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Use THIS simple method to find Continuation or Reversal profiles using Dealing Range Theory (DRT) — Transcript

by Ali Khan · 3,923 words · 556 segments · language en · Watch on YouTube

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0:00How do I know if it's a reversal or if
0:02it's a continuation? How can I determine
0:05the directional bias? These are two of
0:08the most common questions that I get
0:10asked from my students. So, in today's
0:12video, I'm going to explain how we can
0:15anticipate a continuation or a reversal
0:18and how we can use DRT to determine
0:22directional bias. Now, I went over a
0:25type one dealing range in the last
0:27lesson. You can check that up here
0:29somewhere. But if you haven't, that's
0:30fine because I'm going to recap that
0:32over here. Now, I'm going to explain
0:35everything conceptually first and later
0:38on I'm going to get into some chart
0:40examples. So, here we have two levels on
0:44our screen in front of you. This level
0:46is our buy side liquidity pool above an
0:50old high. And down here we have our
0:53sellside liquidity pool which will rest
0:56below an old low. Now in this example
0:59we're going to discuss a bearish type
1:01one dealing range. And in order to
1:04establish a dealing range we must see
1:06two conditions met. The first condition
1:09is we want to see price raid buyside
1:13liquidity above an old high. We then
1:16want to see the market reverse and drop
1:19lower.
1:21sweeping liquidity below an old low.
1:24When a swing low forms after this, this
1:27gives us our new dealing range from our
1:30high down to our dealing range low. Now,
1:34since we are here on a higher time frame
1:37bearish trend, we ideally want to see
1:40lower prices. And for a type one dealing
1:43range, we expect a continuation profile.
1:47So, for this specific type of dealing
1:50range, we're using it as a framework to
1:52hunt for short setups. Now, let's get a
1:55little bit deeper here. Between the
1:58highest point of our dealing range, so
2:00our dealing range high, and the lowest
2:02point of our dealing range before the
2:04swing formed, so our dealing range low,
2:07we have the equilibrium price point or
2:10the 50 DRT level. Since the dealing
2:13range high is the highest price inside
2:15of the range and the dealing range low
2:18is the lowest price inside of our range,
2:20the equilibrium or 50 DRT level will be
2:23the fair price since it sits halfway
2:26between the highest price and the lowest
2:28price. Now price will generally
2:30gravitate back towards equilibrium since
2:33this is fair value and the market has
2:35been coded on this principle of offering
2:38fair value. Now inside of this dealing
2:40range anything above the equilibrium or
2:4450 DRT level we can consider that as a
2:47premium market and anything below that
2:50equilibrium or 50 DRT level we can
2:53consider that as a discount market for
2:56ideal entries when we are looking to go
2:59short and to use a type 1 dealing range
3:01as a framework. We ideally want to see
3:04the market reprice up to a premium since
3:08we always want to short premium prices
3:10and we always want to buy discount
3:13prices. Now let's get a little bit
3:15deeper here. Inside of a premium market,
3:18we can also divide this into two
3:22sections where we have a midpoint
3:24between the dealing range high and the
3:27equilibrium level. We call this the 25
3:30DRT since we are in a type one bearish
3:32dealing range. We can also do the same
3:35in a discount market where we have the
3:38mid price between the dealing range low
3:41and the 50% equilibrium or 75% of this
3:45entire dealing range and we call this
3:47the 75 DRT level. The upper quadrant of
3:51this dealing range between the 25 DRT
3:54and the dealing range high, we can class
3:57this as an extreme premium. And anything
4:00between the 75 DRT level and the dealing
4:04range low, we can class this as an
4:06extreme discount. Now the market can
4:09gyate inside of these levels. And
4:12typically this will be seen inside of a
4:15consolidation market where we'll see the
4:17market repric to an extreme premium turn
4:20around and gravitate back towards
4:22equilibrium and or an extreme discount.
