About this video

• Video Title: Trading LIVE with the #1 Scalper in the WORLD (EXTREME Accuracy)
• Channel: Chart Fanatics
• Speakers: (Not explicitly mentioned in the transcript)
• Duration: 03:34:10

Overview

This video features a live trading session and strategy breakdown by a top-ranked scalper, Fabio Valentina, who shares his approach to trading. The discussion centers on his unique model, emphasizing market structure, order flow, and volume analysis to identify high-probability trading opportunities, particularly during the New York session. He explains his methodology through step-by-step analysis and live chart examples, highlighting the importance of understanding market conditions and participant behavior.

Key takeaways

• Scalping Strategy: The video details a trading model used by a top-ranked scalper, focusing on identifying market inefficiencies and utilizing order flow and volume analysis.
• Market Structure and Auction Theory: The core of the strategy involves understanding market structure, how markets act as auctions, and identifying periods of balance and imbalance to anticipate price movements.
• Order Flow and Volume Analysis: The speaker emphasizes using tools like volume profile, cumulative volume delta (CVD), and order flow data to gain an edge over traditional price action analysis.
• Two Trading Models: The video presents two primary models: a trend-following model for volatile sessions like New York, and a mean-reversion model for more consolidated periods, often seen in London sessions or during summer months.
• Importance of Timing and Session Analysis: Specific trading sessions, particularly the New York session for trend-following, are highlighted as being more conducive to the discussed strategies due to increased volatility and liquidity.
• Risk Management and Psychology: The speaker stresses the critical role of risk management, position sizing, and maintaining psychological discipline, especially when dealing with high-frequency scalping.
• Adaptability and Continuous Learning: A key message is the need for traders to remain open-minded and adapt their strategies based on market conditions and new information, rather than rigidly adhering to a single approach.

Auction Market Theory (AMT) describes how markets function as an auction, where price discovery occurs through the interaction of buyers and sellers. It suggests that markets move from periods of balance, where trading is efficient and prices are accepted, to periods of imbalance, where prices move significantly to find new areas of acceptance. The theory posits that markets are always seeking balance, moving from imbalance to balance, and then back to imbalance.

Imagine you're playing a game where you want to guess what other kids are going to do before they do it, but in a super smart way! Fabio's scalping process is like this:

1. Figure out the Big Picture (Market State): First, he looks at the whole game board. Is it a super busy time where everyone's running around like crazy, or is it a calm time where things are just staying in one spot? This helps him know if he should expect big jumps or small changes.

2. Find the Best Spot (Location): Next, he looks for specific spots on the game board where something interesting is happening. Maybe it's a spot where lots of kids have traded before, or a spot that looks a bit "empty" for trading. These are like special places where he thinks something might happen.

3. Look for the "Go!" Signal (Execution/Trigger): Once he's at a good spot, he waits for a very clear sign that something is really happening. It's like waiting for a teacher to say "Go!" before you run. This signal is usually when lots of buyers or sellers suddenly start pushing hard in one direction. He looks for these "big pushes" to know when to jump in.

4. Jump In and Be Smart (Trade Management): If he sees the "Go!" signal, he jumps into the game! But he's super careful. He puts a small "safety net" in case he's wrong, like a rule that says, "If I lose this much, I stop playing this round." He also knows where he wants to get out if he wins, like a finish line.

5. Be Patient and Follow the Rules: The most important part is not guessing what might happen, but watching what is happening. He waits for his special spots and his clear "Go!" signals. If the game board looks messy or confusing, he just waits. He doesn't force himself to play when the signs aren't right.

So, it's like being a detective, looking for clues (market state, location, "Go!" signal), and then making smart moves with a safety net, all while being super patient!

Let's break down those terms in a simple way:

FVG (Fair Value Gap):

Imagine you're at a market, and you see a vendor selling apples.

