Original subtitles

In the previous lesson, we looked at the actual mechanics

of the market of how order flow.

So the interaction between buyers and sellers, that battle of supply and

demand is what actually leads the price action that we then see on our charts.

Right?

So now what we're going to do is look at how we actually draw and identify these

areas of supply and demand in the month.

On our charts and how we can use them as high probability trading opportunities.

When we then combine them with everything that we know so

far about market structure.

Now time doesn't know, price and price doesn't know time.

I know at first that sounds like some kind of city that riddle that now you might

be trying to get your head around, but it's actually quite simple and really.

So as retail traders, you know, we can get quite caught up in our world of technical

analysis and looking at candlestick charts all day, or we can be forgiven for

thinking that everyone who participates in the Forex market, you know, it was

trading it in a reasonably similar fashion to the way that we kind of think

about and, you know, look at the market.

But when you actually kind of take a step back and you think about what we

just discussed in the previous lesson on market mechanics, and you think

about the order flow in the model.

Right.

The $7 trillion that go through the market every single day.

There's actually no way that a human brain can even begin to imagine just

how much money that actually is in big institutions who are pretty much making

up the majority of that order flow.

They're not necessarily sitting there and you're trading with charts and analyzing,

wasting for those kinds of closures.

They're just putting their orders through the market and they're just,

you know, facilitating those trends.

So a lot of those big dealing desks that banks they're just working through

commercial volume that comes through to them, you know, to facilitate those

transactions, uh, you know, for various and endless amounts of different reasons.

You then also have pretty much complicated algorithms.

You're that continuously layering orders and another one.

Yeah, whether that's for pure speculative strategies, you know, from the

quantitative side, or even from, you know, market makers whose shop it is

to provide liquidity to the market, et cetera, you know, there's a lot going on.

We don't need to understand and talk about all of it, but what we can do

is we can make sense of, you know, all of that kind of complicated, uh,

interaction and interplay of all of those.

Of that battle between supply and demand between buyers and sellers.

And we can do that with candlestick price Charles.

So the first step to doing this is really by understanding what arranges.

So arrange on a pressure is just a sideways consolidation or correction.

So it's when price is just moving sideways to the right of the chart.

And it's not really moving in any sustained direction and it's

not breaking the swing hard.

Well, the swing low.

So it's just ranging in between two of those swing points and the trend

has pretty much, you know, paused.

So buyers will be stepping in when prices and the discount off of the range

and sellers are stepping in when price is in the premium half of the range.

Now range can obviously be found across all timeframes.

And this is where sometimes jumping up a timeframe and can

then show you more clearly that price is actually stuck in a range.

You know, sometimes you're a bit tombs zoomed in on a lower time.

Now Rangers generally indicate one of two things, one being high volume order flow,

where many orders are changing hands.

And it's very likely that large players are beginning to stack orders.

Are they fair value of price?

So this is what you would often hear traders refer to as an accumulation

or a distribution of orders, which basically just means that demand and

supply are exchanged in quite rapid.

But eventually you do say large expansive move that breaks out of

the range either to the upside or to the downside, depending on which

side of the market is in control.

So when the market deems that price is at fair value, you know, orders can

be exchanging at quite a rapid pace.

And this is where you won't really see much movement on a price chart, but

then eventually when that imbalance between supply and demand eventually

arises and it will eventually arise.

That is when you will then see price move rapidly in one direction.

Why because it's trying to seek more orders, right?

Pricing is to seek more liquidity in order to fill that imbalance and bring

the market back to an equilibrium of fair value between buyers and

sellers, which is where price will then form another range, right?

Until the next imbalance and arises, which will then cause price to

break out of that range to then seek more orders to fill that imbalance.

And in this whole cycle that we've just described a whole cycle of.

And that relationship between supply and demand is essentially that

continuous heartbeat of the market.

So the other end of kind of what can form a ranges, I guess the other

end of the spectrum is low volume.

Now naturally, you know, high and low volume are going to be

very, very different in nature.

And the fact that ranges are created by both of those environments can

obviously be a little bit confusing.

So one kind of common time, which you will see a range is sort of towards the

end of the New York session, as a session is closing and moving into the Asian

session where price tends to range and consolidate because it tends to be kind

of low market volume during those times.

