The Lab Model - Overview 11th April Post PPI
Summary
TLDRThe video script discusses the Lab Model, a trading tool designed for daily market analysis. It identifies retraces and continuation patterns, focusing on standard deviation and liquidity grabs. The model operates on various timeframes, favoring shorter ones like 5 minutes. It involves identifying specific zones and signals like SMT and imbalances to execute trades, aiming for consistent daily market participation with an emphasis on risk management and strategic trading.
Takeaways
- 🔍 The Lab Model is designed to capture retraces and continuation patterns from MXM in the market, and it appears every day across multiple time frames.
- 🕒 The model is generally applied to lower time frames (1 to 5 minutes), and is mainly traded during the New York session, though it also appears in the London session.
- 📉 The core strategy involves trading from a reversal zone, marked between -2 to -2.5 standard deviation, and targeting a move to a discounted area.
- ⚙️ Standard deviation is used to mark potential reversal zones, and once price reaches this area, traders look for opportunities to trade back into the discount.
- 🔑 SMT (Smart Money Technique) is the key trigger for taking trades, signaling liquidity grabs and providing validation for potential market moves.
- 📊 Once an SMT signal is detected, traders look for an inversion of an imbalance and wait for a closure below the imbalance before entering a trade.
- 💼 The model accounts for potential risks such as slippage, and traders are advised to manage their risk accordingly, particularly on lower time frames.
- 🎯 Two main types of trades are highlighted: reversal trades (from the -2 to -2.5 zone) and continuation trades, which only occur after the reversal trade is complete.
- 🔄 Reversal zones are also marked at -4 standard deviation for further opportunities if price extends beyond the first reversal area.
- 📝 A detailed PDF guide for the Lab Model is being prepared, but this video serves as an initial overview for members of the community to understand and backtest the strategy.
Q & A
What is the Lab Model mentioned in the transcript?
-The Lab Model is a trading strategy developed to capture retraces and continuation patterns in the market, particularly in MXM. It is designed to find trades daily across various timeframes, typically focusing on smaller timeframes like 5-minute to 1-minute charts.
What are the key components of the Lab Model?
-The key components of the Lab Model include identifying liquidity grabs, standard deviations, reversal zones (between -2 to -2.5 deviation), SMT (Smart Money Trap) as the entry trigger, and using premium and discount zones for targeting trades.
What does SMT stand for, and how is it used in the Lab Model?
-SMT stands for Smart Money Trap. In the Lab Model, SMT is used as the primary signal for short or long entries. The model waits for SMT to appear, signaling that liquidity has been grabbed, and then looks for imbalances or deviations in the price to take trades.
Why does the Lab Model use standard deviation for identifying trades?
-The Lab Model uses standard deviation to identify key zones in the market where liquidity is grabbed and where price is likely to reverse or continue. The reversal zones are typically between -2 to -2.5 deviations, and the continuation trades extend to the -4 deviation level.
What is the difference between a reversal trade and a continuation trade in this model?
-A reversal trade occurs after price moves to a key zone (such as -2 to -2.5 deviation) and is expected to reverse back into a discount or premium. A continuation trade happens after the reversal trade, where price continues in the same direction until it reaches the -4 deviation level.
How does the Lab Model handle stop losses and invalidations?
-In the Lab Model, stop losses are placed above the SMT or inversion point. If price moves beyond the standard deviation range or breaks the SMT structure, the trade is considered invalid, and traders are advised to exit. The model also accounts for slippage, particularly in Futures trading.
What timeframes are most commonly used in the Lab Model?
-While the Lab Model can be applied to all timeframes, it is most commonly traded on lower timeframes such as the 1-minute and 5-minute charts. Higher timeframes like 15-minute or hourly charts offer more significant probability but may come with larger stop losses.
How does the Lab Model deal with news events and market manipulation?
