Candle Range Theory (CRT) Trading Model — Transcript

Full transcript

1. 0:00Candle range theory is a powerful
2. 0:02trading model. However, some traders
3. 0:04make it complicated and confusing when
4. 0:06it comes to actual trading.
5. 0:09So, in this video, we'll simplify the
6. 0:11CRT trading model, explain the reasoning
7. 0:13behind it, show you how to spot it
8. 0:15correctly on the chart, and reveal the
9. 0:17best CRT trading strategy. So, guys, if
10. 0:20that's something you're interested in,
11. 0:22smash the like button to show your
12. 0:23support, and let's get started.
13. 0:26So what exactly is the candle range
14. 0:29theory?
15. 0:31Candle range theory or CRT is a trading
16. 0:34concept that focuses on the price range
17. 0:36high to low of a single candlestick on
18. 0:38the chart. The general idea behind this
19. 0:41model is that each candle represents a
20. 0:43trading range. If you break this candle
21. 0:46down into lower time frame candles,
22. 0:48you'll notice that the high and low of
23. 0:50the candle often act as turning points
24. 0:52on the lower time frame.
25. 0:54These points form the most important
26. 0:56liquidity levels. The highest and lowest
27. 0:59price traded during the previous trading
28. 1:01period. This period can be a day, a
29. 1:04week, or even a one minute candlestick.
30. 1:07So, let me show you how combining this
31. 1:08single candle structure with smart money
32. 1:10concepts can offer high probability
33. 1:13trading opportunities.
34. 1:15The typical concept of this strategy
35. 1:17usually involves three candles and each
36. 1:19candle has its own important role. The
37. 1:21first candle defines the range. The
38. 1:24second candle creates the sweep. The
39. 1:26third candle provides the entry. Let's
40. 1:29break this down step by step as a
41. 1:31concept. Starting with the first candle,
42. 1:34the candle range theory suggests that
43. 1:36every candle's high and low act as the
44. 1:38most important liquidity levels that the
45. 1:40following candles will use as targets.
46. 1:43The reason is that if you break this
47. 1:45candle down into lower time frame
48. 1:46candles, you'll notice that the high and
49. 1:49low of the candle often act as turning
50. 1:51points on the lower time frame.
51. 1:53For the daily candlestick, these turning
52. 1:55points are the highest and lowest traded
53. 1:57price during that day, which emphasizes
54. 2:00the importance of these prices. So
55. 2:02without analyzing the lower time frames,
56. 2:04we can identify where important
57. 2:06liquidity levels are just by observing a
58. 2:09single candlestick.
59. 2:11The upper liquidity level is called the
60. 2:12candle range high CR and the lower
61. 2:15liquidity level is called the candle
62. 2:17range low CRL.
63. 2:20We can use any candle that appears on a
64. 2:22chart and this applies to any time frame
65. 2:24as well. However, certain criteria help
66. 2:28us define what makes a candle ideal to
67. 2:30use, which we'll be covering later in
68. 2:32the video. Now, if the second candle
69. 2:35attacks the liquidity above the candle
70. 2:37range high and immediately reverses,
71. 2:39there's a high probability that the next
72. 2:41target will be the liquidity below the
73. 2:42candle range low.
74. 2:45In other words, this liquidity sweep
75. 2:47from the CR suggests that the market is
76. 2:50likely to shift direction and seek out
77. 2:52liquidity resting at the opposite end of
78. 2:53the range.
79. 2:56If instead we see the second candle
80. 2:58close above the CR, then the potential
81. 3:01candle range theory setup becomes
82. 3:02invalid.
83. 3:04This is because it's more likely that
84. 3:06the market will continue pushing upward
85. 3:08rather than targeting the low of the
86. 3:10first candle's range. However, if the
87. 3:13criteria are met and the second candle
88. 3:15fails to close above the candle range
89. 3:17high, we can then look to the third
90. 3:19candle for a potential short setup with
91. 3:21our target being the candle range low.
92. 3:25Now that was just the general idea and
93. 3:28reasoning behind candle range theory.
94. 3:30Let's move on to the actual rules and
95. 3:32break down how to trade it step by step
96. 3:34on the chart.
