Following on from Imbalances Part 1, this tutorial provides previous live examples of applying imbalances.
Time Stamps
2:09 – ETH/BTC Previous COTW (DO NOT TRADE THIS)
- ETH could have a crucial connection with BTC
- If two levels are very close to each other, Daniel prefers to keep the HTF level on the chart (but is also aware of the other level)
- For Daniel to trade altcoins, he has to see the strength in ETH
8:32 – IMBALANCES
- Daniel likes to use Exo Charts (but you can use any other).
- The main things to look at with imbalances are:
- absorption,
- SFP with trapped traders,
- stacks (stacked imbalances that act as support)
- Daniel likes 15 minutes chart but it depends on the time frame that fits you (Daniel likes taking scalps as well)
- The time frame you trade is the one you concentrate on
- Daniel trades imbalances off of his reference levels = the levels he is primarily trading off of.
- You should never be in a scenario that you are just trading to trade
- You have to view trading as a business – make or break, fully concentrated so that you can be(come) consistently profitable.
- You have to have your rules (for instance, you will always take a trade when there is 0.618 on the Weekly level) and mark up your chart
- You have to look at the imbalances in the high reference region where you intend to buy/sell but when the price is in between you should not be interested.
- Daniel prefers to not set any bids/asks if he is at his computer but to see the reaction instead. Example:
- When price comes down to his reference area he’d look if there is absorption at the lows. The aggressive option is to just buy when you see a rounded bottom and heavy negative delta at the lows. You have to see the average volumes when you approached lows previous times to compare to see absorption. The other option is waiting for confirmation.
- The beauty of footprint charts and imbalances is that they provide evidence (no guessing). If you were for instance buying every 0.618 blindly before, you can now see with the knowledge of how to read these charts the confirmation. Your win rate will dramatically increase (even double).
25:40 – EXAMPLE
- To see absorption volume needs to increase – heavy selling into the low which is not breaking down. CVD divergences show absorption.
- Ingredients of confirmation: upon taking the reference level there should be an increase of volume, a lot of buying imbalances forming on the way up (high positive delta). If reference level does not show these the price can fall down lower and no one loses money by waiting for a lower price.
- Second scenario: we claim the reference level and there is evidence of trapped shorts (up-ticking volume, NET longs opening, OI increasing, positive delta with buying imbalances). In this scenario, we get wicks.
38:26 – EXAMPLE (TRAPPED LONGS IN SFP WICK)
- In the wick, there is a lot of aggressive buying
- As soon as you see trapped longs into the high you instantly go back down below your reference level you go into a short position at market. Invalidation is above the high – if price goes back above the high longs are no longer trapped (invalidation).
- There should be a lot of selling imbalances when price rejects (high volume)
- SFP are good to trade because invalidation is very close and defined.
45:24 – Q&A
- Daniel changed a lot how he trades nowadays because his time is limited, he only takes best quality trades (high probability trades).
59:00 – ANOTHER EXAMPLE OF IMBALANCES
- it is not about time frame, it is about volume – Daniel likes to look at Volume 5M chart
- Daniel uses imbalances at 618 – he likes higher imbalances