Understanding Narrative in Trading

Key Concepts Introduced:

• Difference between predicting price direction and being a good trader.
• Importance of narrative in trading.
• Concepts: PD Ray, FLA, OD, and LOT.

Revisiting Bias and Direction

• Bias: Determines if the price is going higher or lower.
• PD Ray: Points of interest to target (e.g., Swing points, Fair Value Gaps).
• Understanding which PD Ray to move towards.

Narrative in Trading

• Beyond direction: Where are we moving higher/lower from?
• Trade from PD Rays: Identify starting points for price movement.
• Example: Swing points, Fair Value Gaps as trading targets.

PD Rays and Order Flow

• Order flow shows direction and trading points.
• Three PD Rays: Swing points, Fair Value Gaps, Fair Value Areas.
• Different PD Rays have different probabilities.

Understanding Probabilities in Trading

• Trading is based on probabilities; focus on high-probability scenarios.
• High vs. low probability of PD Rays playing out.

Identifying Order Flow Lags

• Found on monthly, weekly, and daily timeframes.
• Higher timeframes are stronger and more significant.

Candle Science and Order Flow

• Candle science: Order flow seen through a single candle.
• Example: GBP/AUD analysis on monthly, weekly, daily timeframes.
• Importance of context in finding order flow lags.

Dissecting Order Flow Lags with FLA, OD, and LOT

• FLA (First Line of Defense): Initial PD Ray encountered in retracement (often Fair Value Gap).
• OD (Overlapping Defense): Area where two PD Rays overlap (Fair Value Area + Fair Value Gap).
• LOT (Last Line of Defense): Final swing point considered in the order flow.

High vs. Low Probability Scenarios

• High Probability FLA: Fair Value Gap as initial retracement point.
• Low Probability FLA: Fair Value Area as initial retracement point.

Case Studies

• Understanding and identifying FLA, OD, and LOT in charts.
• Importance of recognizing high and low probability PD Rays.

Summary

• Prioritize high-probability PD Rays in trading strategies.
• Importance of narrative and understanding order flow components for effective trading.

Upcoming Topics:

• Detailed analysis of FLA, OD, and LOT.
• Entry confirmation techniques based on understanding PD Rays.