Time & Price Algorithmic Trading: Higher Timeframe Protocol

Summary

In this lecture on the higher time frame trading protocol, the focus is on identifying key elements that drive market movements: order flow, liquidity, and points of interest. The concept of 'narrative' is introduced, where price is expected to move from point A (point of interest) to point B (drawn liquidity). The lecture explains how understanding order flow helps frame market maker buy and sell models. With practical examples and a homework assignment, the session aims to help traders predict price movements by combining higher time frame analysis with lower time frame execution.

Takeaways

• 😀 **Higher Time Frame Protocol** is essential for framing high-probability market maker models by identifying key price levels (Point A and Point B).
• 😀 **Narrative** refers to the story of price moving from Point A (a point of interest) to Point B (drawn liquidity).
• 😀 **Order Flow** defines the market's direction: bullish order flow is expansions higher and retracements lower, while bearish order flow is expansions lower and retracements higher.
• 😀 The **Drawn Liquidity** is the price level that hasn't been reached yet, guiding the continuation of the order flow in the current direction.
• 😀 To identify **market maker buy models**, bullish order flow involves retracements lower followed by expansions higher.
• 😀 To identify **market maker sell models**, bearish order flow involves retracements higher followed by expansions lower.
• 😀 The **Point of Interest** is where price will retrace into before expanding towards the drawn liquidity.
• 😀 **Combining Order Flow, Drawn Liquidity, and Point of Interest** helps build the narrative, anticipating price movement from Point A to Point B.
• 😀 A clear **market maker buy model** forms when the price retraces lower into the point of interest and then expands higher towards the drawn liquidity.
• 😀 Homework: Collect 15 examples of bullish and bearish market maker models and mark them with blue and red boxes to highlight retracements and expansions.

Q & A

What is the Higher Time Frame Protocol in trading?

The Higher Time Frame Protocol is a method used to frame high-probability market models by analyzing order flow, drawn liquidity, and points of interest. It helps traders anticipate price movements from one price level (Point A) to another (Point B), allowing them to plan trades more effectively.

Why is identifying the narrative important in trading?

Identifying the narrative allows traders to understand the story behind price movements. By recognizing the path price will take from Point A (point of interest) to Point B (drawn liquidity), traders can plan trades with more confidence, knowing the expected direction of price.

What is order flow and why is it important?

Order flow refers to the pattern of price movements, showing whether price is expanding or retracing in a particular direction. It is important because it helps traders determine whether the market is bullish or bearish, and it guides the framing of lower time frame market maker models for entry points.

What is the difference between bullish and bearish order flow?

Bullish order flow involves price expanding higher and retracing lower, indicating a market moving upwards. Bearish order flow involves price expanding lower and retracing higher, indicating a market moving downwards.

How does knowing order flow help frame market maker models?

Knowing whether order flow is bullish or bearish allows traders to frame lower time frame market maker models. For example, in bullish order flow, retracements lower followed by expansions higher form a buy model, while in bearish order flow, retracements higher followed by expansions lower form a sell model.

What is drawn liquidity and why is it important?

Drawn liquidity refers to the price levels that the market is naturally moving towards. Understanding where drawn liquidity lies is crucial because it helps traders predict where price is likely to go next, ensuring they are positioning themselves for continuation in the right direction.

What role does the point of interest play in the higher time frame protocol?

The point of interest is where price retraces before expanding in the same direction. It acts as a key level where traders anticipate price will reverse direction and continue toward the drawn liquidity. Identifying the point of interest is essential to frame entries and exits for trades.

How do traders apply the higher time frame protocol in practice?

Traders first identify the order flow (bullish or bearish), then locate the drawn liquidity (where price is headed), and finally determine the point of interest (where price will retrace before continuing). Once the point of interest is reached, traders apply the lower time frame protocol to confirm entry points.

What is the purpose of the homework assignment in this lecture?

The homework assignment asks students to identify 15 examples of higher time frame retracements and expansions. These should be categorized into bullish and bearish market maker models, with retracements and expansions drawn in blue and red boxes, respectively. This exercise reinforces the concepts of order flow and market maker models.

What should traders do once the point of interest is reached in the higher time frame?

Once the point of interest is reached, traders should drop down to a lower time frame and apply the lower time frame protocol to confirm that a market maker model will unfold. This helps ensure that the expected price movement from the point of interest toward drawn liquidity will continue.