Advanced Gap Theory Introduction

Date: 2023-06-07

URL: https://youtu.be/sfRO5LrTgTA?si=o_olymUgFhOUbI6b Watched Date: June 7, 2023

We’re looking at the Dollar Index. This is a weekly chart, just to keep you abreast of where we are in that weekly range.

We chopped up into the weekly bearish order block, which is this candle right here. We pierced the midpoint of that last week.

So far this week, we’re just meandering around inside the range between the weekly order block’s opening price and its mean threshold.

Daily chart here: you can see the bearish order block again, working that level a few more times over the last few days.

We have a small little fair value gap there.

Assume for a moment that we move higher. Unless we break below this low here, I’m going to stay with that narrative. And if it does, we’ll be looking for buy-side here.

Then we have a volume imbalance there, and we have a wick. So consequent encroachment of that — I don’t have it on here because I don’t want too many lines — but I have that level in mind.

Should we go above this high, I’m looking at the midpoint of this wick and then the volume imbalance.

That is also the premium wick consequent encroachment on the weekly chart.

So let’s move down into an hourly chart for the Dollar Index.

Usually, I don’t do this with you, but we’ll go into a bit more detail here.

Inside this swing low — all this price action — this is a swing on a larger daily chart, but we’re looking at it through the lens of an hourly chart.

See this gap right here?

Notice there’s an absence of one over here, but look at all the back-and-forth price action. So we have only sell-side delivery offered here. That means price moved between this candle’s low and this candle’s high, and delivered on the downside.

So it is sell-side delivery, inefficient in the form of buy-side delivery. That buy-side delivery is offered here on this candle.

Then the next candle opens, trades down, rallies back up, and closes here. The next candle opens, trades down, stops right inside that gap low, then sends it higher.

This is a balanced price range.

Balanced price ranges tend to either stop at their high, low, or midpoint. Most often, they will be consequent encroachment — the midpoint of the gap.

We can see that happening essentially here.

The algorithm is going right back to this inefficiency.

The fact that we traded back and forth here means buy-side and sell-side have both been offered. It left that range right here. If it ever comes back down into it, it is highly unlikely that it will trade to the low of this gap again and through it.

That is what makes an ICT balanced price range.

We also have an imbalance here. I wanted to make sure I highlighted this gap: this candle’s low and this candle’s high. That would typically be the shaded area here.

So only buy-side was offered here. Sell-side was offered to it there. And then, quickly after hitting the balanced price range consequent encroachment, price immediately erupted to the upside, working up into this bearish fair value gap in the form of a SIBI — sell-side imbalance / buy-side inefficiency.

Notice how many times it hits that daily bearish order block here.

It works that level here, here, and here. And that mean threshold of the weekly bearish order block here at 104.540 also has a small little inefficiency still remaining.

So we got as high as that candle here, but between this candle’s high and that candle’s low, there is still a small little gap in there.

If you look at the high, the low, and the higher high here, this down-close candle extended through is an ICT bearish breaker.

You can see it being respected here, respected here, here, and even here.

So it would be much more meaningful to me if we were to break that low here. Otherwise, I’m going to stick with the likelihood that the Dollar Index will either consolidate or go higher.

Either one, I could care less right now. I’m still neutral, and I’ll explain more about that as we go.

Here is EUR/USD on the weekly chart.

All of this price action back and forth in here — even though there is liquidity resting below this — is being met with high resistance.

High-resistance liquidity runs can still deliver and trade below here, but they can be very frustrating for individuals who don’t know how to anticipate them or don’t know what they are.

So in my concepts, I teach you how to identify a high-resistance liquidity run, so you can understand the distinction between that and a low-resistance liquidity run.

Low-resistance liquidity runs are high probability. They are immediate gratification. They run immediately to your objectives, and they are very fun to trade. It’s almost immediate feedback once you get into the trade.

Whereas with a high-resistance liquidity run, the trade is met with a lot of resistance in getting to where your objective may be.

Now, because I’m calling it high resistance or low resistance, that does not mean resistance in the retail support-and-resistance sense. It’s resistance in the sense that it is very hard for price to deliver one way.

