Transcript for:
Understanding Market Trading Mechanics

there we go okay so now first of all like what are your questions so let's go through them or should I go through them along the way how should we do this yeah tell me what your questions are and then I'll answer them along the way okay so that would be better uh main basically if a range is confirmed then I will doubt where we can sell where we can buy yeah I'll show okay and uh let's start I will ask ah okay okay okay yeah let's do it okay so first thing now you know what strong highs and lows are right so something like this this right here is what we call a strong High okay this is what we call a strong High liquidity grab break up structure yeah so stop stop loss has to be yeah liquidity has to be taken out and then structure has to be broken like this okay so once that happens this right here will be what a strong High okay this will be a strong high and same thing this will be a strong low now remember this formation is very important okay this will be very important like some people call this the qm and all that stuff right a bullish and a bearish qm so yeah whatever name you want to call it but like as long as you understand the logic behind it it's more than enough okay so something like this this is a strong high and this right here will be a strong low okay this will be a strong low and also now when I say liquidity has to be taken out like it doesn't have to be equal highs all the time okay or it doesn't have to be trend lines all the time now yeah this this could be taken as liquidity but it doesn't have to be this because now you know the three candle formation right for a swing High and a swing low I think I would have gone through that yeah yeah yeah yeah you know that right so if it just runs above one single swing high and gives you a break of a swing low that's more than enough okay that's is more than enough and remember for the breaks we will not be considering the weeks okay so it has to always be with a body closing okay you get that right now those days I used to use to we weak breaks too but we're not going to do that anymore okay we'll be using body breaks only because they are way more accurate than the Wicks okay so yeah something like this and then and yeah you know how these inducements and stuff works right like let's say we had something like this yeah let's go through this quickly and then let's get into the other topics okay so let's say we had something like this and yeah maybe the market gave you a little retracement and another break okay so now if you look at basic Market structure what can we see we have a lower high right a lower low another lower high in here and then another low low low right low low yeah this is just basic Market structure so you know what everyone does right now if they want to reenter they will also expect another lower high and low right because makes sense because this is what makes sense to do right so yeah everyone will be doing this everyone will be doing this but so now first thing what with smart Money traders too like they start looking at order blocks and now all the stuff in here right they start looking at order blocks or something in here like sell it here stop loss above this and stuff and then Target lower prices this is what the majority of them would would do right and not only smart money even Supply and demand right even supply and demand and not only them you know now what what what else trend lines right trend line Traders are also expecting the same thing maybe a move like this and then a drop right they're also expecting the same thing and yeah not only them break and retest support and resistance and since this high right here a swing High what do we have above that high buy stops right buy stops are resting above every single swing high in the market okay so now yeah if you know ICT yeah yeah you probably know ICT tells you that liquidity is what it's something like a magnet okay liquidity is something like a magnet and price is like a paper clip what happens it always draws towards the magnet right this is what happens so you have to always know where the draw on liquidity is where is the liquidity resting so what do we mean by liquidity liquidity means the stop losses and the pending orders that are resting in the market okay so now in this price section in this bit of price action where is the most amount of stop losses resting it is right above that high right we know that okay most amount of liquidity it's resting right above that high so is it safe for us to sell here with our stop loss above that high no right it's not safe so what we do is we look for a point of Interest above it okay above it so this is what we do now remember now when it comes to pois okay now there'll be like we we have refined the the way we used to look Mark the PO problem with the POI sele yeah I'll show you okay I'll show you because like the way we Mark out the pois right now are completely different from how the smart my Traders mark it out okay so I'll show you I tra I trade in EUR the I shot of this I just practice the trade around I watch yeah let's go let's go through okay so yeah let's go through it okay so now like right now now just forget whatever you learned from the previous ones okay because right now we'll be doing something that's way more different not very different though because I'm not telling you to jump from one strategy strategy no this is a refined version of it okay some Advanced version of what I already used to do okay so using ranges and all that stuff but the way we Mark out pois will be completely different okay so that will be different so now one thing now we'll only be marking out just two types of pois okay one will be imbalances okay so you know what imbalances are but remember imbalances are not that important okay imbalances are not that important the most important type of poi will be the closing prices of candles okay it will be the closing prices of candles I will show you example so now like which means now first thing like how are order blocks formed so let's go through it okay let's go through it so now let's say maybe we had equal highs okay let's say we had equal highs like this now what will the retail Traders assume most of the retail Traders would assume that a double top is a sign of a reversal right a double top isal so what will they do once this breaks they'll expect a move like this right they'll expect a move like this so what will they do they sell it with their stop loss above the above those equal highs right this is what most of them would do now not only them some people would call this the M formation some people will call this a strong resistance and all that stuff so whenever price goes here they'll be expecting it to to drop right they'll expect the price to drop but now there smart money right smart money knows that there is a pool of liquidity resting above that high okay they know that there's a pool of liquidity resting above that high so what they do is now whatever retail Traders do Smart M Traders will do the opposite okay so when retail Traders are selling here smart Money traders will start buying it okay they'll start buying it like why are they actually buying it that's only to take out the stop losses that were resting above that high okay so after taking out the stop losses what will they do they'll start selling it once again okay they'll start selling it once again so now what's happening though okay what's happening so now