Understanding Trading Narratives and Probabilities

you might be the best at predicting the direction of price but that does not mean you are a good Trader you also need narrative and that is exactly what we are going to dive in in the fifth video of the MMC series first understanding narrative and then how that leads to certain Concepts like fla a and lot so let's first revisit the bias the direction that we have determined because in the first four videos of the MMC series the main focus was on understanding the direction of price action so are we going higher or lower the PD Ray to trade towards so we understand we are going to Target a PD Ray That Swing point or that fair value Gap it is our job to find out which PD Ray we are moving towards next now that leads to the following for example the swing high that we have right there on the left that is what we can look to Target and that very simply summed up is the direction now the direction is only the first part now we need to understand narrative so what is narrative well if we are going higher then where are we going higher from so in the direction we understood okay we are trading towards a PD with narrative we are looking how we can deliver towards that PD so we are looking to trade from PD in other words the PD to trade from now like mentioned in the first video about PD Ray we can use PD Ray as a Target but but also to trade from now what does that look like in the bottom right we have determined okay we have that swing point that is the PD rate that we can trade towards then how can we deliver there or what PD rate can we trade from is for example this fair value Gap right there to then continue higher off of that to deliver into the swing Point into the Target and that is exactly what narrative is and that is what we're going to focus on now we have already touched on this a little bit in the order flow video If video number three because an orderflow lack not only tells us the direction of price it also tells what we can continue lower or continue higher from well this order flow lag right here we can break this down it has all three PD Rays it has that swing point right there it has the fair value Gap like we discussed and also the fair value area sitting right there those are three PD Rays meaning those are also three PD rays that we can trade from so three opportunities potentially what we can continue lower from in this example like we mentioned here Order flow tells us what PD Ray we can trade towards and what PD Ray we can trade from is the direction and the narrative now do we just place an order at every single one of those PD Rays no because different PD rays will have different probabilities trading is all about probabilities and probabilities are extremely important to understand as a Trader because trading is all based on probabilities we always want to focus on the highest probability scenarios because two fair value gaps can look the exact same but they will have different probabilities meaning they will have a different chance of actually playing out when we always focus on the highest probability thing to happen that's when the odds are literally in our favor to be profitable the higher the probability of a trade ID the better the trade ID the lower the probability of trade ID the worse a trade ID now the probabilities topic is something we will dive deeper into later on in this series but the probabilities already start right here understanding what a high probability order flow lag is and a low probability order flow lag but before we go over what are good orderflow legs and what are bad orderflow legs let's first understand where we can find those orderflow legs if we are looking at a direction for the monthly weekly and the daily time frame then those order flow LS in other words The Narrative will be found on the monthly the weekly and the daily as well that is the highest probability and we are always going to trade from an orderflow lack it's just our job to find the orderflow lack so for example how does this then work with candle science because in Candle science we only focus on one candle remember well candle science if we also remember is order flow seen through a singular candle so let's say we have a disrespect candle continuing lower on the weekly or the monthly time frame then all we want to do is go down time frames until we find an order flow lack as soon as we find the order flow lack that's exactly when we then want to stop looking for it so to give you an example here on GBP Australian dollar on the monthly time frame we have this most recent candle which closes in one day 4 hours as very much bullish candle arguably a disrespect candle right there on the weekly we have the same exact thing where we can look to potentially Target the highs that we have towards the left right there now our job right here is to find an order flow lack that we can continue higher from so ideally that starts with a fair value Gap here for example we have a weekly f g in the making which potentially after this candle closes we can continue higher from but right now it's not that relevant but if we go down into the daily it turns again into an orderflow lag and we see that most recently we are stinging into this daily F Gap that we can potentially continue higher from and as soon as you find the order flow lack that we can continue higher from that's also where you want to stop going down time frames because order flow lags need to be in context meaning the reason why we start on the monthly time frame is because the monthly time frame is the strongest time frame then after that it's the weekly then after that it's the daily so the higher the time frame the stronger the time frame remember all the way at the beginning of the MMC series is that PD Rays can be traded towards and traded from as well so they can act as a magnet that we can trade towards and to trade off of like a rocket as well so if we have for example a daily order flow lack right here a daily fair value Gap that we can continue higher from and we also have these 4our fair value gaps sitting right here these four hour F gaps are not strong because beneath this 4our F Gap there's daily fair value Gap that means that the 4our fa value Gap right there is not in context within