12 Advanced Trading Concepts — Full Breakdown & Transcript

[00:00] There are probably hundreds of concepts you can study in trading. This is not supposed to be a definitive list. These are simply 12 ideas that I consider to be highly useful. Concepts that can give you a completely different way of looking at what the market is doing.

[00:14] And chances are, even if you've been trading for years, there are a few on this list you've either never studied properly or never considered using this way. So without further ado, let's begin. The first concept we'll talk about is the double shift.

[00:28] At this point everyone is familiar with the market structure shift pattern that usually anticipates a trend change. A higher high followed by a lower low before a downtrend and a lower low followed by a

[00:40] higher high before an uptrend. However we can take this one step further and increase the reliability of the pattern. The double shift occurs when two consecutive market structure shifts happen separated by

[00:52] a piece of meandering price action. It can be complex or as simple as a pullback dividing the two patterns. The first shift is an early sign of reversal and the second serves as a confirmation.

[01:06] For example, here we have the gold futures 4-hour chart. At a first glance, this is just an accumulation followed by an uptrend. But the chaotic accumulation hides a double shift pattern. The first one signals an uptrend, but price doesn't confirm the pattern.

[01:22] A few candles later, we see a second market structure shift pointing up again, roughly in the same region of the first. On the third leg of the second shift, price makes an obvious gap, which serves as the last zone before price indeed goes up.

[01:37] Notice that as soon as the double shift pattern occurs, the accumulation is over. If you enter the first shift and place your stop correctly below the lowest low, you would not be stopped out, but you would spend a lot of time waiting for price to go up.

[01:51] The appearance of the second shift acts as a confirmation in a more precise and efficient entry. The second concept is the implicit fair value zone. This one is a type of supply and demand zone that combines price section and order flow

[02:06] elements in a simple detection mechanism. More specifically, it combines this link point, which is a foundational market structure idea, with the inference of fair value areas through price section, assuming that areas

[02:19] price overlap are areas of fair value. To identify an implicit fair value zone you need to identify a swing point first. Once that's done you identify the range of price action that is common amongst the three candles that form the swing

[02:33] point. The overlapping price action in a swing high will form a supply zone and in a swing low it will form a demand zone. The advantage is that this is a very specific zone that most traders cannot see and it is perfectly objective.

[02:48] There is no guesswork involved, although it takes some practice to see the overlapping price action in the swing points. Here we have an example of this in the pound dollar for hour chart. The first step is recognizing a swing point.

[03:02] In this case we are looking at the swing low. The second step is to determine the range of price action that is common among the three candles that form the swing low. Once again, this is not a rough estimation, it's perfectly objective.

[03:16] By extending this zone to the right, we see how the next pullback ends precisely after touching the zone. This pullback itself repeats the same pattern a little bit later. By identifying the range of price action that is common among the three candles that form

[03:30] the swing point, we get this. Extending it to the right shows how the next pullback ends when price meets the zone. You get the idea. This is among the best supply and demand zone techniques I've ever encountered and it's

[03:44] remarkably simple and objective. The third concept is a rebranding of one of the foundational ideas in option market theory and it's called the balanced price range nowadays. The balanced price range is also a price action concept that implies a rough estimation of

[04:00] order flow. The idea is to detect two opposing and overlapping fair value gaps separated by a swing point. For example, a bullish fair value gap followed by a swing high and then a bearish fair value

[04:12] gap will often form a zone where both gaps overlap. That's the balance price range, and it often serves as a supply zone in this case. The same rationale, of course, applies to a demand zone, but with everything inverted. In this chart of the one-hour Australian dollar,

[04:29] we have an extremely interesting example of this. Here we have a prominent swing high. To the right, we find a relatively narrow fair value gap pointing down, and before the high we find a wide fair value gap to the upside. The main point is that these

[04:43] two ranges overlap into a very narrow zone in this case. If we extend the zone to the right we get the main idea of the balanced price range. Price action reverses after touching the zone and it does so in a suggestive way meaning that

[04:57] the upper Campbell shadows clearly reacts to the zone. Recall once again that this is not really an ICT concept. It doesn't matter what you call it. It's a natural conclusion from Stoudemire's auction market theory from the 80s.