97. 3:36Now the first question is which candle
98. 3:39should you choose to apply the candle
99. 3:40range theory. If you've studied this
100. 3:43topic, you'll know that one of the most
101. 3:45popular approaches among traders is to
102. 3:48focus on the 1-hour candle just before
103. 3:50the New York session opens. Why? Because
104. 3:53the New York session is known for its
105. 3:55strong reversal movements, especially
106. 3:57right after the open. Typically, it
107. 4:00starts by sweeping the liquidity built
108. 4:02up during the London session and then
109. 4:04often reverses direction. This makes it
110. 4:07a great trading opportunity.
111. 4:10So, here's a smart approach. Apply the
112. 4:13CRT model to the 1-hour candle before
113. 4:15the New York open. If the price sweeps
114. 4:17liquidity beyond that candle's range and
115. 4:20then returns back inside it, you're
116. 4:21witnessing a setup that aligns both with
117. 4:23CRT principles and the natural behavior
118. 4:26of the New York session. This confluence
119. 4:28can provide high probability trade
120. 4:30setups, especially if you're timing your
121. 4:32entries correctly and managing risk with
122. 4:35precision. However, there is only one
123. 4:38problem with this approach.
124. 4:40We are trading against the trend.
125. 4:42Trading alongside the trend gives us
126. 4:44more confidence and better high
127. 4:46probability setups.
128. 4:48So, is there any way to use CRT while
129. 4:50following the market direction?
130. 4:53The answer is yes. We have developed a
131. 4:55trading setup that works with the trend
132. 4:57and still follows the CRT idea. Let me
133. 5:00show you how it works.
134. 5:02First, we want to see a market that is
135. 5:04clearly trending up or down. Then we
136. 5:06wait for a correction because that gives
137. 5:08us a better price to enter and a safe
138. 5:11place to put our stop loss. Let's say
139. 5:14the latest impulsive move started from
140. 5:16this point and went all the way up to
141. 5:17here. We expect the correction to happen
142. 5:20inside this range. From here, we start
143. 5:23using the CRT model, but only on bearish
144. 5:26candles. Since the market is in an
145. 5:27uptrend, we mark the high and low of
146. 5:30each bearish candle and then watch how
147. 5:32the next candle reacts. If the next
148. 5:34candle breaks below and closes under the
149. 5:36range, the setup is invalid and we don't
150. 5:39take a trade. Then we move to the next
151. 5:41bearish candle and do the same. This
152. 5:43continues until we see a candle that
153. 5:45sweeps below the low but then closes
154. 5:47back inside the range.
155. 5:49That's when we have a valid setup. We
156. 5:51now have both the range and the sweep.
157. 5:54Now the question is where do we enter?
158. 5:58One simple way is to open a buy position
159. 6:00right after the sweep candle closes. But
160. 6:03there's a better and more optimized way.
161. 6:05We can zoom into a lower time frame to
162. 6:07find a more accurate entry. For example,
163. 6:10if we are on the 1 hour chart, we can go
164. 6:12down to the 5 minute or 15minut chart.
165. 6:16On the lower time frame, we can see more
166. 6:17details. In this strategy, we use the
167. 6:20fair value gaps that appear after the
168. 6:22sweep as our entry zone. So, all we need
169. 6:25to do is wait for a fair value gap to
170. 6:27form and then place our buy order at
171. 6:29that level.
172. 6:31We put the stop loss below the gap. For
173. 6:34targets, we can make the trade risk-free
174. 6:36by closing half of our position when the
175. 6:39price reaches a one:1 risk-to-reward
176. 6:41level. That way, even if the price
177. 6:44reverses later and hits our stop-loss,
178. 6:46we don't lose any money. For the rest of
179. 6:49the trade, we let the profit run until
180. 6:51the price reaches a strong level ahead.
181. 6:54Since this is a trend continuation
182. 6:56setup, this combination gives us a
183. 6:58powerful and smart way to trade CRT, but
184. 7:01this time with the direction of the
185. 7:03market.
