BFI Analysis Movement (4/7)
Two Ways Markets Can Move
In this section we will try to get you to understand that the market moves from one zone to the next in very recognizeable patterns. The market moves in certain ways and it is the price that pulls it along, and the price is pushed by the BFI both upwards and downwards, and it moves from zone to zone; some zones getting respected, and some zones getting disrespected AKA Zone Wipeout. Price will move from areas that are under-priced to areas that are over-priced; from one zone to another as the supply and demand of Buy-OFV and Sell-OFV is in a constant balancing-act.
There is a certain pattern to the movements the price makes, as the price travels it is pushed from zone to zone.
First, we need to cover the only two ways the markets can move; it can keep going or it can make a U-turn. Of course, it can go sideways, but that is already assumed and is automatically included, which we will call basing, or pausing. Now, any experienced trader understands that the market does not move all at once in one straight line. We see a downward impulsive move, and then price takes a break, or retraces, before another impulsive move begins.
Two ways markets can move:
1. Continuation: an impulsive move, then a pause, followed by another impulsive move in the same direction.
2. Reversal: an impulsive move, then a pause, followed by another impulsive in the opposite direction.
Pausing
The consolidating that the market does after every major move is a very important thing to understand. A consolidation can last for a one candle, or it can last for years. Price will break out of the consolidation and begin the next impulsive move when it is ready to begin the next impulsive move. Trying to time it is not a smart strategy. For most consolidations, you should already be in and have a position; we will discuss a Consolidation Entry but that is not the best way to enter the market.
After every impulsive move, we must experience a pausing, retracing, or some kind of basing. Some call it ranging, consolidating, sideways price-action, or as I call it “reloading” before the next move happens. We will discuss this consolidation in detail in future sections because we will see that the highest levels of volume are found within these seemingly innocent consolidation periods. Rarely will price ever go straight up or straight down in a straight line without ever stopping. For now, we will call this ‘stop’ a PAUSE.
For a continuation, the only market movement patterns are:
Bullish Continuation:
Upwards impulsive move – PAUSE – Upwards impulsive move
Bearish Continuation:
Downwards impulsive move – PAUSE – Downwards impulsive move
An example of a Bullish Continuation Movement: Up - Pause - Up which usually originates from a Buy-Zone.
An example of a Bearish Continuation Movement: Down - Pause - Down which usually originates from a Sell-Zone.
From a Buy Zone, there is usually a complete bullish continuation move, [up - pause - up], away from the Buy-Zone.
From a Sell-Zone, there is usually a complete bearish continuation move, [down – pause – down], away from the Sell-Zone.
Notice the pause or consolidation can be one candle or multiple candles.
REVERSALS
If the market will reverse, the only market movement patterns are:
Bullish Reversal: Downwards impulsive move – PAUSE – Upwards impulsive move.
Bearish Reversal: Upwards impulsive move - PAUSE - Downwards impulsive move.
Classic example of a Bullish Reversal; notice the 'pause' was only a few candles.
Classic example of a Bearish Reversal; notice the 'pause' was only one candle.
Reversal market patterns may occur as price reaches a potential valid zone and the zone is respected. I understand that there exist many methods and ways to study the way markets move, such as fractals and the Elliot Wave Theory, but after all these years in the markets, the only movements that I have found to be extremely reliable are the 4 movements we have discussed in this section: 2 continuations, and 2 reversals.
Train your eyes to see these movements on a chart. When looking for these movements, notice the “pause” or the “ranging” can last for one candle or it can be multiple candles. With practice and application, you will begin to see these patterns and recognize them subconsciously and with little effort.
VOLUME
There is a misconception in trading about consolidation. In the retail world, a consolidation is known as “choppy” and should be avoided. This only stems from a lack of understanding the term consolidation and exactly what happens within a consolidation. The greatest levels of volume of orders being transacted is almost always within these consolidation periods. Understanding consolidations is another key and integral part to understanding the engineering of the markets. Remember, BFI’s account for over 80% of all orders being transacted on a daily basis. They own this game, they control it, and they run it exactly as they desire. We have no say in this and it is very important that we follow them blindly, and in order to do that, we need to understand what they are so we can take advantage of consolidation instead of avoiding consolidation.
