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The Complete Price Action Course (4+ Hours) — Transcript

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0:00Okay, hello, and welcome to
0:01understanding price. This is a 3-4 hour
0:05master course on technical analysis. And
0:07if you watched any of my videos before,
0:09you know that we're going to go deep.
0:11So, we're going to break down why
0:12markets move and spend some good time on
0:14helping you to understand what it is
0:16that actually drives price. We'll go
0:18through Japanese candles, market
0:19structure, supply and demand, market
0:21efficiency, liquidity, momentum, and
0:23top-down analysis. So, all of the
0:24different concepts that I used to trade
0:26for myself, we're going to break them
0:28down in incredible depth and show you as
0:30we go the process being layered onto
0:32different trade ideas. By the end of
0:35this class, you will be able to look at
0:37a chart and immediately know what it's
0:38telling you. Often times, without even
0:40having to draw any analysis onto the
0:43chart you're looking at. So, we're not
0:44going to waste any time. We're going to
0:45jump straight in and start by breaking
0:47down what it is that truly makes the
0:49market move. Let's go. So, we're going
0:51to spend the first part of this course
0:52going through what it is that actually
0:54makes the market move. Because one of
0:56the biggest problems that traders face
0:58is that they view charts as charts. And
1:01I know that sounds really weird, but let
1:02me explain. When you open up your chart
1:05to trade the asset that you want to
1:06trade, you simply look at this, all of
1:08the different candles, the movements
1:09they've made, as kind of a static
1:12pattern. And what you're looking to do
1:14inside of this is use your concepts,
1:16whether it's support and resistance,
1:18supply and demand, trend lines,
1:19liquidity, market structure, whatever
1:22concepts you trade with. You're trying
1:24to use those concepts to basically draw
1:26out patterns and then execute upon them
1:29without any deeper context as to why
1:30you're actually doing that. So, a trend
1:33line trader, for example, may say,
1:35"Okay, we had one tap, two taps, and
1:37then the market broke out, so we should
1:39buy." Right? That could be something
1:42that would happen. You're just using
1:43static patterns. A support and
1:45resistance trader may say, "Okay, this
1:47is a resistance, so we will sell." And
1:49then when it breaks out, they may say,
1:50"Okay, it's broken, so we will buy the
1:52retest." It's okay, but you're not
1:54making any sense of what's actually
1:56happening. You're literally just saying,
1:58"This line broke, so therefore buy."
2:00Right? Doesn't really dig deep into
2:03what's actually happening under this
2:05surface layer. Supply and demand trader
2:07may see, "Okay, the market structure has
2:09broken lower, and this supply zone has
2:11been retested, so therefore I will
2:13sell." Now, that again, it's fine, but
2:15it avoids the context. You're missing
2:17out. Why would we sell? What actually is
2:19happening here to tell us that selling
2:21is the likely move. The point I'm making
2:23here is concepts are good. Concepts are
2:26important and valuable, and we will be
2:28going through a fair few of them inside
2:30of this course, but without the context
2:33beneath the concepts, you are going to
2:35struggle to trade successfully. For a
2:37few reasons, number one, you might take
2:38trades where trades shouldn't be taken,
2:40but number two, you may also hesitate
2:43out of trades. So, let's say you were
2:44the supply and demand seller. You saw
2:46this supply zone. You saw the market
2:48structure had broken lower, and you saw
2:50that there was like an imbalance or
2:52inefficiency into this. So, you thought,
2:53"Okay, when the market gets here, I will
2:56sell." Right? Completely fine,
2:58completely valid, but without the
3:00context, without understanding the story
3:02that's happening underneath the candles,
3:04you can run into two problems.
3:07Number one, let's say you've recently
3:08taken a loss. So, now you're feeling
3:10kind of hesitant about taking a trade
3:12because you're scared that it might lose
3:13again.
3:14You could find yourself a reason to not
3:16get into this trade, and then you'll
3:19feel good while it's pushing into
3:20drawdown, but as soon as it runs all the
3:22way to targets, you'll feel like an
3:24idiot for not just trusting your gut and
3:26taking the trade.
3:27Now, potentially even worse than that is
3:30you may get into the trade. It may run a
3:31little bit, but then when it starts to
3:33reverse against you, you get out because
3:35you think, "Well, surely this trade now
3:37is going to turn into a loss." Then a
3:39few hours later, when it's at the
3:40target, again you're feeling stupid
3:42because you missed out on the whole
3:43move.
3:44So, by not understanding the context and
3:46the story, it's easy to hesitate or to
3:49avoid trades or to make early exits
3:52against rational kind of thinking
3:54because you don't know why the market
3:57should support your idea.
3:58Now, what we want to do is we want to
4:00read deeper than the surface layer,
4:02deeper than the patterns themselves, and
4:04start to read the story that the market
4:07is telling us. So, every single candle
4:09that you see on a chart, on any chart,
4:12is basically a representation of human
4:15behavior. Every time we see a gray
4:17candle in this instance, or maybe red on
4:19yours, that is going to be a bearish
4:21candle. That is basically the market
4:23saying, "In this given price range,
4:25selling was stronger than buying because
4:28we saw the market close lower.
4:30Therefore, we know more sellers were
4:32trying to get a deal done than buyers
4:34were willing to at this given price,
4:36right?" So, we learn things from every
4:39individual candle.
4:40And when we zoom that out, we can learn
4:42things from every phase of candles as
4:44well. For example, this movement down
4:46here is very strong and very fast. It
4:49just continually weakened without much
4:51pulling back. So, we can see that
4:53sellers were pretty strong there. Now,
4:55if we look at this phase where the
4:56market crawled very slightly up again,
4:59what is this telling us in comparison to
5:01the previous move? Well, this is a lot
5:03slower. We haven't achieved anywhere
5:05near as much ground to the upside, and
5:07it's taken a much longer time to pull
5:09back up. So, we can see again that
5:12buyers in this phase are just not very
5:14strong. So, when we see the market break
5:15down, this is no surprise. And what this
5:18actually tells us again is considerably
5:20stronger selling than the buying we saw.
5:23We made again a larger movement down
5:25than the entire movement up we got in a
5:27much smaller period of time. So, this
5:30confirms selling control.
5:32When we see the buying taking place
5:33again, it's slow, and it's a bit choppy.
5:37In comparison to the selling move we
5:38had, we can still see buyers are not so
5:42strong here.
5:43So, this basically validates as a
5:46seller-controlled market. We're seeing a
5:48lot of pressure from the sellers and
5:51little resistance from the buyers.
5:53Before a lot of pressure from the
5:54sellers and little resistance from the
5:56buyers. Then, of course, what do we
5:58expect that to lead into? Well, of
5:59course, you can see a lot of pressure
6:01from the sellers once again. So, when
6:03you start to read that story, that kind
6:05of extra layer that's hidden in plain
6:08sight beneath the charts that you look
6:09at, that is when trading really makes
6:11sense because the context that you get
6:13from doing that helps you to understand
6:15what trades are good and what trades are
6:17bad. Let's dig deeper into exactly why
6:20this happens now. And by the end of this
6:22section, you'll be able to understand
6:23the story and your perception around
6:26what markets actually are showing you
6:28will be changed for the better forever.
6:30So, let's go. At the core then, the
6:32market is just a battle between buying
6:34and selling.
6:35When price is going up, that means
6:37buyers are in control. And when price is
6:39going down, that means sellers are in
6:40control. Now, this does not mean, and
6:42this is an important distinction to
6:44make, that there is more buying than
6:46selling or more selling than buying
6:48taking place at one given level because,
6:50simply, that is impossible. You cannot
6:52buy more than someone is willing to sell
6:54to you. And you cannot sell more than
6:56someone is willing to buy from you.
6:58Every transaction needs two
7:00participants. We have to have a buyer.
7:02We have to have a seller. So, it's not
7:04that there's more buying or selling
7:06taking place. It's that there's more
7:08willingness to buy or sell at specific
7:11price levels. So, to explain this, we're
7:13going to dumb it right down to a pizza
7:15shop. Imagine you've got the only pizza
7:17shop in your town. Now, because you're
7:19the only place that anyone can get
7:20pizza, you will likely have a very big
7:23queue of willing buyers coming to buy
7:25pizza from your shop. Because all of
7:27these people want pizza and you're the
7:29only provider of the pizza, meaning
7:31there aren't many willing sellers, it's
7:32just you, and there are many willing
7:34buyers because they all want pizza, you
7:36could realistically charge higher prices
7:38for the pizza and people would still pay
7:40it. You could sell at $10. There's
7:42probably willing buyers at $20 and $30
7:45and some people would even buy the
7:46pizzas even if they were $50 each. That
7:49is what's happening when the market is
7:51increasing in price. There are more
7:53people who are willing to buy than there
7:55are assets available at a given price
7:57level or people willing to sell at that
8:00price. The sellers can demand higher
8:02prices and willing buyers will take up
8:04the offer. But, what if now multiple
8:07other pizza shops opened up in your
8:09town? Well, now we have more willing
8:11sellers, right? And let's presume that
8:13the pizzas are of the exact same
8:15quality. So, the only differentiator now
8:17is price.
8:18Well, because there are a bunch more
8:20places selling pizza, your pizza at $50
8:22is not going to cut it anymore because
8:25the person next door might sell pizza
8:26for $40. And then the person next door
8:28to them might offer the same pizzas for
8:30$30.
8:31Now, the willing buyers exist at $30. No
8:35one wants to pay $50 for the same pizza
8:37they can get somewhere else. So, it
8:39becomes a bit of a race to the bottom.
8:41And the only way for you to compete
8:42again or to sell your pizzas is to lower
8:45the price to meet the willingness of
8:47buyers. That's what's happening when we
8:49see the market decline. Buyers are no
8:51longer willing to pay premium prices, so
8:54sellers keep dropping the price until
8:56there are enough willing buyers to take
8:58up their offers. It's essentially a bit
9:00of a race to the bottom where now if you
9:02want to offload your assets, you got to
9:04be cheaper than the next guy. Now, if
9:06the price increases, all that is telling
9:08us is that traders are no longer willing
9:10to transact that low, which generally
9:12means there are more willing buyers
9:15happy to pay higher prices than there
9:17are willing sellers happy to sell for a
9:19cheaper price. That is how the market
9:22moves. It's transactions taking place
9:24between buyers and sellers. And it's the
9:26willingness to buy or sell at specific
9:28price levels that determines whether the
9:30market will go up or down. Markets are
9:33driven by supply and demand, okay?
9:36Supply is the available quantity of an
9:38asset, and demand is simply how much
9:40people want the asset or not. Now, we
9:42could go deep into the semantics of the
9:44formulas, charts, and explanations of
9:46supply and demand in an economic sense,
9:48but we don't need to do that in trading.
9:49We can keep it very simple. What you
9:51need to understand is that prices will
9:53decrease when supply is high and demand
9:56is low. So, when you have a lot of an
9:58asset and people don't really want it
10:00that much, they're not excited about it,
10:02then you have to meet people at a lower
10:04price. Think mass-produced cars like a
10:06Suzuki. We don't really have Suzuki
10:08super fans who are dreaming of one day
10:09owning these, and there are lots of them
10:12available. So, therefore, the prices for
10:14one of these are pretty low. Now, on the
10:16other side of that, prices will increase
10:18when supply is low and demand is high.
10:20So, when you have a scarce resource that
10:22a lot of people want, you can charge
10:24pretty much any price you want for it,
10:26and people will still buy it. Think
10:28about Ferraris that routinely sell for
10:30700,000, 500,000, even sometimes $1
10:33million plus, and people are still
10:35buying them out fully, right? There's
10:37high demand, low supply. Therefore,
10:39prices can be set very high, and they
10:41will still sell. Now, in financial
10:43markets, demand for something doesn't
10:45come from a desire for status in the way
10:47that buying a Ferrari or luxury watches
10:50or designer clothes does, right? In
10:52financial markets, the demand comes from
10:54various different, more boring factors.
10:57So, this is a silver chart from around
10:582021 all the way through to 2026. Now,
11:02that gray arrow signifies around the $14
11:04price where I was telling my friends and
11:06my private students that I was going to
11:08be buying silver heavily. The reason I
11:10had that idea back then is because we
11:13were seeing the deficits in silver grow.
11:16So, basically, more people every year
11:18are using silver to produce things, to
11:21put to the market, like, you know,
11:22actual products, uh tech, things like
11:24that. With that extra silver being used
11:26up, it created deficits, which meant,
11:28essentially, there isn't enough silver
11:30were produced to go around for everyone
11:32that wants it. So, therefore, silver
11:33prices went ballistic over the following
11:36years. Now, another thing that goes
11:37alongside this, of course, is investor
11:40demand. So, as well as people buying
11:42silver to use it in tech, in products,
11:44whatever it is, there's also investor
11:46demand. That we had very tricky economic
11:49times pretty much from 2020 onwards up
11:51until today. And when we have that, we
11:53see people in the market trying to buy
11:56things that are generally going to
11:57perform better during tricky economic
11:59times. And one of those is precious
12:01metals. So, we saw a lot of money
12:03flowing into silver from investors. And
12:05we also saw the supply problem that
12:07could be was created driving silver
12:09prices higher. So, the demand comes from
12:11those two factors and drove the market
12:13up hundreds of percentage points to
12:16today around $70 at the time of
12:18recording this. And at the peak, a few
12:19months before this, actually trading
12:21over $100. So, that is where the demand
12:23comes from in financial markets. Now,
12:25there is one important caveat to explain
12:28and break down when we're talking about
12:30supply and demand. And that is the
12:32Ferrari, for example, is actually rare,
12:34okay? They only make around 14,000 cars
12:37per year. The demand exceeds the amount
12:38of Ferraris that exist on the planet or
12:40will probably ever exist. And silver,
12:43too, to a degree, because although there
12:44is a lot of silver available on the
12:46world, we actually are already seeing
12:48deficits where so much of it is being
12:50used up every year in many different
12:52industries that we are going to need to
12:53mine and process more of it to keep up
12:55with that demand.
12:57But, many of the markets that we trade,
12:59like currencies, indices, stocks, a lot
13:03of cryptocurrencies, not so much
13:04Bitcoin, and commodities, well, these
13:06things are enormous and often
13:09expandable. So, currencies, for example,
13:11you're never going to buy every dollar
13:13on Earth, right? The total supply is
13:15enormous, and they also print more
13:17dollars every year. So, it's expandable.
13:19So, the real total supply of US dollars
13:22is really never even considered by the
13:23traders who are buying and selling
13:25dollars. The same goes for a lot of
13:27indices, a lot of different stocks, many
13:29of the cryptocurrencies that have, you
13:31know, billion or 100 billion plus
13:33supply,
13:34and a lot of commodities too, like oil.
13:36Millions of barrels of oil are being
13:37produced every week. So, these things
13:41are enormous and expandable.
13:43Which essentially means the total supply
13:45of the assets that we generally trade
13:47is not really a concern to us as traders
13:50or any of the traders because there are
13:52just so many of these assets available.
13:55So, if total supply isn't a concern,
13:56what is? Well, the real answer to supply
13:59and demand in our sense is available
14:01supply at a given price level. So,
14:03imagine you are trading gold, for
14:05example. There are 220,700
14:09tons of gold or thereabouts on Earth.
14:11That is a hell of a lot of gold
14:12considering it's $4,500 an ounce right
14:15now. So, no one is thinking about all
14:17220,000 tons of gold while they're
14:19trading. They're thinking about how much
14:21gold are traders willing to sell or buy
14:23at this price today. Because that number
14:26is very different from the total supply,
14:28right? A lot of it's being used up, a
14:30lot of it is being held in vaults by
14:32government. So, how much gold is being
14:34traded willingly at today's price? That
14:37is the supply that we want to look at.
14:39Which means of those 220,000 tons,
14:42there's only going to be a fraction
14:43available at $4,000, for example, for
14:46the next couple of days. That's the
14:48supply that we're interested in. And
14:50this is the same for all of those
14:52different assets that we just discussed.
14:53It's today's price and today's
14:55availability. That is where we are
14:57considering the actual supply. Now, a
14:59simple way to explain this is housing,
15:02right? There are millions of houses in
15:04any given country, but only a few are
15:07for sale in your town at one time,
15:09right? Which means the price of that
15:10market is set by the demand for the few
15:13available houses. And the rest of the
15:15houses, they're just not really a
15:16concern when setting the immediate
15:18market price because they're not on the
15:20market, they're not available, they're
15:22not for sale, right? So, housing markets
15:24don't move because houses disappear cuz
15:27rarely that happens, but very, very
15:29rarely at that. They move because buyers
15:31and sellers change the price that
15:33they're willing to trade at, right?
15:34Today's price and tomorrow's price may
15:36be different. Today's supply and
15:38tomorrow's supply available may be
15:40different. And that is the way that we
15:41need to view supply and demand when
15:43we're trading in the markets. So, now
15:46I'm hoping you understand how we want to
15:48view the markets, right? It's just one
15:50big auction. When we see prices
15:52declining, these are phases where supply
15:55has exceeded demand and the sellers have
15:57to drop the price of the asset to meet
16:00willing buyers. Now, when they meet the
16:02willingness of buyers, we will see the
16:03market drive to the upside where sellers
16:06now want to charge higher prices and
16:08buyers will only buy for as long as they
16:10are willing to do so. In markets that
16:12are moving down, it's just a clear case
16:14of essentially seller control where the
16:16sellers are setting the price of the
16:18market because the buyers are not
16:20willing to buy at those prices. And when
16:22markets are increasing, this is when
16:24demand is very high and supply at an
16:26available given price is now
16:28constrained. So, when we're trading
16:30here, we are seeing basically buyers
16:32want to be in this market, but the
16:34sellers, they don't want to sell at that
16:36price. So, the sellers can demand more
16:38for the asset and more and more and more
16:41and prices will increase as long as
16:43there are willing buyers ready to take
16:45up the offers of the sellers at these
16:47higher prices. Eventually, that will
16:49fade and that is where the market runs
16:51in these cycles. It's one big auction
16:54driven by supply and demand, buyer and
16:57seller willingness.
16:58All right. So, now that we have that all
17:00important introduction out the way and
17:02you can see how the market can be read
17:03as a story and how there is a lot
17:06happening underneath the candles that
17:08you see, it's time to start getting into
17:10the actual technical concepts. So, the
17:12things we will use to find trades.
17:15Now, I'm going to be showing you the
17:16concepts I used to catch trades like
17:18this, which is the latest trade that I
17:21took as of the time of recording this
17:22video.
17:24Now, this is a trade that uses what I
17:26call logic-based concepts, and that's
17:28what we're going to be going through.
17:30Now, realistically, when it comes to
17:32your technical trading, there is no
17:33right or wrong because the majority of
17:35the money is made or lost in the other
17:38elements like how you manage risk and
17:40how you weigh the probabilities.
17:42But, I would argue that some concepts
17:44are just objectively better than others.
17:47Now, of course, this might be personal
17:49opinion, and you might disagree,
17:51but I think that concepts that make
17:52sense of the market are always going to
17:54be better than static pattern concepts.
17:57When I say static pattern concepts, I'm
17:59talking about things like support and
18:01resistance, right? We have a support
18:03flow here, it breaks through, acts as
18:05resistance. That would be one place that
18:07you would look to trade. And I'm also
18:09talking about trendlines, right? Where
18:11we connect the highs of a
18:13downward-moving trend, and then we use
18:15that to determine our trades. Now, there
18:17is two ways to trade off of these
18:19support and resistance and trendlines
18:21patterns, right? Trendlines, generally,
18:23you're looking to sell the retest, and
18:25support and resistance, you're looking
18:26to sell the resistance. So, now that
18:28we're under a trendline and we're under
18:30a support resistance level, this area
18:32here becomes an incredibly attractive
18:34place to sell from when you're trading
18:36these static pattern concepts. But, the
18:38problem is, right? If we take a look at
18:40what actually happened, the market drove
18:42higher. That would have stopped out
18:44anyone selling. And then, this is a
18:46trendline break and also a resistance
18:49break. So, a new buy would come in here,
18:51but as you can see, this just ran lower
18:53again, leading in another loss. Now, at
18:57this point, when the market's trading
18:58under this level, traders would then
19:00presume, because we're back under the
19:01level, we should look to sell the
19:04retest. And again, another resistance
19:06has come in here. So, again, this
19:09becomes a very attractive place to sell
19:10from, but what happens? Well, you can
19:12guess, the market just drives higher
19:14once again, right? So, this actually
19:17would result in a bunch of losses, and
19:19the biggest problem with this is not the
19:21fact that you're going to lose a few
19:22trades here and there, but it's the fact
19:24that you don't actually understand what
19:26the market is doing because your
19:28analysis is determined by lines you've
19:30drawn on a chart that actually aren't
19:32grounded in any real logic, right? When
19:35we draw a support or resistance level
19:37on, we have literally just drawn a line
19:39that the market's reacted to a few
19:40times. The market doesn't know that this
19:43level is there, and we also don't know
19:45why the market's reacting there. So,
19:47therefore, we don't really have any
19:49context as to what to do if the level
19:52doesn't work. The same goes with trend
19:53lines. Again, these are just lines
19:55you've drawn on a chart, and the market
19:57doesn't even know they're there. You've
19:58just drawn it on, and you're now
20:00reacting to a random line for whatever
20:02reason it may be. Most people don't even
20:05know other than that they were told to
20:06do it in a YouTube video.
20:08So, because we don't have any context as
20:09to what's actually happening underneath
20:11the candles with this style of trading,
20:14it's going to make it very difficult for
20:15us to actually succeed because as soon
20:17as something goes wrong, we can't just
20:19zoom out and realign with the big
20:20picture narrative. We just have to guess
20:23or move with what we think is best next,
20:25and that can result in you getting
20:26whipsawed out of those trades over and
20:28over again in the pattern that I've just
20:31showed you. Truth stands for more
20:32complex approaches to trading like
20:34Wyckoff. At the end of the day, this is
20:36still a static pattern, and when you're
20:38trying to trade these schematics in real
20:40time, you end up thinking things have
20:42happened before they have or joining the
20:44market too late and end up missing the
20:46schematic. These are easy to see in
20:47hindsight, but difficult to trade in
20:49real time because you're relying all of
20:50your trading on a static pattern and not
20:53actually reading into the story behind
20:55the market to determine your ideas. The
20:57same with Elliott wave theory because
20:59the market's not always going to run in
21:01these perfect patterns that Elliott wave
21:02suggests. If you're trying to trade
21:04these more complex strategies, these can
21:06be just as bad as the support and the
21:09resistance and the trend lines and those
21:11basic static patterns as well. Just
21:13because these ones are more complex
21:14doesn't mean they give you any further
21:16context on the market and doesn't mean
21:17they're going to be any easier for you
21:19to trade. And even if you are trading
21:21with the so-called smart money concepts
21:23like structure, liquidity, supply and
21:25demand and imbalances, not fully
21:28understanding how to do it correctly and
21:30not fully understanding the reasoning
21:31why these things are happening is
21:33basically the leading cause of
21:34hesitation end up missing really good
21:37trades or closing them early when they
21:39start to turn around on you instead of
21:40holding them all the way through to
21:42their targets. So, it's very important
21:44that you trade with good concepts, but
21:45it's also very important that you have a
21:47full understanding of the concepts
21:50behind the concepts you're trading so
21:51that you can trade them without
21:53hesitation, fear and doubt. The first
21:55thing that we're going to break down is
21:57Japanese candlesticks. And now, I know
21:58you might already be familiar with
22:00candlesticks, but sit with me through
22:02this because I'm going to be breaking
22:03down how we read individual candles and
22:06how different formed candles can give us
22:08different levels of information. Now, of
22:10course, the candlesticks that we're
22:11talking about are simply the things that
22:13make up the charts that you trade. So,
22:14we have bullish candlesticks. These are
22:17where the open is lower than the close.
22:20So, at the start of, let's say, 1 hour
22:22cuz we're on the hourly time frame
22:24currently, the market opens at this
22:27price. Within that hour, the market
22:29travels all the way up and it closes the
22:31hour at this price. That creates a
22:34bullish candle because throughout that
22:36hour, price moved upwards. It moved in a
22:38bullish direction. Bearish candles are
22:41where the open is higher than the close.
22:43So, at the start of the hour, we opened
22:45at this price and throughout the hour,
22:46we moved down and we closed down here.
22:48Therefore, making it a bearish candle
22:50because throughout that given time
22:52frame, the price moved down. Okay? So,
22:54those are the two types of candlesticks
22:56that we get. Now, these candles are made
22:58up of two parts and this is where things
23:00start to get interesting and very
23:02valuable. They're made up of wicks, the
23:04small sticks that we see coming out of
23:06the tops of the square or rectangle part
23:08of the body, and then we have the
23:10bodies. This is the thing that makes up
23:12the majority of the candle, the actual
23:14colored bit. Could be green and red for
23:16you, or different colors if you've
23:19changed that for yourself and customized
23:20them in the way that I have. So, the
23:22body tells us confirmed price action
23:24within a specified time range. If we are
23:26looking at an hourly time frame,
23:28>> [snorts]
23:29>> the market opens here at the start of
23:30the hour and closes here at the end of
23:32the hour.
23:33If we're looking at a 15-minute time
23:35frame, that simply means the same. At
23:37the start of the most previous 15
23:39minutes, the market opened at this price
23:41and throughout the 15 minutes, it went
23:42up and it closed there. So, it shows
23:45that the price moved upward within
23:46whatever time frame it is you're looking
23:48at, regardless of whether it's the
23:49hourly, the weekly, or the 1-minute, or
23:52anything else in between those. So, that
23:55is the body, confirmed price action.
23:57Now, the wicks show rejected price
23:59action. All this means is, throughout
24:01that, let's say, hour, the market did
24:04actually get up to this level. However,
24:06before the hour closed, the market drove
24:09price back down to this level. When we
24:12see wicks on the lower boundary of a
24:13bullish candle, that means within the
24:15hour after opening at this price, we did
24:18actually attempt to go lower, but the
24:20market participants drove price back up
24:23all the way from that level and threw up
24:25to here before the market closed for
24:27that hour, okay? Now, a bearish candle
24:30is exactly the same, of course, only
24:32this time it means we tried to go up,
24:35then we went all the way down, and then
24:37we ended up closing there, right? So,
24:39the wicks are just showing you price
24:41action that was attempted or temporarily
24:43reached, but that didn't actually close
24:46at during that specified period of time,
24:48whatever time frame it is you're trading
24:50on. So, that is the basics of
24:52candlesticks, but now we're going to dig
24:53into what these candlesticks actually
24:55show in different forms, okay? So, we'll
24:58remove this one for now to keep it
25:00simple
25:01and we'll focus in on the bullish
25:03candlestick for now. Now, when we're
25:04looking at a bullish candlestick, we
25:06want to read the market in two different
25:08ways. We want to read it through the
25:10bodies, okay? And we want to read it
25:11through the wicks. And through both of
25:14these, we are looking for the size and
25:17the speed because these two things,
25:19these two elements here, are going to
25:21give us the insight into how strong or
25:24weak the market is. So, if we're looking
25:26at a bullish candle like the one we've
25:27got drawn on the chart here, this
25:29obviously has quite a large candle body,
25:32right? The body is significantly larger
25:34than the wicks and it shows a clear run
25:36from this level up to this level here.
25:39So, this shows that throughout this
25:41specified period of time, let's call it
25:421 hour, the market was very bullish. The
25:45wicks on this one are equal both sides,
25:49which basically means there isn't clear
25:50rejection happening from one party or
25:52the other. It's basically the natural
25:54flow of the market because we attempted
25:56to go lower, pulled back up, we
25:58attempted to go higher, pulled back
26:00down. We don't have any significance
26:02really being shown to us from the wicks.
26:05So, this would be a pretty strong
26:07bullish candle. Now, the reason that's
26:08important is because when we understand
26:11how strong the market is in one
26:13individual candle, we can then determine
26:16where it's more likely to go in the
26:18following candles, right? So, if we see
26:20a candle that is this bullish and this
26:22strong, it's about medium-high strength,
26:26right? It's not a massively impulsive
26:28candle, but it's certainly not weak. We
26:30would therefore most generally presume
26:32that the more likely following movements
26:34are going to be continuations higher
26:37rather than a break back down through
26:40the low of the candle and beyond.
26:42So, we gain from that that this is
26:44reasonably strong, okay?
26:46Now, if we were to have, for example, a
26:49candle like this with absolutely no wick
26:53on the upside. This is pretty much the
26:56strongest candle that we can get.
26:58The reason for that is, if we open here
27:01and we close here, it means we closed at
27:03the highest possible point the price
27:04reached within that specified time
27:06period. We didn't have any pullbacks
27:08whatsoever and there isn't any visible
27:10wicks.
27:11Now, these are the candles that really
27:14show very clear buyer control. You're
27:16not going to see these as frequently as
27:18candles with, let's say, even a small
27:20wick at the top. But when you do see
27:21them, these are the ones that are most
27:23likely to just impulse straight away
27:25into the following candles. So, in
27:27certain settings, and we will get to
27:29this later, candles like this can
27:31actually be really good to execute
27:33trades from, entering there with your
27:35stop beneath the candle. Now, obviously,
27:37this is all relative to how large the
27:39candle is and where it is in the market,
27:41but this is going to be covered closer
27:43to the end of the course.
27:45For now, all you need to understand is
27:46if a candle has no upper wick and it's a
27:49bullish candle, it's basically showing
27:51incredible strength throughout this time
27:54period, okay?
27:56Now, if we have
27:58a small candle body like this with a
28:00large wick, this completely changes
28:02things.
28:03First thing we want to look at is the
28:05candle body itself. We can see within
28:07this time period, we opened here and we
28:09closed here. So, we didn't make much
28:11movement in terms of actual price
28:13direction. That, if we isolate it to the
28:15body, basically shows that there's not a
28:17lot of size behind that movement. So,
28:19this would be a pretty low strength
28:21candle. It's still bullish to a degree,
28:23but it really didn't get too far.
28:26Now, when we bring the wick into the
28:27equation, that's when things get the
28:29most interesting and this is where we
28:30can draw the most value.
28:32This wick, we have a small wick on the
28:34downside. We say small, but it's still
28:37larger than the actual candle body,
28:39which shows we did attempt to get lower
28:41before going higher.
28:42And we have a massive upper wick, right?
28:45Now, this can tell us pretty much one
28:47thing quite clearly. And of course,
28:49context matters and we'll get into
28:51deeper context throughout the course,
28:53but from one individual candle, if we
28:55break down what this is showing, it's an
28:57open here. It's attempt to go lower.
28:59It's pull back up all the way to this
29:01level. And then when we get here, it's
29:04push all the way back down to this
29:06level. So, this with a large wick above
29:10can often times be seen as a reversal
29:12candle.
29:13Because if we think about what's
29:14happening behind the candle, it's
29:17basically a way to represent essentially
29:20a bit of consolidation that's taken
29:21place, right? So, we start here.
29:24We get all the way up to here. We go all
29:26the way down there at some point and
29:27then we close there. So, the price
29:29action we're actually seeing, if we were
29:30to break this down to a line chart,
29:32would basically be open,
29:34trade a bit lower,
29:36go all the way up like this,
29:38and then come all the way down like
29:41this, right? That is the price action
29:43that we see behind this candlestick if
29:46you were to translate the candle into a
29:48line chart.
29:49Now, what does this say? Well, this says
29:52we're actually looking pretty weak or
29:54we're at a point where we're starting to
29:56reverse, right? Because obviously having
29:58seen this very impulsive top, we've then
30:01reversed pretty much all of the gains
30:02within that specified period of time.
30:05Which shows us, if we go back to that
30:07battle between buyers and sellers, that
30:09buying was strong from this point, okay?
30:12And strong down here as well because we
30:14didn't fail to actually uh build
30:17momentum, right? We of course did indeed
30:19build momentum. But when we got here,
30:21sellers and selling in the market was
30:24incredibly strong.
30:26Strong enough to actually reverse the
30:27majority of the movement that we'd made
30:29inside of this specified period of time.
30:32So, this shows us a point where selling
30:34pressure has stepped into the market in
30:36full force up at this high and created a
30:39massive downward push, which has brought
30:41us back to a very mediocre and not all
30:44too impressive close where we didn't
30:46make much price movement that was
30:47actually confirmed within that given
30:49time frame. So, when we see huge wicks
30:51like this, these are ample sign of
30:53potential reversal because it basically
30:55shows us that buyers took the market
30:57higher and then sellers stepped in and
30:59said, "No, we're not going any further
31:01with this. It's coming back down." Now,
31:03this can take place for a number of
31:05reasons. Maybe people taking profit on
31:07buys on shorter term trades. Maybe
31:09people just seeing the market has
31:11reached a premium price level, right?
31:12And again, this is where the big picture
31:14context matters. But, regardless of what
31:16it was, we absolutely saw a lot of
31:18selling pressure coming in, which means
31:20this can be seen as a likely, not 100%
31:24it's dependent on context, a likely
31:26reversal candle. Okay?
31:28So, that is where the wicks become kind
31:30of detached from the candle body in
31:31terms of the value they provide. Now, if
31:33we were to see a candlestick which had a
31:36small candle body and small wicks like
31:38this side to side, this changes the
31:40equation entirely. Again, let's draw
31:42this out like a line chart. We open
31:44there, we tried to go there, we tried to
31:46go there, and we closed there.
31:48So, we start,
31:49we go higher, we come back down, we go a
31:52bit lower,
31:53and then we come up, and we close here.
31:55That's the line chart behind this
31:57candle. Now, of course, it could also be
31:59this way,
32:00but regardless, the outcome is the same,
32:02right? We went up, we came down, we came
32:05up, and we closed near the open. Or, we
32:07went down, we went up, we came down, and
32:09we closed near the open, right? They're
32:11both showing very, very similar things.
32:14And what this shows, regardless of which
32:15way it went first of all, is indecision.
32:19It's a market that isn't being
32:20controlled right now by buyers or by
32:22sellers.
32:24Because if we saw buyers in control, we
32:26would have seen more upside pressure, or
32:28at least potentially larger downside
32:31wicks where we've actually seen buyers
32:32coming in and driving the market higher.
32:35If sellers were in control, we would
32:36have seen, again, a bearish candle
32:38potentially where we close lower. Or we
32:40would have seen at least a larger upside
32:42wick such as in the case we just broke
32:44down.
32:45But we didn't see either of those
32:46things. We see equal weighted
32:48wicks up and down and a small candle
32:50body, which basically shows a period of
32:52indecision. Buyers couldn't control,
32:55sellers couldn't control, and we ended
32:56up closing around where we opened. So,
32:58this is what we call an indecision
33:00candle. Now, unlike the other two
33:02candles that we've looked at so far,
33:03which either show pretty clear impulsive
33:05control or a reversal in the market
33:08where it's potentially shifting control,
33:10this candle kind of just tells us that
33:13the market's at a point of moving
33:14nowhere, right? So, if we see this
33:17candle, we can't really derive from it
33:19an opportunity to immediately trade. But
33:21what we can do is we can see what
33:22happens next. Cuz let's say we have an
33:24impulsive upward candle like this, well
33:27now we can say, "Okay, after the
33:28consolidation,
33:30buyers have taken control." And so,
33:32[snorts] pulling back to here can be a
33:34good point to buy from, which is where
33:35we would look for continuations higher.
