hey there and welcome in part two of the rain series we're diving into footprint chart strategies there's a lot of information and real examples ahead so make sure to watch Until the End we'll also be sharing some tips to make your trading strategy even more effective first what does rain stand for it's our unique acronym that includes reversal absorptions imbalances and non belief we'll go through the setups in this exact order one quick note if you're not familiar with the terminology or how to set up a footprint chart check out part one of this series and if you're unsure how to identify support and resistance levels don't worry we'll cover that in the next video subscribe so you don't miss out all right let's get started we've prepared two charts the left one shows the strategy during a downtrend reversal meaning a reaction to resistance while the right one demonstrates a reaction to support meaning an uptrend reversal in each explanation the left chart will serve as an ideal textbook example whereas the right chart will have less ideal conditions in both cases the strategy remains valid the first strategy based on a reversal is the most common its key condition is that the price returns to the point of control po of the signal candle the price moves up to a certain level this could be a price Action level like a weekly High monthly open order block a volume profile level a pending limit order in the smart doom and so on depending on your trading style what's crucial is that the signal candle closes in the direction of the trade we're about to open in this case it should be red have a negative Delta and close below its P level we assume this level will act as resistance so we prepare to enter a short position this footprint closed red below its Po and with a negative Delta all the conditions are met if any of these conditions are missing the strategy is invalid and we stay out of the trade Don't Force trades stick to the setup for example if the candle closes with a zero Delta or right at its POC the signal is not valid for rain setups an additional bonus is the presence of a finished auction near our resistance or support level 0 X7 in this case this isn't a mandatory condition but it increases the probability of a successful trade so all four conditions are met after the previous upward move the price reaches a resistance level the candle forms in the expected downtrend Direction closes below its Po and has a negative Delta we're now preparing to enter with a limit order placed one tick below the PO the one tick below rule is important because the price doesn't always return to the PO of the signal candle or there may be too many orders at that level preventing the execution of our order since the PO acts as the Market's first barrier a retest followed by a continuation in the expected Direction makes for a stronger trade setup the left side of the screenshot shows a textbook example the next candle opened here moved up slightly the wick tapped the level one tick below the POC of the signal candle we entered with a limit order and the downtrend began in an uptrend things are a bit trickier let's say we have some support meaning the price is approaching a level from above and we're getting ready to open a long position the conditions are met we have a green candle that closes above its p and has a positive Delta the previous candle might also have a positive Delta but that's not critical what matters is that the green signal candle which aligns with the expected Direction has a positive Delta in this example the signal candle has an unfinished auction at the bottom however this doesn't matter because a finished auction appeared in the previous candle with 1 x0 at the low while this isn't a mandatory entry condition it does slightly increase the probability of a successful trade so all entry condition are met we have a green candle confirming the expected move an uptrend in reaction to support it closes above its Po and it has a positive Delta we're ready to enter the trade with a limit order one tick above the POC of the signal candle notice that the next candle moved up drifting away from the entry level and our limit order wasn't filled we don't adjust or move our entry level we just wait as you can see it could be the next candle or even the second third or 10th eventually the wick of another candle dipped below the level where we had our limit order that's when our order was filled the trade was opened and the market moved up sometimes you'll see a double POC like here this gives us extra confirmation that the market sees this level our pattern works because the candle in the expected Direction met all three conditions important note each of our four setups loses its validity if any candle breaks the high of the signal candle in a downtrend or the low of the signal candle in an uptrend at that point the pattern isn't valid anymore let's move on to live charts there will always be a blue line on the charts representing a support or resistance level for our setups any of the rain patterns must appear at a specific level not just in an empty space for example in this candle series there were several conditions that looked good but there was no reaction at the resistance level we need to be patient and wait until the price reaches our level pay attention to the volume values shown in Blue on the candle statistic indicator and the Delta which appears as a green or red number the price just broke through the resistance level we've been watching if you look closely at the top of the footprint you'll see finished auctions and an imbalance this doesn't mean everyone suddenly started buying but it does suggest that there was no more interest in trading on the left side of the footprint as we we talked about in the first part of our rain series the right side of the ask on the footprint shows either Market bu orders or limit sell orders this means some people were still selling above the resistance level with limit orders or Traders started buying at the market price expecting that the resistance was broken and the price would keep Rising it's important to pay attention to the volume of individual Footprints you might notice that 1,84 contracts on one 5-minute footprint are a significantly higher amount compared to the others this means that most contracts were traded on this candle as you can see the candle closed below its P plus it's red and has a negative Delta even though it's a very low number minus two it meets the condition now we have all four conditions for entering the red candle that closed below its po the negative Delta and all of this happened at the resistance level as a bonus we also have