Please note; It is not advisable to trade within a consolidation, especially for inconsistent traders and beginners. The consolidation trade opportunity is discussed in the Manipulation of Consolidation section; but the essence of it is to enter outside of the consolidation , and not to trade within the consolidation.
First, let us discuss VOLUME.
In the following image, we use a volume tool to measure the range of the candle see the amount of OFV transacted within this single candle. A new BFI Trader must understand that this could be a 1-minute candle, or it could be a 1-month candle; what is the difference?
Using a Fixed Range Volume tool across a single candle.
If this was a 1 minute candle, then our tool will measure the volume within that fixed range candle.
If this was a 1-month candle, then our tool will measure all the OFV transacted within that fixed range in this single monthly candle.
Let us show you where to find this Fixed Range tool on TradingView in order to measure the OFV within any fixed range on any timeframe.
Where to find the Fixed Range Volume tool on TradingView.
Understanding what is going on at point A and at point B is critical to understanding precisely “how” these BFI’s operate.
Using a Fixed Range Volume tool across a single candle.
Two key points to be made, at A and at B.
A. Here we have outlined the largest levels of OFV
B. Here we have outlined the POC, known as the Point Of Control; which is the price-level at which the highest level of volume was transacted. We do not use this level as a support or resistance level, nor do we use it for any entry's. It is just a price-level where the most contracts or "lots" were transacted at.
Within these bars is VOLUME, or just OFV (order-flow volume) which are just orders. A large mix of buy-orders & sell-orders, each in different quantities. Sometimes there are more buy-orders, or Buy-OFV, than there are sell-orders, or Sell-OFV. There is stack of Buy-OFV, or a pool of liquidity, scattered around any price-chart. There are some pools of liquidity where the Buy-OFV greatly outweighs the Sell-OFV, and there are pools of liquidity where it is the Sell-OFV that is dominating in large quantities, or volume. The flow of this volume of orders is important to understand, and this is the engine behind the markets.
Price Consolidation
Price consolidation, also known as ranging, basing, pausing, etc., are all terms that refer to the same thing being discussed in this section. Price is ranging in between two price-levels. As we all know, consolidations come in all different shapes and sizes. Some are a single candle, and some are many candles; in the end, it is ends up moving sideways. We do not know how long a consolidation will last, but it is advised to be prepared WHEN the consolidation period comes to an end, and another impulsive move is about to begin. Let us take a closer look at some examples of volume and consolidation in order to understand why the two words are very related and should be synonymous with one another; “consolidation” and “heavy volume”.
Why does every consolidation always have very heavy levels of volume? Because that is the smartest way a BFI can pile up a bunch of orders without moving price too much against them. You must remember that the BFI’s control the game, and they have exquisite way of loading up on a position and exquisite ways of unloading a huge position. This will not work well for them if price is moving in an impulsive movement type of fashion; but in certain cases of consolidation, the price is stuck within a tight range between two price-levels, which is exactly what they need to begin their accumulation of very large positions. When they accumulate a bunch of Sell-OFV, typically at or near a Sell-Zone, price will move downwards when the BFI’s have completed their position accumulation.When they accumulate a bunch of Buy-OFV, typically at or near a Buy-Zone, price will be pushed upwards when the BFI’s have completed the accumulation of all their long positions.
Volume simply helps us understand whether or not there exists a “BFI presence”; if there is a large amount of volume as price is moving in a “choppy” way, then there is strong impulsive move that is about to occur.
The key concept here to understand is that only during periods of consolidation can a BFI accumulate large positions and transact large levels of OFV within a fixed range or boundary without moving price too much.
When a BFI finishes Sell-Stacking , the downwards impulsive move will occur.
When a BFI finishes Buy-Stacking , the upwards impulsive move will occur.
The best time for a BFI to stack orders is within a consolidation area. When price is “stuck” between two price-levels, this is when the BFI are likely very hard at work, transacting huge levels of volume; AKA “orders”.
