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0:00 This guy is the best scalper in the world for the first time ever where he showcases the power of his strategy and breaks it down step by step. Freemon. You wait for this candle. You put the stop loss here. You target either. This is the main reason why a lot of traders use money. They try to anticipate what the market is doing before the market does it. People call this manipulation. They try to break out and they fail. This is the reason we will get here. You finally will see a trader break down candle by candle exactly what he thinks is going to happen live during New York session. We are getting ready for the squeeze. The squeeze will be present here. Look, there you have it. When I told you I will scale out, it's exactly because when you see this, the next step is aggressive sellers. Yeah,
0:46 you you coded the algorithm. This is a top 1% trader showcasing his strategy for free to give to the audience a little bit of reference. You can either do 15 minutes, 3 minutes, you can do 1 hour 5 minutes or you can do the most aggressive one. That is what I do. The setup that we took before is exactly what I will execute in the world trading cup. How I did this performance in the world trading cup is building profit for the day, building profit for the day, building profit for the day. And in directional days, I risk for example, Fabio Valentino. You've never seen anything like it. It will blow you away. Make sure you tune in to this episode of Chart Fanatics. Welcome everyone back to Chart Fanatics, the go-to channel for all of the very best trading strategies and concept breakdowns with the very best traders in the world. Talking of which, today
1:34 we have a worldclass scalper with us, a future scalper at that. He has been in the top three in the world rankings of the Robins Club, actually achieving in a 12-month period over 500% return. And that is in the futures division as well. You probably already know who it is. If you don't know, you're going to get to know. We're going to go through his exact strategy that he used to be able to achieve those incredible results on the world stage. is the one and only Fabia Valentina. Thank you for asking me Ritz. And uh today we will go deep dive in the model that I used in the world champion. I made some videos about it but I keep the source for this this podcast and um before starting to explain how the model works we need to explain what's the misconception about
2:26 market structure in the market. So I will just start drawing it and explain what 90% of traders do and why 90% of traders lose money. So let's start with I think that'll be helpful. The concept of the market structure that's what usually a lot of traders do and you can confirm it. This is what usually it's done uh watching a market structure shift or change of character or breakout. There are 100 terms that you can use for it. And uh what they try to do is they try to go trend following when pattern like this presents and then they can just wait for the uh retracement to jump in just going through considering we are in a short sentiment here
3:13 like using the concept of supply or order block if you want to be more fancy following the algo uh mitigation level and continue to go down. Now what I tested in a lot of years of experience is that this pattern usually doesn't work if you don't frame it in the correct uh concept and to frame it in the correct concept you need to start using something that is necessary that is the profile. So you need to understand exactly where you are in the market and what's the big picture that you are watching because if this pattern is presented when the bell curve of the distribution of the day is like this you are exactly jumping on a trend to go against the lower
4:08 distribution of the volume. M and what this says statistically is that only 30% will go through the rest will remain in what it's called the fair value area. So you will just keep getting stopped out till the market really uh decide to take off. And this is the reason a lot of traders that try to embark on a journey of using trend following strategies they understand really soon that uh the win rate is not what they were expecting like 70 80%. when they try to target for example this level from here and they say okay I will just have 50% 60% we rate 1 to three this is not real
4:53 because you are not you are not reading what the market is saying you are trying to predict the market okay now the good point about order flow and about volume analysis in general is that you get the knowledge to understand when to stay away because if the same pattern is presented in this area it's a completely different situation to explain you this we need to go to AMT AMT is uh the real nature of the market and is the concept of auction market theory market is an auction and it goes from balanced area where all market participants are transactioning efficiently
5:40 to imbalance Now market is not usually in in imbalance. It's usually in balance. So that's the reason why traders that start take you streak of stop-loss because they try to get the long and they get liquidated by you can call what you want. You can call spring, you can call liquidation, you can call uh liquidity seeking everything you want even if it's not what happens behind the curtains but you try to get the last spring. M before the move up and you notice that this 1 to 10 becomes a 1 to2 because you take four stop to try to do it. Yeah. Now if you do this simple change and you wait for the market to get to a condition of out of balance your win rate will
6:28 jump up by at least 20 to 30%. And this is exactly the building point of the model that I use. Why I call it a model and not a strategy? Because the concept of strategy is a group of rules that you need to follow strictly. And how can you follow a group of rules strictly without understanding the narrative if the market is a dynamic entity? It's like trying to cage an animal that is not made to be in a cage. And it change every day. It adapts. For example, yesterday there was this situation about America bombing Iran. we open with a gap down really heavy. You cannot expect that the market today will behave as Friday. You will have a different behavior. Now what it's helping you is understanding how you can use the profile to exactly time your entry and your
7:19 area. So this is the step one of the model and is understanding the location. The location is when you can efficiently trade when you are out of balance. So your model is okay to be traded. You start to see what all the traders are using. So you start to see the market structure and you start to validate which area can be used to jump on trade. Yeah. Okay. So now it comes handy to use supply and demand zones and it comes handy to understand inefficiency. Now inefficiency if we can talk about it uh is misconcepted. nowadays because it used the term fair value gap. Yeah.
