How To Trade Real Fair Value Gaps with Extreme Accuracy - Carmine Rosato (Full Strategy)

Welcome everyone back to Char Fanatics, the Go to channel for all the very.

Best trading strategies in the world with the very best traders in the world as well. And talking of which, we have a phenomenal trader with us today. I've been super excited for this very episode. I've actually waited years for this. And it's the one and only, the founder of Investor Trade, the one and only Carmine.

Thanks for having me on here.

My absolute pleasure, man. Like I said, we've discussed this on a podcast we did probably almost two years ago now about charts. We were missing the charts, we're missing the strategies. So today's the day and we're going to do a masterclass into not just order flow, but a specific order flow strategy. Right?

Right. Yeah. I think like on our last podcast we could sit down face to face and talk. But like having a visual like we're going to have here really puts the concepts together and the audience can really visualize it and see it and then kind of put it to the test.

I'm excited, man. Where should we, where should we begin?

So what I call this strategy and order flow, however you order flow is, it's the mechanics behind why the market moves. The candles form, the market moves up and down because somebody places an order. We don't know who places an order, but we know there's a buy or sell order coming into the market. So I firmly believe that reading the order flow is the most important concept in the market because you can follow the footsteps of larger buyers, larger sellers, and then follow their trail and then it'll provide high probability levels where the market could either reverse or continue. So this strategy has to deal with combining price action, supply, demand, key levels, support resistance with the order flow and the volume around these levels of interest. So I guess we could begin with, we could call it a four or five step process to this, I'm going to call this strategy the, how I describe it is low volume nodes. So LVN is just low volume node. And this is just like a branch to order flow. And the tool to, to do this with, you could use any tool that has to deal with volume by price. I find volume by price to be more significant than volume by time. A lot of traders draw like a candlestick chart, right. And then they have the volume down here. The volume increases, the volume decreases, the volume increases, that's fine. But this strategy, I find volume by price being more significant than this is volume by time. And now we have volume by price. So let's just say this is at $100, this is. At $50, this is zero. Let's say at $100, there's a lot of volume. And we can see this by the volume building, again by price. Then the market comes down to call it $80. Volume's a little less, little less. And then at 50 bucks, volume's like really, really high. We can distribute volume by price and then volume by time. I find volume by price to be way more significant than volume by time because volume by price will tell us at what price was there a lot of volume or what price was there. Minimal volume versus volume by time will just show us volume at that specific time frame chart that we're looking at. And it, for me, it doesn't give enough information that I can make a quality trading decision off of. Alone, it's good, it works. But alone, I find volume by price to be a lot more leading in terms of strategy. So precision behind it, a lot more precision behind it. Because again, the market's an auction. So look at this as a real estate auction, right? Someone's looking to buy a house at $100,000, $50,000. Well, if the market's coming up to $100,000, do we have a lot of buyers, a lot of sellers? Do we have maybe not a lot of buyers and a lot of sellers? And this gives us more important information about the market than by time. I don't care if somebody buys something in March, June, January. I care about what price are people willing to buy at and how much of it. So that's volume by price versus volume by time. Now, there's a couple of tools that we can do this with. And again, different tools are going to show us the same information, just in a different way. Yeah, so a couple of tools right off the bat, depth of market, which just shows us price and volume. Heat map, which will show us. I have plenty of examples which we're going to get into in a bit. A footprint chart shows us completed transactions, volume by price, heat map, footprint, depth of market, and a volume profile, just a normal volume profile that people could even put on a candlestick chart like I just drew. So low volume node. Four or five steps to this process. The first step we're going to mark for. We want to identify a level of support, level of resistance, or a level of demand or a level of supply. And in this example, let's say we had the market beginning to sell off, and then all of a sudden, during the sell off, the market begins to consolidate for a little time, attack like these Are candles, not just lines. Following this move of consolidation right here, the market then impulsively moves up. This level of consolidation now becomes for me a level of interest to watch at some point in the future for the market to possibly come back down and revisit this level. So this is point number one is establishing a level of supply, a level of demand, or even just a level of support and resistance. We want to first come up with an area of interest or a level of interest that we are watching the market cautiously around. Step number two is then waiting for the market to revisit this level and then have, let's say, a rally up. If we're talking about support or demand, we want to see the rally up. The concept of this strategy is it puts us in the position of large buyers or large sellers defending price is what I call it.

If the market's down, trending, I'm not the biggest fan of trying to catch the market, let's just say long at a demand zone. Yeah. So this enables the market to rally. We will then miss this rally. But the part of the strategy is that this rally right here will make buyers in this example, buyers, it could be sellers. If we're talking about supply factored into the market. And the concept of this strategy is then a pullback or retest of the buyers for large buyers to defend price. So point number two let's talk about now is after the market revisits this level of demand.

After revisits the level of demand, we want to see strong buying activity or selling activity. If we're talking about supply out of that level. Now, why that's important, step number two is because the concept again of the strategy is we want to make sure buyers are factored into the market. This is going to dive into the concepts of low volume. Because on this rally, when we use a tool like a volume profile, we're going to see the volume distribution on this rally up. And what we're going to look for is areas where the market did not transact a lot of volume at the impulsive move up or down from the level of interest. Because that impulsive move up just means that large buyers or sellers are in the market. So then step number four would be waiting for a revisit of this level of low volume. Waiting for confirmation here. Because now we can follow the footsteps of the large buyers that were in this rally to then follow their footsteps and take long and look for continuation up into profit to the upside. So it's a multiple step process. And why I like this strategy is because we're not really getting in at our level of interest. We're letting the market kind of bounce or sell off in the level of interest, prove that buyers or sellers are there. So we have evidence that the buyers or sellers, and then we look for a revisit of those buyers and sellers. And if they support the market there or resist the market there, we just know that they're really strong and they have an agenda to either bring the market up or down. I think it's going to be good. When we get into the visuals, you're going to see this on the charts, but it's important to use the volume on the move up or the move down of supply to see where areas of low volume come from.

Okay. Okay. So we love it because obviously it's definitely giving you that confirmation. But more so than just confirmation because people who are using just normal candlesticks could say that. Right. We're actually understanding what's going on behind those candles, where those orders are, where the auctions are taking place and where the stronger of the buyers or sellers are taking place.

Right.

Like you said, the low volume areas.

Right.

What we're interested in.

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So now we can even flip this to the level of supply. So let's just say we have the market moving up, we have a period of consolidation and then we have an impulsive move. We to the downside, this level right here becomes our level of interest. We then wait for the market to revisit this level of interest. Now, I think it's important to understand why the market will revisit levels or why traders stop out is to pick up liquidity. The concept of why a level of resistance forms or a level of supply forms is because there were more sellers passively than there were buyers.

Yeah.