4:25We will then see the market run higher
4:27into an extreme premium where if we are
4:30bearish, we will ideally look for short
4:32setups here and then we'll see the
4:34market repric back down to an extreme
4:36discount hunting the highs and lows as
4:40it bounces between an extreme premium
4:42and an extreme discount. But I'll get
4:44into that a little later. Now there's
4:47going to be several factors which will
4:49prevent price reaching above equilibrium
4:53into a premium market. Generally it will
4:56rely on our 75 DRT level and the PDAs
5:01that we can see in price action. Now
5:03again this is way beyond the scope of
5:04this presentation because I'm really
5:06trying my best to keep things as simple
5:08as I can here. But it will rely on low
5:11resistance versus high resistance
5:13liquidity run conditions. the type of
5:15news drivers that we have present in the
5:17market and of course the volatility of
5:19market conditions. Sometimes the market
5:23will be very heavy and it won't give us
5:26an opportunity to get to a premium and
5:29we'll see the market roll over keying
5:31off some kind of inefficiency or a PDA
5:35to the left. Now I will show you
5:37examples in future lessons but for now
5:41let me give you an example here of a
5:43bullish type one dealing range. Now
5:46again we have the dealing range high and
5:48the dealing range low. The caveat to
5:50this is we want to see a sellside
5:53liquidity pool rated first forming the
5:56dealing range low and then we want to
5:58see a buyside liquidity pool raided
6:01above an old swing high forming our
6:04dealing range high. Again, we have to
6:07have a bullish higher time frame dealing
6:10range. And I will get on to that and
6:12hopefully do a whole video just on how
6:14we can interpret directional bias and
6:17where the market is likely to reprise
6:19to. So, if you want me to do that,
6:20please subscribe and leave a comment
6:23below cuz that will be nice and I'll
6:26continue to make more of these videos.
6:28Right. So in a type one bullish dealing
6:31range, we again anticipate the market to
6:33drop into equilibrium or below and find
6:37something to the left that we can use as
6:40an entry to key off to send price higher
6:43back above the dealing range high. Now
6:47let's get again a little bit more
6:49deeper. Let's talk about a type two
6:53dealing range. And in this example, I'm
6:55going to use a bullish dealing range. So
6:58we have the higher time frame which is
7:00bullish. A type two dealing range is
7:03going to be a reversal profile. Now why
7:06I really like the type two dealing range
7:09is because even if you cannot establish
7:12if we're in a bullish or a bearish
7:14climate, the distinct feature of a type
7:16two dealing range is that we will have
7:18clear discernable equal highs or equal
7:20lows. In this case, since we are
7:22bullish, we will have clear equal highs
7:27above the market. The market will travel
7:30lower below equilibrium and it will raid
7:34some kind of a liquidity pool and or
7:38rebalance and inefficiency to the left
7:40of the market. And yes, we can predict
7:43to a very high degree of accuracy when
7:46this turning point will occur before
7:48price even reaches this level. And
7:50again, that's beyond the scope of this
7:52presentation, but this here is enough
7:54information for us. Once we see price
7:57turn around here, ideally, what we're
7:59looking for is a change in state of
8:00delivery around this. And again, I'll
8:02get into that at some point, but in this
8:04case, whether the higher time frame is
8:06bullish or bearish, the draw on
8:08liquidity is going to be above these
8:10equal highs. So, this gives us a
8:13directional bias for price to run
8:15higher. Even if we run those highs and
8:19price continues lower with the higher
8:21time frame bearish bias, it still gives
8:24us room to work with where we can hunt
8:26for setups to go long. If you are
8:28familiar with algorithmic price action
8:30and ICT concepts, think market maker buy
8:33model. Now these DRT levels together
8:36with the dealing range high, the dealing
8:39range low and our equilibrium level.
8:41This sets the framework for the
8:43algorithm to move price within. All your
8:46high probability PD arrays, your high
8:49probability gaps, order blocks,
8:51breakers, whatever you want to call
8:52them, they are all subordinate to this.
8:55High probability PD arrays will be
8:57printed based on these DRT levels.
9:00Furthermore, we can also use these DRT
9:03levels to gauge algorithmic order flow.
9:06For example, if we see price close and
9:10displace through one of these DRT levels
9:13like the 25 or the 50 DRT, then this is
9:16exactly what we want to see. Now, as a
9:19bonus tip here, if we were to buy this
9:21market, we would only buy from
9:24equilibrium and below. And I'll show you
9:27an example of why this is very
9:29important. Our initial target would be
9:31the dealing range high and or an
9:34inefficiency that sits above the market.
