Daily Candle Closure Trading Framework for Reversals and Continuations

How's it going everyone? In this video, we are going to talk about a simple daily framework. This is going to use

candle closures as well as wick size. But if you haven't already seen my equilibrium video, my candle 2 and

candle 3 closure video, I would watch those first. This is based off the fact that I'm either going to be looking for

a reversal or for a continuation. If I'm looking for a reversal, I'm always going to frame that reversal off of previous

day's high or previous day's low. So, here you can see we have had a bullish day. We close near the high. I'd be

looking for the next day to open, trade into previous day high, have a reversal formed, and then I can look to trade it

back into the range, looking for that EQ or to the previous day's low. Now, if I'm going to be looking for a

continuation, I'll look for price to open, trade lower first, respect the EQ of that previous day's range, and then

trade up and through that previous day's high. Let's take a look at what an example of a reversal would look like.

Here you can see we want to see price open, trade higher first into the previous day's high, which is our

important level, and then have a shallow wick to form a reversal and trade lower. Now, if you don't know why we want a

shallow wick, a shallow wick supports expansion lower. So, we can trade this lower in the reversal day. If we have a

large wick, then we're going to want to wait for candle three or the following candle to trade the continuation. If you

haven't already seen my video on wick size, please check that out. But essentially, over this previous day

high, we're going to want to see a lower time frame change in the state of delivery to confirm the wick of this

daily candle and then trade it back lower. I'm generally going to be looking for this on the hourly or 30-inut

charts. If it's in Asia or London or in New York, I will use the 5 minute or 15 minute time frame. Now, when looking for

a continuation, I want to see price open up, respect the EQ of the previous day's range, and then trade higher. So, we

have an open low and then forming the body before we have a high and close. And similar to a reversal, I will be

using a change in the state of delivery intraday to confirm the wick of that higher time frame candle. So, as we zoom

in here, you can see we have a change in the state of delivery, which confirms this higher time frame wick. And then we

can trade the body of the higher time frame candle. So, let's get into trading view and go over a few examples of this.

So, here we are in our first example. We are on YM on the daily chart. Now, let's first give a little context here. You

can see we are trending higher and we are creating new protected swings. So, you can see we reach into a fair value

gap. We close over the down close candle into that fair value gap. Now, this low is protected. If we are going to trade

higher, we then reach into this fair value gap here. And what does this previous candle do? It closes over the

down closed candles into that fair value gap. Now this low is protected. So this is an ideal candle to closure. Now

looking at this, if we are expecting a continuation, what do we need to mark out? Well, with all of these days, we're

just going to mark out the EQ as well as our previous day high and previous day low. In this case, since we are bullish,

previous day high. Now, if we are bullish, we're looking for a continuation. We want to see price open,

trade lower first, respect the EQ, and then trade higher through previous day high. Now, my favorite time frame to

watch this on is the hourly. So, let's drop down to the hourly chart. So, here you can see we have marked out our

previous day's EQ as well as our previous day's high. So, what do we want to see out of this day? Well, we'd want

to see price open, trade lower into this fair value gap, respecting the EQ. And when I say respecting the EQ, it's not

ideal to have closures on the hourly chart below that. So if I'm using the daily, the time frame pairing with that,

I don't want to see a closure below that EQ level. Not that it can't reverse and expand, it's just less probable. So as

we let this play out, let's see how it works out. So you can see we respect that EQ and then we start to trade

higher. So where would we want to see this trade to? Well, because it has a larger wick back to the daily open, but

our previous day's high or beyond that. And there you can see we have our open low and then we have our high, right?

And we trade into these previous highs on the left here. So, this is a good example of a continuation. And what you

want to see, you want to see price open, make a low or this lower wick, and then trade higher through its previous day's

high. Now, how far beyond this previous day's high we go is really dependent on the wick size of this reversal. With a

large wick, I'm not expecting much of a range beyond this level. But with a small wick, we can get an expansion.

Let's take a look at another continuation. So, here we are on USD CAD. And what do we have? We have a

candle to closure, a nice bearish close. So, if we're looking for a continuation, what do we want to mark out? We want to

mark out the EQ as well as the previous day's low. Now when I say respect EQ, price can form its high below that

level. It doesn't need to go up and touch it. So what I will look for is points of interest below that EQ. So

marking that out, we have a fair value gap here and a fair value gap here. Instead of trying to guess which one

will have a reaction, I'm going to wait for a swing to form in that area or a new protected swing. So let's see what

happens. You can see we don't respect this fair value gap. So I can simply remove it. Now right here, let's see. Do

we have a candle 2 closure? No. Do we have a candle 2 closure? No. But we have a candle three closure, which is

