Transcription
Welcome back traders. This is episode three of our free course. Today we are talking about new weekly open gap and new daily open gap levels. These are institutional zones. Price often reverses right at these levels and they work great as support and resistance.
To see if they actually work, I coded a script in TradingView. I tested them and got good statistics for these levels by coding. In this video, I will show you the stats, explain how I use them personally, and also talk about how to combine them with cycles and context. Let's break it down.
You may have heard about these levels from ICT. I'm not a fan of ICT and I don't trade the whole concept, but there is one thing I really wanted to mention from that system, these two specific levels, because they carry a lot of power. The core idea is simple. We mark the difference between the closing price of the previous period and the opening price of the next one.
To mark them correctly, switch to a 1-minute chart and set your time zone to New York. How we mark new weekly open gap? You need to look at Friday's close at exactly 16:59 and Sunday's open at exactly 18:00. The space between these two points is your new weekly open gap. You need to mark this space and extend it for the whole week.
Then let's mark new daily open gap. To identify this gap, we need to look at the previous day's close at 16:59 and the new day's open at 18:00. The space between these two points is your new daily open gap.
So, how do we actually use them during the week? Personally, I use the weekly gap probably the whole week and the daily gap only during the specific day. When it comes to all the levels, every trader has their own approach. Some will love using historical gaps because price often makes a clean reversal from them. ICT said it's best to keep the four or five most recent levels on your chart, but for my own practice, I use only the last two.
I'm not going to give you boring theory about why these levels matter. First of all, I want you to see it for yourself in your own trading. And because I have some coding skills, I decided to use code to check how strong these levels really are. A bit later in this video, we will look at the exact statistics about these levels. But for now, let's move to the most important part. [clears throat] How to actually trade them?
This is the third episode of our true opens course. In the previous videos, I already covered the most powerful levels and the quarterly cycles. It's really important to combine these tools because together they give you a huge edge and a good understanding of the market logic. To trade this, we will use quarterly cycles because they give us good market context. To make it easier for you, I will tell you the exact time when you should look for trades. Very often during these specific hours, the market moves straight to one of the true open levels.
As you remember, every trading session is split into four 90-minute cycles. The first cycle is usually accumulation. The second is manipulation. The third is distribution and the fourth is either continuation or reversal. Our main goal is to trade the distribution cycle. We will focus strictly on the third 90-minute cycle of the session.
If you trade American indices and futures, the New York session is the most important one. This is when the algorithm will deliver price to the key liquidity zones and the main move of the day happens. You can also watch them on the London session. They work also perfectly. London just doesn't usually have such massive and violent moves. Personally, I watch and trade London, too. Depends on my schedule.
So, here is our first rule. We only look for setups inside the first 90-minute cycle. In the London session, the first cycle runs from 4:00 a.m. to 5:30 a.m. And in the New York session, the first cycle runs from 10:00 a.m. to 11:30 a.m. It's all mentioned in the New York time zone. And here is a key tip from my own experience. It's best to open your position either at the macro time inside the cycle or in the middle of it. Don't enter at the very end of the cycle.
So, now you know when to look. The most important thing is context. Before I even think about a trade, I need to understand what the market is doing right now. So, here is how I actually work. I don't start on the 1-minute chart hunting for entries. First, I go to a high time frame to read the story. Personally, I use the 15-minute chart to understand what's happening inside the session.
And what I mean by context? As we know, the market has five phases. First phase, it can be accumulation. Second phase, it can be manipulation. Third phase can be distribution. Fourth phase can be pullback or a rebalance move. And fifth phase can be reversal. And when you are on a high time frame, it can be a 15-minute time frame, it can be a 1-hour time frame, and even higher, you need to ask yourself what the market is doing right now.
For example, let's watch at this situation. On the right side is the 15-minute chart, and on the left side is a 3-minute chart. Before price touched this level, we can see that price built accumulation. Then we can see this manipulation move. As you can see, price swept this liquidity, touched and dog, and then we can see reversal. It looks more like a distribution phase because we are right now currently in a bullish trend, right? So, this phase looks more like a distribution. And as you can see, after price touched this level, we hunted for upper side liquidity. And after this distribution phase, we left some imbalances. And as you see, before price went higher, we balanced that move.