33:38But if we were to see instead that this
33:41market went and closed lower, that can
33:43tell us that sellers are in control. And
33:45again, what that shows us is a
33:46consolidation that ended with sellers
33:48taking control of the market. From
33:50there, we would generally look for pulls
33:52back to then trade out of on the
33:55downside because after the indecision,
33:57basically the next movement is where we
33:59confirm who is actually in control.
34:02It's like if we were to get to the top
34:04of the move
34:06and then stall out, that's what's
34:08happening with this candle, right? And
34:10the market's now deciding who is going
34:11to take control of this market. If it's
34:13sellers and it goes lower,
34:16then we look to sell cuz the indecision
34:18is over. If it's buyers and it goes
34:20above, then we look to buy because the
34:23indecision is over. That's what these
34:25candles show, right? Now, you can get
34:27many different forms of these candles,
34:29but they all are following a formats. A
34:31candle like this shows the same thing.
34:34Even a candle like with a a wick up or
34:36down like this, if the candle body is
34:38really, really small and the wicks are
34:39generally or relatively equal,
34:42it's basically going to be a phase of
34:43indecision, okay? So, those are the
34:45different types of candles we can get
34:46realistically. We can get large candle
34:48bodies with little to no wicks. They
34:50show clear buyer control and if it's
34:53bearish, of course, clear seller
34:54control.
34:55The smaller the wick is on that one in
34:57the direction of the market, then the
34:58more bullish that's generally going to
35:00be. So, if we were to have a candle like
35:02this, yep, that's pretty bullish, but of
35:05course, this is more bullish because
35:06there's no resistance from sellers at
35:08all. We're basically seeing a phase
35:10where buyers fully control the market
35:13and sellers didn't even push back one
35:14time, right? Which shows clear, clear
35:17buying intent.
35:18Then we have candles with large wicks.
35:21We could do this one, for example, this
35:22time, where we have a very large wick on
35:24the downside and a very small wick on
35:26the upside. Now, we opened here, we
35:29tried to go higher, we failed, we went
35:31all the way down here, and then we drove
35:32all the way back up and closed around
35:34the open. This shows an area where
35:36buyers have stepped in in massive force
35:38in these lows, driving the market
35:40significantly higher. So, again, this is
35:42a reversal-style candle, where we're
35:44seeing sellers losing control to buyers
35:47and buyers closing the market back
35:48around where it opened. This can be
35:50first sign of potential reversal and can
35:53provide opportunity to buy from if the
35:55market then returns upwards, okay?
35:58So, those are the three different types
35:59of candles, strong impulsive candles,
36:02reversal candles, and indecision
36:04candles.
36:05Now, they will come in many different
36:06shapes and sizes, but what I'm trying to
36:08do here is explain what's happening
36:10behind those candles to you, so you can
36:12make more sense of what it is you're
36:14actually looking at. If we take this
36:15over to a chart,
36:16let's have a look at what we've actually
36:18got going on here.
36:19So, through this phase of price action,
36:21we can see we have lots of these bullish
36:23candles with little to no wicks at the
36:25top, right? Now, we do have a wick at
36:27the top of this one showing potential
36:29reversal, but then what do we get? We
36:31get that kind of indecision. Now, this
36:33obviously shows some pushback from the
36:35downside, but the tiny candle body tells
36:37us that no one is fully in control yet.
36:40It's first sign of reversal. The next
36:42candle that's incredibly impulsive after
36:44that kind of leads the way into the
36:45continuation of the upside, all right?
36:48So, when we see a phase like this where
36:50we have lots of bullish candles where
36:52there are little to no wicks at the top,
36:54and we're seeing the size of these
36:55candles progressively get larger, this
36:57is of course a very impulsive bullish
36:59bit of price action.
37:01Now, you can actually see
37:03in regards to the indecision around the
37:05tops and the bottoms of almost every
37:06move that we get in the market, like
37:08here, we have indecision candles. So, we
37:10have clear buyer control, and what we're
37:12seeing here is basically buying is very,
37:15very willing at these levels.
37:16Buyers are willing to take up the offers
37:18of the sellers at higher prices, and
37:20then we get to this point, and this is
37:21kind of a point where buyers step back
37:23and say, "Hmm, I am not sure whether we
37:26want to be buying at this price."
37:28Then after the price falls a little bit
37:30where sellers are basically saying,
37:32"Okay, we'll lower the price if you
37:33buy." We then reach a fair value point
37:36again where buyers are happy to start
37:38taking up the offers, right? So, that's
37:40actually what's happening behind the
37:41candles you see, but each one of those
37:43candles tells a story. Now, here's a
37:45good explanation as to the indecision
37:46candles I showed you, too. We don't know
37:48100% when we get here whether the
37:50market's going to go up or down, but if
37:52we see the market break back over above
37:54the indecision phase, that basically
37:56tells us that buyers are once again in
37:58control.
37:59So, that is the way that we view
38:00candles, and that is the way that you
38:02can start to read the market by reading
38:04the candles and the story behind them.
38:06It's far from the last you're going to
38:07see discussed about candles in this
38:10class, but we are going to return to
38:11talk about candlesticks later on when
38:13we'll discuss momentum, because that's
38:15when they become more relevant to
38:17everything else that we need to discuss.
38:18But for now, we're going to move on to
38:20market structure. So, this is what I
38:23call the central concept of the market.
38:26If you don't get your market structure
38:28right, you are going to find it very
38:29difficult to get anything else right,
38:32okay? So, let's start breaking this
38:34down.
38:35Now, market structure suggests, and it's
38:38just an objective fact, that the market
38:40runs in realistically three different
38:42phases.
38:43We have uptrends, where the market is
38:45moving to the upside.
38:47We have downtrends, where the market is
38:49moving to the downside. And we have
38:51consolidation, where the market is
38:53moving sideways, and neither creating
38:56clear upside or downside movement. In an
38:58uptrend, we determine the direction
39:01by the highs and the lows that are
39:03created.
39:04And in a downtrend, too, right? So, what
39:06I'm drawing on here are levels that show
39:09the highs that have been created in the
39:11market,
39:12and the breaks that are happening
39:14through those highs that were printed in
39:16the market.
39:17These levels are what we call breaks of
39:20structure. So, you'll see these marked
39:22as BOS on my charts, okay? A break of
39:26structure is simply a point where
39:28structure has broken through a previous
39:30high or a previous low. So, we would
39:33have a break of structure here, where
39:35the market has broken through this
39:37previous low.
39:39And [snorts] what a break of structure
39:40shows is a continuation of a trending
39:44direction or a reversal in a trending
39:47direction, okay?
39:48So, let's focus on just the upward trend
39:52for now.
39:53Inside of this trend, we have higher
39:55highs. So, each high that we see is
39:59higher than the previous that was
40:00printed, okay?
40:02So, here we have our first high, then we
40:03have a higher high, because this high
40:06was higher than this high.
40:08And then we have another higher high
40:11in around this level here, when the
40:13market kind of reached its peak.
40:16So, during an uptrend, we will see the
40:17market printing higher highs.
40:20Now, we will also see the market
40:21printing higher lows.
40:23So, after each of these highs has been
40:26printed, we have a pullback movement.
40:28This pull down is basically where we
40:30start to see the buyers become a little
40:32bit exhausted and the sellers take a
40:34little bit of control.
40:36Then, we print a higher low.
40:39The higher low is just a low that is
40:42higher than the previous one, right?
40:43It's pretty self-explanatory.
40:46Now, providing the market stays in a
40:48flow of higher highs and higher lows,
40:50that will continue an uptrend. That's
40:54basically what determines that the
40:55market is indeed trending up. And while
40:58we're in an uptrend, we should only be
40:59looking to do one thing. And that is
41:02going to be buy.
41:04We don't want to sell the market if it
41:06is printing higher highs and higher lows
41:08consistently. We only want to buy in
41:10this market because we can see that the
41:12market is clearly driving up.
41:15Now, during a consolidation, we'll
41:17actually see the market create higher
41:18highs and lower lows. So, we'll actually
41:21see a bit of a mess going on where we
41:24don't have this clean upward trending
41:26price structure. We actually have a push
41:29up, then a pull down, then a push up,
41:30then a pull lower, then a push higher,
41:32and a pull lower, and so on. It will
41:34basically be impossible to make sense of
41:36which way this market is going whilst
41:38the consolidation is happening because
41:40it's not going up and it's not going
41:42down. It's just whipsawing and trading
41:44sideways.
41:46Now, sometimes consolidation ranges are
41:47going to be very clear and obvious. They
41:49will just be very confined like this,
41:52for example.
41:53And other times, they will be a little
41:55bit trickier. They will have expansion
41:57where, like this example, we make lower
42:00lows and we also make higher highs and
42:03everything's just a bit of a mess.
42:05But, the point through consolidations is
42:07we just do not trade them. And if we are
42:09going to trade them, we do it by trading
42:12the range. So, looking from sells from
42:14there to here and buys from there back
42:17to there. But, this stuff we will get
42:20into when we talk about a concept called
42:22liquidity. Okay?
42:24The general rule surrounding
42:25consolidations, if you want to trade
42:27safe and effectively,
42:29is simply just not to trade because
42:31through an uptrend while we have clear
42:33directional bias, in a consolidation we
42:36don't have that. So, it's better to just
42:38not trade in these ranges and wait for a
42:40clear trend to be taking place. Okay?
42:43Then, [snorts] the third type of trend.
42:46That is the downtrend.
42:48A downtrend is determined in the same
42:50way that an uptrend is, except this time
42:53we're looking for lower lows. So, that's
42:55what that stands for.
42:57And we're looking for lower highs.
42:59So, we're looking for a point in the
43:01market where every high that is being
43:03printed and every low that is being
43:05printed is lower than the previous.
43:08Okay? So, our breaks of structure this
43:11time are actually on the downside. The
43:13breaks of structure come when we see a
43:14low breaking to a new low or a lower
43:18low, right? And providing the market
43:20continues to break down in this fashion
43:23with new lows being created and new
43:25lower highs being created, that is a
43:27market that is in a downtrend. Now, I'm
43:30pretty sure you already know where this
43:31is going. During a downtrend, we should
43:33only look to do one thing and that is
43:36going to be to sell.
43:39So, in an uptrend where the market is
43:41printing very obvious bullish price
43:43structure, where we are seeing higher
43:45highs and higher lows created, we buy.
43:48Through a downtrend where lower lows and
43:50lower highs are being created, we sell.
43:53And through a consolidation where it's
43:54not clear in which direction the
43:56market's going, we do nothing. Okay?
43:59Those are the three general phases of
44:01market structure and these are pretty
44:03much the only things you need to deeply
44:05understand to make sure you're always
44:07moving in line with the market. Trending
44:09moves are made up of two different
44:11parts.
44:13We have impulse movements and we have
44:15correction movements.
44:18Now, an impulse movement is the pro
44:19trend move, the overall direction,
44:22right? So, in an uptrend, the impulse
44:24moves are the moves that have created
44:27new highs. In a downtrend, if we were
44:29just to flip this real quick, the
44:31impulses are the movements that have
44:33created new lows, okay?
44:35Now, the corrective movements then are
44:37the pullback moves or areas where the
44:40market has short-term shifted down
44:43against the overall trending direction.
44:46Because trends are never linear. We
44:49never see price action like this without
44:51ever pulling back. What we see is a
44:53series of ups and downs inside of a
44:56trend that creates the overall flow,
44:59right? This is what prints the higher
45:01lows and it's what prints the higher
45:03highs as well.
45:05So, in a movement like this, the
45:06impulsive moves are the ones that create
45:09new highs and the corrective moves are
45:11just the pullback moves where basically
45:13we see some shorter-term buyer
45:15exhaustion and some short-term seller
45:17control coming in.
45:19Now, corrective moves happen because
45:21buyers are taking profits and also
45:24because short sellers think that the
45:26market's reached a premium price that
45:27they think the market will sell off
45:29from, right? Now, inside of a strong
45:31trend, the corrective moves never really
45:34get too far. They are always going to
45:36result in an impulsive move back in the
45:38overall direction.
45:41Now, to explain how to differentiate
45:42between impulses and corrections, it all
45:44comes down to the break of structure,
45:46the higher lows, and the higher highs,
45:48right?
45:49So, if we focus in for now just on this
45:52first bit of the trend,
45:54we create a higher high and then we pull
45:56back down and we create a higher low.
45:59Now, to create a higher low, we simply
46:01have to stay higher than we were at the
46:04previous low, right? So, if our first
46:07low is here, uh higher low is here,
46:10this higher low is higher than the
46:12previous one,
46:13which means the movement here, the down
46:16move, has not broken through any
46:18structural points, right? All we've done
46:20is we've created structure move number
46:22one, small pullback, we never got under
46:24that low, and then when we break through
46:27into the new high when the break of
46:28structure comes in, that's what
46:30validates this as the higher low
46:32and validates this move as the
46:35corrective move, okay? So, to show you
46:37that here, when we create a low without
46:41getting lower than the previous, and
46:43then we break through structure here,
46:44creating a new higher high, this break
46:48validates the higher low.
46:51And therefore, with a validated higher
46:52low, showing us that this movement
46:55neither got under new structure or got
46:57over any new structure, uh the
46:59corrective move, that's what validates
47:01this as a correction.
47:03So, an impulse move is always the move
47:05that breaks the structure. An impulse
47:07move is breaking through a previous high
47:10or low into a new high or low.
47:13A corrective move is staying within the
47:15confines of the previous leg of
47:17structure. Now, a leg of structure is
47:19defined from the low to the high, like
47:21so.
47:22So, this becomes a leg of structure,
47:24okay?
47:26If the market fails to get above or
47:28below that level on a corrective move,
47:30well, it's going to be below in this
47:31case,
47:33like this,
47:34okay? If we did that,
47:36then this movement would become an
47:37impulse because we would have broken
47:39structure, we would have created a BOS
47:41at this point. But because we didn't do
47:43that and we stayed within the confines
47:45of the previous leg of structure,
47:48then this move down simply becomes a
47:50correction. And then when the next move
47:52takes off, we see the break of structure
47:54coming in there, that validates this
47:56move as an impulse again.
47:59Then from there, if we had a pullback
48:01movement, providing it stays within the
48:03confines of that current leg of
48:04structure, which is that low to that
48:06high,
48:07then this would just be a corrective
48:10move, and the impulse would come when
48:12structure breaks again. Okay?
48:14So, our goal, when we are trading in an
48:16uptrend, is going to be to look for our
48:19buying opportunities on the corrective
48:21moves. We want to be buying here,
48:23somewhere, right? Ideally, as close to
48:26the low as possible.
48:28The reason we want to buy on the
48:29corrective movements is because we get
48:31the best risk reward. Now, that
48:33basically means we get to risk our set
48:36amount and maximize the profit potential
48:38we get because the market has more room
48:40to move.
48:42So, if we were looking to buy
48:44right now, we think this market's going
48:46to continue, we wouldn't buy there
48:48because in order to have a safe stop
48:50loss, we may have to put our stop loss
48:51down here cuz the market realistically
48:53can pull back anywhere inside of this
48:55range before going higher.
48:57So, if we were to buy at the top and we
48:59were to put our stop into the low, we
49:01would have to see pretty significant
49:03price movements just to make a 1x of our
49:06money. So, if we risked $100, it'd have
49:09to get very far just to make $100 more,
49:12and we have quite a lot of drawdown,
49:14basically dead space where the only
49:16thing we can do inside of this is lose
49:18money, right?
49:20Now, opposing that, of course, if
49:21instead we are able to buy on a
49:23correction, so say the market pulls back
49:26down here. If we're able to buy here
49:29and we have our stop loss there, well,
49:31now our entry is much lower, which means
49:33the same amount of risk opens the doors
49:36to a three, a four, or a five x on the
49:38way up because simply just returning to
49:41the previous high would actually give us
49:432.5 times our money, basically. If we
49:46risk $100 over this price move, then the
49:49run from there up to there is going to
49:51be around $250 of profit. So, it's a lot
49:54more valuable for us to buy on the
49:56pullbacks. Now, exactly how to do that
49:58will become very clear as we go through
49:59the different concepts inside of this
50:01course, but that's what you need to know
50:03for now.
50:04Corrective moves are always going to
50:05happen. They don't tell us anything new
50:07particularly about the trend because if
50:09they don't break through previous lows,
50:11then they're not going to change the
50:12overall direction of the market, but
50:14they are really good for us to buy from.
50:16And in a selling case, they're really
50:18good for us to sell from because we
50:20either get a premium price to sell
50:23or we get a discount price to buy before
50:26the next impulsive move. We've discussed
50:28impulses and corrections, and we've
50:30discussed the direction of trends being
50:32determined by highs and lows. So, if we
50:34were looking at this market, what would
50:35we see? Well, we have a high back here,
50:37okay?
50:38Then we have a low
50:40just here.
50:41And we have a lower high
50:44just here,
50:45which is validated by the fact that the
50:48market then broke down at this point
50:51to create a break of structure
50:54and therefore
50:56a lower low.
50:57So, if we mark out this trend so far,
51:00first off, our impulses and corrections,
51:03we have an impulse, okay?
51:06Then we have a correction. Why is this a
51:08correction? Because it didn't break
51:09through the previous high. Therefore, it
51:11is confined within the previous leg of
51:14price action, okay? Which is this run
51:16from that low to that high.
51:19We pull back on the corrective move, and
51:21then we have another impulse. Why is
51:23this an impulse? This is an impulse
51:25because it did break through a low.
51:28So, the impulsive movement has broken
51:31through the previous leg of price
51:33action, creating a new leg of price
51:35action, and that new leg is an impulse,
51:38all right?
51:40So, what would we expect to happen from
51:41here generally based on everything that
51:43we've discussed so far?
51:45Well, the general approach would now be
51:47to look for a corrective move. So, we
51:50would be looking for something like
51:52this.
51:53And then from there, we would look for a
51:56new impulse where we would see the low
51:58break again and a continuation of the
52:00downside price action, right? So, we are
52:03looking to see the market get somewhere
52:05into this range
52:07>> [snorts]
52:07>> and then sell back down to create a new
52:09low.
52:10So, before we continue, let's just mark
52:12this. We have our high.
52:14We have our low. So, we'll just keep
52:17these simple for now. Then we have a
52:19lower high and we have a lower low.
52:24And that is the current trend. So, we
52:26have confirmed that we are in a
52:28downtrend.
52:30All right. So, from here, we see the
52:32market trades back up. Okay, this is
52:34what we see as a corrective move.
52:36Remember, providing we stay beneath this
52:38high, we are in a corrective move only.
52:42Then our corrective move completes,
52:44which is that movement from
52:47the low towards here.
52:49We only know where this high ends once
52:52we have validated with the new impulse,
52:54right? So, when we get to this level and
52:56we form a new lower low, that validates
53:00the lower high. So, we see this lower
53:02low, we validate the lower high, and we
53:05know
53:06that this is now our corrective move,
53:08the pullback up,
53:09and this is our new impulsive move,
53:13okay? So, we have
53:15impulse, correction, impulse,
53:17correction, impulse. And we have our
53:19high, our low, lower high, lower low,
53:21lower high, lower low. So, this market
53:23is continuing this downtrend nicely. All
53:26right.
53:28So, you're seeing those concepts come
53:29together now.
53:30Now, in pushing through this low, we
53:32have created again another break of
53:34structure. So, we would mark that BOS.
53:37And now we have our new leg of price
53:39action, which is going to be this high
53:41to this low. So, we can now mark this
53:43range and we again are looking for a
53:46break beneath and we're looking for the
53:47market to stay beneath this high in
53:50order to continue the downtrend, right?
53:52So, our new leg of price action is now
53:54here.
53:55If we were to
53:57pull back inside of this range without
53:59getting above this high, and then we
54:01were to close that, this would again be
54:03a correction impulse and that would form
54:05a new lower high there.
54:07And if the market was to get over this
54:09high, then that would actually an
54:11impulse in the opposite direction
54:13because at that point we would create a
54:15break of structure here, which would
54:17then mean we would expect correction and
54:19impulse higher.
54:21That's a reversal and we're going to
54:22talk about that in just a minute.
54:25>> [snorts]
54:25>> So, at this point we kind of have
54:26continued down. I would just not
54:28classify this as a full corrective
54:30movement. Therefore, our lower low would
54:33still be continuing to be formed
54:35essentially at this point in time,
54:36right? Again, at this point we haven't
54:38had a strong corrective move. So, I
54:40would just consider this
54:42the full swing move, right? To see a
54:44correction, we want to see an obvious
54:46pullback move. If we take a look at what
54:48we have here, this [snorts] is all one
54:50leg of price action. This is the
54:51corrective move. It's very clear and
54:53obvious. This is one leg of price
54:55action. This is the corrective move.
54:58This is one leg of price action. This is
55:00the corrective move. We want to see a
55:01notable pull away to actually validate a
55:04new lower high.
55:05We really want it to have that, you
55:07know, that standard zigzag pattern,
55:09right? This is how we know that we're
55:11looking at true corrective moves.
55:13So, we're seeing the market pull back up
55:16and if we let it run forward a bit more,
55:18we [snorts] see that it has failed to
55:21close over the high here. So, again
55:23creates a new lower high and then it has
55:27closed successfully beneath the low. So,
55:29now we've validated a new lower low. We
55:32mark the break of structure. We mark the
55:34lower low. Obviously, this one can still
55:36continue to form if it wants to, but for
55:38now we know that this structure is
55:40validated and we have a new lower high.
55:43So, providing the market stays under
55:45this high, we remain bearish, right? And
55:47from there, we would expect a pullback
55:50and then continuation in the form of a
55:52correction and an impulse and a lower
55:55high
55:57and a lower low, right? That is trends
56:00in a nutshell. That's the basics of
56:02everything I've showed you so far in the
56:04context of a down trend. Now, an uptrend
56:06is simply the opposite, but the same
56:08exact concepts just flipped the other
56:10way. Looking at higher highs and higher
56:12lows instead. Okay, so a market is not
56:14going to trend up or down forever. There
56:17are going to be cycles in the market. We
56:19have some uptrends, we have some
56:22downtrends, we have more uptrends, we
56:24have consolidations, we have more
56:26downtrends, right? The market's moving
56:28cycles through different phases. So, we
56:30need to understand when to let go of a
56:32bias and when the market is telling us
56:34that it's changing direction. To do
56:36this, it's very simple.
56:39In an uptrend where we have a higher
56:41highs and impulsive moves and we have a
56:43higher lows created by corrective moves,
56:45the reason we know they're a corrective
56:47moves is because the market didn't trade
56:49through the low, right? So, we know this
56:52is a corrective move and a higher low
56:54because the market didn't get through
56:56this level.
56:58As long as it stays within the leg of
56:59price action, so within the impulsive
57:01leg, anywhere inside of here, it's fine
57:03to continue trading this bullish because
57:05we know that is still a corrective move
57:07in an uptrend. The impulses are still
57:09driving to the upside. We're still
57:11forming higher highs and higher lows.
57:13So, to validate a reversal or to
57:16identify a point where the market is
57:18changing direction, we just keep an eye
57:20on the lows for an uptrend, right? If
57:23we've got this higher low, anything that
57:25happens above this level is simply a
57:27corrective move, of which we would
57:29expect an impulse to follow from that.
57:32However, if we are to see the market go
57:35through this low,
57:37then this changes the picture. Because
57:39what this does is it shows us the market
57:41is no longer structurally moving in
57:43higher highs and higher lows. And what
57:45we've actually printed instead is a
57:47break of structure to a lower low.
57:51So, by breaking down like this through
57:53the higher low, we create a lower low,
57:56which then sets in motion the beginning
57:58of a downtrend.
57:59Because when we talked about downtrends
58:01and in that example we just showed, what
58:02do we expect to see? Well, after we
58:04create a lower low, we expect a
58:07corrective move to print a lower high.
58:10And after that lower high is printed, we
58:12expect an impulsive move to break the
58:15structure again and print a new lower
58:18low, okay? So, that is what a reversal
58:21looks like in the market. It happens
58:23when an impulsive move is followed
58:25immediately by another impulsive move,
58:28but in the opposing direction.
58:30Basically, instead of a correction where
58:31we stay above the previous low, we
58:33managed to close beneath. That then
58:35becomes its own impulsive move lower,
58:38and from there we can expect a
58:39corrective move higher and another
58:41impulsive move lower.
58:43Now, this happens the opposite way, too,
58:46right? We have in a downtrend, if the
58:48market impulses through a lower high and
58:51creates a higher high, that is the first
58:54sign that this market is turning around.
58:55Because, of course, in an uptrend, we
58:57expect, if we do manage to get through
59:00into a higher high, we expect a
59:02correction, a higher low, and an impulse
59:05into a new higher high, okay?
59:07So, that is how all of this works. Now,
59:10reversals are actually quite simple to
59:11understand, as you can see. We're
59:13basically looking for the point where
59:14the trend gives way, and we end up
59:17seeing an impulse lower. As soon as this
59:20previous low goes, it basically tells us
59:23that the market is reversing, and we can
59:25start
59:26getting rid of buy ideas and start
59:28looking for sell ideas instead, okay?
59:31That is how we spot reversals. All
59:34right, so let's see what that looks like
59:35on a real chart then. We have here
59:37EUR/USD, a downtrending market, okay? We
59:40are forming lower lows and lower highs
59:41consistently.
59:42We're seeing those break of structures
59:44come through. And if we're to mark on
59:46the structural levels, you can see I'm
59:48putting on the breaks of structure, the
59:50impulsive downward moves, right? So, we
59:52have impulse, we have impulse, we have
59:55impulse.
59:56These are the movements to the downside,
59:57and then the corrective movements are
59:59like these movements that we're seeing
1:00:01throughout this trend,
1:00:03which would leave our most recent higher
1:00:05high, or lower high should we say, at
1:00:07this level, okay? So, this is the point
1:00:09of which if we see the market stay
1:00:12underneath that, we would be looking to
1:00:14sell corrections. But, if the market was
1:00:17able to get up over this level, we would
1:00:20then presume to see it, as this would be
1:00:22an impulse, a correction into another
1:00:25impulse, and then a continuation of an
1:00:27upside trend, right? So, all it takes to
1:00:30shift the trend, and this is nice and
1:00:31simple, is for the candles to go and
1:00:34close above the previous high, okay? So,
1:00:37you can see that trending markets are
1:00:39pretty simple. While it's moving down,
1:00:42we sell with it. And if it shifts, we
1:00:45just immediately look buy side, all
1:00:47right? So, let's see how this market
1:00:49progressed. We see the market drove up.
1:00:52Could potentially still be a corrective
1:00:54move here, but then when we break above
1:00:56at that point, that creates the impulse,
1:00:59which now shifts this market from a
1:01:01downward trend
1:01:03into an upward trend, right? This break
1:01:06then sets in motion, we'd be looking for
1:01:07corrections and continuations. Now that
1:01:10we've shifted to the upside with this
1:01:12break of structure, okay? So, I still
1:01:14just call them breaks of structure, cuz
1:01:16that's what they are, nice and simple. I
1:01:18would then
1:01:19be looking for correction. Now, this
1:01:21could be the correction, We'll see
1:01:22whether it closes and then we'll be
1:01:24looking for impulses further from there,
1:01:27okay?
1:01:28So, running this market forward,
1:01:30we see we get another large impulse,
1:01:32pullback, correction, and another large
1:01:35impulse there as well. So, yeah, we're
1:01:37seeing here this trend basically in
1:01:39action, right? You see the downward
1:01:41trend, lower lows, lower highs, and
1:01:43breaks of structure to the downside.
1:01:45Then you see the break up creating an
1:01:47impulse, and then we have correction,
1:01:49impulse, correction, impulse, and so on.
1:01:52That is what a reversal looks like in
1:01:54the markets now.
1:01:56This is an incredibly aggressive
1:01:57impulse. They're not all going to be
1:01:59like this, okay? We're not always going
1:02:00to see this level of momentum behind the
1:02:02reversal moves.
1:02:04But, long story short, you know what
1:02:06you're looking for. It's going to be to
1:02:08see a bullish trend shifting to bearish.
1:02:11We take a look at the low, and if that
1:02:13low breaks, that creates an impulse,
1:02:15then we look for correction and sell. On
1:02:18a buy side idea, it's just the opposite,
1:02:20okay? We mark out the structural high,
1:02:23okay? We mark out the structural high,
1:02:25and then if the market gets back over
1:02:26that level, that creates an impulse, and
1:02:29then we look for a correction down and
1:02:31an impulse higher, right? That is
1:02:33reversals. Okay, so those are the basics
1:02:36of market structure. You've seen the
1:02:38uptrends, downtrends, consolidations,
1:02:40reversals, impulses, and corrections.
1:02:43Now, we're going to go one step deeper
1:02:45to look at internal versus external
1:02:47structure, okay?
1:02:49Now, we have
1:02:51inside of every trend, smaller trends
1:02:53taking place if we are to drop down time
1:02:55frames.
1:02:57So, let's say this black line that we
1:02:59can see, the standard impulse correction
1:03:01flow, is the 4-hour time frame.
1:03:04Now, inside of this 4-hour uptrend that
1:03:07is quite clearly showing impulses and
1:03:08corrections,
1:03:09we have smaller
1:03:11downward trends and upward trends taking
1:03:13place on, say, the 30-minute time frame,
1:03:16right? So, because time frames are
1:03:19fractal and they're going to show their
1:03:21own trends, their own patterns,
1:03:22regardless of what time frame you look
1:03:24at, we're always in a state where there
1:03:26are trends inside of trends. Now, these
1:03:28can be traded uh using topics that we
1:03:31call substructure versus swing
1:03:32structure, which we'll get into soon.
1:03:35But for now, I want to talk through the
1:03:36basics of this and also help you to
1:03:38avoid some mistakes that I see people
1:03:40making all the time.
1:03:42Right. So, if we have trends inside of
1:03:44trends, okay, the 30-minute and the
1:03:454-hour. One of the most common mistakes
1:03:48people make when it comes to structure
1:03:50is they will see a level like this, for
1:03:52example, break. One of the internal lows
1:03:55breaking.
1:03:56And they will presume that because we've
1:03:58broken down into a lower low at this
1:04:00point, we should sell with the
1:04:03anticipation of a full-blown market
1:04:05reversal.
1:04:07Now, the reason that this is a mistake
1:04:08is because although yes, this 30-minute
1:04:10trend has shifted bearish, when we take
1:04:13a look
1:04:14at the 4-hour time frame, we see the low
1:04:16to the high, okay? So, those two levels
1:04:18from here through to here,
1:04:21these are still intact, okay? This break
1:04:24hasn't changed anything about the larger
1:04:274-hour trend. In fact, all it does is
1:04:30kick off a potential correction before
1:04:32we continue trading upwards again.
1:04:35So, while you can trade these breaks,
1:04:38the internal structure breaks, you have
1:04:40to understand that this is a smaller
1:04:42trend inside of the larger trend. And
1:04:45the larger trend is generally going to
1:04:46take precedence over, you know, which
1:04:48one's more accurate. So, if we are to
1:04:51trade internal structural movements like
1:04:53this one, we should only be looking to
1:04:55trade down somewhere within the 4-hour
1:04:58swing leg. We shouldn't be looking to
1:05:00take this market further than that leg.
1:05:03So, we should not look for that.
1:05:05The reason for that is, of course, that
1:05:07the 4-hour trend is still indeed intact.
1:05:10We have impulse, and so far, all we're
1:05:12doing is creating a correction.
1:05:14The only reason we would look to sell
1:05:16through this low is if we first of all
1:05:18traded through this low. Now, this would
1:05:21confirm a bearish trend and then we
1:05:23could look to pull back and sell. But
1:05:25because the market has maintained above
1:05:27this low up until this point, then we
1:05:30shouldn't be looking for a significant
1:05:31downward moves.
1:05:33Now, the same goes when the market
1:05:35starts to shift back up. We can actually
1:05:37use this as a good point of information
1:05:40to start looking for our potential buys,
1:05:42right? Because we have the impulse, we
1:05:44have a correction, and when the market
1:05:46on the 30-minute or the lower time
1:05:48frame, whatever it may be, starts to
1:05:50shift bullish again out of a corrective
1:05:52move without taking out the low of the
1:05:554-hour structure, then that creates the
1:05:58confirmation we'd want to see that says,
1:05:59"Okay, the 30-minute now moving bullish
1:06:03is aligning with what we see on the
1:06:044-hour, which is bullish." So, now we
1:06:07have agreement across time frames and we
1:06:09do this by using kind of these smaller
1:06:11trends inside of the bigger trends. And
1:06:13when the smaller trend agrees with the
1:06:15bigger trend again, that is basically
1:06:18the best probability point we can get to
1:06:21start buying or selling into a market
1:06:23depending on which way it's going,
1:06:24right? So, the key points to think about
1:06:27here are every trend is going to have
1:06:29smaller trends within it. The 4-hour
1:06:31will have 30-minute trends in it. The
1:06:3330-minute will have 5-minute trends in
1:06:35it. The 5-minute may have 1-minute
1:06:37trends in it. You're always going to see
1:06:38this flow where there are smaller trends
1:06:40inside of the larger trends. And the
1:06:43important thing to remember is that the
1:06:45bigger trend that you found your ideas
1:06:47on, let's say you're analyzing here on
1:06:49the 4-hour, this trend of impulse,
1:06:52correction, impulse is always going to
1:06:54take precedence over the smaller trends.
1:06:57The smaller trends can be traded in
1:06:58their own fashion and again we'll get
1:07:00into just how we do that, but you should
1:07:02never look to take the smaller trend
1:07:05movements past the lows of the larger
1:07:07trend, right? So, if you're selling here
1:07:09on the 30, you have to understand the
1:07:11market is likely to react from somewhere
1:07:14inside of the 4-hour leg and continue
1:07:16trading up. Rather than what you're
1:07:18probably hoping for, which is for it to
1:07:20break down into a full-on bearish
1:07:23movement.
1:07:24So, before we come back to talk about
1:07:26swing and substructure, we're going to
1:07:28show an idea of this on a chart and I'm
1:07:31going to present to you a couple of the
1:07:33extra mistakes that people make when it
1:07:35comes to trading internal over external
1:07:37structure. So, here we have a downward
1:07:39moving market on GBPAUD. And
1:07:42realistically, marking the structure up
1:07:44in the swing structure pattern or the
1:07:46external structure pattern, if we view
1:07:48this as the simple waves that we have,
1:07:50we have one large bearish impulse. Then
1:07:53we have a bullish correction, which
1:07:56fails to break through any previous
1:07:57highs, therefore continuing the bearish
1:08:00impulses down and confirming this to be
1:08:03a downtrend, all right?
1:08:05So, if we have a downtrend in action and
1:08:08we understand that the structural high
1:08:10of the previous leg of movement sits
1:08:12around this level here,
1:08:14then we want to make sure that we are
1:08:16not looking to take the market past this
1:08:19high.
