More on Balanced Breaks | Supplementary Material

Alright guys, what's going on? This is Ryan, AKA Kenner and Clark and this is going to be part of our market profile and order flow roadmap series. We're going to be talking about trading significant levels and in this one we're going to be talking about breakouts from balance. Now balance can happen across multiple time frames. You could have, you know, intraday balance, you can have a period of, you know, one week long of daily charts that are in balance. You can have a balance that's formed over the course of a few weeks where it's just a higher time frame range that might have a good degree of dispersion but we might still say it's pretty balanced. In this video we're going to be talking more along the lines of the short term. So this is going to be particularly useful for your shorter term intraday traders up to, I would say your scalpers. Nothing really long term, we're talking more towards the short end of the spectrum. So breakouts from balance. Now typically this is going to be the first short term trades that follow breaks from neutral or balanced days. So it's important again that we understand what a neutral or balanced day is. A neutral day. From a structural standpoint, you're looking at something like this. If we're looking at a volume profile, if you guys just use TradingView still, if you were to put on a session profile for something like the day, or if you were to take a composite over a series of days or a session or rather a fixed range, for example, you'd be looking at something that looks like a very balanced distribution. Right? So no directional bias, there's initiative at the highs and the lows. So we're talking about buyers step in at the lows, sellers firmly reject at the highs. It's very balanced, right? There's a high probability for distribution within this range, alright. And there's a low probability for a breakout. So this does have a certain standard in terms of initial balance. Okay? This often has a pretty average size initial balance and it's often pretty centered. But again, remember we talked about how initial balance is less applicable in crypto because they're not the same. There's not the same concept of a market open. So crypto being a 24 hour market. So the implications of a balanced day is that there's a low probability for a breakout. So any type of clear ups acceptance outside of this balance obviously is something that represents an actionable trade setup and the more time that you have that is balanced. So say we have a Multiple day period, where you have multiple inside days, the stronger the argument is for that initial breakout being somewhat significant. Now we might eventually come back to the range, but that first initial trade typically has a high probability of success. So we'd say that the expectancy is pretty high. So these are going to be your first short term trades, followed by breaks of neutral or balanced days. And again, I said if there are multiple inside days, that is even better. So remember, an inside day is. Let's say that we form a daily candle and I'll just take out the drawing tool for this. Let's say we form a daily candle like this. So this is your. Let's say that this is your open and this is your close. So an inside day would be when that entire next day candle is within the previous day candle. So we didn't do anything above the high, we didn't do anything above, below the low. The entire candle has been within the previous day's range. Now there are different standards for engulfing candles within crypto, there's different standards for inside candles compared to traditional markets engulfing candles. You'll see that sometimes the term is misused. Sometimes rather, people use the term engulfing candle to talk about whether or not the candle was within wicks or whether or not it was within bodies. For inside days, what we're looking for is as close as possible to majority or if not all of the entire candle taking place within the previous day's range. Right. So it's either very clear or it's somewhat loose. Right. It's either that it rather is completely inside the day's range or it isn't. But there's some times obviously when you might have a wick that somewhat exceeds the previous day or the previous days. And that is still something that's considered balance, even though it's not technically considered inside. We would still consider it a day that adds to that overall session or composite balance. Alright. So as long as there's no major deviation, so multiple days that have pretty tight range, overlapping value areas, most of their mass, or most of the activity taking place within the same general area, these are good days or rather periods to use to place this type of trade. So what we're looking for is balance across a certain time period. The longer the time period, the more weight there is behind the trade. So if you're just taking a trade outside of the previous day's balance area, maybe outside of previous day's value area, there's a little bit lower of expectancy, obviously. Right? You might get that initial push, but you might not have any real follow through. So what we're looking for is balance, right? So this is just one day right here. But what you optimally would be looking for is multiple days like this where you're having multiple value areas lined up. And I'm going to show you that you can actually take those days and form a composite. So this could very well just be a composite of let's say four or five days. This is the value area high and the value area low and the point of control for those four or five days. And on Sierra charts you can do this. On Exocharts they'll be adding market profile pretty soon. But the same thing occurs on TradingView. It's a volume profile though it does follow very similar to a market profile. At least with the market profile though, we also have the volume profile to show that both of these are confirming each other. But again with Trading View you could just take the session profile of a fixed amount of days. Let's say that you see three days that are pretty inside. You want to label or mark out your areas where the structures value area low and value area high is. You could do that on Trading View as well. So what we're looking for is.

