Transcription
Getting your bias wrong is the most expensive mistake in trading. I don't mean expensive in a dramatic way. I mean it literally. Every trade you take in the wrong direction. Every zone you take that gets absolutely blown through. Every stopout that felt random, most of them came down to one thing, having the wrong bias.
In this video, I'm going to show you the exact three-step process I use to ensure my bias is correct before I place a trade. Step one, reading the trend. Step two, seeing which highs and lows are being swept and what that tells me. Step three, which PDAs are price respecting and disrespecting? Three steps, the same order every time. At the end of this video, you're going to have an exact process you can run on any chart to get your bias in under two minutes.
Before I get into this process, I want to show you something quickly cuz it explains why bias is more important than any model, indicator, etc. See, we have a supply zone here, and this is technically valid. Cause a good move, cause a fair value gap, and what happens? Price runs through it. Okay, here we have another nice area of supply. Price runs through it again. This area has given me a good move to the downside. We've broken some lows. Surely this is going to work. Boom. Obliterated again. That they were bad supply zones. It's simply you had the wrong bias. You were looking for sells when the bias was bullish and price wanted to go up.
Now, on this exact same chart, imagine if I took a buy from this demand zone or I took a buy from this demand zone or I took a buy from this demand zone. All three worked. All three were the same criteria as a supply zone, but they're in a direction of where price wants to go. There's always two things price can be doing. We're simply expanding, for example, in an uptrend, or we're simply pulling back, for example, in an uptrend. So, even though structure is bullish, if I'm looking for longs when price is pulling back, I'm going to get cooked. If I'm looking for shorts, when price is expanding, I'm going to get cooked. So, you need to know structure. And then which phase are we in expansion or pullbacks?
So, the first thing is we simply do is zoom out a bit. Okay? It just works the same on any time frame and just look at your highs and look at your lows. Which ones are being respected? Which ones are being disrespected? Here I can see we have a high, we break it. So a high is broken. We have a low. We have a new high. We broke this high. Candle closed here. And what do we do? We're breaking highs. And what we're doing respecting lows. We are the new high. and we are respecting these lows. So it's pretty obvious to see okay a kid could see that okay price is pushing to the highest upside. So we know that this current bias is bullish well this current structure is bullish.
Now when we read structure a key thing is okay, you need to know your range where is your external low to high and you can't get caught up in these internal for example my external here is this low to this high so I always want to find that because obviously when the external low breaks then our structure is shifted to bearish so small zones do not count for example if we look at major highs and lows major highs high, major low, major high, major low. If we started to think that these were all breaks of structure and these were highs, we start looking for shorts after these lows. But these are tiny pullbacks. They do not count. Only big swing points count. Okay, small ones are obviously fake structure and they trick a lot of people out.
Now, why is this not a shift in structure here? Well, two things. A this low did not close above this high. So this is not a protected low. Your low has to close above the external major high. It did not do this. So this low has no relevance. And this is still the protected low we are working with because this low actually broke this major high here. So what can we do? You can see we actually pulled back respected that low. We wait till we close above. Boom. We now closed above this high here. And we are trading between this major low. So as we push again, this now is not major structure. It's not big enough. Do not put your protected external low here. It is still here. Okay. So this is simply liquidity. Even this here, this too small to count as real structure. So my external is still between here and here. Let's play price out. Boom. Now I'm not counting these as real shifts in structure because like I said these are just small swing points and the main area is this low to this high.
So the first thing I do is determine my trend which I decided is in an uptrend and I determine my external range which I decided is between here and here. Now the next step we need to decide is are we currently in that expansion phase pushing higher or are we currently in that pullback phase and how can we determine that that's when we can start looking at sweeps. Okay, are we sweeping lows and reacting higher? Are we sweeping highs and reacting lower? Okay, because liquidity right everyone loves to talk about it's simply lows and highs. When we are in a uptrend like this, right, you'll notice that price will sweep lows and react. Sweep lows and react. If we are in a downtrend, okay, or if we are still in this uptrend, after sweeping these highs, we don't react. Can you see? We sweep these highs, we continued higher. We swept this high, we continued higher. We swept this high, continued higher. If price was bearish sentiment after sweeping these highs, we would react lower. Okay? So, if we're in a downtrend, we'd sweep this high and then react.
So, let's see what current price is doing. So, you can see when price was pushing higher, we did what? We swept this low, continued higher. We did what? Swept this low, continued higher. We did what? Swept this low. Now, let's see what we are doing. So as you can see we were obviously sweeping lows and ripping higher which confirmed our bullish sentiment and we said that we are trading between this low and high. Now what is happening within this range? Once we have this range we can simply focus on this range and do the same thing. Let's look at the highs and lows. So we did say that once we swept this low here we started pushing higher. Then we had this low here we swept. But what did we do after sweeping this? We actually failed to push higher. You can see we failed to make a new high. Interesting. We swept this low. Let's see if it's going to react. And let's see highs. What are we doing with highs? Well, we have this high here. We swept that. We move lower. So, this is the first instance. As you can see, instead of sweeping a low and pushing higher, we are sweeping a high and most importantly breaking structure to the downside. So, does that tell you that the current sentiment is bullish or bearish? That to me says the current sentiment is bearish. I have higher probability higher bias looking for sells compared to buys.