smart money they bought it in here right they bought it in here to push price back up right so this move right here is what this is a forced move right this right here was not a right move this was a for move a first move made by whoever that runs these market so now what's happening is when the market is moving down the buy orders that they placed in these areas are in a draw down right the buy orders that smart money placed in these areas are now in a draw down okay so now they don't have to use stop losses because their pockets are deep okay they do not use stop losses like us because they can always move the market okay they can move the market so what they do is they will push price back up into those areas where they earlier bought it from so this right here is what we call a mitigation okay mitigate out of their losses and then once again push the market back down okay so what's the order what's that can I speak uh recently it's it's in uh Euro yeah yeah yeah I'll show you examples okay so people will be expecting like like this is what we can expect because this right here is what we call a mitigation so what is the order Block in here now remember an order block is not a candle okay an order block is not a Zone an order block is a specific price level okay so what is that price now remember that very well okay an OD block is not a candle okay it is not a candle it is not a Zone it is a specific price level so what's the price level like it will be the opening price okay the opening price of the bullish candle that did the manipulation okay so you can take it that way or I will show you examples that way you'll understand so the opening price or is the closing price I'll tell you why you should focus on the closing price okay so simply an order block is a specific price level okay can you understand that the price level that they Ed to push the market up like this okay so that will be your order block so remember an order block is just a price level okay it is not a candle it's wrong okay it is not a is not a wick it is not a it's nothing it's just a price level okay so something like that can you understand that hope that's clear okay so yeah and the next thing is now what's the breaker block okay what's the breaker block remember like a higher time frame order block is always a lower time frame breaker block okay a lower time frame breaker block so what's the breaker block the breaker block will be the last down candle before the manipulation okay the last down candle before the manipulation is what we call the breaker block so rather than having the whole area marked out like this you can always refine it to the breaker that might be in here okay so so something like this this is what we call a breaker block but remember now after today's session you will not call it order blocks or breaker blocks or rejection blocks anymore okay we'll just call it closing prices okay so because like I'll tell you now what we do right now is not purely smart money okay because we have added Malaysian support and resistance into it okay so the way we Mark out U the pois are completely different from how smart my Traders mark it out okay so because we have marked out like we have added support and resistance into it so this way more strong liquidity and support and resistance okay so this will be strong I'll show you okay so something like this so these areas are the areas of interest for us okay so something like this the order block this the breakup block and I'll show you rejection blocks once we get into the charts okay so same thing in here same thing in here now what will the retail Traders do they might think that a double bottom is a sign of a reversal right a sign of a bullish reversal so what they would do is once this breaks they'll expect a move like this right so they'll buy it here stop loss below the equal lows because they think that it is a strong low okay so now not only those type of Traders some people will call this the W formation right the W formation or is maybe a support and all that stuff so they try to buy it here but then smart money knows that there is a pool of liquidity resting below those lows so smart money will push it down like this they'll push it down they'll take out everyone that wanted to buy here and then push it back up like this okay so this is what they would do this is what they would do so now what is the order Block in here okay what is the order Block in here the price level that they used to push the market down so your order block could be from here because why there this is where the last cell started right or is it could even be in here okay it could even be in here because now this issue comes right you have no idea which one to use there'll be too many pois okay so I'll show you how to refine them okay I'll show you how to refine them so once again now this right here could be called an order block so the price level okay it's a price level what's the breaker block the breaker block will be the last bullish candle before the down move okay so a breaker block could be here a breaker block could even be here okay a breaker block could even be here okay so I'll tell you which which one want to use because once we switch time frames you will understand which one to use okay so I will show you examples you get this right about order blocks and breaker blocks now next thing yeah let's talk about these rejection blocks because they are very important okay they are very important so let's see some examples and then um yeah let's see where do we have clear ones that I could explain yeah something like this something like this is what we call a rejection block so yeah if you watched the previous videos you know how we use the base of the wick as a point of Interest right the base of the we as a point of remember yes exactly okay the 50% forget that okay we're not going to use the 50% anymore okay so we're not going to use the 50% anymore completely take it out of your trading model okay so we're not going to use the 50% anymore we will only be using the opening price of the bullish the bearish candle or else okay like necessarily it's not the opening price of the bearish candle okay it is not the opening price of the bearish candle but the closing price of the previous candle okay the Clos cling price of the previous candle like it's very simple because the opening price of this candle is obviously the closing price of the previous candle right but the thing is like once you switch Brokers you will see some issues right you'll see gaps because the opening price the closing price of the previous candle is here but the opening price of the next candle is somewhere around here you'll have a gap okay so then you'll have no idea which one to use so remember always always focus on the closing prices of candles so because according to support and resistance a resistance is something like this okay a resistance is something like this we call it the a formation okay or some people call this a last V whatever don't confuse the names okay because the names are not necessary as long as you understand the logic behind it it's more than enough okay the names aren't necessary so the formation like this is what we call a resistance of like this okay so now look at this this area right here if you look at it on a line chart what is it see that this formation okay so the can you see this formation right here this one okay so this right here is what we call a resistance okay that is what we call a resistance