8:06 But what happened really behind the curtains in uh the concept of inefficiency is when one part is more aggressive than the other. So the market gets really momentum in one direction and this is if you think about it is the best moment to transact because the market is telling you this and this is not my personal opinion or your personal opinion. What the market is telling us look I'm out of balance. Mhm. I'm searching for a new level of balance that will be down. So it it can be here, it can be here, it can be here, but I'm telling you that I will go there. Okay. At the same time is telling you that the sellers are more aggressive than buyers because you are getting this kind of concept. And that's when you go to step two. Step two
8:51 is the concept of validating the level. Mhm. Because now you have the direction, you have the condition of the market, the market status and you have three possible takeprofit that you can frame by watching at the other area. Now it comes handy a concept called order flow that is not a concept but it's like an alphabet a new way of reading the market. So 90% of the trader try to understand what is happening inside a candle using multi-time frame analysis. Yeah, I think the real inefficiency is the way trader analyze the market because it's like trying to get the bullseye Mhm. blinded. Mhm. Like maybe one time it will work, two times it will work,
9:39 but you don't have exact data about the location. Yeah. So what you can do is that you can use this area that create the breakouts and let's consider that I make an arrow here and we zoom out. what is happening exactly inside here. Okay. So if this is the swing point that break this low traders will just watch for what is called fair value gap or inefficiency that is when the candle is not transaction efficiently. What you can do is that you can use from point A to point B using profile to watch exactly when there are low volume node. Yes. And I know this because I saw the other interview that you have made and I really like the model also of Carmen Rosato.
10:28 I think he's a really good order flow trader and is doing something really similar to what am I doing because low volume node it's a really good reaction level. So you can use it as a continuation. If we have a low volume node here the probability that we will go down is really high. Yeah. So you start to add the concept of refinement. Mhm. You have the direction, you have the location, you have the refinement of the location. Now you need the step three. The step three is a little bit more difficult because it's the part where you really need the experience and you cannot just automate it and say okay when it's happening because it's really sensitive to market. What I use is analyzing big orders. So when there is in one specific point
11:18 let's say here a lot of aggression. Mhm. Okay. And in order flow platform typically you see bubbles. Yeah. Okay. If you use any platform you can see bubbles. When there is direction location and aggression your ability to predict is zero but your ability to read is 100. You are exactly tuning in in the market at the correct moment and you are not predicting what is going to do. You are waiting. So this is really beneficial because when you see aggression you don't have a huge stop loss for example out of balance. You don't have a huge stop loss above the high but you can get protected exactly above the big sell aggression. Yeah. So your risk-to-reward rate it's
12:08 really big but at the same time the probability of your trades is really really big also this one what you are doing if we can make an example is just swimming on the direction of the flow. Yeah because you are being pulled down by the market aggression and also by all the traders that were long and when this area breaks will close their position. So you get the catalyst down, you get the location of the aggression of the cell and you get also the target point that can be based. We will see this on chart directly on the previous balance area. Yeah, because how the market moves. Let's remove this part here. But how the market moves is that is seeking balance. Mhm.
12:57 So if you go out of here and the previous balance area was this one where your P point of control, the previous point where the majority of the volume was located, it's here. The probability that when you go this pattern and you enter here, let's say, you don't need to break your mind to understand where you can put your target. Maybe I can try 1 to 30. And this is another error. Traders think that the risk to reward is not influencing we rate. The more you seek to go above the AT daily, the more the probability will get lower. Hey guys, I hope you're enjoying this episode so far. And don't forget, we send every single strategy breakdown from every episode for
13:43 free on chartanatics.com. So the link for that is in the description below. So just make sure you click that. You just put your email in and every single week we will send you an up-to-date PDF strategy breakdown for you to keep, to learn from, to reference for free. And don't forget, we're also launching Chart Fanatics Live where your favorite traders from Chart Fanatics will be live trading every single day. I will also be including special guests on the live Chart fanatics edition. So, make sure you go subscribe to that YouTube channel right now. is linked on the main profile of Chart Fanatics. So, make sure you're ready for that. Up to 6 million in futures funding. That's only possible at one place, Apex Trader Funding. You can get up to 20 accounts at Apex. No other
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15:23 don't forget, you can get a payout at Apex every 8 days. So, you can get either their 25K account all the way up to their 300K account and you can get up to 20 accounts. Now, make sure when you're getting an account at Apex, you use the code CF for up to 90% off at Apex Trader Funding. The link is in the description below. Use the code CF. Get up to 6 million in futures funding today. Now, let's get back to the episode. So, with this model, it's really uncommon that the market will snap back inside because when you see aggression and out of balance, the market needs to search for new balance. It's like human being. When we are in a condition of fear, our heart continue to have takia till we don't get back to calm. Yeah. And we say okay now we are
16:12 stable. Okay. This is exactly what the market is doing. So the step three is getting a location for aggression. So that the trigger of the uh model is aggression and that target point. The target point also is really objective and I noticed during this year and also scalping during the um world cup champion that we can also get a window during the day where this model works really good. Yeah. Okay. So the best session to use this model it's 100% New York session specifically for equities. So for NASDAQ and uh for uh yes and uh is not working properly during the first hour of London
16:58 session. I try to use this model and during London session you see out of balance back inside balance out of balance back inside balance. This is called by traders fake outs. Yeah. And it's usually when the market is not um really clear about direction. So um one concept that I use to remove this is that I don't trade before New York session. I only trade before New York session in the world cup but with a mean reverting model. Okay. So I was doing the opposite and we can go also through it because it's extremely profitable and it's even easier to implement this one and the following one. So let's say that in a balanced market from the statistical perspective during the London