And that generally goes the same for the whole of the Asia session, where

volume is typically lower than, you know, comparison to London and New York.

So Asia tends to be quite range-bound compared to those sessions.

So kind of session timing is I guess, one of the obvious ways in which you can just

assume that if you see a range right.

Eastern Asia, but it's typically because of low volume, but how can we tell

whether a particular range, you know, aside from session timing, how can we

tell if a particular range is caused by high or low volume order flow?

If ranges are created by both of them?

Well, the easiest way to determine which environment you are dealing

with is we're just waiting to see what happens after the range of screen.

All right.

So we don't have to guess we just wait.

And then we ask ourselves, does price rapidly move away from the range or does

it just slowly move away from the range?

Because rapid movement away from the range that suggests high volume, which implies

that a lot of orders have exchanged hands.

And that was likely institutional backing because it takes a hell of a lot of money,

you know, just to move any of those major currency pairs by even just one PIP.

So, you know, if we see price rapidly broke out of a range, And that gives us

our first clue of, you know, a footprint that a large financial institution has

stepped in, or of course, you know, many of them, uh, and that is what

has caused that overwhelming imbalance between supply and demand, right?

To, to, to cause price, to break out of that range.

And then what we can do is start to potentially frame a trade idea around

this when we see that occur in the market.

But if you see quite slow movement, you know, price sort of just trickles

out away from the range, then that will typically suggest Lova.

And that there hasn't been that really significant imbalance

between supply and demand, which is what really we are looking for.

Because remember the whole game we're kind of playing here with supply and

demand is to look for where the big money stepped in to take control of the market.

And we want to use that to understand where price is likely to move, to move

from, because that gives us, you know, another framework in order to read the.

So again, a movement away from a range should be significant to clearly showcase

momentum being injected into the market.

So if price moves out of a range and then sort of immediately retraces

afterwards, that can be not always, but can be further evidence of low volume.

So therefore would not be the creation of a supply demand zone that

we really should be interested in.

So we are not looking to trade that initial, move, that

initial breakout of the range.

But instead we are concentrating on the retest of that range as price

eventually looks to return to that area.

So range greater demand is when we see that sideways range followed

by a rapid expansion to the upside.

And then we look for and move back into that overall demand zone to mitigate

and fill any of those remaining buy orders that may be left in that area of.

So then we can look for another potential bullish move from that price

level where that huge demand initially, you know, stepped in previously.

So again, we don't trade the initial reaction out of the range because we

never know for sure which way in a price is going to break out of a range.

So keep it easy.

We just wait for the market to show its hand and tell us which way he wants to go.

And then what we do is we patiently wait for price to return to that.

And then we start to look for when she bought it was within that zone.

So obviously the same thing goes for range, creative supply.

We see price breaks out of a range to the downside clearly indicating that

in this case and supply managed to earn completely overwhelmed demand, right?

Because it causes that imbalance to the downside.

So we wait for price to return to that range created supplies own well,

then we look for potential entries to short the next move from that area,

whether it is a lot of suppliers.

Now, the second type of demand is supplies that you will see is pivots creates zones.

So in the case of pivot created demand, you will see a sharp down move

for the sharp retrace to the upside.

So what's happening here is that supply is in control as prices moving down, and

it's suddenly an overwhelming amount of demands that's into the market causing

price to then rapidly reverse to the.

And that creates that demand zone that we are now interested in.

And we wait for price to return to that pivot demand zone to

look for potential long entries.

So then pivot supplies, obviously the same, but you know, the opposite where we

see a small shot movement to the upside that is then rapidly reversed with an

expensive move to the downside, showing that the man has an overpowered supply

causing that imbalance to the downside where we will then look for price to

return to that pivot created supply.

To potentially look for short entries.

So these ranges and these pivot creators zones, these really are the footprints of

institutional orders in the market that shows us where they are stepping in with

large orders to cause those imbalances.

Now we never need to guess.

We'll literally just wait for the breakouts to occur, to

create those supply demand zones.

And then we will wait to the return to the zoning question, and then we

look for potential entries there.

Once price gets.

Because the probability of sort of certainty, but the probability of

price causing a similar move, uh, as it mitigates and fills the remaining,

you know, there's large passive remaining orders that are sitting in

the order book at that price level.