1:08:20If it happens, yes, that confirms
1:08:22reversal and allows us to trade higher.
1:08:24But until that happens, we should be
1:08:26looking to sell, okay? And we understand
1:08:29the market can run anywhere inside of
1:08:31this leg of price action before
1:08:33reversing. It could come up to here.
1:08:37It could go all the way up. As long as
1:08:39it stays underneath this high, the
1:08:41market remains bearish because the price
1:08:44structure is telling us that the sellers
1:08:46are still in control.
1:08:48So, inside of this bigger picture trend
1:08:51that we've just drawn out, you can see
1:08:52that there are smaller movements
1:08:54happening, which basically create their
1:08:56own trends within. This is that kind of
1:08:58let's say 15-minute inside of 30-minute
1:09:01or hourly trend that we see, right? We
1:09:04have all of these little price movements
1:09:06creating its own trend. But when we
1:09:08really just factor everything as simple
1:09:11waves, we've got one run lower, one
1:09:13corrective move, and one run lower
1:09:15again.
1:09:16Now, that's something you do have to
1:09:17work on understanding is viewing
1:09:19structure as waves. When I say that,
1:09:22you're really just looking for
1:09:24the direction down, the pullbacks, and
1:09:26the direction down. You're not digging
1:09:28into every tiny little movement that's
1:09:30taking place. You're trying to
1:09:32understand the general bigger picture
1:09:34flow.
1:09:35So, if we were to look at this as a line
1:09:37chart,
1:09:38we have quite simply a big impulse. We
1:09:40bottom out there, we pull back, we top
1:09:42out there, and we impulse down, right?
1:09:44So, average these out into waves, that's
1:09:47how you read the bigger picture
1:09:48structure.
1:09:50Now, again here on the line chart, you
1:09:51can see there are indeed loads of
1:09:53smaller these internal structure moves
1:09:56taking place within the bigger picture
1:09:59trend that we've got, right? So, that's
1:10:00the internal structure.
1:10:03Now,
1:10:04obviously at this point we know
1:10:06that the market should remain bearish
1:10:08providing it stays underneath this high.
1:10:10So, the one mistake I want you to make
1:10:12sure you do not make is when you see a
1:10:15internal structure break taking place,
1:10:17you treat that as reason to trade all
1:10:19the way through the swing structure or
1:10:22the external structure.
1:10:24So, for example, a lot of traders, they
1:10:25will see this high break, and yes, this
1:10:28is bullish to some degree because we
1:10:30broken through a previous high.
1:10:32But this is bullish in the case of this
1:10:34internal trend, the smaller trend, okay?
1:10:37It's not bullish in the case of the
1:10:39bigger trend because we know it's still
1:10:41capped up here.
1:10:42So, if we break through this high, the
1:10:44mistake that you need not to make is to
1:10:47expect this to then continue all the way
1:10:50through to over this high.
1:10:52Because at this point in time, there's
1:10:53nothing telling us that that is going to
1:10:55happen.
1:10:56What we have is a short-term break to
1:10:59the upside, right, taking place at this
1:11:01level. But all that means is we are
1:11:03likely to see some upside before
1:11:05reversing from inside of the previous
1:11:08leg of structure. So this, the break
1:11:11here, kind of all just confirms a
1:11:13corrective move is beginning. And
1:11:15eventually that is likely to turn back
1:11:18into a bearish impulse, okay?
1:11:20So we can of course trade this because
1:11:23if we did get a break, we would
1:11:24understand that we are bullish to
1:11:25somewhere else in this move.
1:11:27That means we could actually start to
1:11:29target, for example, internal points of
1:11:31liquidity. Now this is a concept we're
1:11:32going to get to very soon and we'll
1:11:34start to put trades together then. But
1:11:36for now, basically, if we do break
1:11:38above, all it means is we have some
1:11:40targets to points basically inside of
1:11:43the bigger range, okay? So we're never
1:11:45looking for massive trades, but we could
1:11:47potentially see something like this, of
1:11:49which we could then look to sell from
1:11:50again.
1:11:51Basically, the core thing is to
1:11:53understand to draw your structure as
1:11:55waves, averaging everything out into
1:11:57these simple visible moves. The line
1:11:59chart can help you to do that if you
1:12:00find it difficult to begin with. And
1:12:02then if we do see internal structural
1:12:03shifts like this one that we've just
1:12:05mapped out, yes, it can provide
1:12:07opportunity, but we must always give
1:12:10core focus and give precedence to the
1:12:124-hour or the hourly or the larger trend
1:12:15that we've actually set the trade up on,
1:12:17okay? Because these structure moves that
1:12:19we get are going to take precedence over
1:12:21these small ones. And providing the
1:12:22market stays bearish on the high time
1:12:24frame, we shouldn't be looking for a
1:12:26small lower time frame bullish shift to
1:12:28change the whole market direction for
1:12:30us.
1:12:31>> [snorts]
1:12:31>> So if I show you how this market then
1:12:33plays out,
1:12:34we'll get rid of the lines for now.
1:12:36Remember, we're expecting the market to
1:12:38stay capped into this high.
1:12:40And as you can see there, we have this
1:12:41internal break. Does this open the doors
1:12:43to trading all the way through the high?
1:12:45No. It just created a push up over the
1:12:48internal high. Then we pushed over
1:12:50another internal structural point here,
1:12:52and then we've actually started trading
1:12:54back down. And as you can see when we
1:12:56got to that point there, we ended up
1:12:58creating another leg of price action
1:13:00structure. So, we have our low here.
1:13:04Break of structure takes place there,
1:13:05which essentially then creates the
1:13:07impulse, correction,
1:13:10impulse, correction,
1:13:12impulse. Okay? That is the trend that
1:13:14we've got.
1:13:15So, even though these smaller highs
1:13:18broke, these smaller internal structure
1:13:20points,
1:13:21it didn't open the doors at all to any
1:13:23trading through the bigger trend. The
1:13:25external structure, or swing structure
1:13:28as you'll hear me refer it to it as
1:13:30stayed intact and kept the market
1:13:32bearish.
1:13:33Now, back to that point we said where
1:13:36you can potentially reconfirm the
1:13:38direction of the trend with lower time
1:13:40frame breaks, we have of course impulse
1:13:42correction impulse correction, and then
1:13:44we started to break internal lows here.
1:13:48This break down here
1:13:50puts us back through the internal
1:13:51structure in line with the external
1:13:54structure direction. Now, I know there's
1:13:55a lot of words here, but it's very very
1:13:57simple, okay?
1:13:58High to low, external structure. We
1:14:00think the market's bearish.
1:14:02Low to high, corrective move. This is a
1:14:05short-term pullback that hasn't yet
1:14:06confirmed anything in terms of larger
1:14:08upside, and generally is going to be
1:14:10where we want to sell the market from.
1:14:13We then break down, pushing through
1:14:14internal structure lows, okay? So, this
1:14:17is smaller trend lows, but that pushes
1:14:19us back into the direction of the bigger
1:14:22picture downtrend that we're in.
1:14:23So, when we see this break, this is
1:14:26ample ground to basically start selling
1:14:28pullbacks because we know the big
1:14:30picture, the
1:14:321-hour trend, and the smaller picture,
1:14:34this more refined 1-hour trend that
1:14:36generally is going to be more of a 30-
1:14:37or 15-minute trend, they're now both in
1:14:39agreement on the sell side. So, looking
1:14:41to sell pullbacks down towards the low
1:14:43and beyond becomes is move there to
1:14:46make, Okay? So, that's the difference
1:14:48between internal and external structure
1:14:50on a real chart, and that is how we look
1:14:52to use them. We want to make sure we're
1:14:54always giving precedence to the big
1:14:56trend.
1:14:57If the little trend starts to shift
1:14:58against us, that does not mean we're
1:15:00going to go through the big trend highs.
1:15:02And if the little trend then re-agrees
1:15:03with us, that basically confirms the
1:15:05corrective move is most likely complete.
1:15:08It gives us opportunity to sell because
1:15:10we understand that the low time frame
1:15:11and the high time frame, the big trend
1:15:13and the small trend are now in
1:15:15agreement. All right. So, extending that
1:15:17topic a little bit further, we're going
1:15:19to talk about swing versus
1:15:21sub-structure, which I don't want to get
1:15:23confusing, but is basically the same as
1:15:26internal and external, right? Um the
1:15:28reason we call it swing and
1:15:29sub-structure is just it's a little bit
1:15:31more simple to say.
1:15:33And these two types of structure are,
1:15:35first of all, the main overall trending
1:15:38structure, right? The
1:15:39direction, the external that we just
1:15:41discussed.
1:15:42And the sub-structure is in reference to
1:15:44the smaller trends within trends.
1:15:46However, this time we kind of isolate
1:15:48those smaller trends to the corrective
1:15:50moves.
1:15:51So, swing structure, let's say we're
1:15:53looking at a 4-hour trend, is going to
1:15:56be a 4-hour downtrend. All right. We can
1:15:58clearly see impulse, correction,
1:16:00impulse, correction, impulse. So, the
1:16:034-hour swing structure is bearish.
1:16:06But we said that those internal trends
1:16:08are going to show shifts at different
1:16:10points, and we even just saw that on a
1:16:12live chart.
1:16:13So, we are going to see the market
1:16:15creating bullish breaks of structure or
1:16:17reversals from these smaller, let's say,
1:16:1930-minute bearish trends into 30-minute
1:16:23bullish trends.
1:16:24When we see these breaks up, we have
1:16:27opportunity, sometimes not always, to
1:16:29actually take trades that oppose the
1:16:32overall 4-hour direction. And that's
1:16:34because, as we've said before, the
1:16:36market is fractal. Now, fractal simply
1:16:38means the same patterns and same
1:16:39formations happen on every time frame,
1:16:41regardless of whether it's the one
1:16:43minute, 30 minute, hourly, daily. You're
1:16:45going to see the same patterns, the same
1:16:46things happening. That's because buyer
1:16:48psychology does not change. It just
1:16:50happens over different periods of time.
1:16:52A 4-hour trend is quite zoomed out. So,
1:16:55that's showing you long-term buyer
1:16:57psychology. The 1-minute trend shows the
1:17:00same levels of buyer psychology but
1:17:01happening over a much smaller period of
1:17:03time such as over the last couple of
1:17:05hours.
1:17:07So, because we see
1:17:09very valid trends taking place inside of
1:17:12larger trends, we can indeed trade
1:17:14these. It becomes its own stand-alone
1:17:16opportunity for us to catch a trade.
1:17:18If we see the market shifting up on the
1:17:2030 minute, there's no reason why we
1:17:22can't take advantage of that trend. The
1:17:24only thing we have to consider, as we
1:17:25just discussed, is that we should never
1:17:27look to take these trends past the swing
1:17:30structure trends or the external
1:17:32structure trends, okay?
1:17:34So, I'm going to show you now an
1:17:36opportunity where it was possible to buy
1:17:39from inside of a smaller substructure
1:17:42move and capitalize upon a
1:17:44bullish movement inside of a
1:17:46predominantly bearish trend. These
1:17:48things do happen quite a lot. That's why
1:17:50I'm covering them in this video. They
1:17:52come around frequently enough to
1:17:53actually create uh a very good basis for
1:17:55opportunities. Now, this way, if you're
1:17:58doing high time frame analysis but you
1:18:00don't always want to hold high time
1:18:01frame trends, you can still use the
1:18:03opportunities of these smaller reversals
1:18:06to capture shorter term trades inside of
1:18:09big picture trends, right? It's a really
1:18:11good basis for say day traders or people
1:18:13who want to trade the smaller time
1:18:15frames but still want that big picture
1:18:17context behind their opportunities.
1:18:19So, let's jump to the charts now and
1:18:20I'll show you an example of this.
1:18:23So, from what you've learned so far, you
1:18:24can probably see this is a bullish
1:18:27trend, okay? I'm going to draw up the
1:18:29impulses and corrections for you. We can
1:18:31see here
1:18:32the flow of the market up to this point
1:18:35and then we pull back down and we
1:18:37impulse to here.
1:18:38So, this is the swing or external
1:18:41structure. Okay? We have clear impulse,
1:18:43clear correction, clear impulse, clear
1:18:44correction, and so on and so on up to
1:18:46where we are right now.
1:18:48Now, at this point, we have indeed
1:18:50closed over the previous high, which
1:18:52creates a break of structure. So, this
1:18:55is a new higher high.
1:18:57Now, with the formation of this new
1:18:59higher high, we have validated a higher
1:19:02low. Okay? That's going to be this point
1:19:05just here.
1:19:06So, this is our previous or current,
1:19:08should we say, leg of price action,
1:19:10which has taken place. Therefore,
1:19:12meaning we would expect, given that it's
1:19:14broken into a new high, for an upside
1:19:16continuation to occur.
1:19:19So, our overall idea would be to see
1:19:21this market pulling back somewhere into
1:19:23this range without taking out this low
1:19:26to then move into the next impulse to
1:19:29the upside. All right? That would be the
1:19:31plan for this market.
1:19:33Now, we can, of course, then take
1:19:35substructure opportunities. So, for a
1:19:38substructure opportunity, we are
1:19:39basically looking to catch the
1:19:41corrective move down. So, we're looking
1:19:43for an opportunity to trade this move.
1:19:47Now, because we know the market isn't
1:19:49going to get all the way through this
1:19:51low, well, we don't know that, but we
1:19:53know that if the trade remains valid, so
1:19:55it would only be safe to trade towards
1:19:56this level for now,
1:19:58we would want to find a area, a target
1:20:02inside of this movement up. Now, for
1:20:04reasons that will become rather rather
1:20:06soon,
1:20:08this is going to be one of those core
1:20:10points. Now, this incorporates a few of
1:20:12the concepts we're going to talk through
1:20:13in this course, efficiency and supply
1:20:16and demand. So, for now, don't worry
1:20:19about the reasons too much, as we're
1:20:20going to get into those, but that is the
1:20:22point that we would want to see the
1:20:24market target.
1:20:26Now, we have to look at the internal
1:20:28structure. So, we're looking for the
1:20:30trend that's taking place inside of this
1:20:34individual leg of price action.
1:20:36This is that move. We've averaged the
1:20:39movements out into those waves. We have
1:20:41an impulse, a pullback, an impulse, a
1:20:43pullback, an impulse, a pullback, and
1:20:45then an impulse into here.
1:20:47Remember, the mistake that people make
1:20:49is they see a break of this low, for
1:20:51example, which yes, it is a valid low,
1:20:53but it's a valid low of internal
1:20:55structure, and they think that this
1:20:57means the market's going to go all the
1:20:58way down. But, it doesn't mean that
1:21:01because this
1:21:03external structure, the swing movements,
1:21:06they're still intact, right? So, as long
1:21:09as we stay over the low that we have
1:21:11marked, just here,
1:21:13we will remain bullish.
1:21:15So, for internal structure, we would
1:21:18realistically expect this low to be the
1:21:21one we want to focus on. Now, the reason
1:21:23we don't just sell randomly is because
1:21:26the market can keep going up. And the
1:21:28reason we wouldn't sell if we had a tiny
1:21:30pullback is because once we break down
1:21:31that internal structure, and we identify
1:21:34that we have impulse correction, impulse
1:21:36correction, impulse correction, impulse,
1:21:39well, if we stay over this impulsive
1:21:41low, we could realistically pull back
1:21:43and continue trading higher, creating
1:21:45more of the internal trend before a
1:21:48deeper movement comes in the future,
1:21:49right?
1:21:50So, basically, what we want to see for
1:21:52substructure trades, for these internal
1:21:54opportunities, is for the market to
1:21:56break down through an internal low.
1:21:59Now, the nearest internal low, and the
1:22:01one that's currently relevant, is going
1:22:03to be this low.
1:22:04So, we would only take a substructure
1:22:07trade if we saw a break of structure
1:22:09here because that would put this smaller
1:22:11internal trend into a reversal, and
1:22:14therefore, we would expect it to move
1:22:16bearish, right?
1:22:18So, what we would do is let the market
1:22:21run, see what it does, and if it breaks
1:22:23through this low, now we have grounds
1:22:26for a trade.
1:22:27We've actually closed lower, showing
1:22:29bearish intent or seller control.
1:22:32And now, if we can, we would want to
1:22:34find opportunity to sell down into a
1:22:37point of interest. Now, it is important
1:22:39that the point of interest isn't already
1:22:41hit, because if this market was to hit
1:22:43this level, then selling against this
1:22:45would be pretty risky, given that we've
1:22:47hit a pretty cool point that could
1:22:48continue the market into an upward
1:22:50trend, right? That is why these are only
1:22:52tradeable sometimes, and that we can't
1:22:54get substructure trades every time. For
1:22:57example, if we look back at the previous
1:22:59leg up from here to here,
1:23:02yes, we had a nice impulsive move. And
1:23:04yes, we had a breakdown at this point
1:23:06where we started to break into a bearish
1:23:08trend. But by the time we returned to
1:23:11anywhere we may look to enter from, the
1:23:13market had already come through the
1:23:14entire range and almost met the low.
1:23:17So, there would be no opportunity for us
1:23:19to sell here, because the entire range
1:23:21is essentially already been filled. And
1:23:23as you can see, of course, the market
1:23:25didn't reverse after that. It came down,
1:23:28it came up, and it didn't give a selling
1:23:30opportunity. It just continued towards a
1:23:32new high, okay?
1:23:34So, likewise for the setup we're looking
1:23:36at, we would want to see the market
1:23:38basically reversing without filling the
1:23:40point of interest or the area that we
1:23:42want to see targeted. But as long as
1:23:44that doesn't happen, we can use some of
1:23:47those same concepts. Again, these will
1:23:49become very clear inside of the course.
1:23:51For now, I'm just showing you the
1:23:52concept of this internal trading.
1:23:55And we could place a trade that looks
1:23:57something like this, for example.
1:24:00So, we would be looking to sell from the
1:24:02top if we got the pullback, and then
1:24:05take profits once we hit the point of
1:24:07interest.
1:24:08We take profits here instead of all the
1:24:09way down here, because the way that we
1:24:12understand structure, the market
1:24:14shouldn't get this low. It could, but
1:24:16it's not expected. So, what we're
1:24:18looking to do with substructure trades
1:24:21is basically catch a high probability
1:24:23move and then just get out with our
1:24:25profits and see what the market does.
1:24:28Now, if the market was then to break
1:24:29down significantly, we could lead that
1:24:31into a bigger picture reversal on a new
1:24:34trade.
1:24:35But for now, it makes sense to just play
1:24:37safe and take the obvious opportunity,
1:24:39which would be this trade here.
1:24:42Now, if we see how this market formed
1:24:44from there, we returned to the entry
1:24:46area. Remember at this point, we're
1:24:48basically catching a reversal trade
1:24:51because we've seen a break of structure
1:24:52through this low.
1:24:54The market came
1:24:55pretty high into the zone on this
1:24:57opportunity, but we did break structure
1:24:59and we did fail to then retake the high.
1:25:01So, from there, the market created its
1:25:04run down and hit the point of interest
1:25:06that we would want to target.
1:25:08Now, from here, the market could go
1:25:11lower potentially, but we would
1:25:12generally expect it to continue into new
1:25:14highs. And that is why we would take the
1:25:17safer opportunity and get out a little
1:25:19bit earlier.
1:25:21Now, from this example, we can of course
1:25:23see the market did get lower. It didn't
1:25:25break through the low, so it did
1:25:26maintain its bullish structure and we
1:25:28would expect it to lead into a new
1:25:30impulse.
1:25:31But, this highlights why we want to make
1:25:33sure we're getting out early, right?
1:25:36Because the market will give you these
1:25:37things that will make you feel greedy
1:25:39where it looks like, "Oh, I could have
1:25:40made more on this movement down."
1:25:42But, the market's not always going to
1:25:43get down this far. Often times, it's
1:25:46just going to fill a notable point of
1:25:48interest, of which you will learn how to
1:25:50identify those, and then it will get its
1:25:52reversal from there. So, taking these
1:25:54simple and safe trades with those
1:25:56smaller internal trends is pretty much
1:25:59always the right thing to do. Because
1:26:01when you do that, you get to lock in
1:26:02small wins and then run into the larger
1:26:05moves in line with the external or swing
1:26:08structure. Okay, so those are the core
1:26:11elements of market structure. And we're
1:26:12going to recap what we've been through
1:26:13so far.
1:26:15First of all, markets move only in three
1:26:17phases. We have uptrends created by a
1:26:20continuation of higher highs and higher
1:26:23lows. Every high is higher than the
1:26:25previous. Every low is higher than the
1:26:27previous. And when the market breaks up
1:26:30through a previous high, that confirms
1:26:32continuation of an uptrend. A downtrend
1:26:34is the opposite. Every move we make
1:26:37creates a lower low and a lower high,
1:26:39where the lows and highs are lower than
1:26:41the previous ones formed. And every time
1:26:44we break through a previous low, we
1:26:46create an impulse that confirms
1:26:48continuation of the trend.
1:26:51When the market is moving sideways and
1:26:52not showing any clear direction, this is
1:26:54a consolidation. And the best thing to
1:26:56do through these phases is simply
1:26:58nothing, okay? As we get into liquidity
1:27:01and other concepts, you'll see some ways
1:27:03to make use of consolidations, but if
1:27:04you want the most simplistic trading,
1:27:07the way to trade is buy through
1:27:09uptrends, sell through downtrends, and
1:27:12simply stay out during consolidations.
1:27:17Now, each of the trending moves we see,
1:27:19whether it's an uptrend or a downtrend,
1:27:21is going to be made up of impulse moves
1:27:23and correction moves.
1:27:25Impulse moves are the movements that
1:27:27break through previous structural
1:27:29points. So, when we push through this
1:27:31higher high to create a new higher high,
1:27:33this is an impulse move.
1:27:35Corrective moves don't break through any
1:27:37structure.
1:27:39Corrective moves never get past the lows
1:27:41or the highs of the previous leg of
1:27:43price action.
1:27:44So, this move remains a correction
1:27:47providing the market doesn't get under
1:27:49here and instead leads through to
1:27:52confirm as a higher low by creating a
1:27:54new higher high at the end of a new
1:27:56impulsive move.
1:27:58Now, this is exactly the same for
1:28:00downward trends, except everything is
1:28:02flipped the other way.
1:28:03When we see the markets reversing, so
1:28:06when we see a higher low break in an
1:28:08uptrend, for example, that actually
1:28:10creates an opposing impulsive move.
1:28:12And the impulse to the downside that we
1:28:14see when the structure breaks confirms
1:28:17the market should now be in a downward
1:28:18trend. So, from here we are looking for
1:28:21the formation of a lower high and
1:28:23expecting a new impulse to a lower low.
1:28:26So, to see a reversal, all you're
1:28:28looking for is basically the structural
1:28:30low in a uptrend or the structural high
1:28:33in a downtrend to give way where a
1:28:36corrective move turns into an impulsive
1:28:38move and then the trend naturally shifts
1:28:41from there.
1:28:42>> [snorts]
1:28:42>> Inside of every piece of structure we
1:28:44see, we are going to have internal and
1:28:46external structure. We will see the
1:28:48bigger zoomed out pattern, the waves
1:28:51that we discussed, say on the 4-hour
1:28:52time frame, the daily time frame, it can
1:28:55be any time frame.
1:28:57And then the internal structure will be
1:28:59the smaller trends inside of trends that
1:29:01we see.
1:29:03Now, this is all completely relative. I
1:29:04don't want you thinking you can only
1:29:05find external structure on the 4-hour
1:29:08time frame because that's not true.
1:29:10If your external structure is say the
1:29:1215-minute in this example, then your
1:29:15internal structure would likely be the
1:29:172-minute or the 5-minute trends.
1:29:19Now, you saw in my example, we don't
1:29:21always even have to drop the time frame.
1:29:23We're always going to see these natural
1:29:25movements that we can refine out to
1:29:28identify which is the swing structure or
1:29:30external structure, right? We remember
1:29:32we uh simplify those moves into waves,
1:29:35and then all of the smaller moves that
1:29:36we see within, these then become the
1:29:38internal structure.
1:29:41Now, these become useful because we can
1:29:43trade the trends inside of trends as I
1:29:46taught you when we talked about the
1:29:47swing versus substructure. Your swing
1:29:49structure is your overall higher time
1:29:52frame direction, whatever time frame
1:29:53that is relevant to the way that you
1:29:55trade. And the substructure is the
1:29:57smaller internal structure moves that we
1:29:59see on the way into corrective moves.
1:30:02Now, we trade the swing structure by
1:30:04selling into the larger trend or buying
1:30:07into the larger trend depending on which
1:30:09way the market's going, but we can also
1:30:11trade the substructure, which relative
1:30:13to the high time frame is what people
1:30:15would call a counter trend trade.
1:30:17However, when we do start to see the
1:30:18smaller trend shifting, it sets up a
1:30:21completely valid opportunity for us to
1:30:23then buy because we are seeing a valid
1:30:25trend shift on its own.
1:30:28So, substructure and swing structure are
1:30:29both very relevant and both can be
1:30:31traded in their own ways.
1:30:33Now, you're going to see market
1:30:34structure come up and all of these
1:30:36different elements come up as we talk
1:30:37through other elements and other
1:30:39concepts inside of this course.
1:30:41But for now, I'm going to leave you with
1:30:43this. And before we head on to talk
1:30:45about the next concept, we're just going
1:30:47to go through some of the obvious
1:30:49structure mistakes that people make. So,
1:30:51if you've been trying to trade structure
1:30:52and struggling or when you get into
1:30:54trading structure so that you don't
1:30:56struggle, we're going to set you up with
1:30:57some of the mistakes that you can easily
1:31:00avoid once you understand them. So, with
1:31:01that said, let's get to it. Okay, the
1:31:03first thing for us to go through here is
1:31:05the importance of candle body closures.
1:31:08So, when we were talking about
1:31:10candlesticks, we mentioned we have
1:31:11candle bodies and we have wicks as well.
1:31:15The candle body shows confirmed price
1:31:16movements within a given time frame. The
1:31:18wicks, however, only show rejections.
1:31:21So, when we are determining whether a
1:31:23structural level has broken or not, we
1:31:25have to see candle body closures to
1:31:28truly confirm the opportunity.
1:31:30If we take a look at this trend that
1:31:31we've got moving on up from the low
1:31:33here, we can see this downward trend has
1:31:36shifted, right? We started to see the
1:31:37shifts come in and from there we've
1:31:40actually shifted over more significant
1:31:42points.
1:31:43Now, zooming in then on the bullish
1:31:45trend we've currently got,
1:31:46we have a high
1:31:48and then we closed at this level here,
1:31:51creating the break of structure.
1:31:54We then have a new high here and we of
1:31:56course closed over it with this large
1:31:57impulsive candle, creating a new break
1:31:59of structure.
1:32:00Then we have this high here and the
1:32:02market has closed through it, creating a
1:32:04new breaker structure. And then, once we
1:32:07got to this high, we saw a big sell-off.
1:32:10Now, our higher low for this upward move
1:32:13is going to be just here.
1:32:15So, we would expect, if the market is to
1:32:17get under this level, that would change
1:32:19the direction of the trend, right? Now,
1:32:21obviously, if it stayed above the level,
1:32:23it should remain bullish, and we
1:32:25therefore should be looking to buy.
1:32:27But, one thing people do is they jump
1:32:28the gun too fast on both of these
1:32:30things. So, first of all, let's take a
1:32:32look at this bit of price action.
1:32:34Here, we created a high. We then had a
1:32:36corrective move, and the market pushed
1:32:38up. This wick, however, does not
1:32:41validate the continuation of the market.
1:32:44The market could wick over, and then
1:32:46come lower, and then go higher, and that
1:32:48would still remain valid, but it would
1:32:49set the higher low at this point.
1:32:52So, you never want to trust wicks to
1:32:54actually confirm your breaker structure
1:32:56inside the continuation of a trend, cuz
1:32:58it can actually show rejections.
1:33:00And what could happen after this is the
1:33:02market could actually sell off
1:33:03considerably more.
1:33:05So, we have to see candle body closures,
1:33:07just like this candle here, and just
1:33:09like we've seen on the other candles
1:33:11here and here, as well. Okay?
1:33:14Now, the same goes for reversals. We
1:33:16would really want to see, if we wanted
1:33:18to in any way validate reversal, if it
1:33:20was to come through, we would want to
1:33:22see a candle body closing underneath
1:33:24this low. So, we do not want to trust a
1:33:27wick here. It's got to be a body,
1:33:28because we need to see confirmation of
1:33:31that move. We don't just want to see a
1:33:32rejection of that move.
1:33:34Now, the importance behind that, you're
1:33:37about to see it now, because we have
1:33:39this candle, which at one point in time
1:33:42would have looked like it was closing
1:33:43beneath here, right? During the 4-hour
1:33:46window, this at some point would have
1:33:48been a gray candle or a bearish candle
1:33:50starting here, and that with a a low
1:33:53down there. So, if you were to sell into
1:33:55that too quickly, without allowing the
1:33:57candlestick to close, you could have
1:33:59been tricked into thinking that this was
1:34:00a break. But, as you will see by waiting
1:34:03for the candle closure, it ended up as a
1:34:05massive rejection candle.
1:34:07Now, this is one of those candles that
1:34:08we discussed, right?
1:34:09If we dig into what the price action is
1:34:11actually showing us inside of this
1:34:13candle as a line chart, for example, we
1:34:15have an open, the market's moved up a
1:34:17bit, it's moved down significantly, and
1:34:20then it's moved back up, and actually
1:34:22closed a little bit higher than the
1:34:23open, right? Now, we do have that little
1:34:26bit of movement as well, but we've
1:34:27closed higher than the open. So, what
1:34:30this candle is showing us is an attempt
1:34:32to go higher from buyers, rejected by
1:34:34sellers, and then a significant amount
1:34:35of buying pressure driving the market
1:34:38back up and closing even higher than the
1:34:40candle opened.
1:34:42Now, obviously, in seeing that, you
1:34:43would understand this is most certainly
1:34:46a reversal and rejection rejection
1:34:48candle rejecting any attempt by the
1:34:50sellers to go lower. We have rejected
1:34:53that idea, and now the likely outcome,
1:34:55given the buy-up control that we've
1:34:56seen, is for the market to trade higher.
1:34:59So, if you didn't wait for that candle
1:35:01to close, and you ended up trusting the
1:35:02wig, or trusting an unclosed candle body
1:35:05underneath this level, you'd be looking
1:35:07at this for a selling opportunity. When
1:35:09really, the closure proves to us that
1:35:11this is a huge bullish rejection and
1:35:13reversal candle that is likely to lead
1:35:15into a simple upward continuation.
1:35:18Now, if you see what happens next in the
1:35:19market, that is exactly what went down.
1:35:22We just had a new impulse up, and we
1:35:23ended up going and creating a new high.
1:35:26Now, the interesting thing about this
1:35:28is, this also doesn't change the
1:35:30trending structure. We don't have to see
1:35:32this as a lower low, just because it
1:35:34closed underneath this level. Well,
1:35:35because it didn't. It wicked underneath
1:35:38this level. This is actually what we
1:35:40call a sweep of liquidity, or a
1:35:42liquidity sweep, and that is, of course,
1:35:43a content.
1:35:44Now, another interesting thing is you
1:35:46don't have to classify this as a lower
1:35:48low, because it didn't close beneath the
1:35:50previous low. It's simply a rejection.
1:35:54Now, we call these sweeps of liquidity
1:35:55or liquidity sweeps, and we are going to
1:35:57be getting into that concept in this
1:35:59course a little bit later. But, if we
1:36:02just have a simple wick beneath and a
1:36:04rejection back into very strong upward
1:36:06price, we would just keep this as a
1:36:08simple trend, right? We still have our
1:36:10low, our low, our low. This one is
1:36:13slightly lower, but it's a rejection,
1:36:15not a reversal candle. So, we can just
1:36:17classify this as our new higher low, uh
1:36:20and then from there we should be
1:36:21expecting to see continuations higher.
1:36:24Now, if the market was to, of course,
1:36:25come down and close under this low now,
1:36:28then yes, that would validate sell-side
1:36:30opportunity, but for now, we should
1:36:32remain bullish.
1:36:33So, the first big lesson, the first
1:36:35thing that I'm trying to get you to
1:36:36understand is that you should trust
1:36:37candle body closures only for your
1:36:40confirmations. You shouldn't be thinking
1:36:41about candle wicks. Candle wicks will
1:36:44not confirm reversals, and they will not
1:36:46confirm continuations because they are
1:36:48rejective candles. We have to see body
1:36:50closures to tell us that the market
1:36:52participants are indeed willing and able
1:36:54to move in whichever direction the
1:36:56closure is in.
1:36:58Okay, the next thing to be aware of is
1:37:00the correct use of internal structure,
1:37:03right?
1:37:04So, if we have a swing movement, we have
1:37:06an impulse correction and then an
1:37:08impulse towards this high. Now, this bit
1:37:11of the top here, this represents
1:37:13internal structure.
1:37:15If we were to have this movement, and
1:37:16then the internal structure was to break
1:37:19lower, this could provide us with a
1:37:22substructure opportunity to sell the
1:37:24market down somewhere into this range,
1:37:26remembering that we should stay above
1:37:28this low, okay? So, this would be valid
1:37:31for a setup. Now, there is one mistake
1:37:34that people make very frequently with
1:37:36this, and something you will probably
1:37:38make at some point yourself.
1:37:40And that is that they will see a
1:37:42movement like this, and they will treat
1:37:44this in the same way.
1:37:47Now, what's happened in this case is the
1:37:49high that we have internally has not
1:37:51surpassed the previous one. So, we don't
1:37:54have that reversal pattern where the
1:37:57market is shifting from bullish impulses
1:37:58and corrections into a bearish impulse.
1:38:01In this case, what we're actually
1:38:03looking at is just a simple corrective
1:38:05move, right? We don't have the shift
1:38:07that we want to see. We don't have this
1:38:09higher high into lower low. That is
1:38:12essential to confirm a shift in
1:38:15direction.
1:38:16If we think about how that would work
1:38:18with the current movement, well, uh
1:38:20impulsive move is just this. We topped
1:38:22out there, and everything that's
1:38:23currently happening is simply an
1:38:25internal correction. Okay, we don't have
1:38:28any push above and then pull lower. So,
1:38:30this is kind of actually just
1:38:31meaningless price action.
1:38:33Now, what people will do is they will
1:38:35treat this break as a place to sell from
1:38:38because they will see this breaking down
1:38:40here as a valid break of structure. But,
1:38:42it's not because this in itself is still
1:38:45not a valid structural move. This all is
1:38:48just a correction lower. So, selling
1:38:50from here makes no sense because we are
1:38:53just inside of a corrective move with no
1:38:55lower time frame or internal structure
1:38:57telling us that selling is wise. So, the
1:38:59most likely outcome from this is going
1:39:02to be a push back over the high,
1:39:04therefore stopping you out of a sell
1:39:06trade that you might be getting into.
