59. Advance Price Action Lecture

Overview of the Trading Week

Reflections on Trading Performance

• The speaker expresses hope that everyone had a successful trading week, emphasizing the importance of analysis in predicting price movements.

• Highlights the concept of "Monday one shot one kill," which refers to identifying the high or low for Monday rather than the entire week.

• Each day has its own unique trading patterns, and understanding these is crucial for effective trading strategies.

Best Days for Trading

• The speaker identifies Monday, Tuesday, and Wednesday as optimal trading days during the first quarter of each month.

• Mentions that while there may be volatility on Fridays due to news events, it’s generally not ideal for trading compared to earlier in the week.

Analyzing Price Action

Sequential SMT Analysis

• Discusses how sequential SMT (Smart Money Technique) can indicate potential highs or lows for Mondays based on previous week's data.

• Emphasizes examining monthly price action to understand market trends and reversals effectively.

Currency Pair Dynamics

• Observations about currency pairs: Euro ran below a certain low while British Pound did not, indicating differing market behaviors.

• Notes that Q4 is favorable for reversals in currency trends, particularly with respect to the US dollar index.

Understanding Market Movements

Key Price Levels

• The speaker discusses expectations of lower prices based on specific price levels observed at the start of the week.

• Stresses that discussions should focus on predictive analysis rather than hindsight observations.

Correlation Between Currencies

• Analyzes how different currencies interact; specifically noting failures to break key highs/lows among USD, Euro, and GBP.

• Introduces concepts like Precision Swing Points and their significance in determining market direction based on candle formations.

Conclusion on Trading Strategies

Importance of Timing and Patterns

Understanding Precision Swing Points in Forex Trading

Identifying Precision Swing Points

• The discussion begins with the identification of a Precision swing point in the Euro, emphasizing the importance of candle formations and their relationships to one another.

• A specific candle is highlighted as not being a Precision swing point; however, when it trades below a certain level, it indicates a high probability for liquidity runs that could reverse price trends.

• The speaker notes that while observing price movements, they anticipated higher prices which were confirmed by subsequent candles forming precision points.

Price Action Analysis

• The analysis shifts to the US dollar, where the last candle of Monday and the first of Tuesday are identified as significant due to their timing relative to market sessions.

• Observations indicate that while the US dollar failed to break below a low, the Euro managed to surpass its previous high, suggesting partial sequential SMT (Smart Money Technique).

Correlations Between Currencies

• The relationship between weekly highs and lows for both currencies is discussed; these levels serve as critical indicators for potential reversals or continuations in price action.

• A comparison is made between candles from different currencies (Euro and US dollar), noting how they interact with each other and form correlations that can guide trading decisions.

Liquidity Considerations

• Emphasis is placed on understanding where liquidity resides within ranges established by precision swing points; this knowledge aids traders in making informed decisions about entry and exit points.

• The speaker highlights how price behavior around these swing points can lead to significant market movements, reinforcing their importance in trading strategies.

Practical Application of Concepts

• Discussion includes practical applications of identifying ranges based on precision swing points across various currency pairs like the Great British Pound.

• An example illustrates how breaking above certain candles can signal important market shifts; this reinforces the need for careful observation of candle bodies rather than just wicks.

Conclusion on Trading Strategies

• The conversation concludes with insights into using precision swing points for determining market ranges and spotting potential reversal patterns.

Understanding Market Dynamics and Price Action

Correlation Between Currency Candles

• The Euro USD candle shows a significant correlation with the Great British Pound, indicating that price movements in one can influence the other.

• A delay in price action is noted, suggesting that traders should be aware of how past movements can affect future expectations.

Anticipating Price Movements

• When observing specific patterns, such as a candle formation, traders can anticipate potential lows for the day or session.

• Emphasis on understanding previous discussions about market behavior to better predict future actions.

Liquidity and Market Ranges

• Current market conditions show liquidity below certain lows and above highs, which are critical for identifying potential reversals.

• The market is currently consolidating within a range; this consolidation often precedes volatility.

Sequential Patterns and Market Reversals

• Sequential patterns indicate that after consolidation, there may be a reversal point confirmed by inter-market analysis.

• Historical patterns suggest that price will reverse consistently when certain conditions are met.

Analyzing E-mini S&P 500 and NASDAQ Trends

Focus on Key Indices

• Attention is directed towards the E-mini S&P 500 and NASDAQ due to their relevance in current trading strategies while noting the Dow's lack of volatility.

Precision Levels in Trading

• Identification of precision levels between higher time frame pivots helps traders understand key support/resistance areas.

• Previous week’s fair value gaps were highlighted as crucial points where price action reacted significantly.

Monthly Trends and Reversal Indicators

• Observations from last month’s closing trends indicate potential for reversals at the start of new quarters based on historical data.

Market Manipulation Signals

Understanding True Opens

• Closing prices below Monday's close signal possible manipulation; recognizing true opens aids in predicting future movements.

Fair Value Gaps Analysis

• Discussion on why certain fair value gaps do not get filled again once they have been addressed previously; this indicates breakaway gaps.

Correlations Among High Points

Understanding Market Dynamics and Correlations

Sequential SMT and Price Behavior

• The discussion begins with the concept of sequential Smart Money Techniques (SMT), highlighting that while there may be a correlation, it does not necessarily indicate a price reversal but rather a protraction phase to rebalance gaps.

• Transitioning to the NASDAQ, the speaker points out an order block, emphasizing its significance in understanding market movements.

• A gap is identified as another "crack in correlation," indicating that different market behaviors can lead to varying outcomes; specifically, price movement can continue downward without interruption when no cracks are present.

Pressure Points and Market Structure

• The importance of taking out previous highs is discussed, suggesting that this action satisfies algorithmic trading strategies by building pressure between established high and low points.

• The speaker explains how pressure accumulates within these ranges across various time frames (daily, weekly, monthly), reinforcing the idea that market structure shifts create significant trading opportunities.

Cracking Correlation Insights

• A "cracking correlation" is defined as essential for predicting price movements. The absence of such correlations indicates potential failures in expected price behavior.

• The speaker notes that if a failure swing occurs without sequential SMT backing it up, it lacks validity; thus, traders should be cautious about interpreting such signals.

Intermarket Analysis

• Discussion shifts to intermarket sequence SMT related to the US Dollar Index. This analysis reveals bearish trends due to missing bullish sequences in prior data.

• Price direction changes are contingent upon cracking correlations; if current correlations do not align with previous quarters' data, anticipated movements may not occur.

Trading Strategies and Learning Approach

• Specific levels of interest are highlighted for traders. Understanding these levels requires recognizing patterns and studying past behaviors rather than expecting immediate reversals without context.