(binned per thread starter's request) Market bottom rotation trad

Supply/demand absorption of the oposite players.

Understanding when supply or demand is being absorbed or the sup/dem is failing to deliver a bounce often points towards a hint for supply or demand takeout, it is significant detail of information to note on price behaviour in order to anticipate which key area of price is likely to be taken out. In order to note that its needed to take whole structure in consideration on how price was normally behaving before and what has changed on current stance that could point to supply/demand absorption.
Supply takeout has only two possible phases of behaviour:
-1. Supply is taken out with significant swipe move flying trough the supply zone without any rejection
-2.Price starts to build micro shelf right at the supply area and slowly absorbing supply and then taking it out

Understanding the takeout process, and rounding along with initial/whole area supply is the key to understanding possible trend rotations. No indicator will give a solid statistical performance of finding rotations with over 50% accurancy and consistent performance, for that trader has to ensure it trough reading price behaviour changes, the key is in spotting the change of behaving compared to previous structural moves.

Conceptual representation:


Example

Condensed supply/demand versus initial supply/demand.

The main difference between condensed and initial sup/dem areas is that condensed zones are formed by many rejections of price in similar price area, where the previous highs remain intact and unbroken (for supply case) forming condensed formation of short sell position and stop loses positioned above highs. Break of such condensed area is usually formed by strong squeeze which is result often of direct wipeout of SLs that sit above highs or in some case macro short squeeze if trend is lasting very long. If there is a squeeze it should be obviously visible from chart where price should form very strong quick move upwards after supply is taken out (oposite for demand case).
Initial supply/demand zones are thinner zones with less of SLs exposed, however in clean trends they serve as key fear factor since it points to other players that there is a weakness and behaviour change of price compared to previous consistency of down trend. Initial supply/demand areas are generally formed by only single high or low, and often not followed by strong squeeze in price action.
Both condensed and initial sup/dem zones are important to follow as long as structure is clean, however trader should have different expectations on price behaviour on each of the cases.

Volatility changes

When it comes to price action analysis there is no such thing as observing price in vacuum. Every aspect of analysis has to be applied to previous action of price inside structure or inside trend as a whole, only that way a changes of behaviour can be noted. Large changes in volatility compared to previous price action in structure or trend can often point to potential bottoming or topping attempt of price. It is very simplistic and yet effective way to be prepared for potential rotation in the making.

Example:
Price is in down trend where avarage volatility on each candle is 5 pips move within 1 minute. This price movement continues for 100 candles and then suddenly it changes, volatilty increases 5 fold, where now each candle printed is 25 pips in size for every 1 minute candle. This shows process of either heavy liquidation or an agressive buyers stepping in.

Conceptual example:


Examples:

Rejection of key significant price areas/levels.

This is perhaps the most oversimplified area when it comes to trading where traders will often drawn any line or levels expecting price to be rejected without actually doing empirical research and statistical research based on patterns to see if they really hold any edge on spotting the potential rejections of levels. In order to do such test one needs a robust pattern that can be put into informational package and they backtested to see how price often behaves around it and if there really is a sense to expect rejection after key level gets taken out.
Often traders will draw lines from single lows or highs expecting that there is edge in finding that such price area will be rejected after break, this can be simply dis-proved by doing a quick statistical research that there is no edge in such expection. Same goes for single use of specific fibbonacci levels or random micro supply and demand levels.
A key level is significant level, and a significant level is level that should be clean put itself in a clean price environment where many traders will actually put eyes on same level (even if their reasons of price reactions are different). After such level is taken out, there should be liquidation even and a liquidity gap after certain portion of market is cleared out, creating an oportunity for price to be rejected if it lands back into such area after takeout of level. This is crutial read of price info to have actually statistical edge in expection of rejection rather than just hoping or guessing. To repeat again: In order to see rejection there has to be liquidation event happening after key level is taken out. If one is tracking very asymmetrical structure or price levels with little information inside them its unlikely that there will be strong liquidation event happening around such level.

Rejection can be expressed by quick pinbar candle print or with micro shelf buildup with many rejections of key level.
Leaning trading strategy on rejections is a key factor in how to minimize risk. Price should move in favour of trader "instantly" without significant draw down if key levels are properly tracked.