17:49 session usually in indices you have mean reverting behavior. Okay. So it's less common that you will see a trend. Yeah. You will see bouncing and going out. So one other model that I uh am using is the one that takes opportunity of when the market is deep discount based on the volume distribution and misnaps back in. Now it's the same concept. It's the opposite. Now we are seeking for buy. We have a target. Why we are using this target? Because this target is where the maximum volume volume is transacted. So there is interest like market operators are willing to transact here. Mhm. What I do in this area is that I don't take the first movement. I wait I wait for the
18:38 first breakout. You can use price action for this because I get clear market participants of what they want to do. I don't risk that this is only a retracement and then they collapse. Exactly. Yeah, I get a movement that is clear when I get the first breakout and I'm back inside the balance. This probability is really high. Mhm. This really high probability. Now to increase even more the probability, I wait for the hand of the big market participants. So I wait for big trades. Yeah. So the common bubble of buy order that I can just say, okay, I jump in with them. I don't need to be a wizard. I jump in when the best one are jumping in with big volume and if I'm wrong,
19:27 I want to be wrong immediately. Okay. Yeah. Because all the additional losing that you get when you are inexperienced trader and say maybe I put the stop loss larger when the market is going against you because I will it will snap back. This is really something that will destroy your bank account and your trading account. What you need to do is be wrong immediately and when you are right when you see that you get an additional breakout immediately stop to break even. Yeah. So after this small movement you are already risk free on you quite aggressive with your risk management. I'm aggressive with my risk management because I need to put in this small amount of ticks. Mhm. 0.25% of my account or 0.5% on the account. So you say you could do this or take this concept without
20:18 order flow for example but of course the order flow just allows you to have more confirmation align more with the larger orders. It's working also for price action but it's like something that when you see it you cannot unsee it. So um when you are trading your mind as an orderflow trader says okay price action is nice but let's see what is happening in the level. you want to see it and then I think it's not convenient nowadays to not use orderflow for one simple reason we are edge and edge seekers as traders every 5% more win rate brings us more money at the end of the month every one hour two hour three hour more at the end of the month is more money for us so
21:05 why not using all the information available I've been in trading floor I seen how they trade and institutional trader considering that 90% is algo trading nowadays. But the discretionary trading for alternative markets, they still use orderflow. They use orderflow because they want to see what they are doing. Maybe they are more long-term because they work with huge amount of capital. So they prefer to use volume profile. But for short term, after 10 years of trading, I never seen something better than order flow. So still nowadays the model is not getting changed. The only change that I've made is uh during high compression period that we have seen in 2023 and 24 the the month that you are going through summer like end of March. Yeah. May June you see
21:55 the market is getting a little bit compressed and August like NASDAQ movement are really choppy. So um what you can do is just say to create specific condition where you will not transact. So this model it's okay for London session, it's not okay for New York session, but it's perfect for the summer. So I'm giving you a model that it's perfect for the months that we are going in because this is the behavior maybe with Iran and America and Israel, it will not be the summer to do this model. But um but yes it's working uh properly. But to your point in terms of orderflow wise regardless of you know conditions that understanding of order flow remains right. So in terms of the principles that you're using when using orderflow and understanding that information
22:45 and deciphering that information regardless of the conditions whether we're compressed or whether we're getting a lot of volatility and movement the the lessons and principles you take from order flow remains universal. So outside of because with price action and purely price action, the problem is one, you're guessing, right? You're trying to guess where stops are. You're trying to guess where the big players are because you can't see it. But equally, when conditions change, the same concepts aren't universal. Now you have to change and and be able to adapt. While with the order flow, you still have to adapt. you know, you still have to change in terms of your maybe your risk management, your trade management, but the order flow itself, like those orders are still orders, those stop losses, those those uh participants are still going to be the same. Um, but just a quick
23:30 question for yourself. You weren't were you always an orderflow trader or is it something you picked up? No, I was a free action trader, but I'm really open-minded. So if someone comes to me and say, "Fabio, you can improve your risk-to-reward from here to here using option flow." Yeah, I'm really open to it. Like I think that a trader needs to be the most open-minded person because if a new tools for example, if new data like MBO orders can improve your model, you shouldn't be you shouldn't put your ego here and say no, my model is the best one. if it's improving your profit factor and sharp ratio just use it and connecting to your point I went to order flow also also because the price action it's harder to replicate for students because let's say that we
24:17 have 100 people watching this okay and we say okay use a break of structure in favor of the trend for someone a break of structure is this for someone can be external breakoff structure for someone they take the big swing and is this the breakoff structure? Okay, if I say to you look drop for the full day the profile the profile is this one. This is the level where you are out of balance is not it cannot be this it cannot be this it cannot be this. If I say to you it's when you go here just put a filter of 30 contracts on NASDAQ on the one minute you cannot think it's here because you will see the ball. So it's really objective. Now there is a skill in reading of course market sentiment,
25:05 market change. But when I explain you something, it's something that you can go home test it and you will see exactly what I'm seeing with price action. I think the the subjective analysis is really heavy especially if you start doing puts multi-time frame. So definitely yeah from daily to H4 to H1 to 15 minutes, 3 minutes, 1 minutes. What's the probability that the trade that you frame is the same that the trade that your student will frame? It's really low. That's what I was going to say. So when it comes to say teaching for example when there is no orderflow that subjectiveness becomes quite a difficulty because everyone has a different perception as you said as you you know there's a really good example of of showing that. But then when you have order flow regardless of that the time frame potentially and you know where you're looking that