That gives us a very strong edge in the market for us to potentially surf on the

coattails of that large institutional money entering and exiting the market

that causes those huge imbalance.

And therefore there's huge moves for us to capsize on.

Now, as we go on, of course we will cover entries in a lot more detail and how we

use the lower timeframes for confirmation and refinement, et cetera, but for

now, or what I want you to understand.

And all I want you to think about is just how these zones are

created and how they form in the market and what they represent.

Because remember, all these zones are doing is they are visualizing the

action of the order book, so that.

And that's the language of the market that we are essentially reading

with candlesticks on our charts.

So now we understand the concept of how these zones are created

with these range and pivot zones.

But how do we actually see Andrew these on our chairs?

Well, as you can see here with candles, even as a range creative zone, we just

draw our zone to cover the entire range.

So we draw from the lowest point to the highest point of the range before where

price rapidly then broke out of that.

And it's the exact same, you know, whether it's supply or

demand for pivot created demand.

We draw the zone from the bearish candles that are then engulfed by the bullish

candle that breaks out to the upside.

So we sometimes refer to this as the sell to buy for pivot created supply, which

are the zone from the bullish candles that are then engulfed by the bearish

candle that breaks out to the downside.

Or we sometimes refer to this as the buyer to sell.

So that's how they both look when we mapped these on our of six.

Now whether a zone is a supplier zone or a demand zone that will always

be categorized by which direction price breaks out of the range.

So if price breaks out of a range or pivot to the upside, this is caused

by the Madre, giving us a demand zone.

And if price breaks out of a range or a pivot to the downsides, this

is caused by supply giving us.

But what determines if those zones are continuations zones is essentially

which direction price was traveling in before the zone was created.

So for a demand zone to be a continuation price will be bullish and moving

upwards before the zone is created.

So then when the Mon breaks out of that range, it is a continuation

of that bullish trend, right?

So for a supplier zone to be a continuation price will be

bearish and moving downwards before the zone is created.

So then when the mom breaks out of that range to the.

It is simply a continuation of that bears trend.

So for a zone to be then classified as a reversal, again, it just solely

depends on which direction price was moving before the zone was created.

So in the case of.

Now if price was bearish and moving to the downside, and then the man

stepped in into the market to over to overpower supply, causing a bullish move.

This is then a reversal against the previous bearish trend, right?

So that the zone essentially becomes a reversal.

So therefore, in the case of supply, if price was bullish and moving to

the upside before the range or pivot was formed, then when supplies steps

in causing price to fall to the.

This is a reversal against that bullish, that previous bullish move.

Right?

So, you know, if I flipped between kind of these continuations and reversals, you can

just kill you, see that, you know, supply and demand always in the same direction.

It's just what direction price was moving in previously before those

zones were created, that determines whether or not you classify it right

as a reversal or a continuation.

So again, just to quickly summarize, so we have two main types of.

Either range created or pivots created supply and demand range and pivot,

or your essentially your two main types of zones, but a pivot created

zone can also be just one candle.

So it doesn't have to be multiple candles and you can also then have

what is called a fractal zone.

Now we'll talk about these fractal zones and a lot more depth than just a

minute, but essentially you are refining the candle to just the WIC as this

will be a zone on a lower timeframe.

So, this is how ho uh, how all four of these types of zones would look like,

uh, as continuation supplies zones.

And then this is how all four of those types of zones would look like as,

you know, reversal supplies zones.

So it's always supplying no matter what, because price broke out to the downside.

But what determines whether it's a continuation or a reversal is again,

just dependent upon which direction price was moving before the zone was.

So we've seen how these four zones could look like on their own, whether

it can be a whole range of multiple candles or just a sharp pivot where

you have a few or just one candle.

And then finally, when you can refine that further to just the Frank, the

WIC, but all of these four types can also be refined from just one.

So, if you see this range on the far left hand side of your screen, you can draw

your zone from the entire range, right?

During the bottom of the zone from the lowest wick, all the way up to

the highest point of the range to the highest WIC, but then you could, uh,

you know, refine that exact same range to just the pivot point of that range

before price broke out, where you can see that supply stepped into the market.

Right.