In the following images, try to notice that the periods of consolidation tend to have the largest levels of volume, whereas the impulsive moves that occur before and after the consolidation, tend to have very little volume; empty peanuts. That is because all the buying or selling that was done at the origin of the move, at the consolidation, or the base, is what CAUSES the impulsive move.
BFI’s rarely transact when price is moving strongly. They are already positioned and because they have already entered the market is the same reason why price is now moving strongly. Do not believe that strong impulsive movements, or large strong candles, have huge volume. That is not true. The huge volume is found in the consolidation or the origin of these impulsive moves, and very little volume can be found within these strong and large candlesticks.
This is a conceptual example on how Buy-Stacking occurs during a period of consolidation. ; typically at/near a Buy-Zone.
When a BFI finishes Buy-Stacking , the upwards impulsive move will occur.
This is a conceptual example of how Sell-Stacking occurs during a period of consolidation; typically at/near a Sell-Zone.
When a BFI finishes Sell-Stacking , the downwards impulsive move will occur.
Most of the volume will be found within a period of consolidation; in this case this was a Sell-Stacking.
The impuisive moves before and after a consolidation tend to have little volume.
Most of the volume will be found within a period of consolidation; in this case this was a Sell-Stacking.
The impulsive moves before and after a consolidation tend to have little volume.
Most of the volume will be found within a period of consolidation; in this case this was a Buy-Stacking.
The impulsive moves before and after a consolidation tend to have little volume.
The above image is a good summary of this section; there is the largest volume during consolidation, and little volume during the impulsive move that occurs AFTER the BFI's have stacked huge amounts of OFV.
Remember, we are trying first to understand the engineering of the system first and foremost. Trading, or entering, or making money, comes only after this is understood properly and applied properly on real charts. It makes no sense to enter when we do not understand the arena into which we are entering. This is one of the biggest problems in trading that I have seen over the years; they do not have a proper understanding of the engineering of the system of the markets they are trading.
Most retail traders are given the standard retail “slanted-lines + indicators” approach as to how to trade the markets. This may work normally and it may make some normal gains, but that is precisely the approach we avoid.
The BFI Trading Course is for the elite BFI Trader; we avoid the standard retail “slanted-lines + indicators” approach that is in the mainstream retail market; a BFI Trader goes deeper into their understandings into “why” movements happen (in terms of a movement of OFV) and they attempt to understand the rules of the road; first and foremost. Then and only then can we begin driving properly on the BFI Roads AKA “trading”.
We have not touched yet on the executing of any single trade. We know that we will trade where the best deals are, at these or around these zones, but a BFI Trader must understand the basics of the way the architecture is designed first before ever trading. Anything that has to do with the details on how to take a trade, is discussed in Part 2: Flawless Execution; the details regarding the “entering” of a potential great deal. That is an entirely separate and completely different process and step than Analysis; which is just analyzing a price-chart to extract information from it.
Do not confuse “ANALYSIS’ with “EXECUTION”. They are entirely separate and most traders have problems with the execution aspect of being a manual trader. This is the part that most traders spend the most time on, but as we will see in Part 2, “execution” is only a few seconds; it is simply a transfer of three price-levels, [entry target stop], into a trading platform, and submitting the order. Let us now discuss the “consolidation”, which is where we have learned that it is where the heaviest levels of volume are being transacted.
As a new BFI Trader, maybe you may not associate “consolidation” and "volume" as a synonymous term and you may be wondering why these two terms are grouped together; it is because to me they are synonymous, meaning they mean the same thing. Re-wire yourself and train your eyes to see these two terms, “consolidation” and “volume”, as the same thing.
The Manipulation of Consolidation
Now that we know that consolidation periods, or choppy price action, or a period of sideways price-movement, means that a large amount of orders are being stacked; heavy volume, then now we can discuss and begin to understand how a period of consolidation is manipulated.
First, let us discuss what is meant by the term “manipulation”.