Clearout

Clearout is liquidation event where the SLs of buyers or sellers are taken out. Why clearout event is important is becouse large fish players will often need liquidity to push their position in market if they want to get filled at specific price without "showing their hands", meaning without having significant impact on market price. If big buyer wants to push in size without slippage and large price impact its best done if that is done where other buyers are liquidated and cleared out of positions so that they turn into sellers (long trader when exits position turns into selling long order) which allows large buyer to swallow up their sell orders. Clearouts are most common around very clean symmetrical structures where many traders will watch the same price level or place SLs around the same level due to price forming extremes of highs and lows in that price. Therefore a huge buyer or seller would want to see that level broken for liquidation event to happen and push his/her position in while liquidation is taking place and absorb as much of oposite orders.
Large players often play game 5 steps ahead, meaning they aim for clearout by providing it to enter their position, and forward pushing agressively size to push price above/bellow further supply/demand (usually condensed) zones to then form a squeeze and create large rotation of price and then liquidate their position.
For retail trader aim is to spot such potential plays and join the flow.
Clearout should always present itself with very quick strong move after key lows/highs get taken out, if there was a condensed area of SLs and liquidation took place this should be reflected in candle reaction of price.
Clearout generally is not something that can be easily 100% confirmed empirically its more of a assume type of pattern, since without order flow information and actual SL info its hard to fact check it, however by putting it inside strong bottoming structure it is easy to confirm its statistical edge and that it does push strongly on positive side of performance.
If structure is not even on highs and lows positioning (for example highs or lows being connected to trendline instead of flat line) then the main area to watch is lowest low or highest high of structure, thats where majority of condensed SLs will sit.

For trading takeout structure it is great to see clearout before takeout happens as that ensures that strong player is sitting behind the move on potential takeout.
It is not a key, but it is a additional information where strong player tends to "reveal its hand".

Putting it all together , powder keg

Reading key price action rotations is never about generalizations or drawing random lines of "what do you see". Liquidation events and volatility changes based on strong agressive buyers/short sellers are the key two factors to spot potential changes of trends and market bottoms/tops. In the end nothing works perfectly however, a trader needs to find and form decent strategy around the found information in markets, and if one has edge on price reading its usually going to lead to some losers and to some winners, and generally tight risk control and RR is going to push consistency into positive side. Very few if any pattern behave with extreme positive statistical ratio such as large short squeeze events, most market patterns behave in much lower consistency thus forming proper strategy is important. Watching price reaction around key areas is the key. For most patterns explained in this thread watching micro rejections and shelves is the key. Shelf area should always be symmetrical in the volatility of structure, there is no exact pip/cent point of how deep such shelf should be, it always depends on the size of structure. Price action is always relevant to its previous behavour.

Focus on clean structures, with symmetrical volatility based on previous price action is one of key aspects to find edge in price rotation reading. In asymmetry opinions are very spread across different areas of price, while humans and rational part of brains is made to spot patterns inside clean easy to spot symmetry.

Efficient versus non efficient price action reading

Drawing any level and expecting it to bounce based on per-single pattern analysis versus drawing key levels based on thousands of exact statistical researches that area based on complex patterns that can actually be backtested. In order to find an edge there has to be complexity, simple informations usually tend to have no edge in markets.
Non efficient price reading is often a result of trader sitting in front of chart and using "what do i see" on chart and drawing any line, indicator info, or level that makes logical sense. This statistically leads to very poor performance on price responding to traders initial projections.
Efficient price reading is where informational pattern is packed with complex info that is robust so it can be back tested and it actually performs with at least 60% of statistical edge.

Good Morning!
Had 2 trades today. Maybe not A setups, thatswhy quick TP
Btw Jan, what do you think about diagonal clearouts? I knew a guy called balhana, who was using them pretty much, so i incorporated them too. You know where trend line traders get consumed.

trade idea

106.50 UJ longed, looking for rotation.

gold rotation in the making.

quick try

Gold slowly rotating higher.

Well executed Andy, i took the same trade a bit earlier entry , anticipated supply takeout ahead due to strong clearout rotation.

EURJPY and AUDUSD both on potential rotation , looking for supply takeout to enter.

EURJPY, trying ctrader platform - lower commisions and faster order execution

closed AU, no strength

Both AUDUSD and EURJPY rotated well, micro shelves held perfectly.

Nicely done, a bit of criticism for the entry though...entries should always be taken as close to flipped supply as possible. Basically you want to have your entry right above the previous taken high or overall resistance. That way you are closer to your potential SL and have higher RR on trade. In most cases when price breaks key supply it will return back to retest it, so you dont have to have a fear of missing out the trade entry (does happen in some cases but key is to be patient). This way you will also build better discipline and like i said better RR.
Additionally after price forms clear micro shelf you can move your SL higher as that will then be your key area to watch and it will also help to reduce risk on trade.
If the spreads are large its often best way to place a pending limit order so that you really get filled on price area that you want. You are on good track, just wanted to provide some details to improve your overall RR.

GBPAUD potential continuation play, spreads a bit too jumpy though.