Gaps and How Markets Move In Contraction and ExpansionThere are several ways to trade gaps but first, there should be a solid understanding of what Gaps are and how they show up. Markets aren't that hard to read if we have some simple ways to see them that adhere to the principles of movement.
All markets move in contraction and expansion. A Gap is the sudden supply/demand imbalance that comes out of the contraction and shows up as the expansion. These expansions can even be used to measure how far the next expansion will go.
Start with a simple bar chart and erase everything else off the chart. Look and simply see the dense areas of contraction (Range). Then see the expansion (Gap), followed by another contraction.
Look for same-size contractions and expansion and you will start to see how organized price flow can be. It's no different than swings in that minor contractions and expansions make up the major contractions and expansions.
Shane
Contractionandexpansion
The Contraction, Expansion, and Trend PhaseContraction, Expansion, and Trend Phase
*also known as the Forex Master Pattern *
The contraction, expansion, and trend phase, or the Forex master pattern, is a trading methodology that focuses on identifying and capitalizing on the recurring patterns and phases that occur in the markets. They are based on the concept of these three market cycles.
Institutional players play a significant role in shaping these market cycles observed in the markets.
1.Contraction Phase
This phase represents a period of low volatility and consolidation in the markets
During contraction phases, institutional players often accumulate positions and establish their trading biases.
Institutional accumulation during this phase can create the necessary liquidity and order flow for a breakout in the subsequent expansion phase.
2. Expansion Phase
The expansion phase occurs when market volatility increases and the market breaks out of consolidation, leading to bigger price movements.
Institutional players execute their strategies by inducing price movements to entice retail participation. Depending on their goals, institutions may manipulate prices upward or downward, creating liquidity for their trades while taking advantage of retail sentiment.
Institutional buying during this phase can increase the movement in price and volatility, leading to rapid changes in markets and trends.
3. Trend Phase
Once the market establishes a clear direction following the breakout, it enters the trend phase.
The trend phase marks the end of the contraction, expansion, and trend phases, which are marked by sustained directional movements powered by institutional profit-taking activities. Retail traders often find themselves on the wrong side of the trade during this phase, triggering panic, liquidations, and potential market reversals.
The panic caused in this phase can eventually lead to liquidations.
While this is not a strategy, it is a versatile methodology that works on any timeframe and assets as long as it has enough volume on the market. You can develop many different types of strategies using the Contraction, Expansion, and Trend Phase .
The Master Pattern - 3 Phases of the Market | Smart Money THE 3 PHASES OF THE MARKET
The market goes through 3 phases, these phases can be seen on all assets and on all time frames. They happen on repeat.
These phases can be identified and market on your chart, to understand the true intentions of the market and also predict what will happen next.
1) CONTRACTION PHASE
When price forms a LH and HL this is the start of the contraction phase, you draw a box around it. This is when the buyers and sellers equalize and there is low institutional volume. This is a leading indication, letting you know the expansion phase is going to come next.
2) EXPANSION PHASE
As soon as price expands out side of the contraction box this confirms the expansion phase has started. Price likes to whipsaw around the value line multiple times liquidation both sides of the market, this is how the market makers fill their massive orders. This symbolized volume coming back into the market. This is the phase where most retailers lose their money.
3) TREND PHASE
The trend phase is the 3rd phase in the market and this is the profit taking phase. This is the phase where the market makers take profits off their previously accumulated positions. This is the best phase to trade and the safest phase to trade.
When you understand these 3 phases, it can give you a deeper understanding to the Rhythm of the market and help you understand what will happen next.
By knowing what phase you are in, you are able to trade it according to its characteristic's.
The master pattern concepts is the the real smart money concepts.
Hope this helps.
Master Pattern Trading Strategy | Smart Money Concepts💰10000LADYSUSDT | LONG TRADE
#1 - H8 FLAT BACK BULLISH HEIKIN ASHI ( At the Sweet Spot )
MONTHLY / DAILY / H12 / H8 / H4 BULLISH - UPTREND - Long bias
#2 - Jumped onto the LTF M5 CHART and entered my LONG when price was below the value line in combination with the TDI shark fin entry.
If price is confirmed on a bullish uptrend on the Higher time frame, then we mark out master pattern on our entry charts, and look to take counter trend entries, when price is below the value line for long entries.
These are the best entries to catch the wave of the trend with the lowest drawdown.
#3 - You can exit your trades at value lines or liquidity lines.