the daily fair value Gap and the same applies when we go even lower in time frames here on the 15 minute these 15-minute fair value gaps right there this order flow lag is not as a high probability why because if you zoom out and you go to the 1 hour then below this 50 minute fa value Gap there's a 1H hour fair value Gap right there so since the 1H hour time frame is above the 50-minute time frame that means it's stronger so that magnet of that fair value Gap will be stronger than the 15-minute one so we are more likely to create a bigger retracement trading back into the higher time frame for Val gaps because those are the stronger time frames now why is that actually that is because the higher time frames they tell us what big institutions are doing institutions the big entities that move the market they don't trade off of the 1 hour the 15 minutes they are more focused on executing orders on the higher time frame so think of the 4H hour daily weekly and the monthly so those higher time frame PD rats they are the most significant they are the most important ones and once we understand the higher time frame PDS it will become very easy to also understand what the lower time frame wants to do so for example when we go into our entry confirmation all right so we have an idea on how to find that order flow lack this is a topic that will come back as well so if you do not understand it right now it's not the biggest deal we can move on now what we do need to understand is how to dissect an order flow lack like we mentioned earlier it has a fair value Gap it has a fair value area it has that swing point but we can Define that a little bit better because we can Define it by using flot which stands for first line of defense then a which stands for overlapping defense some people in the mmt also refer to it as ol lot so if you see that just know it means the exact same thing and then we have lot which is the last line of defense this helps us to simplify this orderflow lag and to understand if it's a good orderflow lag or if it's a bad orderflow lack breaking down this orderflow lack through fla odd and lot again it has all three PD Rays so nothing changes right we are just giving it a different name so the first one right there that we see is again that fair value Gap but now we name it as a first line of defense because when price creates a retracement right here into the orderflow LA what is the first PD Ray that it will retrace back into in other words what is the first PD Ray that it will encounter in that orderflow lack well that is the fair value Gap because that's the first thing if we create a retracement that we trade back into and the reason why it's stand the first line of defense is because that's the first PD rate that we might continue lower from already then we also have the second one which is the overlapping defense the overlapping defense is the fair value area so if price creates a retracement the first PD it will encounter is the fair value Gap a little bit above that is the fair value area right there that is called the overlapping defense now what this overlapping defense is is what we're going to touch on in just a moment before we do that we have the third PD which is again the swing point and the swing point is then the last line of defense the swing point because if we still want to continue lower and we can trade from one of these PDS then the last PD Ray Price will encounter to potentially still continue lower from is the swing point the last line of defense now to understand these three defenses a little bit better let's dive into every single one of them starting off with fla the first line of defense what is a flot it is the first PD we run into when we create a retracement best to worst so highest probability flood and lowest probability flood the highest probability flood is going to be a fair value Gap like we saw in the previous example when we have an overflow lag going lower and the first line of defense is actually the fair value Gap that's the best scenario that's exactly what we would like to see but there will also be scenarios where the flood is not a fair value Gap and it's the fair value area that looks something like this where the first PDR that we encounter when we create a retracement is the first line of defense right there and the second PD Ray so the overlapping defense becomes then the fair value Gap instead this second scenario is lower probability to trade from than the first scenario the first scenario is what we always want to look for that's the best scenario now why even is that well very logically speaking look at the difference in weakness and strength between these two scenarios when we look at the first example we see a very weak price action when we look at the first scenario we see that price has a lot more bearish intention that's why the fla is the fair value Gap whenever there's more bearish intention of course there's a higher probability that we actually want to continue new lower that's quite logical in my head at least so in the second scenario what do we see we see that the fair value area is the fla and that then indicates that the bearish side is not that strong whilst the bullish side is quite strong because clearly it's creating quite a strong retracement otherwise the fla would have been a fair value Gap now if we take a look again at GP Australian dollar here on the daily time frame we had determined this recent order flow lack we have Al taken out this intermediate term High towards the left right there that turns into a fair value area right there this fair value area is not the flood it is the overlapping defense because if we look at the most recent orderflow lack the first PD rate that we retrace back into is this fair value Gap this is a good scenario this is high probability that we do want to in fact continue higher because there's a lot of bullish strength then the overlapping part is where this fair value Gap and this fair value area are now starting to overlap which is of course at the exact fair value area sitting right there now before we dive deeper into that example let's also understand the overlapping defense now what is an overlapping defense it is the first area we retrace back into where two PD rays are overlapping that