ideal as we form a new protected swing here. So now I can anticipate that this higher time frame wick has formed,

right? Because this is what I look for at the reversal. Either on the lower time frame, the hourly or the lower time

frame using a candle closure. I can look for price to trade into this previous day low or even lower. And you can see

there we get a move through that previous day low as a first target and that expansion lower. If we want to take

a look at this with my indicator marking it out, you can see we also have that SMT with dollar at the reversal, that

change in the state of delivery. And then we have the T-spot marked up, which in this case is just the equilibrium in

which case we will search for that point of interest and look for it to trade lower. Now let's take a look at a

reversal. Here you can see we have the EQ marked up and our previous day low is right here. So if we're going to be

looking for a continuation, what would we want to see? Price open, trade higher first, respecting this fair value gap

and the EQ to then trade lower into previous day low and beyond. But what occurs?

We open and we trade lower first. That is open low, which is bullish. When price opens and makes a low first, that

is bullish. When price opens and makes a high first that is bearish. So what are we looking for with a reversal? Well, we

want to see price open reach into that previous day's low which is that important level. Then we need what?

Either a change in the state of delivery on the hourly time frame if earlier in the day or if into New York a change in

the state of delivery on the 15minut or 5minut time frame. But let's see what happens

here. So you can see we have an SMT at the previous day low with a change in the state of delivery. But now we have

everything set up with a small wick to see a reversal trade back into the range. Where could we look for this to

trade to? Back towards the EQ or this fair value gap here. So let's see how this plays out.

And there you can see we go well beyond the EQ. And we have a nice move off of that previous day's low which forms a

reversal. Now let's look at this once again. If I'm looking for a continuation, what am I looking for?

Price to open, respect the EQ of the previous day, and then look for above previous day high. Let's see. Do we open

and trade lower first? Yes, we have went into this fair value gap here and closed over. So, let's see if we get a move

into previous day high. We do get a move into previous day high and then we have it forming somewhat of a reversal or a

retracement here. Let's see what happens. And you can see a little bit of a messy

price action here, but we do trade higher. The one thing I do want to talk about, yes, this is a protected swing,

right? But this swing is only protected until it hits liquidity. Once it hits liquidity, this is a pattern I see often

of taking out liquidity, then it will sweep out a protected swing, and then it will have its true move. So, this is

just an example of a reversal, right? So just to review, sweeping out our previous day's low as a lower time frame

change in this state of delivery and then can look back towards that EQ on a bullish day or on this bullish

continuation. I want to see price open, make a low and then trade higher into previous day low or beyond. Now in this

next example, we are on GBPUSD. And I want to clarify the importance of having a higher time frame bias. I'm not

just going to pattern trade this. I want to actually align it with a bias. So here you can see we have an ideal candle

three closure and a new protected swing which is bullish. So ideally I want to frame to the upside here. Let's drop

down to the hourly time frame. So here we are on the hourly time frame and we have our previous day high right here.

And what do we want to see? Well, ideally we want to see price open, trade lower, respect the EQ and then trade

higher. So let's see what happens. You can see price trades into this previous day high first and has a change

in the state of delivery. Now, is this bearish? Yes, this is bearish, but this can be still part of a retracement, not

a full-on reversal. Since I am still bullish, I still want to anticipate this to be a retracement to then trade it

higher. But I'm going to need to wait for what? That lower wick to form and use a change in the state of delivery.

So, let's see what happens. We do get this move lower which is possible to trade. Right? This would be trading the

reversal back in towards the EQ of the range or back into the points of interest around the EQ.

And then what do we want to see right here? You can see we have a little consolidation. We sweep out, respect

this fair value up, sweep out one more time. And then what do we have? We have a change in the state of delivery with

an ideal candle 2 closure. This is where I could take an entry on the open of candle 3 to trade it higher or I could

do what? This is an hourly candle 2 closure. I could look to the 5m minute to trade a 5-minut continuation in

candle 3. But you can see how if you do have a bias, you do want to come in and keep that bias and let the time frames

align with that bias. You can see yes we do get a retracement here off the reversal on previous day high but that

is just a retracement to continue higher within this daily range. Now this is a fractal concept. So we just went over

this on the daily and hourly time frames but you can see here we've had this expansion throughout the day and then

right at 11 what are we having? We're having a reversal form. So if I wanted to trade a reversal on a lower time

frame how would I do that? Well, it's the same, but instead of previous day high, it's going to be a previous

candle's high. So, here you could see if I'm on the hourly chart, I'll be using the 10 a.m. high to frame a reversal.