1:39:08So, to look at this on a chart the other
1:39:11way round here, we have an example. We
1:39:13have this very bearish impulse. Okay,
1:39:16that's completely fine. Then, we have
1:39:18this tricky piece of structure, which a
1:39:20lot of people will see as grounds to
1:39:22make a buy, right? Because, I mean, if
1:39:24you think about it, we created a low, we
1:39:27created some more lows here. They were a
1:39:28little bit higher, and then we broke
1:39:30structure at this point. So, that might
1:39:32tell us that this is a bullish market,
1:39:34right? Therefore, you might want to set
1:39:36up a buy zone, and when the market pulls
1:39:37back into it, execute the buy.
1:39:40But, that's not true. That's not
1:39:42correct. Because the first low that we
1:39:44created here
1:39:46was the lowest low that we created. We
1:39:49did not get that pattern of lower low
1:39:53into higher high, right? Of everything
1:39:55I've showed you so far, we have to get
1:39:57that to confirm reversal because that's
1:40:00actually the impulse turning into an
1:40:02impulse in the opposite direction.
1:40:04In this case, we have impulse, but we
1:40:07don't have an impulse in the opposite
1:40:08direction in any way. Not even in the
1:40:10lower time frame price because this was
1:40:12the lowest low. So everything inside of
1:40:14here is just consolidation.
1:40:16Now this in itself, without any reversal
1:40:19into it, is a very dangerous place to
1:40:20sell the market, or in this case buy the
1:40:22market, sorry, because we don't really
1:40:25have any reason to make a buy, and the
1:40:27market can sink [music] at any time.
1:40:30Now if we were to see instead, let's
1:40:32say, a pull lower like this, taking out
1:40:35this low, then we were to see the market
1:40:37drive higher like this, closing over the
1:40:40high, then that would validate a
1:40:42reversal, at least internally, which
1:40:45would give us grounds to trade a
1:40:46pullback up towards maybe this point
1:40:49here, right? This one. For reasons we'll
1:40:51get into when we talk about supply and
1:40:53demand.
1:40:54So that could create an opportunity.
1:40:57But as it stands right now, we don't
1:40:58have any of that. We just have a low
1:41:01being created, and then what you're
1:41:03doing is actually just trying to buy in
1:41:06at a random point, which essentially
1:41:08looks like trying to buy here or here
1:41:10when we don't have any confirmation to
1:41:12do so just yet, right? Now I'm going to
1:41:14show you what actually happened in this
1:41:15example that a lot of people would have
1:41:18bought into.
1:41:19We just sink down
1:41:20and confirm a new impulse lower.
1:41:22Therefore, this substructure provided no
1:41:24opportunity because it didn't give us
1:41:26the right confirmation,
1:41:27and instead we just got impulse
1:41:29correction impulse, right? So that is
1:41:32something very important to consider.
1:41:34It's one of the most common mistakes I
1:41:35see people making with market structure.
1:41:38It's not just relevant on these
1:41:39substructure pullbacks. It can be for
1:41:41the swing structure as well, but it's
1:41:43just something that's super easily
1:41:45avoided,
1:41:46but definitely will help you to catch a
1:41:48lot more winning trades.
1:41:50So, remember, when you're looking at a
1:41:52reversal in any context, it has to have
1:41:56the impulse into impulse fashion, right?
1:41:59It has to have that. So, what we're
1:42:01looking at on the chart right now, not
1:42:03valid because it didn't impulse into
1:42:05impulse. But, we were to, for example,
1:42:07get this,
1:42:08well, this then becomes valid because we
1:42:10have bullish impulse into bearish
1:42:12impulse. We have higher high into lower
1:42:15low, a very clear shift that therefore
1:42:17creates a very
1:42:19viable and valid trade.
1:42:22Same if we're bearish, we have to see
1:42:24impulse into impulse, lower low into
1:42:27higher high. That is where we see that
1:42:29clear reversal.
1:42:30And if we don't get that, and the market
1:42:32does this instead, this shows nothing
1:42:35and is absolutely not valid to trade.
1:42:37That's market structure, everything we
1:42:39need to cover up to this point. You're
1:42:41going to see this woven into the other
1:42:43concepts we discuss, but for now, we're
1:42:45going to move on to supply and demand.
1:42:48So, this, as we said at the start of
1:42:49this video, is pretty much the core
1:42:52concept of the market, right? Or in
1:42:54terms of why markets actually move.
1:42:56Prices increase when demand is higher
1:42:59than supply, and we see an increase in
1:43:00demand creating a willingness to buy at
1:43:03higher levels. And prices decline when
1:43:05supply is injected into the market
1:43:08without demand to meet it. Willingness
1:43:10to buy is not high enough, and so new
1:43:12supply, or assets that people are
1:43:14selling, are listed and offered at lower
1:43:17prices, which therefore makes the market
1:43:19decline until we meet willing buyers.
1:43:22Now, supply and demand, the concept can
1:43:25actually be used in the chart to
1:43:27identify areas where we will be finding
1:43:29buying and selling opportunities.
1:43:32So, a demand zone is an area of
1:43:34consolidation.
1:43:36Notice here how the market kind of flats
1:43:38out before a large impulsive move up.
1:43:41Remember impulses that we discussed in
1:43:42market structure.
1:43:44A supply zone is an area of
1:43:45consolidation before a large impulse
1:43:48down.
1:43:49Now, each of these things shows us a
1:43:51very valuable piece of information.
1:43:54If we think about what's actually
1:43:55happening behind the charts, right? When
1:43:57we see an impulse to the upside after a
1:43:59small consolidation. This consolidation
1:44:02area that we classify as a demand zone
1:44:05is an area where significant buying has
1:44:07taken place. We saw the market coming
1:44:09down, then it flatted out, and then it
1:44:12rallied with incredible strength, which
1:44:14tells us this area right here, this
1:44:17price range in this point in time is
1:44:19exactly where significant amounts of
1:44:21buying and significant amount of demand
1:44:23entered the market, hence the impulse
1:44:25that we got.
1:44:27Now, if we know that this is seen as a
1:44:28good price to buy from, and we do know
1:44:31that, right? Because we obviously saw
1:44:32significant amounts of buying take place
1:44:34here before,
1:44:35then we can classify this price range as
1:44:38pretty much a discount price for the
1:44:40asset, right? It's seen as a very good
1:44:42price to pay for the asset, a fair value
1:44:44for it. So, if we've seen significant
1:44:46buying take place at this price before,
1:44:49and now the market's trading higher, we
1:44:51can pretty much be sure that if the
1:44:52market is able to get here again, well,
1:44:55it's going to be seen as an even better
1:44:57discount now because the market's
1:44:59trading to a higher value.
1:45:01Therefore, when we see the market return
1:45:03into a demand zone after the demand
1:45:05zone's been created and driven a large
1:45:07impulse in buying, we will oftentimes
1:45:10see the market buy once again from that
1:45:13same level, driving prices even higher.
1:45:17That's how a demand zone works.
1:45:19Now, a supply zone, as you can imagine,
1:45:21is the opposite. This is a price where
1:45:23we have seen sellers selling in mass,
1:45:26hence the impulse that we got driving
1:45:28the market lower.
1:45:29If we know that sellers have been
1:45:30selling here in mass, that could be seen
1:45:33as a premium price level. It's a price
1:45:35where holders of an asset want to get
1:45:37out of the market because it's a just a
1:45:40very good price to do so. It's a high
1:45:41price, right? And it's also an area
1:45:43where short sellers are seeing a lot of
1:45:45profit potential if they were to sell
1:45:47this market hoping to profit from a
1:45:49decline.
1:45:50So this time, we see this as a premium
1:45:54price level, right? So this is a premium
1:45:57because it's a high price that sellers
1:45:59want to sell at.
1:46:01And the other one, the demand zone,
1:46:03that's a discount because it's a low
1:46:05price that buyers want to buy at.
1:46:07Now with the supply, of course, as you
1:46:09can imagine I'm going to draw out, if
1:46:11the market returns to this level again,
1:46:13a level that is proven as a good price
1:46:15for sellers to sell from, we are likely
1:46:19to see more selling take place when that
1:46:21level is met, and therefore we are
1:46:23likely to see the market trade down into
1:46:25a new impulsive low.
1:46:27So you might already get a simple idea
1:46:29as to how we're looking to trade these,
1:46:31right? When we see a demand zone, we are
1:46:33going to be looking to buy from that
1:46:35area with our stop-loss beneath and our
1:46:38targets up into the highs or beyond.
1:46:40This is how we find entries. It's
1:46:42basically the thing that's going to get
1:46:44us into our trades.
1:46:46If we see a supply zone, we will be
1:46:48looking to sell with a stop-loss above
1:46:50and targets down into the low or
1:46:52further. This, of course, is going to be
1:46:54the entry model and the way that we get
1:46:55in for short trades.
1:46:58So supply and demand is useful for a few
1:47:00things.
1:47:01First, it's of course going to give us
1:47:03the entry.
1:47:04Second, it's going to help us to
1:47:06identify what we call points of
1:47:07interest. So what I mean by that is if
1:47:10we are looking to get into a buy trade
1:47:12here,
1:47:13it's just an immediate point that we
1:47:15understand the market's likely to return
1:47:17to. So rather than buying here, buying
1:47:19here, buying here, and being too early,
1:47:21you would just say, "Okay, I see a clear
1:47:23demand, so this is going to be the point
1:47:24to buy from." Same with sell-side
1:47:26setups. If you see a sell here, you
1:47:28don't have to jump the gun because you
1:47:29see the clear supply, and then you sell
1:47:31once the market returns to it.
1:47:33They can also be used, and we may not
1:47:36get into this one too much, but we will
1:47:37go through it, as targets for interim
1:47:40trades. So, let's say you found one of
1:47:42those substructure opportunities at the
1:47:44top here, right?
1:47:46Well, this is where you could then use
1:47:48the demand zone as a target. And you
1:47:50might realize that we actually did this
1:47:52in one of the previous examples
1:47:53regarding substructure trades. We used
1:47:55an area of demand, a consolidation
1:47:57before a large impulse. And what we did
1:47:59is we traded down into that demand, and
1:48:02then exited the trade because we
1:48:03understood this is historically a good
1:48:06price to buy from, and so we may see the
1:48:08market return to the upside and reverse
1:48:11when we get there. But that means, given
1:48:13that it's a magnet price area, the
1:48:14market will be drawn towards, and given
1:48:16that we are expecting generally to see a
1:48:18reaction from there, it can be good for
1:48:20a target as well. So, it's good for
1:48:22entries,
1:48:23points of interest, and targets. That's
1:48:26what we're using supply and demand for.
1:48:29So, what we're going to do is jump over
1:48:30to the charts, and I will show you how
1:48:32to draw this in the candles. If we
1:48:34consider the trend overall, we are
1:48:35moving down, right? We have these
1:48:37bearish impulses down. We had a break of
1:48:40structure coming in under these lows,
1:48:42which actually was confirmed around this
1:48:44point with the candle body closure. And
1:48:46even to back it up even more, we pushed
1:48:48through the large day's driven wick as
1:48:50well, right? So, we have two very solid
1:48:53closures basically confirming that we do
1:48:56indeed have the impulse correction
1:48:57impulse format, and we're moving solidly
1:48:59in a downtrend. Now, why is that
1:49:01important? Well, that's important
1:49:03because you always need to be trading
1:49:05supply and demand in line with the
1:49:06trend, and I'll talk about particularly
1:49:08why very soon.
1:49:10But to plot a supply or demand zone,
1:49:13what you were looking for is an area of
1:49:15consolidation where the market flats out
1:49:17before a movement down. So, we're
1:49:19looking for this point here, right?
1:49:21Basically, this broader range.
1:49:23Now, this only has to be an individual
1:49:25candle. And I pretty much always will
1:49:28draw my supply zones and demand zones
1:49:30off of one individual candle, right?
1:49:33So, [snorts] what we're going to look
1:49:33for inside of the movement down here is
1:49:36basically an area of consolidation where
1:49:38the market moved sideways.
1:49:40We already talked candles and you will
1:49:42see that this candle here, the very
1:49:45well, the pretty much one that's made up
1:49:47only of wicks, is an indecision candle,
1:49:49right? Candle body open and close is
1:49:52exactly the same price. The market
1:49:54didn't get anywhere within that given
1:49:55time, and we have a wick below and a
1:49:57wick above. So, we can see that the
1:49:59market was indecisive at this phase. We
1:50:02had a bearish candle, a bearish candle,
1:50:04and then an indecision candle, and then
1:50:06new bearish candles.
1:50:07So, what that is showing
1:50:09is basically sellers stepped in
1:50:12around this point. They drove the market
1:50:14down a bit, but then there was
1:50:16indecision where they weren't strong
1:50:18enough to drive it down immediately the
1:50:19whole way. After a short while of
1:50:21indecision, the market then sunk
1:50:23considerably with a large impulse to the
1:50:25downside, breaking us through a new
1:50:27structural low.
1:50:28So, we know that that candle there is
1:50:31where the significant sellers stepped in
1:50:34able to actually drive the market lower.
1:50:36Therefore, this becomes
1:50:38a supply zone, which you'll see me mark
1:50:40as SZ. So, with this being the supply
1:50:43zone, we would anticipate that if the
1:50:44market is able to get back to this level
1:50:47in the future, we are likely to see more
1:50:50sellers come in because we know this is
1:50:51a premium price level that sellers would
1:50:54be happy to execute from.
1:50:56So, what we would generally then do, now
1:50:58there's a few ways to go about this, as
1:51:00you will learn through the course, is
1:51:01look for a sell from there. So, we
1:51:03would, for example, place a trade that
1:51:04looks like this. And when the market
1:51:06returns to this level, we are then
1:51:08anticipating a tap into the zone, new
1:51:11sellers to step into the market, and for
1:51:13the market to decline.
1:51:15If we see what actually happened in this
1:51:16case,
1:51:18we did just that, right? We came back
1:51:20in, we hit this area,
1:51:22premium price, more sellers entered, and
1:51:25the market then ran down due to the new
1:51:27influx of selling that we saw, taking us
1:51:29through a new low, and creating a new
1:51:32low inside of the bearish trend. So, you
1:51:34can capitalize on those movements by
1:51:36trading out of the supply zone. It's
1:51:39pretty much the perfect place for us to
1:51:41target for our entries on these
1:51:43positions. And now for demand zones, and
1:51:46these are just the simple opposite.
1:51:48We're looking for discount price areas
1:51:50where buyers stepped in in mass. Now, we
1:51:53can see by looking at this chart, our
1:51:56consolidation phase basically came in
1:51:58here, right? We had a drive up, then we
1:52:01pulled back down a bit, and then we
1:52:03rallied. So, this is the area that's
1:52:05going to be treated as our demand zone.
1:52:07Now, the rule that I use for marking my
1:52:10supply and demand zones is the last
1:52:11candle before the impulse. So, as we did
1:52:15in the previous example, you'll see it
1:52:16was the last candle before the impulse
1:52:18down. For this example, I'm going to be
1:52:20using the last candle before the impulse
1:52:22up.
1:52:23So, the demand zone is going to be drawn
1:52:26wick to wick, covering the entire
1:52:28candle, which is the last candle before
1:52:30the impulse, all right? So, there's the
1:52:33area of demand.
1:52:35Now, because we've seen the market
1:52:36impulse to a new high, that's what
1:52:37validates this as a demand zone, okay?
1:52:39We have to see that because that's going
1:52:41to be basically the trend continuation.
1:52:43And we have [snorts] this uptrending
1:52:45fashion of higher highs and higher lows.
1:52:47Now, we've broke up, we found our
1:52:48demand, and we're going to look for a
1:52:50buy from there. So, we would buy with
1:52:52our stop underneath the zone, and our
1:52:54target somewhere up into the highs.
1:52:56Obviously, that comes down to other
1:52:57concepts, too.
1:52:59But, this is then going to be treated as
1:53:00a bit of a magnet price area.
1:53:03Now, notice here, as I when I was
1:53:05explaining the diagrams at the start of
1:53:07this section,
1:53:08we don't want to just randomly buy into
1:53:11impulsive moves, okay? This is why
1:53:13supply and demand is so good because
1:53:14when we see this demand zone, we
1:53:16understand, okay, there's a high
1:53:17probability the market's going to trade
1:53:18back into here. The simple reason for
1:53:20that is there's not so much transacting
1:53:22taking place on the buy side at these
1:53:24really high levels. People want a
1:53:26discount price to get into the market,
1:53:28right? So, we see less transactions
1:53:30taking place on the buy side, which
1:53:31naturally allows the market to fall
1:53:33down. And when we reach an area we know
1:53:35buyers are uh willing and able to get
1:53:38into the market at, that's when we see
1:53:40the reactions.
1:53:41So, rather than just immediately buying
1:53:42into the market, you just allow it to
1:53:44trade down towards the zone, and then
1:53:46you buy when the market gets there. And
1:53:48as you can see, after pulling back, we
1:53:50get the execution,
1:53:52and then the market runs higher, closing
1:53:54over the previous highs, and creating a
1:53:56new bullish impulse that sets in motion
1:53:58this movement from here up to here. And
1:54:01from there, you can actually utilize the
1:54:03next demand, for example, this area
1:54:05where we would then expect to see the
1:54:08market return to it,
1:54:09like so,
1:54:11and then extend up from there, okay? So,
1:54:14that's how we plot supply and demand,
1:54:16and that is how it really works. We're
1:54:17just looking for areas of consolidation
1:54:20or slight sideways movement before
1:54:23bullish or bearish movements up. Then we
1:54:25mark the last candle before the impulse,
1:54:26and we use that as our buying or selling
1:54:28point once the market returns to it.
1:54:30Now, when you're trading supply and
1:54:31demand, you must make sure you are
1:54:34trading it with the trend, okay? We're
1:54:37going to stick on this example that we
1:54:38just talked over to explain why that's
1:54:40so important. Now, realistically, you
1:54:42are going to see supply and demand
1:54:44zones, or what look like supply and
1:54:45demand zones, pretty much everywhere.
1:54:47You'll see loads of them. For example,
1:54:49there is one right here that could be
1:54:51seen as a supply because it's a
1:54:53consolidation area, a bit of an
1:54:54indecision candle, before this big push
1:54:57lower, right? So, you may then see,
1:54:59well, the market structure pushed under
1:55:01this wick. Maybe I then sell this supply
1:55:03cuz that could be a good trade to take
1:55:05the market lower. But,
1:55:07think about the context. We are in a
1:55:09very clear uptrend at this point in
1:55:10time, and we have this demand zone
1:55:12sitting right here. So, would we really
1:55:15want to sell based on what we can see as
1:55:17a supply zone just because of this small
1:55:20push lower?
1:55:21The answer obviously is no because we
1:55:23would anticipate most likely the next
1:55:25movement given that we are trading in an
1:55:27uptrend creating higher highs and higher
1:55:29lows. We would anticipate what we just
1:55:31saw, and that's going to be a
1:55:32continuation higher because market
1:55:34structure determines which way we should
1:55:37trade.
1:55:38If the market's clearly telling us it's
1:55:40going up, then selling from a zone
1:55:42simply because it looks like a good zone
1:55:44is not something we should do. You're
1:55:46going to be fighting the overall
1:55:47direction, and your probability of
1:55:49winning with that is going to be pretty
1:55:51slim. So, if you are seeing supply and
1:55:53demand zones,
1:55:54make sure they are creating reasonable
1:55:56impulses, and make sure they are in line
1:55:59with whichever direction the market is
1:56:00going. We only trade demand in uptrends
1:56:04and not supply,
1:56:06and we only trade supply in downtrends
1:56:09and not demand, okay? If you do that,
1:56:12make sure you're in line with the trend,
1:56:14you'll be just fine trading this
1:56:15concept. So, again, just as a quick
1:56:17reminder, selling from here, now
1:56:20obviously substructure-wise, okay, fair
1:56:21enough, but still quite a risky one
1:56:23there. Uh but, in terms of selling this
1:56:26hoping for a reversal, it's just not
1:56:28going to happen cuz the market's telling
1:56:29us that we should be buying. Many times
1:56:31as well you'll see that the market will
1:56:33just blast straight through these zones
1:56:35without a second thought. So, this one
1:56:37you could have potentially got lucky on
1:56:38a short-term trade, but it's not going
1:56:40to work out long-term if you continue to
1:56:42do that. And of course, the demand zone
1:56:45takes precedent over the supply zone
1:56:47because this is a bullish market. Okay,
1:56:49so an important thing to understand
1:56:51around supply and demand is that the
1:56:53zones that we trade are only good for
1:56:55one tap. Now, I'll explain what I'm
1:56:58trying to say and I'll break it down for
1:57:00you as to why this matters and why it
1:57:03happens as well.
1:57:04So, to explain it, we're going to go
1:57:05through this bit of price action. Now,
1:57:07we have an impulse correction impulse.
1:57:09This is a bullish market overall.
1:57:11Therefore, the demand zone that we've
1:57:13just marked out being the last candle
1:57:15before the impulse up should be seen as
1:57:17a good area for a reaction, right? So,
1:57:19we'd be expecting if we hit this level,
1:57:22we can then look to buy because the
1:57:24market should respect that level,
1:57:26collect new demand from the discount
1:57:27price area, and trade towards new highs.
1:57:30That is the logic behind the move, okay?
1:57:33So, we could place a trade here if we
1:57:35wanted to. Let's say we put our entry
1:57:37there and we look to target the new
1:57:38high. This would be a wonderful, very
1:57:41large, brilliant trade.
1:57:43This would also make complete sense.
1:57:44We're basically waiting for demand to be
1:57:46hit and expecting a new influx of buyers
1:57:48from what is seen by the market as a
1:57:50discount price level or a fair price to
1:57:52pay for this asset.
1:57:54Now, you will see
1:57:56the market did indeed do that. It hit
1:57:58the level and it started to see some
1:58:01upward momentum.
1:58:03Now, this would be good, right? This is
1:58:04exactly what we want to see.
1:58:06However, you will see from there that
1:58:08the market comes back down and it hits
1:58:11the level a second time.
1:58:13Now, your trade at this point would
1:58:14probably be break even, meaning with
1:58:16this much movement from here up to here,
1:58:18you probably would have got your stop
1:58:20loss and put it to your entry, right? Or
1:58:22at least I would have in my own trading.
1:58:24Now, because of this, it means that the
1:58:26pushback down is not really a big deal.
1:58:28We'd be out of this trade for no profit,
1:58:30no loss. And yes, it's annoying that the
1:58:32market ran for so long and then turned
1:58:34around on us, but at least we haven't
1:58:35lost any money. And that's the thing
1:58:37that matters the most when we're trying
1:58:38to trade.
1:58:40Now, this demand zone has been hit a
1:58:42second time.
1:58:44This changes the picture considerably
1:58:46for what we would want to see.
1:58:48When we had this first tap, we were
1:58:50interested in seeing the momentum drive
1:58:52away from there, right?
1:58:54Why is that? Well, that's because when
1:58:56we saw this impulse before, the market
1:58:58told us that this was a price that the
1:59:00market, the participants, were seeing as
1:59:02a discount or a fair price to pay for
1:59:04the asset. Therefore, we assume when the
1:59:07market hits this level again, we're
1:59:09going to see a fast influx of buying.
1:59:11Now, initially we did see that, and
1:59:13that's really good. But now that we've
1:59:15come back to hit it for a second time,
1:59:17things have changed. Because the fact
1:59:19the market was able to sell off from
1:59:21that level all the way back into the
1:59:23demand zone shows us that the buying
1:59:25that's taking place here obviously isn't
1:59:27as strong, and the willingness of the
1:59:29buyers to pay higher prices now is
1:59:32considerably lower than when we got this
1:59:34first initial impulse.
1:59:36We had a very strong impulse with pretty
1:59:38much no resistance from the sellers. We
1:59:40would want to see that again to prove to
1:59:42us that this demand zone is still of
1:59:44interest to buyers. Because we didn't
1:59:46see that, and because we were able to
1:59:47push back into the zone a second time,
1:59:50we can now confidently say the
1:59:52willingness of buyers is not as strong
1:59:54as it previously was. We don't have the
1:59:57numbers at these levels that we had
2:00:00coming in at these levels here and
2:00:02driving the market higher, right? There
2:00:05is more seller resistance this time.
2:00:07Now, this actually flips things the
2:00:09other way. And with this second push
2:00:11into demand, there's two things you need
2:00:13to understand. Number one is that you
2:00:15will not trade a zone that has been hit
2:00:18twice. And the theory behind that is
2:00:20simply is if the zone was actually
2:00:22strong, then we would have seen the
2:00:23direct impulse from the first tap. Okay?
2:00:26The fact the market's been able to get
2:00:27back shows us that the buyers are really
2:00:30not as willing as they previously were.
2:00:32And two, you're going to see this as
2:00:34potentially a selling opportunity.
2:00:38Now, I know this sounds weird. We're in
2:00:39an uptrend, and we're seeing a demand
2:00:41zone being retested. But because it's
2:00:43been hit again with considerable
2:00:45downward force, and another interesting
2:00:48thing here is that the candle actually
2:00:50got lower than the previous, right? So,
2:00:52we see the previous, the initial tap,
2:00:54stop there,
2:00:55but the second tap has pushed us lower
2:00:57into the zone.
2:00:58Now, this leads towards what we call a
2:01:00supply fail or a zone failure.
2:01:03What that can basically mean is
2:01:05as we see this zone gets hit again, it's
2:01:08essentially getting weaker. Now, you can
2:01:10think about supply and demand zones as
2:01:12kind of a brick wall, right? The first
2:01:14time you throw something at it, it's
2:01:16probably going to bounce off with good
2:01:17force. It's not going to do anything to
2:01:19the wall. You're fine. You should then
2:01:21be able to trade up from there cuz
2:01:23you're going to get a good bounce.
2:01:25But if you keep throwing, let's say, a
2:01:26steel ball at a brick wall,
2:01:29yes, the first time it'll bounce off.
2:01:31The second time it might bounce off as
2:01:32well, but it's definitely going to
2:01:33weaken it a bit. The third time and the
2:01:35fourth time, well, you're probably going
2:01:37to put a hole in that wall. You might
2:01:39knock the whole wall down completely.
2:01:41That's how these supply and demand zones
2:01:42work cuz [snorts] every drive down that
2:01:44we get into this zone again now
2:01:46is telling us that buyers are weaker
2:01:49than they previously were. And if we
2:01:51continue to push down into that zone,
2:01:54like we have again here, we're getting
2:01:55pretty good insight that this brick wall
2:01:57is going to fall down. That sellers are
2:01:59actually currently controlling the
2:02:00market, hence the continuation of new
2:02:03lows made inside of the zone. And
2:02:05therefore, the most obvious outcome for
2:02:07this trade or for this market currently
2:02:10is for this zone to fail, and therefore
2:02:12for the trend to potentially shift. So,
2:02:15that is why we should only trust a zone
2:02:17when it's hit the first time.
2:02:19You can be happy to take a trade here,
2:02:21and sometimes it will lose, often times
2:02:23it will win, and the risk reward you get
2:02:25will be good.
2:02:26But if you see a zone that's already
2:02:27been hit and the market's come back to
2:02:29it again, you absolutely should not take
2:02:31a trade here, at least not on the buy
2:02:33side. And if you see a trade where the
2:02:35market has hit the zone multiple times,
2:02:38there is nothing here that you would
2:02:39want to do on the buy side, and your
2:02:41effort should be focused on basically
2:02:43preparing yourself for a sell.
2:02:46Now, generally you're not going to want
2:02:47to just sell the market simply because
2:02:49it's in a supply zone for the third
2:02:50time, but you should understand that
2:02:52soon it's likely to break, and then your
2:02:54job would be to catch the movement on.
2:02:56We don't know that that's going to
2:02:57happen 100%, but every time a zone is
2:02:59hit, and especially every time a zone
2:03:02creates new lows
2:03:04inside of the zone, right? The price.
2:03:06That is really looking like a zone
2:03:08that's going to give way, and you should
2:03:09treat that more as a failure, or a
2:03:11failure that's coming soon, as opposed
2:03:13to an actual opportunity for you to buy
2:03:15from, okay?
2:03:17So, it's all about just thinking about
2:03:18the logic behind the moves. We are at
2:03:21its core just trying to work out who's
2:03:22in control between the buyers and the
2:03:24sellers, and a zone that's hit this many
2:03:26times, that's showing seller control,
2:03:28cuz if the buyers were truly in control,
2:03:30they would have taken it higher
2:03:31immediately.
2:03:32Now, as you can see in this market, we
2:03:33did indeed end up coming through the
2:03:35zone, and then the market traded a
2:03:36little bit lower. So, once you start to
2:03:39see a zone that's been hit multiple
2:03:40times, scrap your buy ideas, and prepare
2:03:43yourself for what could be a potential
2:03:45sell.
2:03:46Now, I'm going to show you just on the
2:03:48run out of that as well.
2:03:49Once we failed this demand, we had this
2:03:52little supply zone here, this indecision
2:03:54candle, before the impulsive move down
2:03:56that ended up breaking through the low.
2:03:58You can see that the market returned to
2:04:00that level, and actually sold off from
2:04:02there. So, this is a case where demand
2:04:04zone failed, and then a supply zone
2:04:06actually took control and offered a
2:04:08trading opportunity to sell from here
2:04:10down into the new lows, right? But
2:04:12notice we only look at that after the
2:04:15zone has completely failed, cuz when we
2:04:17see this closure beneath, that tells us,
2:04:19"Okay, this demand is completely off the
2:04:21cards, and we should be looking to
2:04:22sell."
2:04:24So, that's supply and demand fails. It
2:04:25works the same both ways around, but the
2:04:27core lesson to take from it, even if
2:04:29you're not going to go as advanced to,
2:04:31you know, trade from the supply and
2:04:33demand fails just yet, you should
2:04:35definitely consider the fact that if a
2:04:37zone has been hit once, it's okay. But,
2:04:39if it's been hit twice, three times,
2:04:41four times, or anything more than once,
2:04:43it's a zone that you should not trade
2:04:45because every time it's hit, it's like
2:04:46throwing a steel ball at a brick wall,
2:04:48and eventually that wall is going to
2:04:50break down.
2:04:51All right. So, leading on from that
2:04:52previous point where we talked about
2:04:54zones that are hit multiple times are
2:04:56weaker than those that have been hit
2:04:57once, or essentially zones that have
2:04:59been hit multiple times are invalid.
2:05:01The one final point we need to talk
2:05:03about before I show some examples of
2:05:05supply and demand trades is
2:05:07inefficiency.
2:05:08So, when you're looking for a trade,
2:05:11your supply or demand zone needs to have
2:05:13what we call inefficiency or an
2:05:16imbalance into it for it to be valid.
2:05:19Now, market efficiency, inefficiencies,
2:05:22and imbalances is the topic of the next
2:05:24concept that we're going to go through.
2:05:26So, you'll see full depth on this in a
2:05:27moment, but unfortunately, I do have to
2:05:29bring it in kind of prematurely because
2:05:31you need to understand it for the case
2:05:33of supply and demand.
2:05:35So, an imbalance or an inefficiency in
2:05:38the market is an open price range
2:05:40generally created by a candle that
2:05:42hasn't been filled yet.
2:05:45So, in the case of this blue candle that
2:05:47we have going up, this is an inefficient
2:05:50or imbalanced candle, okay?
2:05:52What that simply means is we have a
2:05:54demand zone, which is going to be the
2:05:56last candle before the impulse up here,
2:05:59and the price range between this candle,
2:06:02the demand zone, and where price
2:06:03currently is has not been filled. It
2:06:06hasn't been retested, meaning we have
2:06:08not seen price come back through this
2:06:10range.
2:06:11Now, because price hasn't come through
2:06:13the range yet, it's what we call an
2:06:15imbalance. It's an imbalanced price
2:06:17range or an inefficient price range.
2:06:20This simply means that basically, we
2:06:23haven't had a fill of the orders yet,
2:06:25and we haven't seen the market return to
2:06:26a discount price level.
2:06:29Because of this,
2:06:30it's a fresh zone. So, therefore, we can
2:06:32trust this zone for buys
2:06:34because it has the inefficiency into it.
2:06:37And we know once the market is able to
2:06:38fill that range, we should get a new
2:06:40influx of buyers that haven't had the
2:06:42chance at this price level yet since
2:06:45that initial rally.
2:06:46Now, let's take a look at the zone
2:06:48before this one.
2:06:50So, we have this candle here, the last
2:06:52candle before the impulse. Now, for
2:06:53candles like this, as a little side
2:06:55lesson, where we have the candle
2:06:58and then we have a wick that extends
2:06:59beneath that candle. I just like to use
2:07:02the candle to mark out the supply demand
2:07:04zone. And then I extend the box down to
2:07:08cover the low of the wick as well,
2:07:09right? So, that's how I would draw that
2:07:11demand.
2:07:12All right. Now, if we take a look at
2:07:13this demand zone, is it valid? No, not
2:07:17anymore because it's not inefficient.
2:07:20There's no imbalance, right?
2:07:22There was imbalance here through to
2:07:25here, but that imbalance was filled when
2:07:27the market retested the zone. So, this
2:07:29is no longer a fresh zone. Buyers
2:07:31already had the chance to make
2:07:33executions at this price level when the
2:07:35market returned to the level there.
2:07:39So, this is an efficient zone, okay?
2:07:41Efficient zone.
2:07:43With that said, we would not use this
2:07:45one for buys and we would completely
2:07:47ignore this zone in the future. In fact,
2:07:49if the market gets into that based on
2:07:51the previous lesson about supply and
2:07:53demand fails, we would actually expect
2:07:55that that could lead through to a
2:07:56breakdown in price because we would be
2:07:58seeing then the market return to a level
2:08:00which is no longer going to be strong.
2:08:04So, we need to see inefficiency or
2:08:06imbalance in order to validate the
2:08:08zones. We saw it there initially with
2:08:10this imbalance, so buying this retest
2:08:13would be completely fine. But now, that
2:08:15inefficiency, that imbalance no longer
2:08:17exists. It's been filled.
2:08:19So, we move our attention to the next
2:08:22inefficient zone, which is going to be
2:08:25this one here, this gray candle, the
2:08:26last candle before the impulse. Is this
2:08:29a fresh zone? Yes, because the imbalance
2:08:31still exists. So, we would be very happy
2:08:34to trade from here once the market
2:08:36returns to it, okay? Now, if we see what
2:08:39the market did, it pulled down, it
2:08:41retested the zone, and then it traded
2:08:44higher.
2:08:45So, from this point, what if the market
2:08:47returned to this zone again? Would we be
2:08:50happy to trade from it? Well, no,
2:08:53because if we take a look at where the
2:08:54imbalance was, from there upwards to
2:08:57where price was when we found the trade,
2:08:59the whole range here has been completely
2:09:01filled. So, this is no longer an area of
2:09:04interest for us to buy from, and we
2:09:06should instead shift our attention to
2:09:08supply and demand zones higher in the
2:09:10range inside of the new leg of price
2:09:12action, like this point, for example.