-The Lab Model acknowledges that news events and liquidity grabs (manipulation) are common. Traders are advised to wait for price to stabilize and show SMT or standard deviation signals before taking trades. News-related moves are considered accumulation or manipulation phases, which lead to distribution.
How can traders manage risk and take profit in the Lab Model?
-Traders can manage risk by setting stop losses at logical lows in discounts and moving to break even once the trade is in profit. For taking profit, the model uses predetermined levels such as the -4 deviation level or discount areas. Trailing stop losses or partial exits can also be used.
Why is backtesting emphasized in the Lab Model?
-Backtesting is highly recommended in the Lab Model because it allows traders to familiarize themselves with the patterns, validate the model's effectiveness, and fine-tune their strategy. The model appears consistently in the market, but experience and practice are required to spot high-probability setups.
Outlines
📊 Introduction to the Lab Model Overview
In this paragraph, the speaker introduces the Lab Model, a tool designed for daily market analysis focusing on retracements and continuation patterns, especially in the context of 'MXM.' They mention that a detailed PDF is in progress, and this video serves as a temporary guide. The speaker outlines a recent market event involving liquidity grabs and standard deviation zones and explains how these concepts help in identifying potential trades. They emphasize the model’s adaptability across various time frames but highlight the preference for lower time frames, such as 1 to 5 minutes.
📈 Explanation of SMT and its Importance in Trading
The speaker dives deeper into the concept of SMT (Smart Money Technique) and explains how it works in market trades. They describe a scenario where liquidity was taken, focusing on how highs and lows of candles indicate possible entry points. A particular trade setup using a five-minute chart is discussed, showcasing the use of imbalance inversions and waiting for SMT signals before entering a trade. The speaker emphasizes patience in waiting for bearish structure confirmation and managing the risk around stop losses.
📉 Analyzing the Inversion and Entry Points in Trades
This paragraph elaborates on how traders should handle imbalances and SMT inversions to identify good entry points. The speaker mentions how the first bearish structure signals when an imbalance has closed, stressing the importance of back-testing entry limits. They detail the use of logical lows and discounts as key decision points in identifying whether to continue with a trade. The speaker also shares insights into managing risk, particularly when price action nears stop losses, and emphasizes the importance of avoiding early break-even decisions.
📊 The Continuation and Reversal Trades
The continuation and reversal trade strategies are discussed in this section. The speaker explains how reversal trades are framed around certain market zones, specifically at -2 to -2.5 and -4 deviations. They highlight the role of standard deviations in determining when a trade is no longer valid and when to expect price reversals. The discussion emphasizes following the model’s logic by consistently framing SMT and inversion opportunities while adjusting trades based on real-time market behavior.
🛠 Practical Application of the Lab Model
This paragraph covers the practical application of the Lab Model in everyday trading. The speaker encourages traders to actively back-test the model, underscoring the significance of spotting high-probability trades through efficient market analysis. They caution that trading is not always successful, and losing trades are part of the process. The speaker stresses that the Lab Model, while effective, requires traders to actively spot trades in the market and adapt to changing conditions. They end with a reminder to test the model extensively before relying on it.
Mindmap
Keywords
💡Lab Model
💡Standard Deviation
💡Liquidity Grab
💡SMT (Smart Money Trap)
💡Imbalance
💡Premium and Discount
💡Reversal Trade
💡Continuation Trade
💡Inversion
💡Time Frame
Highlights
The lab model developed appears daily in the market and is used to identify retraces and continuation patterns.
The model is based on standard deviation, with key zones between -2 to -4 for identifying price reversals.
The model primarily focuses on smaller time frames, such as the 1-minute or 5-minute charts.
The standard deviation tool is crucial for identifying areas where liquidity is grabbed, and price moves into a discount.
Trades are framed by using SMT (Smart Money Techniques) as the trigger for short trades after liquidity is grabbed.
The model has two trade types: reversal trades and continuation trades, with the continuation only after a successful reversal.
