all right folks welcome back this lesson is going to be on forex and how we can apply this model to the fx market now if you are a longtime student of mine a lot of the things i'm going to talk about in here are going to be very familiar to you i promise you the things that the newer students that just found this channel are going to feel like they're stuck on majority of it is in the free lessons in this youtube channel okay so i'm going to count you to go through those videos and you'll get your answers there okay all right so if we're looking at the euro dollar and i'll let you know that's what this is this is the daily chart for euro i want you to take a look at how price moved above these relative equal highs right here now once it did that this took the buy side or buy stops out of the marketplace here then it started going lower what would it likely be reaching for next well it took buy side out here what do you think is resting below here sell stops or sell side liquidity now just to the left notice these two little devils here relative equal lows and with this one and this one we have two areas of sell side liquidity notice this candle here which happens to be monday's trading or yesterday's trading this low did not take out that low yet notice that so we have unfinished business below here and potentially below here so if this is a daily chart even though we've come from this high and had three consecutive down close candles what is the bias the very next candle what's the bias going to be bearish we're anticipating bearishness going in so let's take that and flush that out a little bit more so here is your chart that would be annotated and you have this level in your chart while you're learning it's important to have these types of things on your chart over time all you need is a pad and something to write with and you'll write down the levels majority of time the only time i'm showing a level on my chart is for teaching purposes i like to keep my chart clean and that way i'm not forcing that bias if i see something that would allow me to like negate the whole premise that i went into the market with and either reverse or move to the sidelines i want that clarity now i say that and some of you purists in here that just simply want to do everything i say and hang on every single one of my words don't avoid or don't try to do it without having annotations like having levels drawn on your chart because you need to train yourself to see it and what i mean by that well having these relative equal highs highlighted your buy stops would be resting above here and the market will go just above that a little bit and then once those buy stops are taken for anyone that's short they're getting knocked down in a loss and that flood of orders to be buying at the market is counterparty to individuals that want to sell short so smart money is selling short up here with the expectation it's going to go below this low here below here and potentially below that low down there so today's trading we had the open it rallies up a little bit then careens through the short term low here and below the relative equal lows here not by much we'll see it but it's still there now what level on the downside after this day close if we're looking for lower prices what could be expected to draw to obviously below here and below here but what price level 109 big figure so the big figure numbers okay or the zero levels they're very influential because there's lots of liquidity that is used around those levels a lot of commerce a lot of business transactions that come in just for the sake of simplicity 0 0 level to 20 levels the 50 levels and the 80 levels so i dub them institutional price levels i teach that in the free videos in this youtube channel too all right so we're going to drop down to an alloy truck but before we get into that i'm going to revisit the swing trading idea that i taught highest up close or opening in this retracement up and the lowest open or close is here so i left the highlighted candles so you can match that up on yours and then we have this old low so below this olaf it goes below that how many pips can it go below that well we have the big figure 109 right remember the previous chart here watch over here that's essentially the 1. 09 big figure so do we have any levels in here on the fib that correspond to that well we have 1. 0919 that's possible then we have 1.
09 that's another level that's possible and we have 1. 0901 essentially almost the big figure right so we have a standard deviation from this swing to here if this is broken these are only true if this low is broken okay so this is a falcon point and this is a fulcrum point so how do we know which level we're going to aim for well we have those relative equal lows at the 109 big figure level and then we have our fib calling for these levels down here in the lowest one without going through 1. 09 is this one here all right on the hourly chart with our buy side liquidity pool level here the market trades up into that area absorbing all of that liquidity then breaking down takes out a short-term low here and here and here retraces up in breaks lower then we go into today's trading the fifth prior to the day starting we know that it's likely to draw below here and then down to that 109 big figure have a lot of convergence around that 109 big figure at the beginning of the day at midnight new york local time that's going to be right in here if we see the market rally up which is what we want to see we want to see a protraction in the marketplace where it starts to go against the expected direction of the move intraday so if we're bearish and we're looking for that 109 level to be treated to and attack the liquidity below here preferably we want to see it rally first that's the judas swing okay that mark of protraction is what we're looking for for manipulation part of my concept power three which is accumulation manipulation distribution okay so once the day begins at midnight we're anticipating a move up what's it gonna be trading up into this imbalance in here okay so once it does that it kind of like forms the daily high and then the rest of the day you're gonna be looking for distribution throughout the day looking for lower prices so inside that little shaded area we're going to use that going forward so let's drop down to a lower time frame 15 minute time frame here is that imbalance that doesn't look that clean on a 15 minute time frame but the hourly is what we're framing it on okay so the market trades up into that here is the midnight new york local time candle on the 15 minute time frame chart opening price is here extended out throughout the day that is your midnight new york candle opening price preferably if we're selling short we want to see price trade above this opening price this is where smart money is accumulating short positions see that so the algorithm goes higher once more higher once more higher and then again right here and then begins its descent into the daily range low now what's occurring here this is not buying and selling pressure the algorithm is offering constantly price above this opening price now every single time it rallies up just because it does that doesn't necessarily mean that it's a time for you to get in but when you couple that with time of day and price it becomes a lot better notice we have an imbalance in here so the fair value gap there and price runs up during the new york open kill zone okay so i dubbed this specific time of day between seven o'clock in the morning new york time to 10 o'clock in the morning this is specific to 4x okay these times are specific to fx payers if you're going to trade an index don't worry about that you can work with the 8 30 to 11 o'clock in your local time but for 4x the algorithm is going to operate on these specific elements of time so if we're looking at this in balance here the market runs up and it overshoots the imbalance a little bit but what's it really go to