Okay folks, welcome back to lesson 5 of the May 2017 ICT Mentorship, ICT Amplified Day Trading and Scalping. This lesson is teaching trading market reversals. Alright, market reversals. I'm going to cover the 8 reversals that I think can be effectively traded with consistency. And the first one we're going to talk about is...
Trading previous days highs and what we're doing is is we're looking for opportunities where the market will blow out the previous high Or previous days high specifically raid the buy stops and then reverse and trade lower. There's certain criteria that I like to look for and back on Baby pips when I first introduced myself to the forex community at large. They were given a exercise by me to buy and sell previous days highs and lows.
And that exercise was to draw your attention to the fact that there are instances that will lead you to seeing opportunities by rating the previous days lows, sell stops, and rating the previous days high for buy stops. Not every previous days high or low is the same in terms of an opportunity, but there's... A criteria that I look for when I'm looking at the previous day's high, there's buy stops above that previous day's high.
There's banking levels, there's intraday algorithms that go up to those previous day's highs and down to those previous day's lows to seek liquidity that would be resting below or above it, respectively. Knowing the conditions that leads to a rate on the buy stops on the above the previous day's high is one of them. gems of this teaching and conversely the opposite is seen when we're looking for previous days lows Where the market rates the sell stops and then reverses again in this teaching I'm going to give you like one of the little gems in my Repertoire where I look for previous days lows and previous days highs to be rated out and then a directional bias is Seen as a reversal.
I get a lot of questions a lot over the years, you know, how How can I sell above an old high and not fear it continuing going higher? And or how can I buy below a previous low and not fear it keeps trading lower? Well, number one, again, I've said this many times in free tutorials and all throughout this mentorship.
I don't know with 100% assurity what price is going to do, but I do have a collection of generic scenarios that. tend to repeat themselves when there's other factors incorporated in those conditions. By itself, we don't simply just go in here and try to sell an old high or buy an old low.
It has to be other things that blend well with all the teachings I've already given you thus far. Another reverse value to trade is the intra-week high, where the market trades above the highest high it's made for the week so far. rates the buy stops, and then reverses. Now as I give you these scenarios, I want you to think in terms of those weekly templates I provided you in earlier months.
Those templates, in conjunction with the conditions that we're talking about here, they will unlock as we get closer and closer to August, where you get basically a flow chart format from top down, where we go right into specific concepts for specific conditions. But for Intraweek, highs what i like to do is look for scenarios where the market has already been trading for instance higher for a period of time and we have yet to meet a premium array that eventually gets traded up to say maybe on a tuesday or wednesday or thursday and it hits that on that particular day but it also does it on the heels of running on a previous intro week high i really like that scenario because Traders are going to be looking to have their buy stops above that initial intro week high for instance It could have made a a high on Tuesday and then trade higher on Wednesday up into a higher timeframe Premium array once that higher timeframe premium array is traded to it's coupled with buy stops that we resting above for instance Tuesday's highs so Traders that would be looking to sell short on Tuesday, because many times Tuesday can create a false decline or a false high. And then Wednesday will come up here and blow it out, and then that's the high of the week. Think about those weekly templates. This is one of the scenarios I like to look for.
And those raids on those buy stops, I'm going to be selling right into that same liquidity pool, just like the banks will. Okay, opposite is obviously seen in the form of an intra-week low, where we see the… the lowest low on the week be violated on the downside and the sell stops be rated and the market reverses. Now again for day trading purposes and scalping it's these are really high odds trades where even if it doesn't continuously move higher as a reversal many times you get a tradable bounce that is 30, 60, even 80 pips depending upon what type of market environment you're looking at or wait you're trading in at the time. But the weekly low that's formed in the middle of the week, now that could be Monday, it could be Tuesday, it could be Wednesday, it could be Thursday. Whatever that low is, if it's traded down below it into a higher time frame discount array, that coupled with the running out of a previous intra-week low to take those sell stops out for those individuals that want to try to capture it all along.
they're going to be premature many times and the market makers will engineer liquidity for that very thing to happen so for instance if there was a low of the week on tuesday and it rallies up but then wednesday it trades down below tuesday's low but then on that wednesday it hits that higher time frame discount array it could be a fair value gap on a daily chart it could be a order block on a weekly chart it could be anything on the higher time frame pd array matrix That is a wonderful opportunity to look for a reversal interweek. Intermediate term highs. Now, this is going to be a little bit longer term.
