<aside> <img src="/icons/reorder_gray.svg" alt="/icons/reorder_gray.svg" width="40px" /> Risk On/Off / Position trader model / 2 Ingredients of High probability / FVG gem
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Even though we have our expectations of dollar going higher, this doesn’t mean every single candle is going to be bullish. Its not a necessarily to have a bias. It just means that while you're learning, it's advantageous for you as a student to want to go in with the expectation of determining a directional bias and only looking for setups in that direction.
Even if you're wrong on an intraday basis. If you're looking for a session from 7:00am-9:00am for trading Forex or you're trading indices before the AM session begins. If the weekly chart is indicating that it's likely to **move higher**, and you're only filtering out setups that are likely to create **bullish scenarios**, that means the market trades down to a BISI or it trades down below a STL, and it creates an SMT Divergence with a closely correlated market.
That high comes in at *105.883*. So if you think that the market is likely to keep drawing up to that level and higher, it's reasonable to anticipate weakness or sell setups in the euro dollar, pound dollar, Australian dollar, kiwi dollar, and all other foreign currencies that are paired with the dollar as a secondary in its name. Anything that has the dollar first in its pair name would be going higher.
Position trader model
Exercise: Look outside of the standard Timeframes. Try 6m-12m-14m, 35sec 😀
With the premise that we believe the dollar is going to move higher and you trade intraday into LTF, let's say you're focusing on the time between 7:00am-9:00am If you're bullish because the weekly chart suggests that the dollar is going to go higher, it means you're going to be bearish on the EURUSD, GBPUSD, and bearish on every other currency that has the USD as the second part of its name.
Bullish USD = Risk OFF
Bearish USD = Risk ON
In this scenario, when the dollar is expected to move higher, other assets are likely to have a very, very difficult time moving higher. They may do so on a very short-term basis, but eventually, they will likely move lower. When the dollar strengthens, everything else tends to weaken. Conversely, when the dollar weakens, it allows for risk-on sentiment, which in turn allows commercials and large entities in various industries to buy up substantial portions of commodities. This gives us the freedom and confidence to trust that rallies in equities and foreign currencies are reliable.
Sometimes, there might be a news driver coming out in the Asian markets like the Japanese Yen, Kiwi, and Australian Dollar, yes their markets come online. However, the financial day technically begins at New York midnight, not in Wellington or London. London is considered a carryover from the previous New York session, and algorithms refer to it as such. This distinction is crucial for understanding day-to-day transactions.
EURUSD & GBPUSD are closely correlated instruments. These pairs, or currencies, are closely correlated, which means they usually, though not always, move in tandem. They tend to move in the same direction, usually, but not all the time. This correlation is advantageous and typically opposite to what you see happening in the Dollar Index. This is a fundamental concept in Market Theory 101. If you filter out the idea that you believe the dollar is higher or bullish and you're anticipating sell signals, you would be looking for sell signals in the EURUSD. You can also examine the relationships between short-term highs in the Euro and Pound. When one of them fails to make a higher high while the other does, that's considered an SMT Divergence.
What we’re looking at ES and NQ. we comparatively studying the relationships of their individual candlesticks, relative highs, and relative lows. How is it behaving? Is it moving in tandem, or is there a decoupling? Decoupling is when the market simply is not moving in a symmetrical manner, where all assets are dropping as they should or moving up as they should. But there is an advantage in knowing and watching closely correlated markets or instruments because it'll give you a tell-tale sign, like tipping its hand to you, saying, **'Hey, pay attention to this because this is a false move.'** And how do you know it's a false move? Because one of them is not moving to that higher high on a lower time frame.
If it's not diametrically opposed, it doesn't mean you can't take any trades. It simply means that you're probably best suited for scalping intraday trades.
<aside> <img src="/icons/megaphone_gray.svg" alt="/icons/megaphone_gray.svg" width="40px" /> "If you're an index trader and you think that obviously we are in a risk-off scenario, that means dollars higher. We have to anticipate the likelihood that rallies in indices are suspect. That means that they're not technically sound. 💎They're going up there for a reason. What are they going up there for? To reprice to an inefficiency or it's going up there to run buy stops. They're the only two reasons why markets go up. To engage new sentiment, drag them in by their hair, or disrupt the present sentiment in the marketplace. It's all based on liquidity, 💎either creating the liquidity or removing it and unseating those individuals that are in the market. Then, taking their position over so that the market can then reprice for them, not you.
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If you can't see reasons for it to go against your weekly bias (whether you want to see lower prices or if you're bullish and want to see it go higher), you don't want to see anything that would be argumentative or reasons for you to doubt the setup. Because most of the time, as a brand new trader or someone undisciplined, you don't have the ability to sit still and demand that the market creates and presents those opportunities where it's so one-sided that you cannot not see it doing what you expected it to do.