So you’ll see a lot of consolidation. Price moves a little bit, comes back, retraces much more than you’re probably comfortable with, consolidates more, then goes a little bit further in the direction you were hoping for. That’s high resistance.

So if a new trader, or a breakeven trader — someone who makes a little money and then loses it — is met with those kinds of conditions in the marketplace, it tends to create very sporadic emotional responses in their psyche.

They become agitated. Many times they get stopped out because they move their stop loss too aggressively, too soon. Or they’re afraid of getting stopped out, so they widen their stop loss a little bit further, and then price runs through that as well. Then they regret having moved their stop to a larger stop loss.

Understanding what a high-resistance liquidity run is will help you filter those types of trades out.

It doesn’t mean you can’t trade them, paper trade them, or tape-read them. It just means you don’t want to put a lot of emphasis on trading in those environments.

More specifically, you want to wait for low-resistance liquidity runs.

Here’s the daily chart.

And here you can see how we hit that bearish order block I mentioned the last time we spoke. It hit it.

Now what is price consolidating inside?

That gap right there.

Look at all the back and forth here: up, down, up, down. So it is being met with high resistance.

Now, can this go higher with the Dollar going lower?

Absolutely.

Can it work its way through this area here and attack the sell-side below it?

Absolutely.

But because it’s not one-sided, because it’s not so heavy-handed, and because I can justify both sides of the marketplace right now, it’s a neutral position for me.

That means I only want to be trading when it’s high probability and when there are low-resistance liquidity run signatures. That means the market is more likely to run quickly to where I think it’s going to go, whether that target is liquidity or an inefficiency.

So if I’m looking for lower prices — gun to my head — I think the Dollar is going to go higher, and I think eventually EUR/USD will attack these lows in here.

Will it meet that before running out this high?

I don’t know.

And because I don’t know, I’m sitting still with my hands in my pocket, not willing to do anything.

But every time I sit down with you, I’m always going to tell you what I believe is likely to occur if I’m being forced into a corner. If you say, “Okay, ICT, what do you think is going to happen right now, regardless of whether you’re going to take a trade or not?” — that’s what I do.

I like giving commentary and analysis when the market is one-sided and showing low-resistance signatures, because it’s very pleasing for me to share it and then have you watch it happen in your charts.

Right now, we don’t have that.

A lot of objectives have been met recently — in the Dollar, EUR/USD, and index futures. So we have to let the market consolidate.

In Month 1 of my mentorship core content, I introduced the four stages of price delivery:

consolidation, expansion, retracement, and reversal.

Those are the four stages of price delivery. Right now, we are in consolidation.

So we have to wait. Simply wait.

You don’t want to push the envelope here and try to predict what it’s going to do when it looks like this.

It is easy to predict where price is likely to draw when it is one-sided and in a low-resistance liquidity run. That means it’s very easy to see one side — either buy or sell — and very difficult to justify the opposite side of the marketplace.

An example would be if the market had only one single swing low, and not the back-and-forth trading range we have in this area here. Price has spent a lot of time working inside this range, so it will take a significant price move to get down below it.

So if it were only a single low and then a reversal — like a V-bottom type of thing — then it would be very easy to assume that this would continuously move lower. That would be a low-resistance liquidity run short.

And obviously, the opposite should be seen for a long in the Dollar Index.

But because we don’t have that, we have to sit and wait for more information. Otherwise, you’re trading with low probability.

Can you make money?

Possibly.

But it’s more likely that you’ll be wrong. And because I’m teaching you the distinction between high-resistance and low-resistance liquidity runs, if you do engage it and you lose, you’ll regret having done so, because I’ve already told you now: it’s lower probability.

Here’s the hourly chart on EUR/USD.

Last time we sat with each other, it was an earlier livestream, and I mentioned this area here: how the market ran up, hit buy-side, traded into a short-term premium relative to this high and that low, and then, once it hit the buy-side and that premium fair value gap in the form of a SIBI — sell-side imbalance / buy-side inefficiency — it worked lower to attack the sell-side here.