It may be a high of the previous week or a week before it. So it's going back a little bit more in terms of time. And what we would be looking for is a run above an old high, basically. And those buy stocks that would be resting above that old high, they would be rated. and the market reverses.
Now this can be a little bit tricky because the old highs and old buy stops that will be resting there or just above it you have to look at the context of the marketplace at the time. Again it's not just simply okay we're trading above an old high so therefore you know it's going to be resistance let's just sell it there. No you have to look at what's the purpose what's the storyline behind why price would be permitted to trade above that intermediate term high.
Yes, they're looking to take those buy stops, but there's a storyline behind it. Is it pairing up those orders to go into an exit of longs, or is it going up there to engineer liquidity to put people on the wrong side of the marketplace and then go lower? Those ideas have to be at least considered when you're looking at it.
So not every old high is one to be selling short at. Many times, it's going to be trading through an old high and can continuously go through it. So you have to look at the context of the marketplace at your current time of analysis and weigh out whether or not are we in a move that's going to most likely continuously go through that high? Or are we due to reverse because above that old intermediate term high fulfills a higher time frame PD array?
Or does it go above that high after a long, prolonged uptrend where logical profit taking would be met? Obviously, the reverse would be seen as an intermediate term low, where last week's low or a couple weeks ago, previous month, that type of scenario, where price trades down below that old low and it raids the sell stops and then the market reverses. Just as we said with the intermediate term highs, we don't simply just buy the sell stops and anticipate a reversal on every old low.
There has to be a context that's used. What's the storyline again? What is the purpose for the market makers to permit price to trade down below that old low?
Is it scooping up sell stops to use as a exit for their short positions they've been in? Or are they looking to knock off those individuals that were already going long and they want to knock them out and unseat them and take their long positions over? Okay, New York session reversals. Now When we look at New York Session, generally it's a continuation of the characteristic of New York I like to view.
First and foremost, it's a continuation generally of what was already established in London. If London was a bullish rallying, making the low of the day, that means I'm going to be first looking for signs that there's a continuation on that move going higher from New York's open going into London's close. But there are instances where that if London created the low of the day or what would be initial low of the day, it. rallies up and goes into New York, but then New York reverses and goes lower, and then you end up having a lower close on the day. That occurs when the markets trade into a higher time frame premium array, in this case, as I was outlining, or the reverses scene.
If London starts trading lower, creates the high of the day, then New York creates the low of the day, reverses, and ends up closing higher on the day, above all the range that was created in London. So there's New York session reversals. They occur when price eventually trades to a higher time frame discount or premium array.
And the London close, everything I just mentioned for New York session reversals applies to London close. But also intraday, obviously on large range days when we have a five day average daily range that's exceeded. For instance, say we have an average daily range for the last five days.
in the euro dollar. And today's ADR for last five days is indicating that it should be 100 pips. Well, let's say it rallies 160 pips.
When we get into 10 o'clock and 11 o'clock in the morning, New York time, you can anticipate a London close reversal for the intraday scalp where price will want to come back a certain measure of that range. And we'll talk about that later on. London close can be a reversal of sorts just like I outlined for New York But it also always has the potential to create an intraday scalp But I like to only do it when the average daily range of the last five days has been exceeded at least One and a quarter to one and a third percent in other words if it's a hundred pips ADR I want to see 125 pips or 130 pips like that or more and then at 10 o'clock only the 11 o'clock If I see some measure of weakness or if it fulfills the numbers as we taught last lesson before this one, you'll learn that there is a measurable and tradable retracement back into the daily range.
But I don't like to do that type of trade when the range is smaller than the last five days average daily range or if it wasn't really explosive. The better trades are when the market has a real big extrapolation one-sided and it moves a lot real quick. Then at London close, you generally get a lot of profit taking on an intraday basis, and you can see some retracement of that total daily range.