25:53 the areas on the charts are all going to be the same. Everyone's going to see the same thing. And those numbers are going to be reflected exactly the same across the board to every single person. While you know even the subjectiveness of say just candlesticks like a large red candle to one person might just another candle while to another person they'll be like oh my goodness the market is completely falling off a cliff when they explain the model when you see a big candle how much it's a big candle how much ATR you you include. So there is a lot of subjectivity and also let's consider that we have three level of analysis. We have lagging, we have real time and we are leading. Lagging are indicators. So if you get MACD, if you get stochastic, if you get RSI,
26:43 this is created as uh derivative of price. So you get uh MACD that is always going after price, never anticipating. Yeah, price is real time. So you are watching what is happening as an effect in real time. But with volume, you are watching the narrative before the price created. I give you an example of something that I never explained. Okay? And this is something that really helped me to see the develop the developing pressure to be able to put at break even sooner than other people. Okay? So let's say that we are here. We have a long bias. We are out of balance and we have the
27:29 previous day point of control. Okay. So with price action when can we put that break even? When we break this level. Yeah. You agree with me? Yes. Because we have level of protection that we can put here and we say okay it will retest and go. Yeah. We shouldn't break that low. Right. Volume we can use one tool that is called CVD. That is cumulative volume delta. What cumulative volume delta is giving you is a benchmark for pressure of volume. Mhm. So you are out of balance. So the probability you will find a new point of balance is high with cumulative volume delta. You see this is the price maybe you see the cumulative volume delta doing this when you are here the cumulative volume delta is doing this. What does it mean that aggressive buyers are really pushing on the
28:17 gas and there is a lot of interest because as the price goes up you don't see sellers aggressive but you see that buyers are willing to buy at higher price and if we are at an auction and there is a a limited piece of Mustang from 1969 okay and the base auction is 1 million and you see buyers starting 1.2 1.4 1.6 six it means that the price is probably going up because they are interested in the piece. So what you can do when you see that cumulative volume delta is pushing up and you see this leg already building you can already put to break even. Yeah because you know that as the smallest retracement aggressive buyers will continue to push up and you are protected. Yeah.
29:03 This is something that you can do with only with leading indicators you cannot do before. Of course, I didn't talk about global macro, but also global macro, it's a leading indicator or onchain analysis for crypto, but for intraday scalping, like orderflow is the benchmark tool. Let's take a break for a minute there, guys, cuz I want to tell you about the best CFD prop firm in the entire industry, Funded Next. Funded Next is a proud sponsor of Chart Fanatics, and they have been leading the CFD prop firm industry for many years. Literally a top three prop firm. Now, why is that? Let me quickly just run through all the incredible things that they do. First off, they have challenges for every trader. Whatever you're looking for, they have. They have a one-step challenge. They have two-step challenges. And now industry-leading instant funding. You get
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30:39 enough, there's no time limit on most challenges. News trading is allowed. There's no imposed limits on instruments or position sizes. They have scaleup plans that can 10x your account size. And something that they did first, if you don't receive your payout within 24 hours, you will receive an additional $1,000 compensation. Now, if that doesn't tell you that they're for traders, I don't know what will. Now, make sure you use the code CF to get the best offer available at Funded Next right now. The link is in the description below. Make sure you join Funded Next today. Now, let's get back to the episode. I love that example to be fair because if you really think about an auction that's probably the closest that the everyday person might have some sort of insight
31:24 into or at least know and understand how they operate uh as a as a usual auction. So in this case the car or house for example um you'll see the same thing if let's say even when there are buyers who want to buy but let's say if the auction price is starting too high they don't they don't really like where it's starting at you'll see actually the auction begins anyone at a million no one answers no one says anything so then the auctioneer or whoever's like running the auction will bring the price down until there's some interest and then you never know like it might seem like oh no one wants this car no one wants this uh vehicle or in this case obviously no one wants to participate or place any orders in this market. But then once it hits the level that people are interested at, let's say if it's that car example again, let's say we started at a million but no one's interested. Bring it down to 800,000. Now suddenly someone's interested,
32:12 one person's interested. Okay, we bid it up, but now people who were there for that particular vehicle moment. Yes. And then you'll suddenly see how Yeah, we started at a million and no one was interested, but suddenly we're blasting up to 1.25 25 million and there's still orders and still more bids and therefore that velocity and that amount of demand at the moment you go to the market price because if the market price is 2.1 million you start to see at 1.9 million of auction market participants saying okay let's go on increment of 50,000 not 200,000 so the market gets lower and you build new balance and then the point of control is the seller that close it usually the auction So um this is how really the market works and this is what I use daily to frame my entry and
33:03 um then what's good about orderflow is that it's really um you can adapt it to every market condition. For example, if you have a model with price action that is working really good, you don't need to abandon your model. just see if you can get better precision and remove the losing trades using this concept. Mhm. So it's not something that you will not start from scratch. Yeah. Just expand the level of knowledge you have from candlestick charts. So like you said earlier as a trader and and a pure trader at that and who's someone who's focused on trading 100%. That's your goal is to how do you build more edge? How do you squeeze more edge out of the same knowledge? playbook or strategy that you're using because that's really what you do at that point.
