Here we’ll look at what horizon is based on. The main Idea is finding supply and demand imbalance points.
What is an Imbalance?
Well, let’s look at how the market works - you have different players like us, small fry, known as retail traders, and big players like hedge funds, investment funds, pension funds and so on. Because of the nature of their work, these big players control large capital, so they enter the market with big capital, and when you do that, you make an imbalance whether you want to or not. For identifying these places, horizon used levels and ranges.
So, first thing we do is find levels and ranges.
That would be places where the trend has changed, and where the price impulsed up or down, and a range is where the top and bottom borders are in themselves imbalances.
So that’s Identifying done, what next?
Next is understanding who is controlling the situation at the moment. To understand that, we need to look how the price reacts to these levels on a smaller timeframe.
As an example, here the price reaches our top border, forms a local range, and then impulses down, which means that’s the point where sellers take control.
Why? A range show a balance of supply and demand, whilst an impulse – an imbalance.
Moving on, the price keeps falling, until it hits the support level and creates another range, then an impulse up and the test is our entry point.
So again, after we find the imbalances, we find out who’s controlling the current situation, and to enter the market with a shorter stop, so better r/r ratio, we use horizon’s patterns.
There are four patterns in total, and in this example, we’ll explore a universal pattern, universal because you can use it any timeframes and markets.
Anyway, after we’ve found the dominating force, we jump to a smaller timeframe, and using the pattern enter with the stronger force
Note the risk/reward, as you may remember that our take profit is going to be the closest level. Take a look at this ratio
All the way up to 1 to 15, which is rather great.
To sum up, horizon is based on
1) finding big players, aka imbalances (levels and ranges)
2) Find out who control the direction (use a smaller TF and see how the price reacts to our levels and ranges
3) Enter using a pattern with a short stop, so high r/r ration
That’s all, very simple stuff.
Thanks for reading and have a good day!