Miss CAPITALFX Inshe mame Gx hemos besten, the mas mr BEGINNERS INTRODUCTION TO INDUCEMENT 1. Market Structure @ Bullish Structure (Higher Highs and Higher Lows) @ Bearish Structure (Lower Lows and Lower HigHs) BOS - Break of Structure CHoCH - Change of Charachter 2. Smart Money Concepts...not working? A common method of trading the market structure above bby using smart money concepts is by using The diagram on the left represents simple market structure, Please take your time to follow along the diagram as you read below. 1 Price is bearish and creates lower lows and lower highs. Each time a lower low is created, we call this a "Break of Structure” or a "BOS" 2. Price creates a "Change of Character" or a “CHOCH". This means that a breakout has occurred of the previous downtrend, The high created asa result of the CHOCH is a higher high. 3 Price continues to create higher highs and higher lows. Each time a higher high is. created, we call tis a BOS. 4.Price creates another CHOCH. This means that a breakout has occurred of the previous uptrend. The low created as a result of the CHOCH is a lower low. 5,Price creates lower lows and lower highs, until another CHOCH occurs, and so on. demand zones and supply zones to buy or sell ‘A demand zone is an area of the market where price rose from, and a supply zone is an area of the market where price dropped from. Ifyou have traded this way before, you probably came to the conclusion that this method is a hit or miss, and it requires more than just a demand/supply zone to have a correct analysis, In order to trade the market structure above, we need (SUPPLY) \ / \ysuppuv to be able to understand the factors of confluence and how to use the factors of confluence cohesively, in order to apply them to the charts with confidence © enisscapicairxMiss CAPITALFX Inthe rame of Ga he most benef, the mos er BEGINNERS INTRODUCTION TO INDUCEMENT 3. Factors of Confluence Ifyou are already aware of the following, skip to the next page. a) Liquidity b) Imbalances Liquidity is the buildup of stop money. The stop money acts like a Imbalances represent areas of the markets market magnet, and price tends to reach into these areas and use where the orders placed there have not yet the money acquired to fuel the next move. been fulfilled Trendline Liquidity Bullish # Traders are buying at the support level and selling at the resistance level To find an imbalance of a * Their stop money resides above and bullish candlestick: below these trendlines. 1.Draw a line from the top of the first candle 2.Draw a line from the bottom of the third Equal Highs and Equal Lows candle * Similar to trendline liquidity, traders are buying at the equal lows, and selling at the equal highs. 3. The space in- between is called an “imbalance”, * Their stop money resides above and below the support and resistance. Bearish To find an imbalance of Wicks a bearish candlestick: © Traders are selling or buying, and stop 1.Draw a line from money already exists above or below the bottom of the long wicks. first candle. * Wicks can also form to be equal 2.Drawa line from highs/equal lows, or trendline liquidity, TT the top of the third when looked at on the lower time candle, frame. 3.The space in- between is called an “imbalance” c) Other Confluences 1.Momentum - How fast or slow price is moving, Having slow momentum towards a demand or supply zone indicates that price could be reaching that point for a correction (a tap into the zone and then a reversal) 2. Wyckoff - Wyckoff Accumulations and Distributions can be used when price taps into your zone. 3.Confirmation - Having a lower time frame CHoCH, BOS, inducement model, or Wyckoff in your zone can act as a confirmation for you to look for entries. 4. Inducement ‘When price makes @ CHOCH or a BOS, it usually leaves behind some type of demand zone or supply zone. Instead of trading these blindly, we can look for imbalances above or below these zones, and the creation of liquidity above or below these zones. This is called inducement. Price creates liquidity above/below a zone that is valid, and uses the liquidity grabbed to fuel the next move. TB owsscaprairxCAPITALFX Inthe name of Ga he most benef, the os er BEGINNERS INTRODUCTION TO INDUCEMENT 5. Trading Inducement Below is an example of how to use inducement in your trading. In the example there are 3 steps followed: “Analysis with Confluence 2.Confirmation 3.Risk Management GBPAUD - 10M AND SM TIME FRAME 1Analysis with Confluence: * The higher time frame trend is bearish. Price has recently broken below a maintained structure. This is called a BOS and not a CHOCH because the breakout was a continuation of the trend, not a change of the trend. The supply zone that was responsible for the break of structure is highlighted in pink * Below the supply zone resides an imbalance. This indicates that price reacted rapidly in response to the supply zone, leaving Unfulfiled orders in those areas. © As price continues downwards, it rallies up to create two highs (circled). This was the creation of liquidity in the form of equal highs. Retail traders, or even smart money traders that believe the mitigation of the supply zone has already occurred, are selling at this price of the market. © Note: The creation of liquidity can be seen as a smart money trap since both retail would be “selling the resistance" and smart money would be "selling the mitigation”. 2. Confirmation = * Alter price has tapped into the supply zone (circled), ma look for a confirmation. In the example above, the confirmation used was not a BOS or a CHaCH. Instead, = itwas the momentum and lower time frame inducement thet occurred, To the right is @ close-up of the entry. ‘+ After price tapped into the zone, it had high momentum to the downside and left behind a supply zone. This supply zone was assisted with an imbalance beneath it and also the creation of short-term liquidity. ©B onisscapitairxMiss CAPITALFX Inshe mame Gx he mos beset, te ms mer BEGINNERS INTRODUCTION TO INDUCEMEN 3. Risk Management. * After the position was entered with confirmation, alerts were set for trailing stop loss to break even and taking partials. After price reached around 50% in profit, the trade was running risk free. «Since price was in a downtrend, the take profit of this trade was targeted towards the "overall" lower low (circled), since itis expected that price continues lower to make another lower low on the higher time frame. 6. Conclusion Use these notes as a guide to understanding the basics of inducement concepts. In order to truly find your edge in the market, consistently back-test your strategy untl you feel cohfidentin your trading analysis, entries, risk management, and emotional control. While you are back-testing: log your trades and take note of what went right (or wrong in your analysis: This is crucial to developing yourself as a trader because italiows you to have an insight to what your weaknesses are in all aspects of trading (analysis, management, and emotional). As you understand your weaknesses better, you are more likely to resolve them. Lastly, kindly ask that you share this document with anyone who may be in need of it. Ifyou are interested in my content, follow my Instagram account @MissCapitalFX and my YouTube account MissCapitalFX as | will continue to post my free content on those platforms. {wish you the best on your trading journey and path to success in this life and the next! MissCapitalFX "And God is the best of providers” 62:11 Legal Disclosure: fm nota financial advisor. The information contained in this document i for educational purposes only, Before investing, s€ consulta licensed professional. Ary trades taken or trading concepis |show should not be considered ‘investment recommendations". hall not beheld lable for any losses you may incur for investing and trading inthe financial markets in attempt ta mirrar what | do. Please be coretl © OB enisscapitairx