[05:11] The fourth concept is what is called the core value zone in the volume profile. As a standard the volume profile has a value area comprising 70 of the total volume However the 7 setting is usually too wide to provide a precise zone for price reversal in certain trading models For this reason traders sometimes

[05:31] adjust the setting to 40% and use that as a supply or demand zone. The 40% value area is what is called core value zone in the volume profile. One way of doing this is to plot

[05:43] the fixed range volume profile with a value area of 40% over A range, and the established value area would then form a probable supply or demand zone for the pullback to end.

[05:55] For example, here we have the 4-hour chart of gold. We can see an upward price movement forming in the range like so. By plotting the fixed range volume profile with the core value area, we establish a narrower

[06:07] zone that serves as a projection for the subsequent pullback to end. If we extend the value area extremes and the point of control to the right, we can spot a few interesting details about how price action interacts with these areas.

[06:20] Once price encounters the point of control, it moves up, breaking one previous high and forming a market structure shift like we can see here. That represents an amazing opportunity because now we have the pullback from the shift happening

[06:33] roughly in the larger zone provided by the volume profile. One additional confirmation here will be the Andrews pitchfork plotted in a market structure shift to catch the end of the pullback like so.

[06:45] The fork projects the price level where the market is likely to run out of energy so to speak. After that confluence we see price finally taking off. The SIF concept is a rather uncommon one among retail traders but a very common one among

[07:00] institutional traders which is the value area reversal in Stoudemire's market profile. that instead of trying to determine trend reversals simply by looking at price action, there was a way of detecting the invisible forces that lead price. That is possible with

[07:15] the market profile method, which reveals the time-based structure that hides behind price and indicates value. I have a free market profile course here in the channel if you want to know more about it. The market profile shows, among many other things, the evolution

[07:30] of value areas based on time, and that can be helpful in determining trend reversals. Instead of looking at the progression of highs and lows in price section, you can look at the progression of value areas in the market profile to determine when the trend will reverse.

[07:45] For example, here we have the 1-hour Nasdaq market profile chart. Each one of these profiles represent one trading session. The brighter squares within the white dashed lines represent the value areas, which in

[07:57] this method is the range of prices where the market spent 70% of the time in that session. Notice how the value areas progress over time in an organized way, either going up, down, contracting or expanding.

[08:10] The red arrows show progressions where the value area gets lower, indicating a bearish continuation. The yellow arrows show progressions where the value area expands or contracts, showing a more neutral bias.

[08:23] However, notice that just right at the center of the chart we see a unique event so far, which is a value area progression to the upside. That is one type of trend reversal signal in this method.

[08:35] And notice that an uptrend is what immediately follows. The point is that this type of information is not easily detectable just by looking up our session. But once you have the information from the market profile, it can be the difference between

[08:47] being on the right side of the trend or not. If you liked the content of this video so far, please click the like, subscribe and share the video if you haven't already. The sixth concept is the swing-point adjusted anchored ZWAP.

[09:02] The anchored ZWAP is probably among the best types of dynamic support and resistance indicators because it incorporates price and volume in the same formula, and perhaps most importantly, you can choose the starting point of calculations rather than a rolling calculation period that

[09:16] makes no sense, like you would do with a moving average, for example. Beyond that, a small modification in the anchored ZWAP's calculation makes it even more powerful. lines plotted on swing highs should be calculated using highs and support lines plotted on swing

[09:32] lows should be calculated using lows. This creates a very interesting effect and very distinct dynamic support and resistance lines that very few traders can see, therefore creating an edge.

[09:44] In this 15 minute chart of Russell 2000 we have a good example of how the simplicity of this technique can generate astounding results. By plotting the anchored view up on a major swing low and using low as a source of calculation, we can see that the line catches three very

[09:58] important lows right after. This can be the difference between trusting the end of a pullback or not. We can observe a slightly more advanced use of this line by plugging the anchored view up on a major swing high like so and using highs as a source of calculation.

[10:13] Notice that initially the line works well as resistance. A prominent candle shadow pierces the line and goes down aggressively immediately. Price eventually comes back to this line to test it again as resistance and it creates

[10:26] a small bump to the downside. Price then proceeds to break the line to the upside, transforming into support now. After that we can find three instances where the former resistance line successfully captures important swing lows.

