About this video

• Video Title: Trading Course Day 2: Indication
• Channel: Trades By Sci
• Speakers: Sci
• Duration: 00:14:38

Overview

This video explains the concept of "indication" in trading, which is when price breaks above a high or below a low, signaling a potential new trend or direction. The speaker, Sci, emphasizes that indications occur after periods of ranging or consolidation and are crucial for identifying entry points and understanding market momentum.

Key takeaways

• Definition of Indication: An indication occurs when price breaks a significant high or low level, signaling a potential shift in direction or the start of a trend.
• Indication vs. Consolidation: Trading typically avoids periods of consolidation (ranging markets) and waits for indications to identify tradeable trends.
• Identifying Indications: Indications are best observed by looking for breaks of "swing highs" and "swing lows" on higher time frames like the 1-hour and 4-hour charts.
• Indication as a Starting Point: Indications are the initial moves that signal the beginning of an uptrend or downtrend, providing a blueprint for potential entries and exits.
• Confirmation is Key: While indications signal potential moves, it's important to wait for confirmation, such as avoiding fakeouts and understanding market structure, before entering a trade.

A "swing" in trading, as explained in the video, refers to a significant upward or downward movement in price. A swing high is the highest point reached before the price rejects and moves in the opposite direction, while a swing low is the lowest point reached before a price reversal. These swings are crucial for identifying potential trend changes and are the levels that indications often break.

In this context, volume refers to the amount of trading activity that occurs when price is in session. The speaker mentions that indications are confirmed by price having momentum, being on a higher time frame, and overall trading with volume when price is in session. This suggests that high volume accompanying a price break of a swing level reinforces the validity of the indication.

"Price in session" refers to the period when trading activity is actively occurring for a particular asset or within a specific market session (like the London or New York trading sessions). The speaker mentions that indications are seen when "price is in session with that volume," implying that the break of a key level needs to be accompanied by active trading and sufficient volume to be considered a strong signal.

A "break of a key level" in trading, as described in the video, occurs when the price of an asset moves decisively past a significant price point. These key levels are typically the swing highs and swing lows that the speaker emphasizes. When price breaks above a swing high or below a swing low, it signals a potential shift in market momentum and the start of a new trend. This break is what the speaker defines as an "indication."

Not quite. The swing itself isn't momentum multiplied by volume.

Here's a breakdown:

• Swings (Swing Highs and Swing Lows): These are the high and low points of price movements. They represent levels where price has previously reversed.
• Momentum and Volume: These are factors that contribute to or confirm a swing, or more importantly, an indication (which is the break of a swing).

So, to clarify:

• A swing is a price level (a peak or a trough).
• Momentum and volume are indicators that can suggest the strength behind a price move, including a move that breaks a swing level.

The indication is the break of the swing level, and that break is considered stronger if it's accompanied by good momentum and volume.

In this trading context, momentum refers to the speed and strength of price movement. When the speaker mentions "price having that momentum," they mean that the price is moving quickly and with force in a particular direction. This is a key component that, along with volume and the breaking of swing levels, helps to confirm an "indication" of a potential new trend.

The video doesn't explicitly detail how to quantitatively determine speed and strength, but it implies it's observed through the visual action on the price chart.

Here's how it's generally interpreted in trading and how it relates to the video's context:

• Speed: This is seen in how quickly price moves from one point to another. A fast move might cover a significant price range in a short amount of time (e.g., a few candles on a chart).
• Strength: This is indicated by:
  • The size of the price candles: Larger candles suggest stronger moves.
  • Lack of significant pullbacks or reversals during the move: If price keeps pushing in one direction without much resistance, it shows strength.
  • Volume: As mentioned, high volume accompanying a move often signifies strength and conviction from traders.

So, while the video doesn't provide a specific formula, you can infer that "momentum" is observed by looking at the pace and conviction of the price action on the chart, often supported by volume.

"Higher time frame" refers to charts that display price action over longer periods. For example, a 1-hour chart is a higher time frame than a 15-minute chart, and a daily chart is a higher time frame than an hourly chart.

In this video, the speaker, Sci, suggests looking at indications on the 1-hour and 4-hour time frames (and sometimes daily) because these longer time frames tend to show clearer and more significant price movements (swings and indications) compared to very short-term charts. This helps traders identify reliable trends.

The transcript mentions "price action" in the context of how indications are observed. It's about what the price is doing on the chart.

Specifically, "price action" refers to:

• The movement of the price: Whether it's going up, down, or sideways.
• The patterns formed by the price: Such as breaking above swing highs or below swing lows.
• The speed and strength of these movements (momentum).
• The accompanying volume.

Essentially, "price action" is the visual story the chart tells about buyer and seller behavior, and the speaker uses this story, particularly when price breaks key levels (swings), to identify "indications."

Here are the trading terms mentioned in the video transcript:

• Indication
• Price
• High
• Low
• Level
• Trend
• Direction
• Ranging
• Consolidation
• Swings
• Swing highs
• Swing lows
• Lower lows
• Lower highs
• Higher lows
• Higher highs
• Momentum
• Time frame (4 hour, 1 hour, daily, 30 minute)
• Volume
• Session
• Uptrend
• Downtrend
• Correction
• Continuation
• Entry
• Exit
• Market structure
• Liquidity
• Support
• Breakout
• Fakeouts
• Stop-loss
• Stop levels
• Take profit

In the context of trading, a "level" refers to a specific price point on a chart. These can be significant price points that have historically acted as areas of support or resistance, or they can be levels that traders identify as important for other reasons, such as psychological round numbers or previous swing highs/lows.

When the speaker talks about price breaking "above a high or a low level" or "breaking these swing levels," they are referring to these specific price points that hold significance in the market's history or structure.

