all right so let's talk a little bit more specifically about ranges again so ranges otherwise known as bracketed markets or consolidations or balanced areas we could talk about them on the individual level or we could talk about them over time the same ideas hold true okay the same conditions hold true the same assumptions hold true regardless of whether or not we're looking at a single day that is balanced so this is a relatively balanced day or if we're looking at what is over the course of multiple days prices that are in relative balance so we're
looking at four days right here where we spent the majority of our time confined to a 200 range that took place between these value areas whereas in this case we're looking at a single daily session down here that was balanced on its own so the assumptions and the approaches are still the same okay so again there's a whole lot of agreement here in a trending Market when we've moved from a trend and started consolidating we go from a period of again value migration where value is being redetermined at new levels whether it's upward or downward
to one of the first signs of a range forming or a trend stopping is we have these inside days with value so we see the value areas up here and then this next day is completely inside of the previous day's value area and this is when we begin to sort of auction sideways and come into a period of relative neutrality between buyers and sellers so it's important to understand the same concept within the individual day occurs within the range over the period of days so while the highs and lows are different we again are focusing
most of our attention within the value area and the point of control the high volume the high participation Zone within this is where we assume is fair value because this is where the most participation occur this is where we spent the most amount of time so since the point of control is the most fair value level within an individual structure and within a composite and by composite I mean what we do when we see a range forming we start to form a composite since the point of control is technically the fair value area we could
make one assumption about getting into position off the point of control okay for one there's a lot of liquidity available in the center of ranges and more often than not the point of control will be near the center and the center is often an area where Traders get trapped okay this makes a lot of sense when you think about how the point of control is fair value this is the most agreed upon level when you're getting into position towards the center or around the point of control this is more often than not a coin flip
because this is the most agreed upon level by buyers and sellers whereas if we're at either extreme it's more likely we are to revert back to this level or return back to the mean so around the point of control within a range the center of the value area this being the most agreed upon level around the point of control this is often an area where price will chop and it's not really the best area to get into position so if we combine both of these positions what we're looking at is right around here we can
see this is the TPO point of control right around here this is not necessarily the best area to get in position you know we'll go into in trending markets when this will be but this is the most agreed upon level whereas when price approaches an extreme we start to see an imbalance and this is where we potentially set up for this reversion to the mean back to this level so there's a few things that we know about ranges since they're in relative agreement or they signify agreement and one of them dictates our response as to
how we will operate when we gain acceptance back within a range so when price gains acceptance back into a previous balance area so when I say range I'm talking about a balanced area uh when price gains acceptance back into a balanced area we're more often than not going to cover this distance so whether we're talking about a composite or a single day so whether we're using this composite or we're looking at this day and this value area what we're saying is that when price approaches this from either the high or the low if we gain
acceptance back within it and acceptance in terms of tpos means two TPO prints inside of this we're more often than not going to auction from either the low to the high or the high to the low so just as an example we'll combine this composite and this also is an 80 rule example which we'll get into price is on the outside of the value area of the structure it gains acceptance back within the structure we have these two TPO prints and what we do is we end up covering the high to the low of the
structure so when price gains acceptance into a previous balance area we are more often than not going to excuse me cover the distance of that level or cover the distance of that range or that area so the area where price is most likely to first stop is also going to be this fair value area remember if we're approaching this from a distance and this was a previously agreed upon level where does it make sense for price to stop the most the most agreed upon level the area where we spent the most amount of time and
that's the point of control so the point of control when we're reapproaching it it is likely the area where price is going to be slowing down okay so the point of control being the area where we spent the most amount of time in this case we'll talk further about the volume point of control and how we integrate these both at the same time so this is the first area that price is likely going to slow down to after moving back to a previous balance area or gaining acceptance rather within a previous balanced area so we'll
close this we can open this and this balanced range right here is actually this period of price action so we're looking at this in the candlesticks and when you're looking at this in the candlesticks you can't really see you can only sort of surmise where the value area would be but again this is why it's beneficial to use something like the TPO charts because we get an immediate idea of where most of this focus and where most of this activity occurs so the next thing to talk about is if price is accepted outside of balance