So when we're focusing for market reversals, we're looking for, number one, a clear indication that it wants to go the opposite direction. But let's look at each one of these a little bit more detailed. All right, trading previous days, highs and lows.
Now, again. Looking at this example here, this is pretty much what I was trying to get people to look at when I came on the scenes in Baby Pips. And I said, look, let's take a look at the previous day's highs and lows and see if there's any reversal characteristics there.
And again, it's to get people thinking about how the market moves after running buy stops and sell stops. For the most part, the neophytes that haunt these forums, they're always in. In confusion, they're always trying to figure out what they should be doing, and they're chasing things that don't lead to greater understanding.
So generic things like time of day, highs or lows formed in London, the opposite end of the range in London closed forms. New York is generally a continuation. Rarely will it become a reversal in New York, but times when it reaches its higher time frame PDRA, that's when you anticipate that New York session becoming a catalyst for reversal.
Well, when we look at previous days'highs and lows, every single trading day, you should always refer to how price traded today after the close in relationship to the previous day's range. Did we work the daily high or the daily low of the previous day or the day prior to it or the day prior to it? So what you're doing is you're always referring to the last three days, counting today as one day.
You'll see that there's a lot of influence over that liquidity that's resting above or below those respective days. highs and lows. Now there's two circumstances that when we're looking to fade the price beyond the previous day's range. There's characteristics. There's things that we look for.
And in my opinion, this is kind of like the crown jewel of this particular teaching. During expansion swings, there are smaller retracements that typically create opportunities where the previous day's low is rated, then price rallies higher. In opposing expansion swings, there are retracements that create opportunities where the previous day's high is rated, then price declines. Obviously, it's the... Concept of turtle soup, which is a false break above an old high or false break below an old low But it's one step further than that.
Okay, so when we're looking at previous days highs and lows When is it that I'm really looking to trade? Below the previous days low to be a buyer or above the previous days high as a seller But when I'm looking to trade the previous days load and I'm anticipating higher prices In this example, you can see price was moving higher as a part of a larger expansion swing, and during a normal retracement lower into a fair value gap, price finds buyers under the previous day's low. Using the previous day's low and anticipating a market reversal after the previous day's low is rated, one can be a buyer intraday. So take a look at this candle right here. This candle is open, trades down, and closes in the fair value gap, and then rallies up and has a higher close.
The candle prior to it, notice it trades down below that candle's low. So you could already be thinking about being a buyer below that candle's low because the fair value gap exists below it and it's throwing a retracement. You're understanding the institutional order flow and the higher timeframes are going to assist you here because while markets generally retrace those retracements, what you're looking for is a move down below the previous day's low.
and also into a discount array. Like in this case, it's a fair value gap. Price trades under the previous day's low. That's where you're going to find buyers.
The market's going to come in with a great deal of institutional sponsorship, and they'll send price higher intraday. Now, we look for confluences of PD arrays to support the idea of buying under a previous day's low, but we don't simply buy under the previous day's low on the sole basis that price moves below the previous day's low. There has to be context behind it all.
Now, trading previous days highs, if I'm bearish on the market and an institutional order flow is suggested to go lower in the higher time frames, I like to look for reasons to see price move up into a short-term premium array. And then having, and I could be seeing this example here, price was moving lower as part of a larger expansion swing during a normal retracement higher after a fair value gap was filled. Notice the gap has already been filled, but After that gap has been filled, price finds sellers above a previous day's high. This candle here trades above its previous candle. When price trades above that previous day's high, the market finds sellers, and you can be a seller that day.
Now, obviously, again, using context, not just simply looking at, well, okay, but we're above yesterday's high, so I'm going to be a seller. It doesn't work like that. You have to have the understanding of what institutional order flow is indicating.
In this case, we're looking for institutional order flow on the weekly, the daily, or four-hour, suggesting prices are going to go lower. If we have that and price trades up into a premium array and it's during a retracement, in other words, it's been moving lower and we're having a little bit of a retracement or a bounce up. Once it goes to a premium array, that's what you couple it with. Then if it trades above the previous day's candle high.
you could be a seller right above that high and anticipate expansion on the downside. Trading intra-week highs. Now in this example, we can see price was trading above equal highs on Thursday of this particular week. Now price rated the buy stop liquidity pool as a premium array. Now when we use intra-week highs, we are basically anticipating a market reversal after the buy stops are rated.