In terms of order of importance, we're looking for measures in delta, obviously. So at the lows, if we're seeing that we are coming down to let's say the composites value area low, typically an area where we will see and just imagine if we're talking about the day that's forming after this composite. So we're opening up within this day say and we're approaching the lows of this value area. So value area low of this composite or if it's an intraday trade and we're just taking a short term scalp, we're approaching the value area low of the previous day. So what we're looking for is an absence of initiative buying at the low or in the case of the highs being approached, we're looking for an absence of initiative selling at the high high of previous day's value area or low of previous day's value area. And we're saying initiative because when price is approaching the value area low, typically we want to see the same effect that we would see if we dropped something in value that was to be determined, valuable to begin with. Right. If you temporarily drop the price of something that was in demand, you would see buyers pretty much scoop up that opportunity. So when you see them, not really respond as much. Let's say we're looking at the course of a range. When you see them not really respond as much, it's a pretty bad sign. Right when we have a breakthrough the value area or breakthrough the composite range low. In this case, we want to see a volume expansion through that break. So you could look at something like a footprint chart. You could look at a one minute chart. Actually, if you look at a one minute chart on trading view, you'll notice that when you really zoom in, you'll start to see major differences in terms of feedback of volume. So you'll see that the moves where real breakouts occur, there'll be massive influx of volume versus moves where you might actually pass through an area. Okay. Or violate the area. But there'll be really no volume whatsoever. So this is going to be important because when we do try to attempt to reclaim the area. So a lot of the times you'll see that the area is broken and there'll be a deviation and we make our way back inside. And the factor that will distinguish making our way back inside versus just approaching the area we broke down from, only to break down again will typically be easily discernible. Or if not, you'll be able to pick up on it somewhat through volume. So you'll see that as we're approaching this area to get re accepted, we'll either have a lot of volume and gain re acceptance or in this case, when we break down, there will be really no buying volume come in and we will auction lower to find buyers lower. So there'll be a lack of an immediate response in terms of getting into this trade. For this case, we're going to be talking about a short sometimes time is of the essence and depending on where the next structural target is. So where the next area is that we could expect friction or some degree of stickiness. You have to consider what your risk reward is for that trade. Before you're taking the trade, you should have all these things in mind. If you have a decent sized risk reward, it might be worth placing a market execution to guarantee that you're in the trade. Now you're going to incur slippage, you're going to incur transaction costs. But the trade should more than make up for this. If there is, let's say in this case there's a gap between us and the next structural area. So we think that the trade can run a little bit, it'll accelerate. In this case, it might be worth getting in with a market execution now. Also, there's many times when price will Pull back to at least the halfway point from the breakdown. So from the area that it broke down outside of this balanced area, outside this balanced composite, we'll often see the price makes an attempt to get reclaimed. And again, this is what you're going to want to observe. You're going to want to look for that absence in volume. In this case where we would be placing our stop, the invalidation would be not only back inside the range, I mean, you could put a tight stop back within the range at the previous structure that we broke down from, or you could put a full thesis negation right above the point of control. So if your thesis is that we're going to be auctioning lower, you should not be back above the point of control of the previous composite range. So let's take a look at all of these details when we're actually looking at the chart. All right, so breakouts from balance, it implies that we're looking for periods where we do have balance established. So we're looking at this area right here. And I said that it would be optimal if we had periods where we had inside days. Meaning if we're looking at this white candle upward, that this black candle right here would have opened within and closed within and the range would have been engulfed by the previous day's candle. Alright, if you're looking at a candlestick chart, that's what an inside day is. But the truth is that if we're looking at this range right here, the bottom of this bar right here, this is basically a double distribution. And these three bars we have overlap between all of the value areas. So we spent most of the time within the same areas between these candles and had most of the volume transacted. And it pretty much is inside in that regard. So when you're looking at just a candlestick chart, you're not going to see those periods. You would have to take some type of fixed