okay so when we're talking about this range what we're talking about again is the market being in Balance right being in Balance I N Balance so it's in Balance it's in agreement this is fair value right here if price gains acceptance outside of this level so if we gain acceptance outside of about a value area so we'll use now we'll move to a different example we have an inside day of here so we have a very balanced Day within another day within another day so this is a good example of again a tightening range so
here's your value area originally there's your high then there's your high then same story at the bottom we have a range that's compressing now what we'll do is we're going to combine these because we have a composite that's forming even though you can more often not go off the last day if it is that tight so we'll combine this and this is the area where buyers and sellers agreed upon prices the most right so this is the most balanced area within the structure so if price gains acceptance outside of this level meaning to the upside
in this case or to the downside this is considered an imbalance meaning price has gotten away from balance if price maintains acceptance outside of balance in this case we see that it moved outside of initially and then reapproached which is a sign that is likely going to break if price maintains acceptance it'll lead to an imbalance and there are more often than not have us move to a next previous level of Bounce okay so if we have a naked point of control if we have a previous structure it will more than likely lead or price
will more than likely move from this one area of balance to the next area where we were balanced where in this case we did not have anything prior but you'll see how when you look at individual sessions this works we run into naked points of control all the time after gaining acceptance and falling into imbalance after falling outside of balance so if price is accepted outside of a balanced area this imbalance will often lead to the next area balance point of control so that's another point that I should mention so for example let's look at
this composite down here price in this case is a prime example price in this case or we're looking at individual session that is balanced and we're looking at a structure that we auction from high to low from low to high to low to high we're ranging within the structure price finally gains acceptance outside of the structure over here we see that in this case let me draw this better we have a very clear value area price again moves gains acceptance Above This value area so this is a new area for Price where it was mostly
confined over here within this range we finally have started contesting at new prices and the next area that we go to in this case is a previous levels point of control so the previous high volume level within the structure we're looking at initially the high volume point of control for price over here or for volume and then the point of control for the TPO chart so more often than not price will seek out these previous points of control in these previous balanced areas after breaking from balance so remember if price is accepted outside of balance
this imbalance often leads to a move to the next area of balance's point of control now more often than not within a range we're going to expect mean reverting Behavior so you're going to look for the behavior that gives you the indication within order flow that one side might give over the other or rather than you know mean reversing mean reversion taking place but normally price is going to mean revert okay and what this means is price is going to spend time auctioning within so it's going to be covering the range of price movements we're
going to see some Behavior at each level that'll indicate whether or not it is going to be turning or more likely to gain acceptance through so you might look within price action to see if there is a sign a strong price price action at the highs or at the lows in the case of looking at microstructure you might look at something like microstructural highs and lows forming so we'll let this chart load but you are ultimately going to be expecting that prices are going to mean revert so more often than not you'll see that prices
are Bid up very quickly at the range low the range low of the value area and again prices are offered down at the High so more often than not balanced areas are going to be environments where we do have this mean reverting behavior and when you see a range forming you should ultimately assume that we are going to maintain the range okay until you see that we have some type of breakout and some type of acceptance outside of it you should be playing it in the anticipation of mean reversion so we'll look at this price
chart now some of the signs you would obviously look for if you're just looking at Price action if we were moving up to a previous day's value area so what we'll do is we'll combine this and look at how we auctioned with respect to the line and the point on the value area okay so now we'll go back to this chart that's actually not the same structure what am I doing let's go that go for that again well that is the seven so we'll just go to the seventh instead what you're going to look for
is the signs within price action that one side is beginning to shift in terms of control so if we know that this is our value area low this is our value area high what kind of signs and price action might you look for well for example you might look for microstructural highs and lows beginning to form you might look for an immediate response on part of buyers so you see this Wick right here so we lose this structure and we'll get into this when we talk about trap Traders we lose this structure and we're able
to reclaim it and retest it successfully so if you're looking at micro structure in this case just price action you're going to see that a story is told in terms of advance and finally when we begin to show a sign that we are reversing you know this is an indication that likely the level is being respected okay so there are things obviously within order flow that we're going to go over to substantiate this and to sort of build the case for either a breaking or for a mean reverting and acting as support again or acting