a finished auction of 0x14 at the top let's place a short order here and calculate the risk to reward ratio we'll enter one tick below the POC as usual and aim for a risk to reward ratio of two this means we'll set a stop loss 15 ticks away and a Target 30 ticks away now we just wait for the price to reach our sell order we'll place the stoploss one tick above the high of the signal candle just a reminder if the price breaks a new too high the setup won't be valid anymore and here the price has hit our Target this was a good example of trading the r setup correctly the second setup is based on absorption so it's labeled with the letter A on the left we see another example of an uptrend which we expect to reverse into a downtrend at the resistance level in addition we notice aggression from one side in unusually high volum volume on one of the candles this spike in volume is often paired with a high Delta for example the volume starts at 7114 then jumps to 367 the Delta suddenly goes from 3479 to 135 these are significantly higher numbers compared to the previous ones pay attention to the values that appear at the top of the signal candle in this footprint normal values are 4X 8 3x7 and 5x5 but as we approach the PO we start seeing double digigit numbers on the ask side 19 27 and even 38 these are unusually high at first glance however this doesn't necessarily mean more participants have entered the trade we're still below the resistance level large players may have already opened long positions but they won't appear on the right side of the footprint due to their High volatility Market orders they had a significant number of pending cell limit orders in this area on the right side of the the smart Doom these orders gradually absorbed the market orders from retail Traders the market had started moving aggressively even before that and Retail Traders might have assumed that after breaking through the level the price would keep Rising this is a classic example of an absorption setup the price started to approach the resistance level below which the large players had set their pending sell limit orders unusually high values began to form at the top of the candle the POC was near the top and the candle closed below its po this is exactly what we need significant volume at the top of the footprint marking the volume of the day for that specific candle we then enter with a cell limit one tick below the PC and wait for the order to be filled the next candle broke through the level we entered and from there we're in a short position the example on the right shows an entry based on a setup responding to support in other words a reversal from a downtrend to an uptrend looking at individual candles we can see the typical values are single digits but then suddenly we start seeing double digigit values at the bottom of the candle again there's no reason to attribute these volumes to large players selling in the case of trading at a support level these are pending orders either limit by orders which we see in the do or hidden Iceberg orders it's possible that this represents large players closing their short positions they likely had limit by ORD set to close their short positions which is reflected on the left side of the the footprint under bids the clue lies in the very long candle up to the level which in this case should close above the POC we can see that the second candle didn't test our level one tick above the PC and neither did the third one until the fourth candle broke through by one tick with its tail that's when we entered the long position to summarize this setup is defined by a signal candle with unusually high volume and often an abnormally High Delta but the key factor is the volume it should really stand out like 18 5180 and then suddenly 394 this is a highly aggressive setup and naturally it comes with higher risk you can use it to its fullest like in the setup on the left or to its minimum like on the right either way the risk to reward ratio is extremely favorable it's definitely a setup worth adding to your toolkit because of its potential profitability let's move on to some Market examples this is a NASDAQ chart with a 5-minute time frame for this aggressive setup the key factor is having a candle with the volume of the day on the chart without a doubt we should be able to say this candle has unusually high volume and it's also close to our support level notice that the average volume is around 300 to 400 contracts in this case the volume is 700 and 800 but we're already seeing a candle with over 3,000 contracts the Delta is also very high making it tough to find a higher number it's also worth mentioning that the the p on the footprint nearly matches the support level we're watching The key thing here is that an aggressive entry based on the absorption pattern should happen on the candle with the highest volume which closes above its POC when expecting a long this is a basic condition in this case we have over 3,500 contracts along with a high Delta over 550 which is four to five times more than the previous candles this is our signal candle for the entry and notice this candle also shows a large amount of imbalance here we even have entries with zero on the right side of the asks the market has sped up very aggressively towards support which likely gave retail Traders the impression that a downtrend was starting but for us the key point is the very high values we see on the left side of the footprint the highest number on the ask side is 129 indicating that there were limit by orders placed just above support aggressively absorbing retail Traders sell orders that's why we see the highest values on the left side of the footprint the large players weren't selling here but were either closing their short positions or buying with limit orders the candle closed above its po one of the conditions and as a bonus we have a 1x0 below this isn't just a finished auction it's what's called a silly seller because there's only one participant left selling at this level so the conditions are met we have a red candle with massive volume in Delta and it closed above its POC I'm focusing on two levels the point where the fair value Gap ends and the level of broken Support also known as the flip we can confidently set these two levels as our targets so I'm planning to enter with two contracts with the entry one tick above the P of the signal candle we'll place the stop loss one tick below the low again with a risk to reward ratio of two the stop loss is set at 10 ticks so our first Target will be 20 ticks away we'll take profits on the first part here and the second part will be held in until the fair value Gap