9:37Now again, I'm trying my best to not get
9:40so detailed with this, but let's jump
9:42into a chart example. This took me a
9:45long time to do because I had several
9:47variations. And one of the criticisms I
9:49get is that I over complicate things
9:51sometimes. And I've been doing this for
9:53nearly 8 years. So I'm trying to look
9:55from the perspective of somebody who is
9:56fairly new to these concepts. So bear
9:59with me because what I'm about to show
10:01you is something that I've been using
10:03for the last few years and every high
10:05probability setup that I take is based
10:08on the concepts that I'm about to show
10:10you today and it all revolves around DRT
10:12or dealing range theory. So let me give
10:14you an example here of a type two
10:17bullish dealing range. We have seen the
10:19market travel lower and it swept below
10:23an old low to the left. I will show you
10:26that low in a second. Now, straight
10:28away, our eyes should be going to the
10:31equal highs. So, whether we're bullish
10:33or whether we're bearish on the higher
10:34time frame, we are bullish. But I will
10:36explain why in the next few slides. The
10:39first thing we can note that, not only
10:41have we swept the liquidity below this
10:44swing low, we also have an old low to
10:47the left and we've really seen price dig
10:50inside of that liquidity over here. So
10:52looking at just this chart alone, we can
10:54see that the damage has been done to
10:57sell side above the market. We can
10:59clearly see we have equal highs. We also
11:01have a whole pool of relative equal
11:04highs above the market and we can see
11:06clear inefficiencies above those highs.
11:09So we have a fair few targets to aim for
11:12for the upside. Right? Since we have
11:14swept above these old highs to the left
11:16and we have raided the sellside
11:18liquidity pools below the market, we now
11:21have a new dealing range from the equal
11:24highs down to our newly formed low. I
11:28want to bring your attention to this
11:30down close candle over here. This is a
11:33very important candle. This is a high
11:36probability order block and I'm going to
11:39explain why for several reasons. More
11:42importantly, this order block has closed
11:44below all of that liquidity to the left.
11:48Now, watch what happens when we plot our
11:51DRT levels from our dealing range high
11:54down to our dealing range low. I want
11:56you to note that 25 DRT level over here.
12:00Notice we have a fair value
12:03gap here that overlaps that 25 DRT
12:08level. Also note the consequent
12:10encroachment which is that black line.
12:12This is our inversion fair value gap
12:15because inside of the
12:17swing that raided the sellside liquidity
12:21that sellside imbalance becomes our high
12:23probability inversion fair value gap.
12:26You can see the support that we've had
12:28at the discount low. When price closes
12:31above it like we do here. This is
12:33something that I refer to as an early
12:35change in state of delivery. Think of it
12:38as a price action event that triggers
12:40the algorithm to say that we are done
12:44offering sellside side delivery. We want
12:47to switch gears over here and start a
12:49buy program offering buyside delivery to
12:53where we're going to see areas of equal
12:55highs and inefficiencies above the
12:57market. Remember they are the two
12:59primary objectives that the algorithm
13:01will seek to repric to. Also take note
13:04here at the 50 DRT level or our
13:07equilibrium. Note the bodies here. That
13:10is not buying and selling pressure. That
13:13is price programmed to stay at that
13:16level and not go below it. Since the
13:19volume is contained inside of the
13:21candle's bodies, we wick through it into
13:24an imbalance. We have sellside imbalance
13:27here which runs back through with
13:30buyside delivery. So we have a balanced
13:32price range. We do not need the market
13:35to repric lower. In this case, we have
13:37two entries. We have this imbalance that
13:40sits around that equilibrium level and
13:42we have the inversion fair value gap
13:44that sits at that 25 DRT level. We then
13:47see price clearly run higher. Note how
13:51it runs through that 75 DRT level with a
13:55close leaving an inefficiency in the
13:58form of a fair value gap which we see
14:00traded to on the next candle before it
14:04runs for that buy side liquidity above
14:06the equal highs like we can see over
14:10here. Again note the consequent
14:12encroachment of that fair value gap
14:14overlapping with that 75 DRT level.
14:17There is a whole lot of other stuff I
14:19can talk about here, but again, for now,
14:22let's keep it simple. Now, how do we
14:24know that we're going to continue inside
14:26of a buy program? How do we know that
14:29the higher time frame bias is bullish
14:32for this particular market? Well, let's
14:35zoom out a little bit. And here you can
14:37see where we have our old low that we
14:40raided below. And what can we clearly
14:42see above the market?