the last closed candle which is a bearish order block how do we know there's a bearish order block because we have the imbalance here and it's trading back up into after a nice move lower so this displacement fair value gap lasts up close candle touches it there's your bearish order block dropping down into a five minute chart everything being as it was on the 15 that's that order block here just being shown on a five minute chart but i'm adding now the annotation of the new york open kill zone seven o'clock in the morning begins here at the end of that line segment and ten o'clock is here so everything underneath this end the trend line here and below this part of it this all is during the new york open kill zone so you're hunting your setup for forex payers within that little block of time so during this time you're hunting your setup what price are you looking for preferably at or just above the opening price at midnight now if you are a new york session trader you want to refer to the opening price at midnight but then you want to recalibrate at 8 30 and we'll look at that in a moment but for now just notice looking at this particular day on the economic calendar we had a high impact news driver at 10 o'clock in the morning it was the ism services pmi number now before you want to start sending me emails or start sending me essay questions in the comments section of this video about what does the ism pmi number do what's it i don't care what these numbers are really discussing i don't care i don't care about the raw data i don't care what the expectation is i don't care okay what i'm expecting is the volatility in the marketplace at or around these specific times because the algorithm is going to use that injection of volatility to facilitate trades now is it trying to give you good trades no it's trying to move and rebook and reprice to levels to allow those in the know to participate it's a rigged game you're not supposed to be in it not consistently profitable let's say that way but for those that are in the know they're looking for these types of signatures and price action so they know what they're looking for in terms of when they're going to operate so as a technician they're looking for a specific element of time which is encapsulated with this segment right here seven o'clock to ten o'clock so that little bracket of time right there on a five minute chart you're hunting your setup what is the thresholds that make it high probability well if you're going short or looking to go short you want to be above the midnight opening price that's here extended out in time but now once we hit this order block here that was during the early stages of the new york open right around the seven o'clock hour the market drops and then retraces back into that news driver here at 10.
so what's happening here is look closely with this swing low it went below this low here and then it rallied back up once more above the opening price at midnight does it take out this high no why doesn't it take out this high because it has an imbalance here that imbalance tells you this is an intermediate term high if we're bearish it shouldn't take this high out now again i mentioned this in a recent video i think if i'm not mistaken it was episode 12. i'm going by memory so please don't roast me in the comments section if that's the wrong one but it's basically what i'm talking about intermediate term short term and long term highs and lows or swing highs and lows a imbalance or a fair value gap associated with a swing higher swing low in this case this is imminent term high not because it just simply has a imbalance but because the narrative is we're expecting lower prices and it went above the opening price at midnight and the imbalance there when it retraces back up into this fake run ahead of the news driver at 10 o'clock the news if you will this movement here is only running right back up into the bearish order block last up close candle the body we don't i don't like to use these long tails and wicks i'll refer to them but i'd like to prefer to annotate if i'm going to show it in my examples or look to price returning back to the body of the candle right there so this return into that order block sets the stage for another move lower we get a swing high lower high to the right of this candle and a lower high to the left of it here so we have three candles making a swing high so we start looking for displacement and movement lower but looking closer after we had that shift in market structure here on a five-minute chart it retraces back up fair value gap parish order block and news this is the wild card okay when you have high impact news drivers this is going to many times scare you out of the trade or stop you out in the words if you went short back here and you started trailing your stop loss this is what that's designed to do take you out so if you're short back here or here or here how are you protecting the trade you're putting a buy stop above recent swing highs so they're jamming it up against that back above the opening price because your buy stop is going to flood the market with buyers willing to pay a higher price than it was here before it runs higher and you're going to buy or those individuals that have their stops they're going to buy the counterparty side of the smart money that wants to sell short because every buyer has to have a seller every seller has to have a buyer so that's what's occurring here but inside this shaded area i want to show you how this model is applicable here in fx so here's the four minute chart we were just looking at five so we start stripping down this price leg here and we're looking for any fair value gap do you see it pause the video look for it all right i'm about to show you this candle is low this candle is high there's your fair value cup isn't it interesting it just goes right up into there closes that in then and only then the market starts to aggressively run below the short term low here and then reaching into our objective down here at that 109 big figure now it doesn't quite get to 1. 09 even but it does get to our fibonacci extension for the standard deviation it does get down to the old relative equal lows on the daily chart which is what that blue line is and look at the bodies respecting that level not much movement below it now for all of you raw dogs out there okay this is too much michael you're over complicating it you're confusing me michael you're talking about the midnight candle for the opening price and now you're talking about the 830 which one do i use why do i use it this that i don't think all right if you're gonna be trading fx you're gonna be using the 8 30 in the morning for new york session trades but refer to the new york open at midnight as well if the opening price is lower at the 830 than that of the opening price at midnight use the lower one reason why is you want to set the minimum threshold for a due to swing or market protraction to the upside when you're bearish and obviously everything that i just said would be reverse if you're bullish you'd be looking for a move below the opening at 8 30 to go long after it moves below it but we're focusing primarily on the shorting opportunity here in hindsight so that way you can get a better feel for how to use this model with fx so there's a subtle little group of nuances that you have to be aware of when you're looking at fx but it's not terribly you know harsh it's pretty easy to work with so we have the market trading above the opening price here market protraction due to swing it rallies up and then breaks down in here now this run here above the opening price does it have a fair value gap here's the four minute chart opening price now doesn't look the same because we're looking at a four-minute chart so it was anchored on a five-minute chart it rallies up you break lower fair value got right there trades up into it hammers it beautifully and then displacement trades lower down into that 109.
