YouTube Video — Transcript

Learn how to apply smart money concepts and liquidity models to Forex trading using Euro Dollar charts and timeframes.

Ask about this video. Answers come from its transcript only — with the timestamp, so you can check them.

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Key Takeaways

Smart money uses buy and sell stops to manipulate price before moving in the desired direction.
Institutional price levels and Fibonacci retracements are critical for identifying target zones and liquidity.
Annotations are essential for learning but charts should be kept clean for trading clarity.
The midnight New York open and morning kill zone are key times for FX price action and liquidity hunts.
Understanding accumulation, manipulation, and distribution phases improves trade timing and risk management.

What the video covers

The video explains applying a smart money trading model to the Forex market, focusing on the Euro Dollar pair.
It discusses identifying buy stops and sell stops through relative equal highs and lows on daily charts.
The importance of institutional price levels such as big figures (e.g., 109.00) and Fibonacci retracement levels is highlighted.
The presenter emphasizes keeping charts clean but using annotations for learning purposes to identify key levels.
The concept of liquidity pools, accumulation, manipulation, and distribution phases in price action is introduced.
Hourly and 15-minute charts are used to show how price interacts with liquidity and order blocks.
The video covers the significance of the midnight New York open candle and the New York session kill zone for FX trading.
A 'Judas swing' or protraction move is explained as a manipulation tactic before the market moves in the anticipated direction.
The presenter provides guidance on entry and stop placement based on swing highs and lows with examples.
The video encourages new traders to review free lessons on the channel for foundational concepts before applying this model.

Chapters

What is the significance of relative equal highs and lows in Forex trading?

Relative equal highs and lows indicate areas where buy stops or sell stops accumulate, which smart money targets to trigger liquidity and manipulate price.

Why are institutional price levels important in this trading model?

Institutional price levels like big figures and zero levels attract significant liquidity and business transactions, making them key targets for price movement.

How does the midnight New York open affect Forex trading according to the video?

The midnight New York open candle sets a reference price for the day, with price often rallying above it before reversing, creating opportunities for smart money manipulation and liquidity hunts.

Full Transcript — Download SRT & Markdown

Speaker A

All right, folks, welcome back. This lesson is going to be on Forex and how we can apply this model to the FX market. Now, if you are a longtime student of mine, a lot of the things I'm going to talk about in here are going to be very familiar to you. I promise you, the things that the newer students that just found this channel are going to feel like they're stuck on, the majority of it is in the free lessons in this YouTube channel. Okay, so I'm going to count you to go through

Speaker A

those videos and you'll get your answers there. Okay. All right, so if we're looking at the Euro Dollar, and I'll let you know that's what this is, this is the daily chart for Euro. I want you to take a look at how price moved above these relative equal highs right here. Now, once it did that, this took the buy side or buy stops out of the marketplace here. Then it started going lower. What would it likely be reaching for next? Well, it took buy side out here. What do you think is resting below here?

Speaker A

Sell stops or sell side liquidity. Now, just to the left, notice these two little devils here, relative equal lows, and with this one and this one, we have two areas of sell side liquidity. Notice this candle here, which happens to be Monday's trading or yesterday's trading. This low did not take out that low yet. Notice that. So we have unfinished business below here and potentially below here. So if this is a daily chart, even though we've come from this high and had three consecutive down close candles,

Speaker A

what is the bias the very next candle? What's the bias going to be? Bearish. We're anticipating bearishness going in. So let's take that and flush that out a little bit more. So here is your chart that would be annotated, and you have this level in your chart. While you're learning, it's important to have these types of things on your chart. Over time, all you need is a pad and something to write with, and you'll write down the levels. Majority of the time, the only time I'm showing a level on my

Speaker A

chart is for teaching purposes. I like to keep my chart clean, and that way I'm not forcing that bias. If I see something that would allow me to negate the whole premise that I went into the market with and either reverse or move to the sidelines, I want that clarity. Now, I say that, and some of you purists in here that just simply want to do everything I say and hang on every single one of my words, don't avoid or don't try to do it without having annotations,

Speaker A

like having levels drawn on your chart, because you need to train yourself to see it. And what I mean by that, well, having these relative equal highs highlighted, your buy stops would be resting above here, and the market will go just above that a little bit. And then once those buy stops are taken, for anyone that's short, they're getting knocked down in a loss, and that flood of orders to be buying at the market is counterparty to individuals that want to sell short.