When you see this happen in your charts, This is when you can step into the marketplace and be a seller intraday. You hear me talk about, and we've mentioned a lot about it in early teachings of this mentorship and throughout my free tutorials too. When we look for equal highs, we know that there is like candy land as we call it. It's very easy to see that retail is going to have their buy stops resting just above that. And any rate above it, 10 or 20 pips above it, will scoop up those buy stops.
And many times banks will go in and sell right into that. And that will give you your day trade as a short. Now obviously like we said with everything else, we're not looking just to sell right above an old high or even old.
equal highs because sometimes old equal highs can be just targets for a longer term price move higher but when the conditions are suggesting that we're in a neutral state in other words we're consolidating or We're getting ready to turn the tide if we go up to a higher premium array Which would be existing just above the equal highs in this case here If we see confluences of PDA raised to support the idea of selling above an intra-week high Then we can step in as a seller at London or New York But also think in terms of what price may be unfolding in terms of overlapping these reversal concepts. See, we have a Tuesday high and then Wednesday had a slightly lower high, but it's basically equal highs. We know there's going to be buy stops above that. So on Thursday, price rallies above it. At that time, it could also be seen as a New York reversal.
So you're blending a couple different things. When you see an overlap of these types of. reversal concepts, it makes it even stronger trading intra-week lows. Now, in this example, we see price was trading below the equal lows on Tuesday of this particular week, and price rated the sell-stop liquidity pool as a discount array.
Now, if you look, I've shown a low that was from the previous week as the double vertical lines as a Sunday. You have equal lows on the previous Friday and on Monday. So those two equal lows are traded down through on Tuesday, violating that old low.
So you have an intra-week low that can be blended in with the previous week's range as well, especially if the reversal occurs on a Monday or Tuesday, as we see in this case here. Now, using intra-week low and anticipating a market reversal after the sell stops are rated, you can be a buyer on an intraday basis. Now, again, like we just said with the intra-week highs, we're not just simply looking to be a buyer below an old low or below equal lows, there has to be a context. The move that drops down onto Tuesday below those equal lows that's formed on Monday and Friday of this example in the chart, that's trading down into a higher time frame discount array. When you're staring at intraday charts and you don't have any reference point on the higher time frame, you're going to miss these beautiful...
scenarios where you can clearly see where the manipulation is going to take place and where they're going to run the sell stops. Now obviously like we said with the previous examples we're not just simply you know buying below and low. We're looking for confluences from the PD arrays to support the idea of buying below an intra-week low and we simply don't go in buying below and low just simply because the price moves beyond the intra-week low. Trading intermediate term highs and lows. Alright, in this chart here, you can see prices trading in a large consolidation, and the periods when the market is not trending one direction, they offer ideal conditions.
You know, for shorting above an old high and buying below an old low, from a previous week or longer in time. So, when we look at reference points in terms of classifying as intermediate term, it's beyond just yesterday, and it can be as short term as intra-week or previous month. Or two months ago, old lows and old highs like that, they're gold mines because think about who would be having their stop losses below or above those reference points. The whales, those large fund traders, when they have their orders in those markets, they're going to be placed around these higher time frame highs and lows.
So if the market trades back to them, they're gunning those stops. Now, studying old highs and old lows and incorporating the PDA rate matrix, it's going to assist you in finding higher odds day trades. Now, the setups tend to present them more in terms of a dynamic response in price than that of just simply looking for what would be centered like an optimal trade entry or looking for a simple order block.
Again, none of my concepts are panaceas, be all, end all. They don't stand alone. They have to be blended with other things.
So when you incorporate these setups with… the PDA ray matrix and higher timeframe institutional order flow, you're going to find dynamic reactions. And it's going to be always a bonus for you as a day trader, because we need movement. We need to have displacement.