There was sell-side liquidity here, and the market was hanging right around this area. We’ll look at that on a 15-minute timeframe.

But eventually, it moved higher to the top end of that daily fair value gap, then went lower, failed to make a lower low here, and then reversed higher to trade into a deeper premium, further up into the upper portion of this 60-minute fair value gap in the form of a SIBI — sell-side imbalance / buy-side inefficiency — then back into that daily fair value gap.

It’s now on the 15-minute timeframe.

Here’s that hourly fair value gap. It ran up into it here.

Notice, when we were talking about this in the livestream, I said while we were hitting this area here: if it was going to go lower, and if it was going to be a high-probability scenario for it to go lower, I would prefer to see price stay below this level here.

If it were to go higher, I’m not interested in going lower.

Basically, consequent encroachment from the fair value gap high to the fair value gap low — in that shaded area here — is the daily fair value gap.

If we were to meet consequent encroachment, then break down and create another fair value gap that would be viewed as a premium array, then I would look for that low and that larger sell-side liquidity pool to be taken out.

Because if it were to go higher, I would prefer it to stay around consequent encroachment and not go too high. If it does go too high, then all that means to me is that if it goes back down lower, it is likely not going to go below that low.

Go back and listen to the livestream where I was talking about it in here.

The reason I’m not interested once it gets up to here — even though it did drop, and notice it dropped handsomely from this high of the fair value gap — is because it didn’t take out the sell-side.

We are in that neutral zone for me as a trader, where I don’t want to take a trade.

If we were to tape-read or study it, ideally, we would want to see consequent encroachment — the halfway point of that gap in the orange shaded area — not trade back to the high end.

But if it does trade back to the high end and then starts to sell off, that is a trap. This low won’t be taken, and this sell-side will be left intact.

Then they run higher to take out the Asia high. This is the Asian Kill Zone, and this is the London Kill Zone.

So the market trades down, fails to go lower, runs a short-term high, and shows a shift in market structure. Then it comes back into an inefficiency here, trades down into consequent encroachment, which is the midpoint of the gap between this candle’s low and this candle’s high.

There’s your Silver Bullet for Euro.

It rallies, finds support at the daily fair value gap — see how it’s respecting that — then runs up and consolidates in consequent encroachment, which is the midpoint of the gap high and low.

Consolidation, expansion.

It respects the high of it, opens, and runs through it. It takes out Asia’s high, swings all the way up to take buy-side, and trades into a deeper premium on that hourly fair value gap in the form of a SIBI.

This area up here, shaded in pink, is this area here on the hourly chart.

So this run from here to here is this on the 15-minute chart — from that low up to the high.

Then it draws right back down into the midpoint of that fair value gap.

So again, it’s reaching for liquidity.

I liked the idea that we did come all the way back up here to take out buy stops. To me, I think that favors a continued move lower because they left this low, and they left a larger pool of liquidity.

🚨🚨🚨

🚨🚨🚨

Again, I’ll take you right back out to this low here.

So there’s sell-side here, and there’s a little bit of a gap right there. You can notice it, although the little TradingView icon is in the way. This candle’s high and that candle’s low — that’s a BISI. And you have sell-side and relatively equal lows here.

So we came all the way back up to take out the buy-side. All of this is efficiently delivered.

If it had traded up to the high end of that, that would have been perfect. But it left a small little portion in there and broke down.

I want to see it run for the sell-side here and here. So I’m thinking 1.0660, and maybe lower.

That’s what I’m looking for going into London to New York tomorrow. That’s what I would favor.

That does not mean I’m trading it. It just means that, gun to my head, that’s what I believe based on what I’m looking at here.

If I’m accurate about the Dollar going higher, that’s what I would expect to see.

We’re just looking at the June contract. So this gap in here is what I said we would draw up into. We obviously did that, and we’re looking at the weekly chart, and the candlestick is represented as such here. So we hit the high of that gap, and then we’ve been banging around inside that, which is typical when price runs to a higher-timeframe target.