Speaker A

So smart money is selling short up here with the expectation it's going to go below this low here, below here, and potentially below that low down there. So today's trading, we had the open, it rallies up a little bit, then careens through the short-term low here and below the relative equal lows here, not by much. We'll see it, but it's still there. Now, what level on the downside after this day close, if we're looking for lower prices, what could be expected to draw to? Obviously,

Speaker A

below here and below here, but what price level? 109 big figure. So the big figure numbers, okay, or the zero levels, they're very influential because there's lots of liquidity that is used around those levels, a lot of commerce, a lot of business transactions that come in just for the sake of simplicity. Zero-zero level, 20 levels, the 50 levels, and the 80 levels. So I dub them institutional price levels. I teach that in the free videos in this YouTube channel too. All right, so we're going to drop down to

Speaker A

an hourly chart, but before we get into that, I'm going to revisit the swing trading idea that I taught: highest up close or opening in this retracement up, and the lowest open or close is here. So I left the highlighted candles so you can match that up on yours, and then we have this old low. So below this old low, it goes below that. How many pips can it go below that? Well, we have the big figure 109, right? Remember the previous chart here? Watch over here. That's essentially the 1.09 big figure.

Speaker A

So do we have any levels in here on the fib that correspond to that? Well, we have 1.0919, that's possible. Then we have 1.09, that's another level that's possible, and we have 1.0901, essentially almost the big figure, right? So we have a standard deviation from this swing to here. If this is broken, these are only true if this low is broken. Okay, so this is a falcon point, and this is a fulcrum point. So how do we know which level we're going to aim for? Well, we have those relative equal lows at the 109 big

Speaker A

figure level, and then we have our fib calling for these levels down here. The lowest one without going through 1.09 is this one here. All right, on the hourly chart with our buy side liquidity pool level here, the market trades up into that area, absorbing all of that liquidity, then breaking down, takes out a short-term low here and here and here, retraces up and breaks lower. Then we go into today's trading, the fifth. Prior to the day starting, we know that it's likely to draw below here and then down to that 109 big figure. Have a lot of convergence around that 109 big figure at the beginning of the day at midnight New York local time.

Speaker A

That's going to be right in here. If we see the market rally up, which is what we want to see, we want to see a protraction in the marketplace where it starts to go against the expected direction of the move intraday. So if we're bearish and we're looking for that 109 level to be treated to and attack the liquidity below here, preferably we want to see it rally first. That's the Judas swing. Okay, that mark of protraction is what we're looking for for manipulation, part of my concept Power Three, which is

Speaker A

accumulation, manipulation, distribution. Okay, so once the day begins at midnight, we're anticipating a move up. What's it gonna be trading up into? This imbalance in here. Okay, so once it does that, it kind of like forms the daily high, and then the rest of the day you're going to be looking for distribution throughout the day, looking for lower prices. So inside that little shaded area, we're going to use that going forward. So let's drop down to a lower time frame, 15-minute time frame. Here is that

Speaker A

imbalance. That doesn't look that clean on a 15-minute time frame, but the hourly is what we're framing it on. Okay, so the market trades up into that. Here is the midnight New York local time candle on the 15-minute time frame chart. Opening price is here, extended out throughout the day. That is your midnight New York candle opening price. Preferably, if we're selling short, we want to see price trade above this opening price. This is where smart money is accumulating short positions. See that?

Speaker A

So the algorithm goes higher once more, higher once more, higher, and then again right here, and then begins its descent into the daily range low. Now, what's occurring here? This is not buying and selling pressure. The algorithm is offering constantly price above this opening price. Now, every single time it rallies up, just because it does that doesn't necessarily mean that it's a time for you to get in, but when you couple that with time of day and price, it becomes a lot better.

Speaker A

Notice we have an imbalance in here, so the fair value gap there, and price runs up during the New York open kill zone. Okay, so I dubbed this specific time of day between seven o'clock in the morning New York time to 10 o'clock in the morning. This is specific to FX. Okay, these times are specific to FX pairs. If you're going to trade an index, don't worry about that. You can work with the 8:30 to 11 o'clock in your local time, but for FX, the algorithm is going to operate on these specific elements of

Speaker A

time. So if we're looking at this imbalance here, the market runs up and it overshoots th...