Contraction boxes are formed when price squeezes and forms a simultaneous lower high and higher low, this shows that the supply and demand is equalizing.
When price breaks out the box this forms the expansion phase, which is shows incoming volatility is entering back into the market.
When price enters into the expansion phase we can look for trade the range of the 2nd phase and let it carry us into the trend when it moved into the 3rd phase of the market.
The true thinking process of the banks - Forex Master Pattern
Hello there traders, in this article I have compressed information which will be useful for every trader. There is this trading methodology which very little know of (Even though its public information) that revolves around a market cycle which consist of an contraction, expansion, and trend.
This article will just open the doors to your understanding of these principles, and will just go over the basics, to master it you must practice it a lot and identify many different zones in the markets.
Practice Makes Perfect
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What will be gone over in this article?
This article will explain what exactly are contraction phases, expansions, and trends and how to identify these different market phases.
Get a basic understanding of what institutional traders look for and how they operate vs Retail.
What exactly is the value line and how it acts like the "center of gravity".
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What is the Forex Master Pattern?
The “Forex Master Pattern”, is a alternative type of Technical Analysis which shows the true psychological patterns of the Financial Markets. This pattern has 3 Phases, which is known as the Contraction, Expansion, and the Trend Phase, which will complete one market cycle in this term.
This pattern also creates a concept known as the “value line,” which is the fair value zone or the neutral belief zone where buyers and sellers agree is the fair value. Consider it in terms of the center of gravity.
This pattern is present on every timeframe and in every market with enough liquidity and volume, and shows the behavior, psychology and activity of retail, professional traders, institutional traders and investors and market makers.
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The Contraction Phase
The contraction phase is the setup and it indicates a period that the market is in consolidation, with a tight and narrow range. During the contraction phase there is going to be low institutional volume and they are avoiding positions and trades. It is best to avoid trade entries in this phase and wait for a clear trend after the expansion.
The Expansion Phase
The expansion phase is the play and its when the institutional traders begin to accumulate positions. There are many things that institutional traders would do in this phase. If the institutional trader or "market maker", main goal is to buy the asset, they will drive the price lower with their money to draw in retail traders to place shorts and sell their positions which will generate liquidity for "smart money" to buy cheaper. and vice versa.
If the institutional trader or "market maker", main goal is to sell then they will make the price go up a little with their own money to lure in traders who will buy their bags so that "smart money", can sell in a profit and overvalued.
The Trend Phase
The trend phase is the final phase that completes this market cycle. Once the institutional traders feel like it is time for them to start taking profits, will commence the distribution cycle which causes price to move down. All this profit taking from "smart money", will eventually lead retail traders to understanding that they were in the wrong side of the trade and the panic, liquidations, and stops start. Eventually they panic and start buying back in, and this generates liquidity for institutional investors and traders to take profits, leaving retail with overvalued bags, for the cycle to repeat itself again.
For the short scenario it'll be a vice versa too, they will move price up with their own money, cause retail to believe the price is going up so that they get into wrong trades (Retail buys, Smart Money Shorts), they start accumulating short positions or selling their bag and with the trend drive price back to value or even below, and at this point retail again begin the panic, liquidations, and get stopped, and ultimately sell their bags to institutional traders who buy at a discount.
This pattern is also similar to the accumulation and distribution cycle and are basically the same theories with different executions.
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What is the value line?
Previously in this article I have explained how contraction zones create fair value lines. Value lines can be described as the average price and the neutral belief zone for price. It sorta acts like an center of gravity. Knowing the HTF value lines can be your key to success since you will understand the general direction of the market.
Value lines help you visually understand what territory the market is in, like if its consolidating at value you should avoid entering any trade at all cost and wait for the expansion and perhaps the trend.
These value lines and contractions can also be used to find certain broadening wedge ranges and the longer price stays in a proper broadening wedge the more volatile it will get. The broadening wedge starting from the origin of the contraction is rare to find but can create some pretty good scalping environments and conditions.
Conclusion:
Well I hope this was educational, and it gives you another way of understanding the markets. This article was pretty basic in understanding this pattern and methodology but hopefully now you have more awareness. The best way to start understanding these principles is to practice in the charts and learn to identify the three phases.
This isn't a strategy but more like a theory or a concept which explains the behavior of the market. With proper understanding you can create many different strategies since this is extremely versatile and works on any market and timeframe if the liquidity is there.
So go on the charts and try to identify the three phases and see how you can improve your trading game!.
