Strength Switching: Universal Frameworks — Transcript
Full transcript
- 0:02[music]
- 0:05>> Hello everyone and welcome back to my
- 0:06YouTube channel. Today we are going to
- 0:08be touching on strength switching and
- 0:10applying a universal framework to
- 0:12mechanically observe this concept and
- 0:15pair it with the concepts you've learned
- 0:17previously on my channel.
- 0:19We're going to be going through the core
- 0:21logic of strength switching and then
- 0:23applying it to both reversal and
- 0:25continuation logic.
- 0:27This lecture should be paired with my
- 0:29prior two lectures on YouTube in order
- 0:31for you to better understand how markets
- 0:33interact with one another in a triad and
- 0:36how true reversals and high probability
- 0:38continuations are framed using the
- 0:41confluence of strength switching.
- 0:44So, let's get into the core logic of
- 0:46strength switching. And to do this, you
- 0:48need to understand two ideas. The first
- 0:51is going to be liquidity dispersal
- 0:53theory and the second is going to be
- 0:55asset synchronization.
- 0:58Liquidity dispersal theory is simply a
- 1:00way of saying that markets do not evenly
- 1:03inject liquidity into all assets in a
- 1:06triad. That results in relative strength
- 1:09and relative weakness as you observe
- 1:11nearly every single day across all
- 1:14correlated markets. So, on the screen
- 1:16here I've shown you a generic assessment
- 1:18of the index futures triad where you see
- 1:21there is a leading asset which trades
- 1:23away from a point of interest and
- 1:25expands towards the other side of the
- 1:26range. We have a middle asset, right?
- 1:29Which is obviously weaker. And then we
- 1:31have a lagging asset which is the
- 1:33weakest and the furthest away from that
- 1:35relevant level. This relative strength
- 1:39is the result of market makers not
- 1:41injecting equal amounts of liquidity
- 1:44into these highly correlated assets.
- 1:47We can go one step further in fact and
- 1:49say that the uneven dispersal of
- 1:51liquidity is what results in SMT
- 1:54formations in the market.
- 1:57The signatures therefore left in price
- 2:01due to this uneven dispersal of
- 2:03liquidity is the basis of what we define
- 2:06as strength switching, and it allows us
- 2:08to determine what is happening at these
- 2:12extreme levels.
- 2:13That is to say, we can understand better
- 2:16if a true reversal or continuation is
- 2:19going to form at a key level. Is price
- 2:22going to break this SMT or is price
- 2:25going to form an SMT and reverse? We use
- 2:29strength switching at key levels with
- 2:32three markets in mind in a triad to
- 2:35better understand if we are going to get
- 2:37a true reversal, which is why it is such
- 2:39a powerful and important concept for our
- 2:42study.
- 2:44So, let's take a look at what these
- 2:45strength switch cracks in correlation
- 2:48really are. We're going to be using
- 2:50crack in correlation to mechanically
- 2:52define this, you know, vague concept of
- 2:56strength between markets.
- 2:58The first is a strength switch SMT, and
- 3:01I'm going to walk you through the
- 3:02liquidity dispersal logic.
- 3:05If we consider a weaker asset in a
- 3:07market, that is to say, an asset which
- 3:09takes out a low or, you know, fails to
- 3:12take out a high, that weaker asset in
- 3:14here, if it gives us a strength switch
- 3:17SMT between consecutive candles at the
- 3:20point of reversal before expanding away,
- 3:24this is a sign that price is reversing
- 3:27off the low and liquidity is being
- 3:29injected into the market. Why does that
- 3:32logically make sense? We are order
- 3:34pairing the extreme of this range. These
- 3:37sell stops form liquidity that is
- 3:40injected into the market. This strength
- 3:42switch switch SMT you're observing is a
- 3:45function of the order pairing of that
- 3:47low, and you're seeing momentary
- 3:49strength from those sell stops being
- 3:51absorbed and that liquidity being
- 3:53injected into the market.
- 3:55This logic is equivalently true for the
- 3:58once stronger asset. The asset which
- 4:01fails to pair the range extreme has less
- 4:04liquidity injected into it. Therefore,
- 4:07at the point of reversal when it forms
- 4:09this consecutive candle SMT, this
- 4:12strength switch lower indicates that
- 4:14this asset, right at the point of
- 4:16reversal, is being paired.
- 4:19Right? With the strength of this asset
- 4:21to trade higher. So, this strength
- 4:23switch SMT that you're observing is one
- 4:26mechanical filter to define a strength
- 4:30switch at a key level, a old low or old
- 4:33high, or in the case of continuation, a
- 4:35gap.
- 4:37What's a two-stage variant of this?
- 4:39We're going to talk about PSPs in just a
- 4:40minute, but the second stage variant of
- 4:43a strength switch PS strength switch SMT
- 4:46would be a PSP forming after that
- 4:49strength switch SMT. So, you see in this
- 4:51case, there is order pairing of the
- 4:52range extreme. It forms a reversal
- 4:55candle here, right? Or it or sorry, it
- 4:57forms an expansion candle here. And
- 4:58then, as liquidity is injected into this
- 5:00market, we form both that strength
- 5:02switch SMT and that PSP. Right? We can
- 5:05see that in both markets. And again,
- 5:07this could be a bullish PSP or bearish
- 5:09PSP. Um what's important to recognize
- 5:11that there is a two-stage component to
- 5:13this crack in correlation.
- 5:15Right? So, when we look at that PSP,
- 5:17we're going to see something very
- 5:18similar. We see price trade into a low
- 5:21on the weaker asset and close as a
- 5:24bullish candle. This represents and
- 5:26shows us on the candlestick chart the
- 5:29logic that liquidity is being paired,
- 5:32and the strength switching via the
- 5:34closure of this swing point is bullish.
- 5:38Right? On the on this side, we see that
- 5:40the asset that was once stronger fails
- 5:42to pair the low, forms a failure swing,
- 5:45and closes as a bearish candle, right?
- 5:47At the point of reversal. And this in
- 5:49here, right, is showing us that less
- 5:51liquidity is being injected at the point
- 5:53of reversal because it has not order
- 5:54paired the low. So, this asset here is
- 5:57strength switching.
- 5:59Again, just like we had in the case of a
- 6:00strength switch SMT, there is also a
- 6:03two-stage strength switch PSP. That is
- 6:06when we form this PSP, and then we get
- 6:08that consecutive candle SMT as well,
- 6:11right? That is forming a strength switch
- 6:13at the lows. In this case, you can see
- 6:16the weaker asset closes as a bearish
- 6:18candle, right? So, that is not strength
- 6:21switching yet. It's just a PSP. Then,
- 6:24once we get that strength switch SMT, it
- 6:27confirms that we are trading away from
- 6:29this low, and we're trading away from
- 6:31this failure swing, right? Via a
- 6:34strength switch SMT, okay? So, these are
- 6:37important cracks of correlation that
- 6:38we're going to use in our analysis
- 6:40moving forward.
- 6:43Let's now get into asset synchronization
- 6:46and how this can confirm, or how
- 6:48strength switching can confirm asset
- 6:50synchronization. So, I want to teach you
- 6:52this concept as a function of a
- 6:55universal model, okay? That means there
- 6:57is a universal application to this idea
- 7:00and where you should consider strength
- 7:02switching as a filter.
