# Market Geometry Basic

For many beginner binary options traders, the idea of trading the markets with the concept of Market Geometry is an alien one. This is because Market Geometry is not defined by any specific rules like those found with many of the technical indicators used by traders in their market analysis. Although the concept of Market Geometry is somewhat similar to that of the Elliott Wave theory in using historical price movements to predict future price movements, they are in fact worlds apart. This is because Market Geometry is based on an estimation rather than fixed defined rules as in the case of the Elliot Wave theory. In addition, Elliot Waves move in terms of impulse and corrective waves whereas Market Geometry is used as corrective waves or when the market is ranging or consolidating.

### Ranges and Consolidation Areas

As mentioned earlier, Market Geometry can only be applied as corrective waves or when the market is either ranging or consolidating. Therefore you need to isolate a range on the price chart before all else. Once you have done that, look for swing movements occurring at a particular point on the price chart. This area will be the consolidation area. The beginning of any market geometry analysis will be the start of the market consolidation. In our example below of the EUR/USD price chart, this will be the area where the price of the EUR/USD hesitated after suffering a steep drop.

### Projecting the Amplitude Distance

From the start point, project a horizontal line across it. The line will form the basis of the entire market geometry analysis. Next, measure the amplitude (distance) of the highest or lowest point from the start point line. From the price chart, we can see that the lowest point has the widest distance from the start line and hence this is the distance that we will use for our market geometry analysis. Once we have the distance from the lowest point to the start line, we will project that distance to above the start line. By doing so, this will give us a rough idea what the opposite swing might look like. In short, it gives us an indication of the possible resistance level.

### Confirmation of the Start Point

From the price chart, we can see the price of the EUR/USD jumped to almost reaching the upper projected amplitude level (Resistance level) in the month of September. This serves as the confirmation of market geometry start point and measurement of the amplitude distance. With the basic foundation of our market geometry in place, we can now proceed to building up the inner levels that will help us establish our market entry and exit points. Take note that this can only be done after the confirmation of the market geometry start point. If the start point is not confirmed then the whole market geometry analysis will be susceptible to errors.

### The Market Geometry Setup

As you can see from the above diagram, our price chart is separated into 2 sections, pre-confirmation and post confirmation. In addition, it is also divided into 2 channels, an upper channel and a lower channel with the start point line being the pivot. Any trade that is made within the upper channel will reflect a bearish outlook of the market. The opposite is true for trades made within the lower channel.

### Fibonacci Retracement Ratios

To establish the respective entry and exit points of your trades, use the Fibonacci retracement tool to establish in both channels the levels for the 38.2%, 50% and 61.8% ratios. Depending on where the price istrading at, the Fibonacci levels will represent your ideal short and long trades with the start point line as your take profit level.

Given you have enough trading experiences already, the market geometry approach is actually a very simple and clean approach for finding profitable trading opportunities. As long as the range holds out, trading within the upper and lower channels will yield profits through the entire time the asset is ranging. While the rate of returns for each trade might not be earth shattering, your trades will still net you a tidy sum at the end of the day since we are trading over an extended period so long as the price doesn’t breach the top of the upper channel drop through the bottom of the lower channel. Once the price has breached these levels, then the market geometry setup is completed.

Unlike most trading strategies that are based on a “Hit and Run” premise, the Market geometry trading strategy is more of a long term trading strategy. There will be misses but life goes on since losses are part of trading. What we want is at the end of the day for our trading account to grow and to do this, we must remain profitable for the long run and one systematic way of doing this is by trading with a Market geometry setup. This simple trading strategy despite having no clear and fast rules can actually be more effective than most of the fancy and complicated trading strategies that we have come across.

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