So the idea here is that whoever did not get to transact in this area, the market will revisit this area to then I guess sellers would look to reload. We could Say, to get filled more position if they have an agenda to bring the market down even more. Now, making this concept even more powerful is that once the market revisits this level of interest and sells off, we know, number one, sellers are here at this level of supply or level of resistance. Number two, sellers are here because they just rejected the market again. And then, number three, when the market aggressively sells off, it's going to. What we look for is levels of low volume on the sell off. The levels of low volume indicate that the selling volume was so strong that the market moved down with ease, enabling an area where the market can possibly revisit again for those sellers to reload for more continuation to the downside. So it's just very powerful because we're not getting in on the first sign of buying or selling. We're getting in once they prove themselves and then a retest where they can look to reload. Of course, a concept with the market is that a large buy or a large seller for them to actually get filled and facilitate, like a large order in the market is they need to buy when everybody else is selling and they need to sell when everybody else is buying. So this concept kind of validates that even more that when traders are stopping out or when traders are looking to get shaken out of a position, it's a very good opportunity for other larger participants to reload in the market. And again, we just follow their footsteps.

So just to reiterate, when that price comes down and we actually revisit, there's going to be those traders who are loading up longs.

Exactly right.

Which is then adding, you know, providing that liquidity as well. And then same with that rebound, if we then come back down and there is a. An area for us, same thing once it rebounds again, more longs.

Exactly. And then even this impulsive move up right here will attract longs. They'll say, hey, the market's bouncing here. Let me get in long. And again, putting context together, this was an area where sellers were present here. So now everybody's buying this move where a seller is providing a perfect opportunity for the market to reverse. And this right here is where we're looking to trade. Not so much up here for this.

Specific strategy, 100%, because you could trade here, but then obviously the risk is much higher versus the confirmation of getting these moves down. Yes.

And identifying this and that also, this just puts you in a better position because we've proved the strength from the buyers or sellers already and where again, we're just following their footsteps. Instead of us trying to be the first seller here or the first buyer if the market's selling off.

Exactly. Yeah.

So a couple pros with this strategy is number one, we're obviously following the footsteps of other larger traders in the market.

Yeah.

The concept of support, resistance, supply, demand is obviously we're looking to find these large buyers, large sellers, and then get in on a revisit of this with using volume by price. It enables us to get kind of pinpointed entries. Yes. More than candlesticks. And again, this is why I'm a big advocate and why in my strategy it's so important to use volume by price is because let's just say we wait for a five minute candle to, to bounce the market off our level of interest.

Yeah.

By the time a five minute candle closes, the market may be all the way up here or all the way up here versus if we see some activity down here, what's stopping us from getting in long down here before that candle develops. So really good pro of the strategies. It gets us in with a better.

Risk to reward ratio and it puts us in the position of following the footsteps of larger buyers and sellers. And a very important concept with this strategy and even any other strategy is keeping risk consistent. And I think this is a very important concept is yes, it enables us to have better risk of reward and follow the footsteps of other large participants. But not even this specific strategy is when we keep our risk consistent. It enables us to follow that strategy, have losses and the wins will overtake the losses completely. So what I mean by that is is figure out how much money you are willing to risk before you enter that trade. For some people it could be 100 bucks. And in this example, let's just call it $100. I'm willing to risk, call it $100 per trade if I'm wrong on this setup.

Yeah.

So the market's selling off, we bounce up, we leave a level of low volume. We're waiting for the market to revisit this level of low volume and bounce up. Let's say we get great confirmation to take the market long as it's bouncing off of this level, call it right here. And our stop loss is under this low right here. Depending on the instrument, whatever you trade, let's just say our stop loss down here is about $50 if we trade just one contract or one lot. If we keep our risk around a hundred dollars per trade and it's consistent. What this will enable us to DO is trade two contracts because 50 times two is $100. Now, let's say we enter. Let's say we get a really late entry and our entry is all the way up here. Again, our stop loss down here now is maybe $100.

Let me do that.

We're losing our black penny.

No.

Now if we're entering up here, we can only trade this with one contract because our stop is all the way down here at a hundred dollars. But now let's just say we get a really, really good entry point and our entry is right to our stop loss. Let's say our stop loss is now only 20 bucks away. We can theoretically trade this with five contracts if our entry is here. See how we're adjusting our size relative to the risk? Yeah. I think a biggest misconception and it's so important with the strategy is keeping the risk consistent and adjusting the size relative to the risk. Every trade is going to have a different stop loss. And I'm going to talk about where I place my stops, where I place my targets, and where I get my entries from. But I think it's so important that no matter where your entries is and relative to your stop loss, adjusting the size relative to that risk. Because if we enter the trade with the same position size on every single trade, some trades we're going to lose $100, 300, 500, and we're going to be digging ourselves in the hole even more. So when you keep your risk consistent and you adjust your size, every loss will be consistent in the same dollar amount.

Yeah.

And what this enables us to do is now let's just draw a P and L curve. Let's act like this is our P and L curve over a month period. What this is going to do is if we focus on risk to reward ratios with this strategy, I get risk of rewards, and you're going to see it in my tree. It's five to one, six to one. I get very high risk to rewards because again, I'm placing myself in the position of large buyers and large sellers. Let's say we get five to one risk to reward ratios and our average loss is around $100. That means our average win is around $500. One win will put us up. Call it 500 right here. We take one loss with consistent risk, a hundred dollars. We take another loss in a row, another hundred, another loss in a row. We just took three losses in a row and we're still up 200 on our P. L curve. Yeah. Versus, if you don't keep your risk consistent, you win 500 on one trade, you take a losing trade, you lose 300, now you're down. Next trade, you lose a thousand dollars. Now you're way down in your negative P L curve. And if you don't have good reward when you're right, it's going to take you a while to build this P L curve up. So it's so important with this strategy, with any strategy to keeping the risk consistent and adjusting your lot size, your position size, whatever you want to call it, relative to the risk. And everybody's dollar amount is going to be different. Mine right now is between 3, 504, 500 per trade. And if I look at all my losses, it's between that amount because I'm not having larger losses. It just puts me deeper in a hole. Yeah, and I think that's important concept and that's a pro of the strategy with better risk of reward. As long as you keep your risk very, very consistent.

Of course.

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And would you say that the strategy itself, is it fractal in terms of like I know we were talking probably a bit lower time frame. Can you also apply a higher time frame?

Yeah. So I'm going to show you an example of a higher time frame chart. But a lot of this is lower timeframe and I guess you could say scalping.

Yeah.

I find the best opportunities come in the first two, three hours of the market being open. I like hitting my setup with these trades and walking away and going enjoy the rest of my, my day behind the screen side of the screens. But I find the volatility is important and when there's volatility this works very, very well because volume again moves the markets. You want to make sure that volatility is in the market. But yeah, in the first two, three hours I find it to be the best. You can apply this for longer term trading for sure. I just find that some of these moves happen in 5, 10, 15 minutes and that's it. They happen quick because again we're looking to capitalize on the quick short term movements in the market. And let's talk about cons now. So the cons, and you're going to see this in the examples that I show you.

Yeah.

The cons are, is that sometimes, let's say the market rallies and we have a really strong bullish move. Sometimes there will be a lot of levels of low volume. One right here, one right here, maybe one right here. And it'll be hard to kind of distinguish between should I watch the pullback in here? Should I watch the pullback into this one? Should I watch the pullback into this last one down here? So sometimes it's a little difficult to distinguish this. And this is why it's so important to understand the first four or five points that I mentioned in the beginning of this video.

Yeah.