- 7:04Let's take a look at two generic market
- 7:07maker models. We have a leading asset
- 7:09and a lagging asset. Consider the case
- 7:12where the leading asset trades into a
- 7:15range extreme, okay? So, this is where
- 7:18you want to consider liquidity dispersal
- 7:20theory and strength switching.
- 7:22There is two things that the lagging
- 7:24asset can now do. It can one, catch up
- 7:27through asset synchronization and
- 7:29strength switching, and break that SMT,
- 7:32or it can reverse via strength switching
- 7:35of the leading asset into a bearish
- 7:37order flow. So, at this point in time,
- 7:40we see markets synchronize either to A,
- 7:43break the SMT as you see in this red
- 7:46catch-up leg, or B, hold the SMT and
- 7:50reverse.
- 7:51These concepts, or these confluences I'm
- 7:54going to teach you today, are going to
- 7:55validate whether the reversal is going
- 7:58to play out or the continuation or
- 8:01catch-up leg is going to play out. And
- 8:03what we will see is that there is an
- 8:05intrinsic logic to using strength
- 8:07switching for asset synchronization.
- 8:10If we are going to see the lagging asset
- 8:14break the SMT high and catch up, we are
- 8:17going to see some form of strength
- 8:18switching or liquidity dispersal into
- 8:21the lagging asset so that it can break
- 8:23the SMT, right? Pair that same level. If
- 8:26we are going to form a SMT and reverse,
- 8:30we are going to see the leading asset
- 8:32reverse here and not strength switch
- 8:35with this lagging asset. That way we can
- 8:38both understand where reversals are
- 8:40likely to hold and where continuations
- 8:43are likely to occur. This concept is a
- 8:46perfect confluence for either scenario
- 8:49for any strength scenarios of a triad.
- 8:52Here you can see I have some common
- 8:54strength scenarios of the index futures
- 8:56triad.
- 8:58So, with that being said, let's get into
- 9:01reversal frameworks. How can we better
- 9:04understand range extremes and true
- 9:06reversals like you learned about in my
- 9:08first lecture on YouTube in the master
- 9:09class using strength switching?
- 9:12The first is going to be an advanced
- 9:15premium and discount sequence paired
- 9:16with a strength switch. So, in the case
- 9:19of one asset, right, reversing off a
- 9:21high like in a market maker model where
- 9:23we trade to an external high and then
- 9:24expand lower, we may see this sequence
- 9:28where during the reaccumulation phase of
- 9:31this leading asset, we see a strength
- 9:34switch SMT as this other asset in here
- 9:38breaks the high and then reverses. So,
- 9:41the asset that was once weaker strength
- 9:43switches to break this SMT and then
- 9:46reverses. Whereas the asset which was
- 9:48once stronger is now in continuation. It
- 9:51forms this SMT, meaning it's weaker, and
- 9:55then it continues towards the draw.
- 9:57In this example, I've also shown you
- 10:00two-stage variants where you can see,
- 10:02you know, a local strength switch as
- 10:04well paired with that higher time frame
- 10:07model. And we're going to go through
- 10:08several examples of this including an
- 10:11example from today's price action which
- 10:12paints a very compelling example of how
- 10:15we see these reversals and continuations
- 10:18form, right? This EQ condition hold with
- 10:22strength switch.
- 10:24Okay, this will be the bullish case. We
- 10:26see the weaker asset reverse at the
- 10:28range low, right? Giving a V-shape. Then
- 10:31we see the lagging ass or the asset that
- 10:34was once stronger break the SMT and then
- 10:37reverse as well while this asset's in
- 10:39continuation. So, we're using that
- 10:42equilibrium
- 10:43paired with that strength switch SMT.
- 10:46And then you're also seeing again the
- 10:48local two-stage variant that can occur,
- 10:50right? This could be with a PSP or
- 10:51another SMT where we see that reversal
- 10:54happen at the lows and that continuation
- 10:56happen on this leading asset, right?
- 10:58Which already reversed.
- 11:01Okay, here's another example where we
- 11:03don't see that expansion away from the
- 11:06low on the previously weaker asset. We
- 11:09see that the asset that was stronger,
- 11:11right? Is lingering near the high. We
- 11:14get that SMT break which I talked about
- 11:16with my advanced premium discount
- 11:18sequence, right? When we have assets
- 11:20that are extremely close to that high,
- 11:22we're likely to see them break. And then
- 11:24when they do break, we see that strength
- 11:27switch SMT, right? We see the asset that
- 11:29was previously stronger become
- 11:31momentarily weaker, and then expand,
- 11:34right? Towards the draw.
- 11:36And again, I'm going to talk about when
- 11:38we demand strength switch in a little
- 11:40bit, but we're going to be using asset
- 11:42synchronization or the idea of relevant
- 11:45swings to really demand strength
- 11:47switching at times. In this case,
- 11:49because we have an open draw on all
- 11:51assets, we don't need to see this
- 11:53necessarily, but it is preferred or more
- 11:56probable.
- 11:58Here's an example of bullish case,
- 12:00right? We see the weaker asset
- 12:02momentarily strength switch as the
- 12:05stronger asset breaks the SMT and then
- 12:09reverses, okay? So, this just shows us
- 12:11that we've already order paired the low,
- 12:13and now what we're doing in here is we
- 12:15are continuing from that reversal, and
- 12:18this asset's breaking the SMT and then
- 12:20reversing itself.
- 12:22Let's look at PSP variants, okay? So,
- 12:25what happens when the leading asset
- 12:27trades into a high and then forms that
- 12:31bearish close? Well, that's a strength
- 12:33switch PSP, and that allows us to trade
- 12:37away from failure swings. So, in order
- 12:40to trade away from a failure swing, I'll
- 12:43need to see this strength switch idea,
- 12:46because that shows me the leading asset
- 12:48is reversing off of the range high and
- 12:50wants to expand toward the other side of
- 12:52the range. So, this premium, right? SMT
- 12:56can hold because this asset, which was
- 12:59once stronger, forms that bearish close.
- 13:02This is the only way I will trade away
- 13:04from failure swings is if I see a
- 13:06strength switch signature. Again, I've
- 13:09shown you a two-stage variant as well,
- 13:11where we get that consecutive candle
- 13:13SMT,
- 13:14right? We get that strength switch SMT
- 13:16as well, paired with that PSP.
- 13:19Here's an example of bullish case,
- 13:21right? We see that weaker asset in here.
- 13:25It forms this bearish close, so I don't
- 13:27trust that, right? So, when I see this
- 13:29two-stage form, right? This two-stage
- 13:32form, on this PSP, that is a strength
- 13:35switch SMT that I can validate the
- 13:38failure swing being traded away from.
- 13:40So, in the case of a failure swing,
- 13:43where we have a deep retracement into
- 13:46the lower high, I will need to see a
- 13:49strength switch of some sort, whether it
- 13:52is via PSP or whether it is via SMT or
- 13:56both to trade away from that. That is
- 13:59one way. The other way I can trade away
- 14:02from this is via a continuation
- 14:05sequence, which I will talk about in the
- 14:06next chapter. That essentially is
- 14:09waiting and demanding a gap to be
- 14:12printed away from the failure swing low
- 14:14here
- 14:15or the failure swing high, and then
- 14:18trading the universal sequence, right?