33:50 You're not jumping, okay, I've got this strategy, but I want to find a better one. That's not how the mindset is, right? And then if you come across a really good playbook and edge and strategy, you always can start to add that. But your focus point is how do I make this playbook the best it can be? How can I be the best trader possible? And in this case, you might have a profitable price action model, but your goal then is okay, how do I squeeze more out of it, right? So in terms of using orderflow if you're not using that already that would definitely help you to squeeze more out of it. Now not I'm sure there might be some people who try and learn orderflow and go n this is a bit more complex for me and uh therefore you know for that particular individual it might not be as helpful for example but I would say it's probably a slimmer amount of people right um but the worst thing you can do is just not even try because you're already writing it's
34:39 like people who need to learn fundamentals right and macro they don't because they it's complex and you know the price action's enough much to study yeah but in reality when you look at even just this year but co was a great example of it for as a lot of traders came into the markets but even just this year for example was a great example last year yes we had quite a bull market but there wasn't really a crazy amount of fundamentals behind um you know in terms of like changes and volatility changes and market changes while this year we're we're just coming into towards the end of June and literally we've seen highs lows we've seen the markets completely shift month after month after week and it's probably not going to change and we call this a Trump But but um again if you don't know macro it's so easy for you to sit there and go the markets are crazy I can't understand what's going on versus the people who do have an understanding and it I won't even class
35:29 it as like a deep deep deep understanding some people you just have a basic knowledge allows them to have more clarity and calmness which as a trader as we know is extremely important u one thing we'll do so from here where should we go from here should we should we uh recap the two models quickly did we we covered two right two to go one point before that is edge decay. Yeah, let's do it. Yeah. Before going to to recap the model, let's do it. Um the concept of edge decay is when your model lose edge. Mhm. Okay. And this is something I notice a lot with price action. So for example, before I was using supply and demand in trend following and when the volatility change for example you are creating one rule that you have moving average long and we are adding to
36:14 the trend when you get here. Okay. uh volatility change. So the the length of the swing if it goes from here to here you already take a lot of stop loss not because you are wrong the direction is right but the market will just swing higher and I think every discretionary trader notice it. Yeah. So this is edge decay and it's your lose of edge in the change of market condition. What's also Jim Simmons was talking about with his renaissance fund and um with or the flow what it's interesting is that you cannot actually have an edge decay because what you are watching is the true nature of the market. So you are not framing the market in something that is close rule from A
36:59 to B but you are understanding what's happening. And I will give you an example of something that improved my model by four or five point in we rate that it's a lot if you are a scalper and is the following one before if you are like closed in a range but you are trading price action and you are trading continuation with brick test model is really common. Okay. So you wait for this then you wait for the week down and on the on on the test you go long. Yeah. When if you start to do one simple exercise and you start to only use order flow to zoom out when this is happening like you you take one specific part. So you cannot say that order flow is complex. You take the same
37:44 candle just you make an exercise watch cumulative volume delta here and orders. You can use also footprint for this. If you see that at this level there is a lot of a aggression and the cumulative volume delta is doing here this it means that this movement is not supported and the probability that you will go down it's here and is something that is telling you before the price bring you to stop. So you can just decide not to jump in. And this is a comp a concept that I want to cover because it's something that I went through when uh the price action model was not working properly during the um 2019 and I had to step up the game and I was thinking no no I need to study from zero
38:30 and I need to implement something that will cancel and raise all the learning curve that I got with price action. But it's not like this just you will start from where you are before. Yeah, just understanding what's happening behind the market. Of course, it's easier to think that the market is dominated by some black entity behind the table because understanding the mechanic is difficult. But I can guarantee you that you will improve as a trader. Mhm. And uh so we go now on the summary of the two models. Yeah. And we start with the trend model. So this model is a trend following model and we will go before on the timing
39:16 that is New York session. Okay. So we want the biggest amount of volatility to implement this model in live market condition and uh I don't advise to keep the trades for the night. So this is a model that gets close as soon as the market close. You don't bring overnight trades because you also need more margin for futures. It's not convenient at all. Just if you are in profit or if you are in loss, cut the position and tomorrow it's another day for this one. So this is the timing. Then when we go on the step one, the first step is understanding market state. We can only have two market state. We can have a balanced market price action
40:06 going here and we can have an imbalance market. Okay, with this model we want to transact here. We are not interested in this market condition. So also for the gamblers uh you have one rule that keeps you out of the market and this is really important because when I start scalping with price action every movement was okay for me like every small impulse and then you say okay I took three stop for the day I'm out and then the big moves arrives. So this is the lock where you cannot enter if you don't have exactly what the market needs to tell you. Yeah, this is the market state and what we frame as the step one. Then we need the location.
40:57 The location is exactly your swing point. That is this one. Okay. Mhm. that you need to analyze deeply because you need to understand if you want to jump in here, if you want to jump in here or just if you want to jump on the train sometimes from the lowest point because momentum is so high that you can just say okay I jump here but I cover myself here. So it's still a good riskto-reward rate. What you use to do this you you use profile. Yeah. Okay. Use profile and what you search is low volume node. Mhm. So where the mark let's make try to draw the profile. Okay. Say that this is the profile for the swing point. What we can see here is that this is the low volume node. Not the best drawing. But
41:49 I think it's understandable that we're going to see on the charts, right? The the point where the lowest volume get transacted. What you can do here is do this. Okay. So what I do usually is I don't put a limit order. Okay? I put an alert a little bit below. Okay? Because when it arrives there, I want to see big trades, big orders. Okay? So as we were seeing before, we started from the timing, we went through the market state, we went through the location, go to the step three, that is execution or trigger. What you want to see is aggression. If you are seller, you want a big red ball. Okay? When you see a big red ball, you can jump in and your stop
42:40 loss will go here and your target will be the previous balance area. Yeah. So, if we are here, the previous balance area, it's here. Let's see the P. This is our target. And we are going to take out not half the position and let it run. we are going to take out the full position because the probability is that the market will reverse from it 70% of the time. So we are it's just not worth to keep the position for only 30% probability more. Yeah, better that we take all that we can in this case. Now let's go to the model two and the model two is mean reverting.