[10:38] Notice that the anchoring of these lines is usually obvious. In this case we are using what most traders would interpret as the major swing point in the visible price action If you want to learn more about advanced order flow concepts that go way beyond what you learning here please check out my advanced order flow trading course in the description below

[10:58] The seventh concept comes from order flow. Asymmetric liquidity consumption is a specific trading technique that can only be seen using a chart type called the footprint. It relates to the ratio between buying and selling aggression within a candlestick. Once again, this is the

[11:14] sort of thing that is impossible to see just by looking at price action. Formally speaking, the asymmetric liquidity consumption is called stacked imbalance. It represents a small range of price action where aggression becomes too imbalanced. These small regions can be later used

[11:29] as non-obvious areas for price action. In the footprint chart, the stacked imbalances are marked by vertical dashes on the sides of candles. If you want to know more about the footprint chart and order flow in general, I have a free course in the channel too. For example, let's say you

[11:45] are trying to determine the reason this pullback ended here. When we look at price action, there are certain clues, but none of them are really strong to justify a movement to the upside like this. However, if we switch to a footprint chart, we see that there is a big stacked imbalance

[11:59] across seven price levels in this candle. If we highlight this zone and switch back to the price chart, the use of this technique becomes self-evident. As soon as price enters the asymmetric liquidity consumption area provided by the stacked imbalance

[12:13] in the footprint chart, price reverses aggressively. This is not always the case, of course, but it's one type of powerful evidence that can give you an edge. The asymmetric liquidity consumption is nothing more than an area where aggression becomes

[12:28] too imbalanced, and the market tends to remember and test these areas again in the future. It's all about observing whether the area still holds rather than just trading it blindly. The eighth concept is also from order flow, and it's a rather common one.

[12:43] CVD divergence is a powerful type of divergence that displays the accumulation of volume delta over time. Volume delta is the difference between buying and selling volume in a candlestick. Observing the cumulative volume delta in candlestick form relative to price action can use very powerful signals.

[12:59] In this chart, I'm grounding the CDD at the start of every week, as it is shown by the dashed vertical line. Here we have the one-hour Dow Jones forming a downtrend. At the beginning of the week, price action and CDD were in sync, making lower highs and lower lows.

[13:16] That generally means that price action is what it seems to be. Roughly in the middle of the week, though, price starts to display some strength to the upside, breaking previous trend structure. This is the moment that a lot of traders will start looking for bullish setups.

[13:30] However, for those using the CVD, the warning is clear. Price just made a higher high, but the CVD made a lower high. Instead of memorizing this as a divergent signal, learn the rationale once and you'll

[13:43] never forget it. If price is making a higher high and the CVD is failing to do so, it means that there isn't enough volume to justify the movement. That can be classified as a buying exhaustion. In other words, we have a false break of structure that would be difficult to detect just by

[13:59] looking at price action. And the trend indeed continues to the downside after that. This is one of the different ways of differentiating between a market structure shift and a liquidity inducement scenario, so to speak.

[14:11] You need to become familiar with the subtle clues in price action and order flow. If you look carefully at the chart, you'll also find bullish divergence signals before price broke structure to the upside. However, the key here is to pay attention to the trend.

[14:25] As a general guideline, you should favor divergent signals that agree with the current trend. The ninth concept relates to what is known as intermarket divergence. The standard type of divergence most traders are familiar with involves disagreement between

[14:40] price and an oscillator within the same market. Intermarket divergence is different. It looks for divergent signals between the price action of two highly correlated markets. The correlated markets share many of the same fundamental drivers, so when a market fails

[14:56] to conform to the other, we can assume something different is going on. That of course can help you predict important reversals or good points for continuation in the trend. For example, in this image you can see two markets with high correlations side by side

[15:09] in the 1 hour time frame, NASDAQ and the S&P. We have an interesting scenario here because there are different divergence signals happening in different timescales, although we can see them in the same timeframe.

[15:21] There are three vertical dashed lines showing the market extremes that happen in both markets simultaneously. If we compare number 1 and number 3, we see that while the S&P was making a higher high,

[15:33] Nasdaq was making a lower high. The other divergence occurs between numbers 2 and 3. While the S&P was making a higher high, the Nasdaq was making a lower high. More interestingly, the two divergences at different timescales are nested, which increases

[15:48] the signal strength. One additional detail here is that these divergence signals happen while a liquidity grab occurs in the S&P. In this case, the intermarket divergence can be a source of confirmation for the liquidity

[16:00] grab. Once a manipulation pattern occurs within a context of the nested intermarket divergence, price starts to fall aggressively. If you truly want to understand the relationship between markets I suggest you dive into John Murphy books They are the industry standard on the topic

[16:18] The Ten's Conflict is a rebranding of the good old market manipulation pattern outside in the beginning of the 20th century by Richard Wyckoff. Liquidity grab is a quick build above a swing high or below a swing low with the intention

[16:30] of triggering enough liquidity to fuel the opposite movement. Remember that in price action, liquidity relates to stop orders above swing highs and below swing lows. In order flow, liquidity relates to limit orders.

