Change In The State Of Delivery (CISD) - Reversal Confirmation

Summary

This video presents a detailed explanation of the concept of CISD (Change in the State of Delivery), a key confirmation tool used in trading. The presenter breaks down the concept using examples from both bullish and bearish market movements, explaining how a singular or series of down/closed candles can signal potential reversals or continuation patterns when they tap into areas of discounted or premium price levels. Through analysis of daily, 1-hour, and 5-minute charts, the presenter shows how to apply this strategy to identify entry points and make more informed trading decisions, especially in consolidating or reversing markets.

Takeaways

• 😀 CISD (Change in the State of Delivery) is used as a confirmation tool, not for pattern trading.
• 😀 CISD can be observed through singular down-close candles or a series of down-close candles that reach into discounted PD (Price Delivery) arrays or key levels.
• 😀 For a bullish CISD, the confirmation comes when a bullish candle closes above the high of a down-close candle reaching into an area of expected reversal.
• 😀 When a series of down-close candles forms, the key to confirmation is closing above the first candle in that series.
• 😀 For a bearish CISD, a series of up-close candles reaching into premium areas should be followed by a closure below the low of the up-close candle.
• 😀 CISD can be used in both reversal and retracement scenarios, helping to confirm price action is reversing or retracing.
• 😀 Timeframe alignment is crucial. Start with a higher timeframe (like daily) to establish the context, then move to lower timeframes (like the 1-hour) to confirm the CISD.
• 😀 For intraday trading, once a change in the state of delivery is identified, finer timeframes (like the 5-minute) can be used to enter trades with more confidence.
• 😀 In consolidating markets, CISD can be used to identify breakouts or reversals by looking for changes in price delivery.
• 😀 To use CISD effectively, always wait for confirmation rather than trying to predict where it will occur, ensuring you align with the broader market context.

Q & A

What is CISD and how is it used in trading?

CISD stands for 'Change in State of Delivery.' It is a confirmation tool used by traders to validate market reversals or trend continuations. It is not meant to be used as a pattern-trading tool but rather to confirm signals derived from higher time frame analysis, like the daily chart.

How does a singular down-close candle in CISD work?

A singular down-close candle in CISD occurs when the price reaches into a discounted key level or price delivery (PD) area, where a reversal is expected. The confirmation happens when a bullish candle closes above the high of this down-close candle, signaling a potential upward move.

What should traders look for after marking the opening price of a down-close candle in CISD?

Traders should extend the opening price of the down-close candle out in time, as this marks a key area of interest. If price revisits this area, it can indicate a reversal, providing traders with confirmation to enter a trade.

What is the significance of a series of down-close candles in CISD?

A series of down-close candles in CISD indicates that price has swept a key liquidity zone or reached a higher time frame discounted area. The first down-close candle in the series is crucial, as a bullish candle closing above its high confirms the shift in market sentiment and potential for a reversal.

How can traders use CISD for bearish signals?

For bearish signals, CISD works similarly but in the opposite direction. When a bullish candle reaches into a premium PD area (a high-price zone where reversals are expected), a bearish candle closing below the low of that bullish candle signals a potential downward move.

What is the role of FIB (Fibonacci) retracement in using CISD?

Fibonacci retracement is used to identify areas of premium or discount. Traders can use the levels on the Fibonacci tool to measure the retracement from a high to a low (or vice versa), which helps in confirming whether the price is entering a premium or discounted zone, making it more likely to reverse at those points.

What is the key aspect when applying CISD to consolidating markets?

In consolidating markets, traders should wait for a change in the state of delivery (CISD) to signal a potential breakout. This could be a confirmation that the market is ready to reverse or continue after a consolidation phase. It's important not to predict but rather to wait for confirmation of a move before acting.

How does time frame alignment play a role in using CISD?

Time frame alignment is critical when using CISD. A trader typically starts with a higher time frame (like the daily chart) to identify key levels and potential reversals, then zooms into lower time frames (like the 1-hour or 5-minute chart) to look for CISD confirmations that align with the daily trend.

What are the practical steps to use CISD for intraday trading?

For intraday trading, traders begin with the daily chart to identify key price levels and discounted areas. Then, they move to a 1-hour chart to spot a change in the state of delivery. If the market behaves as expected, they can use the 5-minute chart for precise entry points during intraday price action.

What are the dangers of pattern trading when using CISD?

The primary danger of pattern trading with CISD is that it encourages traders to predict market movements based on previous patterns. CISD is a confirmation tool, not a pattern-recognition strategy, and should only be used to confirm what the market is already showing, not to anticipate price direction without confirmation.