2:09:15So, just remember that when you're
2:09:16trading, a zone can only be hit one
2:09:18time, and it's only useful for the
2:09:20one-time use, because anything past that
2:09:23is going to be dangerous to trade from.
2:09:25And a zone has to have imbalance to
2:09:28validate it at all in the first place.
2:09:30If there's no imbalance, like the range
2:09:32has already been filled,
2:09:34then you simply do not use the demand
2:09:36zones attached to those impulsive
2:09:39movements, because they're not fresh,
2:09:40and they most likely will not work, and
2:09:43they'll result in the market breaking
2:09:45down if the market does get back into
2:09:47those levels. Okay, so to recap
2:09:49everything we've covered so far on
2:09:50supply and demand, demand zones are
2:09:53areas in the market where we have seen
2:09:55large influxes of buying take place.
2:09:58Therefore, once the market returns to
2:10:00these levels, we are looking for
2:10:01continuations higher. Supply zones are
2:10:04the opposite. They're areas we've seen
2:10:06significant amounts of selling taking
2:10:08place, so therefore they act as premium
2:10:10price levels, and once the market
2:10:12returns to them, we expect to see a
2:10:14decline. We use these for entries, and
2:10:17we use them to determine good points to
2:10:19actually run the market into before we
2:10:22start taking trades.
2:10:24To identify and plot supply and demand
2:10:26zones, we use the last candle before an
2:10:29impulsive move away.
2:10:31So, we just set it to one candle, and
2:10:33it's generally going to be an indecision
2:10:35candle before the larger candles that
2:10:37kick off a move. So, in a supply zone
2:10:40case, that's going to be like this in a
2:10:42downtrend.
2:10:44And we are going to look to target the
2:10:45downside from there.
2:10:47And in an uptrend case, we are looking
2:10:48for the last candle before an impulse
2:10:51higher, and we will use that for buying
2:10:53opportunity once the market meets it
2:10:55once again.
2:10:57Now, it's important that you only trade
2:10:59supply and demand zones in line with the
2:11:01trend because you'll get a lot of false
2:11:02turns, which kind of look like they
2:11:04should react, but they're against the
2:11:06trend. And these things aren't going to
2:11:08work too much because, after all, market
2:11:10structure does determine the direction
2:11:12of the market, and we want to be moving
2:11:14with that. So, in an uptrend, only trade
2:11:17demand zones, and in a downtrend, only
2:11:20look to trade supply zones.
2:11:23Now, a supply zone or a demand zone is
2:11:25only good on its first tap, and every
2:11:27time it's hit after the first tap, it
2:11:30gets weaker. Remember, I said it's like
2:11:32throwing a steel ball at a brick wall.
2:11:34It'll bounce a couple of times, but
2:11:36eventually, you're going to go through,
2:11:37and that's what happens to these zones,
2:11:39too. You really only want to be catching
2:11:41the trade off of the first retest, and
2:11:44then you're looking for that momentum to
2:11:46continue into more significant upside.
2:11:49If that doesn't happen, and the market
2:11:51comes back again for a second, a third,
2:11:53or any amount of taps after that,
2:11:56this zone is getting weaker, and will
2:11:58likely, generally, move you into a
2:12:01selling opportunity instead.
2:12:04And final note of what we've been
2:12:05through so far is the importance of
2:12:08imbalance or inefficiency.
2:12:10The market has to have an imbalanced
2:12:12range, meaning an open price range, like
2:12:15a large candle that hasn't been filled
2:12:16yet, in order to be valid. So, we
2:12:19wouldn't be trading zones like this one
2:12:22for a second time because it's already
2:12:24been hit, but we would be looking to
2:12:26trade zones like this once the market
2:12:28comes in to fill that range. After one
2:12:31tap, it is not going to be good because
2:12:34there would be no inefficiency and no
2:12:35imbalance to work with. Taking what
2:12:37we've discussed so far about market
2:12:39structure, candlesticks, and supply and
2:12:41demand, let's take a look at a first
2:12:44brief idea of a trade, okay?
2:12:46So, this market is of course creating
2:12:47impulses to the upside. We have a break
2:12:50of structure here, that's impulse number
2:12:52one. Then we have a break of structure
2:12:54here, that's going to be the secondary
2:12:56impulse,
2:12:57and this is the one that's just taken
2:12:59place, okay? So, we have a higher high,
2:13:03higher low, and now we're pushing into a
2:13:05higher high once again.
2:13:07So, with that said, we know we have
2:13:08bullish structure, okay? Now, if we lean
2:13:11over to the candlesticks, of course we
2:13:12can use these to determine uh strength
2:13:15of the market by the speed and size of
2:13:17candles.
2:13:18Well, we can see this downward move or
2:13:19this consolidative move was pretty flat.
2:13:22We didn't have any significantly large
2:13:24candles.
2:13:25We had some reasonable candles to be
2:13:26honest, but they would matched with
2:13:28bearish candles, bullish candles,
2:13:29bearish candles all the same.
2:13:31So, this range was flat. This is
2:13:33consolidation.
2:13:35In this, we also saw rejections to the
2:13:36downside, which indicates to us that we
2:13:38may be seeing buying pressure stepping
2:13:40in at this level.
2:13:42When we see the market take off like
2:13:43this with incredibly strong bullish
2:13:45candles, remember little to no wicks at
2:13:47the top and very large candle bodies,
2:13:50this indicates to us that buyers are now
2:13:52in control clearly.
2:13:54So, market structure paired with the
2:13:56candles we've discussed so far shows us
2:13:58that buying is definitely favorable in
2:14:01this market.
2:14:03Now, on to supply and demand. We're
2:14:04going to use the last candle before the
2:14:06impulse, which is going to be this
2:14:07candle here, to mark out an area of
2:14:09demand. We know this is a discount price
2:14:12level that traders would like to buy
2:14:14from again most likely if we are able to
2:14:16reach that value once again. So, we may
2:14:19see buyers refrain from buying in mass
2:14:22at these levels in the hopes of seeing a
2:14:24return to this level.
2:14:27And when this price is met again, we can
2:14:28assume that the market will take off
2:14:31from there because we will see, you
2:14:33know, a new influx of buyers who weren't
2:14:35able to get in here previously, who now
2:14:38want to see this as a fair value to get
2:14:39into this market.
2:14:41So, we have structure, supply and
2:14:42demand, and the candlesticks that we've
2:14:44read so far lining up to give us a
2:14:46trading opportunity. The final thing to
2:14:49mention is of course the imbalance and
2:14:51inefficiency from the demand zone and
2:14:54into where price is now. This entire
2:14:56price range has not yet been filled. We
2:14:58would need to see the market coming back
2:15:00through this to validate a fill and
2:15:02create efficiency in the market. So, we
2:15:06would then look to buy at this level.
2:15:08We could put a stop under the zone and
2:15:10our target into new highs. Obviously,
2:15:13targets-wise, we'll talk about how to
2:15:15determine these soon, but for now, we'll
2:15:17use this random target. And then
2:15:18allowing the market to do its thing, you
2:15:20see that we do indeed get a run up. So,
2:15:23that was quite a lucky run there because
2:15:25we saw a dramatic turnaround in the
2:15:26market, but luck didn't come into the
2:15:28fact that we were able to find a good
2:15:30setup. Obviously, targets, when we go
2:15:33through those, will help you to make
2:15:35sure you're getting out of trades before
2:15:36there are significant reversals, but as
2:15:38you can see, that's pretty much what we
2:15:41wanted to see there. We had a push into
2:15:43the zone. We had a run away from the
2:15:45zone. We saw a continuation in the
2:15:47upward trend, and we saw a continuation
2:15:49in the strong bullish momentum as well.
2:15:51So, that is it, everything so far. Now,
2:15:53let's move on to the next concept,
2:15:56market efficiency.
2:15:58So, you just kind of learn the basics of
2:16:00it when we talked through supply and
2:16:01demand because I showed you imbalances
2:16:04and how zones have to be in balance, but
2:16:06efficiency goes slightly deeper than
2:16:08that and it has more uses than just
2:16:10supply and demand zone validation.
2:16:12So, the theory behind efficiency is that
2:16:16markets or market participants
2:16:19like to buy from discount and premium
2:16:21price areas, right? We know that. You
2:16:23don't want to get something for really
2:16:25expensive if you're going to be buying
2:16:27and you don't want to sell it for really
2:16:28cheap if you're going to be selling.
2:16:30So, after we see, for example, an
2:16:32impulse to the upside, we know we're
2:16:34likely to draw back through that range
2:16:36that is created with the previous
2:16:38impulse.
2:16:39That happens as buyers are basically
2:16:41seeking a better price before they get
2:16:44into the market.
2:16:46Likewise, sell side, if we were to flip
2:16:48this upside down, sellers don't want to
2:16:50sell at the lowest price. They want to
2:16:52wait for a premium price to either exit
2:16:54for a profit or to short sell the market
2:16:56to profit from a larger decline.
2:16:59So, we know that market participants
2:17:01want the best possible price for their
2:17:02orders.
2:17:03Now, that simply means that throughout
2:17:05these ranges, throughout the impulse
2:17:07ranges that we have here, we don't have
2:17:09the largest number of transacting taking
2:17:12place, right? The majority of the buying
2:17:14and selling is going to be happening at
2:17:16core points such as demand zones that
2:17:18are created when the market returns to
2:17:20them, okay? We know this because, of
2:17:22course, as we've just said, they want
2:17:24discount prices and it's pretty much
2:17:26printed on the charts for us. If there
2:17:27were significant buying selling
2:17:29transacting taking place inside of a
2:17:30range, then the range would continue
2:17:33higher, but generally, we are going to
2:17:35get that efficiency and that fill back
2:17:37through the range.
2:17:39So, there are two types of ranges then
2:17:41or two types of price action. There's
2:17:43efficient price action and then there is
2:17:45inefficient price action.
2:17:47Now, inefficiencies, we discussed. We
2:17:50have imbalances, right? An imbalance and
2:17:53an inefficiency are just two names for
2:17:55the same thing, an open price range.
2:17:58So, if we were to look at this for
2:18:01what it is as a range. We have the
2:18:03efficient price range. This is a price
2:18:06range where every time we create a
2:18:07demand zone and the market comes and
2:18:09retests that zone, okay? Therefore,
2:18:11leaving no imbalances open and therefore
2:18:14deeming it efficient.
2:18:16And then we have the inefficient price
2:18:18range,
2:18:19which is where we have a large drive
2:18:21higher
2:18:22and an imbalance is left open where the
2:18:24market hasn't come back to fill the
2:18:26imbalance or inefficiency.
2:18:29So, efficient price ranges are very
2:18:32useful to be able to read because even
2:18:34when we're not trading directly from
2:18:36them, we can use these in a different
2:18:38way that we're going to get into very
2:18:39soon.
2:18:40And inefficiencies are of course
2:18:42essential to know because first off,
2:18:44they're going to help us to validate our
2:18:45buying and selling zones,
2:18:47but second of all, they're going to act
2:18:48as kind of a magnet for price.
2:18:51Now, if we was to see the market trading
2:18:52up here where we are right now, we
2:18:55generally wouldn't be looking to buy at
2:18:57this level, right? Now, we have a large
2:18:59imbalance below or inefficiency, and we
2:19:02know the market likes to fill these. So,
2:19:04what might make sense for us as buyers
2:19:06is to wait for the market to get all the
2:19:08way back through that inefficiency to
2:19:10take the buy. The inefficiency or
2:19:12imbalance then essentially act as a
2:19:14magnet for price and kind of a thing
2:19:16that foreshadows or forecasts where the
2:19:19market's going to go.
2:19:21So, when we can read these imbalances or
2:19:22inefficiencies and we can work out where
2:19:24in the market they are, then it's easy
2:19:26for us to wait on the best trades and
2:19:29it's also good for us sometimes to say,
2:19:31take a trade down to this level
2:19:33because we understand it's going to act
2:19:35as somewhat of a magnet for price, okay?
2:19:38So, imbalances are important because the
2:19:40market will frequently fill them, so
2:19:42it's good to know where they are so we
2:19:44can determine where trades could be
2:19:46through that range or out of the range
2:19:48once it's been filled. And efficient
2:19:50ranges are good to know for a different
2:19:52reason.
2:19:53So, I will go through that one shortly,
2:19:56but first let's jump over to the chart
2:19:57and I'm going to show you an example of
2:19:59an inefficient range and an efficient
2:20:01range. Okay, so first let's break down
2:20:03an inefficiency or an inefficient range.
2:20:06We have here a large impulse to the
2:20:08downside, which comes from this area of
2:20:10supply. Now the area of supply is going
2:20:13to be marked as the last indecision
2:20:14candle before the downward move. And the
2:20:17inefficiency will essentially be marked
2:20:19from the low of that candle, the wick of
2:20:22the candle, through to where price
2:20:24currently is, which is going to be
2:20:26around here.
2:20:27Now we know then there is going to be
2:20:29inefficiency in this area because we
2:20:32have an open space of candles that
2:20:35hasn't been filled. And we know there's
2:20:37another bit of inefficiency basically
2:20:39from this area through to where we are
2:20:41now, but this is just one individual
2:20:43candle.
2:20:44Now with this inefficiency open, we
2:20:46would be interested in seeing the market
2:20:48return to that point before we look for
2:20:51a selling opportunity. So this would
2:20:53provide the prime setup.
2:20:56Now the reason for that, when we break
2:20:57down the theory behind this, is of
2:20:59course that this was seen as a premium
2:21:02price level for sellers to sell from,
2:21:04right? This entire range,
2:21:06sellers were happy to sell here because
2:21:07they were getting a good price to do so.
2:21:10If we think about where we are right
2:21:11now, this relative to the premium price
2:21:15up there is actually a discount price.
2:21:18And sellers don't want to sell for a
2:21:19discount. Some will of course, and that
2:21:21is of course why the market's moving
2:21:23lower.
2:21:24But the majority would prefer take
2:21:26shorts or sell their positions at
2:21:29premium levels.
2:21:30So what we see is simply the sellers
2:21:33getting exhausted. We see less selling
2:21:36taking place, and therefore buying can
2:21:39take a little bit of control for the
2:21:40short term until we trade back into a
2:21:44premium price level.
2:21:46When we hit that premium level, we then
2:21:48see the market trading lower. So letting
2:21:50that run forward a bit, you'll see that
2:21:52after hitting the supply zone, the
2:21:55premium price area, the market traded
2:21:57lower.
2:21:58Now, the inefficiency was crucial in
2:22:01helping us to actually identify where
2:22:03that sell would come in from.
2:22:05Because as soon as we see this
2:22:07inefficient range, we understand there
2:22:09is a high, not guaranteed, but a high
2:22:11probability that we will trade through
2:22:14this range.
2:22:15So, we can view this as kind of a magnet
2:22:18for the price to be drawn through.
2:22:20Now, this provides us with potentially
2:22:22two opportunities.
2:22:23First is if the market shows us signs of
2:22:26reversal down here, we can look at
2:22:28actually some substructure type trades,
2:22:30understanding there's a high probability
2:22:32the market's going to fill this
2:22:33imbalance to trade back towards the
2:22:35premium level. Now, in this specific
2:22:37instance, there really wasn't much
2:22:38chance for us to do that because market
2:22:40structure didn't shift until we ran all
2:22:43the way through to the target. All we
2:22:44had was wicks to confirm.
2:22:46So, this case didn't really provide us
2:22:48with that, but it's definitely something
2:22:50to look for because a lot of the
2:22:51inefficiencies you see will provide you
2:22:53with these substructure opportunities.
2:22:56The second opportunity, of course, is
2:22:58the pro-trend opportunity to simply sell
2:23:01this market down in line with the
2:23:03premium price now being retested.
2:23:06Now, the reason that these
2:23:07inefficiencies happen is simply because
2:23:10we know where the core points for
2:23:12sellers and buyers are going to be.
2:23:14They're going to be in premiums for
2:23:15sellers and in discounts for buyers. So,
2:23:18essentially what happens is we see that
2:23:20race to the bottom of sellers dropping
2:23:22their prices to meet buyer willingness.
2:23:24And we simply get to a point where there
2:23:26aren't any willing sellers anymore.
2:23:28People are not willing to sell at this
2:23:30low of a price.
2:23:31And so, with less selling taking place,
2:23:34any buying that does take place drives
2:23:36the price up. And we see those sellers
2:23:39then demanding higher prices until
2:23:41eventually we meet a point where sellers
2:23:43enter in such force that the the just
2:23:45sinks down again, right? So, it's simply
2:23:48a case of the willing sellers leaving
2:23:50the market and the willing sellers
2:23:52basically asking for higher prices. And
2:23:55then eventually, when we're in the
2:23:56premium, the willing sellers step in
2:23:58massively and say, "Okay, a lot of us
2:24:01are willing to sell here." And we start
2:24:02to see this big decline in price, right?
2:24:05So, that is why the inefficiencies
2:24:07actually work. And inefficiencies, if we
2:24:10break it down, are good for a few
2:24:11things. Number one, they're good as a
2:24:13magnet price range to trade through
2:24:17with substructure
2:24:19setups. Okay? So, the kind of
2:24:21countertrend setups.
2:24:23Number two, they are seen again as a
2:24:25magnet, but this time for larger trades
2:24:30protrend. So, when those inefficiencies
2:24:33are filled, we can look to sell. Now,
2:24:34the reason we use inefficiencies for
2:24:37this specifically is because if you have
2:24:39a bearish bias on this market, but the
2:24:41price is trading, say, here,
2:24:44instead of selling into the market here
2:24:46and getting wiped out or having to have
2:24:47a massive stop loss, therefore getting
2:24:49pretty much worthless risk reward, you
2:24:51can actually wait for the inefficiency
2:24:53to be filled because you know with a
2:24:54probability, uh a high probability,
2:24:57that's what's going to happen. Now,
2:24:59sometimes it won't, right? If we take a
2:25:00look just previous to this, there was an
2:25:03[snorts] opportunity where we had
2:25:04inefficiency and it wasn't filled. So,
2:25:06sometimes if you are waiting for the
2:25:08trades up here, you're not going to get
2:25:09them, but welcome to trading. It's a
2:25:11probabilities game, right? We're not
2:25:13banking on this to 100% give us perfect
2:25:15setups every time. We're using this to
2:25:17build the foundation behind potential
2:25:19ideas. And that is what is so good about
2:25:21imbalances in that right. Because if we
2:25:24wait for inefficiencies to be filled,
2:25:25well, the trades we take, let's say we
2:25:27take a trade from up here, they're going
2:25:29to be much better
2:25:31than the trades that we would execute at
2:25:33random levels. This is a trade
2:25:35absolutely not worth taking, but
2:25:37suddenly, by simply waiting for the
2:25:39imbalance to be filled, well, the risk
2:25:41reward grows so much that we can make so
2:25:43much more than our risk actually would
2:25:45take away from us if the trade loses,
2:25:47that suddenly we have a viable trade
2:25:49from the same bias, right?
2:25:51Now, another thing that they can be used
2:25:53for actually are targets on your
2:25:56pro-trend trades.
2:25:57So, basically, let's say we have this
2:26:01setup that we're looking at right now,
2:26:02okay? This we have our inefficiency
2:26:06and we're looking to sell
2:26:07from the inefficient supply zone.
2:26:11So, up here like this, right?
2:26:13We can, of course, just target the low.
2:26:16But, it's a pro-trend move. So, because
2:26:18we are trading bearish, there could be
2:26:20more room for us to move and maybe we
2:26:22would miss out on that if we just took
2:26:24profits at the low there.
2:26:26So, what we can do with inefficiencies
2:26:27is we can look to the left and we can
2:26:29see how price reacted in the past
2:26:31because we will find often times that
2:26:34there are larger inefficiencies like
2:26:36this that can provide us with very clear
2:26:38targets for the trades.
2:26:40So, obviously, ignore the structure on
2:26:42this one for now. I'm just highlighting
2:26:43the opportunity, but if we were to trade
2:26:46higher and then trade lower, and let's
2:26:48say this is the price action we're
2:26:49looking at just here, right? If we look
2:26:51to the left on a daily time frame or a
2:26:54weekly time frame, we may find that
2:26:55there is a significant imbalance 100 or
2:26:58so pips lower than this low.
2:27:01So, rather than having to take a trade
2:27:03from here
2:27:04and target this low,
2:27:07well, now an inefficiency may have
2:27:09opened the opportunity for us to trade a
2:27:12significantly larger target. So, instead
2:27:14of trading this, we can trade this
2:27:18because the old inefficiency that is
2:27:20still open has a high likelihood of
2:27:22being filled over time. Now that the
2:27:24trend is moving back in that direction,
2:27:26it becomes prime time to basically get
2:27:28in and run the trade through for an
2:27:30extension towards a larger imbalance.
2:27:33So, those are the core things that
2:27:35imbalances are good for. First, they
2:27:37just help you to identify magnet price
2:27:39areas that the market is likely to trade
2:27:41through. Then, areas that you would
2:27:43ideally want to sell or buy from to get
2:27:45the best possible trades. And then you
2:27:47can even use them as targets on
2:27:49extensions to make sure you're getting
2:27:51the most out of the trades that you
2:27:52take.
2:27:53Inefficiencies are super simple, easy to
2:27:56understand. You'll see them everywhere
2:27:57in the markets and they all provide
2:27:59really good opportunities for you for
2:28:01actually setting the basis of your
2:28:02trades. All right, and now for efficient
2:28:04ranges. Now, this is the one that I find
2:28:06really interesting and you probably will
2:28:08as well.
2:28:09The theory behind it is cool and most
2:28:11people just don't know about this
2:28:12whatsoever.
2:28:13So, an efficient range is an area where
2:28:15there are no imbalances left inside of a
2:28:17piece of price action, right? If we take
2:28:19a look at the run down from this high,
2:28:21we have multiple supply zones, but all
2:28:24of them
2:28:25but one
2:28:26are efficient.
2:28:28So, we do have some slight inefficiency
2:28:31into this area of supply, right? If we
2:28:33pull this down the indecision candle,
2:28:35there is a tiny bit of inefficiency at
2:28:38this level. And by the way, it doesn't
2:28:40matter how big inefficiency is or isn't,
2:28:42it's all just as relevant as one
2:28:44another.
2:28:45So, we'll mark this as our only piece of
2:28:47inefficiency. But then above that, every
2:28:49zone that we've created has been
2:28:51retested by price. So, we have a zone
2:28:54there which was retested. We have a zone
2:28:56here.
2:28:57This blue candle which was retested by
2:28:59the push back up of this candle.
2:29:02We have one here, this blue candle
2:29:04again, which was retested there.
2:29:07We have one here which was retested by
2:29:09the wicks. You get the point, right?
2:29:11Every bit of this range has been
2:29:13retested and is now efficient. So, we
2:29:16have this blue candle. We obviously we
2:29:17extend to the high as explained
2:29:19previously.
2:29:20And yeah, you can just see every bit
2:29:22that we've seen in the market here.
2:29:24Every supply zone, every bit of
2:29:26imbalance that's been created has been
2:29:27refilled.
2:29:29So, with that said, this range then it
2:29:31becomes efficient.
2:29:33Basically, what it means is every time
2:29:36we've created an area of premium price
2:29:39as indicated by an impulsive candle to
2:29:41the downside, the market has returned
2:29:43and retested that level. So, we've seen
2:29:45that flow of selling control and then
2:29:48sellers step out until a premium price
2:29:50is met and re-enter the market. So,
2:29:52every time we've stepped down here,
2:29:54we've basically filled what is seen by
2:29:56the market participants as a premium
2:29:58price level. Now, as the market shifts
2:30:00lower and lower we are going to see less
2:30:03willing sellers simply because there's
2:30:05been so much selling taking place at
2:30:07every one of these what's seen as good
2:30:08levels.
2:30:09Now, because there are no untested good
2:30:11levels left, the willingness to sell
2:30:14inside of this range if the market
2:30:15returns to it is going to be pretty low.
2:30:19So, if we mark our efficient range from
2:30:21the high down to around here,
2:30:23then we have our small inefficient range
2:30:25with the inefficiency or imbalance just
2:30:27there.
2:30:28We basically have two ways to approach
2:30:30this now. Or, one way to approach but
2:30:32with a contingency plan backed up.
2:30:35Now, with no significant areas for
2:30:37sellers to get into the market left
2:30:39inside of this entire range, the highest
2:30:42probability thing for this range is if
2:30:44the market breaks into it, it will
2:30:46likely be traded all the way through and
2:30:49the market will go for the next
2:30:50inefficiency which could be above the
2:30:53efficient range.
2:30:54The reason for this is, of course, we
2:30:56just don't have any points of resistance
2:30:58left. There aren't going to be many
2:31:00willing sellers strong enough to hold
2:31:02down buying and push the price lower.
2:31:04We're going to see buyers step in
2:31:06considerably more now that we're at a
2:31:08discount price and we're going to see a
2:31:10lot less sellers willing or able to take
2:31:12on this market given the amount of
2:31:13selling we've recently seen through the
2:31:15efficient range.
2:31:17So, how we approach a market like this
2:31:19is first of all, well, the market is
2:31:20bearish and there is still inefficiency
2:31:22to the downside. So, we would look for
2:31:25this initially, right? And we could do
2:31:27that through sell limits or we could do
2:31:29it through confirmation entries. Now, if
2:31:31you were to confirm it, we'll talk about
2:31:32confirmations a little bit later, but we
2:31:34have kind of discussed this concept.
2:31:36A reversal in the market on a lower
2:31:38timeframe is pretty much what we want to
2:31:40see, right? If we were to see that
2:31:41inside of the range, that would be
2:31:43pretty sure fire to actually get us into
2:31:45a position.
2:31:46Now, if instead of this,
2:31:48if we were to just sell limit, then we
2:31:50would sell there with a stop above and
2:31:52our targets into the lows.
2:31:54Regardless of which one of these goes
2:31:56down, a loss on this position would
2:31:58result in a pretty immediate opportunity
2:32:00in the opposite direction.
2:32:02>> [snorts]
2:32:02>> So, allowing the market to play forward,
2:32:03you will see that the market did not
2:32:05hold inside of this supply zone. In
2:32:07fact, it broke higher into the efficient
2:32:10range. So, a sell limit from this level
2:32:12would have resulted in a loss. And the
2:32:14reason I'm showing you this, of course,
2:32:16is because this is incredibly normal.
2:32:18You need to understand that losses are
2:32:19not your enemy. Losses will happen, but
2:32:22a good way to set losses up with this
2:32:24inefficiency and efficiency kind of
2:32:26format is that the majority of the
2:32:28losses you do take should result in
2:32:30immediate new opportunities.
2:32:32This would have lost for a sell limit.
2:32:34It wouldn't have lost on a confirmation
2:32:36because you wouldn't have entered at
2:32:37that point.
2:32:38But after losing or invalidating the
2:32:40trade, regardless of that outcome,
2:32:43we now see the market's driven into the
2:32:44efficient range. We know there is pretty
2:32:47much no point of resistance waiting
2:32:48inside of this efficient range. And so,
2:32:51with buyers now taking control of the
2:32:52market, it's likely buyers will hold
2:32:55control of the market until we reach a
2:32:57significant level like the high of the
2:32:59range where there could be, for example,
2:33:01liquidity, a concept we'll go deep into
2:33:03soon, or inefficiency.
2:33:06Basically, as soon as the efficient
2:33:08range is traded into, it becomes a clear
2:33:11point for us to trade all the way
2:33:13through, right? And so, what we could do
2:33:15at this point is we could treat this the
2:33:17same way we would as a clean market
2:33:18structure reversal. Supply has failed,
2:33:21the market's in an efficient range,
2:33:22there is no point of resistance to cap
2:33:24buyers. So now we can look for demand
2:33:26with inefficiency into it that way.
2:33:29Well, if we take a look from the low
2:33:30upwards, we have a first zone here. This
2:33:32has been retested with this pullback on
2:33:34that candle down. We have a second zone
2:33:36around here. Again, this one has been
2:33:38retested by this pullback and tapping
2:33:41that. And we have a third zone here.
2:33:43This one at this point in time is
2:33:45completely inefficient. We still have
2:33:47the imbalance, which is going to be this
2:33:49price range, okay? From that up to that.
2:33:52We still have an imbalance that is now
2:33:54likely to be filled to provide
2:33:58a new opportunity.
2:34:00So what we could do is we could go ahead
2:34:02and place a trade here.
2:34:04The stop loss under the low
2:34:06and targets into the high. Because we
2:34:09know, now that we're in the range, we're
2:34:11likely to go all the way through it.
2:34:13There's just not enough resistance from
2:34:14sellers. No significant points of
2:34:16interest that sellers could cap the
2:34:18price. So the most likely outcome, now
2:34:20that we see this reversal beginning, is
2:34:22a full run through the range.
2:34:24Now, we could put our stop loss for a
2:34:26trade like this right under the zone.
2:34:28Because with this being efficient, we
2:34:31understand that the market gets into an
2:34:33efficient range, it's likely to go all
2:34:35the way through.
2:34:36So if we were to get here, we would
2:34:38expect a continuation through to here.
2:34:41So there just is no point having a
2:34:42really big stop loss and slimming down
2:34:44the profits you can make on the trade.
2:34:46We want to get out as soon as we know
2:34:47we're wrong. In the ways that as I said
2:34:49with a sell limit on this side of the
2:34:50market, you would have wanted to get out
2:34:52right above the zone. Cuz we understand
2:34:54if the market does get above the zone,
2:34:56this is unlikely to reverse. So there's
2:34:59no point having a stop here or here cuz
2:35:01we know it's likely to get through the
2:35:02range if that happens.
2:35:04So this could have been a loss, okay?
2:35:06Let's call that a loss. But you would
2:35:07have been getting out immediately when
2:35:09the market failed the final
2:35:10inefficiency.
2:35:11And now we would place a trade this way.
2:35:14Because we've seen the the break into
2:35:15the range. We would have our stop loss
2:35:17tight because again, it's efficient
2:35:19beneath. And now we are basically seeing
2:35:21if the market is going to give us the
2:35:23pullback we want to fill the efficient
2:35:25range and then run higher.
2:35:27And again, a reminder here on why
2:35:29inefficiencies are so good for setting
2:35:31trades. Cuz if you had a bias to take
2:35:33this market higher, you wouldn't want to
2:35:35be buying in here.
2:35:36There's yes, still some significant room
2:35:38to move, but now we know there's this
2:35:40magnet imbalance below. There is a very
2:35:42high probability that the market will
2:35:44get into that range. So for you to
2:35:46execute a trade here, you would either
2:35:48one, have to have an incredibly unsafe
2:35:50stop loss around this level that is very
2:35:52likely to be hit. Or number two, you
2:35:54would have to set [snorts] up a trade
2:35:55that looks something like this, which
2:35:58from a risk reward perspective is just
2:36:00absolutely horrible. You're risking $100
2:36:02to make $137 here. It's just really not
2:36:05a good trade to be taking. Especially
2:36:08when you understand the probability of
2:36:09the imbalance being filled is high. And
2:36:11by waiting for that, you can turn this
2:36:13$100 of risk into $684 of profit, right?
2:36:17So that is a good trade setup regarding
2:36:19efficiency. Now let's see what the
2:36:20market did.
2:36:22It comes close and then it comes into
2:36:23the zone and then eventually it takes
2:36:26off and it runs through the target.
2:36:29So this trade, completely fine. We would
2:36:31say honestly, the execution could have
2:36:33been a lot nicer in terms of how the
2:36:35market reacted, but we don't get to
2:36:37decide that. We tap in here, we hold the
2:36:41trade, and we close it for a win because
2:36:43up until this point, up here, nothing
2:36:46invalidated the opportunity we had,
2:36:48right? We didn't see the market break
2:36:49into an efficient range. We Yes, we saw
2:36:52it weaken a little bit, but it's still
2:36:54the whole time respected the actual
2:36:56efficiency that we've got. And we didn't
2:36:58see any significant closures lower into
2:37:00the zone, just simply a wick rejecting
2:37:03even though it wasn't the cleanest move.
2:37:06So that is how inefficiency and
2:37:08efficiency can be used to formulate
2:37:10trades. Inefficiencies, super simple,
2:37:12that's where most trades are going to
2:37:13come from. But efficient ranges are
2:37:15useful, too, because we understand when
2:37:17the market breaks into them, there's no
2:37:18point of resistance in there to cap
2:37:20price. Now, the same goes for a
2:37:22sell-side opportunity. If we have a
2:37:24bullish trend that is completely
2:37:25efficient, and the market breaks into
2:37:27that range, there are very high odds
2:37:29that we, once filling the inefficiency,
2:37:31are going to trade all the way down
2:37:33through the previous range created. To
2:37:35recap market efficiency, now this one's
2:37:37quite simple, there isn't as much to
2:37:39talk about, but we have two price areas.
2:37:42We have efficient price areas, and we
2:37:44have inefficient price areas.
2:37:47Efficient price areas are points in the
2:37:49market that have created a demand or
2:37:51supply zone and an impulse, but that
2:37:53entire impulse has been filled back in
2:37:55by price, and the demand or supply zone
2:37:58has been retested. These areas leave
2:38:00open no imbalances and no open space for
2:38:03the market, therefore they are
2:38:05efficient. This happens because market
2:38:07participants who are, in this case,
2:38:09buying don't want to buy at premiums, so
2:38:12they wait for the market to return to
2:38:14discounts. With less people buying up
2:38:16here, we see a larger influx of seller
2:38:18control because the willingness from
2:38:20buyers is much lower. That drives the
2:38:22market lower until we reach what is seen
2:38:24as a discount price level, and then the
2:38:25market impulses again.
2:38:28Now, the inefficient price ranges, these
2:38:30are simply the same kind of thing, but
2:38:33just not yet filled.
2:38:35So, if we create a demand zone, and we
2:38:37have an impulsive move to the upside,
2:38:39and this market has not yet seen a
2:38:41return through the range into the
2:38:43demand, this is what we see as an
2:38:45inefficient price range. The
2:38:47inefficiency is marked from the demand
2:38:49zone to where price currently is, and
2:38:51this is what we call an imbalance.
2:38:54Inefficiency, imbalance, same thing,
2:38:56different words. What we're looking for
2:38:58when we see imbalances is for the market
2:39:00to return through this range towards a
2:39:03prime buying point, which would be a a
2:39:05price level. And of course, the same is
2:39:07true if we flip this upside down for a
2:39:09bearish market with price returning to a
2:39:11premium in that case.
2:39:13Now, we [snorts] can use inefficiencies
2:39:15in a few different ways. First, we use
2:39:17them to trade through the range if the
2:39:19market allows us an opportunity to do
2:39:21so. Second, we use them to avoid
2:39:24prematurely entering trades and we wait
2:39:27for the high probability magnet price
2:39:29area before we enter for the best
2:39:31possible rewards of the trades we take.
2:39:33And of course, we can use the older
2:39:36balances. So, let's say we have an
2:39:38imbalance over here
2:39:40creating a supply zone higher up. We can
2:39:43use these points as well. So, the
2:39:44imbalance here
2:39:46to determine a stronger target for our
2:39:48trade so that we can extend targets
2:39:51further than just the current high that
2:39:53we have. So, inefficient ranges are
2:39:55super simple. We identify them and we
2:39:58use them as targets for shorter-term
2:40:00trades and then executions for big
2:40:02picture trades when we have them.
