Transcription
I'm about to teach you an extremely powerful model, the DRT model. This was the exact formula that I used to quit my job many years ago, and I'm going to teach it to you for absolutely free right here in this video so that you can do the same.
Now, I don't promise get rich in 90 days like a lot of the other YouTubers out there. This is still going to require work, but I have simplified it as much as possible to create a six-stage process that can take you from a consistently unprofitable trader to hopefully a consistent one.
Now, I've already explained in the previous video, I'll link that up here somewhere about how we can find directional bias using the DRT concept. And for this specific model, stage one is going to rely on identifying a higher time frame type two dealing range. So let's explore this a little bit more.
So of course there are two types of type two dealing range. We have a bearish type two dealing range and we have a bullish type two dealing range. As you can see with a bearish dealing range we are traveling lower. And the main characteristic in this type two dealing range is that we have equal highs or relative equal highs above the market. And on a bullish type two dealing range, we are trending higher. Below the market, we have equal or relative equal lows.
Now, since the algorithm is programmed to repric to areas of liquidity, the books teach us to place our stops above double tops or double bottoms. Now, why this is so powerful is because we can safely assume that at some point when this market has finished going lower, it is more than likely to turn around and repric higher to target those stops and vice versa on the bullish dealing range where below the market, we're going to have sellside liquidity in the form of retail stops below the double bottom. We anticipate the market to reprice lower to target those stops at some point in the future.
So this gives us a framework. It gives us a longer-term directional bias and we can use this to get in sync on the lower time frames which I will explain to you in a second.
Stage two of the DRT model focuses on two things in particular. It focuses on a raid on liquidity and or a rebalance of an inefficiency. Now, those of you who have been with me for a while know that ideally we like to see both of these conditions in close proximity to one another. So, let's get a little bit more detail on stage two.
Now, I'm going to use a bearish example in this case. We can see that we are in a clear type two bearish dealing range where we have equal highs that reside above the market. Now we are doing nothing until we see the market raid an old dealing range low. Now this can be in the form of major or minor sellside liquidity. But my personal preference is waiting for a major sellside liquidity pool. And of course to understand that you have to understand the dealing range. And you can find a whole lot more about that in the previous lessons of this series.
Now what does that look like on the charts? So in this example we can clearly see that we have equal highs resting above the market. We have a dealing range low here and we have the dealing range high over here. We can see how price has raided that sellside liquidity below the dealing range low. Now when we see this and we observe equal highs above the market, this gives us a green light for stage two. We can therefore move on to stage three.
But first, as a little bonus here, let's imagine this chart is on the 4hour time frame. If we zoom out to a higher time frame, daily chart, this is what it looks like. Now, notice on this time frame, price has closed below that dealing range low. On the higher time frame, that same low, notice how we have failed to close below it. The bodies over here are showing that they have an unwillingness to go lower. And since the bulk of the volume is contained in the bodies, this is what we refer to as a stop run. I've wrote that totally bent, but the point is this is something that we really want to see in price action. It's one of the key indicators that we can use to assess whether the market wants to continue going lower or it's a stop run and we anticipate a market reversal. When we have equal highs or relative equal highs above the market and we see this condition unfold, it's extremely powerful in predicting a market reversal.
Now, when we combine this with stage three, it's even more powerful. And I'll get on to that in a second. But first, the second condition we want to look for in stage two is a rebalance of a fair value gap in the form of a buy side imbalance that sits below the market. Again, this is what it looks like in price action where we have equal highs or relative equal highs above the market. Price has traveled lower and rebalanced an inefficiency. Now, this is also true for a type one dealing range where we can have a mixture of a type one and a type two dealing range. And again, I've explained that in a lot more detail in the previous videos. But whilst we're here, another thing I like to look for is how the bodies are reacting when we enter a fair value gap. Ideally, I want to see a portion of it left open or at the very least, I want to see the bodies remain above the equilibrium or consequent encroachment of a fair value gap. Now, this is a part of my fair value gap leveling system, which again you can find for free right here on this YouTube channel. I'll link that somewhere up there.
Now, once these two conditions have been met, we can move on to stage three, which is our SMT. Now, this relies heavily on intermarket analysis with a correlated pair on obviously the market that we're trading. Now, there are a few different types of SMT, but in this video, I'm going to explain to you two of them that I really, really like to use in this model.
The first one we have here is known as a DRS SMT or a dealing range SMT. Now, remember, major liquidity pools are going to rest below or above a dealing range. If we take this here as an example and this is on the Euro dollar, we can see that we have a dealing range high here and we have a dealing range low here. And on this side of the chart, we have GBP USD, right? So these are both obviously correlated pairs. And again, we have the dealing range high and the dealing range low.