43:26 So the model 2 is using the market state that is the opposite. Yeah. So he's using consolidation. Market state is consolidation and is when the profile is protecting from breaking here and breaking here. Okay. So you get from here to here to here to here. What we are trying to take is the out of balance condition that get back inside balance. And as I told you, we are not trying to take the first swing because it's risky. Yeah, we are getting the second swing. So when we have the first breakout, we are just waiting for the retracement. It's the same concept as before. Now the location is this wing. Yeah. You frame the location,
44:13 you wait for the retracement. Mhm. So let's consider that this is this wing. Same stuff low volume node aggression seller consider that we are here maybe where we go we don't go here this is an error that everyone is doing the probability is not high you go here you go to the where the bulk of the auctions taking place where the probability that you will go to balance it's really high and if you are wrong you want to be wrong immediately if you have big sell orders here immediately Here it's your stop loss. A small trick for the scalpers, aggressive scalpers. There is a way to avoid slippage or at least minimize slippage put the stop loss not above the high. Yeah. Because
45:03 above the high there are a lot of orders and what you see is that market will accelerate. Example when you you take previous daily high, previous daily low, previous weekly high, previous daily low. You see that the market even if it's a failu now it's going down it accelerate. So you lose an additional amount of tick that you can protect. How you can protect them just put your stop loss one or two ticks below the high. Okay. So you are taken out before everyone that is before acceleration takes place. And it's worth it. I tested it and it's worth it because sometimes you get five ticks, six tick of and it's a lot because the overall chances of price getting to one or two ticks below that high and then not go for not it's almost zero. No, it's not zero. Sometimes it happens and you just want to cut your ends but on the long term like statistically wise
45:53 it's worth it. Yeah, cuz in this case for example, just to recap, so this recap wise, timing wise, you're looking at potentially London, right? And then in your consolidation periods such as normally your summer months, right? Yes. um just as an example. But in terms of the recapping the thesis, it's the fact that yes, you know, we're in a range and yes, you could target here because price has shown that yes, we're going from high down to low, but the highest probability is that auction auction area where the bulk of the orders and transactions are taking place versus, okay, yes, we could get here, but there are chances that we could get to there and rebound back up to that auction area again or rebound back up to the high that there's there's too many variables trying to
46:38 target here or especially lower versus the highest probable and that you know it's not guaranteed, nothing's guaranteed, but the chances are way more in your favor, especially considering the information you're taking on board. Uh because again, you're not just entering from the first spike out of the range. You're going to wait for your confirmation and then look to execute. Exactly. Exactly. And then consider that there are some days that they are really blessed days where you have this model. Yeah. Then the market breaks the low. you activate the second model for New York and you take two amazing target and you are done for the week. Um, so yes, these are the the two model. Now the tricky part is correctly identifying the consolidation because you can make it as simple as possible and say this is one day. Mhm. So I use the profile of the previous day.
47:31 Yeah. Okay. So it's easy. You don't need to have headache about it. You just wait for the Okay. There is a more advanced model where you have more execution where you get the ability to identify the consolidation phase. Okay, you just take an orderflow platform and you see the compressed candles and you just plot the profile on there. This is what we were going to do because it needs a little bit more skill. M I will explain you pull out the profile and I will show you something really interesting that not trading view but some orderflow platform are willing to give you also the delta of the transact volume before so you can see for each level who is dominating the market this is really useful because if you see here that you are going up and
48:18 is dominated by buyers it's not the best condition to get a buy trades because the probability that you will do this it's really high. Yeah. At the same time, if in this area you see a huge delta cell when you break out, it's your birthday. Yeah. You just go for it. Mhm. Should we go over the quickly the pros and cons and then we'll pull out the charts. Let's take a break for a minute there, guys, cuz I want to tell you about our incredible sponsor, TradeZella. Tradezeller is the number one trading tool in the entire trading industry. Tradezella allows you to become a more profitable trader. Allows you to make immense progress as a trader, no matter if you're a beginner or an advanced level trader, because it makes journaling easy. It makes journaling something that is fun and enjoyable and something that is interactive. So, no matter if you're a crypto trader, no matter
49:05 if you're a futures trader, no matter if you're a forex trader, no matter if you're a stock trader, all you have to do is select your broker, your platform of choice, and connect it to Tradesella, and it will automatically sync your trades and pull all of that data onto the dashboard, making journaling and finding your edge and adapting your edge so easy. In collaboration with Tradzella and Chart Fanatic specifically, we are actually getting the playbooks from the episodes that we're filming with these incredible verified traders and adding them as playbooks onto Trade Zela. So, you can actually go on there and see the rule sets already predefined. So, make sure you check that out as well. Now, you can actually get 10% off your monthly subscription using CF10 on Tradzella
49:51 right now. But more importantly, I would say CF20 for 20% off your yearly subscription with Tradezella. The links for Tradezella are in the description below. So, make sure you go check them out. Use CF20, get 20% off your yearly subscription, become a better trader today. Now, let's get back to the episode. Yes. So, let's go on the pros and cons. The cons is that if you use the second model, compression days are killing you because sometimes uh especially if you don't work on the daily profile but you work on the um short-term profile that you can trace by yourself. Um consolidation is killing your win rate because maybe you take five small stop-loss. Yeah, five
