MMXM Mentorship Episode 4 Previous Day High Low

Understanding Daily Highs and Lows in Trading

The Importance of Previous Day's Highs and Lows

• The lesson focuses on the significance of previous day's highs and lows as key liquidity pools in trading.

• In bullish order flow, the market seeks buy-side liquidity above previous daily highs; conversely, it looks for sell-side liquidity below previous daily lows.

• Most candles in a daily chart will typically breach either the previous day's high or low, indicating potential liquidity draws.

Analyzing Market Behavior with Charts

• A specific example is provided using a GBP/USD daily chart to illustrate how sell stops are often liquidated at old daily lows.

• The majority of candles (approximately 90%) will take out previous highs or lows, confirming the presence of liquidity pools.

Identifying Targets After Liquidity Runs

• After liquidating sell stops, traders should identify new targets such as imbalances or relative equal highs for potential trades.

• Outlining previous daily highs helps recognize buy stops that can be targeted after significant price movements.

Break of Structure and Order Flow Changes

• A break of structure occurs when a bullish candle surpasses the last swing high following a liquidation event.

• It’s crucial to note if an old low remains intact before breaking structure; this indicates whether there are remaining orders on the sell side.

Fair Value Gaps and Trading Strategies

• Following a break of structure, traders look for fair value gaps which indicate areas where price may retrace before continuing its trend.

• Recognizing these patterns allows traders to anticipate bullish order flow and target previous daily highs effectively.

Utilizing Timeframes for Better Analysis

• On intraday charts (e.g., 1-hour), identifying breaks of structure alongside fair value gaps aids in making informed trading decisions.

• Marking New York midnight lines helps traders understand weekly trends and potential reversals based on session behavior.

Key Takeaways for Trading Strategy

• When trading below the New York midnight opening price, expect potential reversals leading towards previously established daily highs.

Understanding Daily Time Frame Bullish Order Flow

Key Concepts of Bullish Order Flow

• The daily time frame should focus on bullish order flow, emphasizing the importance of marking previous daily highs on your chart.

• Essential elements to include are a vertical line separating days at 12:00 AM New York time and the New York midnight price line, along with previous daily highs and lows as liquidity pools.

Analyzing Daily Candles

• Daily candles indicate ongoing bullish order flow; a bullish reversal candle is noted, which aligns with concepts from prior lessons about market structure.

• A bearish candle can occur within a bullish trend; retracements are normal, but overall order flow remains bullish despite fluctuations.

Liquidity Pools in Bearish Order Flow

• In bearish scenarios, the focus shifts to targeting previous daily lows while recognizing higher time frame arrays that may influence market behavior.

• The market often targets buy-side liquidity by taking out previous daily highs until reaching significant higher time frame levels.

Intraday Analysis and Market Behavior

• Observations show that during bearish order flow, markets consistently target previous daily lows as easy liquidity pools.

• On an intraday one-hour chart, it’s crucial to outline previous daily lows and monitor price action relative to the New York midnight open price for trading decisions.

Trading Strategies Based on Price Action

• When the Asian range is small, trading above the New York midnight price becomes ideal; this strategy helps in identifying potential declines after price surges.