Video Transcript:
In this video, I’m going to talk about how to use higher timeframe charts to first identify the important arrays. It could be an order block, an inversion, a fair value gap, a breaker block, and so on. Based on that, you can either form a bullish or bearish bias or stay neutral until the price shows you something based on the important PDAs you’ve identified on the charts.
This is a weekly NQ chart. Needless to say, it’s an extremely bullish-looking chart. If you look at these two down-close candles, this is nothing but a bullish order block. The overall takeaway from this chart is that the trend is obviously extremely bullish.
Now let’s get to the daily chart. If you look at the daily chart between this high and this low here, we have a bullish fair value gap. If I mark it as a bullish FVG, and if you see here with the price action of 25th September, there was a big wick down, but look at where the body closed. The body is still above 50% of this FVG. So, we can’t turn bearish yet in terms of trend. On the daily chart, the trend is still holding based on this. Now, what happens is if a daily candle closes below this bullish FVG and makes it an inversion, then that perhaps would mean that the price wants to go a bit lower. That’s how we identify some of these important PDAs, and based on that, we can at least draw our bias going into a trading session.
Now let’s look at the 4-hour chart. Here is an interesting bullish FVG that I have marked. This is the 15th September 6 a.m. candle that made this move. If you look at this FVG, it held here, and this is what actually pushed the price to make the all-time high. Here we are again, and it’s again working as support. So, if you look at this chart, the bullish theory is still intact. What would be a big win for the bears would be a candle closing below this. Once a candle closes below this, then this would also turn into a bearish inversion, which the bulls would not want to see. Nevertheless, it’s important to identify some of these PDAs, like this bullish FVG.
Now let’s move to the 1-hour chart. Here, as you can see, I had drawn a bullish FVG. You can see how many times the price came here and then pushed higher—two times and then again higher. Finally, it actually got inverted yesterday. Once this happens, then you can call it a high-probability bearish inversion. Why am I calling it a high-probability bearish inversion? Because this FVG really pushed the price higher, acted as support, and then finally this particular price action made it an inversion. See what happened today after the price faded back into this inversion—right, it pushed back down.
Now, how do we use this information in tomorrow morning’s New York session? For example, if tomorrow a candle closes above this and reclaims this bullish FVG, then that means you have a much higher probability that this low is protected and the price wants to expand again. Until the price is trading below that—in other words, below this inversion—my bias cannot be bullish because we are trading under a high-probability bearish inversion. At the same time, if I look at the 4-hour chart, it’s still bullish. So, when you have this kind of scenario, you have opposing signals. On the 4-hour, it’s bullish and still intact. On the daily, it’s bullish and still intact. However, on the 1-hour, which is also a higher timeframe in my consideration, you have a high-probability bearish inversion. For that duration, until we are hanging in between these bearish and bullish PDAs, my overall bias for the market is neutral.
That’s how I use some of these PDAs—inversions, order blocks, and so on—to determine what the bias can be. Right now, as I said, it’s neutral for me. But the moment a candle closes above this inversion, my bias would start to turn bullish. Once this inversion is reclaimed, it would mean that very likely the price would expand from here, and that would be in conjunction with the 4-hour chart because that FVG is still holding. What it would really mean is that this pullback is nothing but a move to rebalance this FVG before expanding again. The key is identifying your arrays and then forming your bias based on them.
That’s all I wanted to cover in this video. Hope you’re fine. Hey everyone, it’s Dale here. I hope you enjoyed the video. If you’d like to trade alongside me and our team of prop firm-funded traders every day, then click the link below the video and hop aboard. We’re looking forward to trading with you.
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