Ranging, in the context of this trading video, describes a market condition where the price of an asset moves sideways within a defined horizontal channel or boundary. Instead of trending upwards or downwards, the price fluctuates between a support level (low) and a resistance level (high). The speaker notes that they typically do not trade during these ranging periods, preferring to wait for a clear "indication" that suggests a trend is beginning.

In trading, "continuation" refers to a period where a price trend, after a brief pause or correction, resumes its original direction.

In the context of this video, after an "indication" signals the start of a trend, price might experience a "correction" (a brief move against the trend). If the trend then resumes its original path, that is a continuation. The speaker mentions that they will cover continuations in future videos, suggesting it's a key concept following the initial indication and correction.

An "entry" in trading refers to the point at which a trader decides to open a position in the market. This could be buying an asset (going long) or selling it (going short).

In this video, the speaker explains that indications provide crucial information for determining where your entry point should be. Once an indication occurs and is confirmed through market structure, it helps traders identify the optimal price level to enter a trade to capitalize on the expected trend.

"Open the position" means to initiate a trade in the financial markets. It's the act of buying an asset (to open a long position) or selling an asset (to open a short position) with the expectation that its price will move in a favorable direction.

So, when a trader decides on an "entry" point, they are deciding to "open a position" at that specific price.

In trading, an "exit" refers to the point at which a trader closes their open position. This is done to either:

1. Realize profits: If the trade has moved favorably, the trader exits to lock in their gains.
2. Cut losses: If the trade has moved against the trader, they exit to limit further financial losses.

The video mentions that indications not only help determine the entry point but also where the "exit" is likely to be. This implies that understanding the indication helps traders anticipate where the trend might slow down, reverse, or reach a target.

In trading, a correction is a temporary move in the opposite direction of the prevailing trend.

After an "indication" signals a new trend, or during an established trend, the price might pause and move against the main direction for a short period. This is a correction. The video suggests that after an indication, there will often be a correction before the trend continues. Understanding corrections is important for traders to avoid getting shaken out of a position or to identify potential new entry points once the correction ends and the trend resumes.

In trading, market structure refers to the overall pattern and arrangement of price movements, specifically focusing on how price is making higher highs, higher lows, lower highs, and lower lows.

The video explains that understanding market structure is key to confirming trends and avoiding fakeouts. When price breaks a swing high, for example, and continues to make new higher highs, it reinforces an uptrending market structure. Conversely, if price breaks a swing low and continues to make lower lows, it indicates a downtrending market structure. It's the underlying framework that defines whether the market is trending up, down, or is in a consolidation phase.

In trading, liquidity refers to the ease with which an asset can be bought or sold in the market without significantly affecting its price. High liquidity means there are many buyers and sellers readily available, allowing trades to be executed quickly at stable prices.

The video mentions liquidity in a few key contexts:

1. Liquidity Grab: After price makes a new high or low (breaking structure), it often moves to "grab liquidity." This means it might briefly move in the opposite direction to trigger stop-loss orders or force traders out of their positions, before continuing in the intended trend. This is often done to "shake people out" of the market.
2. Avoiding Liquidity Issues: The speaker advises caution with breakouts because price can sometimes "liquidate you," meaning it can move against your position due to these liquidity grabs, causing losses.
3. Volume and Liquidity: The speaker links volume to liquidity, suggesting that when price is in session with volume, it indicates where liquidity is coming from.

Essentially, liquidity is about the availability of buyers and sellers, and price movements can sometimes be influenced by the market's effort to gather this liquidity, often leading to temporary counter-trend moves.

In trading, support is a price level where demand is strong enough to overcome selling pressure, causing the price to bounce upwards. It's essentially a "floor" where buyers tend to step in, preventing the price from falling further.

The video touches upon support in the context of market structure. It explains that when price makes new swing highs, it simultaneously creates new supports. The speaker notes that after a price breaks through a previous support level, it can sometimes act as resistance if the trend reverses. They also show an example on the chart where a subtle support level held, allowing price to continue its upward movement and make a new high.

A breakout in trading occurs when the price of an asset moves decisively beyond a defined price level or pattern. In the context of this video:

• Key Breakouts: The most important breakouts discussed are those that break above swing highs or below swing lows. These are considered "indications" that a new trend might be starting.
• Caution with Breakouts: The video strongly advises caution with trading breakouts. It explains that price can sometimes "liquidate you" through fakeouts, meaning the price breaks a level only to quickly reverse, trapping traders who entered based on the breakout.
• Market Structure vs. Breakout Trading: The speaker emphasizes trading based on market structure rather than just blindly trading every breakout, as this helps to avoid being caught in fakeouts and to capitalize on longer-term trends.

Here are the definitions for the terms you asked about:

• Fakeouts: In trading, a fakeout is when the price of an asset moves beyond a significant level (like a support, resistance, or trendline) temporarily, convincing traders that a breakout is occurring. However, the price then quickly reverses and moves back into the previous range, trapping the traders who entered positions based on the false breakout signal. The video warns against trading solely on breakouts because of the risk of fakeouts.

• Stop-loss: A stop-loss order is an order placed with a broker to buy or sell a security when it reaches a certain price. Its primary purpose is to limit an investor's potential loss on a position. If a trade moves against the trader, the stop-loss order is automatically triggered, closing the position at a predetermined price to prevent further losses.

• Stop levels: "Stop levels" is a broader term that refers to the specific price points at which stop-loss orders are set. These levels are determined by the trader based on their risk tolerance, the market structure, and where they believe a trade would become invalid. For example, a trader might set a stop level just below a swing low for a long position, so if the price drops below that level, their stop-loss order is triggered. The speaker mentions that stop-loss levels and where to set them will be covered in future videos, after the concept of corrections is discussed.