Is because it's important to gauge where the location of this formed and it's, it's, it'll be more effective. It's at if the market bounces or rejects at a level of interest. So again we wait for the market to bounce off a level of demand, pulls back, bounces on this bounce, it's going to leave a level of low volume where then we look to play the pullback, cast the market long. It's more valuable to play an area of low volume after the initiation move of the level of interest versus after the market maybe made an extended move. And I'm going to show you all a losing trade that I took. And the losing trade that I took happened to do with initiating a trade at the highs of an area of low volume versus initiating it at the lows of where that move initiated from. Yeah, so that's definitely a con to the strategy.

Multiple areas.

There's multiple areas and I'm going to show you a losing trade and that's kind of visualize it a lot better. And I would say that's really the only con, a pro and a con of this as well. I guess we could combine this into one is let's say we have the rally, we have our level of low volume right here. We're waiting for the pullback into it. Market pulls back. Sometimes the market just blows right past it and doesn't react to it at all. And there are some confirmations, which again is a pro and con, that I will get in long or I'll play a bullish position here. Just because there's an impulsive, aggressive, violent move down that happens so quickly that I act upon it. Yeah, a portion of the strategy again is how I view the market is treating where there is pain in the market. Because where there is pain, there is gain. Yeah, it's not, you know, really good to say that, but it's true. Where there's an edge is where there's pain in the market. So when the market's aggressively and impulsively selling off and you're gonna have a lot of traders freaking out, selling, selling their position, stopping out. And the quicker this happens, the more impulsive, the more aggressive, the more violent this is, the more times that I'll just simply long the market because it sold off a lot of points in a five second period because of that impulsive move. Because that impulsive move is an active trader stopping out. And these buyers that we're spotting here to again defend price, where we look to capitalize on that upside move. So it's a pro and con because sometimes it just impulsively moves down and keeps selling off. Yeah, and sometimes it's a pro because we get the impulsive move up, happens so fast. That a lot of traders can't act upon it or when they act upon it, they're acting upon their emotions. And this is where there's a great edge from that right there. And it's a pro and con because sometimes the trade stops you out in 10 seconds, 20 seconds, or sometimes you get a great entry and your risk is like one point away and you could trade with such large size because your risk is so small and your reward is so high. That's when we're talking like 10 to 1 risk to reward ratios.

Incredible. Incredible. And then the only other con I would mention in terms of like if we're scalping, as you said, the specific time window. And again, just to, as I always mention in every episode, cons aren't necessarily meaning it bad. It's more so just what to be aware of. You know, if you're going to look to implement this or look at this deeper, these are the things to be aware of that could be hurdles or challenges or just pain points, if you will. And one just being that time window, then if we're focused on a specific time window, those with jobs, for example, or particular routines might be a little bit difficult to execute exactly how we're showing right here.

And another, I guess you could say con is that you have to be very focused. I feel like a lack of traders have focus and patience and you really have to just be dialed into the charts and dialed into like the shape of the profile and dial into the candles because you could easily miss this. It happens. And if you're not focused and watching this, it could happen so quickly and you just missed a great opportunity. You know, you have to be focused in this strategy. In any strategy, you have to be so focused and laser and lasered in.

I'll say another pro though is actually this is the real way of seeing the order book and order flow, you know, because a lot of you probably seen it, a lot of concepts out there will make out, this is order flow, this is volume, etc. But it's not really the true essence, while this is actually the real auction, the real orders. So that's definitely a pro, right?

Definitely a pro. And what I find is BS in this industry is that a lot of traders call this a fair value gap. Like a lot of I was going to mention earlier.

Yeah. But I didn't know if that would.

Be offensive to you.

So in the ICT world, I just found this out because I've been posting about these trades and everybody's like, you're just treating A fair value gap. This is why fair value gaps form. And it's still a little different. The concepts of this is relating to an auction versus the concepts of a fair value gap is just a pattern of a candlestick chart. So really this is just the underlying driving forces of a fair value gap. Again, fair value gaps don't have to deal with supply or demand zones. But why I look for supply, demand zone support resistance is because we want to find the buyers and sellers there. So again, just to reiterate this point, the market sells off, we have this level of demand.

We can mark this as a demand zone. Two days later, maybe 30 minutes later, maybe even three weeks later, the market rallies and then revisits this level of demand. We revisit it, it bounces on this bounce up. What traders will see is a really strong rally candle to the upside and then they'll mark their fair value gap. Somewhere in this area they'll see a candle, right. And then they'll mark. Maybe there's no wick the mark the. The bottom of this candle and say this is a, this is a fair value gap right here.

Yeah.

But the concepts of it is on that green candles to the upside, the market moved so strongly, so violently, so aggressively and impulsively that there was so much buying activity that the market either skipped, jumped, or because it was so aggressive, not every single buyer was able to get filled on that move. So the concept is waiting for a retest of this to then play the market long and capitalize on that move. So it is similar to a fair value gap. I find you saying it's a fair value gap is wrong because this has to deal with order flow.

Yeah.

And the driving mechanics of the market.

Which is this is telling you why it's a fair value gap, essentially. Right. Versus here's just, as you say, a chart pattern to look for, utilize. This is giving you the actual reasoning, the why, which is actually more powerful because once you understand that, your confidence in it, your understanding of it, and then your application and execution of it is so much stronger.

Right. And I feel like a lot of the concepts fair value gap, whatever these traders may use, I find that the driving mechanics behind the candles is the order flow. So if you can read that order flow, it's just going to give you the truest, clearest picture. And I feel like it'll give you more confidence, like you said, and it'll help you like, no matter what gets done, an order has to be placed. You see a green candle, you see a red candle. An order has to be placed. So being able to read the orders kind of gets you in. I don't want to say before the candles, but it tells you why the candles are actually moving and why they're driven. And it gives you just. I find more reliability and more confidence versus you have other traders that don't even use order flow, but they see the patterns and that pattern gives them the edge in themselves. And that's totally fine. It's just that this gives me confidence and reliability that I can't get order off of a candlestick.

Exactly.

And off of a candlestick alone. This strategy won't be as effective is because you need to see the volume.

100%. Yeah, 100%. Is it time to pull out the charts for sure.

Now? Let's get into the. Yeah, visualize all these charts now. So, all right, so I'm going to show you four different trades. Two of them are going to be a. One's going to be a long, one's going to be a short. The next trade is going to be a losing trade because I want to highlight what the setup looks like and how it looks so good and some mistakes behind it. And then I'll show you like a. A bonus setup that kind of makes you think outside the box a little bit. So the first trade is going to be a $15,000 profit. It's a four and a half to one realized versus reward ratio. And again, like that's the biggest concept is that I feel like with this strategy it just enables me to have higher risk to reward ratios. And that kind of takes the pressure off my back a little bit because I don't need to have a high win rate. My win rate could be some months, 30%, 40%. It could be a lower win rate. But I know I can have the backbone of my risk to reward outweighing this. When my losses are 3,000, 4,000 and my wins are 15,000, 20,000, I know I could afford three losing trades in a row. One winning trade will just make me green. So this is a 4 1/2 to 1 risk to reward ratio. As a $15,000 profit, I was risking $3,300. And in this chart right here, we could just see a simple rejection that I've highlighted by this pink box labeled Sellers where my entry was short and then I took profits. I didn't even get a large portion of this move, which is pretty crazy to even think about it. It was just a simple, quick scalp off of large sellers defending price. And up top here we could see a supply zone where the market rejected. And we're going to label this setup as short, low volume node into 5360. And that's another thing I want to talk about. I think it's so important to.