50:40 small stop losses maybe a lose a loss on $5,000. Mhm. Then you take one take profit and it's like 15 20,000 but at the same time psychologically the win rate gets lower and if you see a lot of red in your account even if at the end of the week you are still profitable it's heavy for beginners it's heavy. So one uh bad concept is consolidation that directly affect win rate for the model and this is the reason I created a second model because when I lose with one I make profit with the other one. So it's like balancing the equity curve giving you more execution but the draw down gets lower. So it's worth it. This is the first cons. The second one is it's stress. We need to be honest
51:27 with it. Yeah. when uh um your trades gets to the level not in a proper but in a real account where the single position is worth the salary that you were taking for example 10 years ago. So you are risking 2,000 3,000 4,000 5,000 per position and in 2 minutes 3 minutes you can lose it. Mhm. Of course at the end of the month it's profitable but on the short term it's heavy on the mindset. Yeah. Specifically if you go through the moment and there will be moments where you take streak of stop- loss like in the world cup I show transparently transparently the trades I was taking and one day I received a lot of insult from the people on the Instagram because I've been transparent of one day taking eight stop loss like small stop loss like five tick 10 ticks but a
52:17 lot of stop loss because it was a day that and you risk sometimes 0.2 0.2 2 0.3. So it's like nice stop loss is 1.8%. 2% is not a big amount. You can deal with it. But when you talk to people and you say look I took nine stop loss. You see learn to trade. Yeah. So so so they they just think that a profitable trader is a trader that having a huge amount of win rate. They don't consider that maybe the stop loss are incredibly smaller than gains. Yeah. So the the stress part and the the third cons is the time commitment. Mhm. Like to execute this model you cannot do it as an hobby. You cannot do it as a side hustle. You need to be in on the screen from the starting of the newer
53:07 session to the end because the position not only need to be executed is set and don't forget it's set and check is something like this because you need to trail your stop you need to manage there's a model for real traders. This is very this is a model if you want that trading gets your fulltime income. Yeah. Okay. Now on the London session I manage three I manage companies with my business partner but in the new year session three or four hours I do this and it's necessary you cannot just get out you can't just decide that after a certain time you don't open trades so you can enjoy dinner that's of course can be can be something good on the pros the first one is number of trades
53:56 Why this is good? Because draw down gets covered really fast if you have a big profit factor and sharper ratio. So you can take nine stop loss for the day but by the end of the week I was again in profit. I was high watermark. So I was creating new high on the equity equity curve and uh also a big number of trades creates something interesting for hedge funds that wants to give you capital. Mhm. Because a model that in 12 months does 2,400 execution is more respected than a long-term model that in 12 months have 30 trades. Yeah. Because the data sample wise this model is more valuable.
54:42 Interesting. It's giving you a lot of room of improvement and is giving you a lot of data analysis that you can input and you understand really fast if your model is not working properly in certain market condition because for example I have a benchmark that is the maximum amount of stop- loss I've taken that is 11 stop loss okay it's a humbling experience but you know that the market can stay in compression for one full week you know that every day it's a fake breakout for one week. I saw the last videos of Carmen Rosato. He was like taking a huge amount of uh stop-loss like for 3 weeks, but he's still in profit for the month. Yes. That's the good part about scalper, the number of execution, and it's really easy to go back in profit. The second good part about
55:31 trading with this model is that you don't need headache. Why you don't need headache? because the prediction part is not there. You are just paid to read what the market is telling you. So I don't need to start to say considering the angle of gun maybe the price will skyrocket to this price because this no just this is the market state. This is the location. This is the aggression. This is this is my trades. Mhm. And another good part, maybe this is the best part. I should have put this that you cannot do revenge trading because if you don't have the condition to trade when you trade large amount of size, you just don't feel confident to execute. Mhm.
56:18 If there are not the condition of aggression just it's not worth it to to do it. So the the third part is just there is no headache in deciding and no revenge trading in executing something that is not there. Yeah. You know with projection I don't know if you ever experience it but sometimes you see something that is not there just because you want to trade. So you create the setup well you can have a bias and then if let's say one time frame isn't giving you that bias you can just filter through until you find one. Like our time 10 time frames let's say eight of them are long but you want to be short. You'll just go to the one that says sure. Yeah. You know. Yeah. Yeah. This is something that uh I also did it like our ego is bringing us to the condition that if we say in our mind that the bias for the day long as and the news are long we will just take every
57:08 demand here because we think every demand that is getting break it's a fake and even down here even say it's taking liquidity till this wing doesn't get st out and of course this is a liquidation. So you also trade the reverse and then when you get destroyed you that's normally the last last resort right last resort. Yes. But another pro is that it's a high risk it can be a high risk to reward. It can huge risk to reward when uh it's not common. I need to be honest but when NASDAQ is pushing is pushing heavy and when you are in from the breakout of the level and you are because you need to consider that our target is the P. Okay. If you are here there is no P because you are creating value up. True. So you just decide to trail for the day. Trail. Yeah. Okay. Sometimes you get some 1 to 30 1 to 40. It's not common but it can happen. But even high risk reward like 1 to
57:58 4 1 to 5 that's a common reassurance. One to one to 2.5 is the minimum. Yeah. 1 to five is common. Yeah. 1 to 10 20 is not common. It only when I do 1 to 10 1 to 20 it means that you see on the NASDAQ 2% 3% for the day. Yeah. So it means that I really follow the market properly but I cannot do 1 to 10 if the market is doing 0.25 for the day 0.5 like I'm in tune with it like I I plus it's not like you're focused on risk-to-reward. It's just part of the model. You're focused on understanding what's going on and then reacting and following your model accordingly. Yeah. When when your model and when your primary focus gets to protection of capital and risk management,