SMT setups can be identified by comparing price movements between correlated pairs, such as ES and NQ, for manipulation.
The 5-minute imbalance is often the most reliable time frame for identifying potential reversals using the lab model.
Inversion of imbalances is critical to the strategy, and the trade is only valid after SMT has been confirmed.
The lab model allows for small risk trades every day by identifying short-term moves back into discount areas.
Trades are framed using a combination of standard deviation and premium-discount pricing models to maximize profitability.
The higher the time frame, the stronger the probability of the model working effectively, reducing risks.
Price expansions beyond -3 or -4 invalidate the reversal trades, prompting traders to wait for new opportunities.
The strategy can involve backtesting for optimizing setups and refining entries, particularly around imbalances and reversals.
The lab model community collaborates in testing and refining the method, fostering collective learning and improvement.
Transcripts
right guys been promising a lot of
people to do an overview video the lab
model um and we are working on a PDF so
this is a bit of a stop gap between now
and then um but in essence what the lab
model um is is it's a model that we have
developed that appears every day in the
market it's an mxm um so what it's
looking for is it's looking for to grab
retraces and um the continuation pattern
from most mxm so um there's a couple of
ways to that it's appeared today alone
um and we haven't actively taken the
trades me personally had a lot going on
but we called them out live in the in
the live stream and also there's one
that's kind of ongoing now I've just
deleted um most of it uh so what I'll do
is I will delete everything from um from
the trades from uh from the charts from
uh this afternoon this morning um so
we've come on um we've come online we're
currently we were currently in this
movement down I'm deleting all of these
sorry so we had a uh an a liquidity grab
manipulation from news and a big move
down so standard deviation from there um
if you haven't by the way if any of
these things aren't clear please ask
questions so standard deviation
typically what we're looking for is
we're looking for an area where
liquidity is grabbed price uh or filled
in an efficiency and then mooved to the
downside so in this instance we've
marked down deviation from here to here
we've got our reversal Zone which is the
zone between minus two min-2 and uh -4
these are the settings for the standard
deviation tool that I use um so around
minus 2 to 2.5 the logic is is that
price would extend to - 2 - 2.5 and then
travel back up into a discount um and
typically we are looking for is we are
looking to grab the trade from minus 2
-2.5 to the discounted area and that is
the trade that we check take because at
that point price can either reverse to
the downside or it can pull back into a
more local premium discount and then
reverse and then continue back onto the
upside so it's basically a model that
allows you to trade a small piece of the
market every single day it appears on
all time frames higher lower a lot
typically we trade it on a lower time
frame so we're talking 5 minutes to 1
minute um the reality is is that the
trade here um that appears here the the
actual model trade um there were a
couple here but we got no follow through
to Discount the one that actually did
follow through is actually new strippen
um so it's not actually a trade that um
a lot of people were able to take and
basically that trade looks a bit
like this really
realistically something like this back
up to to this so it's not the it's not
the it's a big move but it's not you
have to risk quite a lot so ignoring
that and just trading it from a local
you know 9:30 comes in the um 930
approaches the market and then we look
to trade it typically we look to trade
this in New York session it does appear
in London some days um but as a general
rule we look to um trade it in in New
York so anyway news comes online grabs
liquidity to the downside I don't need
to go over this entire move but
basically this is all just an
accumulation move this is manipulation
and now we're Distributing higher so
that that move lower um we can mark the
standard
deviation out from that right so that
gives us our reversal zone so we have
our minus two minus 2.5 so again this is
the area where we are looking for price
to trade away from right where are we
looking to trade it
to Mark the low the current low to the
current High the low typically is always
the the low or the high of the standard
deviation low if your if the standard
deviation is um marking higher low if
the high if the um standard deviation is
marking lower so um we can set our
premium discount so we have two things
we have premium discount of the range
that we're currently in the the um one
to from between one and minus uh 2.5
that's not a rule basically this could