Now note what happens here on the euro. This high we fail to sweep above it. But on the pound dollar we can clearly see that the equivalent high that was created at the equivalent time which is very important. We can see how we've traded above that high. So what is this telling us? It's telling us that the euro is weaker than the British pound. is not having the legs to get higher above its dealing range high to raid that buyside liquidity pool. Whereas the British pound clearly is able to get above it dealing range high. Now in this area, smart money are going to be piling in with short positions using all of that buy side liquidity above the dealing range high and the algorithm will move price lower back to an area of sellside liquidity below the market.
Now again note what happens here. Euro leaves equal highs here in the form of a type two dealing range. It travels lower and drops below the major sellside liquidity pool in the form of the dealing range low. And you can see the accumulation that takes place below the lows. Again, smart money piling in with long positions, pairing that sellside retail liquidity to offset that back to the buy stops above the relative equal highs and our type 2 dealing range. Note what happens here on the British pound. The same equivalent low, we are failing to trade below it. Whereas the euro is managing to get below its old dealing range low. When we combine this with stop runs on a higher time frame, this works as an extremely powerful confirmation of a market reversal.
Now, the second type of SMT that I like to look for is something that I refer to as the fair value gap SMT. Now, again, here we have the euro on the left and the pound on the right. Now, remember those equal highs? I'm just taking that snippet of price action here and this was the accumulation below those dealing range lows. Now you can see how the market really ran higher here. It displaced higher leaving this fair value gap. Note how we wicked inside of the fair value gap. But where are the bodies remaining? They're remaining above the fair value gap. Right now, the same fair value gap that was printed here on the British pound is over here. You can clearly see how in this fair value gap that we've completely rebalanced and we're also seeing the body close inside of that buy side imbalance. Right? This is something known as fair value gap SMT. Something that I've been teaching to my students now for a number of years. You also want to note where that sits inside of the dealing range. We're at that equilibrium mark and the consequent move afterwards is to repric above buy side liquidity. Again, this gives us that extra confirmation that we are on the right side of the market.
With stage four, I like to see price close through the 25 DRT level. And again, we're going to use that bearish type 2 dealing range as an example. So, we anticipate higher prices. So, let's see what again that looks like here on the chart. Now I have tried to simplify this as much as possible. In the lower quadrant between the dealing range low and the 25 DRT level, we are likely to find our high probability bullish order block. And when we've raided a pool of sellside liquidity below a dealing range low or we are rejecting from an inefficiency, I want to see displacement in the market. So here we can clearly see that this candle is closing above that 25 DRT level. I call this a DRT change in state of delivery. Each of these DRT levels you can think of as a ceiling. Once we break through that ceiling, price is tipping its hand that it wants to continue higher.
And that leads us onto stage five, our entry model. Now again trying to keep this as simple as I possibly can. If we are looking at purely one time frame, each dealing range will offer us two really good entries. Our first entry will take place at the 25 DRT level. Once we close above that DRT, when price drops back into that 25 level, we can place a limit order or a market execution and place our stop below that dealing range low. If you want to be conservative here, you can target the first high or inefficiency above that 50 DRT level. If you want to be a little bit more aggressive or you have a little bit more experience and you have conviction that the market is going to repric above his dealing range high, then you can put your takerit above the dealing range high. This would be your first entry. Your second entry would come after seeing price displace through that 50 DRT level. Again, this is a strong indication that the market wants to continue higher. You can place a limit order at that 50 DRT level as a pyramid entry and your stop would be placed anywhere below that 25 DRT level. You want to target the dealing range high as your takerit and this is the simplest method of trading ICT concepts and algorithmic price action.
Now, of course, a lot of my students are a little bit more vel wellvered with ICT concepts, and you know that I tend to teach a little bit more of an advanced level compared to many of the other YouTubers out here. So, I designed this for students who have been inside of my boot camp. At stage five, we can cap it there. For for stage six, we can use a type one dealing range as a refinement where if we are using only this time frame alone, we can see that after the turning point over here, we had this sellside imbalance and we repric straight through that with a close and a close above that 25 DRT level. And this is where understanding PD rays, especially the timing element here, which helps a lot. And if you have been through my boot camp, then this should be making a whole lot more sense to you. We can take an entry over here and refine that stop loss slightly. Again, the more accurate you are with this, the more room you will have to yield a higher risk-to-reward trade. Again, it's not fully needed. It's a bit more advanced, but in trading, every little helps, right? And again, that 50 DRT level, you can see how that overlaps with the imbalance. We also have this swing low, this swing high and this swing low. So we have these two consecutive up close candles acting as a breaker as well as this sellside imbalance which would act as an inversion fair value gap and again sits at equilibrium which is something that we refer to as our measuring gap. Having sellside delivery on the left side of the curve and buyside delivery on the right side of the curve, this offers us a balanced price range. And again, note where the body is closing. It's failing to drop below consequent encroachment of that balance price range. And again, that's further supported by the fact that we have an inversion fair value gap to the left.