- 14:20Or the continuation sequence that forms
- 14:23thereafter, as you learned in my last
- 14:25lecture. And we will touch on that in a
- 14:27few minutes here. But this is the core
- 14:29idea of failure swing reversals and how
- 14:32we can use strength switching to
- 14:34validate failure swings.
- 14:37There's also one more way we can use
- 14:38strength switching at reversals, and
- 14:40that is for decoupled markets. So, if
- 14:42you've seen my first uh lecture, which
- 14:45is going to be linked in the bio, I'll
- 14:46link both the first and second lecture,
- 14:48for re-synching decoupled markets via a
- 14:51strength switch. That is when we see,
- 14:54right? The leading asset
- 14:56or the middle asset and the lagging
- 14:58asset have some sort of divergence at a
- 15:00key level, where this asset expands into
- 15:03a low and these assets are expanding
- 15:05into a high, we will see markets
- 15:08re-synchronize
- 15:09through these strength switch crack in
- 15:11correlations. Now, I'm going to be
- 15:13building out a bit more logic on this in
- 15:16a further lecture, but realistically,
- 15:18what you have to understand about this
- 15:20concept or this sequence is that we're
- 15:23going to see the asset which expanded
- 15:25with foreseen distribution form some
- 15:27sort of strength switch in this case
- 15:30with the leading assets, in this case,
- 15:33the ones that are reversing at the high,
- 15:35or the lagging assets, and you're going
- 15:36to see these same sequences. And again,
- 15:38if this is kind of unfamiliar, go back
- 15:41into my lecture part one of the
- 15:43reversals in the master class, and you
- 15:45will see some more logic on asset
- 15:47synchronization, right, for decoupled
- 15:49moves. And I'll be building on this in a
- 15:51future lecture as well.
- 15:53Okay? So, this is how we can confirm
- 15:56that these markets are going to
- 15:57resynchronize by seeing these strength
- 16:00switching signatures between the leading
- 16:03and the lagging and middle assets,
- 16:05right? So, let's take a look at some
- 16:07lower time frame signatures for strength
- 16:10switching as well. I've already told you
- 16:13about these higher time frame cracks in
- 16:15correlation, these candle closes.
- 16:17However, on the lower time frame, we can
- 16:19also see things like faster sys D's. So,
- 16:23look at the lagging asset here. It has
- 16:25this draw on liquidity, and it's
- 16:27reversing with some sort of strength
- 16:30switching, right, at the low? We might
- 16:32see a faster sys D to break that high,
- 16:35right, while the leading asset more or
- 16:38less consolidates, right? So, at the
- 16:41low, you're seeing that this leading
- 16:43asset here has already taken out a high.
- 16:46We're seeing the lagging asset strength
- 16:48switch and then start to trade, right,
- 16:50into that high with faster expansion,
- 16:54right? Quicker V-shapes, etc. Okay? And
- 16:57you're seeing that strength switching
- 16:58concept in here.
- 17:00Now, what else can we use? Gap size,
- 17:02right? So, if we have a strength switch
- 17:04on the higher time frame, we might also
- 17:06see a lagging asset draw into that same
- 17:10high through asset synchronization via
- 17:12larger fair value gaps that are created
- 17:14at that reversal, right? Smaller fair
- 17:17value gaps on the leading asset, which
- 17:20already manipulated the high. Again,
- 17:22these lower time frame signatures can be
- 17:24paired with our higher time frame cracks
- 17:26in correlation that we've talked about.
- 17:29Okay, let's talk about continuation
- 17:32sequences and really the framework by
- 17:34which assets synchronize through
- 17:37strength switching to break SMTs. Okay?
- 17:41So, here's some rule of thumbs before we
- 17:43get into this.
- 17:44If both the leading and the lagging
- 17:46asset have an open draw, a strength
- 17:49switch is not mechanically required.
- 17:51Mechanically meaning we need to see it
- 17:53before we can trade.
- 17:55In the case that the leading asset has
- 17:57no relevant swings to continue trading
- 18:00towards, we are going to prefer a
- 18:03strength switch. So, for example, if we
- 18:05are trading, right, to towards a higher
- 18:09low and there's no relevant levels to
- 18:11the left, right? So, there's no higher
- 18:14levels in that daily range, we're going
- 18:16to prefer a strength switch because
- 18:18there's nothing for the leading asset to
- 18:19draw into in continuation.
- 18:22Now, the third case is when we trade
- 18:25away from a failure swing SMT, which is
- 18:28the sequences I taught you here.
- 18:31Okay? Failure swings.
- 18:33At the year of the range high or the
- 18:35range low. When we have a failure swing
- 18:38SMT, guys, that is when I require a
- 18:41strength switch. These types of SMTs
- 18:44that form deep in the range are low
- 18:47probability. A strength switch makes
- 18:50that reversal or that SMT higher
- 18:53probability. What makes it even highest
- 18:55probability is waiting then for
- 18:58displacement away from a failure swing.
- 19:00So, I have an example here where you see
- 19:02price expand away from this failure
- 19:05swing. If it were to create a gap, which
- 19:08we will see in some examples later, we
- 19:10can then trade a universal sequence away
- 19:13from that gap as the highest probability
- 19:16failure swing sequence.
- 19:19So, let's take a look at one stage
- 19:21continuations. These are going to be
- 19:24strength switch SMT fills from gaps. So,
- 19:27in the case we have a true reversal,
- 19:28right? Look up here. We have this asset
- 19:30which was once stronger forming that
- 19:33PSP, right? So, that that indicates that
- 19:36this failure swing is going to hold.
- 19:38Now, in order to validate this as
- 19:40opposed to trading this leg in here, we
- 19:43wait for expansion, right? Away from
- 19:47this high,
- 19:49a gap to be created, and then we trade
- 19:51the universal sequence from a gap using
- 19:54that strength switch SMT fill, right?
- 19:58So, this asset in here has both have
- 20:01open draws, so we don't demand it, but
- 20:04you can see we get that universal
- 20:05sequence paired with that strength
- 20:07switch SMT fill. So, you want to be
- 20:09trading this asset, the weaker asset,
- 20:12strength switching, right? It was once
- 20:14stronger, now it is weaker towards the
- 20:17low. This was once, right? Weaker, and
- 20:20now it is stronger, so we anticipate
- 20:23that this asset here will hit the draw
- 20:25first.
- 20:26That is a one stage continuation
- 20:28strength switch SMT fill.
- 20:31Now, let's take a look at the case where
- 20:33we have the draw being met by the
- 20:36leading asset. So, this asset in here
- 20:39reverses, and then expands towards the
- 20:42high. Now, here we'll use asset
- 20:45synchronization
- 20:46via strength switching for this SMT to
- 20:49break in this candle. So, you can see
- 20:52this asset hits the high. Now, we're
- 20:54expecting to see some universal
- 20:57sequence, and we have a strength switch
- 21:00SMT fill in the gap, right? In this
- 21:04candle that expands now into the high
- 21:07for the next candle, we want to be
- 21:08trading this asset, right? The lagging
- 21:11asset, because we're getting asset
- 21:13synchronization or SMT break via a
- 21:16strength switch, right? So, when the
- 21:18draw is met, we prefer to see this
- 21:21sequence form to trade higher.
