The 4 States of Price

Take away every indicator and price only does four things, in a cycle that keeps repeating.

• Consolidation · price rests inside a range
• Expansion · price leaves the range with strength
• Retracement · a temporary pullback before continuing
• Reversal · a change of direction after taking liquidity outside the range

It leaves the range first

Price has to expand out of consolidation before it can retrace or reverse. While it is still inside the range, there is nothing to retrace yet.

Expansion → Retracement or Reversal → Expansion

A retracement is not a reversal

The common mistake is to see a pullback and call it a reversal. A retracement pauses and continues. A reversal changes hands, usually after price has swept liquidity outside the range. Telling them apart keeps you from fighting the trend.

In the course I show how to read each state from the candles, and how to pair it with PD Arrays to find where price is likely to pull back to.