Label the setups that you take. If I could take a setup and I could say, hey, this was a low volume node, hey, this was a bounce off demand. This was a rejection of a level of supply. If you can label it, it'll keep you on your toes to make sure you're taking a setup that you know is out of your playbook. And that's the point of this setup. The strategy is this is just low volume nodes and this is one strategy to my whole playbook. There's so much more, but this is just the most effective that I've been using. The past three months. I've made over 300,000 just using this strategy right here. Incredible. So this was something I'm watching, was a 5360 was a rally into this. And if sellers appear, another word for offers is sellers. I'm interested in a short targeting the low of day. Here's our level of supply. Here's the period where the market consolidated followed by an impulsive move to the downside supply and demand is. You want to find the period of consolidation prior to an impulsive move up or prior to an impulsive move down. If you're talking about supply, do you.

Know what time frame this is?

This was, I believe, a 30 minute or a 15 minute timeframe. And you can find supply demand zones, key levels off any timeframe. 30 minute I use.

Yeah, consolidation.

15 minute, 30 minute, 1 hour, 2 hour, 3 hour, 4 hour, daily, weekly. This, I believe is a 15 minute or 30 minute, but the concepts are still the same that the data behind each time frame is going to be the same. It's just showing you a little bit of a different picture course. So here's a revisit of the level of supply and then the market pulls back and rejects that supply. Again, we're not looking to take with this specific strategy. We may have missed the sell off from supply. We may have not seen confirmation there. This sell off from supply is just validating that sellers are there rejecting the level of supply.

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Here's another rejection. In the overnight session, the market rejects. We open up. And when we open up, we're now in a downtrend, putting in lower lows and lower highs from where these green lines are right here. Lower lows, lower highs in a downtrend when the market opens up. Now here is a very good example of a volume profile to the right compared to the chart on the left. Again, a volume profile just shows us volume by price, not volume by time. So we can see all the prices highlighted here, 5,385 all the way down to 5,315, which is just the exact range of this chart right here. Yeah, this is a volume distribution or volume histogram of volume at specific prices from this chart at this exact moment right here. So between 5375, 53, 70, if I just turn on the pen right here from 5375 to 5370, there's an area of higher volume in this range. We also have some higher volume here around 53, 56.

You identify it by, of course, the.

Increased, increased volume distribution. So this is a volume distribution when the bulges are higher, the volume is higher. When the bulges are lower, the volume is lower. And why this is significant is because where I just highlighted these two areas of higher volume in between, this is an area of lower volume compared to the rest of the profile previous previously in the day so far we could say there's an area of low volume here, low volume here, but it's not as significant because this is in between the bulge of two higher volume areas. Another reason why this is significant, again this is kind of where context is important is because prior to this the market had rejected the level of supply and sold off. We know it's safe to say sellers are factored in at this area. When the market sells off then. Now intraday, this is the 9:30 US Open to about 10:20 US Open. This is about 50 minutes in time. We can see the market selling off right here. Now what caused the market to sell off we don't know. But we know there's aggressive selling here because this area of low volume right here and this is why I was then watching for a rally into 5360 area of low volume because this would be an area where the sellers were very aggressive, the market sold off. And why these areas form is because the market aggressively moves down or up. And because of how aggressive and violent it is, it didn't spend much time there or didn't really transact much volume. Yes, that's why these areas of low volume form is because not much time and not much volume was spent there. If there was more time, maybe we were consolidating here for like 20, 30 minutes, you wouldn't see this area of low volume. But because the market basically moved through these 5360s, 5365s with ease and didn't spend much time, this becomes our level of low volume to watch the market rally into. And if it rejects, we get confirmation. I'm going to show you that we look to play, play the market short and play a reversal here. Now it's so important again to use confirmation at these levels of interest. We can't. I said the pro and the con before was simply waiting for an impulsive move up. That impulsive move up is confirmation in itself. But just entering because we're at a level of interest is not viable because you want to put yourself again in the position of those buyers and sellers. So in this example we could see after this level forms, about 10 minutes after we rally into this and we do reject and this was a setup that I did not take, despite the rejection, being kind of perfect. Now, what I pulled up here is a heat map. In very simple terms. We could see a volume distribution here to the right buy those specific prices. You could see the area of low volume right here. Yes, a heat map just shows us a volume distribution of passive orders and aggressive orders. So any line that we see on the chart, you could see, you know, orange, yellow and red. The darker the color, the more wall will serve as resistance there because there are more sellers passively sitting there. So almost act like you're in a room or and you're trying to go above the ceiling, but the ceiling's made out of cement and act like cement is tons of sellers there. It's going to be hard to go through that ceiling. This right here, the darker the line is, just basically the. The stronger the roof is for the market to move down or for the market to move up through that.

Just for example, these, you got the. The red line and then you've got some that are a bit dark, a bit orange. Above that, limit orders are those.

So every line here is a limit order. And these are the passive orders. So these are just showing where there's more limit orders at those prices. And again, limit orders are going to be like walls or they're going to be like resistance or support. So the market's coming up to this and we cannot break above it. It's going to be a ceiling to price, and that's where you're going to get that resistance or that rejection. On top of the lines being just limit orders, the bubbles show completed transactions. So green bubbles just indicate large buying volume and red bubbles just indicate large selling volume. So if the market's rallying, let's just say into a level of resistance where we could see a lot of passive sell orders sitting up here. Like there's a lot of sellers acting like a ceiling to price. If the buyers really try to bring the market higher, you could see by this really large green bubble here, and they fail to do so. That is a very bearish indication because what that says is that there wasn't enough buyers to bring the market above that wall of sellers. And if that's the case, the market's only going to have an option to move down. And this is how an auction actually facilitates trade.

And that's in line with your lower volume to the.

And exactly. So I line that up or I didn't line it up. The market did it right at 5,000, 360. And that's right at our level of interest. Now, the reason why I'm highlighting this is because this is a setup that I did not get an entry on and a setup that I did not take. Now Fast forward this 10 minutes later the market breaks this high interest. And point number two, if I were obviously you know what happens because this is a winning trade. But off this chart alone, with no context, would you see anything here that would indicate like the market to reverse or sell off? This kind of looks bullish, Right. It's making higher highs, higher lows. Nothing really indicates that the market's going to sell off from you. It'd be fair to say that.

Right, Exactly.

Yeah. But point number two or point number one is the setup that I missed. Point number two is the setup that I took. And this is where I found good enough confirmation to take this short. I got short at the 5160s. My stop loss.

Was the 65s or the 80s and I was targeting the lower day. I'll get into my targets when I show you what the trade does. But I was targeting the low of day. So I got short at the 5160s and I put my stop above the 80s. Yeah. And my target was the low a day. I'll get into my targets in a few when I explain the the outcome of this trade. But I basically had very small risk and very high reward. And these were the confirmations. Rejection of the supply zone in the pre market session, the low volume node that formed at the 60s that I just showed. And then the market rallies into this level of low volume. And we saw the passive sellers that I just showed you. Yeah. Where now I'm going to show you an example of aggressive sellers. And this was my confirmation to take the market short. And then we're going to see a large negative delta which just indicates that the sellers were more aggressive there than the buyers were, which I'm going to show you. So here's the more passive sellers there. That was the first confirmation. The second confirmation was again shorting into the strength. This was my entry here. I believe I got short at the 65s. And here are my exits down here and another one down here. Here's point number one and two. So here's the original passive seller at the high.