In the second example.

So essentially you refined that whole.

So just those last two British candles where you get that pivot,

where you get that buy to sell that broke out of the range.

You can then take that pivot and refine this even further to just

the last single candle of that pivot point within the range.

And finally, if you want even further refinement, you can draw the supplies

zone from just the wick of that last bullish candle of that pivot

point within that entire range.

Okay.

So you can just see how going from left to right.

You can see that they are all the exact same price, actually example, but you

would just refining it further and further as you go across to the right.

So why would it be bothered to refine a zone is just like this?

Well, it all has to do with our trade entries.

Really.

Now we're going to talk about entries in way more depth in future lessons, but

for now it's a bit of a good time to just start looking at and just conceptually

thinking about how we will use supply and demand zones to place and size up.

So essentially we will be looking to always, no matter what, always the

place, our stop loss behind the zone.

So in this case, because.

We are expecting price to have a bearish move when price returns to zone.

So we replaced our stop above the zone, above the highest points of that range.

So if it was demand, then we would place it below the zone.

Right?

So that's pretty simple for stop-loss placement.

It always goes behind the zone, which is nice and mechanical now for

where you decide to place your entry.

You have a little bit sort of more freedom and choice, but essentially you will

look to enter anywhere on or within the.

So the lowest point that you would look to enter the supplies zone is at

the distal point, which is the very start of the zone on the outer edge.

You know, just like how the reward to risk tool is drawn here, but

you can enter anywhere within the zone, so you could enter higher up.

But again, I don't want you to worry about this right now.

We will talk about that a lot more in future lessons.

So for the purpose of this lesson, we are just always going to enter it on the

distal, which is the edge of the zone.

So I stopped always goes behind his own and our entry always

goes on the edge of the zone.

So going back to why we could potentially refine our range zone.

So either the pivot, the candle or the frat door fireman, the reason why as

you've probably already guessed, comes down to reward to risk, because as you

can see, if we refine that range supply to just the pivot supply of that, Then

this means that we will be looking to answer our short position slightly higher

up at a better price, but keeping our stop loss in the exact same position.

So this means that our stop loss will be slightly smaller compared to

entering on the entire range supply.

So ultimately this improves our reward to risk ratio.

The next refinement from that is drawing the supplies own from just

a single candle within that pivot.

And you can see that again, this would improve the rewards of risk of.

And have finally refining all of those supplies zones to just the wit to give

us that fractal refinement that will give us even higher potential reward to risk.

So that's great, but you may not be wondering if the fract over five

minutes, it gives us the highest rewards to risk ratio and why

wouldn't we just always draws out.

My bother drawing a much bigger zone on the entire range.

Well, to be fair, that's a pretty good question because the reason why is that,

of course there are zero guarantees.

That price is going to pull all the way back up that far to actually take you

in and enter you into your position.

Because we don't know for certain, you know, where the largest amounts of orders

are sitting within that supply range, that will be enough to overpower demand to

start the next bearish leg down in price.

It could literally happen at any point within that range when price gets there.

So the more that you refine as own, the more you increase your potential accuracy,

giving you higher potential rewards of risk, but it increases the probability

of you not being tagged into a position.

And you may miss more trades compared to not refining.

So now it's that delicate balance between improving your reward

to risk ratio, as much as.

But still making sure you are entering enough positions.

Now, of course, there is no right or wrong balance.

This will be entirely dependent on each individual trader you know,

what makes most sense to you?

What you have the most success with, what aligns most with your trading

personality and ultimately what you find easiest on your own individual

psychology, because you know, some traders may suffer quite bad with FOMO,

fear of missing out, and maybe they were preferred to just enter more position.

And I just want to be in the trades so that they don't miss the move.

So they may actually prefer to not refine that much.

And they will always take, you know, the entire range, for example, or maybe

even just the pivot of multiple candles.

But then what they have to do is they have to accept, right?

That that average rewards or risk ratio may be lower than a trader who chooses

to always refine, uh, their zone to say just a candle or even a fractal

refinement, but the trader who does refine and prefers that higher reward.

They then may have to accept that they're probably going to miss more positions

compared to the trader who doesn't refine.

Right?

So it's that balance between kind of over a finance, get the higher with reward

and a potentially getting less entries.

