MMXM Mentorship Episode 2: OHLC Power 3

Understanding the Power of Three in Candle Analysis

Introduction to Open High Low Close and Open Low High Close

• The lesson begins with an introduction to the concepts of Open High Low Close (OHLC) and Open Low High Close (OLHC), referred to as the "power of three."

• These concepts are foundational for trading, impacting daily buy decisions and entry points.

Daily Candle Dynamics

• The daily candle operates from 12:00 a.m. EST to 12:00 a.m. EST, marking the true day open where algorithms begin their operations.

• Five types of candle formations will be discussed: bullish candle, bullish reversal candle, bearish candle, bearish reversal candle, and consolidation (incisional) candle.

Bullish Candle Formation

• A bullish candle is characterized by an open low high close pattern; it opens at a certain point, creates a low during the day, reaches a high, and then closes.

• Typically formed during the London session with subsequent expansion higher into New York retracement.

Bearish Candle Formation

• A bearish candle follows an open high low close pattern; it opens at one point, reaches a high during the day before closing lower.

• Similar to bullish candles, bearish candles often form highs during London sessions followed by New York continuation downwards.

Incisional Candles

• Incisional candles indicate indecision in market direction with equal top and bottom wicks resembling doji patterns.

Analyzing Specific Currency Pairs

British Pound vs US Dollar Analysis

• The analysis includes identifying premium and discount levels on the British Pound/US Dollar chart.

• Observations show that price action forms around buy stops leading to bullish order blocks.

Intraday Chart Insights

• On intraday charts (15-minute), significant lows are often created below New York midnight opening prices which aids in trading strategies.

Euro USD Market Behavior

Discount Levels Identification

• The Euro/USD chart highlights discount levels from previous lows to highs indicating potential reversals based on liquidity runs.

Higher Time Frame Points of Interest

• Annotations emphasize monitoring New York midnight opening prices as critical indicators for buyers below this line and sellers above it.

Market Reversal Patterns

Liquidity Runs During Sessions

Understanding Market Dynamics: Bullish and Bearish Reversals

Analyzing the Euro USD Daily Chart

• The analysis begins with a bullish reversal day indicated by a longer wick on the daily chart, suggesting potential upward movement after a New York midnight open line.

• A bearish day is anticipated following the purging of buy stops above an old high, indicating that market dynamics may lead to filling an imbalance below.

• During the London session, it’s common for this period to establish either the high or low of the day before higher time frame price discovery occurs.

Intraday Movements and Candle Patterns

• The daily candle formation shows an upper wick followed by a downward trend throughout New York trading hours, leading to a closing bearish candle.

• On a 15-minute intraday chart, it's essential to mark the New York midnight opening line; this helps visualize price movements and reversals effectively.

• A typical pattern involves initial expansion higher during New York sessions before declining again, illustrating accumulation and manipulation around buy stops.

Understanding Consolidation Candles

• The concept of consolidation candles is introduced; these occur when the market lacks direction, resulting in indecisive price action.