Video Transcript:
All right, good morning. My name is David from Trader Dale, and today we’re going to go over a NASDAQ (NQ) trade that we did yesterday using a very, very simple technique. Now, there are really two ways to play this. There is a more beginner-friendly way to play it, and there is a more advanced way to play it, and I’ll go into both of them. But I just want to give you an idea of how we formed a narrative for this trade, looked for what we wanted to see, saw it play out, and then used a simple change of state delivery tactic on a 15-minute chart to get over a 2:1 risk-to-reward trade.
This is yesterday’s price action on a 15-minute chart, and I have this in replay. Coming in, we were bearish. If you look above, yesterday’s previous day high had already taken out liquidity. These red and green lines are the initial balance highs and lows of the previous day. As you can see, the initial balance high had already been taken, which is always a key draw on liquidity. So we figured that these highs and levels up here had already been taken. Where do we look next to see where price can go?
Below, we see really nice equal lows that developed in Asia. That’s a very strong draw on liquidity. Then, coming further down, we actually have a four-confluence level, which is huge. One confluence is that it’s the previous day’s low, which is always a key draw on liquidity. Another confluence is that this wick here was the one-minute 9:30 wick before the move on Friday. Those levels are usually taken out on the market open pretty quickly, but sometimes they’re left behind, and when they are, they become a strong draw on liquidity. The third confluence is that it’s yesterday’s initial balance low, which has not been tested yet. And finally, it’s a key pivot low on a higher time frame chart.
So we clearly have strong draws on liquidity. Now, what are we looking for at the 9:30 open? We want to see some type of manipulation that takes out London’s high. Then we want to see rejection to the downside, where we can look for a change of state delivery.
Let’s move the chart forward. On the open, we get that immediately. Liquidity is taken, and then we have a huge 15-minute bearish candle. Aggressive traders might try to get short in that area using more advanced techniques, but today I’m focusing on a very simple beginner-friendly approach.
After that candle closes, many traders think they’ve missed the move. That’s not true, because we still have strong draws on liquidity below. Now we’re looking for a change of state delivery. What is that? It’s typically the start of a series of up candles that sweep liquidity and then reverse to the downside. We also have an order block here, which is really a propulsion block that forced price higher. Not only do we have a change of state delivery, but we also have a breaker block because that previous order block has now been disrespected.
What we want to see is price return into that level and then attack the lower liquidity targets. Stops are usually placed right above the candle bodies, at least halfway up the candle, typically a little above that.
Even a move to the equal lows offers a 2.43 risk-to-reward trade. If you target the 9:30 level lower, it’s almost a 5:1 risk-to-reward trade.
So let’s see how it plays out. Price taps into the level, rejects, and moves lower aggressively, attacking the equal lows first. Target one is hit. Target two is hit quickly after.
This is a very simple manipulation, accumulation, manipulation, distribution sequence using a change of state delivery technique. What makes this a good trade is the clear draw on liquidity. That’s the most important part. Without a clear draw on liquidity and a defined destination for price, this becomes just a pattern trade, and that’s something you should not take. The clear liquidity draw gives us the narrative and direction to build the trade around.
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, click the link below the video and join us. We’re looking forward to trading with you.
Comments
Post a Comment