Video Transcript:
Neutral bias heading into Tuesday’s trading session, as price was in consolidation. I needed the market to show me its intent before placing a trade. Nearly 90 minutes in, with rangebound pricing and no trades, I thought my trading day was dead. And then this showed up, and it handed me a 6.5-point short. That’s $325 per contract. I’ll show you the three conditions that flip this from a dead market to an active market, including what this red ring means, and the three things I wait for before every entry.
Hey guys, Dan here with Funded Trader Academy. This is the skill that keeps your account alive, and one of the more difficult skills to master is patience: waiting for the market to show you its hand. If you’d like to trade beside myself and other funded traders, check out the link in the video details below to become part of the Funded Trader Academy.
Okay, so let’s take this from the top. We start off by framing our day from a higher-timeframe chart, usually a 30-minute or a 1-hour chart, using a Volume Profile and layering in some higher-timeframe imbalances as well. Okay. And the most crucial levels we came up with to start the day were the overnight high, sitting at 7864, and the overnight low at 7835.
Okay, and when we look at this, we’re looking at what is going to be the initial thrust of the market right off the open. We’re a few minutes out at this particular moment from the open, right? And we’re looking to see what the initial thrust will be. If it’s up, we want to see this 7864 get retested, and we want to assess what the outcome of that retest is going to be. Right? So we want to see if price is going to displace through here, pull back, and deliver higher prices, or if it’s going to pop up here, fail, and rotate back down.
Okay, that’s if the initial thrust is up. Those are the first two scenarios given this landscape of consolidation. All right, the second two scenarios are the exact opposite. If price comes down here off the initial thrust of the market, okay, we’re going to look for a failed breakdown and possible rotation back to the upside, or we’re going to look for a displacing move through here and the delivery of lower prices.
Okay, there’s also an intralevel play here that’s available in case that develops as well. We have 7864 to 7835. That’s a 30-point range. So it is possible for price to take out the London low, displace through it, and deliver to that Asian session low as an intrarange play.
Okay, there’s also that scenario where price could take out the POC right here at 7855, displace through there, and give us an entry model back up to the high side. Okay, those are all the scenarios that we’re looking to see develop as the market opens. We’re watching the initial thrust of the market. In this case, it’s up, and we’re looking for that to test any of those key levels. 7855 is that POC, 7864 is that overnight high, and that 7835–7836 area is that overnight low. Okay, we’re also looking at that London low at 7845.
So, as soon as we test, we did test. We did not get an entry model; it just ripped straight through it. So, we’re looking to see, off this initial thrust, if we are going to deliver to the high side of price. Okay, we’re using order flow to identify how price is going to respond. We’re using an order-flow footprint called Delta Flow. It’s an order-flow aggregate that plots the imbalances directly on your TradingView chart. Okay, so we’re going to watch as price just opens up here and rolls.
Okay, so let’s pause right there. This is the moment when the market shows me its hand. Why? What’s so significant about this latest move right here?
Okay, the first of three conditions for that lightbulb moment is that I need a bias to be developed, confirmed, or negated. Okay, so remember, coming into the market today, we were neutral. I had no bias in this consolidation. So we observed the initial thrust. It was up, and it failed. And as price came back down to another key level, 7845, that London low, we wanted to observe how price acts.
Okay, so as you can see here on the order flow, two things took place. Bearish sellers initiated right here in pretty decent-sized volume and thrust the market back down. Okay, the close of this candle right here, at 9:55, and the close of this candle at 10:00. Okay, it’s going to close right here. It leaves something very significant behind. It leaves a Fair Value Gap right here.
Okay, this is a displacing move through a key level: the initial balance low, the London low. Okay, we displaced all the way through that. This is the first of three conditions. I need a bias to be developed. Now I’m bearish. Okay, we came up here, we failed, and we came through and displaced through a lower level of interest.
Okay, the second thing this move right here, these three candles right here, did is it gave me my criteria number two. I need a narrative. Okay, so now I have a bearish bias that’s just been developed. I need a narrative. What are we doing? Where are we starting from? Where are we going?
Okay, so what this does, right, is that in this instance, in this particular case, I’m going to look for price to dive into here on a pullback, offer me failure, and deliver down here. Okay, this is now the narrative moving forward. Okay, I have a bias, I have a narrative. That’s my lightbulb moment. Now, I just need a setup, and I need a trigger. Okay, once I get that, then I already know where price wants to go, which is number three.
Number three, the third criterion, is that I need a target. I need a clear target of where we’re going. Let’s drop this thing down to the lower levels and watch it play out again. Okay, let’s watch it go.
So, I’ve got my bias that’s set. That’s been developed. It’s bearish. I’ve got a narrative. I’ve got a bearish narrative out of this bearish imbalance. We’re looking for price to deliver down to this 7836. Okay, so right here, absence of sellers right through here. No. Go. Okay, we have another imbalance, a smaller-timeframe imbalance. I’m looking for a flicker of red, a flicker of red to develop. There it is. Sell it.
Take it to target.
So, let’s recap this video. There are three things I need to take a trade. I need a bias, number one. I need that bias to be confirmed, negated, or even developed. Okay? I need a narrative. Where are we starting from? Where are we going to? And lastly, I need those clear targets. Okay, when those three things are clear, you’re free to go ahead and look for your entry model, your setup, and your trigger, just like we showed here.
Okay, we came into the day neutral, with pricing in consolidation. We mapped out our day using basic structure driven from the Volume Profile and higher-timeframe imbalances. We then waited for the market to show us its hand, which is probably the most challenging piece to all of this: waiting for the market to reveal what it wants to do.
Okay, once the market revealed its bearish intent, we then had a bearish narrative and a bearish target. Once the order flow showed us the shift in control right here, the flash of red, we’re looking for that flash of red and a break of structure. Okay, on those lower timeframes, we then struck.
Okay, we got out of this deal. It wasn’t the most lucrative trade in the world, but it’s a nice 6.5-point base hit on the S&P, just over a 2:1 risk-to-reward ratio, making $325 per contract. I hope this was helpful. We’ll see you guys over on the next video.
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