2-S&D Zone Creation Theory

Summary

This lesson focuses on identifying supply and demand zones in the forex market using candlestick charts. It explains the concept that time and price are independent, emphasizing the importance of institutional orders in market movement. The instructor outlines how to draw basic supply and demand zones, refine them for higher probability trades, and discusses entry strategies. The script also introduces the idea of fractal zones across different time frames, highlighting the significance of consistency in trading approach.

Takeaways

• 📈 Understanding market mechanics involves recognizing how order flow from buyers and sellers leads to price action on candlestick charts.
• 🔍 The course will teach how to identify supply and demand zones on charts to find high probability trading opportunities.
• 💡 The riddle 'Time doesn't know price and price doesn't know time' suggests that market participants, especially institutions, may not trade based on time or chart patterns but rather on order flow and commercial transactions.
• 🌐 Institutions contribute to the majority of the market's volume and their transactions can be seen as a footprint of their involvement in price movements.
• 📊 A price range on a chart represents a period of sideways movement, indicating a balance between buyers stepping in at perceived low prices and sellers at high prices.
• ↔️ Trading ranges can be identified across all timeframes, and sometimes a higher timeframe view can more clearly show when a price is stuck in a range.
• 🚀 A rapid breakout from a range indicates a significant imbalance in supply and demand, often driven by institutional trading volume.
• 💹 Traders should look for price to return to a broken range to fill resting orders and then use that as a potential entry point for trades, aiming to capture the continuation of the trend.
• ✅ The most basic form of identifying supply and demand zones is by looking for price consolidations or pauses, followed by a breakout.
• 🔄 The market's heartbeat is the constant interplay of supply and demand, visualized through the ranges and breakouts seen on price charts.

Q & A

What is the main focus of the lesson discussed in the transcript?

The lesson focuses on identifying areas of supply and demand in the market on candlestick charts and using them as high probability trading opportunities.

What is the significance of the riddle 'Time doesn't know price and price doesn't know time'?

The riddle implies that price movements in the market are not necessarily tied to specific times or dates, and that large transactions and order flows from institutions can influence prices regardless of timing.

How do institutions contribute to the market's order flow?

Institutions contribute to the market's order flow by processing large transactions for various reasons, such as exchanging currencies for international investments, and through complex algorithms that continuously place orders in the market.

What is a range on a price chart and why is it significant?

A range on a price chart is a sideways consolidation or correction where prices move sideways without a sustained direction. It signifies a balance between supply and demand, with buyers stepping in at perceived low prices and sellers stepping in at perceived high prices.

What happens when there is an imbalance between supply and demand within a range?

An imbalance between supply and demand can lead to a rapid and large breakout from the range with high volume, indicating that either demand or supply has overpowered the other and is driving the price in a particular direction.

How can traders use breakouts from a range to their advantage?

Traders can use breakouts from a range by waiting for the price to return to the range after a breakout, then entering trades in the direction of the breakout, assuming there will be resting orders and continued momentum.

What is a pivot zone and how does it differ from a range-created zone?

A pivot zone is an area where price reverses direction after a brief pause or correction. It differs from a range-created zone in that it focuses on the last pivot before a price breakout, rather than the entire range of consolidation.

Why is it important to place the stop loss behind the zone when trading?

Placing the stop loss behind the zone is important because it protects the trade from price fluctuations within the range and ensures that the stop loss is only triggered if the market moves against the trade significantly.

What is a fractal zone in the context of supply and demand zones?

A fractal zone is a smaller-scale supply or demand zone that can be identified within larger time frames. It represents the same concept of supply and demand but on a smaller, more detailed level.

How can traders refine their supply and demand zones for better entries?

Traders can refine their zones by focusing on pivot zones or even smaller fractal zones such as inside bars or wicks. This can help to increase the risk-reward ratio and accuracy of entries, but may also result in missing some trades.

Why is consistency important when drawing and trading supply and demand zones?

Consistency is important because it allows traders to maintain a mechanical approach and avoid the pitfalls of random distribution. By sticking to a defined strategy for identifying and trading zones, traders can better understand and exploit their edge over time.

Outlines

00:00

📈 Understanding Market Mechanics and Price Action

The speaker begins by connecting the previous lesson's discussion on market mechanics, which focused on order flow and the interplay between buyers and sellers, to the current lesson's focus on identifying supply and demand zones on candlestick charts. These zones are critical for recognizing high-probability trading opportunities. The instructor introduces the concept with a riddle emphasizing the disconnect between time and price in trading, highlighting that while retail traders may rely heavily on technical analysis, large institutions often operate based on order flow rather than chart analysis. The lesson aims to teach how to identify basic supply and demand zones and refine them for higher trading accuracy.

