What is Re-Alignment in Price Action Trading?

What is Re-Alignment in Price Action Trading?

SUPPLY, DEMAND, AND THE MARKETS, HAVE MEMORY:

How many times have you seen a market retrace back to a level where a recent major move started from, only to respect that level almost exactly before making another strong directional move? It happens often enough to be something that you need to understand, and know how to make correct use of, because these scenarios can often yield very high-probability and high reward to risk trades

It’s important to note that the trade setups by Market Secrets are not a perfect science. There are occurrences in the market that are critical to understand, and our trade setups will provide a tool to have at your disposal when you’re analysing charts.

Supply and Demand – Core Rules:

Before we even start with the lessons, I would like to state that successful traders realize that they are not in the trading business to trade, but rather to make money, and to do that they need patience.

A patient trader with a second rate system will generally outperform an impatient trader with a better system. Having said that, your trading system and trading plan still has significance but not the way you think or as much as you might think.

Its significance lies in the fact that it is your system that gets you out of losers quickly and keeps you in the winners, the exact opposite of what most losing retail traders do in the trading careers.

The system will helps you to take the emotion out of the trade, remove the panic, and build your confidence in the rules and your trading plan.

Trader should understand that what everyone knows is not worth knowing. After all, popular formations and studies/indicators get everyone going in the same direction and then as they panic to get out the best traders have already taken the other side.

The best traders know that once you get into the trade at the right price and the market moves in your direction, they should “leave it alone“.

A wise person once said that “Prediction is very difficult, especially when it pertains to the future”.

Consequently, you should not let your opinion or someone else’s get in the way of seeing the price action and supply and demand, which is what ultimately determines direction.

Let me use a few slides to explain to you what these core realignment rules are:

The slides will NOT use any charts, it’s been done on purpose. Why? I want you to understand the concepts behind these rules, you need to use your imagination a little bit.

By understanding the core concepts you will be ready to look at the charts using these concepts while wearing the supply and demand glasses.

The following slides use the Monthly, Weekly and Daily timeframes as an example. You can choose any 3 timeframes of your choice. There are some rules for choosing these timelines based on whether you are an intraday, positional or swing trader, which will be explained later.

Coming back to our example, we use the top timeframe of our sequence, (i.e) the monthly chart in a Monthly/Weekly/Daily sequence, and plan trades on the Daily chart in the direction of the Monthly trend

So for our example, I’m going with Monthly, Weekly and Daily timeframes.

·         Monthly – Top/Higher Timeframe

·         Weekly – Intermediate/Middle Timeframe

·         Daily – Lower Timeframe. This is the timezone in which I will make my trading decisions.

Any timeframe combination can be used but I highly recommend you to use this combination because I guess you want to have a life, maybe I am wrong and you love staring at your trading platform for hours chasing for trades. Traders are often limited by the number of trading opportunities due to the time it takes to analyse multiple markets.

When analysing the bigger imbalances and sequences, we will be able to move through hundreds of markets at a relatively fast pace.

Less time in front of the computer, less stress and less over analysis and over-trading, resulting in a better life and relationship with your family and friends. Family and friends are more important than your trading, do not ignore that fact as mental health is very important factor in trading.

Coming back to the rules, the basic Rule is that, you want as many timeframes as possible (at least three) aligned in your favour in the direction you intend to trade. So in this case, if all 3 timeframes, which is monthly, weekly and daily are aligned in same direction, it is a high odds trade.

CORE RULES OF THE REALIGNMENT:

First draw the zones as per the rules we have discussed in earlier episodes in all the 3 timeframes you have selected. Then use the realignment rules.

Check the trends in the all 3 timeframes. If all 3 timeframes are aligned (i.e) all 3 TFs are in uptrend, we can trade blindly at the zones marked at Daily Timeframe.

When Weekly and Monthly are aligned (in uptrend) but daily is out of alignment (in downtrend or in consolidation), we should ignore standalone zones at Daily chart and look for zones in daily chart which are nested with weekly chart.

When only Monthly timeframe is aligned (in uptrend) but daily & weekly are out of alignment (in downtrend or in consolidation),, we should ignore standalone zones at Daily chart and look for zones in daily chart which are nested with monthly chart.

This is how we should use re-alignment rules while trading the trends. Reverse is applicable for trading downtrends.

For more details and examples, checkout the video: