[00:00] One of the most important things to be able to identify when to actually take a setup and know when the market actually wants to move is a change in the state of delivery. Now, you might have heard of great infrastructure, and they're very similar, and this video I'm going to show you why I use change in the state, how it also correlates with displacement
[00:15] and sweeping, and so that you're able to better identify where you should be actually taking your setups. Maybe you're taking them too early, maybe you're taking them too late, and I'm going to basically run you through what is a change in the state of delivery, show you some examples
[00:27] and what you should be looking for within the market through better entries in general. So without further ado, let's jump in and let's run through what is a change in the state of delivery. Now, a change in the state of delivery is basically a break of structure. And the difference between the two is it's measured by the candle and it's not measured by the wick.
[00:43] So right now I have it drawn out and I'll show you what I mean when we get into some candlestick versions of this. But what it basically is doing is it's showing a change in the state of delivery in order flow, right? If the market has been selling off and we've been consistently going lower,
[00:55] is basically a sign that the market is now going to reverse and go hunt some other area of liquidity. Now, what we need to understand about change in the state of delivery and how the market works, because you need to understand this needs to have context behind it. And the context is,
[01:10] where is the draw on liquidity? So if I see a bull risk change in the state, which is the market comes back lower, we take some sort of internal low, and then we displace through that, right? We end up getting bought up displacing through that recent high. For this to make sense and for
[01:23] the context to be validated of this, there needs to be some form of buy side liquidity that is resting above us for us to go take that high. Now, in the short example, right, it's the same thing. We come up, we have some sort of internal manipulation where the market sweeps the high,
[01:38] we come through, fail to displace, end up selling all the way back down. We displace lower through this recent low. But again, for this to work in the context, we need to have some sort of sell side liquidity resting below, right? If you don't know what liquidity is, I'll leave a link in the
[01:51] description so you guys can go watch my liquidity video to better understand this and then jump back over to this video. So now that we have a basic understanding, this is just the basic formation. I want you to look at this first. The main thing that we identify is manipulation. What is
[02:03] manipulation? It's one last move in the opposing direction. So if the market ends up coming down, then breaking higher through that swing low, that is where, through that swing high, that is where we can validate a change in the state of delivery. Now, let me show you what it looks like on a
[02:16] candlestick and what the difference between changing the state of delivery and a break of pressure is. Now, a lot of the times what I see traders end up doing is they have the right bias the majority of the times, but they end up taking a trade either too early, then they get stopped
[02:29] out, then they don't have the conviction to re-enter. So this is a really good example. This was Wednesday, and this was a short in the morning going into New York open. Now, what I want you to recognize is all of this liquidity that is now getting built up at these
[02:42] lows. So for the last of us, we have a 15-minute per value gap. And at this point in time, I'm looking for the market to either affirm or deny a bearish bias. Now, if I need to be bearish biased and I want to be bearish biased just from where we are in price action, I need to see
[02:55] internal manipulation. So a lot of the times people will jump into the market somewhere around here and they'll be targeting all the way back to the lows for the market to come stop them out and then end up building more price action. Now, how do we end up avoiding this? There's a couple of things
[03:10] that we want to be looking for. Number one, a change in the state of delivery, but also displacement. So what I want you to notice is the market will chop, the market will chop, and then here we end up coming up putting in a SMT which is a divergence
[03:22] between NQ and ES and then we end up closing below these series of downclosed candles. You can see right here we end up pulling back, I'm waiting, and boom right here. So what we're looking for and what is a change in the state of delivery is
[03:34] it is the last series of upclosed candles or downclosed candles that get displaced through and closed below. The difference between this and a break of is a break in structure is measured by the swing low,