05:01

📉 Recognizing Supply, Demand, and Range Breakouts

This section delves into the concept of price ranges as periods of market equilibrium where buyers and sellers perceive the price as fair value. The instructor explains that a breakout from this range, indicated by high volume and rapid price movement, suggests institutional involvement and a significant imbalance in supply and demand. Traders can use these breakouts to formulate trade ideas, looking for price to return to the range to 'mitigate orders' and continue in the direction of the breakout. The summary differentiates between supply and demand imbalances and how they manifest in market movements, guiding on how to spot and react to these events for potential trades.

10:02

🔍 Identifying and Drawing Supply/Demand Zones

The speaker provides practical advice on how to visually identify supply and demand zones on charts, focusing on periods where price consolidates or corrects. Two main types of zones are discussed: range-created zones and pivot-created zones. The former is identified by a clear price breakout from a consolidation area, while the latter is marked by a pause followed by a directional move. The instructor emphasizes the importance of waiting for price confirmation before drawing zones and explains the significance of thrust candles in validating supply or demand zones, providing a clear methodology for traders to follow.

15:05

📋 Refining Zones and Trade Entries

The paragraph discusses the technique of refining supply and demand zones for more precise trade entries. The instructor suggests starting with drawing a range and then narrowing it down to a pivot zone, focusing on the last significant price movement before a breakout. This refinement aims to improve risk-reward ratios by reducing the stop-loss distance. The speaker also introduces the concept of fractal zones, explaining how a range on a lower time frame corresponds to a pivot on a higher time frame, and vice versa. Consistency in zone identification and trade entry techniques is stressed for effective trading strategies.

20:09

🌐 Balancing Risk and Reward in Trading

This section addresses the balance between risk and reward in trading, cautioning against over-refining zones which can lead to missing trades. The instructor advises focusing on pivot zones for a good balance and consistency in trading approach. The importance of sticking to a defined strategy to maintain consistency and mechanical execution is highlighted, drawing attention to the unpredictable sequence of winning and losing trades and the need for a disciplined approach.

25:11

📊 Fractal Nature of Supply and Demand Zones

The final paragraph introduces the concept of fractal supply and demand zones, explaining how zones identified on a lower time frame can appear as pivots on a higher time frame. The instructor discusses different types of fractal refinements, including inside bars and wicks, and how they can be used to identify zones on different time frames. A distinction is made between strong pivot zones and less reliable wick-based zones, emphasizing the importance of choosing the right level of refinement based on time frame and expected market behavior.

Keywords

💡Order Flow

Order flow refers to the sequence of buy and sell orders in a market, which is a fundamental aspect of market mechanics. In the video, it is described as the 'interaction between buyers and sellers' that leads to price action on candlestick charts. It's the basis for understanding market movements and identifying trading opportunities.

💡Supply and Demand

Supply and demand is a core economic concept that dictates price levels in a market. In the video, it is mentioned as the 'battle' that leads to price action, with buyers and sellers interacting to determine where prices go. Zones of supply and demand are used to identify high probability trading opportunities.

💡Candlestick Charts

Candlestick charts are a popular method of displaying financial data, highlighting the open, high, low, and close prices. The video discusses how these charts are used to visualize complex market interactions and identify areas of supply and demand.

💡High Probability Trading Opportunities

These are moments in trading where the potential for profit is relatively high based on identifiable patterns or zones in the market. The video aims to teach viewers how to spot these opportunities by understanding market structure and supply/demand zones.

💡Market Structure

Market structure in the context of the video refers to the underlying framework or organization of the market, including how prices are determined and how orders are executed. Understanding market structure is key to identifying supply and demand zones.

💡Ranges

Ranges on a price chart represent periods of sideways movement or consolidation where prices are not trending significantly upwards or downwards. The video explains that ranges can indicate a balance between supply and demand and can be used to spot potential breakout points for trades.

💡Breakout

A breakout in trading terms refers to the rapid movement of a price outside of a previously established range. The video describes breakouts as signals of an imbalance between supply and demand, often accompanied by high trading volume and potential trading opportunities.

💡Pivot Zones

Pivot zones are areas on a price chart where the market has previously reversed direction. The video discusses how these zones can be identified and used to anticipate future reversals, providing traders with entry points for trades.

