5 min Bull Flag, Daily Bearish Orderblock,

Another Important Observation*** We backtested an interesting correlation between the 1st deviation moving average, which is the day to day median on price, and there was 100 percent correlation for both premarket and session open prints, where the 1st deviation moving average acted as a MAGNET for price to attract to, before a move was to be made. So this moving average difference between both premarket and session open prints, can be a good gauge to whether price will go up or down for the session. And in this particular case, because we were trading off of weekly levels, and trying to gauge the week candle, it appears that the 1st deviation moving average, served as a draw on liquidity for a wider macro range, rather than a day to day trend following moving average, because the contradiction of daily bias is what actually presented the higher range trades to begin with. (Mostly from H12 Bearish Orderblocks) from what we observed, which can align quite well with a theoretical 3 screen system approach of H12, Daily, Weekly, with H12 being the execution screen, daily as the trade management screen, and weekly as the wave from which the trade is flowing. But overall, we will have to apply this moving average and open print correlation in the future to try to understand the daily draw on liquidity in the most simplistic form. 

 

 

RULES FOR OPEN PRINT & DAILY MOVING AVERAGE CORRELATION:

1. 1st Deviation Moving Average as a Magnet: There’s a 100% correlation observed between the 1st deviation moving average and price action during both premarket and session open. This moving average acts as a magnet for price, especially before significant moves, making it a critical indicator for gauging session direction.
2. Weekly Levels and Daily Bias Contradiction: Trading off weekly levels, the 1st deviation moving average served more as a draw on liquidity within a broader macro range rather than a trend-following tool. The contradiction in daily bias was a key factor in presenting higher-range trades, particularly aligned with H12 Bearish Orderblocks.
3. Three-Screen System Insight: Observations suggest that a theoretical three-screen system could be effective: using the H12 for execution, the daily chart for trade management, and the weekly chart as the guiding wave for trade direction.

Insights:

• The 1st deviation moving average can be used to predict whether price will go up or down for the session by monitoring its relationship with premarket and session open prints.
• When dealing with weekly levels, it’s crucial to consider the broader macro range and how the daily bias contradiction can impact trading opportunities.
• Aligning the H12, daily, and weekly charts can provide a structured approach to trading, with each timeframe serving a specific purpose in the trading process.

Trading Rules:

1. Utilize the 1st Deviation Moving Average: Always monitor the 1st deviation moving average in relation to premarket and session open prints. Use it as a gauge to predict the session’s direction.
2. Apply a Three-Screen System:
   • H12 Chart: Use as the execution screen for entering trades.
   • Daily Chart: Utilize for managing trades once they are open.
   • Weekly Chart: Reference for understanding the broader wave or trend in which the trade is occurring.
3. Consider Macro Range over Day-to-Day Trends: When trading off weekly levels, prioritize the macro range indicated by the 1st deviation moving average over the daily trend.

Overall Lesson:

The 1st deviation moving average is a powerful tool for identifying potential moves, especially when trading across different timeframes. Integrating this with a three-screen approach (H12, Daily, Weekly) can provide a robust framework for navigating both short-term and longer-term market movements.

How to Avoid Future Blowups:

• Stick to Higher Timeframes for Key Decisions: Ensure that your primary trade setups and management decisions are based on the weekly and H12 charts.
• Respect the 1st Deviation Moving Average: Don’t ignore the signals provided by the 1st deviation moving average, especially around premarket and session opens. It’s a crucial indicator of potential liquidity draws.
• Avoid Overemphasizing Daily Bias: Recognize when the daily bias might conflict with weekly levels and adjust your strategy accordingly to avoid getting caught in choppy or contradictory price action.

 

 

 

Key Takeaways:

• Market Shift Sensitivity: The account was successful in trending conditions but faced significant losses when the market shifted, particularly when dealing with weekly and monthly levels that disrupted the daily bias and range.
• Importance of Higher Timeframe Analysis: Consistent rejections were observed off of 12-hour bearish orderblocks, highlighting the importance of analyzing and respecting macro levels and imbalances.
• Orderblock Reliability: Bearish orderblocks, even after liquidity was swept, continued to provide reliable rejections, indicating that these areas remain valid until a full body close occurs beyond the liquidity level.

