of market competenceb d They accept losses quickly and view small losses as a necessary cost of doing businessb d Even if they have more losing trades than winning trades, their profitable trades far outweigh their losses.
131 Who are Weak Hoders - W.ak Hold.rs ar. oft.n n.w trad.rs who r.ly on instinct rath.r than strat.gy" - Th.y ar. und.r-capitaliz.d, #aking th.# vuln.rabl. to loss.s" - Th.y t.nd to g.t “lock.d-in” to bad positions, hoping th. #ark.t will r.cov.r" - W.ak Hold.rs ar. .asily shak.n out by #ark.t volatility or bad n.ws" - Th.y usually trad. on th. wrong sid. of th. #ark.t, l.ading to pr.ssur. wh.n pric.s #ov. against th.#. How Mark.t :ycl.s Wor9 - Bull Mark.ts occur wh.n Strong Hold.rs accu#ulat. stock fro# W.ak Hold.rs, oft.n at a loss to th. W.ak Hold.rs" - B.ar Mark.ts occur wh.n Strong Hold.rs distribut. stock to W.ak Hold.rs, usually at a profit to th. Strong Hold.rs. By r.cognizing wh.th.r you ar. acting as a Strong or W.ak Hold.r, you can shift your trading approach to align with prof.ssional #ark.t participants and avoid co##on r.tail trad.r #istak.s.
132 VSA is based on key factors that work together to provide insight into market sentiment: To explain these concepts, we use the analogy of a warehouse merchant, as described by Richard Ney. Market professionals operate like merchants— buying stock at wholesale (low prices) and selling at retail (high prices) to maximize profits. Understanding this process helps traders recognize institutional activity in the market. buying stock sell stock low prices high prices Accuulation }istribution Testing | Selling Cliaq p Buying Cliaq – Smart money quietly buyin at low prices – Smart money sellin at hih prices – Checkin for remainin supply or demand – Panic sellin leadin to a market bottom – A sure in buyin before a market reersal. F. The Pillars of Volume Spread Analysis (VSA) Richard Ney
133 Key Stages: Fear Induction: Negative news triggers panic selling. False Hope: Temporary recoveries make traders believe the market will rebound. Repeated Selling Waves: More bad news causes further price drops, exhausting retail traders. Final Shakeout: The last weak holders capitulate, allowing insiders to complete accumulation. Uptrend Begins: With supply exhausted, prices gradually rise as smart money takes control. 1. The Accumulation Phase The accumulation phase is a strategic process where insiders (smart money) gradually buy assets at low prices before initiating an uptrend. It involves market manipulation to create fear and force weak holders to sell.
134 The accumulation phase Campaign ends-warehouse Full Breakout Campaign Starts This diagram represents the Accumulation Phase in Wyckoff's market cycle. A sharp price decline occurs as weak hands sell off. Smart money (institutions) buys in gradually at low prices while keeping the price range-bound. This is reflected in rising volumes (blue bars). Once institutions have accumulated enough shares ("warehouse full"), they prepare for an upward move. The price breaks out of the accumulation range, signaling the start of an uptrend. This process reflects how insiders manipulate supply and demand before a major price rally. Campaign Starts: Accumulation Phase: Campaign Ends: Breakout:
135 Final Shakeout & Reversal: Once insiders have fully sold, buying pressure weakens, leading to a market decline or re-accumulation. This phase traps retail traders at high prices before the next market downturn begins. Gradual Price Increase: Prices rise steadily with moderate volume as insiders create positive sentiment. Bullish Momentum Builds: The uptrend accelerates, attracting more traders who fear missing out. Peak & Distribution Begins: Insiders start offloading their holdings while prices consolidate amid continued good news. Key Stages: The distribution phase is when insiders (smart money) gradually sell their holdings at high prices before a market downturn. 2. The Distribution Phase
136 This diagram illustrates the Distribution Phase in Wyckoff’s market cycle: Prices rise as institutions and smart money drive the market up. Smart money gradually sells off its holdings at high prices to retail traders while keeping the price range-bound. Volume remains high as selling pressure increases. Once institutions have offloaded their positions ("warehouse empty"), they prepare for a downtrend. The price breaks down from the range, marking the start of a bearish trend. This phase reflects how insiders distribute stocks before a major price decline. Campaign Starts: Distribution Phase: Campaign Ends: Breakout: The Distribution phase Breakout Campaign Starts Campaign endswarehouse Empty
137 This process helps insiders confirm that the market is primed for the next phase without the risk of fresh selling pressure reversing their efforts. A9 ObseBving :7Bket Re7ction6 H If heavy selling occurs, more accumulation is needed/ H If selling is weak, the market is ready to move higher. f9 Sm7ll Upw7Bd PBice :ovement: A controlled price increase is initiated. How the Test Works: Before launching a major uptrend, insiders test the market to ensure selling pressure has been absorbed....
138 Soluton % The market is taken back into congestion to fush out seers % A new test is conducted; if seing voume is ow, the market is ready for an u&trend. Testing is a key too in Voume Price Anaysis (VPA) and signas an imminent breakout when successfu. Consequences of a Failed TesF % Heavy seing forces &rices ower % Accumuation was incom&ete, deaying the u&trend % Insiders must restart the cam&aign by &ushing &rices ower to absorb remaining seers. Insiders test the market after accumuation to ensure seing &ressure is absorbed before &ushing &rices higher. Testing Supply and Failed Tests 3. Testing
139 This chart illustrates a low-volume test, a crucial step in confirming an uptrend. Indicates where strong selling pressure was previously present. Insiders push the price slightly lower to gauge selling interest. A temporary dip in price occurs. Confirms that selling pressure is weak, signaling that the market is ready to move higher. Previous area of heavy selling volumes: Testing the market: The test: Low volume: Testing The market The test previous area of heavy selling volumes Low volume Key takeaway: A successful low-volume test suggests that the uptrend can continue without significant resistance.
