THE BANKS C O D E

This EBOOK is SUPPLEMENTED KNOWLEDGE to go along with the PREMIUM COURSE.

 INDEX

Lesson 1 | - Market Structure | BOS vs CHoCH

Lesson 2 | - Order Blocks
Lesson 3 | - Market Inefficiency | Imbalances
Lesson 4 | - Liquidity
Lesson 5 | - Supply & Demand
Lesson 6 | - Correctly locating Your Zones
Lesson 7 | - The Price Cycle
 LESSON 1 | - MARKET STRUCTURE

Structure is the most important aspect in trading and analyzing the

charts. When having a good understanding of market structure it will
improve your trading tremendously. In this lesson I'll be going over the
different types of market trends and structural breaks.

There are 3 basic movements the markets make:

UPTREND | DOWNTREND | RANGING MARKET

Each one is compromised of 4 swing points :

Higher High (HH) & Higher Low (HL)

Lower High (LH) & Lower Low (LL)
 Here is an example of an uptrend
An uptrends is when price is printing a series of
Higher Highs and Higher Lows

Here is an example of a ranging market

A ranging market is when price is moving with no
direction and just consolidating between levels of
support and resistance printing Equal Highs and
Equal Lows

Here is an example of a downtrend

A downtrend is when price is printing a series of
Lower Highs and Lower Lows
 Swing Points
As you can see the swing
point here is the highest
point of this downtrend However this swing point here is
lower than the previous swing
this is what we would label
point therefore this is what we
our Higher High (HH)
would label our Lower High (LH)

This swing point here is lower than the previous

swing point therefore this is what we would
label our Lower Low (LL)
 Downtrend
Uptrend

Ranging
 BOS vs CHoCH

Understanding of the 3 basic market movements is all about being able

to identify your swing points.

Then you want to focus on Breaks of structure, identifying these breaks

of structure is necessary to be able to find trading opportunities
because by understanding the principles of the market movements you
can accurately determine where the buyers and sellers are gaining
strength or weakness.

There are 2 types of breaks you must differentiate between:

#1 | Continuation break and #2 | Reversal break which is what we call

our Change of Character (CHoCH)
 Break Of Structure | BOS vs CHoCH

HH
In this example here we can see that there's series of HH's and HL's
being printed this tells us we are in an uptrend now if you pay
HH attention every time a high is broken it price prints a HH then pulls
back printing a HL then continues to break the high. We label each
time it breaks these points as BOS this is to tell us that price is still
LH continuing its move up and buyers are still in power

LH

HH HL
HH
As you can see price was in an uptrend , then the low failed to hold
and price then printed a LL that's our first sign that sellers are
coming into power when price broke through the last low that's an
indication that there can be a shift in the trend, so you identify that
HH
break as a CHoCH. Once you have anticipated the CHoCH and price
printed a LL you can expect price to pull back and now form a LH
LH and then sell off forming more LL's.
LL
LH
MARKET STRUCTURE
 LESSON 2 | - ORDER BLOCKS

Now we look at precise entry points:

An order block is a visible spot on the chart where a large order

is being placed on the market.

You'll notice the order being placed, followed by a quick move

from that region, leaving behind imbalances and break of
structures.

The candle before that impulsive move is what we call an "order

block," but I want you to remember that order blocks are
essentially areas of supply and demand in the markets.
 Bullish Order block (Demand)

Looking at this textbook example, we can

see that the red block was the last
bearish candle before the impulsive
move, the candle would normally consist
mostly body with very minimal wicks.
This is what we call our bullish order block. To
mark out our OB we draw a zone from
the top of the candle to the bottom, but
you may also include the wicks.

Bearish Order block (Supply)

Looking at this textbook example, we can

see that the green block was the last
Bullish candle before the impulsive move,
the candle would normally consist mostly
of body with very minimal wicks, This is what
we call our Bearish order block. To mark
out our OB we draw a zone from the top
of the candle to the bottom, but you may
also include the wicks.
Bearish Order block (Supply)
Bullish Order block (Demand)
 LESSON 3 | - MARKET INEFFICIENCY | IMBALANCES

Fair value gaps (FVG) and Imbalances

All of these terms refer to the same idea, although traders use different
words to describe it. To put it simply, market inefficiency occurs when
the wicks are separated by a distance or a gap and they don't meet .

