Video Transcript:
Hi there, this is David from Trader Dale, and welcome to the Trade of the Week. Today, we’re going to go over a short on the NQ futures that we actually took this morning. If you want to check it out on your charts, today is Wednesday, March 25th.
Just to give you a higher timeframe perspective, first of all we are looking at the ES on the left and the NQ on the right. As you can see, early in the day the ES had taken out its London highs and previous day’s highs, while the NQ did not. This tends to indicate that a top has been put in place and price is likely to rotate back lower into sell-side liquidity.
This is all happening pre-market. So when the market opens, we want to see a bit more confirmation, especially around 9:30. You want to see manipulation and some type of divergence. We’re looking at a 15-minute chart here, and as you can see, in the first 15 minutes the ES broke the high, but the NQ did not. That is a sign of a liquidity sweep and a manipulation move. It’s the first sign, but it needs to be confirmed by some type of order flow change on a lower timeframe.
Then we’re going to start targeting these lower levels. We have a level at the pre-market low at 8:30, and then we have the London and Asia lows below that on both the ES and NQ. That SMT divergence is the first sign that this is manipulation and that price is not going to attract buyers above.
When price goes above these highs, it’s in price discovery. The question is: are we attracting buyers or sellers? In this case, we clearly attracted sellers, because the NQ did not follow. This is an obvious manipulation, which needs confirmation from a short-term change in order flow.
So let’s go to the one-minute chart. You can see the SMT marked out here as well. Now we are looking for a change in order flow. This could be an inverse fair value gap or a change in the state of delivery. I prefer the inverse fair value gap because it shows that the bullish fair value gap failed to hold, which confirms weakness, especially with divergence and clear targets below.
What are the targets? We have relative equal lows, which are always a good target. Then we have additional lows and the pre-market low, followed by Asia and London lows.
Once price inverses the fair value gap, we have confirmation for a short. We enter on the close, place the stop above the inverse fair value gap, and target the lower levels. Our main target gave a 2.63 RRR, and if you held further, it could reach around 3.87 RRR.
As you can see, we didn’t hit all targets immediately, but the ES did. This happens sometimes. When the ES hits the level but the NQ does not, we often exit early, because you can get a reversal and give back profits.
This is our bread and butter setup. It usually happens around the open, especially at 9:30. You’re looking for manipulation into a key area, divergence, and then targeting liquidity in the opposite direction.
When price moves with this kind of speed, you know you’re in the right trade. It’s proper delivery and price discovery into key areas. At the open, the market is actively discovering price between highs and lows, and that creates great opportunities.
In many cases, you can catch one strong move like this and be done for the day.
That’s it for today. If you want to check this trade out, it happened on Wednesday, March 25th. You can map it out on your charts and follow along with what we discussed.
Hey everyone, it’s Dale here. I hope you enjoyed the video. If you’d like to trade alongside me and our team of funded prop traders every day, click the link below and join us. We’re looking forward to trading with you.
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