I know it might sound a little complicated, but anyway, you need to train your eye to read what's happening on the high time frame and to read the context. You need time because this is all a skill, and this is all like a trained eye. And this skill will not come just in one night. Just give yourself some time to understand it because this is all just a skill, and like every skill, it only comes with experience and time. So, the real skill here isn't memorizing a setup, it's learning to read the situation.
I wouldn't give you empty theory. So, let me show you the statistics of these levels. I have some coding experience, and I decided to test these levels by coding. I wrote code to measure how often price actually reacts from these gaps, how often they hold, and how often they give a clean move. I want you to see this before anything else, so you understand these levels aren't empty theory.
So, let's watch at the statistics of these levels. As you see, we have a table and in the table there are two columns. The first one is a reversal and the second one is a pullback. For a reversal to be confirmed, we need to see that the price touches the level and then forms a break of structure twice. You can see this break of structure on the chart as a line drawn by the indicator. When the second break of structure forms, the indicator places a check mark either above or below that line. And that means the reversal is confirmed. If the reversal is not confirmed, the indicator shows a cross instead. And that means the price only made a regular pullback.
Let me explain the condition more clearly. When price touches the level, we usually wait for a reversal from it. For that reversal to count, we need to see two breaks of structure. However, sometimes after touching the level, the market only makes a small retracement and then continues moving in the same direction. If price breaks through the level again before the second break of structure has a chance to form, then this is considered just a pullback. In that case, the level simply caused a small temporary reaction, but the trend continued and the indicator marks this with a cross to show that it was only a pullback and not a real reversal.
In the settings, you can choose between two types of invalidation for counting pullbacks. The first one is set by default. For a pullback to be counted with this method, the price needs to fully break through the level completely. But, there is also another function called zone buffer. Many traders like to place their stop loss order slightly above or below the zone boundaries rather than exactly at this level. So, with this function, you can set a percentage offset, which means the invalidation will not happen exactly at the level, but with a small margin above or below it. And there is another method. You can choose the pivot option. In this case, we take the swing point that was formed by the initial break of structure at the signal. For the signal to become invalid with this method, the price needs to break that swing point level.
Now, let me remind you how the signal table works. A signal is considered active when the price touches the level and locks or unlocks and makes an initial market structure shift, which is shown as a solid line. After that, we have reversals or pullbacks. As I already explained, for a reversal to be confirmed, we need to see the initial structure shift and two confirmed breaks of structure. For a pullback to be counted, the price needs to break either the level itself or the swing point, depending on the validation method you choose. Naturally, the type of invalidation you select will affect the statistics.
In the settings, you can also apply certain filters. The first filter is called count filter inside the session, which means signals will only be counted during active trading sessions. If I enable this filter, you can see that the statistics change because the data is now filtered by time. Additionally, you can view statistics by specific time frames. You can see the data by session, by day of the week, or you can split session days by zone. For example, you can check which days of the week have the highest probability of each level working out. You can also see which session performs well and during which session the level reacts better or check the performance by day of the week. You can even enable weekends because sometimes at the weekly open, the price might still touch a level and that would also count as a valid signal.
Okay, let's go to the chart and look at real situations because examples explain it much better than theory. So, instead of more words, let me show you. Let's break down our first example. We start on the 15-minute chart. Right now, we are in the third daily cycle. Look at what happened with price. It first took liquidity to the downside, then came back to the 50% level of the daily previous cycle. I told you in the last video that we split each cycle into four quadrants and the 50% level is very important. So, you can watch my previous video about cycles for a more detailed breakdown.
As you can see, price touched this level and reacted well. We also have two levels sitting together here on the 15-minute chart, end dog and end walk. Now, let's see what's happening. Price broke below the swing and took liquidity. The weekly open gap and the daily open gap are almost in the same place and they didn't let price go lower. That's the first sign that the buyers are in control. This looks like manipulation, a fake move before the real one.