is going to be a fair value area and a fair value Gap it just depends on which one is the FLA and which one is the odd now what is the best scenario for an orderflow lack what do we ideally want our overlapping defense to be again from best to worst the first thing that we want to see is ideally the overlapping defense being the fair value area and like we mentioned in the previous example the fla being the fair value Gap then the second scenario like we discuss with the plot as well this right here is a low probability overlapping defense and not an ideal order flow lack the same exact thing like we discussed in the first line of defense so looking back at gvp Australian dollar on The Daily time frame this right here is where we have that overlapping defense is the first area where two P rays are now overlapping with one another now remember how we talked about probabilities and high probability and low probability why is this then high probability first of all it's because we have more strength when the fair value Gap is higher then the high that we took to the left the fair value area that means that we are more bullish there's more strength in price because remember those fair value gaps they tell us the intention they tell us how strong price is then second of all when we do retrace back into an overlapping defense we don't only have the fair value area we also have the fair value Gap so that's two discount arrays that we can continue higher from that is double the probability than if it was only a fair value value Gap or only a fair value area now if we take a look at the worst example and we go into the 1 hour to look at the confirmation off of this fair value area then we have an order flow lack sitting right here going higher this order flow lack and you can probably already notice the flot so the first line of defense is this fair value area sitting right there then the overlapping defense so where the fair value area the full fair value area right here and another PDR start overlapping is this area this fair value Gap right there it's the first fair value Gap that we encounter this is not a good orderflow lack this is a low probability to trade from now there is another reason why this is low probability to trade from it is because when we have a scenario like this usually it tends to be the case that we are like we discussed in the kendle science video that we are respecting the swing point right there and then continuing lower so whilst We are continuing lower right here we are actually respecting a swing point so we are respecting a premium array and that is of course not ideal because we would ideally want to see those premium arrays getting disrespected and those discount arrays only getting respected so when we expect bullish prices and we see that premium arrays are getting respected is of course not what we want to see and if we compare compare that with on The Daily time frame the order flow that we had this swing point is not getting respected it already got disrespected now this is also something what we will go over a liquidity sweep versus a liquidity run all right so we understand what is a high probability overlapping defense again that first example of that orderflow lack now we need to understand the last line of defense what is the last line of defense the last line of defense is always going to be a swing point the last area we can still continue lower or higher from now from best to worst funny enough a last line of defense that is the best the highest probability is actually a last line of defense when there's no fair value Gap in the lag which looks something like the following when we create this lack and again we can't call it an order for lack because it doesn't have that fair value Gap but it does have a swing point when there's a scenario like this then this swing point is the first first line defense but also the last line defense it's the only perate that we can continue lower from right there so that we might sweep respect to then continue lower if we are looking to trade off the last L defense we want a scenario like this ideally when we are looking at a scenario where there is a fair value Gap in the lag so we actually have our usual order flow lack then the last line of defense is again the swing Point yes but the last line of defense right there is not necessarily something we want to trade off of we actually want to trade towards it now let me explain what that looks like in a chart so again same example gbpr Sing dollar on The Daily time frame if we go down time frames into the 1H hour time frame then right here we actually see a lack right there continuing lower that doesn't have a fair value gap on this time frame so if we are going to continue lower right there then what can we continue lower from well this is the only premium rate PD rate in that lag so we can sweep that to then continue lower off bit when we do have a fair value Gap in a lack so a usual order flow lack then if we look at the daily time frame here again and we look at this last line of defense all the way at the bottom right there then we mentioned if there is a fair value Gap in the LA so just a usual orderflow lag then we do not want to trade off the last line of defense but in the worst case we want to trade towards the last line of defense what does that mean well remember what the orderflow lag consists of it has a fair value Gap it has a fair value area and it has a swing Point very important what is the fair value area based around a fair value area has that theory of that three swing movement so we have to move lower because we only had buy side right there so we are offering fair value to the market when we offered fair value and we have had right here offered buy side and we have offered sell s side right here as well then this creates this fair value area so the market right there is fair value and has offered fair value the only area where it has not offered fair value just yet is again the area where it is only offered buy side right there so above the high that it took towards the left so the furthest we can retrace is back towards the high of the fair value area like we're seeing in this example to then continue higher off of it now we could have a little bit of a deeper sting into