14:45equal highs. Right? So again, we can
14:49clearly see on this chart that we have
14:51done the damage below the lows. All of
14:54these lows have been
14:56raided. What's left is all the buy side
15:00liquidity above the highs, right? So the
15:03market is going to repric higher. It is
15:05inside of a buy program. When we're
15:08looking for higher prices, we can use a
15:11type one dealing range inside of a type
15:13two dealing range. Once we understand
15:14the directional bias and again I'll show
15:16you examples of that but for now we have
15:19now established that we have our equal
15:22highs which will be our parent dealing
15:25range. Now we will have major buy side
15:28liquidity above those
15:30highs and we have our dealing range low
15:33where we'll have major sellside
15:36liquidity that rests below that. We can
15:38also see minor buy side let me move this
15:41way. We can also see our minor buy side
15:43liquidity pools and our minor sellside
15:46liquidity pools since this is a minor
15:49dealing range inside of the parent
15:51dealing range. I was going to call it a
15:53child dealing range, but I felt that was
15:56a bit weird. Anyway, this establishes a
15:58new dealing range. So, we can now plot
16:02our DRT levels and our equilibrium price
16:05point. It's interesting to note here.
16:07Look where we had that smaller dealing
16:10range inside of the larger dealing range
16:12and where those equal highs formed at
16:14equilibrium. Also look at where we had
16:17the support here at that 50 DRT level
16:20which also over overlapped with our 25
16:23DRT level here on our parent dealing
16:26range. DRT is the algorithmic structure
16:29of the market. And there's a pricing
16:31sequence that runs from higher time
16:33frame down to lower time frame. What
16:35we're seeing here with the equal highs
16:37run lower is the exact same thing that
16:40we're seeing here inside of the lower
16:42half of that parent dealing range. What
16:44we're
16:45seeing over here in the lower quarter of
16:49that parent dealing range is the exact
16:51same thing that we're seeing from this
16:53dealing range and from the dealing range
16:56up there. Now, that's one for your
16:59studies. Let me bring your attention to
17:02the dealing range low and our newly
17:05formed minor dealing range inside of our
17:08parent dealing range. Since we have
17:09raided those equal highs here, right,
17:12this gives us a new dealing range. I'll
17:15just dim out the parent dealing range.
17:17So, you can see we have the dealing
17:19range low and the dealing range high
17:21with our new plotted DRT levels. Now,
17:24note what happens. We have raided sell
17:26side below this low, buy side above this
17:29high, giving us a new dealing range. But
17:31we have a clear draw and liquidity in
17:34the form of the equal highs above the
17:36market. So here we have a type one
17:39dealing range inside of a type two
17:41dealing range. And what do we anticipate
17:43price to do? We anticipate to drop back
17:46lower into equilibrium and below. So we
17:50ideally want to see price drop into a
17:52discount relative to this dealing range
17:55which is a smaller fractal of the larger
17:58dealing range. Now what level does it
18:00come into? Remember what we did over
18:03here that last down close candle over
18:07here which left the inversion fair value
18:10gap. That is a very high probability
18:13inversion fair value gap. my eyes look
18:16at this 50 DRT level and I go straight
18:19across to the last range that was
18:22formed. The last sellside imbalance that
18:25formed inside of that swing is going to
18:28be our high probability inversion fair
18:31value gap when it overlaps with a DRT
18:33level especially around equilibrium.
18:36This is going to be a very sensitive
18:38price point. I mean you can see how many
18:40times we have tapped into this
18:45level. That is how you determine where
18:48your high probability inefficiencies
18:51lie, where your high probability
18:52inversion fair value gaps lie, where
18:54your high probability order blocks lie.
18:57Now let me get back to that order block
19:00in a second. Notice that we haven't yet
19:02traded into that order block, but let's
19:04see what
19:05happens. Price now runs higher.
19:09towards those relative equal highs. You
19:12can see how we have run straight through
19:15the 75 DRT level. Now, another thing
19:18that causes a lot of confusion is the
19:19timing of when this happens. All of this
19:22area here is something known as time
19:24distortion and is where the algorithm
19:27holds price to engineer liquidity.