profile, volume profile or session profiles and line them up, or again look at a market profile. So we need to find the areas where we have overlap in balance, or where we just have a period that we do have a relatively balanced and tight range. Okay, so this is the candlestick chart and this is the area we're going to be focused on. I'm going to go down to this on a 30 minute time frame because this was a really balanced range and the range might not look balanced at certain periods. We definitely have deviation below the first low, we have a deviation above the high. We have these periods where we really violently move down. But we're very quickly rejected. Okay. And as the range forms more and more over time and adds to this structure, the next break is going to gain in significance. So the further along that you paint a range, the more likely that any following break is going to be that much more significant. So any break in the beginning, if it doesn't result in continuation, that's fine. We have our extremes, right? But when we have the third day where we have pretty much identical overlap in value areas, it sets up for a really good short term trade. Remember, this is typically going to be your first short term trade following a break of a neutral or balanced area. We're looking at tradingview right now. And again, if you wanted to form something similar to a composite, you would have to take a session profile. And again, this goes back to what we talked about in auction market theory, what we talked about with value area highs and value area lows. So this shows you where we spent the majority of our volume. So where most of the volume was transacted. So you could see that minus these deviations or these outlier events, we've been pretty confined in a pretty tight mass within this structure. So looking at market profile or TPO charts is going to be extremely useful. So we're going to combine this with delta to really set ourselves up for high probability trades, or rather with the anticipation or assumption that the trades that we do take are going to have positive follow through in our favor. So here's your range. And this again is a combination of the amount of time we spent in an area. So you're looking at market profile, TPO chart, and then we're looking at the volume profile within that. So within this range we have volume profile pretty much confirming the TPO chart. So there's no major deviations. You have an increase in volume down here that exceeds the amount of time. Again, we didn't have much time down here whatsoever. The market really rejected this pretty quickly. Now this over here is your double distribution. The market spent a little bit of time up here, not much action. Again, we talked about double distributions. Not much conviction, not much action. And then we have the single print period where we form pretty much a new value area. So nothing really occurred up here. We violently break down. And this is pretty much where we spent the bulk of our time. This is pretty much where the bulk of the volume occurred. This is an important area, defines our low. Consider this the high again, moving forward a pretty neutral normal day. Again we talked about that kurtosis. It's like that kurtosis within a Distribution, you have that large spike in the center. The there's your point of control. In this structure. We have a little bit of an anomaly at the top. We have two single prints, but it's pretty blunt up here. There's no real major rejection market is favoring this area. You can see that we closed up here again this next following day. We did open up higher, but then we auctioned back within the previous day's value area. So we have 1, 2, 3, 4 days are pretty lined up in terms of point of control and value areas. So one of the best things that we can do is we can actually merge these profiles. So we're going to merge these profiles and what you'll see is we'll get a composite structure. So now we have a composite structure where we have a definite value area high at 8735 and we have a value area low at 85, 87. So now what we're going to be looking for is any clear acceptance below this range. Alright. We want to see that in this case. We're looking at this day where we finally break through the bottom of this range. Okay. If we're looking at just the TPO chart alone, it's not really good enough because TPO again it does organize all the data for us. It does really compress everything so that it's really clear at this point who's in control where the market is spending most of the time. All right. Whether it's imbalance or out of balance with this TPO chart, we've seen now that the market is very balanced in this general area. So really any push because the area is so narrow is likely going to have a bit of follow through. And where would we expect the follow through? We would expect the follow through in this case to the previous high of the structure that preceded this break upward. So we're looking at right around down here as an optimal target. You can see that the market actually came down to that lick that area, spent a little bit more time there. But this would be optimally where we would take profit from the trade. We don't want to expect anything else because at this point we have a good degree of friction created by the previous structures. It's likely going to be a bit stiff, sticky down there. So you could see that when Price broke through this area that it actually did come back and retest the underbelly or