and same thing this right here is what we call a support okay the V form the a formation and the v formation something like this now obviously this did not hold I'll tell you why because when the market is bearish the supports are not going to hold anyway okay so see this formation is what we need to see a support like this see that this right here okay so a and v okay remember we'll be using the line chart a lot too I'll explain more okay so something like this now what happens when this breaks now first it was a resistance but once it breaks what happens it acts as a support okay simple okay first it act it will act as a resistance but if it breaks it will act as a support so we can expect a move like this okay so it always moves from support to resistance support to resistance I I'll show you examples don't worry okay so simply a formation like this we can call it a resistance a support or else a rejection block whatever you prefer but as as long as you understand the logic behind it that's enough okay so it doesn't matter what name you call it okay so something like this something like this is what we call a resistance okay this is what we call a resistance now also now I'll show you another example let me put the replay tool somewhere on here okay now if I ask someone what is the order Block in here okay what is the order Block in here not the whole thing if you mark it out like that that's wrong okay because what is the order Block in here the order Block in here will be the opening price of the bullish candle the body of the candle or else the closing price of the previous one okay so this right here is what we call the order block this right here is what we call the Rejection block or as according to support and resistance terms what do we call this we call this a resistance and we call this open close levels okay we call this open close l once again names are not necessary okay as long as you understand the logic behind it it's more than because people call it different names okay so if you understand the logic behind it it's enough okay so now look at this look at this price level if I go to a lower time frame do you think anyone will have an idea what this price level is no idea right what is there nothing okay nothing but what happens look at this look at the reaction from that level look at the reaction from that level because why okay because this right here was the 4our order blocks price level that's why I told you an OD block is not a candle it is not a Zone it is a spe specific price level because can you see first of all it acted as a support can you see that tapped it started going up but now it is broken then what happens it will act as a resistance see that okay so simple stuff simple stuff but you must understand the logic behind it okay so simply we will be focusing on closing prices of candles okay I'll tell you why and also now there is a simple rule to this now let's say the market has tapped this already like this let's say the market has already tapped into this resistance like this okay so we will not use this level anymore can you understand that we can't use this level anymore because we will only be using fresh levels levels like this okay so if it is tapped in like if it is tested like this we we we call we we will not call it a fresh level okay it is not a fresh level so we can't use this level anymore there are times when price once again comes back up and then Falls but most of the time it will not it will break through it again so you can only use it once can you understand that okay I hope it's clear and then again now I'll tell you why I told you to use the closing prices of candles okay so I think there was an example on fxcm let's see yeah uh I don't remember if it was gbpusd or Euro USD PC oh yeah it was do you let me show you somewhere around here okay so now if I ask someone what is the order block what will they tell you either they'll mark it out like this candle or it's like this this is what they would do right but I told you what is the order block is it the opening price of this candle no it is the closing price of the previous candle this one right here can you understand that okay not the opening price of this okay so now it's like this I told you use the closing prices of candles right the closing prices of the candles so now but the thing is now the way the common Traders Mark out an OD block is like this right maybe like this or it's from the opening price of this candle the body of this candle right here that is what they callock yeah now simply what you should use is not the opening price of candles remember it is not the opening prices that we're dealing with okay we're not focusing on the opening prices we're focusing on the closing prices can you understand that the closing prices so like you know how candle is formed right a bullish candle like it opens here goes down goes up closes here a bearish candle opens here goes up goes down closes somewhere around here okay so simple stuff so now in here are you going to use the opening price of this candle no opening prices has no significance at all remember that very well okay the closing prices that is what you should deal with because now if I just put a line chart in here on the opening price of I'm sorry if I put a line in here on the opening price of this candle if you go to a line chart where is it out of no nowhere right in the middle of nowhere but if you put it to the closing price of this candle and then check the line chart where is it on the resistance see that okay so always remember to focus on closing prices of candle so now when I say an order block an order block is not the opening price of this candle but the closing price of the candle that is before it that is in here this one can you understand because this closed here this opened here so we do not know why they gave you a gap because that Gap is present on some brokers we don't know why but always make sure you use the closing prices of candles can you understand that because now look at this now most people will tell you oh this is the order block the body of the candle let's wait until price gets here but if you go to a lower time frame look at where price is going to react from okay there it goes where did it react from from here or it's here now do you think anyone will have an idea where it tapped into no idea right no idea so that's why I told you use the closing prices of candles okay always make sure you use the closing prices of candles I'll show you more examples that way you will understand because like the way we Mark out pois here will be a bit different so until you understand let's go through some examples uh let's see where were we the example we were talking about yeah in here let's see yeah look at this one look at this one right here okay now in here if I ask someone what is the order block they might Mark out this thing right right that's the block right for them because the last push up before push down then they'll tell you it is mitigated why price has tapped into it already but what is the order Block in here I told you what the order block is right is it the opening price of this cand but no the closing price in here see that now has it been mitigated has that price level been tapped into yet no color of candle does not matter colors doesn't matter okay so you can even have both the colors black okay like because all you need to do is just use a line chart and then where in the line chart you have these little spikes you can