Delivery I - Visual example of the 3-question rulebook
As we mentioned before in the concept of liquidity.
Theory
The three main questions we ask are;
- Where did price come from?
- Where is the price right now?
- Where is the price likely going to?
Let's run that up and be a bit more precise. Add some juice to that.
Where did the price come from?
Did the price just run liquidity? Or did it reject an order block?
Where is the price right now?
Is the price in the middle of nowhere? Or is it running near a strong level, or pushing froma strong level.
Where will price likely go to?
Where are the nearest liquidity pools, levels to target, displacements, equilibrium points etc...
Where did the price come from? - GBPUSD
Price ran a bearish expansion running sell side liquidity. Thus, creating a new dealing range, leaving behind a displacement as well, so we can conclude that momentum is bearish.
Where is price right now?
Look at the wicks, price is in the discounted area of the new dealing range. But no extremes just yet. Price is nearing a strong level and the equilibrium point. Remember, equilibrium = uncertainty.
Where is price likely going to?
Price was reaching closer to that displacement that was left behind. Most probable scenario would have been shorts in this case, as the draw on liquidity towards the dealing range low became sell side liquidity as that protected low did not take out previous structure.
Daily....
Understand that the narration, the story telling you will soon be able to understand, helps implement the greater picture. Because the trade that was in that small, marked square, looked like this.
These where 4H and 1H, which gave away all the details ;)
When you revisit these notes you'll understand the annotations a lot more, and all the technicals behind them.
But the importance here is also understanding that you don't need the biggest moves if your narration and foundation is correct. That's why we start rephrasing this 3-question rulebook so much, engrave it in the back of your mind.