go all the way up here as long as it
doesn't go to minus three basically we
are framing shorts here um so we're
looking for shorts and where are we
looking for shorts too back down to this
discounted area so what are we looking
for we're looking for smt that that is
our trigger for
um for shorts so we're waiting for
smt I could give you the long and short
boring answer to this there's the smt
that appears on this on this time frame
is here so it looks like this
so that smt there basically what has
happened
is
uh es took liquidity as you can see here
the high of this candle is uh
52 uh 5
220 .05 and that's the high of this
candle as well so liquidity that any
stops that were buried at the top of
that candle have been Ran So that is the
the um the smt smt here um price made a
lower high so that is the smt right when
we I'm just going to I'm just going to
go to the replay tool here at this point
there aren't many imbalances so there
are a couple of imbalances here but it's
your job to find the imbalance that
you're going to trade trade out of right
I personally think that the five minute
imbalance is the best the best imbalance
from an inversion perspective um it's
not actually the imbalance that I
charted live um because it just it just
wasn't um but um we do actually invert
this imbalance before the smt is created
so what I want to um highlight is that
you can invert an imbalance but basic
but you will not trade that imbalance
until the smt is created once the smt is
created your
entry your entry then becomes that
inversion of that imbalance so you have
to wait for that imbalance to be
inverted again so in this instance we
invert it right on a five minute chart
we already have inverted it so we've got
closes below so that's our first signal
of bearish structure that's a good sign
and now we're looking for our trigger
for our entries to our shorts as the smt
we get smt we get a closure below the
imbalance right fine we Wick to the
downside what we we're waiting for is
we're waiting for price to then close
below the imbalance
again and our trade will simply
be the limit order you can mark it it's
up to you I've back tested and a lot of
people have back tested shorts uh sorry
limits not shorts we back shorts and
then basically the the logic of it is is
that it's the first it's the first
logical low in a discount when there is
no logical low in a discount the
discount becomes your logical low
because that's the area that we want to
trade into typically if there was a wick
on a one minute chart down here and then
we got a big spike this would be or this
would be your first logical low in a
discount
so that for me is the trade the um the
the model trade that appeared this smt
you always Buri it above here why
because if price was to invalidate this
the entry the SM the framing of smt
becomes invalidated so so does the trade
um so at that point we we wait for the
the F minute candle to close below and
we take the trade and we take it to a
discount this was a bit of a
nerve-wracking trade because price quite
literally came within a tick of our stop
loss um if you're trading cfds you need
to account account for slippage on
Futures typically you are okay if the
wick doesn't touch the the the the order
isn't executed you will get slipped on
entry and exit but that's about it um
there is no rule around going break even
on this it's a basically as much as you
want to or don't want to um this was the
actual trade that we charted live so
because there is also smt
here so there's also smt here and we
actually charted this trade live um with
the same stop basically I didn't find
the I didn't spot the five minute
imbalance and this was the trade that we
actually ended up taking live it's still
a 2 R trade 1.8 R um but as you can see
basically price messes around for a
little while and actually goes back up
to basically
our stop loss um to the point of it
comes within a tick of our stop loss
again you can see that we're still in
this we were still in this
trade and then finally price continues
on to the downside okay so the the the
lab model trade netted you about
6.5r um still it was about 300 ticks and
we still grabbed about
226 um ticks using the trade that we
actually charted live basically I was I
was doing something else I wasn't I was
only on the one minute and that was the
trade that we spotted on the one minute
if I was cycling time frames because I'm
not I wasn't actively trading today it
wasn't something that I was looking to
grab so we've we've reached discount so
there's a there's the continuation trade
so there's two there's two trades
there's a reversal trade and there's a
continuation trade the continuation
trade can only be taken after a reversal
trade so most of our trades are are
basically the what you've just seen
price traveling two minus 2 - 2.5 and
then we're framing smt we're looking for
an inversion we're trading the inversion
with the invalidation above our smt and