💡Fractal Zones

Fractal zones are smaller-scale versions of supply and demand zones that can be seen on different time frames. The video explains how these zones can be identified by looking at the wicks of candlesticks and can provide more refined trading entries.

💡Risk Reward

Risk reward in trading refers to the potential loss versus the potential gain on a trade. The video mentions how refining trading zones can improve risk reward ratios by reducing the potential loss while maintaining the potential gain.

💡Stop Loss

A stop loss is an order placed by a trader to limit their potential loss on a trade. The video emphasizes placing stop losses behind identified zones to protect trades, as it illustrates a basic risk management strategy in trading.

Highlights

Lesson focuses on identifying supply and demand zones on candlestick charts for trading opportunities.

Supply and demand interaction leads to price action seen on charts.

Time and price are independent; market participants do not necessarily trade based on time.

Institutions contribute to the majority of market volume through commercial transactions.

Market orders are influenced by a multitude of reasons, not just technical analysis.

Candlestick charts help visualize complex market interactions.

A range on a price chart indicates sideways price movement, showing market consolidation.

Ranges can be found on all time frames and indicate market's fair value assessment.

Breakouts from a range suggest an imbalance in supply and demand, potentially driven by institutions.

Traders look for price to return to a broken range to capture continuation trades.

Supply and demand zones are identified by observing price pauses and breakouts.

Pivot zones are formed when price reverses direction after a pause.

Traders should wait for clear market intentions before entering trades.

Stop loss should be placed behind the supply and demand zone for safety.

Consistency in trading approach is key to maintaining an edge.

Fractal nature of the market means that ranges on a lower time frame appear as pivots on a higher time frame.

Refining supply and demand zones increases risk-reward but can lead to more missed trades.

Fractal refinements such as inside bars, sell to buy wicks, and wicks can indicate supply and demand on lower time frames.

Proper pivot zones are stronger than wick-based zones for trading decisions.

Transcripts

Alrighty, so in the previous lesson we looked at the actual mechanics of the market.

So the mechanics of how order flow, which is the interaction between buyers and sellers,

you know that battle of supply and demand, that is what leads to the price action that we see on

our candlestick charts, right? So what we're going to do today in this lesson is now we're going to

start to look at how we actually draw and identify these areas of supply and demand in the market on

our candlestick charts and how we can use those as high probability trading opportunities when we

combine them with everything that we know so far about market structure, okay? So that's more sort

of what we'll do throughout the next lessons in this course, but this lesson now is where we're

going to start to look at how we actually just identify these zones in their most basic form,

okay? As we go through the lessons we'll then learn how we actually refine these and try and

make them more and more high probability. Now, just going to kick things off with a bit of a

riddle. So let me just type this out. Time doesn't know price and price doesn't know time, okay?

No expenses were spared in the creation of animations in this lesson. Okay, cool. Fancy

words. What does that actually mean? Time doesn't know price and price doesn't know time. So I know

at first it sounds like some silly riddle that you might be trying to get your head around,

but you know really I think it's quite simple and I guess the point I'm trying to make here

is, and this is something I was sort of guilty for for quite a long time, you know as retail

traders we can get quite caught up in our world of technical analysis and looking at our candlestick

charts and we can be forgiven for thinking that everyone else who participates in the forex market

they must be trading in a similar fashion to us, right? They must be looking at candlestick charts

and you know drawing their zones on and market structure and those things, but if you think about

what we just discussed in the previous lesson on market mechanics and you think about the order

flow in the market, so that's seven trillion dollars that goes through the market every single

day right? You know there's literally no way our human brains can even begin to imagine how much

that actually is, but if you think about all of that volume going through the market and

institutions let's say are the big players who are putting the majority of that volume through,

you know they're not necessarily trading with a chart, you know analyzing and waiting for candle

closures and drawing on their highs and lows and things like that. The majority of them are just

putting orders through the market and they're just transacting you know commercial volume.