Lower-timeframe candlesticks and charts will move into a consolidation profile after multiple markets have met their objectives. As I mentioned, with the Dollar Index, it traded straight up into our premium objectives. EUR/USD traded down into our discount objectives, and ES has traded into its premium objectives. So when that occurs, the market will tend to do what? Consolidate, which is why I’m saying I’m neutral.

So you can see how there’s a relationship between how I teach market profiles—not market profile in the sense that you think it is, but profiles in the sense of schematics, a roadmap, if you will. Typical behavior or performance by price. Something that looks familiar. That’s generally what I’m trying to get at.

And I taught and gave out specific schematics for weekly profiles and daily profiles, so you can see what type of performance price will behave like, because the algorithm will tend to follow those types of profiles. And right now, because the market has met our objectives that we’ve been looking for for a couple weeks now, it just sits still for a little while and consolidates.

It doesn’t mean it’s going to reverse. It doesn’t mean it’s going to explode and continue. It just means that we wait. We wait for more information.

Now, what I do notice in here—and I failed to mention last time we were doing the live stream—there’s a volume imbalance in here, right there between this candle’s close and this candle’s opening. And we’re inside this gap here. It would be fine for it to drop down into that area there, so around 4040-ish. That still would not break the structure that would imply it is going to go higher and move like it did in Nasdaq.

This high here, where there’s buy-side, that would be the next draw on the upside. But short term, it may consolidate or retrace down into this area right in here. That’s a volume imbalance, and I don’t want to have too many lines on the chart, but you want to have that on yours. In the event that we do retrace lower, it might want to draw into that area.

As long as we stay above this candle’s low—why am I picking that candle?

We’ve already worked inside these two down-close candles. That’s your bullish order block: consecutive down-close candles. It traded down into that and repelled price higher.

If it were to color outside the lines of this volume imbalance, which is that white-shaded area, it can trade down into consequent encroachment of this candle’s tail. So that right there, which is essentially the low of that volume imbalance. It can go a little bit past, a little, you know, somewhat, but I don’t want it to go below there.

If it trades below it—it doesn’t require a close—if it trades down below that, then I’d be more reluctant to anticipate that high being the next run on liquidity.

Daily chart here for ES, we have a fair value gap in here. Shift in market structure, drops into a fair value gap, rallies up and into our gap. So in the upper portion of that volume imbalance on the weekly chart, which is that white-shaded area, and that’s the specific area where there was no trading. It’s worked its way up in there, and now look how it’s just hanging around in there. See that? Interesting, isn’t it?

Watch what happens when we drop into a lower timeframe.

Here’s the hourly chart. This blue line is the high of that weekly gap. This blue line is the low of that weekly gap. The white-shaded area is the volume imbalance.

I’m drawing your attention to this wick right here and its midpoint, which is consequent encroachment. So this is a discount array because it’s below market price.

Let’s play devil’s advocate for a moment, and let’s assume, for the sake of discussion, that the market does, in fact, want to go higher. It could trade down into this area here and then run for buy-side. Notice how you have clean highs here, so that looks like perfect textbook resistance. I don’t like that. I never like that.

Smooth edges like to be made jagged. Okay, I have an expression. I say it many times, and I think this will be disrupted. Now, how and when it will occur, we have to watch and see what price does at each kill zone, okay, or specific times of the day where we’d like to trade.

So I want to see, do we respect price at this discount, consequent encroachment of that wick? If it runs through it, there is another wick right there. So this midpoint of that one, you want to draw that out in time, too. It’s also basically these highs.

Now, what I don’t like about that is, I don’t like it going back down to these relatively equal highs, because that’s treated as what? Resistance turned potential support, right? I don’t like that.

So take us back into that higher-timeframe weekly chart. Remember what I said about 4240-ish in that volume imbalance on the weekly chart. So it could trade down into and below these highs here. If it really wants to be aggressive, trade down through that all the way to the low of that volume imbalance,

So just be mindful, I don’t have an affinity for these levels here: draw that out in time, and if it comes down to it, we’ll treat it as support. And I don’t see that as resistance. Okay, I think this is like knocking on heaven’s door.