was it one point zero nine zero one something or other i can't remember i thought i had but it hit it and i think the low of the day was 1. 0901 so not bad i mean it's pretty close to perfect right but by itself you don't want to try to aim for just that level okay because that's the best exit strategy you don't want to do that you want to fluff up your exits with a couple pips i like to teach my students three to five pips and if you're thinking a target is going to be like for instance we'll say 1. 0900 level okay if that's what you think it's going to trade to put your limit order to cover your shorts if you're short at 1.
0905 okay you're not going to get the best exit that way but you have a spread that you have to incorporate when you're working with 4x and fx pairs sometimes and i've had a lot of this happen over the years as a fx trader where my limit order was a little too overzealous i was trying to be a little too perfect and i've had many amazing exits elude me because of my overzealous targeting so be a little bit more forgiving when you're trading especially 4x you got to incorporate the spread and i know some of you have brokers where it's like oh i have a really tight spread let me tell you something every broker has the ability to open that spread up on you you're seeing the best case scenario when that ticker is showing but trust me when it's advantageous for them they'll work it in their behalf not yours so make it easier for yourself just fluff up your excess with five pips okay and if you're really new just use 10 pips okay and if you're struggling with the idea that oh i don't want to do that i'll give up 10 pips well let me show you this would be your entry candle trading right back to this old high here so one pit bat or thereabouts once it hits that candle with this run here that right there would be your entry candle your stop would be right above this candle's high now if you're scared or whatever you can use this swing high and that's fine now in terms of math the entry price would be 1. 096 and your stop would be 1. 09728 hypothetically that's not a lot of pips i would generally round that to 10.
even though it's not technically 10 pips here i would round it to 10 and just be done with it and looking at that model here and you're aiming for that essentially the 1. 09 big figure fluffing it up a little bit so our exit price would be a little bit higher than that you guys see these things all the time and i just feel like using it you know just because i want to be cool the risk is here entry to stop and the distribution to your target down here risk to reward ratio better than eight to one and using a hypothetical 100 000 demo account if you're doing one of those funded account challenges or whatever in this trade here this gives you basically what you're looking for in one trade so i don't know if this scratches the issue for you but the stuff works in forex it works in index trading so it's a matter of adjusting to what it is you're trying to trade and then there's a little bit of rule following that you have to know when it comes to index trading and fx fx predominantly you're working with seven o'clock in the morning to ten o'clock in the morning that's your new york open kill zone okay index trading i'm focusing on 8 30 to 11 and i can take a trade all the way up to 10 40 10 45 and still be okay i'm not interested in taking new trades generally after 10 o'clock in the morning in the fx pair unless there is a news driver like we had this morning with the isem number the pmi number i mentioned earlier in the video so that was allowing me to be a little bit more forgiving with expectations for price you may not want to trade high impact news drivers and that's understandable if you don't know what you're doing but don't be afraid of them now with the economic counter having that high impact news driver at 10 o'clock that extends the new york session kill zone into the 11 11 30 time window because the volatility that it will bring in now i didn't take this trade i haven't taken any fx pair trades at all not for 2022 at least but if you're looking at a model that works in index futures you're looking at that 8 30 to 11 o'clock window and if you're trying to apply this model to fx it's seven o'clock in the morning to 10 o'clock in the morning now the high impact news drivers that come out after 10 o'clock like for instance if you're a canadian dollar trader and the crude oil inventory number comes out usually like 10 30 in the morning you have to make allowances for that and just expect there'd be a likely move on that oil number at 10 30.