Yeah.

Serving like a wall. Point number two. Now this is what made me click the sell trigger to actually enter this trade was that here at the high, you could see a large red bubble.

Yes.

Which just indicates as the market was rallying up, there was a large aggressive Seller in the market. So different from the first one. There was a large passive seller. Now there's a large aggressive seller as the market's moving up at this 53 65,375 level of low volume. And this aggressive selling, we can see it highlighted down here by time. But more importantly, volume by price gave me the confirmation to take this market short along with everything that I've been mentioning so far. And now this is a footprint chart. I'm not going to dive much into footprint charts. On my channel I have like a full order flow series. Gotcha. And on that series I explain all the ins and outs of all these things, if anybody's ever confused about it. But this just shows again, volume by price in a different format. If there's more selling at a level, it's going to be red. And if there's more buying at a level aggressively, it's going to be blue. In this example we could see a delta outlier is what I call it, which just means there's an outlier in the volume that is different than the volume that is normal in the current market. What I mean by that is at this price here, 53.68, there's a negative delta of - 482. If we were to look at the delta or the volume previously, we see nothing even above a hundred. So something to come in and aggressively sell over 400 contracts. So there's an outlier in the data. Yes, it is the difference between the buyers and sellers. Ask data minus bid data. So you have more buyers than sellers, it'll be positive. If you have more sellers than buyers, it'll be negative. So this just shows as the market was rallying here, this large red bubble that indicates that there was large, more aggressive sellers at this price than there were buyers. And this gave me my confirmation to short the market as the selling activity came into the market and then I took profits into the lower day. So a lot of my targets are low a day, high a day, levels of support, levels of resistance anywhere the market can potentially reverse. The way I put myself is in the position of other traders. If there actually are sellers here, and I'm reading this.

Correctly.

Yep. If I was a seller here, where would I look to maybe reduce my trade, maybe take off some contracts? Where could the market potentially reverse on me? My targets are always placed where the market can potentially reverse. I don't want to put myself in a position at that. I'm not selling into a level where the market could move against me. So low a day's high a day resistance supply anywhere, the market can reverse. And I try to put myself in the position of other traders because that'll give me an edge of knowing where if sellers are here. All right, let me take some off at the low a.

Day.

Yep. And I took some off under this low and then not more into the low a day. And I scaled out of the.

Position. How important is it in terms of speed of.

Execution? So that's a very good question. Because in the market there's a concept called the speed of the tape. And if you're reading volume, even if you're reading candles, let's say candles are printing very fast, that usually means there's a lot of volatility in the market. And if there's a lot of volatility, there's a lot of volume in the market. So how fast the market moves is important because you want to see a very fast moving candle. If you use candles in my instance, it's using the volume. Because when there's a fast moving market and the pace of the tape, the speed of the tape is fast, there's a lot of volume coming into the market and that's where you want to act. When it's moving slow, there's not much volume. Nobody really cares about it. When it's moving fast, there's a lot of participants actively there and we look to act upon these participants. So yes, pace of the tape. Speed of the tape is very important. And going back to the question that you asked me earlier about can this be done on higher time frame? This is a volume profile similar to what I drew earlier on the whiteboard of the volume for that specific day. So this volume distribution right here is just for this specific day and it gets cut off right there. The next volume distribution is just for this day right here on the day to the right, which I'm going to highlight, or the left, which I'm going to highlight by one, right here we could see this area of low volume in this range right here. You see that pretty clear. If we were to make this a level of interest, the day that I took the market short here, we pulled back perfectly into this area of low volume that formed from the day prior and actually bounced. And this is kind of where you could get your higher time frame. For people that are like more swing traders or longer time frame, day traders can look to do this. You don't have to do it short term. This is a perfect example of looking for a volume distribution from the day prior And a perfect pullback. And this is a 30 minute chart and the market rallies the S&P 200 plus points from this and that's a significant.

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Episode. You can see the fair value gap in chart pattern terms right here.

Right? Exact area. Yeah, right here, right, yeah. So this is a perfect visual of comparing a fair value gap. I'm sure they would draw it maybe from.

Here. Yeah, they.

Would. But that again is kind of narrowing it down and kind of getting it more reliable information of confirming it with the volume and the order.

Flow. Well, look at the clear difference between. I would just draw a rectangle there and then say okay, price comes in here, what? But versus actually understanding why that's there, understanding what's behind it, understanding how to react. And actually in this particular case, as you said, it's actually more refined by having that understanding too.

Yeah. So I think it's a very good example of fair value gap, longer time frame chart. And this could have been a good target too. Like that short trade that I took up here at the 5360s. This was my entry up here.

5360. Back to your point there, as you mentioned, in terms of picking your take profits, price caught up at the low of, debt reversed and therefore, you know, if you had held that trade, all that work, deciphering of the charts and everything, and that patience to execute is wasted. Exactly.

Yeah. And that's why it's so important to follow the plan. And look, could have been a good target and we could say all we want. Could have, shoulda, woulda. But it's how you execute the trade. If you look at my entries and my exits here, my exits were nowhere near the lower that move. And this would have been a very life changing move if I caught, if I could have caught that low. But you can't look at that. I got to look at. I had a plan, I followed my plan. I sold when I had to sell. I took profit when I had to take profit. And that's the only thing I have control of is just following my plan and managing my risk. I can't look at where the market went next. It could have easily reversed on me. And this could have been a losing.

Trade. Exactly. Do you have scenarios though where you do hold to a longer.

Target. So it depends on the market's conditions in the market context. Not every trade for me, I like hitting my target, getting out and then looking for another entry somewhere else. I'm looking to capitalize on the short term price movements in the market. Yeah, I'm going for quickly who's in pain because that's where I want to gain from. Longer time frame trends. If there's a lot of volatility, if the ranges are higher, then I'll scale out and maybe hold for a larger move. But for me, I like being in and out because these moves happen multiple times a day and being able to capitalize on it, trading for 20, 30 minutes and walking away and going to enjoy the rest of the day, that's where I like doing it. Instead of being glued to my screen for four.

Hours. Well that looks like what if.

This about three and a half hours.

Four hours for this trade as well. And yeah, time is incredible. And to your point though, this is what I was asking as well. I feel like sometimes traders try to be this hybrid trader all the time of like I'm a scalper, I'm a day trader and a swing trader all at once. And it's so hard to focus and be able to manage all those different roles. A lot of the time no one really pulls it off. As you said, you know what type of trading you're doing, you know the style of trading you're doing, you know what your execution is meant for and your take profit is meant for. And then sticking to that, that's where the consistency has come in. And as you say though, knowing context is the biggest word I think that you said really in terms of when you decide to hold longer, it's the context, it's the market telling you and the ranges as well, being larger for you as well, that then allows that to happen. Plus as you mentioned in terms of in the very beginning, the way you do your sizing, right, allow you to take the exact same trades but have actually a higher reward just based on the way that you do the.