- 21:25Let's take a look at some two-stage
- 21:26examples using that same logic.
- 21:28Sometimes we will see, right? If the
- 21:30draw is met on the leading asset, we
- 21:32will see a retracement,
- 21:34right? Which is not a reversal
- 21:36signature, there's no V-shape here.
- 21:38We'll see a retracement, and then we
- 21:40will see some sort of SMT fill paired
- 21:43with that PSP indicating a retracement
- 21:46of this leading asset, and then again,
- 21:48we will get continuation to a draw. This
- 21:50would be a two-stage, right? Strength
- 21:53switch continuation.
- 21:56And here's the bullish case again,
- 21:57right? So, we see that there is an open
- 21:59draw actually on both assets. So, we
- 22:02want to be trading the leading asset.
- 22:05And a good rule of thumb is that we want
- 22:08to trade the leading asset until the
- 22:12draw is met, at which point we want to
- 22:16look for asset synchronization via
- 22:18strength switching to trade the lagging
- 22:20asset. So, in here you can see that even
- 22:23though this asset forms the,
- 22:25you know, bearish SMT, this forms the
- 22:27bullish SMT, this is still the asset we
- 22:30want to be trading towards our draw
- 22:33because it is in closer proximity to the
- 22:35draw, and it is the bullish asset,
- 22:38right? Even though it forms that
- 22:40strength switch signature. This is just
- 22:42telling us that all assets are very
- 22:44likely to hit that high, and this asset
- 22:46is, right? Is having liquidity dispersed
- 22:49into it to then break the SMT once it
- 22:52forms.
- 22:53Okay? So, now let's talk about that
- 22:55idea, right? That we just mentioned of
- 22:57lagging assets redistributing and
- 23:00breaking SMTs via strength switching.
- 23:02So, here is our generic example. We have
- 23:05a leading asset trading to a key level,
- 23:07this high, and it puts in a continuation
- 23:11signature. Recall from my last lecture
- 23:13that is going to look like a
- 23:14consolidation or a retracement, not a
- 23:18V-shape.
- 23:19We will then evaluate if there is going
- 23:22to be liquidity dispersing into the
- 23:24middle and lagging assets to break the
- 23:26SMT via a strength switch, okay? So, at
- 23:30the lows, you can see we had a strength
- 23:32switch SMT.
- 23:33We expanded away, and now we have this
- 23:37SMT at the highs. And we're going to see
- 23:38what happens, right? What phase of price
- 23:41argument can be given, and if we get any
- 23:43strength switching to get to that high.
- 23:46Right? So, we're going to ask ourselves,
- 23:47how does that sequence look like? Or is
- 23:50Or are we going to form the SMT and
- 23:51reverse? The answer lies in strength
- 23:54switching. Strength switching validates
- 23:57if a reversal will hold or if we will
- 23:59get a break of that SMT level. So, in my
- 24:03last lecture, I taught you the ideal
- 24:05sequence. This is when we see the
- 24:08leading asset trade into a key level,
- 24:10and it forms this PSP, which is
- 24:13signifying that it's not reversing, but
- 24:15it's either consolidating or retracing
- 24:17because it leaves a gap.
- 24:19Then we trade the lagging asset via a
- 24:23strength switch SMT towards that SMT
- 24:26break. So, what you're seeing in this
- 24:28circle right here for the middle asset
- 24:30is exactly what you're observing on the
- 24:32lower time frame here [snorts]
- 24:33to reach that key level.
- 24:36Why is this the ideal sequence? The
- 24:38strength switch PSP tells us that the
- 24:41leading asset, once it trades into the
- 24:44key level,
- 24:45right? Is failing to reverse or V-shape.
- 24:49We know that because it's creating a
- 24:50gap, and we can look at the lower time
- 24:52frame signatures. At the risk of jumping
- 24:55back and forth between my lecture
- 24:56slides, I want to point you back to this
- 24:59part, okay? These lower time frame
- 25:01signatures are going to be confirming
- 25:04whether we're reversing or not. Are we
- 25:06getting SMTs out of the range faster?
- 25:09Are we getting consolidation,
- 25:11right? Are we creating gaps or are we
- 25:13not creating gaps? This is going to be
- 25:15signatures of strength switching, and if
- 25:17we do not see reversal, then we're going
- 25:20to be anticipating a ideal sequence
- 25:23formation. Once we get this SMT, the
- 25:26strength switch SMT paired with this
- 25:28PSP, that gets us the lagging asset into
- 25:32the high, where we can then ask
- 25:34ourselves the same questions. Say, are
- 25:35we going to reverse or is the
- 25:38lagging asset, right, the weakest asset
- 25:40going to do that same thing and hit the
- 25:41high? Maybe it'll form another sequence
- 25:43to get to the high. Okay? So, this is
- 25:46why it is the ideal sequence. The fair
- 25:48value gap is telling us about
- 25:49displacement, and the strength switch is
- 25:51telling us about liquidity dispersing
- 25:54into the weaker assets. And then you can
- 25:56trade your universal sequence. ICT has
- 25:59taught us that, right? Towards that high
- 26:00or that low.
- 26:02Okay. So, this is the universal approach
- 26:05to strength switching. You now
- 26:06understand the core logic and how to
- 26:09apply strength switching to asset
- 26:11synchronization cases of lagging assets
- 26:14and to validate reversals either away
- 26:16from SMT breaks or away from failure
- 26:19swings. You've also learned how to use
- 26:22equilibrium and conditions around
- 26:24equilibrium with strength switching. So,
- 26:27what I'm going to do now is hop into
- 26:29some chart examples that will go through
- 26:31several unique cases of strength
- 26:33switching that validates the frameworks
- 26:35you've learned today. Let's do that now.
- 26:38Okay, let's hop into our first example
- 26:41here. And this example is going to be
- 26:43the case of that advanced premium and
- 26:46discount sequence paired with our
- 26:48strength switch for a continuation
- 26:52of the lagging asset. So, what I want
- 26:54you to first consider here is this two
- 26:58um asset
- 26:59um chart. Okay? So, we have the Nasdaq
- 27:02here, and we have the Dow Jones here.
- 27:04And this was today, actually, Thursday,
- 27:06the 12th of March. What we see first is
- 27:09that the leading asset, the Dow Jones,
- 27:12trades into a relevant swing, this daily
- 27:16low down here. Now, why am I calling
- 27:18this a relevant swing? It's because the
- 27:20distance between this swing and this
- 27:22swing is great enough,
- 27:24right? That it is relevant. This is also
- 27:26a relevant swing down here. A new phase
- 27:29of price can be anticipated at this
- 27:31swing.
- 27:32As you can see, Nasdaq is a lagging
- 27:35asset to that swing. It is yet to trade
- 27:37into here. So, on Thursday, on this day,
- 27:40we actually get that lagging asset
- 27:42redistribution via strength switching.
- 27:44This is how we get asset
- 27:46synchronization. They get back into sync
- 27:48and expand together towards the low,
- 27:50right? Through strength switching. So,
- 27:52let's take a look at the higher time
- 27:53frame chart here.