Most people will label anything that hits their stop loss to be a “manipulation”, but this is not the case. Manipulation in the markets has been standardized by the BFI’s. It is a very specific method and technique to manipulate the consolidation and enter their positions. In the end, manipulation is designed within the system. The true manipulation is the manipulation of the trader to click the wrong button, which is performed through the manipulation of the price .Most traders click sell when they should buy, and click buy when they should sell.
Let us take a closer look and study the anatomy of a consolidation. Understanding this section and getting a better mental perspective and a better “eye” for any consolidation period.
Sideways price-action means the price goes up, but is then sold off to its origin; price goes down, but is then bought up to its origin. This up-and-down movement, as we discussed earlier, is a great time to accumulate a large position.
If a BFI or a group of BFI’s are accumulating Buy-OFV, then they will buy up the collapse(s), completely .
If a BFI or a group of BFI’s are accumulating Sell-OFV, then they will sell off the rally(s), completely.
Note: It is very important that for a Buy-Stacking, every collapse must be completely bought up, back to the origin of the collapse. The same goes for a Sell-Stacking; every rally in price must be completely sold off, back to the origin of the rally.
On a chart, a consolidation looks like this:
The consolidation period in a classic continuation move - [Down, Pause/Consolidation, Down]
As we have learned, consolidations have the highest levels of volume, or OFV. Notice the largest levels of volume during the consolidation period, which clearly was used for Sell-Stacking, before we experienced the impulsive move downwards right after the consolidation period ends. Notice as well that the impulsive move downwards has very little volume, because most of the OFV was transacted during the consolidation, where price was kept within a tight range and remained “stuck” between two price-levels.
Let us zoom in on the consolidation portion of this full and complete “continuation” market movement: a downwards impulsive move, followed by a period of consolidation, followed by another downwards impulsive move. This is typically the market movement that occurs as price leaves a valid Sell-Zone. For a valid Buy-Zone, the typical market movement would be an upwards impulsive move, followed by a period of consolidation, followed by another upwards impulsive move.
Remember that a period of consolidation is where price ranges between two price-levels.
Price consolidates between two levels and remains within a tight price-range.
Now let us look at the idea of a consolidation conceptually.
Within a consolidation period or a period where the price is ranging and moving sideways, there exists sellers selling resistance, and there exists buyers buying support.
Order-stacking occurs in every consolidation period with very high levels of volume being transacted.
A consolidation could be a stacking of Buy-OFV, or it could be the stacking of Sell-OFV. The price will head in the direction of the larger stack of orders; buy-orders or sell-orders. In the end, we will either have an upwards impulsive move, or a downwards impulsive move. Your job is to determine and decide whether you believe BFI’s are stacking Buy-OFV, or whether BFI’s are stacking Sell-OFV. Re-visit the Monthly Timeframe section in order to understand the higher timeframe picture, and whether we are bullish, bearish, or potentially reversing.
When we are bullish on the monthly, Sell-Zones tend to get wiped and Buy-Zones tend to get respected.
When we are bearish on the monthly, Buy-Zones tend to get wiped and Sell-Zones tend to get respected.
All this must be kept in mind in order to deduce if this period of consolidation is being used to stack a large amount of Buy-OFV, or a large amount of Sell-OFV.
The Liquidity Scenario
Some traders use tight stops, and some traders use large stops, but the stop-loss of those sellers would be above the consolidation. The stop loss of the buyers buying support would be below the consolidation. Understanding the “liquidity scenario” is the key aspect in this section. The market is just a bunch of liquidity; meaning just a bunch of orders; OFV.
The market does not know what a stop loss is. The market does not know what a take-profit is. There exists only buy-orders and sell-orders. The market only knows two types of orders: a buy-order or a sell-order. The broker knows that. The market does not. The OFV is either Buy-OFV or Sell-OFV; it cannot be both types at once and there is no other kind of order. Remember what we said about the market being binary; a buy-order or a sell-order, there is nothing else.
In order to understand the essence of what goes on with the manipulation of consolidation, let us try to understand the basics of this exact liquidity scenario during a consolidation period:
The anatomy of a consolidation; this is the scenario for all consolidation periods.
There is OFV (liquidity) sitting above and below every single consolidation.