underside portion of this entire composite structure. Now the things that we want to look for is we want to look through, look for volume confirmation through the break. So you can see that from the volume profile, which would not be what I'd be looking for at this point. I wouldn't be looking at this chart. I would have this mapped out from this chart, but I'd be paying attention to delta charts or footprints. You can see that the volume profile actually showed an increase in volume through these lows. Where actually if we look at all the other profiles, there's no substantial increase in volume between these lows. In the last two days we were firmly rejected. So that should be a pretty clear sign. These single prints right here, these lower portion or these tails in the structure showed we didn't really spend much time here at all. The market came down, was swiftly rejected and for the first time we're coming down and we're gaining acceptance in an area that was previously unaccepted. So that should perk your ears up just a bit. Now what we want to look for is an absence of initiative buying through the lows. We want to see an increase in selling with this acceptance. So volume expansion through the break. And not only do we have volume expansion where we're not really discerning where the volume is coming from, we want to see who's doing the buying, who's doing the selling or rather how much.

At the lows. If we're looking at this structure right now as we approach the low, you're going to want to see that there is initiative buying. As we break through this structure, you're going to want to see that there is in this case responsive buying as well. Once we move below this low, it is initiative selling. We have initiative selling and in this case we're going to be looking for the volume expansion and the negative delta to really increase with that volume expansion as well. We want to see that it's pretty one sided that again that buyers aren't really bidding this up. The lack of buying here is going to lead to the follow through. So if we're looking at a delta chart, if we just looked at this delta chart right here, you can see that the portion that we broke through right around here, we start to just get really no buying whatsoever. So I have my settings so that we're just seeing the dominant side be colored. So the red is indication, an indication that the overall delta or the total delta for these volume portion for these volume candles for each. In this case, I think I have it to set to 10 ticks. Is predominantly selling volume. So aggressive selling through the lows. You have a little bit of buying but you could See that there's really no substantial buying compared to the amount of selling that we're seeing. So all of this is dominated by sellers in this case. And then we have the final expansion right through 85.50.

On Very Heavy. I think that sounded like very hairy, very heavy selling volume but again and absence of buyers. So you see that in these cases towards the highs we do have a little bit of buying activity. This could very well being, you know, could be very well your initiative, short scalps taking profit. In this case it's really nothing though. Okay, so it's insubstantial. There's just majority of sellers through this low and we're spending more time here than we had previously. So these are signs you want to be paying attention to. Obviously you want to see a very swift rejection. If there are buyers, you want to see them step in aggressively. You want to see a lot more buying volume. You don't want to see that we're expanding with selling volume through these lows. So lack of immediate response, volume expansion in favor of sellers. Again, we're looking at a, in this case a four hour tick, a four hour delta chart. But we could also look at something like a 15 minute chart, a 30 minute chart or something like a 1600 or 2000 tick chart which is going to create candles through the amount of trades that take place and not necessarily the amount of time that passed. So if we're actually looking at the standard candle chart, you could see that for example, if we're looking at the TPO chart, you see the points of control, they're pretty much around the same area where the volume points of control are. So the volume points of control are your white lines with your white outline. Volume point of control. Volume point of control lines up with your time, price opportunity point of control, which in this case is where we spent the most amount of time. So we have agreement between those which is going to be an important area because that would be where we would place our stop. Because remember I said that it would be either the point of control or the structure high that we broke down from. So in this case we were lastly riding the point of control. So the point of control being aligned to the structure, that was the last area. We kind of had our final stand before having this rejection and snap down. Alright, in this case you could see that we snap down and immediately we're testing the underside in the first candle. So the first candle is being rejected, which should be a clear sign. And remember I said you could enter in at market with acceptance, with immediate sign that sellers are really overwhelming buyers or the buyers are just not stepping in at all, you could enter in that market, but you're likely going to get that pullback. So in this case we did get a pullback to the value area high, or rather the value area low. But