So they may need to take it down deeper, just to try to sell the idea that this is resistance, and then come back up later on and break through this here like gangbusters.

This area here—I don’t have a four-hour chart tonight, but I added the notation that we showed this in a live stream the other day, yesterday. And it’s based on the four-hour Tuesday, May 23, 10 a.m. inversion FVG. So you can watch the live stream; you’ll see it was there. And that’s what we’re seeing the respect of there.

Initially, daily FVG, but you got inside of that.

Here’s the 15-minute timeframe on ES today. High, because that ran at the high of that volume imbalance. Look, that’s perfect. It goes right to the tick. Not in your textbooks, just in the book of ICT.

Breaks lower, trades to the low of the gap. This line and that line are the gap levels on our weekly chart for ES. The white-shaded area is the volume imbalance. This is that wick discount consequent encroachment level that I just showed you before we drop down and go back up. That’s this one here.

Okay, so with discount consequent encroachment there, I can already hear some of the newer students: “This is really complicated.” Everything’s complicated when you first start.

I’m thinking that we could draw down into that H1 wick discount CE, and how we trade to it—and if through it—all the factors I just gave you for the other hourly chart, they are to be weighed out. That’s where I’m waiting to see. I don’t have a very clear, definitive, “Here’s my next setup.”

I’m watching those levels to see how it forms market structure around them. So I’m not trying to guess. I’m not trying to be predictive yet. Okay, so I’m sitting neutral. We’re not reacting to price; we never react to price. But we’re sitting still, waiting for more information, so that way we can predict the next outcome.

Right now it’s uncertain, but I do have the opinion, if gun to my head, where I think it’s going to go. I think it’s going to go lower first to go higher later.

In a 5 minute chart, you can see here we had buy-side resting above these highs here, and this short-term high. This is your opening range Judas swing. So it rallies up, hits the high, that weekly gap high, and drops lower. So now there’s buy-side resting above that.

To the left that we’re here is the other relative equal high on Monday that formed. So over here, you can see all your hit, broke lower, drew back into current new week opening gap, came back up to it, and then rejected, traded down to the weekly gap low, and then consolidated around it.

Notice that this low to the high in this range here, it’s essentially hugging that weekly gap low. So it’s kind of like an equilibrium price point in this consolidation in here, the NWOG. And I would suspect it wants to trade down into that 4240-ish level. Anything below 4240, then obviously we have to keep our mind on seeing that daily level I told you that I didn’t want to see it go below.

Break below here is sell-side, okay, right below there. So all this run-up, it ran for the sell-side and the weekly gap low.

I'm going to teach you a little bit more about gaps. But for now, here is the am session ICT Silver Bullet trading up into that gap high. Swing Low is right there.

If you’re trading the ICT Silver Bullet, which is the model that I’ve taught you for 2023, for the YouTube mentorship, we have a shift in market structure, and it’s much more pronounced. So this swing low here is broken. We have a fair value gap between this candle’s high and this candle’s low. This is a SIBI: sell-side imbalance, buy-side inefficiency.

Price returns back up there, short. You’d have had to endure one more time in a small amount of drawdown. And here it spends a little bit of time and then finally gives up the ghost, breaks one more time below that low, digs into the sell-side. But notice that that low is just barely below those. You know what it’s reaching for? New week opening gap there, like a magnet, okay?

The market drops, comes back up, another fair value gap. So you could have taken this one if you didn’t take that one. Or you could have traded this one short, pyramid more in here. Drops down. Look where that low is on that candle right there. That’s the new week opening gap low. Bang, perfect, right to the tick.

So a hit our higher timeframe weekly objective. That's a key level he hits it breaks lower shift in market structure that's bearish.

Small little imbalance here, this right here. That move right there, that is the 2022 ICT Mentorship model. So buy-side taken into a premium, shift in market structure, fair value gap, trades up into it. There’s your setup: go short.

What do you aim for? Relatively equal lows and liquidity. If you want to be overzealous, you can aim for the weekly gap low. I personally wouldn’t have, but for the sake of argument, you could have.