- 27:55And we're going to look at our daily
- 27:56open, and we're just going to play out
- 27:58this entire daily chart, right? Give you
- 28:00an example. So, here's where we are,
- 28:02right? To start Thursday. We have these
- 28:04relevant swings, and don't mind of this
- 28:06clutter here. This is just from the
- 28:07lower time frame what I'm going to be
- 28:08showing you. But you can see, 6:00 p.m.
- 28:11opens,
- 28:12and the leading asset expands into the
- 28:15draw. Now, in this case, right? We can
- 28:18expect a new phase of price here. So, as
- 28:21long as this asset does it not V-shape
- 28:25back into the range, right? If we see
- 28:27that V-shape back into the range, that
- 28:29would be a reversal with a SMT, and
- 28:32potentially, what could we see down
- 28:34here? Some sort of strength switching,
- 28:36right? Where the lagging asset, right?
- 28:39Or the leading asset to the downside
- 28:40becomes momentarily stronger via
- 28:43strength switch, and then expands. Look
- 28:45at what happens here on the lower time
- 28:47frame, okay?
- 28:48We'll hop down to an hourly chart to
- 28:49show you.
- 28:50We immediately see in this case, we do
- 28:52not have any form of strength switching
- 28:55in here, okay? We see this leading asset
- 28:58to downside stay quite bearish, right?
- 29:00Forming a lower low.
- 29:03This asset is still bullish forming the
- 29:05higher lows. So, we know that this move
- 29:08back into the range because there is no
- 29:10strength switch signature is likely a
- 29:12retracement, okay?
- 29:14So, then you can see price, right? Takes
- 29:16out the low here again. We keep
- 29:17expanding lower.
- 29:20Right? This asset here has traded
- 29:22through this relevant swing, right? Down
- 29:25here.
- 29:25And now we see some reversal in the
- 29:27London session off the lows, okay? In
- 29:30this case, you're going to be able to
- 29:31see we have that strength switching
- 29:34signature right in here. So, you can see
- 29:37I pull up my screen here.
- 29:40We have this asset.
- 29:43Where is my toolbar? This asset here
- 29:45forms that PSP.
- 29:49Right?
- 29:50And this SMT, so we have a two-stage,
- 29:54right? Strength switch SMT and then the
- 29:57PSP and then we expand back in the
- 30:00range, okay? Look at Nasdaq. Bearish
- 30:02close.
- 30:03Trades lower despite being the stronger
- 30:06asset in the range. So, this validates
- 30:09this local retracement back into the
- 30:12range. Not necessarily a reversal of the
- 30:14daily range, but a retracement. You can
- 30:16see is validated by this hourly strength
- 30:20switch, right? Below the lows. And you
- 30:22can see this in here forms the low of
- 30:25this candle at 10:00 p.m. So, the 4-hour
- 30:28power of three is open low high close.
- 30:31Now, what do we end up doing? We end up
- 30:32retracing
- 30:34into what?
- 30:35A gap. So, this becomes my new
- 30:37invalidation if the daily candle is
- 30:40going to expand lower from its open.
- 30:44And we are not going to have a delayed
- 30:46protraction where we see price
- 30:48return back to the open, right? This
- 30:51candle has a very large wick. So, we do
- 30:53not anticipate that candles with large
- 30:55wicks are going to form
- 30:58a reversal into expansion candle
- 31:00printing another body here. So, any
- 31:02deviation up in here should be seen as a
- 31:05potential to go lower, especially if we
- 31:07fail to reprice the opening price here,
- 31:09okay? So, here is the opening price.
- 31:13We have this large wick, but we are
- 31:14still bearish because we have a new
- 31:16invalidation. Now, look what forms here
- 31:18at 6:00 a.m.
- 31:20It's exactly that sequence that that we
- 31:21talk about, right? We have this small
- 31:24opposing run inside of the gap, okay?
- 31:28So, this is our C2 reversal into
- 31:31expansion candle.
- 31:33And what do we see? We see this asset
- 31:35expanding now towards the low. So, now
- 31:38we can anticipate that we're going to
- 31:39break this SMT. So, we want to see some
- 31:42form of strength switching, right? How
- 31:45can we observe that?
- 31:46Well, look at this.
- 31:48Look at how this reversal candle high is
- 31:49made. We see this asset here form a
- 31:52mechanical reversal at the high
- 31:55with a 4-hour swing point
- 31:58being created with a one-stage crack in
- 32:01correlation. So, because it's just a
- 32:03one-stage crack in correlation,
- 32:05I'm not going to trade this reversal,
- 32:07but what do we create?
- 32:08We create a range, have a failure swing,
- 32:12and now we can draw back into this range
- 32:14and expand lower trading
- 32:16internal
- 32:17to external, right? And what do I want
- 32:19to see in here?
- 32:21Ideally, some form of strength switching
- 32:23with this asset showing me a willingness
- 32:25to trade towards the low, right? And
- 32:28displace lower since YM is already
- 32:29paired this low and is still fairly far
- 32:32away from the next relevant swing,
- 32:34right? Even this swing down here, look.
- 32:37Still fairly far away from it, right?
- 32:39And NASDAQ wants to break that SMT. So,
- 32:40we can observe what happened in the New
- 32:42York session.
- 32:44So, we open up here.
- 32:45Sorry, let me go on the lower time
- 32:47frame, actually. It might be even
- 32:48better.
- 32:49So, we have a new 4-hour candle opening
- 32:51up here. This is the 9:00 a.m. candle in
- 32:52here.
- 32:54Let's go to a lower time frame.
- 32:56We'll see there's a couple forms of
- 32:58strength switching in here that actually
- 32:59put us on side with this logic. Okay, so
- 33:02we have our reversal up here.
- 33:04Now, look what happens at the open,
- 33:069:30.
- 33:07I'm going to get rid of this gap just so
- 33:09we know that's where we're reversing
- 33:10from.
- 33:10At 9:30, we see this leading asset
- 33:13becomes which is stronger, right? In the
- 33:15range, notably stronger. It sweeps out
- 33:18the previous candle's high. So, this in
- 33:20here, right? Is a consecutive candle SMT
- 33:24inside of this small volume imbalance in
- 33:25here, okay? This small little volume
- 33:28balance area in here. Now, more
- 33:30importantly, what we see is that once we
- 33:32form this SMT with this asset being
- 33:35weaker, right? We know that the new
- 33:3710:00 a.m. candle is opening and we can
- 33:40expect it, right? 6:00 a.m.
- 33:41continuation. Have we hit the draw? No,
- 33:45right? Look at the 4-hour candle, we
- 33:46haven't hit the draw. So, 6:00 a.m.
- 33:47reversed here, actually. And now we can
- 33:49expect 10:00 a.m. to continue towards
- 33:51the draw.
- 33:52So, we know we're opening up 10:00 and
- 33:54we have this swing point. So, look at
- 33:57what happens in the lower time frame at
- 33:5810:00 a.m.'s open.
- 34:02We see this asset, right? Which was once
- 34:05the lagging or the leading asset to the
- 34:07downside, become momentarily stronger as
- 34:09it breaks that SMT.
- 34:11Remember I talked to you about that
- 34:13example and I can probably flash it on
- 34:15the screen right now of where we see
- 34:18that SMT breaking, right? Paired with
- 34:21this asset reversing thereafter. So, now
- 34:24it's becoming stronger
- 34:28while this asset becomes weaker.
- 34:30And we actually end up getting a
- 34:32two-stage variant here, which I showed
- 34:34you in the previous diagram.
