Bases
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What is this about: This talks about consolidations, their types and their relationship with Institutional candles.To understand the context around Institutional candles, we must first understand bases.To make price move, money is injected. To make price go up, people bought. To make price go down, people sold.
To be more specific, money is injected in accumulations (i.e. consolidations). Consolidations happen when price is being rejected at both extremes of the range (it basically stays inside the range). They’re called accumulations because orders are being accumulated (orders are piling up).
If there are more buy orders than there are sell orders, in the accumulation, price will go up. If there are more sell orders than there are buy orders, in the accumulation, price will go down.
Consolidations/accumulations are called bases. A lot of times, price revisits bases.
Why?
We know that there was money injected in that base. let’s say that there were 4 $ signs in that base (just for an example). It cost institutions 1 $ sign to push price up.
When price revisited the base, it shot up. Remember, there are still 3 $ signs in that base. So, price shot up because there was still money left in that base (3 $ signs) to push price up. Let’s say that it cost 2 $ signs to push price up again. Now, we only have 1 $ sign.
Now, when price comes back to the base again, price gives a small push up because there’s just 1 $ sign left in that base. Now all the money in that base has been used up. So, later when price comes back again, it doesn’t bounce off. It goes down because there’s no money left in that base to push it up.
This is liquidity. Liquidity forms equal lows & highs. Whenever you see equal lows/highs, look to the left to see where they originated from.
The liquidity originated from the base because when price revisited the base, it rejected off of it (as there was money left in the base). So, to know if price will give 1 more move up when it revisits the base or just break through it, we must know how much money is left in the base. In this case, there is no money left in the base. So, when price revisits the base, it will go through it. 2 things happen because of this: huge institutions move the market down and retail traders who bought get taken out.
There are 2 types of bases: continuations & reversals
Institutional candles have lower timeframe bases.
How this can be programmed: A base is a consolidation. Consolidation happens when the price is within a range and rejects off of both the Premium & Discount levels. A rejection at both the Premium & Discount zone should happen at least once for it to be called a consolidation.
What is this about: This talks about using everything we learned before to trade bases (both reversals and continuations)
1) Look for a base which is like this: rally base drop or drop base rally2) Find an Institutional Candle (a.k.a. IC) near the fair price (50%) of the base. This is your supply/demand zone3) Enter a trade when the price revisits that zoneFor a buy: Look for a base which is like this: drop base rally. The rally should be a strong reaction out of the base (this signifies a reversal). Mark out the base.
Find an IC near the fair pricing of the base. The IC should be the origin of the move that broke out of the range. That candle will be your demand zone.
Then wait for price to come back to that demand zone. The low should be equal to/below the top of the zone (to say that price revisited the zone). Then you can take a buy.
For a sell: Look for a base which is like this: rally base drop. The drop should be a strong reaction out of the base (this signifies a reversal). Mark out the base.
Find an IC near the fair pricing of the base. The IC should be the origin of the move that broke out of the range. That candle will be your supply zone.
Then wait for price to come back to that zone. The high should be equal to/above the bottom of the zone (to say that price revisited the zone). Then you can take a sell.
1) Wait for a new range to form (price should break out of an old range and close inside it).2) Wait for price to reach the Premium/Discount zone and reject off of it3) Wait for a base to form near the fair price (50%) of the new range and wait for price to break the 50% level4) Look for an IC in that base and expect price to revisit the zone that it formed5) When price revisits that zone, take a trade
This is in case of a buy:
We can see that price broke an old range and closed back inside the range. Now, our new range was confirmed. Then we waited for price to reach the Discount zone (a low must be equal to/below the top of zone and a high must be equal to/greater than the top of zone to say that price reached the zone).
Then, price went up and formed a base. Then it broke through the 50% level. Within that base, we looked for an IC. That would be our demand zone. Then, we waited for price to revisit the demand zone (we bought here). Then price reached the Premium zone. We can exit once a high is equal to/above the bottom of the premium zone.
This would be in case of a sell:
We can see that price broke below an old range and closed back inside the range. Now, our new range was confirmed. Then we waited for price to reach the Premium zone (a high must be equal to/above the bottom of the zone and a low must be equal to/less than the bottom of the zone to say that price reached the zone).
Then, price went down and formed a base. Then it broke through the 50% level. Within that base, we looked for an IC. That would be our supply zone. Then, we waited for price to revisit the supply zone (we sold here). Then price reached the Discount zone. We can exit once a low is equal to/below the top of the Discount zone.