I’m going to tell you how that low would be significant. Take the high here and add your fib up here, and draw it down to that low. One standard deviation would be 4278.75. That’s a pretty handsome objective.

If we treat that high to that low, this low being a fulcrum point, that means if this move from high to that low was like a door, okay, and it swung—this was the hinge of the door—this high, if it was allowed to swing completely all the way around, it would come right down, right below that low here. It would come to that price point here.

So all I’m saying is this range from that low to high, subtracted from that low, takes us right to this 4278.75.

So that's a pretty good run for a silver bullet. 19 handles. That's a pretty good day, even if you're trading with one contract.

Let’s go a little bit further. Now I’ll teach you advanced gap theory. We’re going to take a look at that same price swing. All of this is the initial run-off. This is a Judas swing, okay, in the first 30 minutes of trading.

So at 9:30 opening bell, we see the price run higher, stops dead in its tracks at the weekly gap high, the gap high that I told you about weeks ago. Having that level on your chart and then anticipating price reacting there. Swing low, it breaks lower, and that gives us this small little gap right there.

This gap right there is simply a fair value gap. It’s a common gap that can be traded, though, with the context that I taught you in the 2022 model: buy-side, higher-timeframe level, takes buy-side. Does it go after the short-term low? Yes, it does. Did it leave a gap? Yes, it did. Can it trade up into it? It does. Go short, stop above this candle’s high right there. If you’re really scared and you don’t want to take a larger risk, put your stop right above here and trade with less leverage.

The market breaks lower, and we have this gap right here. This is a fair value gap in the form of a SIBI, just like this is, but this is a breakaway gap. What is it doing? It’s breaking away from this important higher-timeframe high inside the model of the 2022 ICT Mentorship model that I taught you, and it’s moving aggressive.

So we have one to two times there’s a shift in market structure that’s bearish. This is a breakaway gap. Breakaway gaps must have some context as to why price should see. For instance, this is a bearish breakaway gap. It’s breaking away from a level that we would already anticipate being some measure of a short, okay, some context around this level. We would expect to see some kind of respect of that level, okay?

So it’s a higher-timeframe weekly gap high. We’ve already been here on Monday, repelled lower. We create a short-term high prior to it here, and it ran up to it there. And then it took that low out there. That gap in itself is the 2022 model. Then it breaks again, returns back into it here, with the relative equals. So there’s your fulcrum point from low to high.

You may have missed the 2022 model entry here. No problem. Return back into this gap here.

Breakaway gaps tend to leave a portion of the gap unfilled, from this candle’s low to this candle’s high. It retraces all up into this level. So between these highs of these candles and that candle’s low, a small portion is left open. We would expect to see that if this is going to be a gap.

So you went short into it here, and you’ve seen watching it here: small consolidation inside the breakaway gap. Your stop, if you were shorting in here, would be above this candle high, not fearing any return back into this, because we have two shifts in market structure.

This return in here, while entering the trade, you’re anticipating, you’re expecting this portion to stay open. If it does, you want to see that happen anyway for your trade. But if it doesn’t, it completely fills in, and that’s not a breakaway gap, then it may need to come back up and tap this one more time.

So if you were to get stopped out, you’d have to wait for it to hit this fair value gap and then break one more time, create another imbalance or fair value gap, and then use that to go short.

So what I just taught you is how you navigate if you’re wrong and it doesn’t become a breakaway gap. You wait for it to trade at a higher-timeframe fair value gap and then break lower again, create another fair value gap, and treat that as a potential later breakaway gap.

But the context is, it’s running up here to get traders thinking it’s going higher, bullish, okay? From this low up to this high in here, this looks like a bull flag, and I guarantee most retail traders, when it went above that high here, that validated everyone thinking that it’s a bull flag. Then it broke lower.

Now, if you didn’t have that weekly gap high, you would never understand what I’m showing you here, but you’ve known that level for weeks.

It broke down, and in here is a breakaway gap. It’s qualified as a breakaway gap because it leaves and goes lower to another new low and leaves that portion open. At that time, we get real confident that that never will come back up to this level here, so we can drop our stop right to that level there and let it roll.

