Arjo's 2 Candle Rejection Theory (2.0)

I introduced two candle rejection to YouTube about a month ago and everyone L it now we are back but with a Twist we are going to dive deeper into 2 and rejection and how it helps you because if you truly understand 2 and rejection you are most likely in the top 1% of Traders now by the end of this video you will be a lot closer to that 1% of Traders than you were before first we need to understand that fair value gaps tell us a lot about Direction in the market so if we have

a bearish fair value Gap that that means we could continue lower then what we need to understand is the nature of price action is to create a fair value Gap as fast as possible well it's a buy product because evidently like we see anytime we continue higher or continue low in the market sooner or later we will create fair value gaps so that means according to two candle rejection if the first candle stings into this PD right here and we respect it meaning that we have a long Wick at the top right there that means

the next candle can continue continue lower in the direction of the respect so continue bearish and the goal for that byproduct is to then create a new fair value Gap a new expansion phase candle right there as fast as possible and from this new fa value Gap we see the same thing the first candle is a rejection so that means the second candle can simply continue lower right there now this two candle rejection thing happens over and over and over at every single PD array but there's a problem with it and the problem is what

we're going to fix in the next few steps and throughout this video because what do we see right here that we also reached for a swing High a bearish PD so we have this bearish PD and this bullish PD where in both scenarios we are seeing two candle rejection now this means that we are both respecting the bearish PD rate the swing high with 2 rejection that we might continue lower from it and also the bullish PD rate the bullish F right there that we are respecting and might continue higher from now why is this

a problem well let me explain that using analogy so imagine the following we have a tog of War you know the game where two teams pull on both sides of the Rope to see which side is stronger imagine on the left side of the Rope you have team bearish that is pulling on the rope on the right side you have Team bullish that is also pulling on the rope now if both teams are equally a strong then what happens the Rope doesn't move and stays in the middle now think of this as in the market

we would say the Rope is price and if both sides are equally as strong so both sides of the market are respecting those PDS then the price is not going anywhere going to create a consolidation and stay in the middle this is a problem because this is what we ideally want to avoid now imagine that rope again and team bullish is stronger and is now starting to actually move that rope this in the market will show itself as bullish price action and more importantly we will show that we will be disrespecting those bearish PD Rays

so once we disrespect one side so either that bearish or bullish PD we are now free to move and when this is the case we are looking at an extremely high probability area to trade so what we need to know is how we can figure out when one side of the market is getting disrespected and we'll get into that in just a second first you need to quickly understand that price is always moving towards a PD and from a PD meaning that if we are going to continue lower like we see right here then the

cause of that move lower is going to be due to a bearish PD and if we want to continue lower again we see again right here that we continue lower from another PD this creates that ping pong effect where we are moving higher towards a PD we're also rejecting from a PD and then we move higher again from a new PDR exactly what we are looking at right here because we are rejecting from this PD right there we can potentially continue lower but we're also rejecting from this other PD so we now need to figure

out well which one of those two PD rays are we going to disrespect first in other words if we disrespect the bearish PD Ray then we're going higher if we disrespect the bullish PD then we are going lower so this again is a problem that we need to figure out so how do we know if we are disrespecting either side this is quite an advanced process so I've made a free guide that I'll share with you at the end of this video so you can also use this in your own trading so a side or

those PD rays are getting disrespected when two candle rejection in the given pay is failing and when is a twoand rejection failing when we run the rejection now that is a mouthful so let's break that down fully first what is the rejection of the two candle rejection So currently we have two canand rejection in motion from this swing high right there but also from this bullish fair value Gap we see from the swing high the first candle is actually a rejection right there then we understand that the second candle Etc can then continue lower if

we want to follow through lower so let's name this the rejection high if we run this rejection High then we are dis respecting this bearish PD rate That Swing High meaning that we can continue higher now we want to apply the same thing to the bullish PD so this bullish fair value Gap what is the rejection low in this case from this bullish fair value Gap the first candle was not a rejection so the second candle sweeps the previous candle low to then create the rejection again according to the rules of two candle rejection so

the rejection low is this low sitting right there and again let's also name this the rejection low and what do we do next we simply wait until we either run the rejection high or we run the rejection low but what is this run that we are talking about to understand that you need to understand the difference between a sweep versus a run on liquidity when we for example sweep this previous candle low why are we sweeping that a previous candle low like this is simply set a swing point so in this case a swing low

on the time frames below it's liquidity that's where people place their stop loss where they are starting to look for new entries Etc now sweeping happens when we are not comfortable above a high or low so what we're seeing here is both with this previous candle low and also with the swing high that we were looking at is that we are wicking it why because it's fast price action right there it's quite an aggressive move towards the opposite side and why is that sweep so aggressive because that sweep is there to trap people and if

the market traps people like this then it shouldn't release them because it needs their opposing liquidity that stop loss right there to take them out that's why the move is aggressive and then this like we see here this often times results in those Wicks because those Wicks are made up of lower time frame for gaps in other words where we move fast now on the opposite side if we want to know if we are disrespecting this bearish pay or this bullish P Ray and we need to run the rejection High then a run means that

we are comfortable above the high or the low so we are not trapping people this if we skip a few candles right here then we see the first candle is arguably again a sweep right there with that Wick so we are not running the rejection high so nothing is confirmed just yet and we're actually coming from this opposing fair value Gap the bearish value Gap as well right there so if we now want to disrespect this Bearer value Gap and we want to make sure that we are running the rejection highs right there because this

again is then also a new rejection high from this bearish fair value Gap then we need to run those highs and this often times will result in the following what we see right here is that we close above the rejection high with that candle right there and this tells us because we are running the rejection highs we have now disrespected those bearish PD Rays fully so coming back to that rope that bearish team has now fallen and the bullish team is now winning so only the bullish PD Rays right there are still getting respected they

are still standing and what did we mention that price is always moving towards PDS so what is the next PD that price can reach for this swing high that we have right there since we have now disrespected this fair value Gap we have a clear path and a very high probability area to trade where price will run right there towards the next PD rate because there's no bearish PD rate at this moment in time stopping price from reaching that next PD rate so that makes it as what we call the mmt a no resistance area

and this is where we will see the highest probability price action and now we can keep on doing the same because with this swing high it's the exact same thing the first candle from That Swing high does not create a rejection the second second candle sweeps the previous candle High to then create the rejection so at this moment in time we are respecting this bearish PD array then we also have this bullish fair value Gap so what we see eventually sitting right here is that we are now same situation we are respecting the swing high

right there but we are also respecting the bullish pair value Gap so both bearish and budish PD rays are getting respected well are we going to run the high or run the low and what do we see right here we keep on sweeping and respecting that rejection high right there and instead what do we do we close below the rejection low disrespecting this fair value Gap meaning that now we have a clear path again towards these lows right there and the same thing happens over and over and over first link in the description for the

full process discussed in this video and also some extra examples to help you out all right perfect thank you