But again, don't worry too much about this right now because we will

talk about entries and refinements a lot more as we go along for now.

I just want you to really understand the, the different ways in

which valid zones can be drawn.

So, what we're going to do is we're going to look at a few more examples

of fractal refinements that we can use as valid zones within the market.

So we have range, creates a supply and pivot creates a supply, right?

And we've been thinking about things so far, just in terms

of one single timeframe.

But now what I want you to start thinking about is multiple timeframes

and how these different timeframes will be interacting together.

You know, as we go through a flick through those different times, So, if

we look at the range creates a supply on the left-hand side, let's say for a

second, that this is the one hour chart.

So we draw our supply zone on the entire range there on the one hour chart.

And I want you to imagine how you think that would then look like on your chart.

If you jumped up to the four hour chart.

Well, those full one-hour candles that we have drawn the entire

range on those for one hour.

We'll make up one for our candle, right?

So if you jump up a timeframe to the four hour timeframe, you will see that that

one hour range supply is actually a four hour single candle pivot supplies zone.

Right?

It's a bit of a mouthful, but you can see that essentially on the one hour you

would have four candles, maybe jump up to the four hour timeframe that will then

just be made into one for our candidate.

Okay.

So this is what I meant at the start, you know, with that kind of

silly riddle that time doesn't know.

And price doesn't know time because it's just orders going

through the market, right.

That interaction of supply and demand that battle between buyers and sellers.

But we then use candlestick charts and different timeframes to sort of

make sense of all of that order flow.

So if you see a range creative zone, as you go up the timeframes that will

then be refined to even, you know, a few or even just one single candle, right?

So that lower timeframe range will very likely just be one higher timeframe.

So Rangers or pivots are the two main ways in which we look

at supply and demand zones.

Right?

However, we can essentially anticipate and see where a pivot or wrench

creates a zone may be on a lower timeframe, and we can sometimes see

where they are on a higher timeframe.

So these three examples here are essentially ways in which we can draw

zones on our charts that represent pivots and range creates the zones on a lower

timeframe without even having to go down and actually view that lower timeframe.

So the first example here is what's called an inside bar zone.

So an inside bar is very simply a candle that does not break

the high or low of the previous.

So you can see in both examples, uh, both of these examples of inside

bars that the white candle does not break the high or the low of

the candle that formed before it.

So that's why it's called an inside bar because it foams aside the

high, low of the previous candle.

So what that means is that when the inside ball foams, that will be a range

on a lower timeframe because it's not breaking the previous Canada's high.

So it's just ranging in between, and that's what the inside bar represents.

It represents a range on the lower timeframe.

So when price then breaks out of that range with the following candle,

that will then create our zone.

As there is an imbalance between buyers and sellers as priced, then breaks

out of that lower timeframe range.

But we can see all of that lower timeframe price action by simply just

understanding what an inside bar is.

Now, an inside bar can be bearish or bullish.

It doesn't matter in terms of supplying.

So that's why I've deliberately drawn the candle as whites in both

examples here, just to make that point clear that it doesn't matter

if the candle is bullish or bearish, all that matters is that it doesn't

break the previous canvas high or low.

And then that means that it is a range on a lower timeframe.

So what then determines whether that inside bar is supply demand?

It isn't whether it's a bullish or bearish candle itself, but actually what happens.

Does price break out of that lower timeframe range.

So the upside, if so then that insight bar is a demand zone,

or if that lower timeframe range breaks out to the downside, then

that inside bar is a supplier zone.

So whenever you are looking at frat refinements in general, if you just

ask yourself, you know, how did those series of candles form that should help

your mind to kind of understand what may be happening on a lower timeframe?

So at the inside bar, you can see that price moved in one direction.

And it paused, it fell to break the higher, low, so it must be ranger

on a lower timeframe and then price initiates out on the next candle.

Now, in the next example, we have what are called sell to

buy wicks and buy to sell wigs.

So if we look at the sell to buy Wix example, first at the top,

this is a continuation demand zone.

So we ask ourselves, you know, how did these candles form?

Well, price was initially bullish, right?

It's moving to the upside in that first.

And then you can see that that candle pulls back ever so slightly

because it leaves a little wick.