sometimes you might even see the price pulls back just half. So in this case it might be in your favor to enter in at market if you expect a good amount of follow through, if your target is in this case favorable in a risk rewards perspective. From a risk reward standpoint, meaning that you have a good amount of distance to travel, the more to make up for the cost of the trade, the cost you incurred for placing the trade. Or you could place a limit order in anticipation that there's going to be a retest. Now with this retest, again, what we're talking about is the volume. So what we want to see is the lack of volume. So going all the way back to this period, here's your retest and you can see that we have initial volume, two initial spikes of volume. But the final volume to try to gain re acceptance into the value area low, look how low the volume gets. We have a spike in volume. You see where this crosshair line is coinciding with spike in volume upward. And then the final two candles, look at the volume, look how it drops off. Okay, this final rejection, if at this point you might wait for this immediately as a conviction rather confirmation in this point to add to your trade, or this might be the first time you're placing the trade because at this point your first target would have been down at around 82.50. But again, all these signs existed before you had that expansion in selling volume. Really lack of action by buyers, you do expect a throwback. So in this case these are high probability trades. And what that means is that these are trades worth taking a risk on. And placing this stop, which in this case, let's say that we are taking an entry on a breakout, so we're taking premature breakout. In this case, our risk is still within 1%. The optimal placement for a stop is within 1%, which makes this trade worth taking even prematurely, I would say. So once you see that you're gaining acceptance. So for example, down here you see that this is a swift, this is a swift response, right? Pretty swift response down here, Very swift response down here. This right here. Alright, so just circling this area, this right here is not a swift response at all. This is consolidation below this structure. This is no attempt immediately to reclaim it. This is no attempt rather to regain acceptance back into an area that we've had most of our acceptance within. So in this case it is worth taking a trade by what some might consider prematurely because you have a stop that is less than 1% away and your target is, in this case your first target was actually if we're looking at this just from if we're taking the risk return, here's your risk and your return would have been over 4% away. So you're looking at in this case an R multiple of about four. This is a trade worth taking. Okay? And the reason why this stop is placed is because many times we talk about ranges breaking down and they often will reclaim the center of the range and break upward. So if you are in a trade and it's back above the point of control, let's say it broke down, you placed a short right here. If it's back above here, you don't want to be in the short anymore. Alright? You have to be willing to incur a loss when you're trading. So this is just the cost of doing business. But more often than not you're going to see that there will be follow through with these types of trades. At least follow through, that's one to one. So put it that way. If you're looking for a trade that you're going to take for only the short term, this might be worth taking for short term trade with a limit order if you could get a fill pretty quickly again and if you're looking for just a one to one, you'll expect follow through because often you're not going to gain acceptance outside of here and have all these factors line up have re acceptance back into the range. So hopefully this has been pretty informative. Guys, I'm going to start posting.

All of these setup videos and they're going to be very specific and these are going to be things that you do spot pretty often. Though if we go throughout this chart, you'll see that there are going to be multiple periods where you actually have periods where the balance areas are pretty easy to spot. And again, these are optimal areas for short term trades. So here's the short that I took the other day. What I did was I had a composite and I had a composite of the five days that we were creating this range and I took a short based on premature acceptance below this value area. So if we're just going to take this column apart, you'll see that we spent a good amount of time down here. We did have that volume expansion. So again I took this trade prematurely in anticipation of testing the previous day or in this case before the expansion upward below this range that value area high and it was a very short term trade. I actually took it twice and the second time I closed it out in less of a profit than the first time because the market was actually moving back against me. This was all before we actually ended up moving up and in that case I said you know if we're back above 93.50 or 94 I'm not sure which one I said I think it was 93.50 but in that case it should have been 93.50 because the point of control in that case if we were back above that point then you know I was going to be long so hopefully you found this informative guys if you have any questions feel free to reach out. This is Ryan AKA Kenner and Clark as always exercise property risk management and trade effectively.