Things Done Right:

• Identification of Rejections: Correctly identified consistent rejections from higher timeframe orderblocks, particularly the 12-hour and daily charts.
• Liquidity Sweep Recognition: Noted that liquidity sweeps between 12-hour fair value gaps and imbalances were key to understanding price movements.

Things Done Wrong:

• Misjudging Orderblock Validity: Incorrectly assumed that once liquidity was swept on orderblocks, they were invalidated, leading to trades against these strong levels.
• Over-reliance on Moving Averages: Relied on daily bias via moving averages, which proved unreliable when playing off weekly levels due to the mismatch in the timeframe of analysis.

New Trading Rules:

1. Orderblock Validation: An orderblock is only invalidated if there is a full body close above or below the buyside or sellside liquidity area from which the orderblock originated, and this close must occur on the same timeframe as the orderblock itself.
2. Weekly Level Consideration: When trading off weekly levels, incorporate a 5-day perspective and consider using a 5-deviation moving average for more accurate levels.
3. Macro-Level Focus: Prioritize trading at extremes of orderblocks and liquidity levels on higher timeframes (12-hour and weekly) rather than focusing solely on daily imbalances.

Overall Lesson:

• Adaptability to Market Conditions: The key lesson is the necessity of adapting strategies based on the timeframe and current market conditions. Recognizing the ongoing validity of orderblocks and liquidity sweeps on higher timeframes can prevent premature reversals and losses.

How to Avoid Future Blowups:

1. Respect Higher Timeframe Levels: Ensure that higher timeframe levels, especially those on weekly and monthly charts, are respected, and avoid trading against these levels without solid confirmation.
2. Orderblock Reassessment: Before dismissing an orderblock as invalid, confirm it with a full body close on the same timeframe that created the orderblock, avoiding trades against strong rejection levels.
3. Backtest and Adjust: Backtest moving averages on a 5-day deviation to align better with weekly price action, ensuring a more reliable trend perspective when trading within larger timeframes.

 

 

 

 

We completely blew our papertrading account this week, and we went from an ATM printer machine on the way up, to a complete blowup once the market shifted, and this has been a continuous pattern that we have noticed. When the market trades off of weekly and monthly levels. I think its because these levels tend to completely chop the daily range and the bias. So what tends to happen when the daily bias flips during the day, everyone gets knocked out of position because both sides get stop hunted. 

So obviously its more important to play off of the macro levels. And one thing that I am noticing with a birds eye view of the entire week from the 5 Day 5 Minute perspective, there was consistent reliable rejections off of H12 Bearish Orderblocks, and the completely sweep of liquidity between 12 hour fair value gaps and imbalances. So it could be that because of the imbalance from a 12 hour persepctive, which is half the amounf of time as a full daily candle, that the imbalance between the 12 hour candles created a massive area of liquidity to be swept each day, and you would have to play the extremes and orderblocks of each 12 hour imbalance rather than day to day imbalances.

Another very important thing to note, is that the bearish orderblocks that were created, such as on the 1 day and 12 hour charts, provided consistent rejections AFTER the have already been swept. So we will have to implement a new trading rule in the future, that if we are playing weekly levels, or weekly candles, that you cannot disregard swept liquidity on orderblocks on daily and 12 hour charts, until there is a full body close above or below the stoploss area, meaning buyside or sellside liquidity on the timeframe in which the orderblock is presented. 

Another important note, is that we were trying to guage where this weekly candle would bottom, and we noticed on the prior bar that there was sell side liquidity below the prior weekly low, with a liquidity imbalance to the downside at the next bullish weekly orderblock to the downside. All of the liquidity in this area was swept today from downside back to the upside. So its very important when playing a weekly candle or weekly level, where the max pain or max imbalance is on price for that week to establish where extremity points can come from.

We can also implment a new rule. If the timeframe on the orderblock, is higher than the timeframe of the draw on liquidity. These levels can predict a higher probability of the market reversing. 

We also located on the weekly chart that although the weekly bearish orderblock, already had swept liquidity, it rejected a second time once retested, which was last weeks market reversal top, which came from consistent wick rejections on the 12 hour bearish orderblock, created from the 12 hour bearish orderblock on the 2nd weekly draw on liquidities wick high, and this 12 hour bearish orderblock, still provided consistent rejections after the liquidity was already swept.

