In-depth look at Continuation & Reversal Correction in price action structures/patterns
Hi everyone:
Today I want to revisit the fundamental aspect of trading impulsive and corrective phases in Price Action Analysis. As you all know I focus on multi-time frame analysis and forecasting/anticipating the next impulsive move in the market.
To me, the most important part of identifying the next impulsive phase of the market, is to understand how correction works. An impulse phase usually happens after a correction has finished correcting, so the key is to identify and understand how a corrections structure will complete so we anticipate the next impulsive move.
You may have seen my videos on this topic, but today I will go more in detail on this, and explain the 2 types of correctional structure the market can create.
The market can only be in 2 phases, impulsive phrase or corrective phrase. In addition, the corrective phrase can only be continuation, or reversal.
So to fully have an edge in the market, is to understand what the correctional structure the price is currently making, whether a continuation/reversal, then forecast the possible price outlook, and go down to the lower time frames for possible entries.
Now, it's important to understand that different traders/strategies/styles will call these patterns/structures in varies names. What they are called or identify isn't important, but the important aspect is to understand whether they are continuation, or they are reversal. In addition, simply seeing price action structures/patterns by itself, is not a good enough entry criteria for me. You want to combine multi- time frame analysis, top-down approach, and with multiples of these price actions all happening so it adds extra confluence for you to enter a particular trade. Seeing a H and S pattern, on a 5 minute chart, without considering the overall HTF and other factors, will not be a consistent move in the long run.
Continuation Correctional Structure/Pattern Bullish/Bearish Flag Bullish/Bearish Pennant Parallel Channel
Reversal Correctional Structure/Pattern Ascending/Descending Channel Rising/Falling Wedge Double Top/Bottom Head & Shoulder Pattern/Inverse H and S “M” and “W” style pattern Reversal Impulse Price Action
I will forward all the price action structures/patterns videos I have made in the past to help you understand each of the structures more.
Impulse VS Correction
Multi-time frame analysis
Identify a correction for the next impulse move in price action analysis
I’ve watched this about 3 times already and have already benefited from using it in my analysis. Could you clarify this for me…. Do you draw your trend lines based on the whick or the body?
jojofang0901
⋅
@KevatInFocusBiz I personally draw the trendline to connect the highs and lows of a correction, based on the wick. Certainly there’s no right or wrong on this topic and different traders will tell you different answers. But I don’t use the Trend lines like some support or resistance, rather it’s there to frame the structure that I am looking at.