we're trading to a discount that's it it
appears every day it's all you need it
will 100% appear it's your job to find
it in the market so um we then have a
continuation trade right so the
continuation trade in the market is you
utilizing the same um premium disc
standard
deviation so this standard deviation
will become will basically come into it
will be live and active in the market
until the low or minus 4 has been taken
there's a reason we have min-2 to- um -2
to- 2.5 and we have -3 - 3.5 and -4 so
if a trade if this was to expand all the
way up to here this trade would have
been active and we would have be looking
to frame smt if price expands past minus
three the likelihood is that price is
most likely going to to expand to minus
4 before doing anything else so at minus
three the reversal trade here becomes
invalidated and we look to frame
reversal trades here exactly the same
logic and we always frame the reversal
trades at two places in the marketus 2 -
2.5 and minus 4 they are always the the
areas that we look to frame our reversal
trades so by that logic we are able to
go to min-2 - 2.5 retrace and continue
to minus 4 that is the logic of standard
deviations that most people do use and
the model that we have um engineered
actually allows us to trade that when
it's given to us so minus 2 - 2.5 we
trade down into a discount now as a
general rule we don't really care what
price does we wait for price to to
typically show us what it wants to do so
again we look to frame
smt um so what we're looking for is
we're looking for price to basically
make a low on one pair against the other
we only frame smt with the S I don't
care what does it's irrelevant so you
will see here um that
price ends up trading lower very very
small time frame by the way um and
higher so let's just zoom into
these so this candle here which is being
highlighted on my chart here is the low
on NQ and the next CLE is low on the S
so what that's showing is there showing
there's some manipulation between the
two at a discount that's not the only
trigger but that's your invalidation for
any trades that you might you might look
to take here right
um what are we looking for we're looking
for smt from a reversal perspective
we're looking for smt and we're looking
for an imbalance to be inverted so let's
just frame the imbalances from an
inversion perspective and I'll show you
the one that I actually would take you
can take this on any time frame the
higher the time frame the more
probability that's something you need to
understand
um so we've had no closure above a 1
minute still no closure still no closure
It's always important to note that um
when we get a closure like this this
isn't something I would deem a closure
it needs to be a tick above my little
trick that I always show say to everyone
is if you hover over the candle the Open
high and close here what you're looking
for is the low of this candle so the L
that is 18 20950 and you're looking for
the close of this candle which is 18
20950 so that is not a inversion that is
a um that's basically equal equal to
there's no F phrase but it's just
basically not an inversion you then get
the close Above So as a as an actual
rule you could have taken this trade
here again this is not a trade that I
have or did or or suggested anybody to
take 145 tick is quite a large stock and
the reality is that you're probably
wanting to take the trade up to here or
at least up to this up to this minus 4
four level right you can take partials
as much as you want my rule is stoploss
take profit that is typically what it is
occasionally are move to break even if
there's news or if there's you know a
bunch of other stuff as a general rule I
don't trade um I don't I don't go break
even unless we deep into a profit or I'm
trailing or you know lunch hour macro
etc etc so this is a trade you could
have taken however again like I said um
the higher the time frame the the more
the more likely so typically what I like
to do is from a reversal trade is I like
to look for a three a five or 15 minute
imbalance so um we actually end up
getting a you know basically strong
close above a f minute imbalance down
here
so you could look to trade the five
minute imbalance so I'm just going to
delete the I'm just going to delete this
um and move the 5 minute imbalance to
here that's quite a small imbalance they
are still the same probability and at
the end of the day your stop loss is
still the same so for me that is a um a
trade that I would I probably wouldn't
look to take however on a you basically
have a 15minute inversion that it's also
printing at the same time so you get the
15minute inversion that prints and that
15-minute inversion is likely to be
strong right so
um by this logic you can take this
trade it's a quite a large stop loss but
there are also I'm I'm actually fairly
confident there is smt
that ends up appearing along the way
where is
it but you could basically frame any smt
from this move typically as a as a
