TTrades Fractal Model - Trading Candle 3

How's it going everyone? In this video I'm going to cover how to trade candle 3.

With this video completed you will now have a video on how to trade candle 2, 3, and 4 for each candle within my fractal model.

Let's get into the video. Now the main thing you want to understand is wick size with candles.

We want to be trading expansion candles which have small wicks that support expansion.

You can see we make a small wick or an open low and then we have a one-sided directional move which is an expansion.

And over here if we have a reversal candle that has a large wick so that doesn't support expansion.

You can see we open we have a large opposing run then we move back towards our opening price and close.

So our whole thing is we want to trade following reversal candles when we are trading candle 3.

So here you can see if we had a small wick that is when we could look to trade candle 2 when supported by a change in the state of delivery on the lower time frame but with a large wick like this I'm going to want to let this candle close.

You can see once this candle closes back inside of

the range of its previous we have a large wick which doesn't support expansion during this given time frame so we would want to wait for the open of the next candle or candle 3 to get on side with this expansion lower.

So what does this look like on the lower time frames? You can see we have that large wick which doesn't support expansion.

And what do I mean by that? Price isn't trending in one direction. It opens and closes in relatively the same point.

So the first thing I'm going to look for is from this high do I have a change in the state of delivery? I do.

But now this confirms the reversal or that candle 2 has reversed. So then I can look for a continuation in candle 3.

So how am I going to do that? Well, you can look for any sort of entry model in here,

but ideally I'm going to want to let the wick form and then trade the body lower. So what does that look like?

I personally wait for continuation order blocks.

You can see price opens, sweeps out a high or into a point of interest, has an opposing candle formation,

confirming that this wick has been created on the higher time frame, and then I can anticipate price to continue lower from that point.

So just to review, if I have a small wick in candle 2, that is when I can look to trade candle 2 as it supports expansion lower.

When I have a large wick or a large opposing run from candle 2's opening price, that is when I'm going to want to let that candle close and then look to trade candle 3.

And that is because we've already used a lot of range in candle 2.

If you've noticed, in candle 2 here and in candle 3, price moves relatively the same distance.

It's just in candle 3, it's spending half of that time going up and half of it going down,

versus in candle 3 it is a one-sided move so that is what we are focusing on capturing in candle 3

is that continuation following a candle 2 reversal we're

not really going to want to focus on trading candle 3

when we have a candle 2 expansion because that is

when we can get caught in a new phase of price but let's hop

into a few examples in trading view so

here we are with our first example and it is on euro usd

on the daily chart now if you take a look we have expansion

down taking out lows and then we have expansion

met with an expansion which is a reversal then

we have price for tracing into a fair value gap

and you notice that this daily candle is a reversal candle price has not yet expanded within this current day versus if you look down here we also have a candle to closure

the price expands and you can see how that can set up a consolidation

as price goes from expansion into consolidation

so with the expansion into consolidation

and then viewing this as a reversal i'm looking for price to expand higher in the next day let's drop down to the one hour time frame

so here we are on the one hour time frame and you can see

we are now looking to trade candle three or the third day in a swing on the daily time frame and so what i'm going to want to look for now is that continuation.

You can see we do have price reaching into a fair value gap here.

Let's see if we can get a continuation from this point of interest to trade it higher.

As we let this play out you can see we failed to close over that level which means that we want to see a new low made to form a new protected swing.

So marking out the new low now where is our series of down close candles right there.

Let's see if we can get a close over that. And there we get the close over,

so then I could take a long setup on the open of this new candle, my stop on the protected low, and look for 2R or for those projections above.

So let's see what happens. Here you can see we got a retest of that level, a new swing point, and then we traded to that high.

So just to review, why is this a good candidate to trade candle 3? Well, look at candle 2. We have a nice reversal candle.