is closed this gives us an amazing risk to reward ratio of 7.6 so we open two positions and wait for the price to return to this level here's something interesting the POC of the signal candle lines up exactly with the POC of the current green candle the price hits our second Target and we successfully closed the second part of our position the third setup of rain imbalances focuses on entering trades during imbalances unlike the previous setups where we used pending limit orders this time we use a market order meaning we enter the trade immediately at the market price without waiting for a return to the POC we'll start by going over the details of this setup and then we'll show another entry option that could also be helpful this setup is is similar to the first one but the key difference lies in the emphasis on imbalances that show up on the signal Candle on the left side of the chart we again see an uptrend that we expect to hit resistance reverse and move down this candle meets all the criteria for an entry based on the reversal setup it has high volume a change in Delta and closes below its POC which would allow us to place a pending limit order one tick below the POC additionally we can notice incomplete auctions which can significantly increase the probab ility of a successful trade in setup I we focus on imbalances that appear on the relevant side of the footprint for a downtrend we look for imbalances on the left side which corresponds to the bids these imbalances signal acceleration and strong Market interest in the move whether it's large players or retail Traders there's a reason they're jumping into the trade so aggressively the candle can quickly move far from its POC and can be quite long it's the imbalances that tell us it's not the time to hesitate or second guess so we enter immediately after the candle closes at market price you can also consider splitting the position into two parts entering the main position right after the signal candle closes and adding the rest if the price returns to the PO alternatively you could open the next position one tick below the PO if the price does come back however if the imbalanced setup works as expected the price usually doesn't return to that level and quickly hits the target the condition conditions for entering this setup are as follows the candle closes in the expected Direction red for a reversal into a downtrend closes below its Po and shows a significant number of imbalances additional confirming signals may include High trading volume and a noticeable Delta change on the right side of the chart the situation is similar but a bit more complicated the red candle doesn't have finished auctions and shows lower volume than the previous candle however the signal candle closes above its po which is what we expect in an uptrend and we see a large number of imbalances on the right side this suggests strong interest in continuing the new trend as I mentioned earlier this candle eventually reached the PO of the signal candle and there was an opportunity to add another position however this isn't a rule and shouldn't be relied upon too much treat it more like an exceptional entry opportunity when you see a candle with imbalances don't hesitate or wait for the price to return to the POC you should make the decision to enter immediately after the signal candle with imbalances closes otherwise the price might move away from you this setup depends on the specific imbalance ratio setting I have mine set to 200% which means if one side has a value of 15 the other side must have at least 30 to qualify as an imbalance increasing this parameter will reduce the number of imbalances on the chart it's important to test what value works best for your instrument in time frame we recommend starting with a 200% setting for back testing let's take a look at some real charts to practice the ey setup here we're seeing a strong and aggressive Trend develop we have a support level marked by the blue line which will trade if one of the four rain patterns shows up I can't stress this enough don't look for rain patterns without considering support and resistance levels I know I've said it before but if you skip this step your success rate will drop significantly this candle has already tested the support you might think this would be a good time for an aggressive entry using the absorption pattern but none of the entry conditions are met there are no finished auctions at the bottom of the candle it doesn't have high volume and there's no significant Delta most importantly it closed below its POC whereas we're expecting a reversal into an uptrend meaning the candle should have closed above its POC we also don't see any strong values on the bid side so there's no absorption happening it's not the right moment to enter let's wait for a better setup on the forming candle we can spot a finished 3x0 auction with just three sellers which indicates weak interest in further trading but more importantly there are a lot of imbalances on this candle so as soon as it closes we're ready to enter the market what matters now is that the candle closes green with a positive Delta at the moment we still have a negative Delta so we're waiting we're starting to see a positive Delta and there are even more imbalances on the ask side now that the candle has closed we quickly enter a long position we place the stop loss just below the candle's low and as usual we set the target based on a 2:1 risk to reward ratio it doesn't matter that we entered three ticks lower than the close we stay consistent so we treat the close as our entry level and we calculate the target accordingly you could say this entry resembles a reversal setup that's true but the difference is that we have a positive Delta decent volume and the candle closed above its PC Plus on the right side of the footprint we see many imbalances which are large pending orders and as a bonus we also see finished auctions at the bottom as mentioned earlier we can place a pending order one tick above the candle's PC just in case the price comes back to this Zone if the price drops below the low of the signal candle and hits the stop loss the entire setup will be invalid and we won't look for a re-entry now notice that even this green candle is showing a lot of green imbalances we're still leaving the limit order in place in case the price comes back to this level even just with a wick to double our position it could happen quickly so it would be a shame to miss the opportunity but it's clear that it won't happen now as the price is approaching the target level the setup worked out successfully the last setup represented by the letter N in the rain