general rule when we're trading large
higher time frame inversions I like to
just bury my stop loss under the
inversion under the candle that prints
the
inversion you could get in a lower time
frame trade from the S&T down here the
reason we like to take lower time frame
trades because the earlier you spot the
model the smaller your stop loss the
more the less risk you're you're able to
take right or the less risk you have to
take not able but as a general rule this
inversion here for me is the trade
burying it under the some people bury it
under the inversion some people bury it
under here but as a general rule when I
like to use 15 minute inversions or if
my stop loss is going to be bigger than
200 TI because that's quite a lot you
know One Mini on naseg you're talking
about $1,000 loss um if I've got the
draw down I'll play with it if not I
and this is the trade that basically I
suggested to everybody in the live that
we were we were looking at um we got a
large expansion we basically bottom
ticked the market so we never really got
into any draw down would I be in would I
be break even off the 300 ticks I
probably would so my trade would be here
and my take profit would be here and
that would be the reverse the
continuation trade allowing us to extend
to-4 once we get to minus 4 we look for
reversal trades we were able to move so
this premium discount has been um
efficiently traded so that premium
discount is no longer valid it's what
we'd be looking for now is that this
becomes the the premium discount so we'
be framing reversals from here down to
here it's not a winner every day it's
not and that's the reality is that you
are you are able to take losses and on a
smaller time frame you can end up taking
a loss and the model still be valid
because it prints another smt Etc Etc um
that is just part of the the fight that
allows you to be a Trader if a model was
completely um system driven um then you
know and it was it printed money every
single day everyone would be a
millionaire there is some um element to
this that enables you to be a better
than somebody else at it by spotting a
better trade or or higher probability
trade but I would just absolutely
emplore you all to back test this model
um we have a PDF coming out on it that
is very very detailed around what the
dos and don'ts of the market but as a
general rule what you're looking for is
you're looking to efficiently trade the
distribution legs into each market so as
we are aware price trades from premium
to Discount premium to Discount all of
the time and what we're looking to do is
we're just looking to grab that move
from the the reversal Zone back into a
discount and then the and then the
continuation trade not necessarily that
you have to trade every single one that
appears but as a general rule the revers
um the the reversal trade is the one
that's the best and if price is looking
really bullish you're able to just grab
a trade and once price moves away from
your entry you can then look to to trade
uh look to go break even some general
rules you can trade you can compound you
can do absolutely anything as you wish
what I've just shown you is the model
how we trade it there aren't rules
around
um going break even like I said moving
your stop loss um your TP is very static
in terms of minus four um discount
they're the two TPS that you will always
have discount price can always move away
you have to wait for the inversion the
smt to trigger your trade once you trade
through an imbalance and create that
inversion or trade through an imbalance
that was the inverted previously that
becomes your trigger for the
um I may have missed some stuff um this
is a 20 minute long video this model is
something that we should find over
months um and as a general rule I trade
this every day um it's basically all I
trade
now some a couple of guys inside the
Discord have done some extensive back
testing that's netted some very very
decent results um that will be
um that I will ensure is in the PDF but
at the moment this is the blueprint
for the lab model and this is what we
trade every day A bunch of us trade it a
bunch of us always looking for it if you
have any questions you have any doubts
or you want us to go over a specific
concept please please please just let us
know this video is strictly for the
Discord only please do not share the
link the copy of this anywhere um as
much as we want people to to trade the
model um we do want to foster a
community and a and a a family around
the lab community and the model that
that we've developed as as a community
so appreciate every one of you um and
like I said if you got any questions
around the model please please please
just ping me ping anybody um that you
see talking about it if that person
doesn't know the answers to the question
please um please approach me ask me
raise a ticket ping me do anything as
you wish and I'll get back to you C
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