So a lot of the big dealing desks they're just working through that commercial volume that

you know comes to them to facilitate transactions for endless amounts of reasons right? Let's imagine

big European investment firm and they want to buy a load of real estate, a lot of property in America

what are they going to have to do? They're going to have to sell their euros to exchange those for

dollars to then purchase the American real estate right? So then they'll go to their

institutional bank who will then process that transaction for them to exchange their euros

for dollars right? Now on top of all of that because obviously there's going to be millions

of different reasons and examples like that, you're then going to have complicated algorithms

who are continuously laying orders in the market, layering orders in the market right on top of

each other. So whether that's for pure speculative strategies or purely just from market makers whose

job it is to provide liquidity to the market, there's a lot of complicated you know not

complicated but there's tons and millions of reasons as to why you know money's been

exchanged in the market. So what we can do is we try to make sense of all of that complicated

interaction and that interplay of all of those orders of that battle between supply and demand

between buyers and sellers and we do that we make sense of it with candlestick price charts. The

reason why is very simply they help us to visualize all of that complex interaction in a much simpler

format once you understand how to actually read it and interpret it. So the first step to doing

this is simply by understanding what a range is. Now a range on a price chart is simply just a

sideways consolidation or correction right so we can just see prices just moving sideways

you know it's not really moving in any sustained right sustained direction it's not breaking the

higher low we can see that price never trades higher or lower than a slow right it's pretty

much contained within there right I think that's pretty simple. So what's happening is buyers are

stepping in whenever a price dips into what they deem to be cheap pricing discount pricing

and they're buying they're stepping in and buying at price and then as it moves up into what's

deemed by the market as more premium pricing you know players think it's too expensive here

the sellers are then starting to step in. Now ranges can obviously be found on all time frames

and this is where sometimes just jumping up a time frame can show you more clearly that price

is actually stuck in a range sometimes if you know you're too zoomed in on a lower time frame.

Now when price is stuck in a range like this and it's essentially just moving up and down

that can be viewed as the market deeming the price to be at fair value right so it's kind

of just trading around that area buyers and sellers you know pretty much just think that

that's the price it should be at for a sustained amount of time but eventually as you probably know

there will be an overwhelming imbalance between supply and demand and this is when you will then

see you know that that rapid and large expansive breakout of the range with high volume either to

the upside or the downside depending on who is in control. So when we see that rapid movement away

from the range that basically suggests that typically high volume has entered into the

market a lot of orders have exchanged hands and there was likely institutional backing

because it takes a hell of a lot of money just to move any of the major currency pairs

by even just one pip so if we see price rapidly breaking out of a range like this that really

gives us our first clue of a footprint that large financial institutions have stepped in

and they've caused that overwhelming imbalance between supply and demand and then we can start

to potentially frame a trade idea around this when we see this occur in the market right so price

either breaking to the upside or to the downside out of a range like this because if price rapidly

breaks to the upside like it does over here then this is where demand has clearly overpowered

supply right so what we do is when we see that initiation out of the range and step two has been

completed right we see that impulsive break to the upside this is then where we look for price to

return to that range and we essentially assume that there are going to be some resting orders

left within this range there's going to be more demand ready for price to fill so we look for

price to return to the range for it to mitigate those orders so by mitigation I simply just mean

that price has tapped into the range it's filled up some of those orders and then if there is enough

demand still left from from within here that's where we're then looking to essentially surf on

the coattails of you know that large institutional volume and we want to also look for long

opportunities from within here to buy this and try and capture this continuation like right this final

step this this impulsive leg out of the range okay so if I could keep it more simple you see price

not really going anywhere then price does go somewhere so we assume that it must have taken

a big player or a number of big players to push price up in that direction so then we assume that

there will still be a lot of demand left from within here a lot of buy orders so then when

price returns this is the area in which we want to be looking to get long to try and capture that

next leg to the upside and it's the exact opposite for supply range price isn't really going anywhere

someone must have stepped in or not someone but like let's just say enough volume or a more

accurate statement would be there was an overwhelming imbalance between supply and demand

for supply to overpower demand to break through these lows right because there'll be demand from

within here it can push past it it breaks out we then assume that there's going to be supply

or remaining sell orders from within here so then when price returns this is then when we look to

get involved we look for shorting opportunities to try and capture that continuation out of the

range okay so range initiation out of the range okay so we're not trying to capture this move

we'll wait for price to come back because when this has happened the markets already showed its

hand okay so we're patient we look for where is there clear intentions you'll hear me talk

about this a lot um in the live market i say i'm waiting for clear intentions i want to see

where has someone stepped in where is a clear footprint right i don't want to be second

guessing i want it to be obvious i'm patient i wait for that to happen then what do i do i don't

sell down here right be patient wait for price to come to me i want to be selling at value i want

to be getting into the market where risk reward is on my side and then we look to short here and

then we look to try and capture that next leg to the downside okay so when these overwhelming

