71. Livestream 7/12/24

Doubling Theory and Sequential SMT

Understanding Doubling Theory

• The concept of doubling involves stacking confluences, which can include various tools beyond just sequential market structure shifts (SMT).

• Doubling is illustrated through examples like stacked SMTs and the inclusion of multiple true opens, emphasizing the need for at least two true opens to validate a setup.

• When trading on a daily cycle, it's important to consider previous day’s true open alongside the current day and weekly true open as part of the doubling process.

Clarifying Recent Discussions

• A recent video by Day discussed correlations between hourly and weekly cycles, specifically referencing Q1 opening prices in relation to sequential SMT.

• The discussion highlighted how gaps in futures trading differ from standard timing, affecting interpretations of market structure.

Entry Strategies for Sequential SMT

• It was noted that traders should not enter positions based solely on the first SMT; waiting for a second confirmation is crucial for effective trading strategies.

• The importance of having multi-stage confirmations before entering trades was emphasized. This includes looking for price structure patterns (PSP) as additional validation.

Risk Management Insights

• Entering trades without sufficient confirmation can lead to losses; thus, filtering out unreliable signals is essential.

Understanding Trading Strategies and Market Cycles

Entry Points and Breakers

• The session discusses buying opportunities when the price trades back down to a specific gap, referred to as the "Sur Gap," indicating potential upward movement.

• The concept of S&T (Structure & Time) is introduced, emphasizing its role in identifying reversals and determining when to skip certain trading cycles.

• A question arises about whether the PSP (Price Structure Pattern) needs to occur on the same timeframe as other indicators, highlighting the importance of timeframes in trading strategies.

Importance of Timeframes

• It is noted that while an hourly PSP may not confirm a daily cycle, a daily cycle PSP can reverse price movements effectively during its second stage.

• Technical issues are mentioned, suggesting that there may be external factors affecting the clarity of information being shared during the session.

Confirmation Mechanisms

• The discussion continues on how a 15-minute PSP can significantly influence weekly cycles even if it lacks confirmation from an hourly PSP.

• Clarification is provided regarding how higher timeframe narratives are defined by waiting for weekly SMT (Smart Money Technique), which typically unfolds over several days.

Precision in Entries

• Emphasis is placed on using both higher timeframe SMT and lower timeframe PSP for precise entry points, ensuring better accuracy in identifying reversals.

• A participant asks about trade decisions made based on premium pricing; this leads into discussions about market conditions and entry strategies.

Premium vs. Discount Analysis

• An example illustrates current market action with significant drops, explaining how traders should wait for price retracements into premium zones before entering short positions.

• The strength comparison between different indices (S&P vs. NASDAQ) is discussed, indicating that stronger assets may not retrace as high compared to weaker ones during market movements.

Quadrant Strategy Application

• The concept of splitting premium and discount into quadrants is introduced as a method for analyzing potential market behavior based on asset strength.

Market Analysis and Trading Strategies

Weekly Range and Market Structure

• Discussion on identifying a weekly SMT (Smart Money Technique) under a low, with an hourly PSP (Price Swing Point) as a target. The speaker emphasizes the importance of trailing down based on market structure during the London session.

• The need to observe the London session's behavior is highlighted; if it trades higher into a value gap, the speaker plans to look for a 90-minute SMT before considering short positions.

Clarification on Basic Concepts

• A request for clarification on basic concepts within trading strategies is made, indicating that different members have varying interpretations.

• The speaker connects this inquiry to previous discussions about fair value gaps and liquidity in relation to time frames, specifically how they correlate from higher to lower time frames.

Time Frame Correlation

• Explanation of how different time frames interact: the 4-hour fair value correlates with the 15-minute time frame, which in turn relates to daily cycles. This understanding aids in identifying potential market movements.

• Emphasis on recognizing ranges within higher time frame cycles (weekly cycle vs. daily cycle), which helps traders understand market dynamics better.

Current Market Conditions

• Observations about current market conditions where various indices are out of sync; specifically noting discrepancies between S&P, NASDAQ, and Dow Jones performance.

• Reference to Forex trading strategies discussed earlier regarding premium pricing and its relation to monthly ranges.

Price Action Insights

• Insight into price action dynamics where premium and discount levels are identified. The discussion includes minor lower time frame SMT with PSP in discount relative to higher time frame cycles.