Now the final step in our external range to determine if we are pushing higher or pushing lower currently is simply and one of my favorites is looking at supply demand fair value gaps all arrays and determining which ones are working. Are the bullish ones working? Are the bearish ones working? That simple. For example, if I draw this bearish fair value gap here, what do I notice? Price ripped through it. So, what does that tell me? Current sentiment is bullish because what are we doing? Disrespecting bearish fair value gaps. And you can see this bullish one we actually respected. So, that tells you we are we know we're in an uptrend and we're respecting bullish arrays. Disrespecting bearish ones in the expansion purely look for buys. As we're pushing higher again, what do we get? a bullish fair value gap. What did price do? Sting into it. And guess what? Pushed higher. So what does that tell you? Are buyers or sellers in control? Boom. Buyers are still in control.
Now let's look at what happens here. When do we get our first shift or sentiment change that price is shifting bearish? Well, we actually had a bullish fair value gap here. What did price tapped into it? Failed to make a new high. And what did we respect? We respected this bearish gap here that price failed to break. So broke bullish for valley gap, respected bearish for gap. What does that tell you? There could be a shift in the sentiment here. Again, highs and lows. Which ones are we respecting? Which ones are we disrespecting? Respected this high, broke this low. Going back to step one, that tells you what sentiment is shifting bearish. Let's look at areas of demand. Area of demand here broke. Area of demand here broke. Okay. This area of supply here I would mark price just came into it and dumped. This very small but valid area of supply here. Price came into it and dumped. So putting those three together now we are starting to say okay there could be a shift in sentiment. Let's see what we do here. We have a bearish gap. price respects it and makes a new low. So that's telling you now, do you feel more comfortable shorting or buying in this range? I feel more comfortable shorting because although we are in an uptrend, price is showing me that we are in the pullback phase based of the sweeps based respecting and disrespecting based on these internal lower highs and lower lows.
So let's analyze this chart and how exactly would I read this if we were on this price action step by step. Step one, that external range we said here to here. Step two, am I looking for a buy in this current moment or am I looking for a sell? Because according to structure, we should respect this low and we should take out this high. So I know we are overall bullish, but what phase of price are we in? And again, this works on any time frame. Well, that goes to step two and step three. Again, we're sweeping lows, failing to push higher, sweeping highs, and guess what? Actually pushing lower, bearish bias, bearish for value gap, respecting, bullish for value gap. What did we do? Break. So, currently I would be bearish and I would look for shorts. Let's see when that would change.
Now, I would be looking for this high here to hold. And my range that I would be trading with is this high to this low. Looking for shorts. What did we do? Interesting. We broke this. So what happened here? Now I can see we pulled back into where? Into an area of demand. Okay. Nice. We started to sweep a swing low here. Boom. We even just swept this low here to the T I would use. So we pulled back, swept this low, right? Broke this internal high and what respected bullish fair value gap. That now shifts my sentiment from bearish to bias. That now tells me that although I could look for shorts in this range here, price has changed. Price has now shifted bullish and we are back in that expansion phase and I should look for what? I should look for longs towards this high here. So if you play price out what is going to be high probability now areas of demand bullish fair value gaps bullish sweep. So as we can see there we pulled back what into this range right we were sweeping lows and we were what pushing higher. These are the kind of buyers I want to get involved in. as I target that external high.
Want to cover one more thing before I wrap up. What do you do when the three steps don't agree with each other? This happens and a lot of traders force things or they just freeze completely. Step one could be bullish structure. Step two could be bearish arrays being respected and step three could be swing lows being swept and price reversing back up. So you have no idea what to do. That's what you call is a ranging market. That what you call there isn't a clear bias and there isn't a clear trend. Do take a trade. I'm not being greedy, being aggressive with my risk management, or most likely, I'm not going to take that trade. Only trading the environment when I have a clear bias. First thing you can do is force a trade. The best thing you can do is look to take a trade when all three things align.
I hope you took from this video that getting your bias isn't hard. You just need a step-by-step process. Of course, knowing the process and executing it when live money is on the line, when the pressure is on the line, it's a different story. Traders I work with one-on-one, we ensure they know exactly how to read the bias before they even look at entering a trade. A lot of them had the exact right setup. Setup was perfect. Sixap was perfect, but it's not in the direction of the correct buyers. That one thing can determine whether the trade wins or loses. If you do want to apply, the link is in the description. I read every single one personally. If you did like this video, appreciate any likes, subscribes, as always. Any questions, drop them in the comment section below. And apart from that, thank you for watching and I'll catch you on the next.