Sizing. Yeah, I mean if I held this trade, this would have been, if my target was even lower, this could have been a 30 to 1, 50 to 1 versus reward ratio. But that's like insane, you know, no traders going for 30 to 50 to one risk to reward ratio. I'm going for quick moves and that's it. So to your point, I have a rule called the CLC rule context location confirmation and this kind of validates it what's the context of the market, where's the location of the market and what's the confirmation of the setup and these trades that this trade and all the next trades that I'm going to show you kind of validates that CLC rule. And it's so important because the setups that I take are so repeatable. The patterns appear and I know this is a trade that I should be taking. So going into your point of knowing the type of trader you are before you take that setup is like, I'm going for scalps most of the time. What a lot of people do is they'll enter like a longer time frame trade and they'll turn it into a scalp because they didn't manage that trade properly. Yes. But you have to know the type of trader you are and you have to know the type of trade that you're entering before you enter it. That way there's no surprises, there's no mistakes, there's no uncertainties. That is out of your.

Control. Got.

You. You know, so it's so, so important to know the type of trader you are and the setups that you're looking to take. Now this was a long trade that I took. Long position, bullish, $21,750 profit. This was a five and a half to one risk to reward ratio. And this trade was 20 minutes in duration. So again, high risk to reward, $4,000 worth of risk. So if my stop loss hit, I would have lost $4,000 to gain. Call it $22,000 about. And this was just simply a pullback. We could see the level of demand here, we can see the rally up. We could see an area of low volume which is marked by that green line. The market pulls back into this. I get an entry long here and I capitalize on that upside rally and I call it a day. Again, what I was explaining on the whiteboard, it's their strategies to catch the levels when it comes into a key level of demand and support. The concept of this strategy is we want to say that buyers or sellers are strong in this example. Buyers, yeah, are strong here. They form the level of low volume. We wait for the pullback, the buyers defend the price and we capitalize on that five and a half to one risk reward. All right, there's a one minute.

Chart. It was like a ten minute.

Trade. Ten minute trade. Not.

Even.

It's.

Incredible. And this was the level of demand. Here's the period of consolidation. The market three weeks later revisits this level. Okay. We could See the market in this screenshot. We could kind of see a lower wick right.

Here. Yeah. Just to the.

Right. Yeah. Zooming in a little bit and the market tries to bounce. Now the setup is just long and a low volume at the 55, 63s. Again, two areas that I'm watching, 5563 and 55 50. I'm going to show you all the volume distribution of that because here the market was kind of impulsively and aggressively pulling back into that. I got long at the 61s. 4 point stop loss for about a 20 point reward. Again, 5 to 1 risk to reward ratio. And my target was the high a day breakout, where I'll exit that position. Yeah. Going for a lower day high day targets and pretty much a lot of my trades, depending on the location of it. Here's that demand zone intraday sell off into the level of demand and the market bounces. Now on this bounce5563, where I've highlighted by this green line is this general range. It doesn't have to be exact. You can say 5565, 55, 57. It's just a general range of an area of low volume. Right here. Directly under that we have the 5550s. So this was a trade that I was watching two different levels to gauge how the market reaction did if it pulls back. So here on the chart, 5563 is the first one. And then even down here, the 5550s, which I didn't even have marked on this example. But two levels that we're looking for the market to pull back into. Yeah, it's always what is the reaction at my level of interest? I don't know if my level of interest is going to work, but I want to gauge the reaction and gauge what the market does at that level of interest. So after the demand zone bounce, I marked 5563 as that level. It pulls back into this level and we see about 12 minutes of consolidation right here where the market's kind of in limbo mode. The candles are smaller, there's a lot of wicks. They're very small body candles. Small body candles means the pace of the tape, the speed of the tape was slow. The candles took a little while to develop. It didn't really move in direction or move in price. And these are good opportunities again for larger buyers or sellers to accumulate or get in a larger position. They need to buy when everybody else is selling and they need to sell when everybody else is buying. So these candles that I've highlighted here are significantly smaller compared to the first hour and a half when the market was open. Significantly different. On top of this, the context of it was demand zone. It rallied, formed the low volume node, and now we're consolidating in this range. I want to show you all what price action looks like here.

This right here is what the price action looked like right there. And the good thing about a heat map, again, if anybody's ever confused, just go to the order flow series on my.

Channel.

Yeah. Is this looks identical to this. If you really zoom in and compare, this circled area is the same area right here. The order flow just shows us what's going on behind the candles. I want to know why we're stalling out here and why we're consolidating. This could also form a level of demand. The market sold off. We consolidate here. Now, if we get the impulse to move up, this could also be a level of demand that's forming here. Yeah. To validate that it is a level of demand is there is what I call absorption or a large buyer accumulating out of all these things that I've highlighted here, these arrows. Yeah. As the market's moving down, we see a lot of red bubbles. Again, for traders to buy, they need somebody else to sell to them. So if the market's pulling back and there's a lot of selling volume and holding on that period of the pullback or the consolidation with selling volume, it is very safe to say that someone is accumulating a very large, not even a large, but just a long position with an agenda to bring the market.

Up. When you say someone, do you mean it could be a group of.

People? It could be a group of people. It could be, yes. Yeah. There's traders or a trader looking to accumulate a larger.

Position.

Exactly. They can't buy when everybody else is buying. They have to buy and everybody else is selling. Yeah. For every transaction, there's a buyer and seller. If they're looking to buy, they need somebody to sell to them. It's needed in the market. So here someone was. The market was selling, and there's a lot of selling activity. On top of this, you could see a lot of red and orange lines, which just means there's passive buyers in the market. And then zooming really in depth to this. This right here is just zooming more in depth to what's highlighted here. Every time the market came to the low, we see aggressive selling. Every single arrow that I have highlighted here, there's a large red bubble as the market breaks the previous low. So you have a low here, it breaks a low here it breaks another low, breaks another low, breaks. Right. So the pattern continues. Yeah. They need traders to sell for them to buy, or whoever it is to.

Buy. As part of this is. It's aggressive selling, but we're not moving.

Lower. Exactly. So a very bullish thing in the market is if the market's uptrending or moving up on the pullback. If there's a lot of aggressive selling, somebody has to be buying that selling. Yeah. And when you add the CLC rule, the context, location confirmation, this just validates that. All right. At the 55, 63 key level. Again, if this was in the middle of the range or somewhere just random, it wouldn't be as significant. But this is right at that level of low volume. So when you put all the pieces together, you basically get a very vivid and clear story the market's telling you. And how I view it is that, like the market's a storyteller. When we can read the story it's telling us with more clues and more context, it's going to be easier to know what happens next, you could say, or what has a higher probability of occurring next. And that's where we look to take advantage.

Of. The interesting thing is I've always said the candles are the language of the market, but I was wrong because this is the true language of the market. The candles are kind of like, I don't know, like elementary in a sense. Not to say this is complex in the sense that it's difficult to understand because I'm. Yeah. I just. Looking at the image of this, I remember once I was in Uman, this was up. Yeah. And I looked. I was like, what the heck is that? That's. Yeah. The matrix. You know, this is solar system. Wow. These days, you know, you're karma. This is why you're so good, because you got this matrix hack or some sort of insider knowledge. But now you're breaking it down. It makes complete sense. And being able to translate it the way you have is phenomenal. You know, it's.