[03:46] and this is measured by the series of down close or up close candles. So if we look at this case, and we look at this as the last move higher before closing below this would be my change in the state It the series of these up candles So these three up candles I mark at the bottom of the candle not the wick but the candle low as my change in the state of delivery And as soon as we end up closing below
[04:07] notice we kind of have a hesitation here where we come back here, we end up, you know, not really closing below four, you're not really displacing before coming up, rebalancing through this survive gap and then rolling back over and getting ready to displace through. This is where I would
[04:19] be looking to take a short once we've now built this structure and started to displace towards the downside. Now, there's a couple things that I want you to understand when looking to take entries. And the easiest thing that you can do to validate an entry is all just based off of
[04:33] displacement. So if the market is running back higher and we're generating liquidity and you're looking to take a short, you know, I could look at this and say, okay, well, the internal hand got taken. You know, I want to see us move lower. But the biggest thing that I'm looking for is displacement. What is displacement? Displacement is simply a follow through through a swing low
[04:49] or a swing high. So when we end up coming up, notice I'm looking for a manipulation leg higher, right? For the market to move lower, I want to see the market move higher first. I want to see some sort of buy side liquidity get taken and then fall back down inside the range. Now, for me to be
[05:04] confident that we want to reverse and go towards, let's say, these recent lows that we ended up putting in, I need to see displacement through the swing low, right? So let's say that the candle formation is around here in the last years of us, those candles is my change in the state. I want to
[05:17] see the market displace through this, right? Not just come down and sweep it. Now, for example, like this other one, we could come down, maybe sweep it and then start to reject. And as soon as we then get below it and we actually see the market following through, that is where I want
[05:31] to look to take my short entry to target whatever the opposing liquidity pool is. And this is one of the things that is going to help you from getting stocked out so often and so early because either you're trying to take a position early or you're not waiting for the right confirmation.
[05:43] So what you need to wait for is whenever you have an understanding of the draw on liquidity, which is some sort of highs or lows that you're targeting, wait for displacement through that low or through that high to then take your entry targeting whatever the opposing liquidity pool is.
[05:55] So let's look at some other examples and we'll go back in price action and I'll basically run you through what I'll be looking for. So what I'm going to do is I'm going to scrunch the chart up and I'm just going to pick a random point in time. We'll go to 930 open. So let's do right here,
[06:08] 930 open. And I'll basically run you through what I'm looking for in the day to be able to understand basically where the market might want to go. So when I'm looking at this, what I'm going to be noticing is I'm going to draw my external buy side where we could potentially go internally
[06:21] towards the downside right here. And I want to start looking at where we are in price action. So the first thing that I want to notice is we are generating a lot of sell side liquidity down here. So I'm going to mark this as my internal sell side. And I can notice we also just took
[06:34] this little high to the left of us here. And I want to mark if there's any sort of bearish inefficiency that we're currently in on the one hour or the bigger timeframe. So there is a one our bearish inefficiency here. Once I can look at this area and I want to know, and what am I
[06:46] looking for to take an entry? I'm looking for manipulation in a change in the state of delivery. So literally currently right now, what I'm looking at is the market is about to open in one minute. And the first thing that I noticed is all of these internal highs have now been taken. Once these
[06:58] internal highs have been taken and noticed we lack this placement, the market comes up and we sweep it. We do not follow through it. If we were to follow through it, then I want to see the market go back to this previous high. So I don't need to see this high get taken. The market ends
[07:10] up generating the internal liquidity, then this would be marked as my change in the state of delivery, right? My last series of up-close candles. And another confirmation to add onto this, which is even more confluence, is if we have a fair value gap that gets ran through.