it to then continue higher off it but no deep retracement so something like a retracement like this that is not supposed to happen why not because the market is either doing one of two things it is either offering fair value or it is seeking liquidity and if we know that this is a fair value area and it has already offered fair value but yet it still continues lower then we can assume it's not offering fair value anymore it is seeking liquidity and where is the liquidity that is the last line of defense of that orderflow lack because that's the swing point and swing points are liquidity points so taking a look at this example right here this is the full pair value area that we have sitting right here so if we want to continue higher then we can continue higher of potentially a retracement back into the fair value area to then continue higher after it has done that it has offered fair value so if it does not do that and it continues lower right here then we can say well it's not offering fair value anymore but what is the market doing if it's not offering fair value it is seeking liquidity liquidity in the form of Swing lows swing highs swing points it happens to be that the last line of defense is exactly a swing point so we can look to Target this swing Point instead the last line of defense if we are not offering fair value anymore this is something called unusual context that is something we will go over later on in this series as well now let me give you one more example of this here on the dollar if we take for example this 4H hour orderflow lack going lower right there then we see at the bottom we are not respecting the fair value Gap and we are also not respecting this fair value area that we have right here creating very deep retracements into the fair value area then the last line of defense that we have right here is not actually something that we want to trade from it's something we want to trade towards since we are not offering fair value anymore we are seeking liquidity and that liquidity is that last line of defense now the first line of defense the overlapping defense and the last line defense is what the next three videos are about so we're going to dive into every specific defense right there because before we can go into our entry confirmation we need to understand if the PD rate the higher time for PD rate that that we are trading from is actually high probability or low probability and that will help us a lot with our profit and with our win rate now before we do that of course extremely important to do a case study link in the description to find the study notion where you can easily do case studies as well the case study for this video is study fla odd and lot in your chart and see where it holds and where it does not so already trying to understand what is a high probability PD rate to trade from and what is a low probability PD rate to trade from and then we'll touch on those specific topics in the next videos all right perfect thank you

you might be the best at predicting the direction of price but that does not mean you are a good Trader you also need narrative and that is exactly what we are going to dive in in the fifth video of the MMC series first understanding narrative and then how that leads to certain Concepts like fla a and lot so let&#39;s first revisit the bias the direction that we have determined because in the first four videos of the MMC series the main focus was on understanding the direction of price action so are we going higher or lower the PD Ray to trade towards so we understand we are going to Target a PD Ray That Swing point or that fair value Gap it is our job to find out which PD Ray we are moving towards next now that leads to the following for example the swing high that we have right there on the left that is what we can look to Target and that very simply summed up is the direction now the direction is only the first part now we need to understand narrative so what is narrative well if we are going higher then where are we going higher from so in the direction we understood okay we are trading towards a PD with narrative we are looking how we can deliver towards that PD so we are looking to trade from PD in other words the PD to trade from now like mentioned in the first video about PD Ray we can use PD Ray as a Target but but also to trade from now what does that look like in the bottom right we have determined okay we have that swing point that is the PD rate that we can trade towards then how can we deliver there or what PD rate can we trade from is for example this fair value Gap right there to then continue higher off of that to deliver into the swing Point into the Target and that is exactly what narrative is and that is what we&#39;re going to focus on now we have already touched on this a little bit in the order flow video If video number three because an orderflow lack not only tells us the direction of price it also tells what we can continue lower or continue higher from well this order flow lag right here we can break this down it has all three PD Rays it has that swing point right there it has the fair value Gap like we discussed and also the fair value area sitting right there those are three PD Rays meaning those are also three PD rays that we can trade from so three opportunities potentially what we can continue lower from in this example like we mentioned here Order flow tells us what PD Ray we can trade towards and what PD Ray we can trade from is the direction and the narrative now do we just place an order at every single one of those PD Rays no because different PD rays will have different probabilities trading is all about probabilities and probabilities are extremely important to understand as a Trader because trading is all based on probabilities we always want to focus on the highest probability scenarios because two fair value gaps can look the exact same but they will have different probabilities meaning they will have a different chance of actually playing out when we always focus on the highest probability thing to happen that&#39;s when the odds are literally in our favor to be profitable the higher the probability of a trade ID the better the trade ID the lower the probability of trade ID the worse a trade ID now the probabilities