And then that candle closes where that body ends.

Right?

So it closes a bullish candle, but then the next candle opens up

where the last candle body closed, but price continues to move down.

All right.

So it's still pulling back since that initial week forms.

So price then goes up so that the second candle closes with a big bullish body.

So essentially what has happened is that overall move between those candles

as Kelly bullish, but there was a tiny pullback in between those two candles.

So what that may look like is something like this on a lower timeframe where

it would show a clear pivot to Monzo.

So if you imagine those two big bullish candles that we were just talking

about that say that they form on the four hour chart, and then you see

those cells by WEX, you can then draw his own from those two weeks as that

will very likely be the demand zone on the 15 minute timeframe, for example.

And that could look like this, pivot the mindset on the right, or it

could even look like a range on the.

So it doesn't really matter, you know, if it's a range or a pivot

zone, all that is really relevant is that those wicks, those CELTA by

Wix, those, uh, those wicks represent the month zone on a lower timeframe.

So if you can see a lower timeframe zone that is also visible on a

high timeframe, then in theory, all other things being equal.

This could make that zone hold a little bit more weight.

Because let's say that low timeframe zone wasn't in 15 zone, for example,

on the 15 minute timeframe that is now also visible on the four hour.

In this case now lower timeframe zones will not always be visible on the high

timeframes, but when you can see, for example, that in 15 zone on the four hour

via ReFacto, via a fractal refinement like that, in theory, that should

increase the strength of that zone.

And then all of that, that we've just spoken about of

course, applies to supply zones.

So where you have to bearish candles, for instance, that then

form those buy to sell a Wix.

And then on the lower timeframe, those wicks will represent either

range created or pivot created supply.

And then the final example we have here is when we have large wicks.

So if you want to refine this further, right, because you want some extra

zones smaller to increase your accuracy, to increase your reward to

risk ratio, then you can just simply draw the zone covering only the.

Rather than including the body of the candle too.

And the reason why we do this is because of that, WIC will contain

a zone on a lower timeframe.

So when we hop on the charts and we start drawing on supply and demand

zones, these fractal refinements can be very powerful and useful whereby you

can read and understand and see that on one timeframe, actually, what is

happening on a lower timeframe without even having to go down and look at it.

So now we've seen how supply and demand those are created and how

we draw them on candlestick charts.

However, S and D zones are literally going to be everywhere, right?

So if you hop on your chart and you start drawing, every single zone on your chart

is going to be an absolute mess, right.

It's going to be a shit show and you're going to see some zones play

out and you're going to see a lot that don't seem to work that well.

And it's just going to be really, really confusing because supply and demand zones

are literally everywhere in the mall.

Why are they everywhere?

Well, because there are constantly imbalances between supply and demand,

because if there wasn't, the price would never move because it would just

be at a fixed constant fair value, because of course in reality, what

the market deems to be fair value is shifting every second of every day.

So the balance between supply and demand is shifting concept.

Now every single supply and demand zone, it probably will form some

degree of a reaction, right?

When price returns to that zone, you will almost always see price, at least pause,

or maybe even form a small bounce as those orders are exchanged between hands.

And of course there will be some circumstances, but price will

just smash straight through.

But what we can do to filter out a lot of these zones that are most likely just

not going to be worth the risk of trade.

Right, because we don't just want to enter a position and risk our holiday

and capital on just sort of any old zone that was created with, you

know, not a lot of money behind it.

That is not professional trading.

That's just gambling.

Right?

If you want to do that, you know, go Chuck your money on red at the casino,

you probably have better roads, but we are here to be professional traders

and to determine and refine our edge.

So there are certain consequences that we can look for to increase the probability

of the zones, having a larger, yeah.

Or at least causing a larger move.

So one that we've looked at in depth so far is market structure.

So hopefully you should be very, very familiar with this now.

So we've seen how we can use market structure to very effectively give

us a bias on the direction of price, whether it is bullish or bearish,

whether it is a, you know, a pro-trade run or a countertrend pullback.

And of course, bringing an entirely new dimension to

that by using multi timeframe.

Now, To look at market structure across multiple timeframes and to really build

that story and the overall narrative.

So market structure is a very important tool that we can use in our analysis to

help us make sure that we are trading on the right side of the market.