Now, we can take this a step further. I should have put that phone on the silent. I apologize. I don't know if you can hear that. So, obviously, this chart here is for the British pound on a weekly time frame. If we drop down to a daily time frame, you can see this in a little bit more detail. Again, we have that 50 DRT level and the 25 DRT level over here. Now, on this time frame, it gives us a little bit more detail where we can see that we have a breaking structure above this near-term swing high. And again, we see how price displaces through that 25 DRT level. If we drop down to the 4our time frame. Now what we can do is we can take the dealing range low and the first high that closes above that 25 DRT level here can form our new dealing range. Now since we anticipate a reversal, we've seen a break in structure on the daily time frame and we've seen price close above that 25 DRT level. We can grade that range as a type one dealing range. Remember, a type one dealing range is a continuation dealing range inside of a higher time frame type two dealing range. So, we anticipate price to drop lower. And here you can see it drops into a fair value gap that rests at that 50 DRT level. So, essentially, we're trading back into a discount market relative to our type 1 dealing range.
Now, of course, I have to give you an example of this. Now, I've given many examples obviously of dealing range theory and how accurate it is and the feedback has been absolutely incredible with all the messages I've received. So, just want to take a minute to thank you guys for that. But I promise you, if you keep back testing this model, you're going to find so many gems in this for yourself. Anyway, here we have the Euro dollar on a daily time frame. Straight away, you should be able to spot these equal highs. So you can see that here we are in a type two dealing range where we anticipate the market to run higher. We can grade this type two dealing range from our dealing range high to our dealing range low. Now you see that we have traded through that 25 DRT level. But notice that the market never comes back down below equilibrium into a discount until we get over here. So, we've had this really large period of consolidation where we have our type three dealing range. Now, I'm going to do a separate video on how we can trade type three dealing ranges, but for now, if the market doesn't drop into a discount, what do we do? Well, we wait on this time frame. Unfortunately, we're going to be waiting for quite some time. But one thing I want you to remember here is that if you replace that daily time frame with a 1 hour time frame or a 15minut time frame, price is fractal. It's the exact same process from a higher time frame down to the lower time frame regardless of what style of trader that you are.
Now for my boot camp students who know the timing elements in relation to the type of trading style that you are going to use for this type of model, we can further use dealing range theory as a framework. Now, I want to zoom in on this piece of price action here and continue to stay on this daily time frame as I dim these levels slightly so that you can see this in a little bit more detail. So, here we have that piece of price action. The red dotted line here, I'm not sure if you can even see that, but that is that 50 DRT level on the higher time frame. And we can see that price failed to get above it, dropped back lower and into the inefficiency again. We can see the bodies over here having a real unwillingness to drop any lower into that fair value gap. Now here we have this low, we have this low to the left, and we have this low to the right. So we have formed an intermediate term swing and a smiley face apparently. But this intermediate swing gives us a lot more feedback. It means that the market is likely to have turned a corner after rebalancing this inefficiency. We then obviously see it travel higher and make this swing high. So we can take this information and we can plot our dealing range levels or our DRT levels. It's really worth noting how that 25 DRT level overlaps perfectly with the 50 DRT level on the higher time frame. The more studies you do on this, the more it's going to open your eyes to see how DRT is absolutely the algorithmic structure of the market.
Now, after stage one, when we have identified our higher time frame type two dealing range, we can use this current dealing range as a type one dealing range and therefore we anticipate price to drop back below the 50 DRT level into a discount market. Now for stage two, we want to see a raid on liquidity and or a rebalance of an inefficiency. And we can clearly see that the market drops lower below equilibrium and into our buy side imbalance that also nests at that equilibrium level. Again, this is something that we call our measuring gap.
Now, interestingly, if we pull up the dollar index, which is our correlated asset to the Euro dollar, and again, this is inversely correlated. So, as euro travels higher, we anticipate the dollar index to drop lower. Again, if we grade our entire dealing range here from our dealing range high to our dealing range low, notice that price runs higher inside of a type one dealing range in a bearish higher time frame market profile and it fully rebalances our fair value gap. But notice this small detail here. The bodies here fail to close outside of that fair value gap. Whereas on the Euro dollar, we see it close outside of that fair value gap. So we class this as a fair value gap SMT divergence in an already underlying bullish market. Now I just want to add here we never ever ever trade just off SMT alone. It should only ever be used in context and as an extra confirmation to a bias that you have already underlined from your analysis in stage one and in stage two.