Phenomenal. Right. So, I mean, you know, even looking at this candlestick chart, you could tell something's going on here just by looking at the candles. And that kind of validates what you just said. Like, you could kind of see it on the candles, but digging deeper, it tells you really what's going on. And you can't see from the.

Candles. Right. Have more conviction for you, even if you're not doing like trying to size up or gamble on the trade now, but at least when you're taking it and executing it, you have more information, which only means more confidence and at least more as you say.

Context. Right. So just for this concept, even further, every time we move down, there was aggressive selling coming into the market, but the market wasn't moving down. If you see the selling, the market theoretically should move down, but it wasn't. So that tells me that somebody is buying from all the selling. And this right at the key level, looking at the footprint, you can see a lot of red, you know, volume, delta volume, you can see a lot of red in the bars. There's just significant selling as the market selling off. There's no outliers here, but it's just a lot of red selling. And again, this is a bullish indication when you add it to our level of interest. This is perfect confirmation for me. So just to reiterate, this demand zone bounced. The market moved up. There was aggressive buying on that move up. A low volume node formed at the 63s. We pulled back into that area of low volume. We saw the passive buyer, we saw the absorption, we saw the trap sellers. If sellers are actually in the market here, and this is another very good concept. If sellers are really in the market and this maybe isn't a seller trying to move the market down. If this seller gets in trouble and the market moves up, yeah, he's trapped, he's stuck. He's got to get out of his trade. And the only way for him to get out is to buy. And that's just going to further cause the market to move up. And that's kind of why short covering rallies form. I don't know if you ever heard that concept, short cover rally the concept. That's because a lot of sellers are trapped and if the market goes against them, they have to buy. And for them to buy, it lifts the market up even higher. Another big thing about like how I trade is tons of effort and no reward is a reversal signal. So if you see a lot of sellers putting effort in the market to bring it down and they're not getting rewarded, they got to get out of that trade. Same thing to the upside and buyers. So that's absorption. This was my entry long when I spotted all of that passive buying trap sellers absorption. And what I did was, is because I noticed and this is kind of where it's important to place a stop loss at an important point. Yeah, let's say I got or I Did get long at this candle right here. I don't know how long this is going to take or how long it's going to develop. But prior to this the market kept breaking the lows. So if I were to put my stop loss in this example under the previous low that formed here, it would be really easy for me to kind of get wicked out of this.

Trade.

Yeah. So what I did on this setup was I adjusted my stop loss two or three points under the low of the candle that I got in at of where it formed to give it breathing room just in case it breaks the low again and buyers need a little lower to keep absorbing. And then I took target profits at the high a day, didn't scale out, took all out of my profits above the high. And that was a good move because it kind of pulled back directly after that. So simple moves, impulse. And, and that's just putting yourself in the position of large buyers and large.

Sellers. Phenomenal trade. That is absolutely.

Amazing. And you really can't, you can also even argue that like a lot of traders will wait for this like low to break. That could be good confirmation just in itself off of a candlestick chart. So it's just putting yourself in the position. $21,000 profit, five and a half to one risk of reward. And why I love this strategy is because the risk is just.

Insane.

Yeah. If I waited for a five minute candle to close by the time I would have got long, might have.

Been up here, shifted the whole.

Thing. I'm long down here. This enables me to have more meat on the bone. Yeah. If I have more meat on the bone, I'm going to get more profits out of the market.

Yeah. And it matters so much as well, in particular because obviously if you do take a loss, you know those trades are going to make up for, you know, they're the ones really that are going to make up so much of the P and L at the end of the quarter.

Year. Exactly. Out of the traders that I know, the guys on Wall street that are not even on social media, they have maybe five, ten trades out of the year that make up their.

Year.

Exactly. Yeah. And it's just, it's so important to have large wins and smaller losses. That's the, the key of longevity. So this was a loss, $4,300 loss. Lost my 1R, my planned risk. And similar to what I explained earlier, I basically longed when the market was at the high and not long in it at my level of interest. So this is going to show you a Setup that could have worked, should have, could have, would have again. And I set up that because I missed it. I kind of forced another setup appear at the high. And this was a $4,300 loss. If anybody follows me, anybody's new to following me, if you look at any of my losses, they're all in the same dollar amount. There's no. You're not going to have an outlier of a $20,000 loss. They're small losses compared to the wins. Because I know how much I'm going to lose before I enter that setup. And I have to obey my stop loss. If I don't, that's when I'm going to lose large amount. So my plan here was a rally up, a pullback into 5710, 5700. This was an area of low volume to get long. If the market could pull back into this here in this example, again, this is the con that I explained earlier. We could see a lot of areas of low volume. One up here, one here, another really large down here. So we could theoretically say, this is one up here, this is another down here. What I did was, is I made the two lower zones again, I want to look for initiation areas into one zone. So in this trade, I was watching 5710 to 5700. These were two zones. Here's 5710. Yeah, here's 5700. All right, I just made it one zone. I was watching for a pullback into it. Guess what? We get two perfect pullbacks. One, two. And I didn't take the market long there. Truthfully, I don't remember the setup exactly of why I didn't take it, but in hindsight, perfect confirmation, perfect setup, it just was not something that I put risk on for now, instead of taking that planned low volume node, which worked out so perfectly, I took a much lower quality of a setup, resulting in a loss. Longing the market up here at the highs and stopping out when the market broke this low right there. Reason for this was again, low volume, new at the high. I was just simply longing this pullback right here. And it was at the high of the day, not after an initiation type of level, or not after a level of demand bouncing. It was just an extended rally. And I was essentially longing the market at the high of the day, which I don't like doing. I don't like buying breakouts. I don't like buying higher days, lower days. It just wasn't the best. Even in terms of position in the Market buying it up here, I'd rather buy here. I'd rather buy here on a pullback. This pullback was even shallower and it wasn't so deep. And I stopped out under this low again. Structure broke and resulted in a loss. And it was a 4, 300 loss. But the concept of this was the losses just have to be.

Small.

Exactly.

And now here's kind of like a bonus trade. This is a really good concept. It's kind of introducing the same strategy I'm talking about kind of with a new concept. This was a seventeen thousand dollar.

Profit. You're lining up for a part.

Two. We might need a far sale. We might need out of the five, six playbooks that I have, we might need a one for every.

Playbook. Right. Don't get as.

Excited. So this was a three and a half to one risk to reward. Still good. You know, I shoot for 2 to 1 or better. But a lot of my setups are again 4, 5, 6 to 1, incredible.

$17,000 profit. And what this was a level of demand right here. The market the next day pulls back into this level of demand. And in this picture you can see a little bit of a lower wick. The setup for this was I was watching if 5602 demand trades. I want to play along targeting 5621. It's about a 20 point buffer or 20 point rally to the upside. The market's going to pull back to an area of low volume. I get long at the 5611s going for about a 13 to 11 point target with the 5 point stop loss under the 5606s. Now what's interesting here is we're going to see a low volume node above price and I use that as a target.

While taking the market long at a low volume node under us. So we were kind of in between a low volume note of resistance above us and below us where I got long. So here's this bounce off this level of demand. There's the rally up. And right here we're going to put in the area of low volume again, the fair value gap. Traders will probably say this is kind of like a fair value gap. Yeah. Not 100% sure. Again, this is a new concept, a new term that I learned about fair value gaps from comments on my.