2:40:04And efficient ranges are where things
2:40:06get really interesting. These are areas
2:40:08where supply zones have all been hit
2:40:10throughout the entire range leaving an
2:40:12area of no price resistance. When the
2:40:14market trades through any final
2:40:16inefficiencies like this one here and
2:40:19into the efficient range, we can
2:40:20confidently shift the bias because we
2:40:23understand with no points of resistance
2:40:25inside of the range left, the market is
2:40:27likely to trade all the way through. So,
2:40:30we can shift our focus to identifying
2:40:32inefficient demand zones following the
2:40:34impulse into the range and then we can
2:40:36buy from there and target the high. So,
2:40:39let's break down a trade using all of
2:40:40the concepts we've discussed so far.
2:40:43So, that's going to be market structure
2:40:44first of all. That's the first thing we
2:40:46want to look at to determine which way
2:40:47the market's actually going. We can see
2:40:49an impulse, a correction, an impulse, a
2:40:52correction, and an impulse to the low.
2:40:54So, we have a lower low just here
2:40:57uh formed at this level. This is the
2:40:59lowest low. But then, we have an impulse
2:41:01which pushes us past the lower high of
2:41:04one of the corrections.
2:41:06So, here's our current relevant
2:41:08structure. We've got lower high.
2:41:11We've got lower low. And now, with this
2:41:15impulse to the upside, we have a higher
2:41:17high.
2:41:18Now, what do we expect when we see the
2:41:20market impulsing in the opposite
2:41:22direction? Well, we expect to see a
2:41:25market reversal because that's the first
2:41:27sign that buyers are taking control,
2:41:29right? So, we're looking at this right
2:41:31now. And when we see that, what do we
2:41:33expect? We expect to see a pullback
2:41:35down,
2:41:36formation of a higher low, and then the
2:41:38new formation of a higher high. And that
2:41:40is exactly the position that we're in.
2:41:43So, we're at a reversal point for this
2:41:44trade. It's not a continuation trade
2:41:46where we join in the trend. It's a
2:41:48reversal looking to catch the start of a
2:41:50new trending opportunity.
2:41:52So, now we need to work out where are we
2:41:55going to enter the trade? Well, we don't
2:41:57have the benefit of having very clear
2:42:01open demand zones in this range here.
2:42:03On the 30-minute time frame, we're on
2:42:05the hourly right now, there is actually
2:42:07inefficiencies there. But what we're
2:42:08going to do is we're going to stick to
2:42:09this time frame to show you how you
2:42:11could find the opportunity regardless,
2:42:13okay?
2:42:14So, with this higher high, if we take a
2:42:16look inside of basically the structure
2:42:19downwards from there, we have our own
2:42:21kind of trend inside of the trend, okay?
2:42:23We've broken down into a low here. We
2:42:25then had a corrective move which topped
2:42:27out here. And then we broke down again
2:42:30into a new low here.
2:42:32So, if we were, for example, able to see
2:42:35the market getting over this high, what
2:42:37would that do? Well, that would set us
2:42:39up with the same pattern on the low time
2:42:42frame that we've seen on the high time
2:42:44frame. Essentially, internally in this
2:42:47smaller version of the trend, we would
2:42:49be seeing that same exact shift to an
2:42:52impulse to the upside. And when the low
2:42:54time frame or the substructure setup
2:42:56agrees with the high time frame, that's
2:42:58about as good as we're going to get in
2:43:00terms of confirming good opportunities.
2:43:02So, what we would want to see is simply
2:43:04the market breaking over this level.
2:43:07Now, if you see, that's exactly what the
2:43:09market went and did. It closed with
2:43:11candles over this high, confirming to us
2:43:13that this lower time frame trend is
2:43:15indeed agreeing with the higher time
2:43:17frame trend. So now, what do we look
2:43:19for? Well, we want to find out the
2:43:21perfect place to buy.
2:43:23To do that, we want to identify why
2:43:25inefficiencies into remaining demand
2:43:27zones. And between these two lines you
2:43:29can see here, we have a clear
2:43:31inefficiency or imbalance. So, we'll
2:43:34mark that with this little highlighter.
2:43:35That's going to be just there.
2:43:37[clears throat]
2:43:38With that now in mind, we can mark out
2:43:40the demand zone beneath it because we
2:43:41know it's an inefficient zone.
2:43:44And that is going to create a buying
2:43:46zone that sits just there.
2:43:48So, we have the trend showing us a shift
2:43:50from lower lows and lower highs into a
2:43:52higher high. We have the substructure
2:43:54trend showing us the exact same thing.
2:43:56And now we've identified an inefficient
2:43:58demand zone to buy from.
2:44:00>> [snorts]
2:44:00>> So, our trade is basically complete in
2:44:02terms of the entry, the idea, the setup.
2:44:05We can place a buy limit here.
2:44:07We can put a stop under the low. There's
2:44:08no reason to put the stop too far down
2:44:10because we know if the market fails this
2:44:12zone, we'll be trading into efficiency
2:44:14and there would be little reason for us
2:44:16to reverse from that.
2:44:17And then, we can work out where the
2:44:19target's going to go.
2:44:21So, the obvious simple target is just
2:44:23trading into a higher high like this,
2:44:26okay? So, if the market comes down, we'd
2:44:28then be expecting a reaction from demand
2:44:30after filling the imbalance and a run
2:44:31higher towards this because of course,
2:44:34with us now starting a new trend, we're
2:44:36expecting the next movements to be a
2:44:38trade into higher highs.
2:44:40So, targeting each of these highs is a
2:44:42super simple way to capture good entries
2:44:45and good targets for your trades.
2:44:47But, we can actually go one step further
2:44:49than that by inviting the concept of
2:44:51inefficiencies into the trades as we've
2:44:53just explained.
2:44:54What we can do is we can look to the
2:44:56left and we can determine where there
2:44:58might be larger imbalances that the
2:44:59market could potentially trade towards.
2:45:02Now, we can see before this large
2:45:04impulsive move down, we have this kind
2:45:05of area just here.
2:45:07This is an inefficient area of supply.
2:45:10Which means rather than running the
2:45:11trade here at around 4.32 risk to
2:45:14reward, this is really good by the way.
2:45:16It means for every $100 you risk on the
2:45:17trade, you're going to make $432 back.
2:45:20We can actually extend it further and
2:45:22turn it into a 6.51 risk to reward
2:45:25trade, meaning you're going to make $651
2:45:28for every $100 you risk. Providing this
2:45:30trade works out as you want it to.
2:45:32Now, the higher we can get our risk
2:45:34reward like this, the better because it
2:45:36allows us to take more losing trades
2:45:38which are inevitable and will happen a
2:45:39reasonable portion of the time.
2:45:41If you lose, let's say 50% of your
2:45:43trades, but you can capture a risk
2:45:45reward like this, well, three losses at
2:45:48$100 is going to lose you $300 and one
2:45:51win at $651
2:45:53will put you at a net total of $351,
2:45:56which is a very nice place to be
2:45:58considering you're only winning one out
2:46:00of four trades there.
2:46:02So,
2:46:03anyways, we've set that target up. We
2:46:06have a 6.51 potential and from
2:46:08everything we've discussed so far, this
2:46:09trade is basically complete. We have the
2:46:11trend, we have the substructure trend,
2:46:13we found our clear buying zone and we've
2:46:15used inefficiency to set up a good
2:46:17target.
2:46:18So, let's see how the market goes from
2:46:19here.
2:46:20You see [snorts] it pulls down, trades
2:46:22into the zone and then it runs up from
2:46:24there towards the imbalance supply zone.
2:46:27Which sets us up with a 6.51% potential
2:46:30trade and locks in this win for us.
2:46:33So, that is a trade breaking down
2:46:34everything we've covered so far. This
2:46:36time including efficiency. Now, we're
2:46:39moving over to one of the most
2:46:40interesting things in all of this video
2:46:43and also one of the most important
2:46:44concepts to understand in all of trading
2:46:46and that is liquidity. Now, the reason
2:46:49it's so important to understand
2:46:50liquidity is that if you don't see where
2:46:52liquidity is sitting in the market, you
2:46:54are going to be at at mercy of it, and
2:46:56you will end up being the liquidity for
2:46:59the traders who understand it.
2:47:01So, to explain what liquidity is,
2:47:03liquidity is simply refers to money,
2:47:06right? Or orders.
2:47:08It's areas in the market where there is
2:47:10a significant number of orders situated.
2:47:13Now, as we've already been through the
2:47:14battle between buying and selling, you
2:47:16understand by this point that it is
2:47:18orders, it's liquidity, it's transacting
2:47:21that actually creates the fuel for the
2:47:23market, for the movements that we see up
2:47:25and down.
2:47:27Now, when it comes to the case of say a
2:47:28supply zone,
2:47:30basically the reason markets move from
2:47:32supply zones, right? Is because there is
2:47:34a significant number of orders situated
2:47:37in and around that area. We know, being
2:47:40a premium price level,
2:47:42that there are going to be
2:47:44a huge quantity of people looking to
2:47:46sell if the market returns there. So,
2:47:49that's why we see returns through ranges
2:47:51because these areas don't have so much
2:47:54liquidity. We don't have anyone super
2:47:56excited to buy or to sell inside of a
2:48:00range. We know buyers want discount
2:48:02prices, sellers want premium prices. So,
2:48:05within here, there is less liquidity
2:48:07than there's going to be say under the
2:48:09low, or say inside of the supply zone,
2:48:12right? So, given that the most
2:48:14transacting takes place inside of those
2:48:17larger areas, they become points where
2:48:19there is a lot of fuel for movements.
2:48:22Now, the liquidity we're going to
2:48:23discuss forms in a different way. It
2:48:25forms around highs and lows, and it's
2:48:28basically the same thing in terms of a
2:48:30significant number of orders, but it's
2:48:33set up in a different way.
2:48:35A supply or a demand zone is a pretty
2:48:37obvious area of discount or premium
2:48:39price where we know there's going to be
2:48:40lots of buying and selling.
2:48:42But the liquidity we're going to discuss
2:48:43around highs and lows, this is a little
2:48:45bit trickier. But when you see it, it
2:48:47starts to make a lot of sense.
2:48:50So, let's say we have a movement down in
2:48:52the market. We pull back making a
2:48:54corrective move, then we have a drive
2:48:56lower. This being a break of structure,
2:48:59therefore driving us into what we would
2:49:00see as a bearish market.
2:49:03Now, we could even have a supply zone
2:49:05around this point. And we may be
2:49:07interested in selling from this point,
2:49:09right?
2:49:10The problem with this is, in this
2:49:13specific example,
2:49:14if we take a look at where the highs
2:49:16formed, we have one,
2:49:18two,
2:49:20equal highs.
2:49:21Meaning these highs have formed at
2:49:24exactly the same level.
2:49:26Now, a problem arises here. And that is
2:49:29going to be the mass market education of
2:49:31supply or no of support and resistance
2:49:34trading
2:49:35suggests to people that they should sell
2:49:37resistance levels with stop losses above
2:49:40the high,
2:49:41or they should buy support levels with
2:49:44stop losses beneath the low, okay?
2:49:47Now, because of this, and trust me, a
2:49:48lot of people, many, many people trade
2:49:51in this way, even if you are in the
2:49:52price action kind of bubble,
2:49:55a lot of people trade this way. Uh and
2:49:57even not down to just the equal highs,
2:50:00but down to the fact there is a high
2:50:01here, we know there's going to be a
2:50:03significant number of stop losses above
2:50:05this level.
2:50:06There's also going to be a significant
2:50:08number of buy stop trades.
2:50:10So, to explain what they are, a buy stop
2:50:13is basically a trade order you set to
2:50:16automatically buy when the market hits a
2:50:20certain level.
2:50:21So, if you are a breakout trader, for
2:50:24example, and you are expecting to see
2:50:26the market break out here and then
2:50:28retest and continue,
2:50:30it's likely you would put a buy stop at
2:50:32this point. So, we know there's going to
2:50:34be a lot of buy stop orders there, okay?
2:50:36So, we have buy stops.
2:50:38Now, stop losses, if we think about what
2:50:40they truly are, which a lot of people
2:50:42don't stop to think about,
2:50:44a stop loss is basically just an order
2:50:46to either buy or sell your contracts
2:50:48back to the market at a different price
2:50:49to what you paid, right? It's not this
2:50:51magical order that's perfectly designed
2:50:53to save you from losses. It is literally
2:50:55just a buy or sell order in the market.
2:50:57Now, if we think about a selling
2:50:59example, and this is the more complex
2:51:00example of the two. If you've sold
2:51:02inside of this range, anywhere really,
2:51:05your stop loss
2:51:07is going to be a buy order.
2:51:09So, when you short sell a market to
2:51:11profit from a decline, you are
2:51:12essentially selling contracts you don't
2:51:14own with an obligation to buy them back
2:51:17later.
2:51:18If you sold the contracts and then the
2:51:20market declines, you can buy them back
2:51:22for cheaper than you paid, and that
2:51:24difference is your profit. So, let's say
2:51:26you sold something in advance for $50
2:51:29here, I'm not even going to try and draw
2:51:30that, and then you bought it back for
2:51:32$40 here. Well, depending on how many
2:51:34you sold, that $10 price decline, you
2:51:36get to buy back $10 cheaper than you
2:51:38sold. So, you actually profit $10 per
2:51:41share, for example. Your stop loss order
2:51:44then is literally just an order to say,
2:51:47"If the price gets here, buy those
2:51:49contracts back." And at that point,
2:51:51you'll be buying them back for more than
2:51:52you sold them for, so you would make a
2:51:54loss. But what that does is stop you
2:51:57from getting into a big loss that you
2:51:58cannot avoid, right? But at its core,
2:52:01that means that buy stop orders are buy
2:52:04trades,
2:52:05and stop loss orders are also, in this
2:52:08case for a selling example, buy trades,
2:52:10right?
2:52:11So, with lots of stop losses and buy
2:52:13stop orders sitting in this area, we
2:52:15basically have a whole bunch of buying
2:52:18orders sitting here waiting to be
2:52:20activated.
2:52:22Now,
2:52:23in that right then, we understand as
2:52:24traders that if there is lots of buying
2:52:27momentum hitting the market, that should
2:52:30drive the price higher, right? Because
2:52:32that shows clear buying control.
2:52:35However, something interesting can
2:52:36happen here.
2:52:38Because these areas are
2:52:40basically predictable, right? You can
2:52:42see them yourself, and so can
2:52:43significant players in the market. What
2:52:46actually happens instead is many times
2:52:48we will see absorption of the buy
2:52:50orders.
2:52:51And to explain how that works, imagine
2:52:54you've got 100,000 units that are all
2:52:57going to be sold at the exact same
2:52:58level, right? So, we know in here
2:53:00there's 100,000 units of said thing to
2:53:03be sold at one price.
2:53:05Now, imagine you want to sell into the
2:53:07market, okay? And you have tens or
2:53:09hundreds of millions of dollars that you
2:53:11want to get into this market. Now, the
2:53:13problem with this is your massive amount
2:53:15of selling orders, let's say you wanted
2:53:17to sell 100,000 units into the market,
2:53:19that will create price movements before
2:53:22the order is filled because of the
2:53:23amount of selling liquidity or selling
2:53:26pressure that you're pushing into the
2:53:27market. So, you sell a bit here,
2:53:31and that's going to drive the price to
2:53:32where the next willing buyers are. And
2:53:34then you'd sell a bit here, and it will
2:53:35drive the price lower until it meets new
2:53:37willing buyers.
2:53:38Essentially, there aren't enough buyers
2:53:40at the exact price level that you would
2:53:43ideally want to sell at if you wanted to
2:53:44get into the market right now. So, it's
2:53:46tricky for you to execute your full
2:53:48position without getting a terrible
2:53:50average entry because every time you
2:53:52sell some of your units, the price has
2:53:54to be dropped to meet the next willing
2:53:55buyers, right? So, you end up trying to
2:53:58get in there, for example, and by the
2:54:00time your trade is all in, your average
2:54:03entry might be somewhere like this,
2:54:06significantly lower than where you
2:54:07wanted to execute.
2:54:09So, how do you combat that if you're a
2:54:11trading firm or a hedge fund or someone
2:54:12who wants to execute with massive sums
2:54:14of money?
2:54:15Well, what you can do instead is you can
2:54:17just not sell yet, and you can wait for
2:54:20the market to naturally glide up here as
2:54:21the selling pressure declines because
2:54:23everyone who's selling has already sold,
2:54:25and there are less willing sellers at
2:54:27lower price levels.
2:54:29Now, when the buying pressure takes
2:54:30control of the market, it will drive
2:54:32through towards that point of liquidity
2:54:34above, say, some equal highs or above a
2:54:37significant range high.
2:54:39When the buying pressure takes the
2:54:41market into here, you will see, of
2:54:43course, these buyers slowing down. There
2:54:45will be less willing buyers taking place
2:54:47in the market because we're no longer at
2:54:49a discount price level.
2:54:51So, when we hit this point and this
2:54:53100,000 units worth of liquidity in the
2:54:56form of buy stops and stop losses on
2:54:58sell trades is triggered,
2:55:00well, now there are 100,000 units that
2:55:02you can take up the other side of.
2:55:05And that's what the absorption is. So,
2:55:07what you do here,
2:55:09if you're the big player who wants to
2:55:11buy, or in this case sell 100,000 units,
2:55:14is you wait for 100,000 units worth of
2:55:16buyers who are automatically being
2:55:19forced out of their trades or into
2:55:20trades through buy stops and stop
2:55:22losses, and you sell the 100,000 units
2:55:25into them, right? So, what you actually
2:55:28do is you get your massive position and
2:55:30they get out of their losing positions.
2:55:33And that massive influx of selling
2:55:34pressure that kicks in at one price
2:55:36level can then drive the market
2:55:38significantly lower. And what it
2:55:39actually does is absorbs all of the
2:55:41buying pressure and flips the market the
2:55:43other way.
2:55:45Now, this is why when you've been
2:55:46trading, if you don't understand this
2:55:47concept already, you would have seen
2:55:49phases in the market where you've set up
2:55:51what seems to be a beautiful trade, your
2:55:54stop loss is above the high, let's say,
2:55:57like this,
2:55:58and then what happens is, rather than
2:56:00the trade working in your favor, it
2:56:02spikes directly over into your stop loss
2:56:05and then goes towards the targets that
2:56:07you had set.
2:56:08That is liquidity in action. Your stop
2:56:11loss has become a part of the liquidity
2:56:13for the larger player to get into the
2:56:15market. So, they've absorbed the stop
2:56:17loss and the orders that you've
2:56:19triggered into the market through your
2:56:20stop loss, and they flipped the market
2:56:22lower.
2:56:23Likewise, if you were a breakout trader
2:56:24and you've seen a breakout happen
2:56:26thinking you were about to get a great
2:56:27entry for a buy, and then the market's
2:56:29completely melted on you, again, you
2:56:31have been the liquidity for those larger
2:56:33participants who have absorbed the
2:56:35buying you've done and shifted the
2:56:36market lower.
2:56:38And the same exact thing happens on the
2:56:39buy side, right? If we have stop losses
2:56:43down here in significant numbers, and we
2:56:45have sell stops down here, then we have
2:56:47a whole bunch of selling liquidity at
2:56:50this point. If the buyer wants to get
2:56:52in, they can let the market gradually
2:56:54decline through towards this point, and
2:56:56when all of that selling liquidity is
2:56:57opened at the exact same level, they can
2:56:59absorb that with their huge buys, which
2:57:01then rallies the market impulsively in
2:57:03the opposite direction. As of course,
2:57:05that's a massive willingness to buy
2:57:07entering the market, a massive wave of
2:57:09demand, and the sellers aren't really
2:57:11there to push back on it given that the
2:57:13selling, of course, has all just been
2:57:14absorbed.
2:57:15So, that is how liquidity works at its
2:57:17core. All right, so let's talk about
2:57:19where you find liquidity and how to
2:57:21identify it in the markets. Now, the
2:57:23easiest version is equal high and equal
2:57:26low liquidity. We've pretty much just
2:57:28been through this one. It's going to be
2:57:29points where highs and lows have
2:57:31created, well, equal levels, right? Just
2:57:34like what you would consider a support
2:57:35or resistance. Now, when support and
2:57:37resistance traders are looking to trade
2:57:39it like this,
2:57:41we're actually looking for a little push
2:57:43above. This can provide the opportunity
2:57:45for us because this actually creates the
2:57:47point where the liquidity has been
2:57:49taken.
2:57:50Now, in order to trade this, we just do
2:57:52it in a very simple way. We look for,
2:57:54once these levels have been taken out,
2:57:56that standard pattern that we want to
2:57:58see when it comes to the structural
2:58:01shift, right? So, we would kind of use
2:58:03substructure to identify this kind of
2:58:06pattern taking place around this high.
2:58:08If we see that, we get the idea that
2:58:10this market is likely to trade lower,
2:58:13usually providing with an entry
2:58:14somewhere around here, here, somewhere
2:58:16like that, to then run the market down
2:58:19in the overall given direction.
2:58:22So, when it comes to equal high and
2:58:23equal low liquidity and pretty much all
2:58:25forms of liquidity,
2:58:26we're almost never going to be buy
2:58:28limiting into trades.
2:58:30We can't really just place an order
2:58:31above the high because one, we would
2:58:33have to guess where the stop loss would
2:58:34go. We don't know how big the
2:58:36liquidation's going to be. It could be a
2:58:38pretty big spike up before the reversal.
2:58:40Could be a small one. So, that's almost
2:58:42impossible to work out. And as well,
2:58:45obviously, sometimes the market may not
2:58:47want to absorb the orders. There may not
2:58:50be participants the other side ready to
2:58:52take on the amount of selling liquidity
2:58:54that's open or the buying liquidity
2:58:56that's opening up on the other side of
2:58:57the market. So, in those cases the
2:59:00market can rally. That's absolutely
2:59:02something that can and will happen quite
2:59:04frequently.
2:59:05So, we don't want to sell limit in. We
2:59:06want to see the market confirming a
2:59:08shift. And that is when the
2:59:10opportunities become available from
2:59:12these points.
2:59:13So, to show you this just the other way
2:59:14around real quick, this is what the
2:59:16equal low liquidity would look like. A
2:59:18point in the market with two or more
2:59:20lows at the exact same level. These we
2:59:23expect to see swept, but again, we're
2:59:26going to want to see confirmation before
2:59:27we start executing any trades back in
2:59:30this direction because if the absorption
2:59:32doesn't take place, then we could easily
2:59:34adjust trade lower. Another very common
2:59:37place that we can see liquidity form is
2:59:39around trend lines.
2:59:41So, a trend line is, of course, a line
2:59:43on the chart that you connect multiple
2:59:45highs together. If it's descending, that
2:59:47gives traders the idea that the market
2:59:49is in a downtrend. And if it is
2:59:50ascending, that gives traders the idea
2:59:53that the market is in an uptrend.
2:59:55The theory behind trading trend lines,
2:59:56of course, is to buy if the market
2:59:59retests the level. So, you'll be looking
3:00:01to buy there.
3:00:02And to sell if the market breaks through
3:00:04the level. So, if we were to, for
3:00:06example, get to here, traders would then
3:00:07start to look selling the trend line
3:00:09because it's broken. And to trend line
3:00:12traders, that tells them that the trend
3:00:13has shifted.
3:00:15However, this is a very very good point
3:00:19for these liquidations and absorptions
3:00:21to take place, and I'll show you why.
3:00:24Now, with what we've learned around
3:00:25market structure so far, we could ignore
3:00:28the trendline for a moment and realize
3:00:30that this market is a bearish market,
3:00:33okay? That's fine. That's in line with
3:00:35what the trendline says. So, at this
3:00:36point in time the trendline isn't
3:00:38looking too bad. It's still telling us
3:00:39the market is in a downward trend.
3:00:42However, the problem with trendlines is
3:00:45it doesn't account for the real price
3:00:46structure. So, if we were, for example,
3:00:49to get a break above the trendline like
3:00:52this,
3:00:53this tells trendline traders that the
3:00:54market is now bullish. But, if we had
3:00:57look at the real price structure of what
3:00:59the candlesticks are doing, it's not
3:01:01bullish at all because our lower high is
3:01:03at this level here.
3:01:05So, for the market to actually change
3:01:07direction, it would have to get above
3:01:09this level. That would actually tell us
3:01:11that the market has impulse the other
3:01:12way, and that could provide us with an
3:01:14opportunity to buy.
3:01:16But, because it hasn't done that yet
3:01:17when we're trading at this point, this
3:01:19is just a clearly bearish market to
3:01:21anyone who trades with market structure
3:01:23consideration instead of trendlines. And
3:01:26the next obvious thing to do with this
3:01:28movement when we get rid of the
3:01:29trendline would be to sell this bearish
3:01:32market, right?
3:01:33So, this creates the perfect trap for
3:01:36traders who trade trendlines.
3:01:38We know, considering we have obviously
3:01:41the two ways to trade of sell the
3:01:43retest, these traders are going to have
3:01:45stop losses in and around this region.
3:01:48And when we have the buy the breakout,
3:01:50those traders are going to have buy
3:01:52stops in this region. And then other
3:01:55ones who don't execute immediately will
3:01:57be buying the retest, so there will be
3:01:59even more buy liquidity upon a retest of
3:02:02the level. So, there is buy liquidity
3:02:04buy liquidity buy liquidity here, okay?
3:02:07Now, as well as this,
3:02:09these buyers, all of these buyers
3:02:11really, are going to have stop losses
3:02:13back beneath the level, right? So, we
3:02:16have sell liquidity here, and we have
3:02:18buy liquidity, buy liquidity, buy
3:02:19liquidity.
3:02:20Alongside this, of course, we have the
3:02:23obvious price structure, which is
3:02:25bearish.
3:02:26So, we know significant players are
3:02:29going to be moving with the price
3:02:30structure, therefore selling the market,
3:02:33and their core focus will be on getting
3:02:35as much selling done as possible. And
3:02:37then we know the smaller players,
3:02:39the people who are going to be doing
3:02:40this kind of stuff,
3:02:41don't have the power they need behind
3:02:43the selling. The sellers are not going
3:02:45to be interested in absorbing the sell
3:02:47liquidity on the buy side,
3:02:49but they will be interested in absorbing
3:02:50the buy liquidity above the zone, right?
3:02:53So, they are looking to take on as many
3:02:55sell orders as possible,
3:02:57and they're not going to be interested
3:02:58in taking the other side of the sell
3:02:59orders, because their intention is to
3:03:01move with the price structure, okay?
3:03:04So,
3:03:05breaking that down to where the
3:03:07tradeable opportunities live when it
3:03:08comes to trend line liquidity, well, a
3:03:10lot of retail traders, and obviously
3:03:12some commercial banks and whatnot, will
3:03:14be looking for the breakout and trade
3:03:17above. So, they'll be looking for this.
3:03:20But the majority of traders are going to
3:03:21be looking for, or significant traders
3:03:24are going to be looking for
3:03:25continuations of bearish price
3:03:26structure. So, they will be waiting for
3:03:28the price to get into this region,
3:03:30and then taking a sell.
3:03:32Now, we naturally would be doing this
3:03:34anyway, because when we strip back, of
3:03:36course, the trend line, we are going to
3:03:37be looking for supply zones to sell from
3:03:40inside of downtrends.
3:03:41So, we would be looking for this trade
3:03:43regardless.
3:03:44But that addition of the liquidity that
3:03:46we've just gone through is a really good
3:03:49weighing factor that helps us to get
3:03:52these trades right, or at least helps us
3:03:54to determine where these trades are
3:03:55going to come from.
3:03:57If we see this trend line, and we know
3:03:58there's a giant pool of liquidity
3:04:00sitting in here,
3:04:01we can have pretty good confidence that
3:04:03this is a prime reversal point for the
3:04:04market, right? If that pairs with an
3:04:06imbalance supply zone, well, certainly a
3:04:09really, really high probability trade
3:04:11comes in here.
3:04:12Selling against the trend line.
3:04:14Everyone who's trading the trend line is
3:04:15going to get wiped out, but we are going
3:04:18to get a really good trade here. We're
3:04:21selling supply.
3:04:22We're piggybacking on that liquidity,
3:04:24and we're trying to capture an entry
3:04:26into the absorption from the big players
3:04:28who want to take the market lower in
3:04:30line with the existing price structure.
3:04:33So, trend lines are a really good point
3:04:35of liquidity that a lot of people don't
3:04:37know about, and when you start to see
3:04:39it, you will realize how good it
3:04:40actually can be, okay?
3:04:43Now, another interesting thing about
3:04:45trend liquidity
3:04:47is that they become good magnets to
3:04:48trade towards, as well.
3:04:50So, let's say we get a bit of price
3:04:52action like this, where the substructure
3:04:54shifts to the upside.
3:04:55We can see,
3:04:57uh let's of course call this a sweep,
3:04:58too. We can see the market has room to
3:05:01move to the upside, trading towards some
3:05:02of these previous areas of supply.
3:05:04So, what we could actually do
3:05:07is execute here off of the confirmation
3:05:10we have to trade towards this level, and
3:05:13then into wherever the supply zones are
3:05:15going to be for a good trade to be
3:05:17executed. So, not only can you trade out
3:05:19of the liquidity, but you can use that
3:05:21liquidity, the trend line, and the zones
3:05:23above the trend line as a magnet for
3:05:25price. And if you get a good
3:05:26substructure trade, there's nothing
3:05:28stopping you from taking that position
3:05:30up prior to, of course, looking for the
3:05:32execution in the bigger picture
3:05:33direction.
3:05:35So, that is how trend liquidity works,
3:05:36and those are the different ways that
3:05:38you can trade it.
3:05:40Okay, and the other type of liquidity
3:05:42that we're going to discuss, and this is
3:05:44somewhat the most complex or the hardest
3:05:46to kind of learn, but um it's not too
3:05:49difficult once you understand it, right?
3:05:51You'll get into it over time. So, this
3:05:53is internal range liquidity.
3:05:56Now, this is a really interesting piece
3:05:58of liquidity because it can provide us
3:06:00opportunities to enter trades from areas
3:06:03that aren't supply and demand zones. Now
3:06:05I'll show you some examples as well.
3:06:08But let's break down exactly how it
3:06:09works first of all.
3:06:11So inside of our structural moves,
3:06:13right? We understand we have
3:06:15swing structure, which is going to be
3:06:17this overall averaged into waves, upward
3:06:20trending market. And then we have the
3:06:22substructure, also known as internal
3:06:25structure. These are the smaller trends
3:06:27inside of trends that we see, right? So
3:06:29the smaller up moves, the smaller lows
3:06:31that we create inside of the larger
3:06:33trend.
3:06:34Now these
3:06:35are trends of their own inside of
3:06:37impulsive moves, okay? But the trends of
3:06:40their own, the little lows that we get,
3:06:42create the internal structure.
3:06:44Now once the market sweeps liquidity
3:06:47under some of these internal lows. So
3:06:49once the market comes under that level,
3:06:51that means
3:06:52we can oftentimes or sometimes, should I
3:06:54say, see reactions that lead into new
3:06:57impulses, despite the fact that, say,
3:06:59the demand zone has not been hit.
3:07:02Now this is kind of what you will see
3:07:04when you're looking for a trade and it
3:07:05doesn't fill into your entry point and
3:07:07instead reverses and runs in the overall
3:07:09market direction without you because it
3:07:11didn't come into the zone that you
3:07:12wanted to buy from.
3:07:14So what actually happens here a lot of
3:07:16the time
3:07:18is the market takes out what we call an
3:07:20internal low and the liquidity
3:07:21underneath the internal low.
3:07:23And it's pretty much the same exact
3:07:25format as what we've discussed so far,
3:07:27where under some of these lows will be
3:07:29significant amounts of fuel for the
3:07:31upward move.
3:07:33So here, for example, what we see is
3:07:35basically underneath each of these lows,
3:07:37there's going to be a certain level of
3:07:39buying or selling orders. Now on the buy
3:07:41side, of course, we are likely to have
3:07:43sell orders under these lows, stop
3:07:45losses and sell stops to trigger
3:07:47automatic sells if the market breaks
3:07:48below them.
3:07:50If one of these lows holds enough
3:07:51liquidity and enough fuel for the move
3:07:53and sits at a point that is seen enough
3:07:55by the market as a discount price level,
3:07:57then it can create a reaction that sends
3:08:00the market into a new impulse in
3:08:01continuation of the uptrend without
3:08:03fully returning to an area of demand.
3:08:06So, that is what internal range
3:08:07liquidity is.
3:08:08You'll sometimes see this when you are
3:08:10trying to find bullish opportunities and
3:08:12the market doesn't fill your zones
3:08:13because the market is instead reacting
3:08:15to the liquidity that sits underneath
3:08:18internal structure lows.
3:08:20Now, it's exactly the same for sell-side
3:08:23opportunities, just flipped upside down.
3:08:26There will be enough liquidity above
3:08:27some of the internal structure highs
3:08:30that the market can find the fuel for
3:08:32the next movement from there, react and
3:08:34move lower without filling a supply or
3:08:36demand zone.
3:08:37Now, these areas can be really good to
3:08:39find opportunities and it is oftentimes
3:08:41worth when you're setting up a trade
3:08:42understanding points where the range
3:08:44liquidity could potentially reverse the
3:08:46market so that if it starts to happen
3:08:48here and your overall trade idea was
3:08:51expected to take place higher up, you
3:08:53can at least capitalize on a reversal if
3:08:55one does take place. Okay, so here we
3:08:58have a bullish market. The market is
3:09:00continuing to make upward moves and we
3:09:02can see that we have inside of this
3:09:05upward moving structure some equal lows.
3:09:09So, would we want to buy from this range
3:09:12in the market? For example, would we
3:09:14want to buy this demand zone?
3:09:16Well, the answer is no, even if this one
3:09:18broke out above the previous high, which
3:09:20it hasn't yet done. And the reason for
3:09:22that is because the equal lows will
3:09:25create enough liquidity that the market
3:09:27will likely be drawn towards this level.
3:09:29Okay? So, because of these equal lows, 1
3:09:322 3 that we have here, we understand
3:09:34that this is going to create liquidity,
3:09:37which acts as a magnet for price. So,
3:09:39buying above that point is basically
3:09:42irresponsible because there's a high
3:09:43likelihood the market will be drawn
3:09:45through to sweep that liquidity before
3:09:47absorption into a larger move up. So,
3:09:50even though everything else about this
3:09:51may look okay, especially if we broke
3:09:53out above, it's not somewhere we'd want
3:09:55to buy because
3:09:58it's going to be a magnet below. It's
3:10:00going to draw price lower and then the
3:10:02buys are likely to take place from
3:10:03there.
3:10:04So, if we see how the market went from
3:10:06this point, we swept underneath this
3:10:08level and then from there we actually
3:10:12managed to trade higher.
