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Video Transcript:
All right, good morning. This is David from Trader Dale, and today I’m going to show you an example of a continuation model trade that you can take after price has already begun its delivery out of a key area and is well on its way already to the desired area, target, liquidity area, or whatever type of system that you’re trading. Okay? If you’re confident in the draw and target that are still above or below your price, these continuation models can be very effective.
And they’re really effective because, in these types of markets like we’ve seen this week, especially on Monday and even yesterday on Tuesday, you’re not getting very good retracements to enter trades. There are no 50% retracements. There’s no trading back to equilibrium. There’s no OTE or anything that people use or things that are very common. So, I want to show you a trade from Monday that we did that was well into premium, well on its way. Okay? And we’re talking about this area right here and this area right here on the ES.
Now, we watch these markets together because, when you watch these markets together, they will give you an idea if price is manipulating and is going to continue higher or if price is going to reverse. All right? And one of the ways that we do this is we use a technique called SMT. It is a crack in correlation. It’s a divergence in price, and that kind of gives us an idea of price continuing to move higher when one of the indices manipulates lower while the other one doesn’t.
An example here was this area right here. We have a specific low right here on the ES, and we have that same low here on the NASDAQ. What happens is the ES breaks that low, which now creates a divergence where the NASDAQ does not. Both of these trades are delivering from near-term Fair Value Gaps and holding bullish Fair Value Gaps. So, that confirms that the order flow is still bullish when we respect bullish Fair Value Gaps. The NQ did not even tap back into its Fair Value Gap because it didn’t need to. That’s how strong it was.
So, after we see a formation like this, the next thing we want to see is a change in order flow to the upside, meaning respecting bullish and then disrespecting bearish. That bearish Fair Value Gap would be right here. And when we are respecting bullish and disrespecting bearish, this is when you can really understand the order flow. And it’s the same thing here with the NQ.
So, once price respects the bullish Fair Value Gaps and then disrespects the bearish, that is a confirmation that order flow remains bullish. And now we can take a trade, a continuation trade to the upside. In this case, it was the NQ going long right at that close. The stop is going to be just—well, we’ll do a conservative stop right below the bodies of the candles that led to the move higher.
Once price starts closing above here, this is a spot where you can either take some profits or move your stop to break even, or trail your stop if price continues to go higher, which was the case on Monday. And listen, I don’t have the draw on liquidity marked here exactly, so it was somewhere up here. But I always tell people, if you’re not sure about the draw on liquidity, just taking a 2:1 and setting a 2:1 risk-to-reward trade is more than enough to be consistently profitable in these markets.
If you’re able to hold a little further, then obviously this trade really had a lot of potential. But this is an area where you can scale out, you can trail your stops, but the entry, the level, and the direction are most important. And the reason why traders have the most trouble with this is because they don’t understand how to buy in premium and short in discount, especially when the draws on liquidity and the targets are still in play, when the market is too strong to pull back and you wind up missing the entire move.
And even worse, you decide, “Well, if I can’t go long, maybe I’ll start looking for shorts and start looking for pullbacks. We’re way too extended.” So, this was a trade that we did on Monday the 21st off the 30-minute chart. Excellent continuation move. It had all the ingredients of everything that we like to see.
And this is how you place a trade and trade either on the long side or the short side when the markets are moving very, very strongly in one direction and we’re just not getting those pullbacks back to equilibrium or those OTE levels that people like to see so much and that are regularly taught in videos across the industry.
All right, so I hope this helps. Moving forward, look for these patterns. They’re basically mini AMD patterns: accumulation, manipulation, distribution, just like we have mini AMD patterns along the way. Accumulation, manipulation, distribution. Accumulation, manipulation, distribution. Accumulation, manipulation, distribution. That’s how you can tell that price is bullish and the intent is to continue higher.
Then eventually, when you make a move like this and you inverse a Fair Value Gap, now you can start to tell that the intent is slowing, and we might get a little bit of a reversal or just basically go into consolidation to reaccumulate in this position before moving higher.
Hey everyone, it’s Dale here. I hope you enjoyed the video. If you’d like to trade alongside me and our team of prop-firm-funded traders every day, then click the link below the video and hop aboard. We’re looking forward to trading with you.