So it seems alot of the reason for our losses during this week, was because we assumed since liquidity has already been swept on these orderblocks, that they were less likely to hold or provided 2nd a 3rd trade opportunites, and we would try to trade against them anticipating that the levels would break, but they never did. So we clearly need to establish new defined rules on orderblocks and swept liquidity. SO again, we will establish yet another persepctive on this new rule. The orderblock is ONLY invalidated, if there is a full body close above or below the buyside or sell side liquidity area established at the high point or low point from which the orderblock came, with the full body close coming from the same timeframe as the orderblock itself. 

If we do this, we can play the right side of the V setup at the extremities of the orderblock itself, and the buy side or sell side liquidity levels, if the bar has not yet closed outside of the liquidity level, potentially providing a deep risk reward setup against any potential wick rejections. 

Another important note, is that although the moving averges had a general daily bias overview, they werent reliable from a daily trend perspective while playing off of weekly levels, because obviously, a week is 5 days worth of price action, and our moving averages are only 1 and 2 deviation which means 2 days of price action, so there is an imbalance of another 3 days. So maybe we will do a backtest on a 5 deviation moving average to see if we could have found any levels. 

Another thing to note, is that the 2nd day rejection on the week, came from a 61.8% retracement from the high to low after a new 5 day (week range) was established. So we can note this for the future. 

1D 1M VWAP Lowerband & MoAvg Confluence, 1D M1 VWAP, 20D 1H Month VWAP Upperband, 2nd Deviation MovAvg Long, Daily Bearish Orderblock, Daily Bearish Orderblock Target, Daily Draw On Liquidity (Upside), H12 LIS Bearish Trend, H12 LIS Bullish Variation, M1 Bearish to Bullish Variation, M1 Entry, Month VWAP, Pre Market Low to Pre Market High, VWAP Lowerband To Upperband, Weekly Draw On Liquidity (Upside),

Refined Key Takeaways and Trading Rules from the Session:

 

Reflection Note - 8/19/2024 4:21 PM

Observation:
Today was an exceptional trading day with perfect execution, especially in nailing the trade of the day setup during the 9:30 session. However, a significant amount of profit was left on the table towards the upside.

Actionable Insight:
For future sessions, it may be beneficial to revisit and refine strategies for capturing more profit in similar scenarios. This could involve:

• Extended Profit Targets: Considering higher profit targets when market conditions suggest strong continuation, supported by volume and trend strength.
• Trailing Stops: Implementing a more dynamic trailing stop strategy to lock in gains while allowing positions to run further.
• Partial Profit Adjustments: Reassessing the timing and scale of partial profit-taking to maximize the upside potential without prematurely exiting strong moves.

 

 

Key Takeaways:

1. Trend and Variation Analysis:

   • A shift from a bullish trend to a bearish trend was observed, triggered by a stop-loss event in the overnight session.
   • Confirmation was obtained that a bullish variation holds more weight than a bearish trend, which influenced the day's trading decisions.

2. First Deviation Moving Average:

   • A loss occurred when trading based on the first deviation moving average against liquidity that had already been swept.
   • This emphasizes the need to avoid trades against liquidity that has already been acted upon.

3. Second Deviation Moving Average:

   • The successful trade was based on the second deviation moving average, which aligned with a 1D 1M lower band and created a strong bullish variation.

4. Market Conditions:

   • No significant market-moving data was available during the session, which required a focus on technical setups rather than fundamental events.

5. Entry and Exit Strategy:

   • The buy stop order was executed at the moment of a bullish variation creation, with zero drawdown experienced and a clear exit strategy based on potential reversal signals.

6. Volume and Liquidity:

   • The market showed no signs of slowing down, with volume continuing to expand, indicating a strong bullish momentum.

Trading Rules:

1. First Deviation Moving Average:

   • Rule: Do not trade the first deviation moving average against liquidity that has already been swept. Only trade it into liquidity that has not yet been swept.
   • Adjustment: This rule may be revised if future data suggests different variables that can influence the probability of success.

2. Extremity Point Trading:

   • Rule: In the absence of clear market data, focus on trading from extremity points rather than following trend moves from the open.

3. Second Deviation Moving Average:

   • Rule: Prioritize trades using the second deviation moving average when it aligns with other technical confluences, such as lower bands and the creation of bullish variations.

