Original subtitles

We're looking at teaching 3.6.

Reinforcing order block theory.

We're dealing specifically with the vacuum block.

Okay.

A bullish vacuum block is a gap that's created in price action.

As a result of a volatility event, the gap forms by a vacuum of liquidity

directly related to an event non-farm payroll can create a vacuum block

or in futures, a session open can.

Okay.

On the left-hand side here, we have a crude depiction of price action, a short

term Lowe's formed, and this can be if we're trading a futures contracts, where

they have a session opens and closes where there's no trading, or if we see a star.

It could be a, um, intraday in the C B S and P 500, or it could

be just any old Forex pair.

And there may be a large volatility injection coming in form of

the economic calendar release.

It could be not for payroll.

It could be a FMC related event.

Um, anything along the lines of interest rates, or it could be a

geopolitical event that was not.

Uh, foreseen, maybe not even on the economic calendar, say a terrorist attack,

something of that, like something of that nature at any rate, we're going

to assume that we see the market gap.

Okay.

When we see that gap, uh, the, the first assumption is on the part of

most traders is, uh, it's things gonna keep going higher right away.

And sometimes it will, but we're going to be looking at the vacuum

block and the scope that we can use it to get in sync with what may

be underlying in the marketplace.

Um, the short-term load it's formed here in our diagram.

If we have traded lower prior to that swing low.

In this case, this outline that I'm giving you here would be

a little bit more probable.

Um, if the market had been rallying for a number of days or weeks, or

it's been in a prolonged uptrend, and then it does this, this could

potentially be at an exhaustion gap.

And exhaustion gap is typically, uh, a graphic depiction of capitulation.

And capitulations basically like the last bit of a momentum in an

underlying trend or direction.

But assuming that we have been in a down correction and upward market, or if we've

been in a down market and we expect the market to give some kind of a bullish

news, or we're expecting the market to reach for liquidity above where we're

currently trading it and the New Zealand.

Releases and we get this gap up.

Uh, what we're essentially saying is this, if we gap up away from a market, that's

in a discount and we had some retracement, but we are expecting higher prices.

Nonetheless, we see this gap like this.

The first thing I want you to start thinking about is when we see that,

that space in between the two camps.

It's important.

Now, while on our charts, there's going to be a vacuum.

If you will, of trading, there's no trades being made between the previous

candles close and the next candles opening to that gap, it could be large.

And sometimes, um, for instance, non-farm payroll, it can get sometimes

30, 50, 60 pips from where it was trading rate before the numbers release.

Now all of a sudden they do a quick repressed.

At the central bank level, because that happens, there's absolutely

no way for any trader to execute.

There's no trade between those two price points.

So what it does, it creates a vacuum of liquidity.

Most times, I'm not going to give you a specific percentage because there's

no real accurate way of depicting that because it says we're going to classify

as a high probability that the market will want to come back and try to close that.

There are some points that I want you to take special notice

of as we go through this.

But for the most part is we're going to anticipate that mood to fill in.

But first we have to identify that gap in a specific manner,

because they're looking at the gap.

We come to the realization again, that there's no trades

being made in this range.

So if there's no trades in that range, what's the market actually done.

Gapped up through it and started trading at a higher price on a new candle when it

opened up and it traded a little bit more.

And now we have to discern whether or not the market is going to continue

and run away from that price level and leave the gap opening, or will it

trade back down and closing that range.

And if it doesn't close in the range, how much can we reasonably

expect for that range to close in and still look for a potential buyer?

Inside that range.

We have a vacuum block and that means we've blocked out

a reference point in time.

And we have to look at it like this because even though there's

new candle stake, our bar on our.

Price did in fact have a parameter before, and

we can look at it as this handle or range.

Okay.

And again, we're, we're interpreting it.

We're visualizing it.

If you will.

There's an, there's an absence of liquidity.

There.

There's an absence of price being traded there, but we're defining it

as the high and the low of the game.

Now, if we looked at it in terms of a candle or a bar, it would be

just the same as anything else.

We would expect to see a mean threshold, an opening, and a close.

So if we see that, okay, we're just going to treat it just like any other candle.

So let's take a look at it now with the gap in mind and assume for a

moment we start seeing price trading.

Our expectations are one of two scenarios.

If we're bullish, we're looking for, is there any bullish order

block or down candle that would cause the gap to not want to fill

entirely as price trades down?

We see that actually occurring here.

We have the down candle right before the move and it's two

consecutive down candles.

The bullet or buck would begin at the higher of the tube down candles prior

to the gap up and this price trade into that candle, we would reasonably

expect a potential bounce there and leave that little gap opening.

It's still intact, but this could potentially be a buy.

Now, if you're looking for this to occur, you'd have to see immediate feedback.

If you're going to be buying there, can you take the risk that's

associated with entering here?

And using a stock below that lowest down candle.