We need to see a rapid movement to get paid before the end of the day. So we're always battling time and we're always battling the uncertainty of whether or not we're going to get magnitude of our move. So while most statistics state that day traders don't make money consistently over time, Because they number one they don't look for the conditions that are ripe for day trading This week we had some instances where in our live sessions we were able to call very precise what the market should be doing and where it should go next. There was other instances once my objective for the week was met, you saw how I was off on my analysis, but I was not going into the marketplace and trading anymore.
So that skill set comes by experience. You're not going to be able to do this just simply by taking these concepts and saying, OK, plug and play. I'm going to be good. It takes a level of experience doing it for a while, seeing it, and developing a feel for it.
And that experience factor can't be communicated in a teaching. It has to be earned, and you have to do that through time. Now, when a market lacks directional trend and one-sidedness, those conditions, they offer more opportunities to trade like this than not.
So when traders that identify range-bound conditions see that in their charts, once you do this several times in practice, once you see it in examples in the past, when you find yourself on a Saturday morning, you wake up before anybody else gets up in the house and sit down with a bunch of charts. Like I used to do this for years. Before I had children, I loved it.
Not that I don't love my children, but I loved the fact that I could spend my time doing that, and I would be uninterrupted. I wouldn't have any distractions, and I could literally pour over charts and really build scenarios of why price went up here. Who would they knock them why would they knock those individuals out?
What was the purpose of going up there? Because when I first started trading, I thought that buyers just stopped running out of buyers and the market topped. And there's a lot of people who still teach that premise in the marketplace. That's not what it is.
The absence of the market makers. selling it to them at a higher price, they don't offer it any higher. Because believe me, if they want to offer it a higher price, all they do is offer the price and they'll put whoever they want in that price. Because a market order is a market order to get in right now.
And they can couple that with a ridiculous price level that would be outside the normal range. Once I understood what price was actually doing and the behind the scenes view of what takes place for runs on liquidity, the concept of reversal trading was much more, in my opinion, my cup of tea. I liked it, which is the reason why my London Open strategy became like my repertoire for Forex, because essentially what you're doing is you're looking for reversal patterns every single London session, because the Judo swing, when we're looking for bearish moves, it's going to be rallying higher.
What we're doing is trying to time that intraday reversal. So these reversal concepts are large in scale with intermediate-based ideas, as I'm describing here. But it also is minute to the point where we can reduce it to the London Open for Judas, the CME Open for the New York Judas, and Asia. It has its Judas at 8 o'clock in New York time or 0 GMT. And then you have it also in London Close on days that create.
London closed reversals as we'll talk about. Okay, New York session reversals. When we look for New York session reversals, obviously the first thing to remind yourself is that the weekly templates that I provided in earlier teachings, this is going to provide you the basis for studying current market structure and then also learning to anticipate what the New York session is going to do in terms of continuation or reversal. Now, while a reversal can occur, On any day of the week, we learn that certain weekly templates are more likely to unfold over another. Knowing the higher timeframe PDA raise and the IPTA data ranges the market is presently respecting, scenarios can be outlined in our analysis.
If there is a higher timeframe discount array that is below the market price but yet has not been met yet, the day it trades down into it during London's move and crosses over into New York Open, This is the classic New York session reversal condition. Now, obviously, you reverse these conditions when you're looking for a opposite market reversal in a New York session. In simple terms, when we see price trade down into a discount array on a higher time frame chart, and it does it at the time New York opens, that is when the most likely chance of a market reversal occurring in New York session is going to be seen. As long as New York has not traded down into a higher timeframe discount array or up into a higher timeframe premium array, New York session will always be slated as a continuation of that was seen in the London session.
So in simple terms again, unless the New York session opens up at a premium array on a higher time frame or discount array on a higher time frame, New York will always be expected to be a continuation of what was seen in London. So if it's a high formed in London and we're expecting to be bearish. New York should be a continuation.
That changes if London trades down lower and then crosses into New York, but New York trades down into a higher time frame discount array. Anticipate a market reversal going higher. Reverse is said when a London session creates the low of the day. It's been rallying up, crosses over into New York open into a premium array. Once the New York session trades up into that premium array, Expect a market reversal in New York session.
Trade higher into that premium array just to go lower on the day. You expect that New York session reversal. The characteristics are simple, but what many of you are not getting is that you have to see it. You have to study it.