topic is something we will dive deeper into later on in this series but the probabilities already start right here understanding what a high probability order flow lag is and a low probability order flow lag but before we go over what are good orderflow legs and what are bad orderflow legs let&#39;s first understand where we can find those orderflow legs if we are looking at a direction for the monthly weekly and the daily time frame then those order flow LS in other words The Narrative will be found on the monthly the weekly and the daily as well that is the highest probability and we are always going to trade from an orderflow lack it&#39;s just our job to find the orderflow lack so for example how does this then work with candle science because in Candle science we only focus on one candle remember well candle science if we also remember is order flow seen through a singular candle so let&#39;s say we have a disrespect candle continuing lower on the weekly or the monthly time frame then all we want to do is go down time frames until we find an order flow lack as soon as we find the order flow lack that&#39;s exactly when we then want to stop looking for it so to give you an example here on GBP Australian dollar on the monthly time frame we have this most recent candle which closes in one day 4 hours as very much bullish candle arguably a disrespect candle right there on the weekly we have the same exact thing where we can look to potentially Target the highs that we have towards the left right there now our job right here is to find an order flow lack that we can continue higher from so ideally that starts with a fair value Gap here for example we have a weekly f g in the making which potentially after this candle closes we can continue higher from but right now it&#39;s not that relevant but if we go down into the daily it turns again into an orderflow lag and we see that most recently we are stinging into this daily F Gap that we can potentially continue higher from and as soon as you find the order flow lack that we can continue higher from that&#39;s also where you want to stop going down time frames because order flow lags need to be in context meaning the reason why we start on the monthly time frame is because the monthly time frame is the strongest time frame then after that it&#39;s the weekly then after that it&#39;s the daily so the higher the time frame the stronger the time frame remember all the way at the beginning of the MMC series is that PD Rays can be traded towards and traded from as well so they can act as a magnet that we can trade towards and to trade off of like a rocket as well so if we have for example a daily order flow lack right here a daily fair value Gap that we can continue higher from and we also have these 4our fair value gaps sitting right here these four hour F gaps are not strong because beneath this 4our F Gap there&#39;s daily fair value Gap that means that the 4our fa value Gap right there is not in context within the daily fair value Gap and the same applies when we go even lower in time frames here on the 15 minute these 15-minute fair value gaps right there this order flow lag is not as a high probability why because if you zoom out and you go to the 1 hour then below this 50 minute fa value Gap there&#39;s a 1H hour fair value Gap right there so since the 1H hour time frame is above the 50-minute time frame that means it&#39;s stronger so that magnet of that fair value Gap will be stronger than the 15-minute one so we are more likely to create a bigger retracement trading back into the higher time frame for Val gaps because those are the stronger time frames now why is that actually that is because the higher time frames they tell us what big institutions are doing institutions the big entities that move the market they don&#39;t trade off of the 1 hour the 15 minutes they are more focused on executing orders on the higher time frame so think of the 4H hour daily weekly and the monthly so those higher time frame PD rats they are the most significant they are the most important ones and once we understand the higher time frame PDS it will become very easy to also understand what the lower time frame wants to do so for example when we go into our entry confirmation all right so we have an idea on how to find that order flow lack this is a topic that will come back as well so if you do not understand it right now it&#39;s not the biggest deal we can move on now what we do need to understand is how to dissect an order flow lack like we mentioned earlier it has a fair value Gap it has a fair value area it has that swing point but we can Define that a little bit better because we can Define it by using flot which stands for first line of defense then a which stands for overlapping defense some people in the mmt also refer to it as ol lot so if you see that just know it means the exact same thing and then we have lot which is the last line of defense this helps us to simplify this orderflow lag and to understand if it&#39;s a good orderflow lag or if it&#39;s a bad orderflow lack breaking down this orderflow lack through fla odd and lot again it has all three PD Rays so nothing changes right we are just giving it a different name so the first one right there that we see is again that fair value Gap but now we name it as a first line of defense because when price creates a retracement right here into the orderflow LA what is the first PD Ray that it will retrace back into in other words what is the first PD Ray that it will encounter in that orderflow lack well that is the fair value Gap because that&#39;s the first thing if we create a retracement that we trade back into and the reason why it&#39;s stand the first line of defense is because that&#39;s the first PD rate that we might continue lower from already then we also have the second one which is the overlapping defense the overlapping defense is the fair value area so if price creates a retracement the first PD it will encounter is the fair value Gap a little bit above that is the fair value area right there that is called the overlapping defense now what this overlapping defense is is what we&#39;re going to touch on in just a moment before we do that we have the third PD which is again the swing point and the