as resistance and this failed breakout it's important to understand that when we do have a failed breakthrough level so this gets us to our next point this failed breakthrough the level is often an opportunity that sets up for a trap so when you have something like a value area forming or an area of balance forming what doesn't happen meaning when we gain acceptance to the low and we don't continue to break down to in the next area what doesn't happen is worth paying attention to so instead we gain acceptance through this low we're able to
reclaim this level and at that point we treat this as if it's a new auction and then we're looking at covering the distance of this range again so we're looking at this mean regarding behavior continuing so these are just some more Basics added to the previous range video it's really important to understand that when we're treating a range like it's going to continue like it's going to result in continuation rather than change our entries should be outside of the balanced area so our entry should be on the border of the balance area as we said
rather than for example adjust my chair rather than within the structure so this is the most accepted area this is the fair value area there's a great deal of liquidity here but again it's the most agreed upon level so getting into position here doesn't make sense versus getting into position at the extremes anticipating immune version back to the center so when we're getting into position within a range and we see that a range is beginning to form our entries are often in the best position slightly outside of the value area because what we're looking to
happen is for price to come outside of value and this will go back to the auction market theory for low prices to come outside and for these opportunities to be bid up immediately so we're looking to sort of fish for these opportunities that deviate from this from this balanced area and for that reason when you're trading something like a balanced area or even just an individual range if we see that a range is forming over time there are plenty of ranges on this chart so we have a range over here that formed we have a
brief range that formed over here at the high down here in a single day we had this rotation moving upward over time this ultimately resulted in a trend but when we see that any kind of composite is forming so say for example we are just trading this structure that we're just going over when we see any kind of composite forming if we're trading within the structure and we're trading the lows and the highs and taking advantage of this range our stop should absolutely be outside of it okay so our stop should always be outside of
this balanced area because remember the balanced area is where we are in most agreements so it makes sense for price to move within this balance area in any in any regard meaning or rather in any way that it wants not you know that we place our stop within the structure anticipating the most tight stop possible to put on the biggest position no this is the area where we're in agreement we could expect you know great deal choppy Behavior within here the area to have our stop is outside of this range right it makes sense to
have your stop outside of not just a structural stop right not just getting arbitrarily stops placed from highs or lows or rather using that to arbitrarily Place stops but we're taking and it's not arbitrarily I understand what that sounds like we're actually taking into consideration the range of price values over time to determine where this level should be so it might not be necessarily this structure or this structure again this red line is the value area it would be somewhere outside of this level outside of our original entry so if our entry is going to
be for example outside of this value area in this case our stop definitely needs to be and we might incorporate something like an ATR stop or any kind of other volatility stop to make sure that we are not prematurely stopped out to a position that's going to just mean revert back to the center of the structure so stop should always be placed outside of this area of balance so when we're looking at a composite for forming a composite and this is not the best example because we ultimately have a lot of presence to the downside
but you can see within the beginning of the structure so if we look at we'll undo this if you see the beginning of the structure before ultimately favoring the lows and the last point will be with regards to that the opportunities that we had were very quickly bid up so we're looking at that we're looking at ultimately we'll open this the opportunities that we had within the structure okay did not have much time to spend at the low we had that fake out to the downside that ultimately resulted in a good trap setup but what
you should look at is a very quick response by buyers okay again as I said this is not the best example but we're going to use this to to make the next point which is if price continues to stay had a given area so when price let's say favors the high or favors the low so we're looking at this range right here when price begins to favor one area over the other it's more likely that that's going to lead to an imbalance break okay so more likely that this leads to acceptance outside of this range
we're looking at price fail to move up again lead to acceptance outside of this range and then break down and ultimately what we do is we come to the next sticky area within structure so the next sticky area within structure was a previous range so it again just to drive home that point when price leaves one area of balance it returns to a previous area of balance so we're looking at this prior area of balance over here price returns to this level and even though it moves back and forth multiple times It ultimately makes it
all the way to that point of control so remember we talk about the point of control being sort of I should articulate it that the point of control is sort of a magnet so when we lose an area of balance the next area we seek out is a next or the prior consolidation or balance range point of control