• Clarification that while one might be at an extreme premium or discount, focus should remain on micro cycles rather than broader monthly trends for effective trading decisions.

Defining Ranges and Continuation Strategies

• Inquiry about DTR (Defining Trading Range), with acknowledgment that it may not always align closely with personal trading strategies but can indicate reversal points.

• Discussion around using specific levels for setting stop-losses and take-profits based on established SMT patterns across different time frames.

Higher Time Frame Alignment

• Explanation of how traders can utilize lower time frame PSPS after establishing higher time frame SMT setups for continuation trades.

• Mention of focusing on specific candles during sessions (e.g., 2 AM candle), which can provide insights into sequential SMT formations between London and New York sessions.

Intermarket Relationships

• Discussion about intermarket relationships where opposing SMT cannot occur mid-week according to prior lectures; this highlights the importance of consistency in market analysis over days.

Understanding Market Structure and SMT

Key Concepts of Market Structure

• The discussion begins with the importance of understanding market structure, particularly in relation to Strongest Market Trend (SMT) patterns observed on specific days like Monday and Tuesday.

• When shorting during a rally, traders may get burned if they misinterpret the market's strength; recognizing original footing is crucial for accurate predictions.

• It’s emphasized that one should not look for an SMT above previous quarters once a solid footing has been established in earlier quarters.

• Simplifying concepts into binary code (zeros and ones) is essential for true understanding; most trading concepts can be distilled down to this level.

Intraday Reversals and Continuations

• Tuesdays are typically associated with reversals, while Wednesdays favor continuations. Thursdays also present opportunities for reversals based on prior market conditions.

• If no SMT occurs between Monday and Tuesday, traders should anticipate looking for an SMT on Wednesday to guide Thursday's actions.

Intermarket Analysis

• The relationship between Asian and London sessions is critical; observing SMT between these markets can indicate potential outcomes for the New York session.

• News events affecting currencies like the pound or Euro can create significant correlations that enhance the probability of continuation patterns in subsequent sessions.

Sequential SMT Patterns

• A monthly cycle sequential SMT at lows indicates that true reversals cannot occur until another equal or greater sequential SMT appears later in timeframes such as weekly or monthly cycles.

• For example, having two weekly SMTS alongside a daily one creates a cumulative effect necessary to validate potential reversals at higher levels.

Validity of Lower Time Frame Patterns

• Lower time frame patterns can hold validity even without higher time frame confirmations if both types of patterns occur simultaneously within their respective cycles.

• Emphasis is placed on ensuring that lower timeframe SMTS align with higher timeframe movements before making trading decisions.

Market Structure and Trading Insights

Understanding Market Structure Shifts

• Discussion on the significance of identifying market structure shifts, particularly focusing on the concept of "doubling at the low" as a potential indicator.

• Explanation of categorizing time frames in trading, emphasizing that higher time frames hold more power. The monthly time frame is considered the highest for summing values to identify reversals.

• Clarification on counting different types of market structures, suggesting flexibility in classification based on context.

• Introduction to lower time frame SMT (Smart Money Technique), which follows a higher time frame SMT and indicates continuation after retracement into fair value gaps.

• Importance of having two stages and a PSP (Price Swing Point) for confirming valid market structure shifts.

Execution Strategies and Time Frames

• Overview of execution strategies across different time frames, highlighting the need for alignment between weekly cycles and lower time frame PSPS for effective trading decisions.

• Discussion about true opens in trading sessions, explaining how they measure premium and discount levels within market movements.

Practical Examples and Observations

• Request for examples illustrating narrative alignment in charts; emphasis on using historical data to validate current trading strategies.

• Reference to a specific example from previous months where significant price action occurred at key levels, indicating strong market behavior.

Technical Difficulties During Streaming

• Mention of technical issues faced during streaming sessions, including software crashes that impacted recording quality.

• Acknowledgment of audience participation while wrapping up discussions; setting expectations for session duration.

Reflections on Trading Experience

• Personal reflection on the extensive editing process required for educational videos related to trading concepts; sharing insights about starting trading in September 2022.

• Emphasis on incorporating numerology (369 theory), noting its relevance in understanding price action over time.

