Daily Bias Was Hard, Until I Understood This

Summary

In this video, the speaker simplifies the concept of daily bias for traders, emphasizing one key question: 'What is the market choosing to respect?' By understanding key levels like order blocks and fair value gaps, traders can effortlessly determine their daily bias, whether bullish or bearish. The speaker highlights how retail traders often go against the trend and provides real-world examples to show how these market reactions can guide successful trades. With practical insights and a focus on simplicity, the video helps traders improve their strategies and navigate the markets more effectively.

Takeaways

• 😀 Daily bias is a fundamental concept in trading, but often misunderstood. It's a concept that simplifies the process of identifying market direction.
• 😀 The key to understanding daily bias is asking one simple question: 'What is the market choosing to respect?'
• 😀 Daily bias can be applied to any market, and understanding it can make identifying trends effortless, even for beginners.
• 😀 Retail traders often trade counter to the market trend, leading to losses. When the market is moving down, they expect an upward reversal, and vice versa when the market moves up.
• 😀 A real-life example of retail bias is seen on myfxbook.com, where the majority of retail traders were bearish on the Euro/Japanese yen, yet the market was moving bullish.
• 😀 Key levels in the market (order blocks, fair value gaps, highs and lows) are critical to determining daily bias and the market's direction.
• 😀 An order block is a countertrend candle that can signal a reversal when the trend changes direction.
• 😀 Fair value gaps represent areas with significant volatility between candles, where price tends to react strongly. These gaps help define the market’s bias.
• 😀 When a key level like an order block or fair value gap is violated (disrespected), it signals a shift in the market's bias, e.g., from bullish to bearish or vice versa.
• 😀 Daily bias simplifies the trading process by focusing on what the market respects, rather than trying to predict or control its movements. Traders should aim to follow the market's reaction to key levels.
• 😀 The concept of daily bias is reinforced by a consistent strategy that focuses on identifying key levels and respecting market reactions. Using this method, traders can continue to trade confidently without forcing positions when the market is uncertain.

Q & A

What is the key concept of daily bias that the speaker emphasizes in the video?

The key concept of daily bias is understanding the market's behavior by asking one simple question: 'What is the market choosing to respect?' This question helps identify the direction and key levels that the market is following, making it easier to determine whether to go bullish or bearish.

Why is daily bias considered one of the most misunderstood concepts in trading?

Daily bias is often misunderstood because traders complicate it, but in reality, it can be simplified by focusing on what the market respects each day, like key levels such as order blocks and fair value gaps. Many traders also struggle with consistently aligning their trades with the market's trend.

What are the three key levels mentioned for identifying daily bias?

The three key levels mentioned are order blocks, fair value gaps, and swing highs and lows. These levels are crucial for understanding market reactions and predicting whether the market will continue in the current trend or reverse.

How do order blocks influence the daily bias in the market?

Order blocks are counter-trend candles, and they act as significant levels where the market may reverse. If the market respects these bullish or bearish order blocks, it reinforces the daily bias in the direction of the trend. For instance, a bullish trend will respect bullish order blocks, and a bearish trend will respect bearish ones.

What is a fair value gap, and how does it relate to market movement?

A fair value gap is a three-bar pattern on the daily chart, where there's a gap between the high of the first candle and the low of the third candle. This gap often indicates high volatility and potential market reaction points. If the market respects these gaps, it can provide clues for the daily bias.

How does the concept of retail traders' behavior relate to daily bias?

Retail traders tend to trade against the trend, often expecting reversals when the market is either oversold or overbought. The speaker shows that this contrarian approach often leads to losses, and understanding daily bias helps avoid such pitfalls by staying aligned with the market's actual movement.

What happens when the market disrespects key levels like an order block or fair value gap?

When the market disrespects a key level like an order block or fair value gap, it indicates a potential change in direction or trend. For example, if a bullish order block is broken, it could signal a shift towards a bearish trend, which requires traders to reassess their bias and strategy.

Why does the speaker stress the importance of staying neutral when the market is at extreme key levels?

The speaker stresses neutrality at extreme key levels because these areas are where market reversals are likely. Instead of aggressively betting on the market's next move, traders should be more cautious and wait for confirmation before making any decisions. This approach reduces the risk of false breakouts.

How does the market's reaction to a fair value gap help determine the daily bias?

When the market reacts to a fair value gap by either respecting or breaking it, it gives a strong indication of the daily bias. If the market continues respecting a bullish fair value gap, the bias remains bullish. If the gap gets disrespected, it could signal a bearish shift, and the bias would change accordingly.

What is the role of 'I don't know' in trading, according to the speaker?

'I don't know' plays a critical role in trading because it reflects humility and discipline. The speaker suggests that when a trader is unsure about the market's direction or when key levels are too extreme, it's better to acknowledge uncertainty rather than forcing a trade, which helps manage risk and avoid unnecessary losses.