Now, let's go to the 1-minute time frame for a closer look. As I said before, it's better to take trades inside the first 90-minute cycle because it's most volatile and often pushes price towards liquidity or key levels. On the 1-minute chart, we can see price forming a market structure followed by an inverted fair value gap and an imbalance. This could be the first sign of a reversal. So, we could have taken a buy entry from that candle. For the stop loss, we can place it below end dog zone or below the recent swing low. But, since liquidity is already taken, I think it's better to put the stop below the end dog zone. For the take profit, the first target can be at the second cycle's high liquidity and the second target, we can place it at the quarter one high since that can also act as potential liquidity. So, you can close your profits partially or once price reaches the first target, you can just move your stop loss to break even.
Okay, let's break down this example and we will start on the 15-minute chart. As you can see, two things are happening at the same time. A liquidity sweep and a price rebalance. The market fills this imbalance area and taps right into the end walk zone of interest. Now, let's switch to a lower time frame. As I mentioned, we look for entries inside the first cycle. Pay close attention to it. At the start of the cycle, price pushed down and hit the end walk level. As you can see, these levels held beautifully. Right after the tap, we got an inverted fair value gap combined with a volume imbalance. A very good sign of strength from the buyers. 10:30 is a good time to open a position within the third cycle. In my previous video, I usually mentioned that it's best to look for setups inside the macro window. You could definitely open a position during the macro here, too. Let's look at it more closely. I have marked the macro window. Notice how we had a slight pullback, but as soon as the macro window started, price aggressively pumped up to take out liquidity. For your target, the second cycle's liquidity will be perfect. And let me mark a key note. Before the market squeezed upward, it manipulated the downside. Swept the liquidity and bounced at the heart of the end walk zone. So, as you can see, before price went higher, we manipulated first. And only then the market reversed.
Okay, let's dive into the next example. We are starting on the 15-minute chart. Let's look at the cycles first. Right here is our second daily cycle, which acts as a manipulation phase. Let's see what happened. Price swept the liquidity of the previous cycle and formed a daily SMT divergence. After that, price broke through the end walk, did a clean retest, and ran to sweep the opposite side liquidity, expanding all the way to the end walk zone. Let's drop to a lower time frame to see exactly how and where we could have formed an entry.
Now, let's pay attention at the third cycle. You can see that SMT divergences had formed between the first and second cycle. And before the first cycle even starts, this 19-minute SMT divergence is a very good sign of potential reversal. Right inside the third cycle, within the micro window is where you could have opened your position. You can place your stop loss behind the end of zone. For your take profit, you could target the nearest liquidity pool or scale out with partials to the end of level. This kind of trade management comes with experience. The most important thing here is to keep a cool head. Don't try to squeeze every single point out of the move. Instead, listen to the market and understand what it's doing.
Let's recap this setup. Before reversing, the market manipulated the upside, swept the previous cycle's high liquidity, and formed a bearish divergence. It finally reversed during the New York session, giving us a beautiful entry right inside the third cycle. Drawing this skill takes time, not a few days or a few weeks. It usually takes several months of real practice before it starts to click. This is a skill and like any skill, it needs repetition and a trained eye. You have to see hundreds of these situations before your brain starts recognizing them on its own.
So, let me say this very clearly. If you come here looking for a magic tool that gives you constant profits with zero effort, I'm not that person and this is not this channel. But, if you're ready to actually put in the work, if you're willing to spend the time to truly understand what's happening on the chart, then you can stay. Give yourself a few months. Be patient with yourself because once you build this skill, no one can ever take it away from you.
Honestly, these levels have a very strong potential and for a long time I didn't pay enough attention to them. But, please don't think this is a holy grail. It's not. It's just proof that these zones deserve your attention. The real edge comes when you can combine it with context through opens and FVG levels after true open.
So guys, thank you for your attention. Thank you for your time. Have a good trading day. See you in the next video.