Review of Recent Price Action

• Analysis of recent price action without active trades taken due to high-impact news events; preference for waiting until after such events before making trades.

• Identification of hidden SMT patterns coinciding with significant economic announcements like CPI reports, discussing their implications for future price movements.

Trading Insights and Strategies

Trading Conditions in Q4

• Discussion on trading conditions for Q4, highlighting a 90-minute market structure shift (SMT) observed with the Dow.

Decision-Making in Trading

• Emphasis on the dilemma traders face when entering trades: whether to chase price or wait for optimal entry points, particularly within specific ranges.

Understanding Market Structure Shifts

• Introduction of the concept of SMT versus true market structure shifts, emphasizing the significance of the 2 AM candle as a powerful indicator.

Weekly Cycle Analysis

• Explanation of analyzing higher time frames (weekly cycle), noting that bullish trends can form SMT during early week sessions, specifically Monday and Tuesday.

Change in State of Delivery

• Clarification on what constitutes a change in state of delivery and its importance in confirming trading strategies.

Precision Candles and Order Blocks

• Description of how precision candles relate to order blocks and their role in identifying changes in delivery states during trading sessions.

Candle Analysis for Trade Execution

• Focus on using specific candles (like those breaching previous day lows) to identify lower time frame SMT opportunities for trade execution.

Importance of Timing: The 9 AM Candle

• Personal insights shared about why trading at 9 AM is preferred due to its high probability outcomes based on extensive experience with morning sessions compared to PM sessions.

Consistency in Trading Strategy

• A quote from Bruce Lee emphasizes the value of mastering one strategy through repetition rather than diversifying into multiple approaches.

Monthly Trading Considerations

Trading Strategies and Insights

Continuation Patterns in Trading

• Wednesdays are identified as key days for continuation patterns, particularly after observing market behavior between Monday and Tuesday.

• The 10 a.m. candle is sometimes traded if the 9 a.m. candle does not yield results, focusing on Fibonacci time zones for measuring moves.

SMT and PSP Concepts

• The speaker emphasizes the importance of seeing an SMT (Smart Money Technique) immediately or shortly after its formation to identify potential price swings.

• A lower timeframe SMT can indicate a second stage of trading; if no higher timeframe signals appear, traders should look for lower timeframe setups.

Reversal Confirmation Techniques

• Recognizing reversals through displacement is crucial; traders do not need to act on every reversal but should wait for confirmation via PSP (Precision Swing Point).

• Once a reversal is confirmed by PSP on a lower timeframe, multiple entry opportunities arise, including fair value gaps and order blocks.

Trading Instruments and Execution

• The speaker primarily focuses on bonds, Forex pairs, and futures while avoiding commodities like oil.

• An upcoming indicator tool will assist traders in identifying chart patterns more effectively; interested individuals are encouraged to reach out directly.

TPD (Turtle Soup Setup)

• TPD combines Precision Candle and Precision Swing Point concepts; it indicates potential setups like Turtle Soup based on specific candle sequences.

• The sequence theory involves three candles where the third candle serves as an entry point targeting the first candle's reaction level.

Market Conditions and News Impact

• Discussion about future expectations regarding trading platforms suggests patience due to ongoing developments affecting various trading servers.

Understanding High Probability Trading Setups

Importance of Higher Time Frame Analysis

• The discussion emphasizes the significance of higher time frame narratives in trading setups, particularly when transitioning from a weekly to a 4-hour chart.

• A low probability trade is identified due to lack of supporting evidence until after the fact; a weekly setup followed by a 4-hour setup increases confidence in trades.

• Incorporation of candle range theory is highlighted as essential for analyzing price movements, especially around significant candles like the 2 AM and 6 AM.

Caution Around High Impact News Events

• The speaker advises against trading during high impact news events due to risks such as slippage, which can lead to unexpected losses.

• It’s recommended not to enter trades just before major announcements (e.g., CPI), as market volatility can trigger stop-loss orders unpredictably.

Learning from Past Mistakes

• An anecdote illustrates how traders might get caught in unfavorable positions during news releases, leading to larger drawdowns than anticipated.

• Emphasis on learning from experiences shared by others who faced challenges while trading around high-impact news events.

Trading Strategies and Community Engagement

• Discussion about potential future live sessions indicates an interest in community engagement and sharing insights regularly.