swing point is then the last line of defense the swing point because if we still want to continue lower and we can trade from one of these PDS then the last PD Ray Price will encounter to potentially still continue lower from is the swing point the last line of defense now to understand these three defenses a little bit better let&#39;s dive into every single one of them starting off with fla the first line of defense what is a flot it is the first PD we run into when we create a retracement best to worst so highest probability flood and lowest probability flood the highest probability flood is going to be a fair value Gap like we saw in the previous example when we have an overflow lag going lower and the first line of defense is actually the fair value Gap that&#39;s the best scenario that&#39;s exactly what we would like to see but there will also be scenarios where the flood is not a fair value Gap and it&#39;s the fair value area that looks something like this where the first PDR that we encounter when we create a retracement is the first line of defense right there and the second PD Ray so the overlapping defense becomes then the fair value Gap instead this second scenario is lower probability to trade from than the first scenario the first scenario is what we always want to look for that&#39;s the best scenario now why even is that well very logically speaking look at the difference in weakness and strength between these two scenarios when we look at the first example we see a very weak price action when we look at the first scenario we see that price has a lot more bearish intention that&#39;s why the fla is the fair value Gap whenever there&#39;s more bearish intention of course there&#39;s a higher probability that we actually want to continue new lower that&#39;s quite logical in my head at least so in the second scenario what do we see we see that the fair value area is the fla and that then indicates that the bearish side is not that strong whilst the bullish side is quite strong because clearly it&#39;s creating quite a strong retracement otherwise the fla would have been a fair value Gap now if we take a look again at GP Australian dollar here on the daily time frame we had determined this recent order flow lack we have Al taken out this intermediate term High towards the left right there that turns into a fair value area right there this fair value area is not the flood it is the overlapping defense because if we look at the most recent orderflow lack the first PD rate that we retrace back into is this fair value Gap this is a good scenario this is high probability that we do want to in fact continue higher because there&#39;s a lot of bullish strength then the overlapping part is where this fair value Gap and this fair value area are now starting to overlap which is of course at the exact fair value area sitting right there now before we dive deeper into that example let&#39;s also understand the overlapping defense now what is an overlapping defense it is the first area we retrace back into where two PD rays are overlapping that is going to be a fair value area and a fair value Gap it just depends on which one is the FLA and which one is the odd now what is the best scenario for an orderflow lack what do we ideally want our overlapping defense to be again from best to worst the first thing that we want to see is ideally the overlapping defense being the fair value area and like we mentioned in the previous example the fla being the fair value Gap then the second scenario like we discuss with the plot as well this right here is a low probability overlapping defense and not an ideal order flow lack the same exact thing like we discussed in the first line of defense so looking back at gvp Australian dollar on The Daily time frame this right here is where we have that overlapping defense is the first area where two P rays are now overlapping with one another now remember how we talked about probabilities and high probability and low probability why is this then high probability first of all it&#39;s because we have more strength when the fair value Gap is higher then the high that we took to the left the fair value area that means that we are more bullish there&#39;s more strength in price because remember those fair value gaps they tell us the intention they tell us how strong price is then second of all when we do retrace back into an overlapping defense we don&#39;t only have the fair value area we also have the fair value Gap so that&#39;s two discount arrays that we can continue higher from that is double the probability than if it was only a fair value value Gap or only a fair value area now if we take a look at the worst example and we go into the 1 hour to look at the confirmation off of this fair value area then we have an order flow lack sitting right here going higher this order flow lack and you can probably already notice the flot so the first line of defense is this fair value area sitting right there then the overlapping defense so where the fair value area the full fair value area right here and another PDR start overlapping is this area this fair value Gap right there it&#39;s the first fair value Gap that we encounter this is not a good orderflow lack this is a low probability to trade from now there is another reason why this is low probability to trade from it is because when we have a scenario like this usually it tends to be the case that we are like we discussed in the kendle science video that we are respecting the swing point right there and then continuing lower so whilst We are continuing lower right here we are actually respecting a swing point so we are respecting a premium array and that is of course not ideal because we would ideally want to see those premium arrays getting disrespected and those discount arrays only getting respected so when we expect bullish prices and we see that premium arrays are getting respected is of course not what we want to see and if we compare compare that with on The Daily time frame the order flow that we had this swing point is not getting respected it already got disrespected now this is also something what we will go over a liquidity sweep versus a liquidity run all right so we understand what is a high probability overlapping defense