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| Hi pilot,
Hope things are well. Great post. Lots of great questions. Market structure is alot of things. It's a gap, a OSB, and ISB, a KR, groups of bars can be lumped together, and pivot is market structure as well. So it's a pretty general term that can have a lot of references tied to it. A "structural " pivot is defined that way because it did something that confirms it. And thus we can use it to build a framework to understand what is going on in with price.
Regarding scaling, I would imagine it depends a little on your screen size. If you are using a 55" 4k screen you obviously could put more on than someone using a Ipad. So its kind of a personal preference. As a general rule, go up in time before scrunching in. Going up in time get rid of the day to day drama and makes it a much more pure chart.
First, kudos to you. Looking at the market structure is the most important thing you can do. And honestly, I find myself drawing less and observing more all the time. It is IMHO the most under utilized technique that anybody can do, the most powerful....and the most over looked. It is so stupid simple that nobody does it. Yet, if you had just marked buyers and sellers, you would have known what price should do 3 out of the last four years, and thus could have sold pennies from the high without giving a hoot about what the weather, or acres, or the radar, or the MACD or the 38% fib. We blind ourselves with information when knowing less is truly knowing more.
So you have three set of sellers that we are going to be thinking about. The first are at the all time highs. That is the biggest on the board. The next lies around 5.20, and the last confirmed seller are the ones near 4.50. They are the ones that we need to get rid of first. The term "job" is designed to help us create a simple framework in our minds. In a downtrend - for it to continue price must do what? Make lower highs and follow them up with lower lows and vice versa in an uptrend. So, when the sellers at 5.20 were successful in making new lows and price started to pull back, what is the job of that swing? To make a LOWER HIGH. It took three attempts for those sellers to get their job done, but they did it in 2016. FACT: Sellers are at 4.50. Not, they were there because of a record crop, or a report, or a weather forest....Who cares, why. Fact: They were there. So price finds a low and pulls back. What is its job if the downtrend is to continue? Make another Lower high. FACT: Sellers showed up last summer and tried to make new lows and failed. Not fact because of carryout, or the weather, or exports. FACT: Sellers tried and failed. So now we have a higher low. What is the job of that swing? A HIGHER HIGH. You knew that already back last fall. You didn't need to know acres, or weather, or a fancy line. All you needed to know what that prices job is to make a Higher High. So knowing that why get all worried about whatever the drama is of the day, and sell before price nears completing its job? And price did exactly that. FACT: Buyers were at 3.35ish. 555....you listen close so you can get over your confusion.... So price had two jobs to do. The bigger swing's job is to make new lows, while the smaller "wiggles" job was to make a Higher High. That's why price often has multiple jobs to do. So FACT: Sellers tried again at last years highs and thus far failed to make new lows. If this sticks and remains,....should we be panic selling because of tariffs, or because everybody is going to plant corn and no beans next year? No. Fact, if price makes a higher low, its job becomes making a higher high. Now, price isn't perfect, but its really, really good at doing its job and more times than not, it will be successful at completing its task. So without knowing anything else, you have a simple framework to use to help you understand what price is doing. Since we are on this, why do we think it will be so important to sell at least some of multiple years production if we get range extension? Because the facts are that buyers were not willing to buy at 5.80 and seller are confirmed at 7.40. And if we go to 6, what would that be? A lower high. And what is the job of price then? To make Lower lows, or go to prices below were we went in 2016. Not go there if there is a big crop, not if the weather, and acres agree. That becomes that swings job. And it will expend all the energy it has stored attempting to do it. That is why is so important to understand what is going on the chart. It's a stupid simple concept. You can load a monthly, spend 10 minutes marking it out, and you are done. You know have a simple framework to help you keep clarity of the situation. It is the one technique that will make you a better marketer instantly.
The sellers at 4.40 are absolutely structural, but they had to be pretty disappointed. Price spent 2 years going horizontal and barely squeaked out new lows. And if you were the whale that sold there, and was thinking. "Man the first time I sold it went 3.50, the second time it went 2, and third time I barely squeaked out a buck". Do you think he is gonna chase price when his risk reward is collapsing? No. He will want to sell that - if at all- where he can minimize his risk and maximize it reward. And you have another reason why price can't make new lows technically....the big boyz aren't gonna chase price. The funds are NOT big boyz. They are the heel biting Chihuahua.
Regarding structural buyers. There are two. The ones on the lows, and the ones on last years lows. But they would be considered "minors" at this time. Until they break the back of the bigger formations sellers at 4.40, they are minor buyers. They confirmed absolutely but so did the ones post 2014 a couple times and they eventually got taken out with new lows. Basically, a simple way to think of it is when you were in grade school, every class had a bully - the "tough" guy. He is the minor. He runs the show in his class. But when it's time for recess and K through 6 is on the playground, but sixth grade "bully" rules the roost. The minor bully tries to run his show, while staying out of the way of the bigger bully. That goes on until the minor bully becomes the 6th grader, and the previous bully doesn't show up to defend his territory or the "minor" bully punches the bigger bully in the nose..... And thus the big bully has changed and the sellers don't show up.
Hope that helps.
Take Care
Edited by J P 8/6/2018 07:51
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Back to the basics: Market Structure