name is called non-belief because it's based on uncertainty in this scenario the price reaches resistance and forms a candle in the expected Direction meaning a red one however the key condition for the r setup isn't met the candle should close below its POC you'll notice that this candle has the highest volume and there is a shift in Delta from green to Red all of these are important signs there's also a completed auction at the top but there's no chance to wait for a pullback to the PO as we're already above that level the candle closed above the P it doesn't matter if there are imbalances in the candle or how large the volume is even if it's several times greater than the previous candle's volume in this case the PO acts as a barrier the price simply hit resistance and formed a POC but couldn't break through that first barrier its own POC this creates uncertainty and doubt it might signal rotation which is often followed by a longer move in the expected Direction the potential for a reversal is there but we need to wait and see if the PC level will be broken this is the point where we can enter the position we would place a cell limit stop one tick below the p a sell limit stop means it's a pending order with the condition that the price must at least Reach This level which is one tick below the PC we don't wait for the next candle to close completely below the POC we enter as soon as the PC level is broken at the first return in most cases if the price doesn't hit resistance and is ready to keep moving up the POC break won't happen at most it will be tested once so we place a stop limit sell order one tick below that level betting on the break in the second case things get a bit trickier as often happens the signal candle is green moving in the right direction and has the correct positive Delta for an uptrend but the volume isn't bigger than the previous candles and the Delta is smaller with unfinished auctions at the bottom but the most important thing is that it closes exactly at its po which goes against the our patterns rules so in this case the reversal pattern is invalid the candle should have closed at least one tick above its po not right at it but that didn't happen we place a stop limit by one tick above the P of the signal green candle as you can see the next candle doesn't break this level it reverses and starts moving down the following candle continues moving downward which might suggest the downtrend will keep going however the third candle breaks the level we're watching and this is where we would enter the position as mentioned earlier we could be seeing a rotation phase here this is typical of the fourth setup where there's no immediate reversal or reaction and the chart shows a range with the price staying there for some time we're waiting for the price to break out of that range so we can enter the trade without delay this condition is confirmed when the the point of control of the signal candle is broken to sum up the conditions for the fourth setup are as follows the color of the signal candle should align with the expected trade Direction the Delta should be in the same direction negative red Delta for shorts positive Green Delta for Longs and the close should either on the left be above the PC or on the right below it or as in this case the close happens exactly at the PO we wait for the breakout in place a limit order one tick low or above the PO depending on the direction of the trade we're going to enter let's move to real charts and practice the fourth setup n which represents uncertainty here you can see that a range is starting to form notice that these candles have relatively large volume if we look back we can see that the price was in an uptrend interestingly a similar pattern appeared here where the candle had decent volume closed green and there was an unfinished auction at the bottom there were even imbalances however the key condition wasn't met we didn't identify a support level and didn't base our trade on The Logical level there was a red candle here that closed below its po so it might have seemed like a short entry this green candle has an unfinished auction at the top en closed below its POC but it has a negative Delta so it doesn't qualify as our signal candle for the rain and pattern this candle also has a negative Delta but the next candle has a positive Delta it's green and there's a finished 1x0 auction at the bottom since the condition for closing above the poc in the reversal pattern wasn't met this is a case of uncertainty so while we can't enter with the reversal pattern we can enter using the N pattern we'll place a pending stop limit by order one tick above the P of the signal candle if the price breaks this level we'll go long we set the stop loss one tick below the low of the candle and our Target is set with a 1 to2 risk to reward ratio the stop loss is 39 ticks so the target will be 78 ticks this candle is the first in the range that meets all the entry conditions for the Rainin pattern it's green has a positive Delta and closes below its POC we're waiting for the price to break the level one tick above the PO of the signal candle the price has now reached its Target let's review the situation there was a range that could have been traded using a breakout strategy after the uptrend but we entered on the breakout of the signal candles po do you realize the risk a Trader would have faced trading the breakout and how much better was our entry you might have noticed that there were no support or resistance levels on the chart this time but in reality the price was moving around the previous swing high that was our level we were expecting the breakout of that high in the continuation of the trend so these are the four rain setups based on proper footprint reading besides an idiom no rain no flowers comes to my mind we'll adapt it to no rain no trades if none of the setups appear or if any of the core conditions isn't met then don't enter the position we always have to keep waiting for rain and patience is one of the most important qualities in trading you have to be able to wait three important recommendations the four patterns can serve as both entry signals and triggers for other trading strategies the rain patterns help identify critical Market reactions to support and resistance levels they will guide you in deciding whether or not to enter a trade each pattern becomes invalid as soon as a candle breaks the high or low of the signal candle when that happens the pattern no longer applies most importantly avoid chasing trades wait for the right pattern instead thanks for your attention let's take our trading to the next level with these patterns