186. 7:06Now, let's have a recap of the bearish
187. 7:07scenario, but this time include the
188. 7:09discount and premium concepts. But
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206. 7:50This time, we're adding the concept of
207. 7:52the premium and discount. In this case,
208. 7:55the market is in a downtrend. We don't
209. 7:57want to jump in right away. Instead, we
210. 8:00wait for a correction to pull the price
211. 8:01back up into a premium zone, which gives
212. 8:04us a better entry and increases the
213. 8:05chance of a successful trade. Once price
214. 8:08enters this premium area, we apply the
215. 8:10CRT model. But this time, we only focus
216. 8:14on bullish candles within the
217. 8:15correction. Just like before, we mark
218. 8:18the high and low of each bullish candle
219. 8:20and wait to see how the next candle
220. 8:21behaves. If the next one breaks and
221. 8:24closes above the range, the setup is not
222. 8:26valid. But if it sweeps above and then
223. 8:28closes back inside the range, we have a
224. 8:31valid CRT signal in line with the
225. 8:33bearish trend. To improve the entry, we
226. 8:36zoom into a lower time frame and wait
227. 8:37for a fair value gap to form right after
228. 8:39the sweep.
229. 8:42Then we place our sell order at that gap
230. 8:44and set the stop loss above it.
231. 8:47Again, we can take partial profit at 1:1
232. 8:50and let the rest run toward the next
233. 8:52major support or liquidity zone.
234. 8:54By waiting for a pullback into a premium
235. 8:56area before applying the CRT, we combine
236. 8:59three powerful elements: trend
237. 9:01direction, manipulation, and entry from
238. 9:03a discount premium zone, giving us a
239. 9:06clean, smart, and high probability
240. 9:08setup.
241. 9:10Now that we've gone through how to apply
242. 9:11CRT properly, let's quickly look at some
243. 9:14common mistakes traders often make and
244. 9:16how you can avoid them.
245. 9:19One big mistake is trading CRT during a
246. 9:21choppy market where there's no clear
247. 9:23direction. CRT works best in trending
248. 9:26conditions where you can clearly
249. 9:27identify impulse and correction legs.
250. 9:29Without that, the sweeps can become
251. 9:31meaningless.
252. 9:34Another common issue is entering too
253. 9:35early. for example, taking a trade just
254. 9:38because the price reversed. But that's
255. 9:40not enough. You need to wait for a
256. 9:43proper liquidity sweep followed by a
257. 9:45close back inside the candle range. Wait
258. 9:47for the candlestick to complete. If you
259. 9:49enter before that, it might continue
260. 9:50pushing downwards again.
261. 9:54Traders also often forget about market
262. 9:56context. Even a perfectl looking CRT
263. 9:58setup can fail if it happens right into
264. 10:00a major news release or near a strong
265. 10:02higher time frame level like a daily
266. 10:04resistance or support.
267. 10:06Always check the bigger picture.
268. 10:08Avoiding these simple mistakes will help
269. 10:10you get much more reliable results with
270. 10:12CRT.
271. 10:14Now in the next part, let's look at some
272. 10:16real chart examples and see how we
273. 10:17approach different market scenarios.
274. 10:20So here we have Euro dollar on the 1
275. 10:22hour chart. We are going to take every
276. 10:24CRT trading pattern we spot during the
277. 10:26back testing. Let's begin. By breaking
278. 10:29above this swing high, the latest price
279. 10:32action shows that the bulls are in
280. 10:33control and we are in an uptrend.
281. 10:36So we are only interested in buying
282. 10:38opportunities. Therefore, we are going
283. 10:41to apply the CRT model to the bearish
284. 10:43candles.
285. 10:45Here we have our first pullback
286. 10:47candlestick. We mark the highest point
287. 10:49as candle range high and the lowest
288. 10:51point as candle range low. Now the only
289. 10:54thing we want to see is that the price
290. 10:55breaks below the CRL and returns back
291. 10:58inside the range. But if we get another
292. 11:01bearish candle completely breaking below
293. 11:03the CRL, then we will skip the trade and
294. 11:05keep looking for the next setup. So
295. 11:07let's see what happens when the next
296. 11:08candle forms.