Speaker A

dropping down into a five minute chart everything being as it was on the 15 that's that order block here just being shown on a five minute chart but i'm adding now the annotation of the new york open kill zone seven o'clock in the morning begins here at the end of that line segment and ten o'clock is here so everything underneath this end the trend line here and below this part of it this all is during the new york open kill zone so you're hunting your setup for forex

Speaker A

payers within that little block of time so during this time you're hunting your setup what price are you looking for preferably at or just above the opening price at midnight now if you are a new york session trader you want to refer to the opening price at midnight but then you want to recalibrate at 8 30 and we'll look at that in a moment but for now just notice looking at this particular day on the economic calendar we had a high impact news driver at 10 o'clock in the morning it was the ism

Speaker A

services pmi number now before you want to start sending me emails or start sending me essay questions in the comments section of this video about what does the ism pmi number do what's it i don't care what these numbers are really discussing i don't care i don't care about the raw data i don't care what the expectation is i don't care okay what i'm expecting is the volatility in the marketplace at or around these specific times because the algorithm is going to use that injection of volatility

Speaker A

to facilitate trades now is it trying to give you good trades no it's trying to move and rebook and reprice to levels to allow those in the know to participate it's a rigged game you're not supposed to be in it not consistently profitable let's say that way but for those that are in the know they're looking for these types of signatures and price action so they know what they're looking for in terms of when they're going to operate so as a technician they're looking for a specific element

Speaker A

of time which is encapsulated with this segment right here seven o'clock to ten o'clock so that little bracket of time right there on a five minute chart you're hunting your setup what is the thresholds that make it high probability well if you're going short or looking to go short you want to be above the midnight opening price that's here extended out in time but now once we hit this order block here that was during the early stages of the new york open right around the seven o'clock hour

Speaker A

the market drops and then retraces back into that news driver here at 10. so what's happening here is look closely with this swing low it went below this low here and then it rallied back up once more above the opening price at midnight does it take out this high no why doesn't it take out this high because it has an imbalance here that imbalance tells you this is an intermediate term high if we're bearish it shouldn't take this high out now again i mentioned this

Speaker A

in a recent video i think if i'm not mistaken it was episode 12. i'm going by memory so please don't roast me in the comments section if that's the wrong one but it's basically what i'm talking about intermediate term short term and long term highs and lows or swing highs and lows a imbalance or a fair value gap associated with a swing higher swing low in this case this is imminent term high not because it just simply has a imbalance but because the narrative is we're expecting lower prices and

Speaker A

it went above the opening price at midnight and the imbalance there when it retraces back up into this fake run ahead of the news driver at 10 o'clock the news if you will this movement here is only running right back up into the bearish order block last up close candle the body we don't i don't like to use these long tails and wicks i'll refer to them but i'd like to prefer to annotate if i'm going to show it in my examples or look to price returning back to the body of the candle right there

Speaker A

so this return into that order block sets the stage for another move lower we get a swing high lower high to the right of this candle and a lower high to the left of it here so we have three candles making a swing high so we start looking for displacement and movement lower but looking closer after we had that shift in market structure here on a five-minute chart it retraces back up fair value gap parish order block and news this is the wild card okay when you have high impact

Speaker A

news drivers this is going to many times scare you out of the trade or stop you out in the words if you went short back here and you started trailing your stop loss this is what that's designed to do take you out so if you're short back here or here or here how are you protecting the trade you're putting a buy stop above recent swing highs so they're jamming it up against that back above the opening price because your buy stop is going to flood the market with buyers

Speaker A

willing to pay a higher price than it was here before it runs higher and you're going to buy or those individuals that have their stops they're going to buy the counterparty side of the smart money that wants to sell short because every buyer has to have a seller every seller has to have a buyer so that's what's occurring here but inside this shaded area i want to show you how this model is applicable here in fx so here's the four minute chart we were just looking at five so we start

Speaker A

stripping down this price leg here and we're looking for any fair value gap do you see it pause the video look for it all right i'm about to show you this candle is low this candle is high there's your fair value cup isn't it interesting it just goes right up into there closes that in then and only then the market starts to aggressively run below the short term low here and then reaching into our objective down here at that 109 big figure now it doesn't quite get to 1.09 even but it does get to our fibonacci extension for the standard deviation it

Speaker A

does get down to the old relative equal lows on the daily chart which is what that blue line is and look at the bodies respecting that level not much movement below it now for all of you raw dogs out there okay this is too much michael you're over complicating it you're confusing me michael you're talking about the midnight candle for the opening price and now you're talking about the 830 which one do i use why do i use it this that i don't think all right if you're gonna be trading fx you're gonna be using the 8 30 in the morning for new york session trades but refer to the new york open at midnight as well if the opening price is lower at the 830

Speaker A

than that of the opening price at midnight use the lower one reason why is you want to set the minimum threshold for a due to swing or market protraction to the upside when you're bearish and obviously everything that i just said would be reverse if you're bullish you'd be looking for a move below the opening at 8 30 to go long after it moves below it but we're focusing primarily on the shorting opportunity here in hindsight so that way you can get a better feel for how to use this model