• Sometimes, apples sell really, really fast because everyone wants them. When this happens, the price might jump up quickly from one price to another without many apples being sold in between.
• This "jump" in price, where there's a gap because things moved too fast, is like a Fair Value Gap. It's an area on the price chart where the market moved very quickly in one direction, leaving behind an "imbalance" or a space.
• Traders look at these gaps because sometimes the market likes to come back and "fill" them later, like the vendor coming back to sell more apples at those prices. It's a clue about where the price might go.

Order Flow:

Think about a busy store where you can see all the customers coming in and out, and what they are buying or selling.

• Order flow is like looking at exactly what's happening with all the buying and selling right now, not just the final price.
• Instead of just seeing the price go up or down on a chart, order flow shows you:
  • How many people are trying to buy at a certain price.
  • How many people are trying to sell at a certain price.
  • Which side (buyers or sellers) is pushing harder.
  • If big players (like big stores) are making big buys or sells.
• It's like seeing the "behind-the-scenes" action of the market, which helps traders understand who's in control and what might happen next. It's a more detailed look than just the final price on a regular chart.

CVD stands for Cumulative Volume Delta.

Think of it like a running scorekeeper for the battle between buyers and sellers.

Here's how it works in a simple way:

1. The Scorekeeper: Imagine you have a scorekeeper watching every single trade that happens.
2. Buyers Score: Every time a buyer makes a trade happen (meaning they bought at the seller's price), the scorekeeper adds a point for the buyers.
3. Sellers Score: Every time a seller makes a trade happen (meaning they sold at the buyer's price), the scorekeeper adds a point for the sellers.
4. The Running Total: CVD is the total score. It adds up all the points for buyers and subtracts all the points for sellers (or vice versa, depending on how it's set up, but the idea is to track the difference).
5. What it Shows:
   • If the CVD line is going up, it means buyers have been more aggressive than sellers.
   • If the CVD line is going down, it means sellers have been more aggressive than buyers.

Why is it useful?

It helps traders see the underlying pressure between buyers and sellers, even if the price itself isn't moving much yet. It can give clues about:

• Strength of a move: If the price is going up and the CVD is also going up, it suggests the upward move is strong, supported by buyer aggression.
• Potential reversals: If the price is going up but the CVD starts going down (meaning sellers are getting more aggressive even though the price is higher), it might signal that the upward move is weakening and could reverse.

It's another tool to help traders understand the real "push and pull" happening in the market, beyond just looking at the price candles.

Fabio uses order flow and CVD together as a way to see the real "strength" and "intention" behind price movements, not just the price itself. It's like getting a secret decoder ring for the market!

Here's how they work together in his process:

1. Order Flow Shows the Big Picture of Activity:

   • Order flow tools show him the "bubbles" or the "footprint" of trades. These bubbles tell him how many contracts were traded at specific prices and who was pushing the trade (buyers or sellers).
   • He looks at this to see where the most activity is happening and if it's mostly buyers or sellers causing those big moves.

2. CVD Shows the Aggression Behind the Activity:

   • While order flow shows the volume (how much), CVD shows the aggression (who's winning the battle).
   • If the price is moving up, but the CVD is going down, it's a warning sign. It means that even though the price is rising, sellers are actually being more aggressive behind the scenes. This might suggest the upward move isn't as strong as it looks on the price chart.

3. Putting Them Together for Pricing Trends:

   • Confirming Strength: If the price is going up, and he sees lots of buyer activity (big green bubbles on order flow) and the CVD is also going up, that confirms the upward trend is strong. Buyers are both active and aggressive.
   • Spotting Weakness: If the price is going up, but he sees buyer activity, yet the CVD is going down, it's a sign of weakness. Buyers might be active, but sellers are more aggressive, pushing back. This could mean the upward trend might not last.
   • Identifying Traps: He looks for situations where price might be moving in a certain direction, but the order flow and CVD don't agree. For example, if price is dropping, but he sees lots of buyer activity and the CVD is starting to tick up, it might mean sellers are being trapped, and a reversal could be coming.
   • Understanding "Why": Instead of just seeing a price move, he uses order flow and CVD to understand why it's moving. Is it genuine buyer demand, or is it sellers being forced to close their losing positions (a squeeze)?