So your range in terms of managing your risk and defining the risk would

be putting those two reference points.

If price was trading lower.

And we get down to that Porter block area and we don't want to buy there and say,

we have a little bit stronger conviction that we'll probably trade back down

into the last up candle before the gap.

The reasons I would expect to see that is if it was time of day sensitive.

In other words, if we had a lot of a left in the day where we can trade.

In other words, if it's just now beginning of New York, Uh, New York would

probably come down and close that gap in.

If it was gapped up late in the afternoon, chances are, it

probably would leave the gap open.

But if it price trades down into this point here and Tom

day permits more trading.

In other words, if it's still early New York session, or it may be even a London.

I think it creates that gap, uh, highly unlikely that it does it in London.

Usually it's a trading event that takes place, but a gap like this usually occurs

in the New York session or late New York with FLMC, but generally at eight 30 news

embargo lifts, there is usually markets that cause a gap like this to occur.

So we're going to assume that it's still early in New York, uh, eight 30

would be relatively decent in terms of allowing more time for the day to unfold.

Forget the bullet shore block level here and anticipate this

small little area still to form.

But if we are later in, for instance, let's say it's the 10 o'clock or 11

o'clock hour, and we could this gap.

We may end up seen this portion of the gap to remain open, and that would

present us a fair value gap for a later.

We would look for price to a later time, come back and close that in,

but leave it open during this specific trading day again, that would begin,

uh, our thought process like that.

If the gap occurs late, New York opening or after 10 o'clock in the morning to

11 o'clock in the morning, the news events that usually release there.

So we have two reference points.

The opening of the gap up candle and the close of the candle

rate before the gap forms.

And again, as price trades, lower, lower, boom, it hits that and we would

see a complete closure of the gap.

That would be a full return on a vacuum block.

No words, everything is completely been closed.

This whole range.

Here is 100% filled.

This is in effect, perfect delivery of price.

Once it's done this, this is completely balanced out now.

And if we were expecting higher prices, if just liquidity that hasn't been sought out

after, uh, prior to that, uh, highest tie that formed on the gap, opening and back

bullish liquidity above the marketplace would now allow price to drive higher.

So this could be a buy.

And now notice buying here and using a stop loss below the lowest low, your risk

is more defined for more leverage, but still having the same potential parameters

for exposure, percentage of your equity.

If price was to trade down and hit that level.

And we start to see a rally up.

We don't want to see price ever come back down below the level that would

have caused it to close the gap.

When we see this, we're looking for the upkeep and it formed at the gap.

We want to see that low me cleanly broke through.

We don't want to see it.

I hesitate here because otherwise that will be a bear shorter block.

Right.

So what we're looking for is we're anticipating.

Oh, this move to drive right on through that last up candle.

And when it got dark, because now price has already been delivered

efficiently, that vacuum of liquidity it's been completely balanced out.

We traded down with the two down candles to close the gap.

Now we've had a bullish move up.

So what has happened?

Price has been delivered on the downside.

To close the gap and now it's trading up.

There's no reason for price to come back down.

It's closed in and filled in that vacuum of liquidity.

There's no reason for it to come back down and trade below the last point of

reference before the gap, which would be the close of the first up candle.

So when that closes in that range, the vacuum block is completely

filled in and now prices permitted to trade bullishly higher.

And once it takes out that high, we would reduce it and expect

to see price and continually up.

So in summary, a vacuum block is nothing more than a breakaway gap.

What I teach with the breakaway gap is because it creates a vacuum of liquidity.

You have to understand not all gaps fill completely.

And why do we anticipate the gap sometimes not filling if there's a bullish order

block in this case, if we're both.

Mainly kept up the price may only come down to a bullish or block that would

be inside that gap in pricing just comes to that level and then stops

trading the lower in any rallies, higher leaving a small gap, which would

be classified as a fair value gap.

And we could use that at a future time when price is now trading

lower, and we would look for price to come down and close that gap in.

But if it stays open, we would label that while we're bullish as a breakaway.

And it would show willingness and strength to get in there and expect higher prices.

So for expecting bullish prices and price closes in that gap, it's

filled in that vacuum of liquidity.

It gaps up.

We close in the gap with price delivery on the downside price trades.

Bullishly up through it.

So now we've had both passes in price and delivery.

We've had it sell down.

And rally up.

So there's been no reason after that point to see price go down

below that first off candles close.

If it does, the chain is probably going to be suspect and you would

want to look to take some profits.

If you've seen a move like this, take something off, but if it starts

to correct and go lower, you want to take the complete trade off

because there's no reason for it to come back down into that area.

Once it's already closed the gap.

So then this is a Bush back in blond.

The reverse would be seen if we had gap lower and we would wait for that

gap to fill in on some up candles.

And then we would go short in the same venue that we would do here.

Looking for long system.