- 34:37Where NASDAQ, right? Puts in these equal
- 34:40highs. Well, how can I trade away from
- 34:42equal highs? I need to see a strength
- 34:45switch, right? So, you see this is that
- 34:48local two-stage variant where we see at
- 34:51the reversal with this premium and
- 34:53discount sequence, right? From this high
- 34:55to this low, it's already reversed. Now,
- 34:57it's retracing into EQ.
- 35:00Forming this two-stage and you can see
- 35:02ES here, the third asset gives us that
- 35:04SMT, right? ES runs out that high. So,
- 35:07this is a two-stage variant with the
- 35:08S&P.
- 35:10Now, we can trust these equal highs to
- 35:11hold. I actually did take this trade
- 35:13today. If you look at my Twitter, I
- 35:14actually have the execution and whatnot.
- 35:16Um, but you can see we open at 10, we
- 35:19expand higher.
- 35:20We form that SMT sequence and now I can
- 35:23trade this away from the failure swings.
- 35:25And if you look at lower time frame,
- 35:26this is verbatim what I showed you in
- 35:29the lecture slides, right? We have this
- 35:32stronger asset reversing, creating a
- 35:34displacement range, this range. Then we
- 35:38have a gap being retraced in here, you
- 35:40can see.
- 35:41It's actually in the 5 minutes a bit
- 35:41clearer. We have these gaps being
- 35:43retraced.
- 35:44And what do we see inside these gaps? We
- 35:46see this advanced premium discount
- 35:48sequence where the lagging asset or in
- 35:50this case the leading asset breaks the
- 35:51SMT.
- 35:54Right? And once it breaks the SMT, at
- 35:56the point of reversal at 10:15, this new
- 35:5915-minute open right in here,
- 36:04we see the two-stage occurs as well,
- 36:05okay? Two-stage at the high, strength
- 36:08switch.
- 36:10Right? So, this is that strength switch
- 36:11that we really need to see. This is also
- 36:12that strength switch here, right? This
- 36:14is that strength switch SMT.
- 36:17Now, we can trade away from this and all
- 36:19I need to do, the only entry technique I
- 36:21took was just this 3-minute CISD.
- 36:24Like this. And now, what am I targeting?
- 36:27The SMT break, right? That relevant
- 36:29swing. So, what did I say before? We
- 36:31trade the leading asset until the draw
- 36:34is met.
- 36:36Okay?
- 36:37Once that draw is met, we look to see
- 36:39some form of strength switching and then
- 36:41trade the next asset because look how
- 36:42far away from the low
- 36:44this next swing is.
- 36:46Here, right?
- 36:47All the way down here, right? These
- 36:48swings are a bit closer, but you can see
- 36:50Nasdaq clearly is weaker now, right?
- 36:52Much weaker. We can trade this asset
- 36:55right, towards the low like I did. And
- 36:57again, I'll put my executions on Twitter
- 36:58so you can see. Get a really nice 3R
- 37:00trade to that low.
- 37:03I don't know my TradingView is doing
- 37:05this thing where it lags out. That's not
- 37:07ideal.
- 37:09Maybe I can
- 37:10go to a higher time frame, for example,
- 37:12and play out another candle. There you
- 37:14go.
- 37:15You can see we hit that low and that's
- 37:16exactly where we spend the rest of the
- 37:18day inside this range, more or less,
- 37:20just chopping, right? You can see we
- 37:22break that SMT, that relevant swing, and
- 37:24the rest of the day we just spend So,
- 37:26that's the first example. I'm now going
- 37:28to hop into another example, okay?
- 37:34All right, let's get into the second
- 37:35example. In the second example, we see
- 37:37another variation of that concept I
- 37:40taught you about trading away from
- 37:42failure swings utilizing strength
- 37:45switching once again. So, look here.
- 37:47Here I have it all annotated for you,
- 37:48right? Just for the sake of time, right?
- 37:50We come into this 4-hour level right
- 37:52here. This is an internal range of
- 37:54liquidity on the 4-hour chart. YM takes
- 37:58out the low and Nasdaq forms this rather
- 38:01deep range, right?
- 38:03SMT. So, this becomes a low probability
- 38:09divergence because it's so close to
- 38:10these lows. And also, look at the S&P
- 38:12here, right? I want you to pay attention
- 38:14to the third asset here.
- 38:17Look how close to these lows
- 38:20the the is. These are pretty much equal
- 38:23lows down here, right? These are not
- 38:25relevantly spaced in the market at all.
- 38:27Look, it's equal lows here, right? So,
- 38:30what we want to see, in order to trade
- 38:32away from this, the only way we can
- 38:34is if we can see some sort of strength
- 38:36switching. And again, I took this trade
- 38:37as well, and I took this trade live,
- 38:39actually. So, you can uh go watch that.
- 38:41I think it was on my Funded Futures. Um
- 38:43but, you can go watch that. And uh you
- 38:45can see in here, once we put in this
- 38:48failure swing SMT, Nasdaq has equal
- 38:50lows. I am not interested,
- 38:53right, in trading away from this unless
- 38:55I see some form of strength switching.
- 38:56So, look at the candle here aligned with
- 38:59the new 4-hour open at 10:00 a.m.,
- 39:02right? This 4-hour open, which is
- 39:04forming this SMT.
- 39:06So, we have this key level being
- 39:08diverged at. We have this failure swing,
- 39:10and then 10:00 a.m. opens right in here.
- 39:13The new 4-hour puts in this 4-hour
- 39:16divergence.
- 39:17This is a sequential SMT on the 4-hour
- 39:21charts.
- 39:22But, more importantly, look at this.
- 39:24That SMT that's made is a strength
- 39:26switch PSP. And then, what do we get? We
- 39:30get that two-stage variant, which puts
- 39:32in these equal lows, right? Let me get
- 39:34rid of these. Look at these equal lows.
- 39:37That equal low there is only a
- 39:40permissible to trade away from it
- 39:41because we have the strength switch SMT
- 39:46paired with that PSP. So, when we get
- 39:49that signature, despite the fact that we
- 39:51have
- 39:52failure swing here, okay?
- 39:55Failure swing here, and failure swings
- 39:57down here, we can trade away from this
- 39:59if we see that V-shape signature. Now,
- 40:02look at the lower time frame. We start
- 40:04to expand higher here.
- 40:07I'm going to play this out uh again.
- 40:08Sorry, my uh TradingView is not
- 40:11cooperating with me very much today in
- 40:12the replay mode. I go down to a higher
- 40:15time frame.
- 40:18Try and play one more candle. There we
- 40:19go. That works. We can just pop down to
- 40:21a lower time frame I can show you how we
- 40:23get to this high up here, right? So,
- 40:25what we want to do is we want to trade
- 40:26this asset, which is the lagging asset
- 40:29towards these highs. So, I forgot to
- 40:31show you this, but on the higher time
- 40:32frame
- 40:34we're seeing the strength switch, which
- 40:35makes sense in context of the universal
- 40:37model, right? Remember what we said? We
- 40:38have this leading asset trading to this
- 40:41high, failed to reverse. Now, we're
- 40:44getting this the strength switching from
- 40:46what?