Speaker A

with fx so there's a subtle little group of nuances that you have to be aware of when you're looking at fx but it's not terribly you know harsh it's pretty easy to work with so we have the market trading above the opening price here market protraction due to swing it rallies up and then breaks down in here now this run here above the opening price does it have a fair value gap here's the four minute chart opening price now doesn't look the same because we're looking at a four-minute

Speaker A

chart so it was anchored on a five-minute chart it rallies up you break lower fair value got right there trades up into it hammers it beautifully and then displacement trades lower down into that 109. was it one point zero nine zero one something or other i can't remember i thought i had but it hit it and i think the low of the day was 1.0901 so not bad i mean it's pretty close to perfect right but by itself you don't want to try to aim for just that level okay because that's the best

Speaker A

exit strategy you don't want to do that you want to fluff up your exits with a couple pips i like to teach my students three to five pips and if you're thinking a target is going to be like for instance we'll say 1.0900 level okay if that's what you think it's going to trade to put your limit order to cover your shorts if you're short at 1.0905 okay you're not going to get the best exit that way but you have a spread that you have to incorporate when you're working with 4x and fx pairs

Speaker A

sometimes and i've had a lot of this happen over the years as a fx trader where my limit order was a little too overzealous i was trying to be a little too perfect and i've had many amazing exits elude me because of my overzealous targeting so be a little bit more forgiving when you're trading especially 4x you got to incorporate the spread and i know some of you have brokers where it's like oh i have a really tight spread let me tell you something every broker has the

Speaker A

ability to open that spread up on you you're seeing the best case scenario when that ticker is showing but trust me when it's advantageous for them they'll work it in their behalf not yours so make it easier for yourself just fluff up your excess with five pips okay and if you're really new just use 10 pips okay and if you're struggling with the idea that oh i don't want to do that i'll give up 10 pips well let me show you this would be your entry candle trading right

Speaker A

back to this old high here so one pit bat or thereabouts once it hits that candle with this run here that right there would be your entry candle your stop would be right above this candle's high now if you're scared or whatever you can use this swing high and that's fine now in terms of math the entry price would be 1.096 and your stop would be 1.09728 hypothetically that's not a lot of pips i would generally round that to 10. even though it's not technically 10 pips here i would round it to 10

Speaker A

and just be done with it and looking at that model here and you're aiming for that essentially the 1.09 big figure fluffing it up a little bit so our exit price would be a little bit higher than that you guys see these things all the time and i just feel like using it you know just because i want to be cool the risk is here entry to stop and the distribution to your target down here risk to reward ratio better than eight to one and using a hypothetical 100 000 demo account if you're doing one of

Speaker A

those funded account challenges or whatever in this trade here this gives you basically what you're looking for in one trade so i don't know if this scratches the issue for you but the stuff works in forex it works in index trading so it's a matter of adjusting to what it is you're trying to trade and then there's a little bit of rule following that you have to know when it comes to index trading and fx fx predominantly you're working with seven o'clock in the morning to ten

Speaker A

o'clock in the morning that's your new york open kill zone okay index trading i'm focusing on 8 30 to 11 and i can take a trade all the way up to 10 40 10 45 and still be okay i'm not interested in taking new trades generally after 10 o'clock in the morning in the fx pair unless there is a news driver like we had this morning with the isem number the pmi number i mentioned earlier in the video so that was allowing me to be a little bit more forgiving with expectations for price you

Speaker A

may not want to trade high impact news drivers and that's understandable if you don't know what you're doing but don't be afraid of them now with the economic counter having that high impact news driver at 10 o'clock that extends the new york session kill zone into the 11 11 30 time window because the volatility that it will bring in now i didn't take this trade i haven't taken any fx pair trades at all not for 2022 at least but if you're looking at a model that works in index futures

Speaker A

you're looking at that 8 30 to 11 o'clock window and if you're trying to apply this model to fx it's seven o'clock in the morning to 10 o'clock in the morning now the high impact news drivers that come out after 10 o'clock like for instance if you're a canadian dollar trader and the crude oil inventory number comes out usually like 10 30 in the morning you have to make allowances for that and just expect there'd be a likely move on that oil number at 10 30. so

Speaker A

just something to throw out there i know a lot of you been barking wanting to see something fx related because you know predominantly i've been doing that since 2010 but i humbly submit this for your inquiry and that way you can study this and listen to it a few times it has a couple things in there that mia went over your head it's not terribly you know demanding in terms of note-taking but there's some things in here that are noteworthy for you to have in your study journal and

Speaker A

for the most part it looks like it works pretty good in this pair too or in this asset class so until i talk to you again on thursday be safe

Topics:Forex tradingsmart moneyliquidity poolsEuro DollarFX marketFibonacci retracementinstitutional price levelsNew York openorder blocksprice action

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