An efficient market, on the other hand, is one in which the wicks do not
have a gap between them and actually meet.
 If you take a look at the this example here , notice
Inefficient / imbalance
wicks dont meet how there is a gap between the wicks on the 1st
candle and the 3rd , the wicks don't meet ,
therefore this is identified as an imbalance or
inefficient price action.

on the other hand , in this example here, notice

how there isn't a gap between the wicks on the 1st
candle and the 3rd , the wicks meet , therefore
Efficient / imbalance
this is identified as efficient price action.
wicks meet
 BUT WHAT DOES IT MEAN TO HAVE EFFICIENT AND INEFFICIENT PRICE ACTION,
AND WHY IS IT NECESSARY TO DISTINGUISH BETWEEN THE TWO?

EFFICIENCY/INEFFICIENCY TELLS US A FEW THINGS.

When there is inefficiency in a price range, it means that the move was caused by large orders placed. For
example, if the price made an impulse move to the upside and left behind an imbalance, it means that a lot of
buyers have come into power, causing inefficiency, and vice versa.

WE NOW KNOW THAT THE WICKS WILL MEET IN AN EFFICIENT SCENARIO. BUT WHAT DOES THIS TELL US?

It shows us that price is giving both buyers and sellers a fair chance at accessing liquidity, so
when the wicks meet in a bullish example, it provides buyers access to get in and profit on the move up.

when an inefficient scenario occurs, we can now expect price to eventually pull back to fill in the gap it
created, giving us a fair opportunity to liquidate the market.

If we find a region of imbalance, we can expect price to pullback to that point to fill in the gap it had left
behind, giving us an opportunity to enter a trade to continue the move in the direction it was intended to
move towards. Keep in mind that this does not always mean every single imbalance you find gets filled .
 1. price was in a downtrend and then it broke
above the previous high creating a higher high.

2. this tells us that there is a Change in trend so we

label the break as a CHoCH.

3. as price made an impulsive move up and broke

through the high we can see that it created
imbalances in the range.

As you can see price has pulled back after

taking out the high and has now filled the
imbalances it created therefore providing
buyers a fair opportunity to get in and
capitalize on the move.
LONG EXAMPLE SHORT EXAMPLE

Imbalance AND ORDER BLOCK filled.

Imbalance AND ORDER BLOCK filled.

 LESSON 4 | - LIQUIDITY

Liquidity is just an area where there is stop losses and pending orders waiting,
essentially we are all liquidity in the markets, however that does not mean every single
order must be targeted and taken out by the market makers as some areas are simply
not liquidated enough for it to be worth the grab for the institutions.

Popular areas where retail trader tend to set their stops and pending orders are at levels:

support / resistance
double tops / double bottoms
trendlines

Therefore these popular areas where retail traders tend to execute their trades will have
a lot of stop losses making it a nice level of liquidity for market movers to target.
 DOUBLE TOP BULLISH TREND SUPPORT LEVEL

STOP LOSS

ENTRY

ENTRY

STOP LOSS

ENTRY

STOP LOSS

This is a double top , retail This is a bullish trend line , This is a support level ,
traders would identify a high retail traders would identify a retail traders would identify
and enter a sell if price tests channel/trend that price a level that price tests
that high again and they set continues to retest and would multiple times and would
there stops above it. execute a buy position if price execute a buy position if
tests the trendline again, price tests that area again
setting there stops below. and they set there stop losses
below that level.
TRENDLINE LIQUIDITY

As a retail trader you would've

entered a sell of this trendline
as it has been tested multiple times
 liqu
idit
y re
stin
ga
t th
is t It takes them out
ren
d li
ne
$$$