[16:42] If you want to know more about why that distinction matters, you can watch the free guide I have about liquidity concepts here in the channel. The liquidity graph can take many forms. The important thing is observing the quick probe of a swing point followed by a rejection

[16:56] of the movement. For example, here we have the 15-minute chart of DAFEC. We can see two major trend reversals here, and just before both of them, we can see subtle liquidity grab patterns.

[17:08] The first one signals an uptrend. Notice how the previous swing low is quickly probed by the lower shadow of the candle, which turns out to be a strong bullish candle. These are the two prerequisites for a successful liquidity grab.

[17:20] The quick violation of structure followed by a clear recession. In the chart, it's clear that this was one of the catalysts of the upper trend. The other liquidity grab happens at the end of the uptrend, and it's more subtle than

[17:34] the first grab. Price probes above the previous one high, but just barely. In the next candle we see a strong bearish candle, so once again, both prerequisites of a liquidity grab and the beginning of a downward movement.

[17:47] The liquidity grab can take slightly different forms, but this is the main gist of the pattern. The eleventh concept in the list is the now popular liquidity inducement. The silver inducement is the intentional violation of structure with the goal of generating liquidity

[18:02] to the opposite side of the violation. In this sense, the liquidity grab we just saw is one type of inducement. However, there are more variations of this idea. For example, here we have the 4-hour chart of silver.

[18:16] When crypto traders see price breaking a swing low like we can see here, many of them assume the market is bearish, and many of them sell into the signal. This is an opportunity for the smart money to absorb the sudden burst of stop orders

[18:29] with limit orders, for example. Remember that stop orders are simply market orders waiting to be triggered, and market orders only match limit orders. We can be much more precise about the definition of smart money, but that's a subject for another

[18:43] time. So the idea of inducement here is basically the smart money inducing sellers to think a downtrend will happen, just so they can absorb that same movement and get on the opposite side. After that we see price going up, of course.

[18:57] One detail worth mentioning here is the prominence of larger lower shadows. That's one of the subtle fingerprints of certain market players observing the liquidity provided by sellers. The sellers here are not necessarily retail traders.

[19:12] Institutional traders can also be maneuvered by other institutional traders with more power and information, for example. And by the way, this inducement occurs exactly at an implicit fair value zone that was outlined previously in the video as you can see here, meaning the overlapping price section in the

[19:27] swing low. The last concept is an advanced one called GEX. GEX stands for Gamma Exposure from Market Makers and Dealers. This is an advanced topic that goes way beyond the scope of this video, so I have made a

[19:40] whole free course about it, which you can check out in my channel. In very simple terms, Gamma Exposure tells you whether Dealer Hedging is likely to produce a self-correcting or self-reinforcing price action, and price levels with concentrated

[19:53] gamma levels, also known as gamma walls, give rise to an advanced type of support and resistance that cannot be seen by looking at buy charts. Once again, this is an oversimplification. If you want to go deeper into this, please watch my free guide.

[20:08] One very practical application for price action traders is the call resistance and put support levels that arise from concentrated gamma levels. In this chart you can see a call resistance successfully stopping price action from going

[20:20] up. From the price chart perspective, this looks like a triple top, but the reality of why the triple top worked in this case goes much deeper. In the second image we can see a put support working almost perfectly as well.

[20:33] This is yet another example of how the tools the smart money traders use can go way beyond the price chart. That's it for this video. That's it for this video. If you want to enhance your trading skills and make more rational decisions, I offer a whole range of advanced trading courses with many different techniques and strategies based on scientific principles. You can learn more about them in my website, fractalflowpro.com, or by sending me an email at support at fractalflowpro.com.

[21:00] If you enjoyed this video, please help support the channel by clicking the like button, subscribing to the channel, activating the notifications, leaving a comment and sharing the video with your trading community. Thank you very much for watching and I hope to see you in the next videos.

[21:14] Take care.

[21:30] you