imbalances between supply and demand eventually rises that is when you obviously see those rapid

moves in one direction out of the range because at that moment when you see price price going to the

downside it's looking it's essentially trying to seek more orders to balance price because if price

is moving rapidly in one direction or in this case it must mean there's you know there's more

supply than there is demand so those sellers are looking for people to sell to and what do

they need to make a trade you need an equal and opposite transaction you need a buyer so it keeps

rapidly moving until it can find a buyer and then when there's more buyers and sellers price will

move to the upside then it'll be more or i should say there should be more supply than demand at

this point then price starts going to the downside right and it's continuously trying to seek where

those next orders are going to be that liquidity until the market deems it's at fair value again

and then what we see you'll see price range and will form another range and then price might either

break to the upside like this or will range and it will continue and it'll break to the downside

okay and that's essentially the heartbeat of the market so we now know how these zones are created

and how they form in the market and what they represent so right so they are visualizing the

action of the order book right it's a visual way of us seeing the order flow of the market

and that's the language of the market that we are then reading with candlesticks

so how do we actually see and draw these on your charts well if i can kind of give you the most

simple tip of where to start is you really just want to be looking for where is price sort of

ranging or consolidating like where is it paused where is it not kind of really going anywhere like

where is it taking a breather right it's not rapidly moving in one direction like this

we want to wait for like when does it start to do this a little bit now it may only be one or two

candles it may be loads of candles but we're just looking for you know where does that that kind of

that break that pause in price action start to happen so that's where you want to see that and

then you want to look to see where price then breaks out rapidly breaks out of that range okay

so when we think about it that way if we keep things simple there's kind of really only two main

types of supply and demand zones that we kind of look at right we have a range created zone

or we have what's called a pivot created zone okay so hopefully it's reasonably self-explanatory

but with a range created zone that's where we have let's get my paintbrush again we have this

range creating right we have a consolidation and then we wait for price to show its hand we wait

for it to commit to itself and it breaks out of the range with momentum right that's kind of key

we want to see price really commit to itself again remind yourself what are we trying to do

here with these funny shapes these funny candlesticks what it comes down to is we're

looking for where did overwhelming imbalances occur in the market where did that big money step in

right where did supplier demand take control okay boom there it is i can see that you know

big big something stepped in there whatever you want to call it okay cool i want to try and

surf on the coattails of that when price fills up more of the orders and then boom that's the

move i want to capture i want to capture this movement here okay that's all we're trying to do

if you're kind of struggling to get your head around this okay so when you see that consolidation

and you see it push out this is literally all you do to draw the zone you just basically draw

a box whatever tool you want to use and you draw it from the the low of the range to the top of

the range and then we get that that thrust out and essentially that whole box there represents

our supply range okay range catered supply supply range whatever you want to call it exact opposite

for demand okay so draw it from the top of the range to the bottom of the range to before where

price breaks out right so that's basically your zone but we drag it across because we then wait

for price to return into it and then as it comes in to that previous range it fills up the orders

this is where we can then begin to look for long positions to try and target that continuation

after the mitigation right so the other sort of main type of zone we get is a a pivot zone right

so you know this can be where typically you see price come down and it could pause for one maybe

two maybe three candles right and then we go so it's kind of just looking for that move to the

downside right a bit of a pause a bit of a correction and then what happens supply steps

in the market to continue to move right and that's why we look for price to come into that area

fill up more of those orders and then we try and capture that next wave right so it's kind of

that pivot in the market and it can sometimes it can be reversed as well so you get price coming

up right and then it pivots to the downside we're just looking for where basically something changes

in direction okay so with supply you'll sometimes hear us refer to this as a buy to sell zone bts a

buy to sell zone basically what it means is price is bought and then it's sold and basically that

shows where you know there's a nut movement and then the sell movement and that's where supply has

stepped into the market and we get the exact opposite for demand okay where we have a sell

you know selling pressure and then boom big buying pressure comes into the market so we call that the

sell to buy okay because there's the sell portion before the buying portion okay it's a bit of a

dumb name but that's just what we refer to it so yeah when you're looking in the markets you're

basically looking for where has price sort of paused or corrected you're just taking a breather

and then typically what you'll see is if it's demand it's usually a bit of a pullback so price

is selling right it usually has a slight decline to it and then boom you see that that buying

pressure come in and then you can either take the whole range or you can take the pivot right that's

your demand and then the exact opposite for supply it's usually you know that that pulls in the

