How do we decipher what sequence the market is in? In this episode, Dylan explains what market sequencing is, how this works and shows examples both annotated and live on the charts and effective technique to make sure we are trading on the right side of the market.  

It sounds silly, but so many new traders fail to understand the true direction of the market,

This is the topic of this video, we are going to hone in on exactly how we locate and decipher what the market is doing.

 

Is the market making a series of higher highs and higher lows? Is the market making a series of lower highs and lower lows? Is the market range bound?

 

This really is crucial to the strategy, so without further ado let's jump straight into it…

 

LL - Lower Low

LH - Lower High HL - Higher Low

HH - Higher High

  https://www.tradingview.com/x/3sSAciOz/   This example shows an example sequence in its most basic form.

Price action has pushed to the upside creating a higher high, we have then retraced in the form of a correction creating a higher low.

This sequence will continue until the bear begins to take over the market, it is very unlikely you will see the bulls or bears continue to dominate one trend, without a change in market sequence.

As a typical rule of thumb, the further a market is within its sequence i.e the more higher highs/ higher lows or lower highs/lower lows we have seen form the higher the probability of seeing the market change sequence in the future.

When the market does change it’s sequence we will be looking for a break of:

 

Previous low for a bullish to bearish change

Previous highs for a bearish to bullish change.

 

https://www.tradingview.com/x/sYGDikQL/

  The problem is, the market has multiple timeframes that we trade off?

What may seem bullish on the 1hr timeframe may also seem bearish on the 8hr maybe daily timeframe so which do you focus on?

Well, the answer to this is.. Both!

You see, a professional trader will have a good understanding of what is happening on all timeframes, not just the one he/she is focusing on at the time of the trade. What may look good on the 1hr time frame might be running into a setup that fits the opposite bias on the higher time frames.

This is why we look at multi time frames analysis, you will see this when we create our evening update videos and weekend market breakdowns.

If we, at the back of our minds, understand where the market has the highest probability of changing sequence on the higher time frames, everything up to that point can be traded for what it is.

So if we know there are 400 pips to the next daily order block (where we will see multiple confluences stack for a change in sequence) we know that we can trade the market sequence up into this region on the lower time frames.  Trades that are ‘counter trend’ (going in the opposite direction to our area of higher time frames orders will have a slightly lower probability of going in our favour.

This is The Social Trader's way of remaining adaptive within this market, some of our most profitable trades have come from positions that are on those lower time frames, trading smaller market sequences.

If you jump on a chart and just label out the sequences on both higher time frames and lower time frames you will quickly master this concept.

We often teach some of our newer traders sometimes the most simple way of getting your head around a setup is to just mark out the highs and lows within the market on the higher time frames and lower timeframes. It is an incredibly simple technique but can be the difference between truly understanding the setup and sequence you are trading vs trading a lower quality setup that will likely go against you.