Lesson 1 : 3 Candle Formation

A 3 Candle Formation, also known as Swing Highs and Swing Lows, is a very important piece of Price
Action that will be crucial for you to train your eyes to see as they will tie into future topics. Their purpose is
not necessary for you to understand right now, but being able to identify them will be vital. So let’s get into
the key components of what creates a valid 3 Candle Formation.

**Key Components of a 3CF**

So as the name suggests, a 3 Candle Formation requires 3 Candles. Two key things to remember is that
Candle #2 will always be the Highest/Lowest Candle out of the 3, and the colours of the candles do not
matter. All that matters is the formation.

**Swing High:** For a Swing High you want to see Candle #2 as the Highest Candle of the 3.

**Swing Low:** For a Swing Low you want to see Candle #2 as the Lowest Candle of the 3.

It’s as simple as that. Let’s take a look at a diagram of what that looks like so you understand what I am
describing. As you can see in the diagram, Candle #2 is the Highest Candle of the 3 for a Swing High and the
Lowest Candle of the 3 for a Swing Low. Now that you have a basic understanding of what they look like,
let’s take a look at some real chart examples.
Lesson 2 : Market Structure

We are going to go through the very basics of Market Structure. It is very important that in this lesson, you
understand that this used on its own or ANY topic used on its own for that matter, will not work
consistently. We are going to blend everything together so all you need to understand right now is the basic
concept of Market Structure and you will see as you progress with this course, how it ties into other topics.
We are now going to show you how the 3 Candle Formation which you previously learned, ties into Market
Structure.

In Bullish Market Structure we will see a series of HH’s and HL’s. The HL’s are protected and then price will
drive higher to create a new HH. When Price creates a new HH, that is a BOS to the upside. If price breaks a
HL, that is a BOS to the downside, and in the right context could shift the Trend from Bullish to Bearish.
In Bearish Market Structure we will see a series of LL’s and LH’s. The LH’s are protected and then price will
drive lower to create a new LL. When price creates a new LL, that is a BOS to the downside. If price breaks a
LH, that is a BOS to the upside, and in the right context could shift the Trend from Bearish to Bullish.

NOTE: Until the HH has been made, we cannot say we have a confirmed HL yet and until the LL has been
made, we cannot say we have a confirmed LH yet. This is important.

Bullish Market Structure Example

Bearish Market Structure Example

Tying in the 3CF

Now that you understand the 3 Candle Formation, it’s time to learn one of the important ways we use it,
and one of the things we use it for is Market Structure. You may recall from the lesson on 3 Candle
Formations that they are also known as Swing High’s and Swing Low’s. That is because once we blend it
with Market Structure, they will now become what we call our “Swing Points”. These Swing Points are the
key areas of Price Action that define the Market Structure. Let’s take a look at the previous examples of
Bullish & Bearish Market Structure chart examples, but now identify the 3 Candle Formations to find our
Swing Points.

Bullish Market Structure Example

Bearish Market Structure Example

As you can see, now the 3 Candle Formation has a purpose, which is to identify our Market Structure Swing
Points. You might also notice that when price creates a BOS, it’s breaking above/below the 3 Candle
Formations and not protecting them. They are the Swing Points. So for a valid BOS, price needs to break a 3
Candle Formation.
Another question you may ask is if we need to see a BOS with a Wick or a Body. For a High Probability
break, we prefer to see a body close above a Swing High or a body close below a Swing Low. It can still be a
genuine break with a wick but it’s just less convincing and less trustworthy compared to a body break.

Lesson 3 : Impulse and Retracement

It is important to always know in what phase the price is at a certain moment.

For Example:

If the market is in an uptrend on HTF and you just created an HH. The price has most likely established a
new bullish TR, so in theory, the price has finished its impulsive phase and now
start your pullback phase . On Daily and Weekly you will be bullish but you can trade the retracement on
shorter timeframes like 1h once the price starts to show a change in the 1h structure from bullish to bearish.
You will be trading a daily pullback, but typically those pullbacks are several hundred pips, so it is often
worth taking the risk and trading Counter-Trend (CT).