Now, I want to have a small wick and then I can trade it lower. So, let's drop down to the lower time frames and

check this out. So, here we are on the 5minut time frame, and we have marked out our previous candle's high. Now,

ideally, we want this candle's high to form early into the candle and have a small wick. But what confirms that? Are

we just going to use a closure like this? No, we want to wait for what? The change in the state of delivery. So

let's see what happens here. You can see we get this closure below which forms a change in the state of

delivery which then protects this high and we can see a move lower. So let's see what happens.

You can see it is quite messy as we are counter trend but we do have the SMT at this high as euro and dollar took out

this high while GBP did not. And then we go run out these targets lows. The main thing I wanted to point out is this is a

fractal concept. So generally, although I normally use this on the daily time frame with the hourly and trading that

intraday, you can use it on the lower time frames such as the hourly and the 5minut. However, I don't prefer to go

below the 4hour time frame as it just becomes a bit more difficult. If I'm going to be trading these reversals or

these candle twos, you can check out my previous video on trading candle 2. then I'm going to generally focus on trading

a reversal candle on the daily or 4hour time frame. Once you get a bit lower than the 4hour time frame, it just gets

a bit messy and more difficult. Let's do one final example here and we will show the fractal nature as we are going to do

this on the 4hour time frame. And then with the 4hour, what do we pair it with? The 15-minut time frame. So here you can

see we've had three bearish candles. We do have a sweep here and then a closure forming a change in the state of

delivery. Following these two expansion candles, we have yet to hit this range low. So, we still have an open target.

Here we have a consolidation. So, if we want to trade away from a consolidation, what do we want to see? We want to see

the previous high ran out to then trade it lower. We could anticipate price to sweep out this high and then trade it

lower. If it has a small wick, then we can look to trade the reversal candle. If it has a large wick, then we're not

going to want to trade the reversal candle. We'll wait for the following candle. Let's get on to the 15-minute

time frame to check this out. So, here you can see the consolidation a little bit better. And how can you see this?

Well, we cannot form a continuation here. We can't get the closure to form a protected swing. So, then we make a new

high. And here you can see we also can't go form a new continuation. So, this is just continuing consolidation. So, I

want to see another high ran out. So, putting on the indicator, let's see what happens.

So here you can see we run into this high. Now am I going to trust this yet? No. I need to wait for a closure through

or a change in the state of delivery which then confirms that this wick has been created.

You can see we struggle to close but then right away we close after. So if I'm going to be trading a reversal then

I could look to trade this position here. Put my stop on this high and then look for that range low that we were

talking about. Let's see how this works out. And there you can see this does work out

as we have a nice reversal off the previous candle's high paired with a change in the state of delivery and SMT.

If I'm going to be trading a candle too, I do prefer to have SMT paired with it. Now, let's talk about one more thing

here. If we are looking for a continuation lower here, what do we want to see? We want to see price open, trade

higher first, and then into this low. If we are going to form a reversal off of this previous 4hour low, how is that

going to work out? Well, we're going to open trade lower first into this low and then we'll form a change in the state of

delivery and continue back into the range. So, let's see what happens here. You can see we are getting a

continuation and this has a large wick. So, this is not a candle that I would be interested in trading back into the

range because if it was going to form a reversal, I would rather trade the following candle. So, here we are in our

last example and let's take a look at our previous day. So, we're on the hourly chart. This is the daily chart.

You can see in the previous day, we have wretch up into our previous day's high. We have a nice V-shaped reversal with a

change in the state of delivery alongside an SMT. And then we displace lower throughout the day with a nice

bearish closure. So with a bearish candle 2 closure, we'd be looking for a continuation in candle 3 out of where a

T-spot or the EQ. I want to see price open, trade higher first to then trade lower. Now, if I'm looking for a point

of interest in this T-spot, what am I looking for? A fair value gap or a high to be taken out. Here we have a fair

value gap. So let's see. Do we get a reaction out of this area? Nope. We kind of consolidate, but we do

take out this high here and then we have a change in the state of delivery. Now, since this is during Asia session or

early onto the day, this is when I prefer not to go down to the lower time frames and I like to execute on the

higher time frames. So, here's where I could take an entry short and I could put my stop at the high here and then

look for 2 R or in this case it's 1.83. If I want to adjust it to 2 R, could use the body there as I don't want to see it

traded back up into that. And let's see what happens. And there you can see we hit our 2R. So this is just a good

example of when seeking a continuation. I want to see price open, reach into a point of interest, have a formation that

confirms the wick of this higher time frame candle, and I can look to trade that continuation. In a reversal, I want

to see price open, trade higher into that previous day's high or that previous candle's high, have a change in

the state of delivery, which confirms that wick high, and I can look to trade the reversal if it has a small enough

wick. Now, I hope you enjoyed this video. If you have any questions, leave them in the comment section below. And

with that, I hope you have a great rest of your day, and I'll see you guys next time.