market but it's usually slightly you know to the upside it kind of has that slight inclination to

it the incline i should say and then boom that selling pressure comes in right and then you can

take the whole range or you can take the pivot from within it and that's it don't really need

to over complicate things too much more than that now what i do say is with you know we kind of

refine into a pivot zone you take a pivot zone in terms of supply the thrust candle is kind of what

i'm calling the you know the the candle that initiates out it needs to close so this this

candle here the body of the candle needs to close below the wick of your let's call it your zone

candle i don't really know what else to call it but your zone candle okay so obviously we're

looking for a a a supply zone we're looking for that buy before the sell this candle here this

thrust candle it needs to close below the low of here okay so if you had an instance this is going

to look a bit weird but if you had something like that which can happen okay i would not draw on

that supply zone that's not valid supply this only becomes valid supply once this closes it

literally has to close it if it closes there that's valid all right and now i can draw my

zone on from the high of the of the buddhist candle to the low okay because this just about

closes below the low so that's valid supply okay now it's not the best supply in the world because

what do we want to see you want to see that kind of true commitment right when you see something

like this like momentum that looks a lot better right that's that's price truly coming in because

if you get something like that think about it what's happened price has initially come out of the

range but then it's kind of come back up there's a bit more buying pressure coming in which isn't

as much you know it's not as strong as if you see something really committing to itself okay so the

point i'm trying to make here is that your your thrust candle let's call it should close outside

the previous candle now in this instance when you get something like this where you kind of

get two bullish candles and price closes below both of them then what you can also do is draw on

you know two candles like that and sometimes it could be a third candle and then you know

it's basically turning into range supply at that moment but that's what you can do but i personally

if i'm going to do that i want to see price close below both of them right and you can have this

in the market and you can choose to refine it to one candle you can choose to have it both

you will kind of figure out what you want to do over time and we'll talk about that as we go on but

hopefully now you can kind of see the basics of what we're trying to do here we're looking for

where was there a pause in the market and then did pure momentum come in right where an overwhelming

imbalance between supply and demand has occurred right and ideally you want to see price you know

well it needs to close above the previous candles high if it's demand and the previous kind is low

if it's supply and then once that happens you can draw your zone on okay now again quick caveat

halfway through this lesson what we are doing now is we're not learning how to draw the best zones

the strongest zones the ones that we want to trade from this is just step one of how to draw it as

you go through the lessons we're going to learn more and more confluence of what actually look

for okay but yeah that is range and pivot zones and that's pretty much sort of the two main types

of zones that we look at now we're going to talk about actual trade entries in a lot more depth

as we go throughout the course and we'll have some dedicated lessons in that towards the end of the

technical analysis module but i want you to start thinking about how is it we actually enter the

market and in its most basic sense once we've identified a zone that we want to you know trade

from or build a trade idea around let's imagine it's on our entry time frame we're going to be

entering on or within the zone and our stop loss is always going to go behind the zone okay we

always want to protect it behind the zone and the reason why we want to put it behind the zone is

because you know we never know okay easy way to explain it is if we're looking at range supply

let's just think about this right we know somewhere from the lower the range the top of the range

that's where all of the supply came in to push price out of the range but we don't know exactly

where the biggest orders are within that range right so we know price could sometimes tap into

here and it could go or sometimes it could pull all the way into the top and it could go we never

quite know so we always want to keep our stop loss protected behind the zone okay and obviously the

opposite if there's demand we would put it our stop loss behind the bottom okay so yeah that's

essentially what we're going to be doing for entries stop us behind and we're going to enter on or you

know within the zone depending on what you want to do but we'll talk about that in more depth as we

go on for now let's keep it very simple and let's just always assume that once you've drawn your

zone your entry is always going to go on the front edge of it right the front edge and the stop loss

is always going to go behind right let's just keep that simple for now and we'll be consistent

with that okay so as you can see we have this range created supply and as you can probably

guess i've taken that exact same price action okay so these exact same candlesticks and then

just copy and paste that over here but you can see how i've refined the zone to the pivot okay so

before you'd have had the range created supply just like here and what we can do is we can refine

that to the pivot from within that okay so you can see how price kind of it comes up it comes down

and you kind of get that last pivot that buy before the sell okay and in this case i've refined

it to the single candle pivot zone now this type of zone how i've drawn it like this to the single

candle this is probably what 95 to 99 percent of the time i'm refining my zones to and especially

with my entries at the moment at the time recording i like to enter on the single candle