[07:24] So notice the market comes up. And again, what's the logic here? Why does this make sense for the market to go lower? Because buy side's been taken. We've ended up generating all of this sell side liquidity that we have not yet taken. It's in favor of the bigger timeframe draw. When we look
[07:38] there's actually a low here the market's been having bearish order flow this entire time as well so once we've ended up closing below this change in the state of delivery this is where i take my short entry we end up closing below i put my stop loss at the swing high that we ended up having from the manipulation leg and i targeting the opposing liquidity pool This is my trade in which I looking to take right Everything in which I looking for There a couple things that I want you to notice from this example and we
[08:01] going to continue to look at some more examples. The logic behind it is that there's a bigger timeframe draw to the downside. Order flow has been very, very bearish. You can look at the price action. The trend in which we are in is bearish. We're making lower lows. We're making
[08:13] lower highs. Now, in the overnight session before going into open, we end up taking some form of buy side liquidity, right? This recent high to the left of us, and also these highs right here. And then we end up having internal manipulation where the market ends up coming to take an internal high, runs through a bearish or a bullish curve valley gap, and then ends up having a change
[08:28] in the state of delivery. So this is what I would be looking to take a short and going in open, it ends up playing out. And this is where I can also leave a runner to go towards the opposing liquidity pool, which is the low that's to the left of us. So this is what I'm looking for to
[08:40] take an entry, right? Waiting for the market to close below the change, look to take a short, target or my flop is at the recent high that from the manipulation leg and then targeting the opposing liquidity pool so what i'm going to do again that was a random point price action let's do another one i'm going to go back and let's click to 9 30 open around let's go all the way
[08:57] over here 9 28 so let's do it again right can we identify a constant draw on liquidity where do we want to go so just by looking at this it's like it kind of prices a little bit all over the place right i want to zoom out to the one hour get an understanding what do we want to do so we just
[09:11] recently ended up taking this low to the left of us. I want to see, are we ending up going to hold this bearish for value gap, or do we want to end up breaking through it, right? There is buy side
[09:23] liquidity to the rest of the highs as well to the left of us. So going into open, I want to watch to see, do we want to come down, take this internal low, take this internal low, right? There's equal lows actually resting below us here. This is my internal buy side. There's also some highs here
[09:38] to the left of us as well. So I want to see us pick a side of the market first to gain an understanding of what we want to do. So the market ends up opening. We have a move higher, right? At this point in time, if the market just wants to go higher, then there would be no trade for me. If we end up sweeping this, then I'll be looking to move back towards the downside. So let's see
[09:53] what we end up doing here. Market comes back down. We start to move back higher. Now, what I would look for internally is on a lower timeframe, we do end up coming down to take this recent low here, which could be my manipulation. Now, I can't end up going lower because it's too far back in price
[10:06] action. But on the 30-second time frame, there might be an internal change in the state. But at this point in time, I'd probably expect the market to go higher. All right, let's take another point in price action. We'll go right here, 9 o'clock. All right, so here's another example going into
[10:18] market open. Now, notice buy side to the left of us ends up getting taken. There's some internal generated sell side here, but most likely all the way back down here would be our sell side liquidity. Now, for me to be bearish, again, I need to see displacement through the lows. I need to see us
[10:31] show signs that we do want to reverse back lower. So far, we've just been accumulating up here. We end up coming down, again, failing to really displace through these lows, sweeping it, and then market opens, and then immediately just runs back higher. So for me to be bearish, I need to see a big change in order flow, just immediately inverse this move.
[10:47] So the first sign I'd be looking for is this five-minute for value gap getting ran through, and boom, right here on the five-minute, do I have my internal manipulation and really big change in order flow, right? This five-minute for value gap is the first sign, and right here is when I have my five-minute change in the state of delivery.
[11:03] Now, this is when I can look to wait for a pullback where we tap into this five-minute fair value gap. And this is where I would be looking to take a short entry. I'll put my stop at the recent candle high that's above that five-minute fair value gap.