again that first example of that orderflow lack now we need to understand the last line of defense what is the last line of defense the last line of defense is always going to be a swing point the last area we can still continue lower or higher from now from best to worst funny enough a last line of defense that is the best the highest probability is actually a last line of defense when there&#39;s no fair value Gap in the lag which looks something like the following when we create this lack and again we can&#39;t call it an order for lack because it doesn&#39;t have that fair value Gap but it does have a swing point when there&#39;s a scenario like this then this swing point is the first first line defense but also the last line defense it&#39;s the only perate that we can continue lower from right there so that we might sweep respect to then continue lower if we are looking to trade off the last L defense we want a scenario like this ideally when we are looking at a scenario where there is a fair value Gap in the lag so we actually have our usual order flow lack then the last line of defense is again the swing Point yes but the last line of defense right there is not necessarily something we want to trade off of we actually want to trade towards it now let me explain what that looks like in a chart so again same example gbpr Sing dollar on The Daily time frame if we go down time frames into the 1H hour time frame then right here we actually see a lack right there continuing lower that doesn&#39;t have a fair value gap on this time frame so if we are going to continue lower right there then what can we continue lower from well this is the only premium rate PD rate in that lag so we can sweep that to then continue lower off bit when we do have a fair value Gap in a lack so a usual order flow lack then if we look at the daily time frame here again and we look at this last line of defense all the way at the bottom right there then we mentioned if there is a fair value Gap in the LA so just a usual orderflow lag then we do not want to trade off the last line of defense but in the worst case we want to trade towards the last line of defense what does that mean well remember what the orderflow lag consists of it has a fair value Gap it has a fair value area and it has a swing Point very important what is the fair value area based around a fair value area has that theory of that three swing movement so we have to move lower because we only had buy side right there so we are offering fair value to the market when we offered fair value and we have had right here offered buy side and we have offered sell s side right here as well then this creates this fair value area so the market right there is fair value and has offered fair value the only area where it has not offered fair value just yet is again the area where it is only offered buy side right there so above the high that it took towards the left so the furthest we can retrace is back towards the high of the fair value area like we&#39;re seeing in this example to then continue higher off of it now we could have a little bit of a deeper sting into it to then continue higher off it but no deep retracement so something like a retracement like this that is not supposed to happen why not because the market is either doing one of two things it is either offering fair value or it is seeking liquidity and if we know that this is a fair value area and it has already offered fair value but yet it still continues lower then we can assume it&#39;s not offering fair value anymore it is seeking liquidity and where is the liquidity that is the last line of defense of that orderflow lack because that&#39;s the swing point and swing points are liquidity points so taking a look at this example right here this is the full pair value area that we have sitting right here so if we want to continue higher then we can continue higher of potentially a retracement back into the fair value area to then continue higher after it has done that it has offered fair value so if it does not do that and it continues lower right here then we can say well it&#39;s not offering fair value anymore but what is the market doing if it&#39;s not offering fair value it is seeking liquidity liquidity in the form of Swing lows swing highs swing points it happens to be that the last line of defense is exactly a swing point so we can look to Target this swing Point instead the last line of defense if we are not offering fair value anymore this is something called unusual context that is something we will go over later on in this series as well now let me give you one more example of this here on the dollar if we take for example this 4H hour orderflow lack going lower right there then we see at the bottom we are not respecting the fair value Gap and we are also not respecting this fair value area that we have right here creating very deep retracements into the fair value area then the last line of defense that we have right here is not actually something that we want to trade from it&#39;s something we want to trade towards since we are not offering fair value anymore we are seeking liquidity and that liquidity is that last line of defense now the first line of defense the overlapping defense and the last line defense is what the next three videos are about so we&#39;re going to dive into every specific defense right there because before we can go into our entry confirmation we need to understand if the PD rate the higher time for PD rate that that we are trading from is actually high probability or low probability and that will help us a lot with our profit and with our win rate now before we do that of course extremely important to do a case study link in the description to find the study notion where you can easily do case studies as well the case study for this video is study fla odd and lot in your chart and see where it holds and where it does not so already trying to understand what is a high probability PD rate to trade from and what is a low probability PD rate to trade from and then we&#39;ll touch on those specific topics in the next videos all right perfect thank you

Transcript for:Understanding Trading Narratives and Probabilities

Transcript for:
Understanding Trading Narratives and Probabilities