Video. You don't want to.

Know.

So the market's going to pull back into this. Here we can see the low volume significant right here. And you like technically there's an area of low volume. Up here. But it's not as significant as this, I guess you could say valley of low volume. And also it's not significant if it's a volume tail. You say at the low a day. So usually at lows or highs you're going to see a volume tail. This is an example of a volume tail because that's normally at every single lower high. Yeah, you're always going to see low volume at a higher low because what puts that low or high end is nobody gave a crap about that move. So when nobody cares about it, the volume is obviously going to be lower and that's what actually forms that.

Low. Would you say it's outside of the auction.

Area? Outside of the auction area, yeah. And this is at the level of the support down.

Here.

Gotcha. So the Significant is this 56, 15, 5610 area that I've highlighted here because this is just the difference in the data in the volume distribution. Now, we had this level of low volume at the 5615s, 5610s. And I have a video I prepared here for the long. At the 5602 demand confirmations bounce off 5602 strong bids at the level of demand. And there's aggressive buyers after we pull back into an area of low volume. And then the large buyer or seller fills and defends prices. So I have a replay here.

And this video is going to be in forex speed. So it's going to be four times the normal speed of the market hitting the.

Market. Because I was actually going to ask you, was it like when it's in real.

Time?

Yes. Of how does.

This. So this is going to be in real time, just a little sped.

Up. Yeah.

Yeah. What we're going to see here is here we see the area of low volume at the 5615, 5610s. Here we see the volume tail at the low. And keep in mind, the level of demand was at 5602. So here's where the market bounced off that level of demand. Here at the bounce of demand, you could see a lot of red bubbles or a lot of selling activity. And here you could even see a large passive buyer there. Again, if there's a lot of selling, who are they selling to? They're selling to these passive buyers sitting there. At the level of demand, the market bounces forms this level of low volume. And watch what happens here when we pull back. When we pull back here, 5610, 5611 is inside this level of low volume. But I want everybody to keep an eye on 5610, 5611. I'm going to zoom in a little bit more. You're going to see a lot of aggressive selling here hitting this passive buyer. So zooming in, you could see these two orange lines right here. 5610. Yeah, those are passive buyers in the market. Market's pulling back. Again, the concept of the strategy is putting ourselves in the position of large buyers. We can validate this by looking at this passive buyer sitting here. We know he gets filled. A lot of people say, oh, I don't look at the level two. Or I don't look at limit orders in the market because they could be spoofed. That's true. But they can't be spoofed when they actually get filled like this. In this example, we know he got filled because there's a large aggressive selling print selling volume highlighted by this red bubble filling the passive buyer. If he didn't get filled, we wouldn't see the volume hitting him. Yeah, but there's somebody selling, hitting that buyer. And this for me right here is good enough confirmation to get long place my stop loss under those lows, capitalizing on this passive buyer right here getting filled. You see the selling volume on the pullback. You see the passive buyer there filling. You see the market bouncing off that level of demand with that aggressive selling volume at 5602. And this is just the area of low volume. Now, what's interesting is why I placed my target at the 22s was because this is an area of low volume right here at the 22-25s. So I used it as a target. Now, what's interesting here is because now we're longing the market into this target of low volume. It would be very safe to say if the market reclaimed this area of low volume, this would be where we get very large.

Continuation.

Okay. And this is where you can look to capitalize on larger moves or maybe look to scale out or like kind of get creative with your trade management that if the market holds above these 56, 25s, this kind of would give validation that the buyers are strong, we're taking over the sellers, and we may have a solid trend continuation to the.

Upside. So is that where you could look to hold partial.

Partials. And again, this is where context comes in. And what's interesting here is the market's going to fill this level of low volume. Again, when the market spends time there, it Builds volume, it fills these levels. That's how the volume gets.

Built.

Yeah. See how you're kind of filling and filling and then the market just aggressively moves up. And we're above that now. This remains now important support. We have to remain supported above that for the remainder of the day. Wow. And here's just a visual, not in the video example of the pullback into that large passive buyer there. The seller got filled. You can see it by the large red bubble filling into a buyer. A seller has to hit a buyer to get filled. We get the completed transaction, market lifts and rallies from there. And this is what it looks like on the candlestick chart. This is why I like sharp, aggressive pullbacks, because traders act on impulse. If you're in a long position, you see the market just aggressively sell off, you're going to freak out, you're going to stop out and that's a perfect opportunity for someone else to buy from your mistake or for you stopping out of that.

Tree. And more people are going to.

Try and sell and more people are going to try to sell because they see these red candles coming to the downside. And in the moment you see a lower wick at these, at these arrow, this arrow one minute candle here. But in the moment it actually looked like another red candle to the downside because it was much lower. So in that moment was actually that buyer getting filled. And in that moment when we took the market long, it looked very bearish. It didn't look like.

This. That's one of, I guess the cons in a sense is like having to have conviction in your.

Trade.

Exactly. Against the mark. Well, against what the market may seem like it's showing.

You.

Exactly. That's where the benefit of going beyond the just the candlestick comes in. Because if you're just looking at the candlestick as you say, that would be a bearish candle. You would probably think sellers, you could be very emotional, you could get panic versus when you understand the deeper level that you've given us today, you have a better understanding, you can have more calmness. You can actually understand and try and dissect what's going.

On. I know the worst case scenario is my stop loss is going to hit. Guess what? I accepted that risk before I entered it. I'm not going to, I'm going to be okay. I'll be a little upset that my stop loss hit, that I just lost money. But I, it's out of my control. My stop loss hit. I did everything I could. I had a plan, followed it exited and my risk was defined before I entered that setup. And I think that's so important, like you just said too, is that when I entered this trade long, this was a bearish candle. It did not look bullish. And it's kind of getting in. I have a saying in the market is spotting non obvious things before they become obvious. So when you spot something that is very obvious and everybody's doing it, it's probably not a good time to be active and trade in the market versus getting in when it's not really that obvious and no one's really kind of watching it because it wasn't obvious to take the market long there. And that just made this trade even better for me because I know when I go deep into the order flow, someone's buying this. And worst comes to worst, my stop loss hits oh well, it was a part of my setup and I would be more frustrated if I did not take the setup then actually, let's just say lose on it and it didn't work out on me. I rather deal with the feeling of losing on a setup than having a plan and not taking that trade.

And seeing it play.

Out. And seeing it play out. And again that that low volume node at the 5625S, it was a previous level of support, support, support and then resistance. And that's kind of why I look to scale out there. And so it was candlestick level, low volume node level. And it needed to be reclaimed for continuation. And then I got all out on the strong push up. Incredible. I held 50% on the move, on the move and just putting myself in the shoes and footsteps of other large buyers and large.

Sellers. Carmine, you know, I'll say two things. One, you know, the two year wait was worth it. But I'm also sad that I didn't call you sooner so I could learn this sooner as well. Absolutely insane value. So much debt. Everyone at home, drop a comment of your biggest takeaway from this episode. Drop any questions. You know me and Carmine will take a look at those. But most of all, as Carmine said, if you want an even deeper look at this, the links for Carmine's channels will be below. So go check that out for sure. Other episodes are on screen hit like hit subscribe. And this has been chart fanatics. Until next time, take care.