[11:15] And I would be targeting the opposing liquidity pool. Now, again, I'm waiting for confirmation that the market doesn't want to go higher. When I see the market open and we're super bullish, and then this entire move just gets inversed, and also to the left of us, right, when we zoom out, we're so far up in this
[11:30] range where we have a lot of room to now go back to the downside right by said the QWERTY has been taken we generated all of this accumulation to then have manipulation and then distribution right this is what we call power of three where we have this accumulation range and then we end up having this
[11:43] manipulation leg to then expect to see distribution to the down so let see how this ends up playing out market ends up going lower and then finally ending up taking that low after the change in the state of delivery Let look at another example All right so market is about to open and I want to mark my
[12:00] buy side liquidity and my sell side liquidity, right? So this is my external buy side. This is my external sell side liquidity. And then I'm looking also, what is my internal liquidity? This would be my internal sell side, and this would be my internal buy side liquidity. So I
[12:14] would want to be bullish bias going into the morning, but I'm waiting for a close above that five minute curve. I got noticed we are five minutes in the state. Sorry, we end up coming up failing to break through this and then going lower again, right? So now we have another form of
[12:29] internal manipulation. And when I zoom out, I want to see again for me to be bullish. Number one, if we want to go lower, there's not really anything that I can do. If I look at the lower time frame, there actually might have been a internal change in the state here once we took this high to go
[12:42] back towards this low, but I would want to be still bullish by. So what would I be waiting for? The close above the down close candles that we have, right? So this would end up becoming my change in the state of delivery. And notice, this is the sign that I'm looking for, right? This
[12:56] entire move that we just sold off gets inversed. And this is where I would be looking to take my long position. Once we end up closing above this, put my stop down here and look to see a continuation back towards these external highs, right? So now notice we've had internal manipulation. We've had
[13:11] a strong change where the market sells off and then immediately recoups that position. And then now we end up closing below that down close candle. And normally what I'll do is I'll always zoom out to different timeframes to see the confirmation. So on the five minute timeframe,
[13:23] have we had a change in the state? Yes. On the 15 minute timeframe, have we had a change in the state? Yes. On the one minute, have we had a change in the state of delivery? Yes. Right here. Right. So all of the timeframes, everybody says, Justin, what timeframe do I look at? You want to
[13:35] validate it with all of the timeframes most of the time. So we'll see how this ends up pouring out. The market ends up going higher and we end up working our way towards that buy side level after having that morning change in the state of delivery.
[13:47] So the main thing that I want you to understand and how we can anticipate or react to having a change in the state of delivery is number one, looking for a sweep and displacement, right? So notice the market ends up coming down at open and we end up continuing to fail through
[14:02] this low three times, right? We take it once. Don't go lower. Rebounce back higher. Take it twice. Don't go lower. take it three times. Don't go lower, right? Where we try to go lower three times and each time that we take that internal low, we sweep it. And then for this move to get inverse, right? What happens
[14:18] first before we inverse it? We run through this bearish fair eye gap, right? Showing us and starting to see signs that the market does want to go higher. Once we break through this, we can wait for our change and look to see a continuation towards whatever the opposing liquidity pool is.
[14:32] But that is the most important thing as well is also, does it make sense for the market to move higher. Is there an opposing liquidity pool? Is there some reason for the market to move? We have to have context within looking for a sweep of liquidity to then understand, okay, if we want
[14:45] to go in the opposing direction. Just another ITT concept to memorize. It's the lens in which affirms all the other contexts. When you start viewing the market through a change in the state, displacement, sweep mentality of where is the market going, what are the highs and lows that
[14:57] make sense for the draw to be, you'll start gaining a lot more clarity. Go back in your charts, start testing these examples, build confidence with it, then work your way up to real-time identification, which watching twice action in real time, testing ideas, market change,
[15:10] ask yourself where you think the draw and the query is. If you've been struggling with your entries and ending up getting stopped out too early or maybe missing the position, wait for the market to obviously show you we want to switch, right? Use the analogy that I always use is
[15:22] trading is like a game of Pictionary, right? When you see the setup forming and you try to guess too early, you're always going to be wrong. But if you wait for the entire drawing to be clear, you're able to clearly identify it and say, oh, I'm drawing, I'm drawing, I'm drawing. I'm not
[15:35] going to guess early and try to be right, but I'm going to wait for it to be clear in front of me that the market does want to go towards where I'm expecting it to with the change in the state, with displacement, and then you take your guess, and then you take your trade. Hopefully you guys enjoyed this video, and I will see you guys in the next one.