In essence, order flow gives him the "what" (volume and who's trading), and CVD gives him the "how much aggression" behind that volume. By combining them, he gets a clearer picture of the underlying forces driving price, helping him anticipate trends and potential reversals more accurately than just looking at price alone.

Let's break down those terms:

Low Volume Node (LVN)

What it is: Imagine a busy highway. Most of the time, cars are driving at a certain speed (volume is high in that area). But sometimes, there are spots where hardly anyone drives – maybe because there's construction or a weird exit. These "empty" spots on the highway are like Low Volume Nodes in trading.

In trading, a Low Volume Node (LVN) is a price level or range where very little trading volume occurred. This happens when the market moved through that price range very quickly, often during a sharp move up or down.

How Fabio uses it:

• Areas of Interest: LVNs are like "attraction points" for the market. Because not much trading happened there, the market might want to go back and "revisit" these levels later.
• Potential Support/Resistance: When price returns to an LVN, it can act as a support (if price goes down to it and bounces up) or resistance (if price goes up to it and bounces down). It's an area where price might react.
• Entry Points: Fabio looks for LVNs as potential spots to enter trades, especially when combined with other signals like aggression from buyers or sellers. For example, if price is going up and pulls back to an LVN, and he sees aggressive buyers there, it could be a good place to buy.

Mean Reversion

What it is: Think about a bouncy ball. If you drop it, it bounces up and down, but it usually settles back down near where it started. Mean Reversion is a trading idea that suggests prices tend to move back towards their average or "mean" over time. After a big move up or down (like the ball bouncing high or low), the price is likely to pull back towards its usual range.

How Fabio uses it:

• Consolidation Periods: Fabio uses mean reversion strategies mainly during times when the market isn't trending strongly, but is instead moving sideways in a range (like the bouncy ball settling down). These are often called "consolidation" periods.
• Trading Against Momentum (Carefully): While his primary trend-following model goes with the strong moves, his mean reversion approach looks for opportunities when the price has moved too far, too fast away from its average. He might look to trade against that extreme move, expecting it to reverse back towards the middle.
• London Session Example: He mentions that during the London session, especially in indices, mean reversion behavior is more common. He might use this strategy when the market is less clear on direction and tends to bounce around.
• Finding Entries: For mean reversion, he looks for price to go to an extreme (either very high or very low) within a range, then waits for confirmation that the price is starting to revert back towards the middle. This confirmation often comes from seeing order flow or CVD signals that suggest the extreme move is losing steam or reversing.

In short, LVNs are specific price areas that the market often revisits, and Mean Reversion is the idea that prices tend to return to their average after extreme moves, which Fabio uses during less clear market conditions.

In trading, a "squeeze" refers to a situation where sellers who have bet on prices going down are forced to buy back the asset to close their losing positions.

Here's a simpler breakdown:

1. Betting on Lower Prices: Imagine some people think a stock or a currency will go down in price. They "sell" it, hoping to buy it back later at a lower price and make a profit. They are shorting the asset.

2. Price Goes Up Instead: What if, instead of going down, the price starts going up? The people who sold it (the sellers) are now losing money.

3. The Squeeze: To stop losing more money, these sellers are forced to buy the asset back, no matter the price. They are being "squeezed" by the rising price.

4. The Effect: When all these forced buyers jump into the market at once to cover their shorts, their buying pressure can cause the price to shoot up even faster. It's like a domino effect – the rising price forces sellers to buy, which makes the price rise even more.

How Fabio uses the concept:

• Identifying Trapped Traders: Fabio looks for signs in the order flow and CVD that suggest a lot of sellers might be trapped in losing short positions.
• Catalyst for Big Moves: He knows that when these trapped sellers are forced to buy, it can create a powerful upward "squeeze" that accelerates price movement.
• Entry Opportunity: He might look for an entry point where he anticipates a squeeze to happen, or a point where sellers are likely to be forced to cover, leading to a rapid price increase. He often looks for this after identifying a "low volume node" or a key price level that might trigger this reaction.