You have to look at it. And if I give you one or two examples, it's not enough. You need to go find it in your charts and see it. Make notations. Draw up some notes on your charts and look at them.
repeatedly go over and over and over and over again. But by having the higher time frame PD arrays outlined on your daily, transposed over to your lower time frames, you won't be blindsided by these reversals. When I talk about the likelihood of seeing a market reversal profile in New York session, every time I mention it, I got 30 to 40 different emails from members in our mentorship. And it's always a repeating question.
How do I know it's going to reverse? Because I see it trading into a higher time frame PD array. If it's trading up to that higher timeframe PDR, it's going to most likely reverse. There's no mystery here.
It's a simple concept of knowing what the higher timeframe PDRs are. If we're trading into a level that would be bearish and it does it at New York, expect a reversal. It's simple as that. All right, London close reversals.
Now, London close can be used for intraday reversals on large range days. Again, like I said in the earlier portion of this video, for scalps. The large range day that exceeds its five-day average daily range tend to retrace about 20% of its total daily range at 10 o'clock in the morning to noon New York time.
In longer-term conditions, the London close can time a market reversal that can lead to a series of days of one-sided direction. This is best determined with the use of the weekly templates and study of the current market structure. As I indicated in previous slide about the New York session reversals, the same thing applies to the London close. time period as well.
So everything that I mentioned in the previous slide about New York, just take New York out and put in London close for all the things I said without having to repeat it at all. But there are times when you anticipate the New York session causing the reversal, and then later on, London will go back to that higher timeframe PD array and blow out the stops on the New York session, as you see here in this example. So always be mindful that even if you're expecting a New York reversal, London can come back and act like we see many times in London. London open, you expect a high of the form. It creates a high.
It trades down 30, 40 pips aggressively, and then it comes back one more time, knock those stops out, and then it sells off. Well, when we're expecting New York session reversals, the London close can be that second swipe for those individuals that are really on the right side of the marketplace. and they're buying the reversals in New York or selling the reversals in New York, London Clothes can many times go up there one more time or down there below to knock out those stops for those people that were right, anticipating the New York session reversal.
So if you see that occur, step right in there again and buy it below the New York low if you're looking for a bullish New York session reversal. If it comes down again in London, I'll step right back in there again and buy it again. And many times you'll get really wicked low pricing and it quickly moves away the other way. And everything's reversed on the sell side. But as you see in this example, the reversal occurred on the Wednesday at London Close.
This price occurred and the reversal occurred at a higher timeframe discount array and was expected to trade higher as a result. London, like New York, can reverse the market. It's not just London Open that creates the reversals. It can be done on the New York session and the London close.
So hopefully I've taught you something with reversals here that will obviously build on your understanding. Some of you are going to be scratching your head saying, well, I need a little bit more refinement. And I'm going to tell you that that comes in time. It comes with many examples.
It also comes with a later month's teaching. That brings us to how to study these reversals. Now, the best place to go is inside your charts. The best practice is to first scour through your price charts for examples of all of them.
Experience seeing them, how they form is crucial. They will many times be very similar in a lot of ways, but then there's going to be some things that are going to differ. These subtle nuances are only learned with study on an individual basis. In August, we'll be going through a specific set of templates that will be used for a top-down approach that will lead you to a reversal mindset.
These are the eight reversals I look for. So you'll know what to be looking for based on that specific criteria. So I understand some of you like to have 50 different examples, but you don't need to have 50 different examples. You just need to know what the concept is.
Go into your charts and see it. Times of day, study. What was the market doing? Pick one pair.
Go back over the last three months and outline where the reversals occurred. What was the context? What did they go up for for buy stops? What did they go down for for sell stops? By doing this, until you go through your charts, you're not going to understand that the best teacher you have is your charts and the time you spend over top of them and your personal note-taking.
The apt pupils in this mentorship that enjoy study of price action will build a collection of each reversal concept discussed here. Seeing how every lesson prior to these concepts fit together, you'll be aided in your analysis. Again, as a reminder, we never know for certain what price will do next, but we can anticipate generic.
price behavior that repeats over and over and over again. So until next lesson, I wish you good luck and good trading.