Price then moves in their direction to motivate them to

continue using this strategy and that it works
EQL LOW LIQUIDITY

As a retail trader you would've

entered a buy at this equal bottom.
 Price then moves in their
direction to motivate them to
continue using this strategy
and that it works

but then takes them out

EQL HIGH LIQUIDITY

As a retail trader you would've

entered a sell of this resistance level.
 But then takes them out

price then moves back in their direction to

motivate them to continue to use this strategy
and that it works.
 LESSON 5 | - SUPPLY & DEMAND

Supply = sell | Demand = buy

An area with increased supply is an area with increased selling pressure.
An area with increased demand, on the other hand, refers to an area with increased buying pressure.

Supply and demand zones are defined when an imbalance in the buyers and sellers occurs. Think of supply as a product such as cherries.
We can also think of demand as people who like buying cherries. Assume that this was an excellent year for cherry growers. They've
produced a large number of cherries and there is a greater supply of cherries than there is a demand for them.

Farmers would have to lower the price of cherries and put them on sale, buyers will consider buying more since its a good price. The price
will keep dropping until all of the cherries have been sold. That would be the equilibrium point, or the point at which there are enough
buyers to meet the market's supply of cherries.

Farmers clean their inventory as the cherry season draws to a close, and a lower supply of cherries is now available on the market.

Cherry demand has has lowered and with the same amount of shoppers buying them as before. Because there are fewer cherries to sell, the
price will increase. It will rise to the point where the buyer wanting to pay a greater price will be able to purchase a cherry That level is the
equilibrium level in these market conditions. The price of that commodity will remain within a restricted price range as long as there is
demand of buyers.

When one side's volume surpasses the other's — for example, if there is more supply than demand — an imbalance occurs, causing prices to
fluctuate until the two sides are in balance again. On the price charts, this imbalance can be seen as a large shift away from the current
price level.
In the financial markets, the asset is the product and the value is the demand. If the price is cheap, it means there is more supply
than there are willing buyers. If the product is expensive, that means there is more demand (buyers) for less supply.

By understanding the supply and demand concept, it will be very simple to spot S&D zones on charts. Although this would be a
hindsight observation, it will give us a good hint of where to look for our trades in the future. It is critical to recognize that the
supply and demand trading is based on analyzing and finding these zones in the past then these zones will help us predict how
the price will behave in the future.

Let's return to the topic of cherries and buyers. If you could buy cherries for $1 and we only have five packs to sell, but buyers
are requesting ten packs. As a result, five packs were sold for $1 each, and no buyers were located for the remaining five orders.
Keep these five unfulfilled orders in mind for later.

Obviously, the price would rise to $1.50 per pack of cherries in order to attract additional growers and increase supply. Later,
when supply outnumbers the buyer's willingness to pay for the pricey cherries , the price lowers back to $1. Now the five orders
that were unfulfilled at $1 per pack are still assumed to be there waiting.

Their request will now be filled immediately, as they are first in line for cherries at the rate of $1.
Something similar happens in the trading market.

When the price changes, we can assume a high likelihood of unfilled orders. These orders are waiting and they will be the first to
be executed once the price returns for the first time to the demand level of $1.
 There are #2 TYPES OF SUPPLY & DEMAND ZONES.

REVERSAL OR CONTINUATION ZONES

RALLY | BUYERS EXCEED SELLERS

BASE | SELLERS & BUYERS ARE EQUAL
DROP | SELLERS EXCEED BUYERS

CONTINUATION ZONE

is formed when there is a rally then a base then another rally (RBR) and in a
bearish example a drop then a base then another drop (DBD)

REVERSAL ZONE

is formed when there is a rally then a base then an impulsive drop (RBD) and in
a bullish example we have a drop then a base then an impulsive rally (DBR) .
 CONTINUATION ZONE
These type of zones form, when price moves in one direction ,
consolidtaes and then continues moving in that same direction .