pivot zone right i don't like to refine it more than that and i don't like to kind of enter on

big ranges like this because as you can see here the more and more we refine the zones what does

that do it allows our stop loss to get smaller you can see the stop loss here is smaller than

this stop loss so what does that mean it means my risk reward is higher like for instance if we were

targeting all the same targets here i can get a 4.24 risk reward here i can only get a 2.2 risk

reward so we're trading the same idea we're trading the same zone but by refining our entries a bit

shorter right risk reward goes up as you guys can see and then finally we're going to talk about

fractal zones in a little bit more depth schools in the lesson but essentially what i've just done

is i've refined this zone to the wick okay and that can give you obviously increased risk reward

but as i've seen here the more and more you refine that can give us increased accuracy right giving

us high risk reward but it increases the amount of missed trades because like i said at the start

we never know how far into this range or into the pivot price is going to pull before at some point

that overwhelming imbalance is going to happen where at this moment here there is more supply

than demand so what happens it overpowers it and we move to the downside and then if you've over

refined then you cannot get tagged into the trade at all okay so trading is that that fine art of

trying to balance between you know your your risk reward and your strike rate and you know how many

trades you want to be tagged into so that's why i said for the majority of you i would focus on

pivot zones you know it's a nice balance between being a bit more refined than taking the whole

range and not being over refined okay and this is a good balance for risk reward and getting

tagged into a lot of trades and some of you also may want to take like you know we get those those

two pivot candles there you may want to do that as well but for now let's just keep it simple and

think about one candle so last point i'll make about this is like i said find a consistent balance

that works for you and it's super super key to just stick to it you need to be consistent

hopefully you've watched the trading and edge module and you will know about random distribution

right we never know the order of which our winners and losers will occur or when our

edge will play out so if you always take the pivot try and be consistent with always taking

a pivot don't flip and flop between when you're going to take the whole range and when not

or if you do sometimes take one and sometimes take the other have strict rules to know when you

will or won't do that okay you need to define it so you can be consistent and be mechanical

okay so just before we kind of wrap things up and head on to the charts to practice drawing

these and identifying these we're going to start to think about the market in more of a fractal

nature so in those previous examples we've just been thinking about one time frame now i want you

to start thinking about multiple time frames okay so don't worry about market structure or premium

discount or any of that fun stuff just think about supply and demand across a few different

time frames so let's look at this range created supply here right the examples we've just been

looking at now there's four candles here right before the thrust candles candle one two three

and four now if you were to draw this range like this let's say that we're on the one hour chart

okay so this here is the one hour chart so one h right one hour cool so you've got four one hour

candles and you draw this range on now if you were to jump up to the four hour chart how do you think

it's going to look you guessed it it's going to look like this candle it's going to look like one

candle okay because obviously a four hour candle is four times one hour candles and when you jump

up a time frame this is how that's going to look right because it's what it's the four hour candle

opens here and then it closes here so that's what happens you get that bullish movement that's what

it looks like okay so when you draw a lower time frame range zone on you don't even have to look

on the higher time frame you should be able to guess just by looking at this on the lower time

frame you should know in the back of your mind that that's a hard time frame pivot okay so a

lower time frame range will be a higher time frame pivot zone right so like i said yeah when you see

that lower time frame range you should be able to visualize what that looks like on a hard time

frame and likewise if you're sitting on the four hour chart and you see this you already know on

the one hour chart it's going to look something like this right it's going to be that range okay

i'll just put some examples for here it's not really that important but like i said right if

there's four one hour candles like this then that's going to be one four hour candle likewise this

could be the m15 chart if you've got four m15 candles that's going to be a one hour candle

right and then some more slightly complicated ones for you if there was 16 because sometimes

you can get like a big range right you can get a long range like this and let's say this is the

m15 you're gonna get 16 m15 candles right that will be one four hour candle okay i think you guys

get the idea but yeah cool okay and final thing i just want to talk through you guys is sort of

those fractal refinements so remember before where we talked about let's see where we have range

supply okay and then we can grab the zone and we can refine it to the pivot right whether you want

to take two candles or one candle one candle is kind of what i recommend most of you just start

with just to keep nice and things nice and simple that's your pivot supply and then you can refine

it to have something like a fractal refinement so there's kind of three main fractal refinements

which we can see here first one is an inside bar and basically that's i hope you guys should know

right when we looked in previous lessons that's the candle that trades in between the high and

the low of the previous candle right so it doesn't break the high low so we get an inside bar and