A stop loss of a seller is a Buy-Order; the seller must buy back their position at a loss.
A stop loss of a buyer is a Sell-Order; the buyer has to buy back their position at a loss.
This is the UNIVERSAL SCENARIO FOR ALL CONSOLIDATION PERIODS.
A BFI Trader must understand deeply the liquidity scenario that exists at a consolidation. You must understand the context of the consolidation; “where ” it is consolidating; is it near a valid Buy-Zone or is consolidating near a valid Sell-Zone; context is key in trading.
There is a universal scenario of liquidity that exists for all consolidation. As we have seen in the previous image, every consolidation as sellers at the top selling resistance, and buyers at the bottom buying support.
Now, since we know the stop-loss of a buyer is a sell-order, and that the stop-loss of a seller is a buy-order, then we will replace the terms and this is our new liquidity scenario:
This is the universal scenario for all consolidation periods.
This is a very important image to understand and it is the universal scenario and situation for every consolidation on the planet. The longer it consolidates, the more the amount of the orders that build up above and below it, meaning the impulsive move that occurs after the consolidation will be stronger and travel further. Price can consolidate for as long as it likes, and as it continues to move sideways and consolidate, there are large amounts of liquidity, or orders, that are building up above and below the consolidation, as the BFI continue stacking their positions within the consolidation.
The Manipulation Aspect
The interesting part of any consolidation is the way that it is manipulated before the next impulsive moves begins. In a simple summary, the liquidity on both sides of the consolidation is typically triggered before the next impulsive move begins and the consolidation is over.
If the impulsive move after the consolidation is an upwards move, then typically price will trigger the sell-liquidity below the consolidation, before the upwards impulsive move.
If the impulsive move after the consolidation is a downwards move, the typically the price will trigger the buy-liquidity above the consolidation, before the downwards impulsive move.
Why does this happen so frequently on almost every consolidation?
The short answer is LIQUIDITY.
BFI's Require Liquidity
BFI’s REQUIRE liquidity.
BFI’s only buy and sell in very large quantities; how can a BFI buy a bunch if there are very few sellers selling it? How can a BFI sell a bunch if there are very few buyers buying it?
In simple terms, BFI’s require liquidity; opposite orders to take the other side of their own orders. Since BFI’s have the largest lot sizes on the planet, they have the power to generate their own liquidity.
BFI’s require a bunch of Sell-OFV in order to buy a bunch.
At the peak retail seling, BFI's can easily buy a bunch.
BFI’s require a bunch of Buy-OFV in order to sell a bunch.
At peak retail buying, BFI's can easily sell a bunch.
This is the standard operating procedure for the manipulation of a consolidation. The liquidity on both sides of the manipulation gets triggered, and the BFI's always end up with the best position; retail is usually on the wrong side of the market so there is nothing new when they buy after a rally, and they sell after a collapse.
In the next section, we will discuss in greater detail why this classic pattern of manipulation can trick many traders into being on the wrong side of the market.
Remember, BFI’s can create their own liquidity; they can create their own buy liquidity if they need to sell a bunch, & they can create their own sell liquidity if they need to buy a bunch. The way this happens is not simple, but for this educational course, I have kept things extremely simple, basic, and very rudimentary for now, as we progress through this BFI-perspective and this BFI educational course.
With time, you will become more experienced and see things play out live on a chart. Remember what manipulation is all about; getting you to click the wrong button, between a buy-order and a sell-order. They use the price to do that, but do not be deceived by the price, especially during periods of consolidation in which huge amounts of volume are being transacted and the BFI’s are doing their business and are hard at work accumulating and distributing positions.
Zone Creation
The ways BFI’s operate are some of the most closely held secrets in the trading world. Nobody truly knows, but what we know for sure is that they move the most volume and have the largest lot sizes, so they automatically receive a special benefit; the ability to create a rally in price, pushing it slightly higher, in order to sell more at the better price; or the ability to create a collapse in price, pushing it slightly lower, in order to buy more at the better price.