- 40:47The fair value gap, which is a key
- 40:49level. Now, we're trading this ideal
- 40:52sequence, right? With some sort of
- 40:53strength switch with this internal range
- 40:55towards the high. Okay? So, now we want
- 40:59to get up to this high
- 41:00and you can see that once we form that
- 41:03reversal signature here,
- 41:05right? Get that V shape.
- 41:08You can take entry.
- 41:12Cover the low and you can get all the
- 41:14way up to this high with really nice R,
- 41:16right? Around three and a half R or four
- 41:17R. Now, I didn't actually take this
- 41:19trade. What I took was the continuation
- 41:20later in the day, right? So, I let the
- 41:22reversal from Remember I said, you don't
- 41:24trust the If you do not trust the
- 41:25reversal, wait for a gap. Now, look at
- 41:28this.
- 41:29What do I have in here? Look. I have
- 41:31this leading asset put in this ideal
- 41:34sequence, right? We take out the highs.
- 41:37We print a gap.
- 41:40Now, I have a two-stage
- 41:42PSP, right? So, this is a PSP.
- 41:47And you can see we have this SMT fill
- 41:50that forms
- 41:51right in here. It's on the lower time
- 41:53frame.
- 41:55So, we actually do we don't get that. We
- 41:56don't get the continuation here on
- 41:57Nasdaq. My apologies, it wasn't the
- 41:58two-stage variant. It's just the
- 41:59one-stage variant.
- 42:01We get this SMT fill inside the gap
- 42:05that looks like this. Okay? And this is
- 42:07a strength switch. So, the asset that
- 42:10was weaker down here and strength
- 42:12switching bullish to break the highs.
- 42:14Right? We get that strength switch SMT
- 42:17fill.
- 42:18We get a V-shape. Let's see the V-shape
- 42:19signature on the lower time frame.
- 42:22We go down to our 1 or 3-minute time
- 42:23frame here. And again, this is very
- 42:25clear, right? So, we have that SMT
- 42:27strength switching
- 42:29for the fill.
- 42:30We get this really nice balanced price
- 42:33range in here, right? And then you can
- 42:35take with the trade I took was the intra
- 42:37candle
- 42:38continuation or propulsion block.
- 42:41Target Stop loss to the low and then
- 42:43target the high, right? And you get
- 42:44three R nicely to that high. So, it's
- 42:46another very good example, right? Of us
- 42:49trading away from the failure swings,
- 42:51confirming this failure swing divergence
- 42:53that we're seeing right in here.
- 42:55Failure swing divergence. Essentially
- 42:58equal lows here and look at look at ES.
- 43:00Equal lows down here, too, right? With
- 43:03that strength switch concept, okay?
- 43:06Right here. That gives us high
- 43:08confidence in that reversal. And then
- 43:10the continuation also gives us SMT fill,
- 43:12which is another very nice sequence. So,
- 43:14that is the second example. Now, let's
- 43:16move on to the third.
- 43:17So, in this third example here, I'm
- 43:19going to walk you through two days of
- 43:20price, starting with this Thursday,
- 43:22okay? So, you can see we have a failure
- 43:25swing SMT at these highs.
- 43:29Now, what you see is that this daily
- 43:30candle here opens, expands into this
- 43:33previous day high, but it leaves, right?
- 43:35This failure swing. This is not a
- 43:38relevant swing. It's too close in
- 43:39proximity. And what we don't see here is
- 43:42any form of strength switching. So, look
- 43:44at this 10:00 a.m. open. When we form
- 43:46that failure swing at the previous day
- 43:48high, we're seeing this asset is stays
- 43:50weak. Now, this asset is strong, and
- 43:53there's no lower time frame strength
- 43:55switching signatures. So, I don't trust
- 43:57this reversal, okay? I don't like this
- 43:59reversal. What I instead want to see,
- 44:01you can see we have this just regular
- 44:02SMT between candles, which forms the
- 44:05high. But again, it's no strength
- 44:07switch, and we have failure swings. So,
- 44:08I cannot trade this asset in the
- 44:11reversal. As I said to you, I need to
- 44:13see a strength switch. So, instead what
- 44:14I will do is that we'll wait for some
- 44:17sort of sequence to form.
- 44:19I want to see some sort of universal
- 44:20sequence like I talked to you about to
- 44:22validate that's going to hold. Let me
- 44:23see if my candles will play out here.
- 44:29Yes. So, when we form this failure swing
- 44:31SMT,
- 44:32I now understand that I'm waiting for
- 44:35some sort of sequence, right? And the
- 44:36sequence I get in here is right like
- 44:39this. So, I want to be trading which
- 44:42asset? I have the I have the draw marked
- 44:44out, okay? So, this is the draw on
- 44:45liquidity.
- 44:47You can see, I want to be trading the
- 44:49leading asset to the downside
- 44:51cuz it's staying weak
- 44:53until the draw is met. So, what do I see
- 44:56in here? I see a gap printed away from
- 44:58the reversal. I don't trust the reversal
- 45:00cuz the failure swing, obviously. So, I
- 45:02wait for a gap.
- 45:04Wait. Now, not all three assets need the
- 45:07gap. In this case, I only need one of
- 45:10the three assets to form the gap as
- 45:12price manipulates above this 90-minute
- 45:15high, I'm seeing my two-stage
- 45:20right? continuation. So, there is no
- 45:24strength switching here, and I do not
- 45:26need to see strength switching. I do not
- 45:29need to see strength switching for this
- 45:32continuation.
- 45:34The leading asset has a draw intact.
- 45:39I do need to see
- 45:41I do need to see strength switching at
- 45:44this reversal
- 45:46which does not happen, so I do not trade
- 45:49it. Simple as that. I'm filtering out
- 45:52trading this reversal because it is a
- 45:55failure swing SMT to the relevant level.
- 45:59I'm anticipating this high. So, I wait
- 46:01for a gap. All right, I see this asset
- 46:03is still stronger. Look,
- 46:05there is a bullish candle close here and
- 46:07a bearish candle close here. This is the
- 46:09stronger asset still and it's still far
- 46:11away from the lows. So, I don't trade
- 46:14this asset. I trade the relevant weaker
- 46:17asset that's staying weak to the draw,
- 46:20okay?
- 46:21So, what do I see? SMT fill. I took this
- 46:24trade as well, posted on Twitter, full
- 46:25executions and everything, right? None
- 46:26of this is hindsight, guys. I'm taking
- 46:28trades that I've actually done so you
- 46:29can see I use this concept. So, I get
- 46:31this SMT fill that I taught you in my
- 46:33last lecture, right? We have a
- 46:35continuation. We have a change in the
- 46:37state of delivery and again,
- 46:40enter,
- 46:41stop loss,
- 46:42TP is that low, right? And you can see
- 46:45we get down to that low very nicely for
- 46:46a 3.5R trade. So, now let's jump ahead a
- 46:50bit and we're going to see what happens
- 46:51at this low.
- 46:53Here's another example, okay?
- 46:55Whoops, a little bit too far.
- 46:58So, in here, you can see at this low, we
- 47:00form this SMT divergence. I want to show
- 47:04you the lower time frame. We form this
- 47:06SMT divergence in here after this SMT
- 47:08fill and whatnot and you can see I'm
- 47:10going to delete this side of the curve
- 47:11now.