297. 11:11Here we can see that the price
298. 11:12penetrated below the CRL with a wick and
299. 11:15closed back inside the range. So with
300. 11:18our range candle and sweep candle
301. 11:19formation, we will look for a long trade
302. 11:22and expect the price to complete the CRT
303. 11:24model with an upward move. But the
304. 11:27question is where do we enter the
305. 11:29market?
306. 11:31To execute the trade, let's zoom into
307. 11:33the 5-minut chart to set our entry.
308. 11:36Here on the 5-minut chart, we can
309. 11:38observe much more detail. This is our
310. 11:41latest impulse that swept the liquidity
311. 11:43and closed back inside the range. So
312. 11:47right now the only thing we need is to
313. 11:48find a bullish fair value gap area to
314. 11:51enter the trade. If you focus on the
315. 11:53latest move, you can see that it has
316. 11:55already created an FVG and is currently
317. 11:58being rejected by the price. So
318. 12:00everything is ready to open a buy
319. 12:02position here and set our stop loss in a
320. 12:04safe place. Now for the targets, as
321. 12:06mentioned before, we always close half
322. 12:08of the position when the price reaches
323. 12:10our one:1 target. And for the second
324. 12:12half, we let the profits run.
325. 12:17Even if we missed this trade, see how
326. 12:19many times price created FVGs along the
327. 12:21upside move and gave us trading
328. 12:23opportunities.
329. 12:25So here we had our first successful
330. 12:26trade. But let's continue on the 1 hour
331. 12:29chart to find more setups.
332. 12:32Here once again we have a bearish
333. 12:34candlestick formation where we can apply
334. 12:36the CRT model. We mark the high and low
335. 12:39and wait for the next candle to close.
336. 12:42Once again, sweep forms. Let's zoom into
337. 12:45the five-minute chart to enter the
338. 12:46trade.
339. 12:48On the five-minute chart, we can see
340. 12:50that the price has already formed
341. 12:52multiple fair value gaps. We will set a
342. 12:55buy limit at the lowest FG because it's
343. 12:57located in the discount zone, giving us
344. 13:00a better risk-to-reward ratio and a
345. 13:02safer stop-loss placement. We use the
346. 13:05same exit rules as in the previous
347. 13:06trade. Now, let's see what happens.
348. 13:11The price triggers our buy limit, hits
349. 13:13our first target, but then reverses
350. 13:15downwards and eventually hits our stop
351. 13:17loss. However, since we closed half of
352. 13:20the position at the 1:1 target, we ended
353. 13:22up with a break even trade. So, we
354. 13:25didn't lose any money and got out
355. 13:26safely.
356. 13:29Still, let's zoom out to the 1 hour
357. 13:31chart to find more entries.
358. 13:33Once more, we can see a big bearish
359. 13:35candlestick where we can apply the CRT
360. 13:38model.
361. 13:40The following candle sweeps the
362. 13:41liquidity below the candle range low.
363. 13:44And once again, it's time to zoom into
364. 13:45the lower time frame to execute the
365. 13:47trade.
366. 13:49With the sweep candle formation on the
367. 13:51higher time frame, the only thing we
368. 13:53want to see in this lower time frame is
369. 13:54a bullish FVG forming. So, we can set
370. 13:57our entry. So, let's move forward.
371. 14:01Here we have a small FVG. So, we set a
372. 14:03buy limit with a relatively larger stop
373. 14:05loss.
374. 14:08Following that, we have another FVG
375. 14:10formation. So, without canceling the
376. 14:13first trade, we set up another one.
377. 14:16Once again, we get a great winning
378. 14:18trade.
379. 14:20Of course, this was just back testing,
380. 14:22and fortunately, we found multiple
381. 14:24successful trades, but that's not always
382. 14:26the case in real trading. However, this
383. 14:29was just to show you how we approach the
384. 14:31market in different scenarios. So guys,
385. 14:33I hope you enjoyed this video. If you
386. 14:36did, please hit the like button to
387. 14:37support our work and also don't forget
388. 14:39to share your ideas in the comment
389. 14:40section. See you in the next video.