140 After the distribution phase, insiders test demand to ensure all buying pressure has been absorbed before pushing the market lower. How the Test Worffisfl G Insiders sell at high prices while bullish news drives demand? G @uyers rush in, fearing they will miss out? G Price manipulation creates volatility to attract more buyers? G Once insiders have fully distributed their holdings, they initiate a market decline? G As prices enter previous demand zones, a demand test is conducted. Outcome of the Testfl G If demand is weak, it confirms that buying pressure has been exhausted? G The market is now ready for a downtrend without resistance. This process ensures a smooth transition into a bearish trend without unexpected buying pressure. Testing Demand
141 This chart illustrates a low-volume test in a downtrend, used to confirm whether the market is ready to continue declining. Indicates where strong buying pressure was present. Insiders push the price slightly higher to check for buying interest. A small upward move occurs. Confirms weak buying pressure, signaling that the downtrend can continue. Previous area of heavy buying volumes: Testing the market: The test: Low volume: Key takeaway: A successful low-volume test suggests that there is no strong demand, allowing the bearish trend to persist. Testing The market The test previous area of heavy Buying volumes Low volume
142 This ensures a smooth transition into a bearish phase with minimal resistance. Testing occurs after accumulation or distribution, often with progressively lower volumes, signaling insider preparation for the next move. Once prices break from congestion, the trend is confirmed. Markets rise slowly and fall quickly because insiders control emotions—fear and greed. After panic selling, they accumulate stocks, gradually rebuild confidence, and push prices higher in steps. As prices peak, greed takes over, and once distribution is complete, fear returns, triggering another market crash to refill inventories. Market Manipulation by Insiders Market Cycles & Time Frames These cycles happen across all time frames, like nested Russian dolls. Short-term trends fit into longer trends, helping insiders manage inventory. Traders should use multiple time frames for a broader view—e.g., scalpers use 5m-1h charts; swing traders use 1h-daily charts. The chapter ends by introducing selling and buying climaxes, setting up the full market cycle explanation. High Volume Test – Bad News!
143 Testing The market The test previous area of heavy Buying volumes High volume This chart represents a price and volume analysis in trading: Indicates a past price level where significant buying activity occurred. The price is revisiting this area to test if buyers are still present. The market is testing the reaction at this level. An increase in trading volume suggests strong buying or selling interest. Overall, the chart suggests a potential support zone where buyers might step in again. "Previous area of heavy buying volumes": "Testing the market": "The test": "High volume":
144 The selling climax ends the distribution phase with high volume and a close near the opening price, signaling a peak before reversal. It traps buyers, allowing insiders to sell at retail prices, leading to the next accumulation cycle. This chart represents a distribution phase in trading, leading to a market downturn: A period where big players are offloading their positions before a decline. A sharp increase in selling pressure, leading to a breakdown. Indicates strong participation, often signaling the end of distribution and the start of a downtrend. "Distribution at Market": "The Selling Climax": "High or Extremely High Volumes": Overall, it suggests a transition from bullish to bearish momentum. Distribution At Market The selling climax High or extremely high volumes 4. The selling climax marks
145 After driving prices down, insiders trigger panic, restock inventory, and shake out sellers before a bullish trend begins. Despite regulations, they manipulate cycles: accumulation, buying climax, price rise, distribution, and selling climax, repeating the process. This chart illustrates a market accumulation phase followed by a buying climax: – Smart money absorbs supply at low prices before an uptrend. – Volume spikes indicate strong participation, confirming accumulation. – After accumulation, prices rise rapidly with high volume, marking a potential turning point. Accumulation at Market Bottom High or Extremely High Volumes The Buying Climax Accumulation at the buying climax market bottom High or extremely high volumes 4. The buying climax This pattern suggests insiders have accumulated enough and are now pushing prices higher for the next phase.
146 The market cycle repeats across all time frames and asset classes, driven by insider manipulation through Insiders use psychological tactics, like media influence, to trigger fear and greed, not direct price control. Volume spreed Analysis (VSA) helps identify insider activity, with high volume during buying and selling climaxes signaling accumulation and distribution. Price levels form support and resistance areas, where insiders buy and sell. As distribution progresses, insiders struggle to maintain prices, leading to a selling climax, after which the cycle repeats. Understanding these strategies makes market cycles predictable. accumulation and distribution. Marking market up Distribution phase Accumulation phase Buying climax Selling climax Test Marking market down
147 In a selling climax insiders sell large volumes of stock to meet demand, but this inadvertently pushes the price down. To avoid significant price drops, insiders break up large orders or use "dark pools" to hide trades. While dark pools obscure some volume data, they have minimal impact for traders using Volume Price Analysis (VPA). Similar challenges occur during a buying climax, where heavy buying raises prices. Insiders cannot execute all trades in one session, so distribution, selling climaxes, and buying climaxes unfold over multiple sessions. Patience is key to waiting for these cycles to complete.
148 In a buying climax insider buying drives prices higher, often amplified by short sellers closing positions. Despite the market briefly rising, insiders use negative news to push prices lower, allowing them to accumulate more stock. This cycle of buying and selling continues until insiders build their positions. The key takeaway is the relationship between price and volume: ultra-high volumes during a buying climax signal a potential bullish trend, while high volumes during a selling climax indicate an imminent downturn. This connection between volume and price action is critical for understanding market movements.
Part -6 Smart Money Concept