then price breaks and closes above that so if we obviously if this thrust candle closes above

the previous candle what does that do that gives us a demand zone and that inside bar right if you

look at a lower time frame will typically be a range or sometimes be a pivot if you only jump

down a very close time frame but essentially what happens right is on this time frame it just looks

like price comes up it comes down and it comes up right but that quick pullback that only lasted

one candle on this time frame if you were to go and look on a lower time frame right it's going

to be multiple candles okay exact same for supply price comes down it comes up and it comes down

on a lower time frame that will be a range right now you can draw it on the inside bar

this is very minor detail but you can also draw it from the low of that candle to the top of the

candle okay if you just want to include that as well sometimes i'll do that because what can happen

is price can come in and it can tap that low and continue rather than it doesn't always quite

reach the inside bar okay so it's a bit more of that that range right because what happens is

price comes down you then get that buying pressure and then boom the supply steps in

right so from the low of where the pullback started to the top of the pullback that's that's

your supply okay so sometimes if you see price action like that where you know the low is so

near here i don't over refine and i'll just i'll just take that whole that whole area as a supply

okay so that's inside bars sell to buy wicks this is where it gets a bit more interesting in terms

of kind of true fractal zones whereby if you just see two bullish candles a lot of people won't

realize that there's actually valid supply in the middle of that and the reason why is if you think

about how the candles are formed okay so we have this bullish candle here it opens here right so

opens with our mouses probably trades down a bit then it goes up right and then it pulls back a

little bit and then that's where the candle closes so we have a bullish candle now what happens in

the next bit is the next candle starts and price trades down right so it continues the down movement

from that wick it comes down and then it goes up and it pulls back a little bit okay so if i just

draw that to the side what's happened between those two candles is again just like inside bar

we've had an up movement we've had a bit of a pullback and we've had a continuation so that

sell to buy right that that little pullback what's that going to be in a lower time frame

you're going to likely get a range or maybe a single candle depending on you know how near

of a time frame you're looking at but essentially that's what we're looking for and that from the

top of the reaction or the top of the the pullback to the bottom of the pullback that's your zone

that's where the demand stepped into the market that's your sell before the buy

so whenever you see wicks like this you can draw in a zone and realize what it is that it's lower

time frame demand and the like ways for supply right price comes down it pulls back and it continues

down so that buy before the sell that is your supply and if you look at a lower time frame it

will look something like this or like this okay and then last but not least we have wicks and

sometimes you can draw this on like what you've seen in the live market is you'll get sort of

normal size candles and then sometimes you'll get this big candle with a big wick like that

and if you should take the whole pivot it can be quite a large zone so sometimes what you can do

is you can just refine the zone to the wick just to be a little bit more refined right if you want

to kind of increase your risk reward and your accuracy right and again if you look in the wick

on the lower time frame it will look something like this or something like this so I think you

guys get the idea now the final and only key point I want to make about these fractal zones

specifically and more so about the two types of wick zones here is that I don't view them

or at least in my experience in my testing I don't view those types of zones as strong

as a normal type of pivot zone okay so imagine you know just think about one time frame now right

four hour zone imagine these are all four hour candles okay if you had like a proper um you know

imagine unless this is a time frame but imagine this is the four hour zone and you have a full

bodied you know full candle body zone like this a full pivot zone that to me is like a proper four

hour zone it's a true true four hour supply zone right if we then have this on the four hour chart

it's four hour wicks but it's not really like a four hour zone it's not a proper four hour

candle zone this to me is just a way of viewing that there's an m15 supply zone here but I can

see it on the four hour time frame okay so if I had the option from trading from four hour buy

to sell wicks like this or from trading from a four hour pivot candle zone like this I'm always

going to want to pick this zone this to me holds a lot more weight it has a lot more orders within it

than just reading the buy to sell wicks because remember time is power the four hour chart is

more powerful than the m15 this to me this is a four hour zone here this is a four hour pivot zone

buy to sell wicks that's just that's an m15 zone but it just so happens I can see it in the four

hour chart okay so I'll be aware of these and I'll draw them on my charts but I don't view

this as strong as a proper four hour you know candle pivot zone hopefully that makes sense okay

so yeah that's kind of all the sorts of ways in which we draw zones and for some of you who

are new to supply and demand this might seem quite a lot to take in so re-watch it a couple

of times but then in the the next lesson we're now going to go through some examples on the

charts of how kind of how we identify them and draw them