4. Data-Driven Decisions:

   • Rule: Continue to rely on data and execute trades based on the setups that present themselves, adjusting strategies as more data becomes available.

5. Partial Profit-Taking:

   • Rule: Take partial profits after significant moves, especially when multiple order blocks suggest a potential reversal, while allowing a portion of the position to run if the market continues to show strength.

This refined summary and the set of trading rules should help guide future sessions and improve decision-making based on the lessons learned today.

 

 

 

 

It was a great trading day. It started somewhat yesterday in the overnight session for me as I took a long entry off of the first deviation moving average, and was stopped out for a loss at the open of the next H12 candle, that broke the trend from a bullish to bearish trend shift. Thats the exact area I took a stoploss, and it was for a very minimal loss, I think around 8-10 points. The entry was around midnight, and the stoploss was a half hour later. From that point I just went to sleep instead of continuing to trade. From the time the market opened in the overnight session, it trended staight up to what I had marked as the Week and Daily confluence draw on liquidity. And above that draw, I had the prior week draw on liquidty, which is the level I believed we were targeting last week, and it actually happened to be my main target on todays trading session, since it lined up in confluence with the 20D 1H Month VWAP Upperband

I marked the red and green ovals, because from the overnight session, shorts had the trade of the session setup from the short taken from the Weekly and Daily draw on liquidity, and because the price action held the prior H1 ODB and seemed to be shorts take profit, plus the H12 Bullish Variation Line In The Sand was still intact, but at this moment I had no data on whether a bullish h12 variation or a bearish h12 downtrend held more weight, but today I now have confirmation and data to support that a variation holds more weight than a trend, which is what I figured prior to taking my long trade today. 

One thing I did wrong and I guess I will have to avoid again in the future, is that I took a trade based off of the first deviation moving average, which seemed like a good trade at the time because the h12 trend was still bullish and intact at that point, from the low of my entry as a stoploss, at 1 in the morning at the turn of the next 12 hour candle, it stopped me out and shifted into a bearish trend. 

Now im not exactly sure what caused the first deviation moving average long stopout, but my best guess is that It would have been a higher probability trade if I took that long into the weekly and daily draw on liquidity/first take profit rather than taking the long against liquidity that was already swept.

Now the tricky part is that I still had higher draw on liquidity targets above, so whos to say that it couldnt have been the correct long entry?

Overall I will need to gather more data on this in the future on different variables that can affect which moving average may provide a higher probability long entry, but for now I will make my best guess a hard trading rule for the future. And that is, dont trade the first deviation moving average against liquidity that has been swept, and to only trade it into liquidity that has not yet been swept. 

If any data changes this rule in the future we will re adjust. 

So for the 9:30 session, the market opened, and I noticed also that there wasnt any hard market data on the day. There was minor 10AM data, but again, nothing that was market moving. So from this point, obviously we had a contradiction between the H12 bearish trend and the H12 bullish variation, so I knew that I need to take a trade from an extremity point rather that a trend move from the open type scenario. Now at this moment, obviously the trend was still up, because the moving averages have not yet reversed, so I knew that the only entry left for me was the second deviation moving average, so i decided to disregard and remove the study of the first deviation moving average because of the stopout I took in the overnight session. So around 10:21AM, we got a rapid reaction to the downside, which created an extremity/imbalance in price action, and the 1D 1M lowerband was in confluence with the 2nd deviation moving average. From this point, the moving average held, with no closure below, wicked on the 1 minute chart, and I traded it with a buy stop order at the exact moment the bearish to bullish variation was created. From the moment I entered, I experienced zero drawdown, with a fair value gap created and displacement from my entry, which is marked with a hard green box from my entry, and a hard stop at the low created from the imbalance. I took off around 85% after multiple orderblocks showed signs of potential reversal, and because we had a full lowerband to upperband move, so I wanted to take partials. As i sit here and journal this, the market is continuing to rip far beyond my profit targets, now heading into the next daily bearish orderblock and beyond. As it should, because volume is still expanding to the upside on the 20D 1H Month VWAP, and because there is a bunch of un swept liquidity of sell orders. This market doesnt seem to be displaying any signs of slowing down anytime soon. So I will just do what ive been doing, and that simply trading exactly what I see infront of me, relying on the data, and executing on the setups infront of me when I see them.