58:45 you increase the profit. Definitely like when you put your focus on something that you think it's not directly related is when you make the most amount of profit. Well, now let's go into well the charts I guess the actual trade examples. Yeah. So, as we've established, this is truly a strategy and playbook for real traders. traders who really want to not only trade but understand the markets at a deep level. So now we're actually going to go over trade examples on the charts uh of those same playbooks and uh what do we have in front of us here? So this is a orderflow platform is a deep chart and uh what we have here is volume profile uh distribution profile of specific consolidation area. So what I was explaining to you before is that you can make it stupid simple putting just
59:34 daily profile. You can do this also from trading view. Maybe the volume will not be as precise as this or you can just do it um identifying the most interesting compression area. As you can see here they are clearly visible where the market didn't transacted higher or lower. It just stayed in compression. I use every day this area. And what I wanted to show you before is exactly this. You see here is the volume. Okay, this is the volume. This is how much volume is transacted per price level. This blue line is the value area. So every time you see the model in consolidation when it gets back, get back in target. Get back in target up get back in target down get back in target. This
1:00:20 one will be stop loss. But you have the second model. You have the execution model of this in this consolidation. We need also to be honest that you don't identify it immediately. You need you can identify maybe from here you can take these two trades. This one is really uncommon because you start to see the real compression. Yeah. It's too early. Exactly. Now what is interesting is that you can frame also the delta. What is the delta? The measure amount of volume getting transacted from one side on one place level. the aggression and if you see here look how much is big the delta is exactly at the level where they accumulate the last time and created this extreme breakout. Okay, this one here I will also explain you later why the news catalyst is something where
1:01:11 a lot of people think that the market is seeking liquidity but at the moment this movement is make because market maker go out of the market. So the volatility gets higher because you have less limit orders and in this case uh the market explode up to create a new level of balance. So in this case we have reversion model, reversion model, reversion model, reversion model and stop here probably aggressive model here breakout and we will go deep dive in the lower time frame because now we are in 5 minutes then we will drop down to 1 minute. This model can be used in every time frame like to give to the audience a little bit of reference. You can either do 15 minutes 3 minutes,
1:01:59 you can do 1 hour 5 minutes or you can do the most aggressive one. That is what I do. 5 minutes 1 minute. Okay. So 5 minutes is to watch the breakout candle. Okay. This one I don't go deep dive inside it because it's impossible to execute. You see it went out of balance. No retracement, low volatility, low liquidity. So it's impossible to take. Then we will go to this one that is the 23 is this morning. Okay. Okay. This morning we will see exactly how the model play out perfectly on the trend following side. So I will show you how also the model behaves in London session. Even if I only use this in New York session, the model really works as also reversion model in London
1:02:46 and New York. Yeah, I want to show you the entity of the momentum to explain you why I do New York. This is New York. This is you see how much is compressed more retracement. This when you take it, it just explode. Yeah. And this is what I was trying to explain you before as the flow getting in tune with the flow. So what we do now that our area are clear, we can go to one minute time frame and we will start with the first one. Okay. What we have here is the previous area. This is the value area high. This is the value area low. This is the poke. Okay. So, we are clearly out of balance from this movement. You can either be aggressive or just say I want to clear out
1:03:36 also the high. Yeah. So, I just want that there is no obstacles in my explosion higher. This is something that I usually do. I don't transact only when you break out. I wait because it can be the reversion model here, you know. Then what we do, this is the magic. We activate the orders that are getting filter for the amount of aggression. Yeah. Okay. So my filter usually is around 20 to 30. Okay. In this case, I think it's pretty visible. And this is the best example you can have. Look how much is balanced. Look what happens when momentum is building. So what I was saying to you even before the breakout, if you know how this stuff works, can you understand
1:04:24 that something is happening here? You are going from small orders balance to someone buying aggressively and continuation aggressively. Also look at the amount of big orders that you have in bullish momentum and in bearish momentum. So you can clearly understand if you are following the flow or not. So the trades here is like I was saying before either the momentum continuation trades that you get framing the level with a huge presence of buy aggression and this is another model that I also show on YouTube that is just not because this stuff happens in one minute. Okay. So every candle is one minute. You can either be fast and use only big orders or just as I was
1:05:12 saying before plot the profile from the beginning to the end of the impulse and say look let's zoom out in here what we have we have a lack of volume here. Yeah. So there is a huge area that we can use as a low volume node. Okay. So when you have the retracement and you get close to the area, you can decide to take this as an aggression or I will take this one as an aggression. Okay, maybe you enter here, you have the mitigation of the level and then you have just continuation. Now the more you wait to enter, the more it gets risky. Yeah. Because if you enter here, you are getting to a point where sellers can say it's too expensive the price. I went out of balance.
1:06:02 But you want to be in fast and close fast. Yes. Okay. So from here you can just identify from when the aggression is still bullish. I will start to be a little bit afraid here. I will start to say look the market is compressing again. The sellers are starting to fight back this huge momentum. Yeah. So maybe I can put my stop loss in profit. Gotcha. Below this low. Then what happens that the market against you don't need to be a wizard. The market give you clues because this breakout you see it's participated by huge buyers. The sellers try to get control back here. But what the market print a week. So it means that they cannot control the movement.
1:06:51 And I would completely take out the position where I see that because big sellers no follow up small sellers big sellers huge follow up and close on this candle you can go out you can go out on stop loss in profit or you can go out when you reach your risk-to-reward rates. Okay. Because with this
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