3:10:14It happened after the liquidity was
3:10:16already swept, meaning the best
3:10:18opportunities for a trade like this
3:10:19would come in around these points for
3:10:21continuations, so pullbacks towards
3:10:23these points for example, or the
3:10:25pullback here. Or in this specific case,
3:10:28but not all cases, we actually see the
3:10:30market return to a demand zone, so just
3:10:32here.
3:10:33This would have been a very good point
3:10:35to execute a trade and you'd have been
3:10:37able to help identify that and not get
3:10:39caught up in this mess by realizing the
3:10:41liquidity that was situated here and
3:10:43understanding that's likely to be hit.
3:10:46Therefore, it makes more sense to wait
3:10:47for that to happen before you get into
3:10:50trade instead of getting into trades
3:10:52higher up.
3:10:53So, that is an example of equal low
3:10:55liquidity. Now, of course, the same
3:10:57exact thing works in the opposite
3:10:58direction for equal high liquidity. If
3:11:01the market's trading down and we see a
3:11:03collection of equal highs, we simply do
3:11:05not execute a trade until that has been
3:11:08swept out and we can work out whether
3:11:10there's any meaningful supply or demand
3:11:12areas to trade off of and if not, we can
3:11:14just join continuations once the market
3:11:16is moving in the direction after the
3:11:19sweep, okay? So, that is how equal high
3:11:21and equal low liquidity works and a
3:11:23simple rule
3:11:25that you can live by when you're trading
3:11:26this kind of liquidity
3:11:28>> [snorts]
3:11:28>> and when you're trading in your general
3:11:30day-to-day
3:11:32is never buy above equal lows and never
3:11:35sell below equal highs. If you do that,
3:11:38you will win a lot more trades. You will
3:11:40avoid a lot of the losses because you'll
3:11:42stop buying and selling at points that
3:11:45the market is likely to be drawn through
3:11:46your stop.
3:11:48All right. Now, let's talk about a
3:11:49descending trend line and the liquidity
3:11:51around this. So, this is a real example
3:11:53of what we just went through on the
3:11:55diagrams. We have one tap, two taps. And
3:11:58for trend line traders, this is what
3:12:00they want to see. Then, they are going
3:12:02to look for a sell from here if the
3:12:04market bounces from that level or if we
3:12:06see a break above, they will be looking
3:12:08for a buy assuming this to be a shift in
3:12:11the trend.
3:12:12Now, obviously, with the market
3:12:14structure understanding you've now got,
3:12:15you can see how this could be
3:12:17interpreted completely incorrectly
3:12:19because the real market structure, the
3:12:21real price that we see, has a break of
3:12:24structure here
3:12:25creating a lower low at this point. And
3:12:27then a break of structure here creating
3:12:29another lower low at the current point
3:12:32that we're in. We also have lower highs.
3:12:34So, it's quite obvious to us what the
3:12:36trending structure is. You get a
3:12:38complete perspective shift when you just
3:12:41take the trend line off. For us, this is
3:12:43a clearly bearish market and we would be
3:12:45looking to sell anywhere underneath this
3:12:48high because that would maintain the
3:12:50bearish trend that we have, okay?
3:12:52But for a trend line trader, they don't
3:12:54see it the same way. They see the trend
3:12:55line as the actual trend. Realistically,
3:12:59it's not.
3:13:00So, we know there's going to be
3:13:02liquidity up here
3:13:03in the form of stop losses for sellers,
3:13:06okay? So, we're going to have a lot of
3:13:07buy orders waiting there
3:13:08in the form of stops for sellers. We
3:13:10know there's going to be a lot of buy
3:13:11stops for breakout traders. We know
3:13:13there will be manual buy executions
3:13:14taken here as well with stop losses
3:13:17underneath this level. More selling
3:13:18pressure waiting there.
3:13:20So, this is what they expect to see, the
3:13:23trend line traders, and therefore, the
3:13:25liquidity sits around that point or this
3:13:27is what they expect to see. Regardless,
3:13:29that liquidity is building up.
3:13:32Now, what we will oftentimes see then on
3:13:33these trend line markets is the market
3:13:36trades above.
3:13:38We get stopped out. Okay, the sellers
3:13:39get stopped out selling the trend line.
3:13:41Buyers step in. So, there's lots of buys
3:13:44taking place at this point. More selling
3:13:46liquidity sitting at this point. More
3:13:47sell orders ready to fuel a further move
3:13:49down. And then, we see a continuation to
3:13:52the downside instead. So, basically,
3:13:56regardless of whether you traded it for
3:13:57the retest or the breakout, you got
3:14:00smoked because your trade opposed the
3:14:03overall market structure direction.
3:14:05Now, this is where we can get
3:14:06opportunities because if we were if we
3:14:09just jump this back for a moment, if we
3:14:11were to see, for example, this supply
3:14:13zone here
3:14:15in line with an overall bearish trend,
3:14:17right? And we weren't considering this
3:14:19trend line. We would say this is a
3:14:21clearly bearish market, and we have a
3:14:23clear point of imbalance supply to sell
3:14:25from. So, a good point for us to take a
3:14:27trade would be here with a stop into the
3:14:30efficiency cuz we know if the market
3:14:32gets there, it will likely go higher.
3:14:34And a trade like this would be just
3:14:36perfect, right? Because we have the
3:14:38overall trend direction in our favor. We
3:14:40have a clean entry zone. And then, when
3:14:43we bring the liquidity in, we realize,
3:14:45okay, this favors our setup even more.
3:14:48Because in order for this trade to be
3:14:49triggered, we will need to liquidate the
3:14:51trend line. Basically, move above it and
3:14:53hit that point where all the stop losses
3:14:55are going to be, fueling the move even
3:14:57further by providing a lot of buyers to
3:14:59be absorbed by significant sellers. So,
3:15:02this helps to weigh in pretty much what
3:15:04we already have as a nice strong valid
3:15:06setup and stops us from selling from,
3:15:08let's say, any of these supply zones,
3:15:10which in themselves wouldn't really be a
3:15:11great idea due to the inefficiency we
3:15:13have, but definitely wouldn't be a good
3:15:15idea if we were to be doing this knowing
3:15:18that the trend liquidity is sitting
3:15:19there.
3:15:20Okay? So, this is then where our setup
3:15:22would come from.
3:15:23And as you can see, it plays out pretty
3:15:26good moving to the downside. So, that's
3:15:28an example of trend liquidity in action.
3:15:30And as we're saying on all of them, it's
3:15:32exactly the same the other way. If we
3:15:34have an ascending trend line which
3:15:36creates liquidity, we have a demand
3:15:37zone, we have bullish price structure,
3:15:39breaking that trend line doesn't tell us
3:15:40anything about the actual trend itself.
3:15:43It just tells us a little bit about how
3:15:45some participants are viewing the
3:15:46market. And that is going to create
3:15:48liquidity for us that we can then buy or
3:15:50sell into to continue taking the market
3:15:53in the overall structural direction.
3:15:55Right, now let's talk about internal
3:15:57range liquidity.
3:15:58So here we have an impulsive upward
3:16:00move, right? We have a clear upward
3:16:01trend. To mark the structure points, we
3:16:04obviously want to be clear with this
3:16:05from the get-go because we need to work
3:16:07out what's internal and what's
3:16:09significant structure. They're going to
3:16:11be our impulses, okay? So we have
3:16:13impulse number one is the run up to
3:16:14here, then correction number one,
3:16:16impulse number two, correction number
3:16:18two, impulse number three, correction
3:16:20number three, impulse number four. This
3:16:22is an interesting one, right? Because
3:16:24some people would mark this incorrectly
3:16:26by presuming that this is a higher low,
3:16:28higher high, higher low. But take a
3:16:30look, we didn't close over the high. So
3:16:32this is actually just one impulse,
3:16:34right? After this correction, the whole
3:16:36movement here is one impulse. Now this
3:16:38one does have larger internal structure
3:16:40than some of the other ones, but um it
3:16:42is, yeah, just one impulse, okay?
3:16:45Then we have so far corrective move.
3:16:47Right. So what we can do at this point
3:16:49is we can mark the lows of each move. We
3:16:52have a higher low.
3:16:54We have a higher low again.
3:16:57And then we have a higher low just here.
3:17:00Now inside of
3:17:02the ranges that we've created, the
3:17:04impulses, we are going to have a series
3:17:06of smaller lows as well.
3:17:08So we have one around this point.
3:17:11That's going to be an internal low.
3:17:14We also have one there, too, okay?
3:17:16On this movement up, we have
3:17:19one there.
3:17:21And we also have one around here. So
3:17:23these are the small consolidative phases
3:17:26on the internal structure.
3:17:28This move, well, we have one super clear
3:17:30one and that's pretty much it because
3:17:32all of this is efficient. Then we have
3:17:34this here.
3:17:36Besides that, we've pretty much got all
3:17:38of the structural lows locked in, okay?
3:17:41Now the internal structure lows,
3:17:42obviously, is where the internal
3:17:44liquidity is going to react and where
3:17:46it's going to come from. So, what I'm
3:17:48going to do is I'm going to get rid of
3:17:49everything that isn't the internal
3:17:51liquidity for now so that we can see
3:17:53where those internal areas are, okay?
3:17:57So, for this movement up, oh and this
3:17:58one, too, by the way, we have an
3:18:00internal load there.
3:18:02Now this is a piece of price action
3:18:04that reacted significantly well to
3:18:06internal structure and less so well to
3:18:08supply and demand, which is why it's
3:18:10important to understand this one cuz
3:18:12this is where a lot of those trades will
3:18:13actually come from. You can take trades
3:18:15from internal liquidity sweeps in the
3:18:17same way you can with supply and demand,
3:18:18just with the additional layer of making
3:18:20sure you use confirmation for every
3:18:22setup.
3:18:23So, if we look at move number one, this
3:18:25reaction here, the impulse that we got,
3:18:27this did not come from a supply or
3:18:29demand zone. It came after we swept an
3:18:32internal low. We then had a sharp
3:18:34reaction to the upside creating a new
3:18:35drive higher.
3:18:37This second move as well, this one
3:18:39actually did react from a demand zone,
3:18:42which is nice, but it also came after we
3:18:44swept this internal low, right? This one
3:18:47didn't react, didn't give us too much in
3:18:49the ways of information, but the
3:18:50internal low being swept at the the
3:18:52bottom there
3:18:53in line with the uh supply and demand on
3:18:55this one, kind of then catalisted the
3:18:57next move up.
3:18:59This one, there isn't a clear demand
3:19:00zone, but there was a reaction after we
3:19:02swept the internal low, right? So, you
3:19:04can see continually that sweeping
3:19:07internal lows can lead us into new
3:19:09impulsive moves to the upside.
3:19:11Right now, this larger impulse, okay?
3:19:13This is where I actually took a trade.
3:19:15So, the one I'm about to show you is a
3:19:16trade that I took um and this is going
3:19:19to, of course, be from the internal low.
3:19:22Now this impulse up then, the
3:19:24significant internal low we have is this
3:19:26point here.
3:19:27Some people would make the mistake of
3:19:28presuming if the market broke under this
3:19:30low, that this then changes the
3:19:32direction bearish, but it doesn't
3:19:34because of course as we've already
3:19:35determined the high and the low of this
3:19:37impulse are there. So we would need to
3:19:40see, to validate any kind of shift, a
3:19:43break under this level. So if we get
3:19:45into this area here, as long as we stay
3:19:48above that bottom line, we remain
3:19:51bullish and on track to create impulsive
3:19:54movements to the upside. Therefore, this
3:19:56internal low sweep given is no clear
3:19:59demand for us to buy from, could be a
3:20:01very good point to look for an
3:20:02opportunity to buy, okay? So let's strip
3:20:05that back again.
3:20:07And then see how the market reacted
3:20:09around that low. You will see
3:20:11the market came underneath the
3:20:14structural low with a wick, right? So
3:20:17what does that show? That shows
3:20:18rejections, that's even better than
3:20:20seeing a candle body close there. Though
3:20:21if the candle does close below, as long
3:20:23as it's wiped back out with some bullish
3:20:25candles, that's okay as well. But a
3:20:27wick, even better, showing significant
3:20:29buyer willingness as soon as we get
3:20:30under that level.
3:20:31Then, taking a look at the substructure
3:20:34cuz now I'm going to show you how to
3:20:35truly set the trade up. We have this
3:20:38basically low, lower high, lower low. So
3:20:41this would be the structural point that
3:20:43would reconfirm the lower time frame in
3:20:45agreement with the higher time frame,
3:20:47okay?
3:20:48We would want to see this to close over
3:20:51here to shift this back into a bullish
3:20:54trend and therefore give us opportunity
3:20:56to buy pullbacks, okay? So that is how
3:20:59we trade internal liquidity. Now if we
3:21:01let the market run forward, you will see
3:21:03we rallied up. After rallying up, so
3:21:06this one, two, three, four candles or
3:21:10realistically just this first candle
3:21:11confirmed it, we opened doors to a
3:21:14demand zone, which was just here.
3:21:16This demand zone is where I bought from
3:21:18and becomes the very obvious point to
3:21:20buy because it is the demand zone that
3:21:22created the impulse that pushed the
3:21:23market higher.
3:21:24Targets-wise for this trade, well, you
3:21:26could target the high. I actually went
3:21:28and targeted higher up, but my stop loss
3:21:30was more conservative because of lower
3:21:32time frame zones here as well. So, my
3:21:35trade ended up being around 3.5%
3:21:39uh targets-wise, we won't go into it too
3:21:41much in this one because we're focused
3:21:43in on the specific concept. But, let's
3:21:45just call it at the next high. Nice
3:21:47simple target, right? You can see how
3:21:49this trade has been set up from start to
3:21:51finish without a demand zone. Now,
3:21:53obviously, demand zones, supply zones
3:21:55are the best places to sell from
3:21:56generally, but we won't always get them.
3:21:58And internal liquidity is how we capture
3:22:01the trades that don't give us clean
3:22:02zones, right? Um much in the way that
3:22:05equal highs and equal lows don't have to
3:22:06be swept [snorts] and then reverse into
3:22:09a supply or demand zone, they can just
3:22:11literally sweep the level and then find
3:22:13reversals. This is very much in the same
3:22:16way, but this time it's generally the
3:22:18alternative. If there is no supply or
3:22:20demand zone, we can look towards
3:22:22internal lows to find reactions much as
3:22:24the market created at this level, at
3:22:27this level. Well, this one did have a
3:22:29bit of demand. And obviously, at the one
3:22:31that we're currently coming into as
3:22:32well, okay?
3:22:34So, that is how you would set that trade
3:22:35up. Simple. Sweep of internal low, shift
3:22:38back in line with the overall bullish
3:22:40trend, buy from the open imbalance
3:22:43demand zone after agreement [snorts] on
3:22:45the low time frames. You execute, the
3:22:48market runs, you close your trade, and
3:22:50you take the profit, okay? That is how
3:22:53to trade internal liquidity. Now,
3:22:55[snorts] this one is arguably the most
3:22:57important factor of liquidity to
3:22:59understand, but also somewhat the
3:23:00trickiest, but I think this example has
3:23:02showed you that it actually can be quite
3:23:04simple. You just mark out the internal
3:23:06lows, see how they react when swept, and
3:23:08if you get something like this where the
3:23:10market confirms after sweeping your
3:23:13significant low of internal liquidity,
3:23:15that's going to be solid basis for a
3:23:17trade from here up to wherever your
3:23:20target is. Okay, so to recap what we've
3:23:23discussed on liquidity so far, there are
3:23:24many different types, but all of the
3:23:26different forms of liquidity refer to
3:23:28the same thing and that is money,
3:23:30orders, or transactions.
3:23:32We know the market is driven by money,
3:23:34by orders, by transacting with one
3:23:35another and we know it depends on who is
3:23:37in control between the buyers and the
3:23:39sellers as to which direction the market
3:23:41will go.
3:23:42Now, liquidity forms around significant
3:23:44highs or lows and basically on a
3:23:47buy-side example like this, we're going
3:23:49to have a lot of sell orders underneath
3:23:51the low. Why? Because there's stop
3:23:53losses on buy trades, which is basically
3:23:55a contract to sell the contracts for a
3:23:58loss and we also have sell stop orders
3:24:00for people expecting to sell directly
3:24:02into this market if this level breaks to
3:24:04take the market lower.
3:24:06Now, if a buyer with massive influence
3:24:08and capital wants to get some to the
3:24:10market, they can wait for this to be
3:24:11naturally swept due to a lack of buyer
3:24:14willingness at higher levels and then
3:24:16they can absorb all of the selling
3:24:18orders at the same time and get a really
3:24:20good execution on a strong position with
3:24:22enough capital behind it to generally
3:24:24move the market. The same goes on the
3:24:27buy-side example or sell-side example
3:24:29should we say where there is a lot of
3:24:31buy liquidity waiting to be absorbed. In
3:24:35certain cases like this,
3:24:37all of those buy orders will be absorbed
3:24:38by a strong selling and then the market
3:24:40will move down. And that is why when
3:24:42we're looking at any form of liquidity,
3:24:44we see these kind of stop hunt looking
3:24:46things where it hunts your stop loss and
3:24:48then gets a short reversal from there.
3:24:50But it isn't personal, it's just a
3:24:52natural flow of the market.
3:24:54So, the different types of liquidity you
3:24:56need to be aware of are equal high and
3:24:57equal low liquidity where we have
3:25:00well, equal highs or equal lows and you
3:25:03should never be selling beneath equal
3:25:05highs, you should never be buying above
3:25:07equal lows. You should be waiting for
3:25:09these levels to be swept because with
3:25:11significant probability, they will be.
3:25:14When that takes place, you can then
3:25:15assess for your standard entry model,
3:25:18which is going to be that shift in
3:25:19structure, and you can join the trend
3:25:22higher. Same with a sell-side idea, but
3:25:24you want to see this one shifting lower
3:25:27after sweeping above the high. Then you
3:25:29can confidently join using that
3:25:31structural agreement and get your trade
3:25:33on to trade the market lower. Trend
3:25:35liquidity is one of the other common
3:25:37types. This is where we see trend lines
3:25:39where the majority of traders will be
3:25:40trading these in a very linear and
3:25:42similar way, looking to buy the retest
3:25:45or sell the breakout. But we, as
3:25:47structural traders, can see the actual
3:25:49real market structure is pointing to the
3:25:52upside. So all of the liquidity that
3:25:53collects under here in the form of stop
3:25:56losses for buyers on a trend line, and
3:25:58also sell stop orders and manual sell
3:25:59executions if the market is to break
3:26:02through this level, creates a pool of
3:26:03liquidity that can act as a brilliant
3:26:05catalyst for trades. If we can line up a
3:26:08trend line trade with a nice point of
3:26:09imbalance demand or supply, which
3:26:12happens quite frequently, then this
3:26:13becomes a very strong point to make a
3:26:15buy from due to the fact number one, we
3:26:18have the structural agreement. Number
3:26:19two, we have the supply or demand
3:26:21agreement. And number three, that pool
3:26:23of liquidity will add to the likelihood
3:26:25that the market gets that, and also that
3:26:27the market runs from there with
3:26:29strength.
3:26:30And the third type of liquidity,
3:26:32arguably the most important to get your
3:26:34head around, is of course the internal
3:26:36range liquidity. This is great as an
3:26:38alternative way to capture trades when
3:26:40we cannot find clear supply or demand
3:26:42zones to buy from, or when the market
3:26:44simply isn't reaching those zones.
3:26:46Inside of the larger swing structure, we
3:26:48want to identify the substructure trends
3:26:51within.
3:26:52So the smaller lows, the smaller highs
3:26:53taking place, that aren't significant in
3:26:56the grand scheme of the big picture
3:26:57trend, but are significant in the fact
3:26:59that they create these own independent
3:27:02lows.
3:27:03When these lows are swept, we can see
3:27:05from some of them sometimes enough fuel
3:27:07to actually create the upward move into
3:27:10a new high, into a new impulse. And we
3:27:12can actually see, much like the example
3:27:14we recently looked at on Euro USD,
3:27:16continually sweeping and impulsing into
3:27:19new highs. Sometimes these moves will
3:27:21align with supply and demand, sometimes
3:27:23they will ignore range liquidity and
3:27:25move towards supply and demand, but
3:27:27other times we will get clean reactions
3:27:29without meeting a supply or at all. So
3:27:32these can be really good points to run
3:27:34your standard confirming pattern trades
3:27:37where you want to see the low time frame
3:27:38beginning to agree with the high time
3:27:39frame again after one of these sweeps
3:27:41has taken place, and this can be a
3:27:43really great way to capture yourself a
3:27:45trade and run into the next impulse in
3:27:48price action. The next concept to talk
3:27:49about is momentum.
3:27:52So remember earlier on we talked about
3:27:54candlesticks and how we could determine
3:27:56the strength of individual candlesticks
3:27:58through the size and the speed of the
3:28:01candles, right? So we talked about how
3:28:04large candlesticks like bodies like this
3:28:07with smaller wicks generally indicate
3:28:10control from the buyers or the sellers,
3:28:12whereas smaller candle bodies like this
3:28:14with larger wicks either side generally
3:28:17indicate indecision. These various
3:28:20different things that we discussed,
3:28:21well,
3:28:22they're not only relevant over
3:28:23individual candles. See, momentum, the
3:28:26size and the speed of movement, can be
3:28:28tracked over larger areas, so larger
3:28:31phases of price action.
3:28:33So as an example, let's imagine we have
3:28:35a market that looks like this, where we
3:28:37have these strong and fast upward moves.
3:28:40They move up pretty quickly, and we have
3:28:43a few phases of that where everything is
3:28:45looking pretty high momentum.
3:28:47Well, this can tell us, of course, that
3:28:49buyers are pretty strong inside of this
3:28:51market. However, if we were to have a
3:28:54large impulse like that, so
3:28:56a very quick impulse up, and then we
3:28:58were to have a very quick impulse down,
3:29:00well this wouldn't be so useful to
3:29:01determine who's in control because
3:29:03obviously the move has been taken back
3:29:06out by sellers. I mean, we can get in
3:29:07some information from this, but it's not
3:29:09going to help us in the terms of a
3:29:10continuation trade.
3:29:12Now, if however, we were to see
3:29:14following these strong impulsive
3:29:16movements, some slower, choppier
3:29:19downward price action pullbacks like so,
3:29:22well this, with the slow speed and the
3:29:25smaller size of these pullback moves,
3:29:27would actually help to indicate that
3:29:29buyers are maintaining control of the
3:29:31market, right? Because we have strong
3:29:33impulsive movements up, and then we have
3:29:35weaker, choppier, and more sideways
3:29:37movements down.
3:29:39Now, even if the corrective movements
3:29:42pull back pretty much the full distance
3:29:44of the impulsive movements, which would
3:29:45show
3:29:46uh size-wise that we're actually pulling
3:29:48back significantly,
3:29:49we can determine based on the speed of
3:29:51that move whether there is any element
3:29:53of control coming in from the sellers
3:29:55there.
3:29:56Because obviously, if we've covered,
3:29:57let's say, the impulsive ground in 1/3
3:30:01of the time it takes to pull back
3:30:03through that range again on the
3:30:04downside,
3:30:05that's a pretty good indication that
3:30:07we're likely looking at a rather bullish
3:30:09market here. Sellers are unable to get
3:30:11the market down anywhere near the pace
3:30:14that buyers were able to take price up.
3:30:17Now, another thing is how the range is
3:30:19formed.
3:30:20If we have, obviously, these impulsive
3:30:22moves, you can see we have large move,
3:30:24small pullback, large move, small
3:30:25pullback, large move. What is this
3:30:27telling us? Well, this tells us that
3:30:29buyers are pretty uninterrupted. We're
3:30:32having some small little areas where the
3:30:33buyers are stopped in their tracks, but
3:30:36for the most part, this is an
3:30:37uninterrupted phase of buying. The
3:30:39pullbacks we see are tiny, and they are
3:30:41essentially a last-ditch effort from
3:30:43sellers to push the market back down,
3:30:44but they're completely overwhelmed by
3:30:46the amount of buying pressure.
3:30:48Now, when we see more so like the
3:30:50pullback moves here, where we have a
3:30:52large chop where we move down and then
3:30:54we retrace the majority of the move. We
3:30:56move down again and we retrace the
3:30:58majority of the move. Every time we do
3:31:00this, we're showing that the sellers are
3:31:02Yes, they're stronger at the moment, but
3:31:04they're almost equaled in strength by
3:31:06the buyers because the buyers are
3:31:08retracing almost the majority of every
3:31:10single movement down that we get inside
3:31:12of this corrective phase.
3:31:14So, when we see price action like this,
3:31:17we can gather it's sideways, it's
3:31:19choppy, which essentially means buyers
3:31:21are stepping in at every single low.
3:31:24It's slower, which means the sellers
3:31:26aren't as strong as the buyers were
3:31:28during their impulsive phase.
3:31:30Uh and yeah, it's taking longer and it's
3:31:32just not as strong, right? And generally
3:31:34as well, in these cases, we've only
3:31:36pulled back 50% of the bullish move in
3:31:40let's say nearly twice the time. Same
3:31:42again with this one, three times the
3:31:44time and we've come back down around
3:31:462/3. So, it's taking a lot longer to
3:31:48cover less ground than the impulsive
3:31:50move.
3:31:51Now, how does this help us? Well, it
3:31:52helps us because we can of course trade
3:31:55in what we can deem as the controlling
3:31:57direction.
3:31:59If we understand that buyers are most
3:32:00likely in control during this phase,
3:32:02that gives us confidence and clarity and
3:32:04conviction behind taking buys with this
3:32:07overall trend.
3:32:08If instead we were to see, for example,
3:32:11a very large impulsive movement up,
3:32:14but then we were to see, a very large
3:32:16impulsive movement down, something like
3:32:18this,
3:32:20well, this would give us a little bit
3:32:22less confidence around executing upon
3:32:24the buy side because we can see, yes,
3:32:26although the market may be creating new
3:32:28highs at this point in time, let's say
3:32:30it's breaking structure upwards, it's
3:32:32actually reversing the bullish pressure
3:32:34at the same pace that it was building
3:32:36it, which tells us realistically,
3:32:38this might not be the best point to buy
3:32:40from cuz this could be a point where
3:32:42sellers are actually taking control over
3:32:44the market.
3:32:45So, momentum can be really useful for
3:32:47basically building conviction and real
3:32:49clarity behind the ideas. And it's
3:32:52simply a fact of reading into who is
3:32:55currently in control. Is it buying or is
3:32:57it selling that is running this market
3:32:59right now? Look at that on a chart now.
3:33:01So, see this bearish impulse, the
3:33:03initial move. It took from this candle
3:33:06down to this candle, five total candles
3:33:09to make this entire bearish impulse.
3:33:11Now, when we started this corrective
3:33:13move, it took around eight candles
3:33:15just to run back up the length of one
3:33:18individual bearish candle.
3:33:20Now, in these eight candles, we came
3:33:22back probably around 30% of the move. We
3:33:24didn't even come back halfway. So, we
3:33:27have significantly more speed and
3:33:29strength in the bearish candles than we
3:33:31do in this pullback.
3:33:33As soon as we finish that small upward
3:33:34push, there is a bearish candle the size
3:33:37of five of the bullish candles, right?
3:33:39So, you're seeing even while the
3:33:41market's appreciating, the sellers are
3:33:43still pushing back with significant
3:33:45force.
3:33:46Now, the first notable bullish candle we
3:33:47get is this one here. But as soon as
3:33:50this prints, it's followed by a bearish
3:33:52push which drives us down into even a
3:33:54new low. So, we're seeing that the
3:33:56buying attempts completely subdued there
3:33:59by the selling attempts.
3:34:00Then we have some buying attempts again.
3:34:03Notice the wicks either side, lots of
3:34:04indecision in this buying move. We gap
3:34:07down, we rally up a little bit. This is
3:34:09a a reasonable sign of momentum, but
3:34:11even take a look, right? We have what,
3:34:13five candles back to back uh bullish
3:34:15candles there?
3:34:16They only cover the ground of around one
3:34:18of the bearish candles. So, we're seeing
3:34:19basically that the buyers here
3:34:22are really weak in comparison to the
3:34:23sellers here. And the sellers here
3:34:26are just about equal in strength to the
3:34:27buyers in this phase. So, even during a
3:34:29corrective phase, we're seeing pretty
3:34:32good seller intent. After this
3:34:33corrective phase, which took, I mean, as
3:34:36a guess, what, about 10 times longer
3:34:39than the initial bearish impulse, which
3:34:41was larger as a range. We see again
3:34:43another significant bearish impulse,
3:34:46which once again happens incredibly
3:34:47quickly.
3:34:49Like that.
3:34:51So, we have
3:34:52a bearish impulse that's very strong and
3:34:55fast. We have a corrective move, a
3:34:57bullish phase, which is incredibly slow
3:34:59and very weak, and still even trading
3:35:01lower despite the bullish attempt. And
3:35:03then we have another bearish impulse,
3:35:05which is incredibly strong and fast.
3:35:07Now, that is pretty much exactly what we
3:35:09would expect after seeing the weakness
3:35:11of the buyers and the strength of the
3:35:13sellers.
3:35:14What we would look for from here for
3:35:16continuation to build conviction behind
3:35:18the move would be the same thing. If we
3:35:20are able to get slower, choppier
3:35:22consolidation, then that would forecast
3:35:24to us that the likely outcome is going
3:35:26to be a pretty dramatic downward move.
3:35:29So, let's see how this market plays.
3:35:32Now, immediately you can see
3:35:34the attempt from the buyers here is a
3:35:35lot weaker once again. We have a phase
3:35:38where the market has indeed gone up a
3:35:40bit from there to there, but it's taken
3:35:43what, about three times the length of
3:35:44the entire bearish impulse while
3:35:46retracing only around 50% of the move.
3:35:49So, it's taking way longer and it's
3:35:50covering way less ground. And as soon as
3:35:53this is over, we get another bearish
3:35:54impulse. This one isn't as strong, this
3:35:56bearish drive that we get, but it does
3:35:58still show considerable strength over
3:36:00the buying attempt.
3:36:02>> [snorts]
3:36:02>> Then we have another buying attempt, and
3:36:04it's really again not too strong. It
3:36:07takes quite a long while for this to
3:36:08make any ground, right? So, we're seeing
3:36:11basically weakness on the buy side,
3:36:13strength on the selling side.
3:36:15The first sign of bullish momentum that
3:36:17we get, really that has any anything
3:36:19worth noting, is around here. We have
3:36:22this nice bullish push up. But what
3:36:24happens as soon as that rally occurs? We
3:36:26get a sell-off at about the same pace.
3:36:28In fact, even more pace. This bearish
3:36:30candle is even larger than the bullish
3:36:32ones that have driven the price up.
3:36:34So, this is pretty much exactly what we
3:36:36want to see to maintain seller control
3:36:38and hold conviction behind the idea of
3:36:40selling in this market, right? Here's
3:36:42two incredibly strong bearish moves and
3:36:45then we have this big phase of slow and
3:36:47choppy kind of sideways buying attempts
3:36:50before again, we run into a strong
3:36:53bearish impulse. So, to tally up each of
3:36:57the phases,
3:36:59we'll simplify it down.
3:37:01We've got the selling move, correction,
3:37:03selling move, correction and then
3:37:05another selling move just here.
3:37:07And if you take a look at the size of
3:37:08these and the ground they've covered,
3:37:10you'll realize how easy it is to read
3:37:12this momentum to determine who could be
3:37:15in control in these phases of the
3:37:16market. The idea behind this and the
3:37:19value of reading momentum isn't so much
3:37:21to find individual trades on their own,
3:37:23but to back up ideas that we have. So,
3:37:25we have here a phase in the market where
3:37:27we're shifting from bullish into
3:37:29bearish. We have this bearish impulse
3:37:31and that is driving us down lower.
3:37:33Now, if we factor the strength of this
3:37:35move, obviously, this leads us to
3:37:37believe that sellers are likely in
3:37:39control, right? But if we were to have a
3:37:41buying candle that was in equal size
3:37:43pushing back up to around here, that
3:37:45would write off the idea of selling
3:37:47because the buying candle would show
3:37:49that it's managed to wipe out basically
3:37:50all attempts from sellers and put the
3:37:52market back into a buying phase.
3:37:54Basically, it would reverse this entire
3:37:56candle.
3:37:57Now, if instead we were to get a slower
3:38:00choppy pullback up, well, that would be
3:38:02really good because that would tell us
3:38:04that this selling control is not being
3:38:06matched by the buyers. We are still
3:38:08seeing sellers maintain control even
3:38:10through the bearish phase.
3:38:12So, taking a look at what we've got
3:38:13going on here, you can obviously see,
3:38:16although [snorts] we covered a pretty
3:38:17good amount of ground through this
3:38:18bullish phase, we had all of this time
3:38:21to reach a high, right? Versus the time
3:38:24it took to actually get down there
3:38:26was about three candles, about four
3:38:28candles. So, it took a significant
3:38:30amount more time for the market to trade
3:38:32up. And when we look at the choppiness,
3:38:34okay, we have yes, we start off with
3:38:36decent buyer strength, but even then we
3:38:38have some wicks and some indecision. And
3:38:40then we step into this sideways phase
3:38:41where the market wasn't able to get
3:38:43anywhere for quite some time. Now
3:38:44obviously that does indicate that
3:38:46sellers weren't strong enough to drive
3:38:47the market down immediately, but it also
3:38:49indicates that buyers really don't have
3:38:50that much force here cuz even in the
3:38:52middle of the range where we wouldn't
3:38:53expect selling intent to be as strong as
3:38:55the highs, the market still unable to
3:38:58push higher. Takes quite a while for it
3:38:59to break out. And as soon as it does,
3:39:01that actually ends up being the highest
3:39:03closure we get before the market starts
3:39:05selling off again.
3:39:06So being able to determine the momentum
3:39:08based on the speed and the size of these
3:39:10movements and how choppy or direct they
3:39:13are is really really valuable for
3:39:14helping us to determine which way the
3:39:16market is likely to go. In this case,
3:39:18with very strong and direct selling
3:39:20pressure and weaker, choppier, more
3:39:23indirect buying pressure, it leads us to
3:39:25believe we would have good conviction
3:39:27and good pressure behind a selling move.
3:39:29One of the most valuable things about
3:39:31momentum is the ability to use it to
3:39:33avoid taking bad trades, right? So let's
3:39:36say we have this market where we've had
3:39:38this large impulse down, breaks of
3:39:40structure, we are obviously leaning to
3:39:42the downside. We have a supply zone
3:39:45sitting here and it has imbalance.
3:39:47Everything about this looks like it
3:39:48could be a good short trade. There's
3:39:50efficiency above which means that would
3:39:52realistically be the last point of
3:39:54resistance for a selling move. Now from
3:39:56this, we could anticipate a movement
3:39:58like this. We trade into there and then
3:40:00we trade lower.