And that will increase the probability of the zones that we are looking

to trade from causing the type of large moves that, you know,

we actually wants to position us.

So market structure will help us to manage our expectations of how far the move from

that zone is likely to reach before price may potentially pull back or even reverse.

So that's why market structure is king.

We then looked at the concepts of premium versus discount.

So essentially helping us to see if we are looking to trade at

a level that is actually well.

So if we introduced supply and demand to this, we can then look to buy from

demand zones in discount prices and sell from supplies zones in premium

prices to help increase our strike rate and potential reward to risk ratio.

There are then some other very key concepts such as liquidity,

sweeps, and mitigations, which we haven't discussed yet.

And we haven't looked.

So don't worry.

We will look at these, uh, in depth in future lessons.

So you don't need to concern yourselves about these just now, but these are also

some key confidence that can help us, you know, to kind of pick and choose which

zones that we are actually interested in building solid trade ideas around.

Okay.

Now all of these are really great confidence that we should be

using to make sure that we are training with as high as a strike.

And as high as every reward to risk ratio as possible.

And those conferences are really nice to have, but you know, they are not

necessarily a strict minimum requirement.

So what do I mean by that?

Well, if they were a strict minimum requirement, then you

would only ever buy from demand zones that were in the discount.

For example, And perhaps you would only buy from demand zones that were also

pro trend and in the discount, right?

Because that should in theory, you know, really give you that higher probability.

But what that also means is then, you know, you would never sell from the

supplier zone that was in the discount prices and maybe a supply zone.

That was also countertrend because this would be, you know, I guess as

low probability as you can make it.

And it would be a lot more.

But the reason why, you know, I don't say it's a minimum requirement that price,

you know, needs to be a good premium or a good discount level, or it has to be

with pro trend and you can't trade counter trend is because you can do those things.

If you want to, it will be a bit more aggressive and maybe low probability.

So I wouldn't really advise it just starting out.

Um, but they're just not hard and fast rules.

So that will all depend on each individual trader, you know, and how they wish to.

What makes sense to them?

Will they have the most success with, you know, what is easiest, uh, congruent with

their own trading psychology, which again, will only come with time, experience

testing and, you know, constant reviewing.

So as I was saying that list, there are all conferences that increase

the probability of, um, you know, supply and demand zones playing

out with large and sustained.

But they are not necessarily a strict minimum requirement to validate a

zone that you may want to trade from.

But there are two core methods that we use to validate the strong supply demand

zone that are my personal opinion.

You should really only be looking to trade from zones that are a minimum

do at least one of either of these two methods or ideally both of them

together in order to trade for.

So, what I mean by that is I personally view them as a minimum

requirement in my trade plan.

So I would advise that you probably do also.

So what are these two core methods?

Well, again, because we want to find the zones where there was a drastic

imbalance between supply and demand so that when price returns to it,

the probability of that big money stepping in again is a lot harder.

Right because those are the areas that we really want to concentrate

on, that we want to focus on and that we want to trade for them.

So again, what can we do to try and validate which those are going to

be the strongest, which shows are going to be the most significant

and therefore have that highest probability of causing a strong move.

Or the main idea is to find a zone that has achieved something

significant in the market.

So there are two main things that we look for that we deem are significant

in order to validate a strong.

The first of those is that we want to find zones that caused a break of structure.

So we wanted to see the zones that led to a boss.

So we want to find whether demand came into the market that led to price, being

able to break structure to the upside, to break a high and form a higher high.

And likewise, we want to find whether supply came into the market

that led to price, being able to bridge structure to the downside in

order to break that low and form.

So we should know by now that there are three different types of structure,

swing, minor, and sub structure.

So the more significant level of structure that he's zone manages to break, then the

more significant that that zone will be.

So with swing structure, being the most significant of the three minor

structure, being less significant than swing structure, and finally substructure

being the weakest out of those.

So this means that the highest probability zones will be the ones that

lead to the break of swing structure.

So the demand zones that caused those swing higher highs or supplies

zones that cause those swing levels.

Now all three zones, boss and boss and S boss can of course be tradable,

but it's the swing zones that are going to hold the most weight and

have the highest probability of leading to another large swing move.