- 47:14Price in here stays weak. Look, at the
- 47:18low, at this reversal at 1:00 p.m., I do
- 47:20not see a strength switch PSP. There is
- 47:22no strength switch PSP. There is also,
- 47:26right? Bearish SMT, bullish SMT. So,
- 47:28this asset still stronger.
- 47:30So, I want to be trading this asset
- 47:32higher if we reverse. Now, because there
- 47:34is no strength switch, I must trade the
- 47:37continuation on this leading asset
- 47:40higher if I want to trade it higher. So,
- 47:42I do not trade at this point of
- 47:44reversal. There is no strength switch.
- 47:46So, I must trade continuation. How do I
- 47:48trade continuation? What did I say?
- 47:50[clears throat] Wait for a gap, right?
- 47:51There's no strength switch so you can't
- 47:52trade the reversal.
- 47:54Let's find a gap in here and trade an
- 47:56SMT fill sequence, right?
- 47:59So, in here I just wait for some sort of
- 48:02SMT fill sequence, which might look like
- 48:05this, guys. Look.
- 48:07We expand.
- 48:08I have a draw on liquidity. All right,
- 48:10this is a relevant swing
- 48:13to this high.
- 48:14Here is my universal model, model within
- 48:16a model. I have an gap.
- 48:18What do we see in here? Here is where we
- 48:20see that strength switching, right?
- 48:23So, but not this asset This asset
- 48:24doesn't have the gap. It's just this
- 48:25one. And what we see is that we get a
- 48:27divergence between
- 48:29these candles. Look.
- 48:32Oops.
- 48:33We get a divergence. This is a strength
- 48:35switch SMT. The weaker asset, and let's
- 48:38mark out that same high here.
- 48:43The weaker asset is getting momentarily
- 48:46stronger after reversing, right? That
- 48:48was that sequence I showed you. We had a
- 48:49reversal. We have a gap. And now this
- 48:51strength switch in here is showing me
- 48:53this continuation is very likely to
- 48:55hold, right? So, there we go. I have a
- 48:59uh single stage SMT between consecutive
- 49:04candles inside of a gap. I need a
- 49:06V-shape signature, and I want to trade
- 49:08towards this high. And I believe the
- 49:09best asset trade towards this high is
- 49:11going to be the Dow, right? Look at the
- 49:12proximity to the high and look at the
- 49:13strength switch.
- 49:14So, we're going to look for a
- 49:16CISD signature,
- 49:19which is going to look like this.
- 49:22Boom.
- 49:24Right?
- 49:25Simple as this.
- 49:28Take this CISD.
- 49:30We're going to target the
- 49:32draw on liquidity.
- 49:34And you get a very nice 6R trade here.
- 49:36If you want to be even safer, wait for a
- 49:39propulsion block to form.
- 49:41Okay? And then you can take the second
- 49:43CISD with very similar nice RR. Both are
- 49:46valid, right?
- 49:48I like to get involved early in the
- 49:49range, right? I trust my invalidation,
- 49:50cuz if I'm wrong, it's going to come
- 49:51down take all these lows anyways. Going
- 49:53to take all these lows if I'm wrong.
- 49:55Right? If it's not going to form this
- 49:56swing point, it's not going to form here
- 49:59as a failure swing. If it won't, it's
- 50:01going to take out all these lows.
- 50:03So then this is an example of how we use
- 50:04our strength switch SMT fill.
- 50:07Strength switch SMT
- 50:11fill
- 50:12to trade the once weaker asset
- 50:16getting stronger to hit that draw on
- 50:18liquidity, right? So this is a strength
- 50:20switching on the buy side of the curve.
- 50:21We don't trade here because there is no
- 50:23strength switch. We can trade here in
- 50:26high probability to get to that high.
- 50:28And you can see Nasdaq puts in a failure
- 50:30swing to that high, right?
- 50:32Okay. So very, very nice stuff here with
- 50:35this third example. And I'll do one more
- 50:36example here for you guys just showing
- 50:38you again that ideal sequence, right? So
- 50:41look here.
- 50:42Nasdaq comes into this high. There is
- 50:45nothing relevant in this daily range for
- 50:48us to trade into, okay? So look at the
- 50:50daily open.
- 50:53We are not going to expand
- 50:55from here to here, right? Without any
- 50:58new phase of price. This is very far
- 51:00away, but look at the lagging asset in
- 51:02here. The lagging asset, which is YM,
- 51:05can draw into the same high that we are
- 51:07failing to manipulate here on Nasdaq.
- 51:10How do we know we're failing to
- 51:11manipulate? We're consolidating. This
- 51:13consolidation signature shows me we're
- 51:15not V-shaping and strength switching
- 51:17lower, right? To validate that as a
- 51:19reversal. Now look what happens on the
- 51:21new 4-hour candle,
- 51:23right? We have this
- 51:25advanced premium and discount sequence
- 51:27that I taught you. Remember the slides?
- 51:29I can show you again on the screen.
- 51:31And then we also have this two-stage,
- 51:34right? Ideal sequence.
- 51:36So look.
- 51:37We get a reversal
- 51:39at these lows, which is a bearish SMT in
- 51:42the gap, right? With this asset. Now
- 51:44this asset takes out the high and is
- 51:46just consolidating for the most part.
- 51:47Now you see on the new 10:00 a.m. 4-hour
- 51:50open, we trade and we form a 4-hour
- 51:53divergence
- 51:55with these lows.
- 51:57It's current low of day actually. We
- 51:58form this divergence.
- 52:00Right? With the 4-hour candles, you'll
- 52:02see. 10 and 6, 10 and 6. And we also
- 52:05have on the lower time frame this
- 52:07advanced premium and discount sequence.
- 52:09So look, we have a gap here on that on
- 52:12YM.
- 52:16Right? In You hear this? In discount of
- 52:19this range. So we expand at 9, putting
- 52:21in a failure swing. These are decoupled
- 52:23moves. Look, up close, down close again.
- 52:25How our market is going to
- 52:26resynchronize? They're going to
- 52:28resynchronize via strength switching.
- 52:30Right? That's how assets will get back
- 52:32in sync and expand.
- 52:34So look in here.
- 52:3510:00 a.m. Diverges with the 9:00 a.m.
- 52:37low inside of this gap. I get a V-shape
- 52:41signature. This is the ideal sequence I
- 52:43showed you. Again, I can put the slide
- 52:45here for the ideal so you can see.
- 52:50And what do I need to see?
- 52:51Simple as I need to see a change in the
- 52:54state of delivery. Right? There's that
- 52:56advanced premium discount.
- 53:00Once I form my CISD,
- 53:03I have a very nice draw on liquidity.
- 53:10Okay? I can take YM to that high. So now
- 53:12you have several clear examples of how
- 53:14we utilize this sequence for both
- 53:16reversals and continuations. I really
- 53:19hope you guys enjoyed today's lecture. I
- 53:21hope you learn something. If you found
- 53:23it helpful, um you can support me by
- 53:25using code lab with prop firms or even
- 53:27just giving a like and a comment on this
- 53:29video. I really appreciate all the
- 53:31feedback you guys give me. Let me know
- 53:33if there's some other concepts you want
- 53:34to see me explain, and I really look
- 53:36forward to my next video with you guys.
- 53:38Thank you very much, and I'll see you
- 53:39soon.
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