DEMAND ZONE SUPPLY ZONE

DROP

RALLY
BASE
BASE

DROP

RALLY
CONTINUATION ZONE

RALLY

BASE

DEMAND ZONE

RALLY
 CONTINUATION ZONE

DROP

BASE SUPPLY ZONE

DROP
 REVERSAL ZONES
Are formed when price reverses direction and sets of a new swing

SUPPLY ZONE DEMAND ZONE

BASE
DROP

RALLY

RALLY
DROP BASE
 REVERSAL ZONES

BASE

DROP
RALLY
 REVERSAL ZONES

RALLY
DROP

BASE
 THE SECRET | INDECISION CANDLE

I frequently draw my zones using an indecision candle as a reference point.

An indecision candle is one in which both buyers and sellers have equal power,
resulting in a candle with a small body and mostly wicks.

The body of the candle will normally close in the middle.

It looks something like this:

High of wick
open

close

Low of wick
INDECISION CANDLE

stop loss
entry
 LESSON 6 | - CORRECTLY LOCATING YOUR ZONES

HOW TO KNOW WHICH ARE THE BEST ZONES TO SELECT.

YOU MUST LEARN WHAT EQUILIBRIUM , DISCOUNT & PREMIUM PRICING IS.

Equilibrium is the midpoint of a price range or you can say the midpoint of a swing, it is the
level at which an asset is neither expensive or cheap. Therefore when price is a level of
equilibrium it wouldn't be of interest to execute an order of this level.

When executing we want to be buying in at a cheaper rate which is below the equilibrium,
this is what we would call our discount pricing , and we would want to be selling at a more
expensive area which is above the equilibrium that area is what we would call premium pricing.
 SWING HIGH PREMIUM
These levels can easily be identified using our
fibonacci tool .The levels we are interested in
are 70 | 80 percent.
EQUILIBRIUM 50%

To identify your discounted areas when looking

for long opportunities you must plot your fib
tool from the swing low to the swing high
and for your premium areas you must plot it
from the swing high to the swing low .
SWING LOW DISCOUNT
Which demand zone would you look to take an entry off ?

The zone that aligns with the 50% or 70% / 80%?

WHICH ZONE?
As you can see the one at the 50% did not hold , price
pulled back into a deeper level which was the 70%
discounted level , then it reversed at that level.
WHICH ZONE?
Price pulled back very nicely into this premium level of supply which
alligned nicely with our 70% and 80% FIB level and completely broke
through supply at the 50% level.
LESSON 7 | - THE MARKET CYCLE

Starting with contraction, the price cycle progresses to

expansion, retracement, and then the reversal.

CONTRACTION

REVERSAL EXPANSION

RETRACEMENT
 ELEMENTS TO THE MARKET CYCLE

1 - CONTRACTION - Equilibrium / Ranging in the market.

2 - EXPANSION - When price breaks out of the contraction zone.

3 - RETRACEMENT - Price retraces to fill in any imbalances / FVG's

4 - REVERSAL - When price absorbs liquidity and continues the trend

1) At this point, we see that price CONTRACTION ZONE

has expanded out of a small

range, breaking structure and
leaving a lot of imbalance that
needs to be filled.

2) Notice how the expansion

left us a very nice level of

supply.

EXPANSION
 3) Price has now retraced back after expanding out and taking out a low,
filling in the imbalances that it had left behind
.
4) The supply that was created prior to the expansion has also been
mitigated after the imbalances has been filled in.

HTF 8 HR
CONTRACTION ZONE
RETRACEMENT

EXPANSION
 5. Now, following the retracement, price has reversed, and the target is the liquidity
below or the previous supply and demand zone.

6. Here we identified some Equal Lows (double bottoms) which is liquidity. Remember what
the task was for the reversal cycle 'to seek out any LIQUIDITY', as you can see those EQLs were
mitigated.

CONTRACTION ZONE HTF 1 HR

RETRACEMENT

REVERSAL

EXPANSION
CONTRACTION
RETRACEMENT

EXPANSION REVERSAL
SMART-MONEY TRADER

www.smartmoneytrader.co