In the example below you can see how our Swing structure is the black line and the blue one is the intraday
price action. It shows how what in Daily is a retracement, in a lower TF (1h) it can be intraday shorts with
TP areas in discount of our daily TR. Once in POIs of the daily TR, we will wait for the lower TF to go
Pro-trend. Swing analysis with intraday entries gives a large Risk-Reward (RR). This applies to all TFs. 4h
structure and entry with a 15m structure or less.
Example on the Daily TF Swing Chart trading a pullback

All the blue dots are daily structure points. We see price making a BOS and creating a new HH. We know by
now that once the price makes a BOS, a pullback should be anticipated. As shown in the image the 1hr made
BOS, which lets us know that price is going to make a pullback. By knowing a pullback is happening we can
take CT ( counter trades ) from the 4 & 1h structure until we reach the daily POI. Once the price reaches
CT TP we will look for PT ( pro trend ) long opportunities on the LTF.
Lesson 4 : Timeframes & Structure

We all know the saying "The market is Fractal" because what is shown in a Daily chart, we can also see in TF
of Minutes or even in Seconds. Large Timeframes like Daily, Weekly, or Monthly will give you your
long-term Bias and 4h or 1h price action will give you your short-term Bias and are the ones you will
probably see most often since those TFs will help you find the POIs you will be looking to enter trades with
for a intraday or Swing TP.

Time knows no Price & Price knows no Time

The reason we use LTFs in conjunction with HTFs is because the same concepts work across all TFs. That is
because the price does not know time and time does not know price. Order Flow only understands Order
Flow. What this means is that the same behavior that you see in Daily TF, you will also see in Minutes and
even in Seconds TF.
We have all heard that "small timeframes are just Noise". Yes, it's just “Noise”, if you don't know how Order
Flow and Market Structure work.

HTF vs. LTF

Something important that we must learn to correctly identify is our largest structure, because for example; If
we see that we have a bullish Daily and Weekly structure and the price is creating an HH, we expect a
pullback at some point.
When the pullback begins, in TF of 4h or 1h it will seem that it is a trend change and many get confused
there it is key to interpret the TR and the structure so as not to get confused. The 4h-1h pullback will only
be a correction to Discount prices, to reach POIs and mitigate them and then continue with its HTF trend.
That is why multi-timeframe analysis is crucial. Combining our understanding of Structure and Timeframes
will help us to have a solid foundation to anticipate what is most likely to happen in the market.

3CF

A 3 Candle Formation is a SH, WL, SL, WH (QM) when broken down into a lower timeframe. This is why
the 3 Candle Formations work as Swing Points and Structure. A Swing Low is a Bullish QM when viewed
on a Lower Timeframe and a Swing High is a Bearish QM when viewed on a Lower timeframe. This also
works the opposite way, if you see a QM then it means it’s a 3 Candle Formation on a Higher timeframe.
Lesson 5: Strong Points & Weak Points

Strong Points:

They are strong structural points that, when formed, create an impulsive movement that results in the
breaking of Weak Points (previous Highs or previous Lows) and that, once they create new Highs or Lows,
create a new Trading Range (TR). Once we can identify our TR we will have a solid base on which we can
operate.

Weak Points:

These structural points are those that will serve as TP once we enter into a Strong Point trade. They are
called Weak Points as they are broken by Strong Points.

HTF Narrative:

By understanding our HTF narrative, along with our Strong Points and knowing what phase the market is
in, we can get a solid idea of what is happening. Always looking at the structure of the larger Timeframes
will prevent you from getting lost in the price action of small timeframes. When you feel confused about
small TFs, always look at the bigger picture on HTF.

Strong Highs & Weak Lows

Strong Highs are those Lower Highs (LH) that form in a bearish structure and when formed create new
Lower Lows (LL). In those areas of Strong Highs, we will find most of the time our points of interest for
shorts and our TP will be the IRL and the Weak Lows. ( For every strong High there is a weak Low ).

To be considered a Strong High it must do the following:

Must cause manipulation and break structure.

Strong Lows & Weak Highs

They are those Higher Lows (HL) that are formed in a bullish structure and that when formed break Weak
Highs and create new Higher Highs (HH). In those areas of Strong Lows, it is where we will find most of the
time our points of interest for longs and our TP will be the IRL and the Weak Highs. ( For every strong
LOW there is a weak High).
To be considered a Strong Low it must do the following:

Must cause manipulation and break structure.

Lesson 6: Break of Structure

The Breaking of Structure (BOS) should always be considered as the breaking of a Weak High or a Weak
Low, and this applies to all TFs.

When we are identifying or mapping the structure, it is important to identify a true BOS since it will depend
on that if at the moment we are analyzing the market we will be seeing the correct price direction or not.

To take into account a BOS as a true BOS and not a False BOS, we must always wait for it to be a break of a
Weak High or Weak Low and preferably a break with a candle body. Sometimes we will be able to take into
account a BOS with a wick, depending on the reaction and the speed with which the price reacts after seeing
the supposed BOS at that moment. Timeframes will often depend on this because what in 4 hours is a wick,
in 1 hour will be candle bodies. This applies to the TF of minutes as well.

Valid Bullish BOS

Valid Bearish BOS