3:40:01If we see what the market did next
3:40:03though, we'll see that we had this
3:40:04massive bullish impulse. Now this can
3:40:08tell us, even just off of this first
3:40:10candle,
3:40:11we should not take this trade. So what
3:40:13we could actually do after seeing that
3:40:15massive bullish candle is if we had,
3:40:16let's say, a sell limit placed,
3:40:19we could take that sell limit order off
3:40:21and not get into this trade.
3:40:23Now obviously it might seem a bit rash
3:40:26to avoid taking a trade off of one large
3:40:28candle, but when you think about what
3:40:30the candle is actually telling you,
3:40:32that's where you can get the insight to
3:40:34decide whether or not this should be a
3:40:35good opportunity, right? Because
3:40:38realistically, when we're taking trades,
3:40:39we are trying to just move with whoever
3:40:42is in control.
3:40:43When we see this downward move, and we
3:40:45see the market continuing down, we see
3:40:47pretty clearly, okay, at this point in
3:40:49time, sellers are in control. So, the
3:40:51setup makes sense.
3:40:52But, think about what this candle did,
3:40:55right? Within one bullish candle, we
3:40:57wiped out, I don't even want to count,
3:40:59but probably 40 previous candles that,
3:41:02you know, a significant amount of time
3:41:04took to actually get to this point. So,
3:41:07from this level all the way through to
3:41:10here that's how long it took us to get
3:41:12down there. And then the reversal took
3:41:14this long, maybe 1/10 of the entire
3:41:17move, and it closed higher than the
3:41:19entire previous range.
3:41:21So, not only did it move faster and more
3:41:24significantly than the downward
3:41:25movements did, but it also closed us
3:41:27over the highs of this entire range
3:41:30even over the wick here as well.
3:41:32That tells us that this buying move has
3:41:34basically engulfed anything that we've
3:41:36seen beneath this level. And given that
3:41:38this is where the market structure
3:41:39broke, the market's basically telling us
3:41:42we've completely reversed this entire
3:41:44break to the downside. Therefore, if
3:41:47we've seen buying pressure come in with
3:41:48that much force, it would make sense to
3:41:51just not take the sell trade, because at
3:41:53this point you're seeing clear buying
3:41:54control in the market. And really, what
3:41:56we're seeing is basically a huge
3:41:58reversal. So, do we want to sell here,
3:42:01even if the other concepts look okay?
3:42:02Well, realistically, no, cuz this looks
3:42:05mostly like it's going to be a breakout
3:42:07into new highs, okay?
3:42:09So, if we see how this played out,
3:42:11you're going to see that it did indeed
3:42:12break out to new highs, and it was quite
3:42:14obvious that that was coming given the
3:42:15amount of momentum that came behind this
3:42:17upward move. So, that's just something
3:42:19to think about, you know, and it really
3:42:21will save you from a lot of losing
3:42:22trades. I suggest this to the people I
3:42:24work with and we usually improve their
3:42:27win rates pretty significantly simply by
3:42:30teaching people to avoid taking trades
3:42:31against significant momentum. Momentum
3:42:34is something that people really don't
3:42:35give enough attention to, but when the
3:42:37whole game is just trying to be on the
3:42:39right side of the market, there's no
3:42:40better way to see which side of the
3:42:42market you're on than the direct and
3:42:43immediate candles that are forming.
3:42:45Incredibly bullish candles coming out of
3:42:47a bearish range tells [snorts] us this
3:42:49could be the point where the market has
3:42:50shifted direction. If instead we were to
3:42:52see a slower and more gradual climb up
3:42:54to this zone, I absolutely would be
3:42:56happy to risk the money there because
3:42:58we're seeing strong seller control,
3:43:00weaker buyer control. So we would
3:43:02anticipate strong seller control again.
3:43:04But when it's, of course, as you can
3:43:06see, it's strong seller control and then
3:43:09very strong buyer control, well, no.
3:43:11This is more reversal than continuation
3:43:14and it's not something I'm going to want
3:43:15to take a sell from because for the most
3:43:17part, it's more likely to lead into
3:43:19continued buying.
3:43:21So another thing you can use momentum
3:43:23for is validating structural shifts. If
3:43:25we take a look at this piece of price
3:43:26action. Now, it is a bit messy because
3:43:28we had a market gap, but the structure
3:43:30all the same is a low, lower high, lower
3:43:33low, and then a higher high. So here, we
3:43:36have a breakout. Now in many instances
3:43:38this would of course set us up with
3:43:40potential to buy from this point because
3:43:42we're seeing that structural shift. An
3:43:44impulse to the upside can tell us that
3:43:46we could have a buy opportunity on our
3:43:48hands.
3:43:49However, if we take a look at the actual
3:43:51structure, the bearish momentum down to
3:43:54here was incredibly strong, right? We
3:43:55did have some rejections from buyers,
3:43:58but then we had another reasonably
3:43:59strong push down.
3:44:01This candle again exceptionally bearish.
3:44:03After a small bullish candle, we have
3:44:04another rather bearish candle. And
3:44:06although we have actually shifted to the
3:44:08upside, if we take a look at what it
3:44:10actually took the market to get up here,
3:44:13we saw a long phase of buying and the
3:44:15buying was very indecisive. Every time
3:44:17we push up, we pull back down. We push
3:44:19up, we pull back down. We push up, we
3:44:20pull back down. You can see that this
3:44:22impulse is what we would just
3:44:24essentially refer to as not very strong,
3:44:26right? Even the drive down from here
3:44:31to there only took this amount of time.
3:44:33And now to reverse that movement, it
3:44:35took us this amount of time, right? So,
3:44:37about 15 times longer just to get back
3:44:40to that point. So, that can indicate to
3:44:42us that selling is still stronger than
3:44:44buying, despite the fact that we've
3:44:46actually broken above structure. Now,
3:44:48again, we did have this reasonably
3:44:50bullish candle. This could give you a
3:44:52good insight, but as soon as that
3:44:53bullish candle got over the structure,
3:44:55we had indecision candle, indecision
3:44:57candle. Then we had an attempt to go
3:44:58higher, and then this bearish roll back
3:45:00over. So, the actual price action after
3:45:03the breakout is incredibly weak at this
3:45:05point in time. So, what you could look
3:45:07at this as is basically a liquidation or
3:45:11a reversal potential sweep before a
3:45:14reversal down, rather than a strong
3:45:17actual breakout that we'd want to buy
3:45:19into, right? Now, obviously, that could
3:45:22then tell you don't buy this market
3:45:24because we obviously see sellers are a
3:45:25lot stronger than buyers at this point
3:45:27in time. And if you just simply skipped
3:45:29this trade, you would have of course
3:45:31saved yourself some money when the
3:45:32market went and took out the low.
3:45:34So, it's good for validating your buys
3:45:36and your sells as well based on the
3:45:38structural reversals. As an example, if
3:45:40we have the bearish impulses down,
3:45:43but then our shift back to the upside is
3:45:46slow and choppy like so, and doesn't
3:45:48manage to gain much ground after
3:45:49breaking through the high, this is
3:45:51almost certainly going to be a trade
3:45:53that you don't want to take on the buy
3:45:55side because what this usually leads
3:45:57into is sweep reversal, like the
3:45:59liquidity that we discussed earlier, as
3:46:01opposed to what you're hoping for in a
3:46:03lot of cases, which is a continuation
3:46:05up. If that continuation was likely, the
3:46:07buyers would have been a lot stronger
3:46:08than they were. If this reversal was
3:46:10worth considering, the buyers would have
3:46:11been able to take the market higher in a
3:46:13faster time with more clear buying
3:46:16intent. Look at momentum real quick.
3:46:18Now, if there's one thing that people
3:46:20miss out of their trading too
3:46:21frequently, it is certainly momentum. I
3:46:24see not many people talk about this and
3:46:26it really is very valuable in helping
3:46:28you to build clarity, conviction, and
3:46:30make sure you're on the right side of
3:46:31the market. So, the general idea is the
3:46:34stronger, the faster, and the larger the
3:46:37impulses we get, the more clear buying
3:46:39intent or selling intent that we see. In
3:46:42this case, it's seller intent. When we
3:46:44have this large drive down with little
3:46:46to no pullbacks on the way through and
3:46:48any attempt by buyers to take the market
3:46:50back up is quickly wiped out by selling,
3:46:53this shows us clear selling intent. We
3:46:55can see this is quite a fast, large, and
3:46:57impulsive move. So, this gives us the
3:46:59idea that this is likely a seller
3:47:01controlled market. Now, the thing that
3:47:03really becomes valuable is then
3:47:04monitoring how the market pulls back.
3:47:06Because, for example, if we were to see
3:47:09equally strong impulse back to the
3:47:10upside, well, this could actually be
3:47:12seen somewhat as a phase of indecision
3:47:14despite the fact we've had large up and
3:47:16down moves cuz the market at this point
3:47:18in time is failing to show clear control
3:47:21by buyers and sellers. It's
3:47:23clear seller control, but then clear
3:47:24buyer control taking that back up and
3:47:26putting us in a phase where we have to
3:47:27try and guess which way the market's
3:47:29likely to go.
3:47:31What we prefer to see for validating
3:47:33setups is, of course, slower, choppier,
3:47:36and less direct price action.
3:47:39If the selling move is strong and
3:47:40impulsive and then the buying move is
3:47:42choppy like this, it has a lot of
3:47:44pullbacks. So, every time the buyers
3:47:45take the market up, sellers bring it all
3:47:47the almost all the way back down. When
3:47:50we see this, this is really good for
3:47:51validating continuation of seller
3:47:53control because if the buyers had any
3:47:55grip over this market, they'd be able to
3:47:57just run the market up equal to how the
3:47:59sellers brought it down, right? So, we'd
3:48:00see a much stronger impulse. Now,
3:48:03another thing is the time it takes. This
3:48:05was rather fast. This has taken almost
3:48:08twice the amount of time, and we've only
3:48:10covered around 50% of the distance of
3:48:12the downward move. So, it shows
3:48:14basically through this phase marked in a
3:48:15red box, sellers are still showing some
3:48:18level of control over the buyers who are
3:48:20attempting to drive the market higher.
3:48:22What do we expect to see from that?
3:48:24Well, from there, with strong seller
3:48:26control on the impulse down, weak buyer
3:48:28control on the corrective move back up,
3:48:30we would expect to see another strong
3:48:32impulse to the downside.
3:48:34So, here's what that looks like on a
3:48:35real chart. We have a large impulsive
3:48:37bearish move.
3:48:39Then, we have a corrective move like so,
3:48:41which you can see is very choppy. The
3:48:44corrective move takes many times longer
3:48:46than the impulsive move did to only
3:48:48cover around 60% of the ground. So,
3:48:51we're not moving as far or as fast, and
3:48:53we are seeing that resistance from the
3:48:55sellers with these drives down every
3:48:57time the market comes to a new high. The
3:48:59candle bodies are smaller, there's more
3:49:01wicks, more indecision, and obviously
3:49:03that is then followed by another bearish
3:49:05impulse. Now, for a potential area for a
3:49:07trade, we could look at this supply
3:49:09zone. And what do we see on the run into
3:49:11this? Well, we have a large bearish
3:49:12impulse showing clear seller control,
3:49:14and then the pullback up is full of
3:49:16wicks and indecision, and it takes quite
3:49:18some time to get back up there. So, that
3:49:20again is really good basis for what we
3:49:22want to see to validate our setups and
3:49:24give us conviction to be able to hold
3:49:26the setups through to that completion.
3:49:28Obviously, after this, what we would
3:49:30expect to see is a strong bearish
3:49:32impulse like what we saw there.
3:49:35Now, another use case for momentum is of
3:49:37course avoiding bad trades. So, if you
3:49:39found a setup that looks real good, but
3:49:41then the market rallies with significant
3:49:43strength against your trade, wiping out
3:49:46loads of the previous price action,
3:49:48that can tell you, "Okay, maybe this
3:49:50trade isn't so great after all, because
3:49:51we've obviously seen, despite everything
3:49:53else, significant amount of buying step
3:49:55in at that level, and I don't want to
3:49:57sell against significant buying
3:49:59strength." So, we kind of want to see
3:50:01that sell, chop back, sell. We don't
3:50:04want to see sell, consolidate, buy. That
3:50:07is not going to be such a good market to
3:50:09sell into cuz at that point buyers may
3:50:11just hold control of the market for
3:50:12longer.
3:50:14And the other final thing, of course, is
3:50:15validating your breaks of structure by
3:50:17determining how strong the buyers really
3:50:19are or the sellers, depending which way
3:50:21you trade it. So, if we see a valid
3:50:23standard confirmation, but then the
3:50:25market grinds really slowly up towards
3:50:28the break of structure and then finds
3:50:30indecision after taking the structural
3:50:33high, this can actually be leaning more
3:50:35towards a sweep and reversal to the
3:50:37downside than an actual continuation up.
3:50:40So, these kind of trades, where we have
3:50:42very slow grinding price action to the
3:50:44point of the structural break, are often
3:50:47times or pretty much always best left
3:50:49alone. You want to see a clear impulse
3:50:51to the upside which shows clear buying
3:50:54control taking place here. As we've seen
3:50:56in many the examples we've shown before,
3:50:58you don't want to see the market
3:51:00grinding up and having to really fight
3:51:02to get to that structural break. When we
3:51:04see this, we already know buyers are
3:51:06weak and buyers at a more premium price,
3:51:08well, they're much less likely to take
3:51:10the bait there, either. So, that's the
3:51:13thing we can expect the most. So, that's
3:51:16momentum, incredibly useful. It's not a
3:51:18standalone concept you'll trade on its
3:51:19own, but it's something you weave into
3:51:21all of the trades you take to determine
3:51:22whether the candles are telling you
3:51:24anything about the buying and selling
3:51:25control inside of the larger narratives
3:51:27that you create. Believe it or not,
3:51:29that's actually pretty much all of the
3:51:30concepts that I use in my trading. Now,
3:51:32we do need to go a little bit deeper to
3:51:34talk about fractals, top-down analysis,
3:51:36and actually formulating this into
3:51:37trades on the right time frames. But, to
3:51:40quickly recap the process, we are
3:51:42looking for structure, first and
3:51:44foremost. We want to make sure we know
3:51:45which way the market's going. And to
3:51:47work that out, we use the direction of
3:51:50the highs and the lows, the real price
3:51:52structure. We don't use trend lines, we
3:51:54don't use any indicators. We look at
3:51:55where the lows and the highs have formed
3:51:57and determine whether the market is in
3:51:59an uptrend or a downtrend.
3:52:01When we're clear with the direction of a
3:52:02market, we will, as a standard trade,
3:52:05look for imbalances to work out where
3:52:07potential entry points could be. Those
3:52:09entry points for the most part are going
3:52:11to be supply and demand zones, sometimes
3:52:13internal range liquidity or different
3:52:15points of liquidity, but in this
3:52:16example, there isn't any visible, so we
3:52:18work with the simple area of supply.
3:52:21Then we want to determine the momentum
3:52:23on the run back into the zone. If we
3:52:25have smaller, slower, less strong
3:52:28momentum to the upside, that's a good
3:52:31point for us. That's going to tell us
3:52:32that sellers are still in control of
3:52:33this market, and that will provide us
3:52:35with what we want to see. The only
3:52:37caveat to this, of course, is if we were
3:52:39to see an incredibly strong drive up,
3:52:41then this would be a trade we would not
3:52:43take. Instead, providing we have good
3:52:45momentum back into our zone,
3:52:48everything is good, and we can look to
3:52:49take that trade.
3:52:51Now, we don't generally usually want to
3:52:53just sell straight into the market. It's
3:52:55better to see a confirmation. This is
3:52:57where we use that substructure trend,
3:52:59the internal structure, to determine a
3:53:02agreement again with the time frame that
3:53:04we're trading. So, this, let's say it's
3:53:06the 4-hour time frame.
3:53:08If we take a look at the zoomed-in area
3:53:10here, we can see generally like a 1-hour
3:53:12uptrend taking place inside of a 4-hour
3:53:14downtrend. If that 1-hour shifts into
3:53:17agreement with the 4-hour, and now the
3:53:191-hour's bearish as well, that is what
3:53:21we want to see. Then we can set our
3:53:23trade up. Generally, it's going to be
3:53:25execute, stop over the high, target to
3:53:28the low or beyond, and that is pretty
3:53:30much the full process. So, that's what
3:53:32your standard trades will look like with
3:53:34the concepts that I've taught you. Now,
3:53:35of course, there will be liquidity
3:53:37trades, there will be the substructure
3:53:39trades, where sometimes you'll have an
3:53:41opportunity to buy from down here and
3:53:43run through this range,
3:53:44but the average standard trade in the
3:53:46format that we're looking for overall is
3:53:48generally what you can see on the chart
3:53:50right here. Okay, so now we've been
3:53:52through the concepts, let's start
3:53:53talking about the actual application,
3:53:55starting with one of the biggest
3:53:57questions I get asked on pretty much
3:53:58every video, what time frame do I use to
3:54:01do this? Well, good news for you, the
3:54:03market is what we call fractal, which
3:54:05means the same patterns form on pretty
3:54:07much all time frames. Take a look at
3:54:09this trade. We have bullish impulsive
3:54:12structure. Okay, so we have a breaker
3:54:14structure to the upside, higher high,
3:54:16the market's come down through some
3:54:17liquidity, through an imbalance, into a
3:54:19demand zone, and then traded higher.
3:54:21That's a pretty clean and obvious setup.
3:54:23This was done on the 1-minute time
3:54:26frame.
3:54:27But, we also see the same exact thing,
3:54:29bullish impulses, higher high, market
3:54:32comes through liquidity, trades into
3:54:33demand zone through imbalance, then goes
3:54:35higher. This is the daily time frame.
3:54:38So, the same pretty much the same exact
3:54:40setup forming here on the minute and the
3:54:43daily, and it also happens on every time
3:54:45frame in between those. So, the simple
3:54:47answer is, when it comes to the concepts
3:54:49you want to trade, whether you want a
3:54:50day trade or swing trade, you can
3:54:52basically use whatever time frames you
3:54:54want to use.
3:54:56But, you should make sure there is
3:54:57structure behind it, and that brings us
3:54:59on to the next topic to discuss, which
3:55:01is top-down analysis.
3:55:04So, top-down analysis is the idea of
3:55:06using multiple different time frames to
3:55:08formulate your trade ideas.
3:55:11For example, on the daily time frame, we
3:55:13could see that we have an upward
3:55:15trending market. We also have a large
3:55:18demand zone. So, we could get the
3:55:19general idea that we probably want to
3:55:21buy a pullback in this market, right?
3:55:23That would give us the broad foundation
3:55:25for a trade idea. However, we probably
3:55:28don't want to do that on the daily time
3:55:30frame, because it would take weeks for
3:55:32the trade to play out. So, you could
3:55:33then zoom in and see the substructure,
3:55:36some of these smaller refined areas on
3:55:38the 4-hour in the same piece of trending
3:55:40structure, and refine that demand zone
3:55:42down. So, find a 4-hour zone inside of a
3:55:44daily zone, which allows you to make the
3:55:46zone smaller and work out the more
3:55:48precise point to get into a trade. Now,
3:55:50this, of course, would then allow you to
3:55:52get a much better execution. Your stop
3:55:55loss wouldn't have to be huge, and you
3:55:56could run this with considerably more
3:55:58profit potential.
3:56:00As well as this, we could also maybe
3:56:02scale down to the hourly to find a
3:56:04refined area for a substructure trade,
3:56:07okay? Against the overall trend to trade
3:56:09through the imbalances and into the high
3:56:11probability zone that we've prepped. So,
3:56:13by doing top-down analysis rather than
3:56:15relying on just one random time frame,
3:56:17we build a picture that agrees across
3:56:19the daily, the 4-hour, the 1-hour, and
3:56:21everything below that as far as you want
3:56:22to go.
3:56:24That way you're in full agreement across
3:56:25time frames, you got full clarity as to
3:56:27what's actually going on in the market,
3:56:29and your trades will be able to be taken
3:56:31with much more confidence and
3:56:32conviction. And you'll also find those
3:56:34smaller trades inside of trades like
3:56:36this one that we've got marked here.
3:56:38Now, a good thing about this is, and
3:56:39you've probably faced this in your own
3:56:41trading, when you've been trying to
3:56:43trade, you might find something that
3:56:44looks like a good setup. So, for
3:56:46example, looking at this market, we can
3:56:47see an efficient and very bullish
3:56:49market. So, you may want to buy into
3:56:51this market, right? Let's say on the
3:56:53hourly time frame or the 30-minute. But
3:56:56if you zoom out to the 4-hour or daily,
3:56:58you may realize that that exact piece of
3:56:59price action you're looking at is
3:57:01sitting right inside of a massive supply
3:57:03zone after a break of structure to the
3:57:04downside. Well, now suddenly your buy
3:57:07idea that looked good on the lower time
3:57:08frame looks like an absolutely terrible
3:57:10idea that is likely to go wrong on the
3:57:12higher time frame. When you do the
3:57:14top-down analysis process from the top
3:57:16to the bottom, you understand what every
3:57:18time frame is doing, you understand
3:57:20where in the market you're sitting on
3:57:21each of those different time frames, and
3:57:23it's easy to avoid taking these trades
3:57:25that logically in hindsight were never
3:57:27going to work. But when you zoomed in
3:57:29and over-refined and you're not in
3:57:31consideration of the big picture
3:57:32context, they're easy to take, they're
3:57:34easy to lose consistently. Okay, so to
3:57:36teach you top-down analysis, we're going
3:57:38to run it back to the EUR/USD trade we
3:57:40shared not too long ago, but instead of
3:57:42just looking at the hourly timeframe,
3:57:44we're going to do it from the weekly
3:57:46down.
3:57:47Now, I suggest you begin all of your
3:57:48top-down analysis on the one-week
3:57:50timeframe for a simple reason. It's
3:57:52going to give you the most zoomed out
3:57:54and clear look as to what the market is
3:57:56doing overall, right? If we take a look
3:57:58at this on the weekly,
3:58:00we kind of see not too much in the way
3:58:02of clear direction, cuz this is quite
3:58:04consolidative. But, we have first ideas
3:58:06that the market closed through this low.
3:58:09That's maybe the start of a bearish
3:58:11impulse, right? The start of a bearish
3:58:13trend. So, we have impulse there pushing
3:58:15through this low.
3:58:17Then, we have a second break of
3:58:18structure, again pushing through the
3:58:21next low.
3:58:22So, from what we can take from the
3:58:23weekly, and we really don't need to pull
3:58:25too much in the way of trade
3:58:26opportunities here. We just want to get
3:58:28a broad idea for what's going on. We
3:58:30could say, "Okay, impulse, correction,
3:58:32impulse. This is probably a market that
3:58:34we want to sell at some point in this
3:58:36current trend."
3:58:38So, if we go to the daily timeframe now,
3:58:41this is where I suggest you go second.
3:58:43And what we're doing here is running off
3:58:45the same idea, but refining it down a
3:58:47little bit. We can see on this level,
3:58:50the impulse correction impulse is pretty
3:58:52clear. I'll map that on real quick, just
3:58:54so it's in our minds.
3:58:56And if we take a look at where the
3:58:57market landed, so looking to the left
3:58:59over here,
3:59:01this is an efficient range, okay? So,
3:59:03there is efficiency here. Therefore,
3:59:05meaning the market doesn't really have
3:59:07too much ground to fully reverse from,
3:59:10further backing the idea of potentially
3:59:12selling this market, okay? So, we're
3:59:15building a good picture now. We probably
3:59:16want to be selling overall when it comes
3:59:19to the high timeframes.
3:59:21So, with that, we can jump down to the
3:59:234-hour timeframe and see what's going on
3:59:26there.
3:59:27This is where we can really start to
3:59:28build a little bit more information as
3:59:31to what's happening.
3:59:32So, one thing I would notice on the
3:59:344-hour perspective here is, of course,
3:59:37with the idea to sell, where could that
3:59:39selling take place from?
3:59:41Now, looking in the previous leg of
3:59:43impulsive price action, which is going
3:59:45to be this high to this low, we want to
3:59:48determine where the best possible place
3:59:50to sell could be.
3:59:51Obviously, first off, we have a supply
3:59:53zone. So, your attention would be drawn
3:59:55towards that. That's completely fine. We
3:59:58can mark this area out and consider that
4:00:00for a possible reversal.
4:00:02And now, we want to factor liquidity.
4:00:05This is what's going to help you to not
4:00:07get caught up in traps, okay?
4:00:10So, the first thing I can note when it
4:00:12comes to liquidity is we've got a pretty
4:00:14obvious descending trend line, which
4:00:16runs through from here down to where
4:00:19price currently sits. So, [snorts] this
4:00:21could create some potential trend line
4:00:23liquidity in and around this range. So
4:00:25far, that's okay. Maybe that could still
4:00:28back the short trade that we're looking
4:00:29at, right? Because there's liquidity
4:00:31being swept as we speak.
4:00:34The other thing I can see, however, is
4:00:36some equal high liquidity here. So, we
4:00:38have two equal highs in the market. We
4:00:41know this is going to act as liquidity
4:00:43and potentially draw price towards it.
4:00:46So, if we have equal highs, what did we
4:00:49rule when we were talking through
4:00:50liquidity? We said we shouldn't sell
4:00:53beneath equal highs, okay? Not like
4:00:56this.
4:00:57So, with this now acting as a potential
4:00:59magnet for price, we could say with more
4:01:02certainty that this supply zone might
4:01:04not be the best because we still have
4:01:06some liquidity just above that that we
4:01:08can go and trade into. Now, if these
4:01:10equal highs were miles away, we could
4:01:12potentially brush that away, but this is
4:01:15right above the point of which we are
4:01:16looking to sell in a supply zone. So,
4:01:18with that said, these are going to hold
4:01:20some reasonable weight because they're
4:01:21close to where price currently is and
4:01:23they're going to act as a magnet for
4:01:24price, okay? That's why it's important
4:01:26to spot liquidity. So, the trend
4:01:28liquidity, maybe that's okay, maybe it
4:01:31wants to be purged a bit further. The
4:01:32equal high liquidity, that's not going
4:01:34to be okay to sell under. So, I
4:01:36personally would pretty much write off
4:01:38the idea of looking to sell from here.
4:01:40Now, we've got a more zoomed in view of
4:01:41this leg of price, which gives us zoomed
4:01:44in perspective of the internal range
4:01:46highs and lows, okay? We have a high,
4:01:49we have a low, we have an internal high
4:01:51there, pull back down, internal high
4:01:53there, pull back down, internal high
4:01:56there.
4:01:57So, with the internal high liquidity and
4:01:59the equal high liquidity sitting
4:02:01together, we could basically say the
4:02:03market is quite likely to come towards
4:02:07this range between this high,
4:02:09where we expect it to surpass this high
4:02:11and go through the equal highs really.
4:02:13So, we'd ideally look at, say, the next
4:02:15internal high, because internal highs
4:02:17are a good point for the market to
4:02:18collect fuel from, as we showed
4:02:20previously, as well.
4:02:23So, although we're in a bearish market,
4:02:25okay, we've pretty much been able to
4:02:26write off the supply given the liquidity
4:02:28that sits above it. And if we're
4:02:29expecting the market to get to here, we
4:02:31would generally want to see it take an
4:02:33internal high for fuel for the movement
4:02:35down. So, this would be that point,
4:02:37right? So, the 4-hour that we're on now
4:02:39is really where we're formulating the
4:02:41idea, validating and invalidating
4:02:44certain areas to set up good trades.
4:02:47So, with this said then, I'm going to be
4:02:49quite interested in seeing the market
4:02:50come up towards here, and then I will
4:02:52look to see if there is an opportunity
4:02:54to sell. But of course, this is pretty
4:02:56high time frame stuff. So, with us
4:02:59expecting the market to be magnetized up
4:03:01there, is there a possibility for an
4:03:04opportunity for us to buy the market
4:03:06from where it is into these higher price
4:03:08levels?
4:03:10Well, the simple thing we could do is
4:03:12simply target the equal highs, cuz
4:03:13that's a very high probability point to
4:03:15be hit.
4:03:16So, we'll take this supply zone off for
4:03:18now.
4:03:19We'll take off the trend liquidity for
4:03:20now as well to keep it simple.
4:03:22And now we have an idea that we could
4:03:24maybe, whilst this market is still
4:03:26bullish on the lower time frames, trade
4:03:28through towards that point of equal
4:03:30highs.
4:03:31So, now let's zoom in on the hourly and
4:03:33work out what we're working with here.
4:03:35So, the equal high target is going to be
4:03:36this level. Let's just strip everything
4:03:38back to that. That's going to be the
4:03:40target we want to go for.
4:03:42What is the current trend telling us?
4:03:44Well, we had this bearish phase of lower
4:03:46lows and lower highs.
4:03:47Then we broke over into a higher high.
4:03:51Then we have higher low, higher high,
4:03:53higher low, higher high, higher low,
4:03:57higher high. Okay? That's the structure
4:03:59we're currently working with.
4:04:00Now, within this structure, we can
4:04:02actually see that the market has reacted
4:04:05quite significantly through each of
4:04:07these phases to internal liquidity. So,
4:04:09we have internal liquidity there.
4:04:12We have internal liquidity around this
4:04:13point being swept as well.
4:04:15We have internal liquidity around this
4:04:16point, the sweep leading to a reversal.
4:04:19And now we have a trickier impulse
4:04:20because the impulse was slow until this
4:04:23phase.
4:04:24So, with this being a break of
4:04:25structure,
4:04:27that then sets us up with uh
4:04:29the structural break we want to see, and
4:04:31now our only job is really finding the
4:04:33point to buy from.
4:04:34Well, we would generally then want to
4:04:36look under the internal liquidity low.
4:04:39So, that's going to be the internal low.
4:04:42And then from there, if we were to trade
4:04:43down gently, we would look for our
4:04:45confirmation, and we would buy from
4:04:47there. Okay? Obviously, on this one, we
4:04:50can actually extend the target up
4:04:51towards this point, too.
4:04:53And you already know how this one goes.
4:04:55Let's run it forward.
4:04:56The market came down brilliantly.
4:04:58Remember also consider your momentum
4:05:00when you're in trades. And now, by the
4:05:02way, the hourly is where we find the
4:05:04smaller opportunities and refine
4:05:05potential trades inside of trades,
4:05:07right? We are looking for a big short
4:05:09once the market gets higher.
4:05:11And then, because we expect the market
4:05:13to get higher, we have the possibility
4:05:15to look for a smaller buy. Still a
4:05:17pretty reasonable buy from where we are,
4:05:19though.
4:05:20So, we sweep the liquidity, we break up,
4:05:22we retest demand, and then we get an
4:05:24execution from the area of demand
4:05:27to take the market higher. From this
4:05:29region, with stops under the low to keep
4:05:31it nice and safe, and you could target
4:05:33all the way into that. So, that's going
4:05:36to give you around a 6.6%
4:05:38potential trade, and that is simply by
4:05:41following that top-down flow, where
4:05:42we're finding trades inside of trades,
4:05:44and making sense of the overall market
4:05:47to then give us, you know, the big
4:05:48picture opportunity, and then smaller
4:05:50picture opportunities within that price
4:05:52action as well.
4:05:54So, when I was trading this myself, as
4:05:55said, I ended up getting out of the
4:05:57trade around this point. Um I had a
4:06:00smaller area that I was looking at.
4:06:02Realistically, I could have held it up,
4:06:03and probably should have, but we're not
4:06:05all perfect all the time.
4:06:08So, there we go. That is basically where
4:06:10we're at in the market right now.
4:06:12If we skip this forward, you can see
4:06:14what's progressed from that point, and
4:06:16take a look at this, this reversal that
4:06:18we've seen come from a sweep of the
4:06:21equal highs, and also from a sweep of
4:06:24the internal high. So, I am interested
4:06:27in shorts from around this point, and
4:06:29see where the market can get to, because
4:06:31that fits in with the big picture that
4:06:33we built, right? The sweep of internal
4:06:35liquidity, which can potentially turn
4:06:37into a larger term reversal to bring the
4:06:39euro lower. Now, that's not 100%
4:06:42confirmed just yet due to structure, but
4:06:44everything is kind of in place to
4:06:46potentially set up another good trade.
4:06:48So, that's how top-down analysis works.
4:06:50You basically build a story around what
4:06:51the market's doing using the weekly into
4:06:54the daily into the 4-hour into the
4:06:571-hour for your refinement and
4:06:58execution. And look, if you want to do
4:07:00this as a very, very low time frame
4:07:02trader on the 15-minute, 5-minute, you
4:07:04absolutely can. I suggest just doing
4:07:06that weekly around once a week, analyze
4:07:08that weekly daily, and then day-to-day,
4:07:10you can follow this exact flow inside of
4:07:12the big picture on, say, the hourly down
4:07:15to the 30-minute, down to the 15-minute
4:07:17with 5 minute for executions and
4:07:19refinements if you want to do that.
4:07:21Because the markets are fractal, it
4:07:22really is down to you what you want to
4:07:24do. Higher time frames, easier to trade,
4:07:26more consistent, less chaos, but if you
4:07:29are interested in the low time frames,
4:07:31nothing stopping you doing that as well,
4:07:33okay? So, we got weekly into daily, into
4:07:364-hour, into 1-hour, and then if you
4:07:39want to go lower and find those trades
4:07:41inside of trades and day trade to your
4:07:43heart's content, no one's stopping you
4:07:45from doing that.
4:07:47So, that's the theory of top-down
4:07:48analysis and a practical application of
4:07:50how it actually goes down.
4:07:52And that is everything. That's pretty
4:07:53much everything you're going to need to
4:07:55know to go forward and do successful
4:07:57technical analysis and make a lot more
4:07:59sense of the market and I'm sure you can
4:08:00see that now. So, what is the next step?
4:08:03What should you do? Well, you should go
4:08:04and practice these concepts through some
4:08:06back tests first of all. So, go and mark
4:08:09up past price data, run some back tested
4:08:11simulated trading. Don't trade this live
4:08:14because at this point, having only just
4:08:15watched the video, you're not ready to
4:08:17trade them with real money this soon.
4:08:19And if you try these concepts with real
4:08:20money at risk, you're going to mess
4:08:22things up. So, you should practice on a
4:08:24demo and in back tests first of all.
4:08:26Now, if you want to master this trading
4:08:28style with my help alongside many others
4:08:31inside of a community where we're all
4:08:32trading in the same way and learn the
4:08:34full step-by-step process I use to
4:08:36capture trades, you can join the ETM.
4:08:38That's my program. The first link is in
4:08:40the description will take you there, but
4:08:42that is a paid program. Now, if you want
4:08:43to learn more without paying, if you
4:08:45want some more freebies, uh you can
4:08:46learn more about the statistical side of
4:08:48trading, obviously the next natural
4:08:50layer, inside of a 40-ish minute video
4:08:53that I've got also linked in the
4:08:55description, and that one's going to be
4:08:56the second link. So, whichever one you
4:08:58want to do, check them out, and if you
4:08:59don't want to do either of those, just
4:09:00at least practice on demo and back test
4:09:03before you start doing this live. Hope
4:09:05you've enjoyed this course. Thank you
4:09:06for watching, and I'll see you in
4:09:08another video soon.

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