We have these two candles here. These are one-minute candles, so this is essentially a two-minute fair value gap versus a standard, typical ICT fair value gap in the form of a SIBI. And you can see them come back and trade back to them.

There, like again, a common gap. Common gaps can be retreated to multiple times, and they reclaim them sometimes as support or resistance.

Then we have this large gap here, these two down-close candles. That’s one big fair value gap in the form of a SIBI if we’re looking at a two-minute chart. Right now it’s a one-minute.

If you do this on your own charts, look at this area here on a two-minute chart. That’s one candle down. So it’s only trading back up into consequent encroachment of the two-minute range of these two specific one-minute candles.

So in easy language, in layman’s terms, from this candle’s low and this candle’s high, on a two-minute chart, this is one down-close candle. Midpoint of that is where it’s trading here. That’s consequent encroachment. This is a fair value gap in the form of a SIBI: sell-side imbalance, buy-side inefficiency. And it’s measuring. What's that mean? We can take this range and use it for projection.

Then we have another fair value gap in the form of a SIBI. You can look at this on a two-minute chart; it’d be one down-close candle. And again, essentially working into consequent encroachment, taking buy-side here, and then breaking lower to a lower low below that weekly gap low.

Standard fair value gaps, which are common gaps, they can be reclaimed or traded back to as resistance or support. When it trades back up to here, look at the bodies of the candles here. That’s telling you the narrative.

If you’re reading my gap theory in price, if you see the signatures like this, I tell you all the time: the body is telling you the story, the wicks do the damage. The wicks are what everybody else gets messed up with: dojis and specific new types of candlestick formations, nonsense. It’s all nonsense, okay?

Reading price action naked with time, and looking for these types of signatures here.

The open and close of these two candles here are supporting the idea that this low of that inefficiency is being respected. And then price does work. It trades lower. Where does it trade to? Below the sell-side here, but not some random level.

The open and close of these two candles here are supporting the idea that this low of that inefficiency is being respected. And then price does work. It trades lower. Where does it trade to? Below the sell-side here, but not some random level.

If we take the high of that price swing and draw that Fibonacci all the way down to that candle’s high right there, from high to low of the gap. Why this gap? Because this is the measuring gap. It’s approximately half of an implied dealing range. Implied meaning we’re looking for it to go lower, but we haven’t seen price go there yet.

We’re not reacting, remember. We’re predicting price. So the high here, draw that down to that candle’s high right there. Right there, okay. What that does is gives you a projection to a standard deviation of negative one.

That is the daily low to the tick right there. It never went lower today, even after our session. It didn’t go lower. So this is my ICT swing projection theory when I break the market down.

See, gaps are just like a PD array matrix. They have a hierarchy, okay? You have a breakaway gap. You have common gaps. Common gaps can be reclaimed; that means treated multiple times. Measuring gaps tend to leave a portion open, just like a breakaway gap.

So if we’re expecting it to go lower, it stands to reason that we expect it not to trade all the way up here. And if we’re expecting it to be a measuring gap, guess what? We want to see it not go up there, and that confirms and qualifies it as a measuring gap. Then we can take the high, project it down to the low of the gap if we’re bearish, and then get our standard deviations. But that standard deviation, the negative one, has to be in agreement with moving below an old area of liquidity.

So that, between these two things, makes us have the precision, okay? It’s not simply you take a fib, put it over two different price swings, and then you’re going to get the same math that I have. But understanding that gaps have a hierarchy, okay, and this is how I qualify my gaps.

Every time you watch me do a recorded trading episode where I’m going in and I’m trading live data, and I’m pyramiding, adding and adding, and pyramiding and adding, and I’m taking partials off, and I’m looking for a specific level, I’m using this logic here. When I’m drawing out, when I say, “I want to leave this portion of the gap stay open,” “I want to see this portion of the gap stay open,” ideally, if it leaves this portion open, unfilled, it’s this theory I’m teaching you right here.

Use this as a benchmark to go and look at your other old price swings and start measuring them out in journal them in your trading journal