And it's those swing runs that really, we want to catch and position ourselves in.

So that's the first main way in which we can validate the significance

of a supply or the mindset in the market by concentrating on the ones

which caused a break of structure.

And the second main way that we use to validate zones as doing

something and achieving something very significant in the market is if

a zone actually manages to overpower and take out a, another strong,

valid zone causing that zone to fail.

So we call these flips so supply to demand, flips, or demand to supply.

So when you find a zone that combines both methods.

So not only does it cause a break of structure, but it also caused

another zone to fed in the process.

Then this is when you had the highest probability zone, all else being equal.

So let's just do a super quick crash course summary of everything that

we have covered in this lesson, supplying them on zones are caused by

overwhelming imbalances between supply.

And we can identify and draw these on our charts by seeing

where price broke out of a range.

And this can be in the form of range or pivot created supply or demand.

And of course we don't trade the initial breakout.

We instead wait for price to show his hands and see which

direction he wants to go.

And then we wait for price to return to that zone and then look

for our potential entry models.

So we look to buy from demand, or we look to sell from.

And what the time is.

If those zones are continuations zones, is which direction price was traveling

in before the zone was created, surprise will be bullish before a demand zone.

It was a continuation and it will be bearish before he supplies own.

If it's a continuation, if it say reversal, the price will be

bearish before the demand zone or bullish before the supplies.

Range and pivots are your two main types of zones, but a pivot creates created

zone can also be just one candle.

It doesn't have to be multiple candles and you can also then have what's called a

fractal zone, but all of these four types can also be refined from just one range.

And we can see that here from left to right, we look to enter on

or within the zone and I'll stop loss will always go behind that.

But the more refinement of the zone does lead to increased accuracy, giving

us higher potential rewards of risk, but potentially more miss trades.

If price does not pull back that far.

So are you range creates his own or even a pivot zone that has multiple candles that

would essentially be a pivot on a higher.

So that lower timeframe range can generally be cleaned up and refined

to a w you know, a single candle.

If you were to jump up and view that same price action on a higher

timeframe, we then have three main types of fractal refinements inside

bars, where the candle does not break the high or low of the prior candle.

And it is that engulfed by the next time.

So this represents a range, creates a zone on a lower timeframe, and we don't care if

the inside bar is bullish or bearish, it's a relevant in terms of supply and demand.

We're just looking for which way price moves after the inside bar forms.

So if it breaks out to the upside its demands or to the downside, it has

of course supply, then we have sell to buy and buy, to sell wicks, which

represent a pullback on a lower time.

So within those weeks, there will be a pivot or range creative zone on the

lower timeframe, which is visible as those wicks on the higher timeframe.

And then finally we have large wicks.

There's always pretty much stuff in Wix.

So if you refine your zone to just the wet, this will be a range or pivot created

zone within that went on the lower time.

Now, so probably demand zones are literally everywhere.

Now.

Almost all of them will give some form of a reaction, but not all unnecessarily

one in which we want to risk our capsule on and take a tray from.

So of course we build a portfolio of confluence and evidence for each

trades to increase the probability, not only for the zone to hold, but

also how far that reaction from the zone will actually be likely.

So we can use market structure to help us with direction premium or discount

to see how well priced is owners and then liquidity, sweeps, and mitigations,

which we will cover at a later point.

So all of these are pretty nice to have, and we really do want to see them, but,

you know, they do not necessarily have to be a very strict minimum requirement,

but there are two main ways in which we do actually validate a strong.

So I personally want to see at least one of these occurring in

the market to consider validating and trading from a specific zone.

So we want to find zones that actually achieve something, something very

significant in the market because of this.

That means that they are likely to be a strong zone that had a

lot of money backing that area.

So the first way to see this is by looking at the zones that cause a breakfast.

The more significant the structure design breaks that in turn, the

more significant the zone will be because it takes more money to

break its strong structural level.

The second method is by looking at zones that cause other strong zones

to fail and we call these flips.

Now, when you combine both flips zones and structure breaks, This can

give you very, very high probability zones to build trade ideas around.

So over the course of the next few lessons, we are going to look at both

of these two called methods in depth, and we're going to combine them with

all of the other conferences that we have looked at so far, such as market

structure and premium and discount.