19:29Again, beyond the scope of this
19:31presentation, but this is what tends to
19:33catch people out because they're trying
19:35to trade inside of this range up and
19:37down. Time comes before price, but DRT
19:41with time with high probability PD
19:43arrays, you suddenly get an X-ray view.
19:45It's like reading the matrix. Anyway,
19:48let's keep things clean and let's move
19:50along. As you can see here just before
19:53we raid that major buy side liquidity
19:55pool and this is very typical of when we
19:57come to the extremes of dealing ranges
20:00is we will see in that upper quadrant
20:02price will accumulate engineering buy
20:04side liquidity above the market. Now why
20:07is that? Because over here retail are
20:12placing their stops. They look at those
20:14equal highs as double tops right? And
20:17now what do the books teach us? They
20:19teach us to place our stops above double
20:22tops because that's strong resistance,
20:24right? So when the market reprices all
20:27the way back to those levels, it will
20:29consolidate below it, giving retail a
20:33false sense of security and they will
20:35then be piling in short positions
20:37because they're like, "Look, it's a
20:38double top." So that is strong
20:41resistance and look, price is unable to
20:44get above it. Well, obviously the
20:47algorithm has other ideas. It sweeps
20:49above it once, reprices lower into
20:53where you see the inefficiency at the 75
20:57DRT
20:59level and then really runs higher. What
21:02does it
21:03leave? Relative equal highs. And then we
21:07see price really repric lower. All of
21:11these equal lows down here, we have a
21:14lot of sellside liquidity below the
21:16market and this inefficiency. The market
21:20is going to repric lower back into the
21:23inefficiency.
21:24And remember our old order
21:28block. Look at the price action here
21:31with the bodies. It's probably a little
21:33small. So might try to zoom in on this
21:35part.
21:38We find a lot of support over here. And
21:40then we see price run higher. Look at
21:44the reaction that we've had from the
21:45order
21:47block. 25 DRT level, we find support. 50
21:52DRT level, we find support. Now, this is
21:54the reason why I say it's best practice
21:57to not enter above that 50 DRT level
22:00into a premium because when we get to
22:02the extremes of the dealing range,
22:04especially in the upper quadrant, we're
22:06doing the same thing before we run that
22:09buyside liquidity above our parent
22:11dealing range high. Now, of course,
22:13we've run above it once, but retail is
22:15still going to look at that area as
22:16strong resistance. And so, they will
22:19engineer liquidity back above those
22:22equal highs. price will drop lower back
22:24into our 50 DRT level and below. Note
22:28the order block that we have at 50 DRT.
22:31The order block at 50 DRT is a very
22:33powerful order block. Any order blocks
22:35that sit above the 50 DRT level, the
22:38weaker order blocks. Notice how we have
22:41all of these order blocks
22:43here and price just really runs all the
22:46way through them because we have still a
22:48ton of sellside liquidity in the form of
22:51retail trend lines below the market.
22:54Now, this is an example on Euro dollar
22:56on the hourly time frame. What
22:59transpires next is the market runs
23:02higher and we can actually predict the
23:04high of this whole buy side program.
23:06This is something that I've kept close
23:08to my chest for quite a number of years
23:11and it's the culmination of almost eight
23:13years of algorithmic study and deep deep
23:15study on ICT concepts. In the next
23:18lesson, I'm going to walk you through
23:20the entire range of the Euro dollar and
23:23how I was able to predict where price
23:25would go one year before during the 2024
23:29mentorship right here on this YouTube
23:31channel. I'll link somewhere up there.
23:34As you can see, it's not just about
23:36premium and discount. It's not just
23:38about sweeping a candle high or a candle
23:41low. To get ridiculous precision and an
23:44understanding of where the markets are
23:46going and how the algorithm is using
23:49these DRT levels to set a framework
23:52really is the core to algorithmic based
23:55price action. Now, if you haven't done
23:57so already, click the link below to
23:59download my free ebook, Market Maker
24:01Secrets, where I give you the foundation
24:04to algorithmic price action. And if you
24:06like what you see here and you'd like me
24:08to continue making these videos for
24:10free, again, please like and subscribe.
24:12Leave a comment on what you want me to
24:15teach next. And I'll catch you soon.
24:18I wish I had this when I was coming

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