Anyway, moving on. Let's drop down to a 4hour time frame here on the Euro dollar. So again, you can get a little bit more detail here. I'm just going to dim out those higher time frame levels. So we obviously had that blue shaded area was our daily fair value gap that nested at that equilibrium price point. Now already you should be able to see what type of dealing range we have here on the 4hour time frame. That's right. We have a type two dealing range where we have equal highs or relative equal highs above the market. And this comes off the back of a turning point where we have seen price drop into a discount on a type one dealing range on a higher time frame and seen a stage three fair value gap SMT divergence. Now watch what happens when we grade this dealing range. Note our stage 4 close through our 25 DRT level. Also note this area. We close above the higher time frame 50 DRT level and the consequent encroachment of that daily fair value gap. At the same time, we're seeing the British pound fail to make a lower low. Whereas here on the Euro dollar, we can see a clear lower low being formed. Note the bodies of the candles here respecting that 25 DRT level and dropping into our buy side imbalance. Again, where does it nest? Inside of that 25 DRT level. Price then turns around and we see it repric back through that 50 DRT level. We then drop back lower and note all that price action here in the in the form of the candles bodies. They're failing to close below the consequent encroachment of that buy side imbalance that again nests at that 50 DRT level.
Now, I explained all of this with entries and everything in the previous video. Again, I'll link that up somewhere. But for the purposes of this video, I want to keep it as simple as possible. Now, at the same time as price was dropping into that 50 DRT level, it's worth noting what was happening with the British pound. I'll leave that for your own homework.
Now, in this case, placing an entry at the 25 DRT level and you stop below the dealing range low and then taking a second position at the 50 DRT level with your stop below the low at 25 DRT. Once price gets above the 75 DRT level on a closing basis, it's fine if you move your stop accordingly to that 50 DRT level. This is obviously if you want to stay conservative. There are many ways to skin a cut using this model and whatever your preference is, but make sure you respect your risk parameters. Remember the main thing about trading here is capital preservation.
As a quick side note here, notice after we run the dealing range high, price drops lower back below the 50 DRT level and digs deeper into that buy side imbalance over here and sweeps the liquidity below this low that's nested inside of that 50 DRT level. Again, notice the bodies over here failing to close below it. And if you take the dealing range low to the newly formed, let me get rid of all of that. The dealing range low to the newly formed dealing range high, we drop back into a type one dealing range. Also worth noting the equal highs that we now have above the market. We haven't quite reached that far at the time of this recording, but that would be the most likely draw on liquidity.
Now, of course, for those of you who have a little bit more understanding, we can refine this whole dealing range down to a lower time frame where here on that 4hour, we have the dealing range low and that first push through our 25 DRT level, we can grade that entire dealing range and again, we have another type one dealing range where we drop back below equilibrium. Now, you can use this 4hour time frame as the higher time frame. Remember, we traveled all the way from the weekly, the daily, and the 4 hour. You can get even more dialed in and refine this from taking scalping models into full-on swing trading models based on DRT. It really is a universal model. You can apply anything to this. Whether you understand how to use the market maker model, which is basically what we have here with buy and sell programs, the power of three, optimal trade entry, everything literally fits inside of the DRT framework. And it encapsulates all of ICT's concepts into an actual working model. And this is something that we've really missed in the ICT space. If you just use this alone, you can do what I did and make real life-changing money. It can genuinely help you to quit your job, but you have to learn how to control your emotions and really respect your risk management. You have everything that you need in this one video.
If you like to go deeper and you want to understand the algorithmic key levels and the different PD arrays, all the different timing elements and projections of how we can predict the highs and lows of when and where they're likely to form, then it's worth checking out my boot camp. And you can find more details on a web page in the link below. But if not, that's absolutely fine because this is my gift to the trading community. after almost eight long years of study, being able to interpret the market in this way, I already know is going to be life-changing for many people out there. So again, thank you for all of your support. This video concludes the DRT series after this. I am going to do a whole lot more foundational stuff. So I do apologize to those of you who are really new to algorithmic price action and ICT concepts. Please let me know in the comment sections what you would like me to teach next. Like this video, subscribe, and that will really help the channel out, and I'll continue dropping a ton of free gems and value right here on this channel. Again, thank you for watching, and I'll see you in the next video. Okay, I think that will do.