These principles are used by the BFI’s and they have been using these methods for hundreds of years. This is nothing new, so we need to understand them and apply them in our trading. We will discuss these fake rallies and collapse more deeply in Part 2: Flawless Execution.
In this section, we will learn how Buy-Zones and Sell-Zones are created.
When are they created, and how are they created?
We have already learned that a zone is validated with a BFI-footprint, and we have learned precisely how to draw them properly. Also, we have learned that there can be multiple zones; a major zone and multiple middle or minor zones. Obviously, the results of trading middle minor zones, especially against the monthly trend, are trades with low probability; while the results of trading major zones at the edges, especially if along with the monthly trend, are trades with high probability.
When are these zones created?
We have guidelines and techniques that help us better understand and prepare for the creation of this very special supply-candle or demand-candle, and we see the subsequent zone that is created after. We use this supply-candle which created our Sell-Zone. We use this demand-candle which created our Buy-Zone. If the price breaks beyond this supply or demand candle, then obviously that candle is not the candle that is going to create our zone, and the BFI have yet to enter and begin their operations.
Identifying price “exhaustion”:
It is only after Buy-OFV exhaustion does the supply-candle print, and we have a BFI Sell Entry. Typically, sell-stacking commences followed by an impulsive move to the downside.
It is only after Sell-OFV exhaustion does the demand-candle print, and we have a BFI Buy Entry. Typically, buy-stacking commences followed by an impulsive move to the upside.
In order to understand and identify “exhaustion” of price, we must take a look at the sine curve and couple that with a proper understanding of OFV. As the price moves up and down, it eventually reaches a zone where it is bound to reverse. This is the point where one type of OFV overtakes the other type of OFV, and we have a change in direction. It is these reversal points that we must master in order to become a proper BFI Trader.
We use very simple lines to determine whether or not price is experiencing an exhaustion of Buy-OFV. These are not trendlines; they are lines to be used to cut the middle of the candles of a price move, in order to see the incline of our lines and see whether or not they are becoming steeper , or less steep . This is used to see exhaustion of a certain type of OFV; in this case it is the exhaustion of Buy-OFV.
There are a few principles we need to learn before we can move on and try to understand this conceptually, because the traders that work at these BFI’s are humans just like you and I. They have a job to do and they do it. It is just business as usual day-to-day for them and their operations. So let us learn some new concepts in order to better understand how they operate.
After a BFI-entry, stacking must begin.
After a BFI Sell Entry – Sell-stacking begins.
After a BFI Buy Entry – Buy-stacking begins.
We have already learned how this “stacking” of orders is completed:
Selling off rally’s for a Sell-stacking
Buying up collapses for a Buy-stacking
Train your eyes to see these types of patterns on your macro timeframes.
Sell-Zone Scenario
For a Sell-Zone, the supply-candle typically prints after “ buyers exhaustion” AKA Buy-OFV exhaustion; this just means that the Buy-OFV is slowing down, and it is lessening. Price will eventually reach a point where, for a micro-moment, the Buy-OFV is equal to the Sell-OFV at the current market price. Eventually, the Sell-OFV becomes a much stronger flow than the flow of the Buy-OFV and the price begins to drop. As the flow of Sell-OFV entering the exchanges increases, the price continues to drop.
BFI -footprint created by a BFI Sell Entry at the labelled candle in the red box.
Supply-Candle
The supply-candle is the candle with the highest price-level; this is the point where the selling began, and we will label it as the entry of either a BFI or a group of BFI’s. In this scenario, it would be a BFI “sell” entry.
Buy-Zone Scenario
For a Buy-Zone, the demand-candle of a valid Buy-Zone typically prints after what we call “ sellers exhaustion”; this just means that the Sell-OFV is slowing down, and it is lessening. Price will eventually reach a point where, for a micro-moment, the Buy-OFV is equal to the Sell-OFV at the current market price. Eventually, the Buy-OFV becomes a much stronger flow than the flow of the Sell-OFV and the price begins to rally. As the flow of Buy-OFV continues to enter the exchanges, the price continues to go up.
BFI-footprint created by a BFI Buy Entry at the labeled candle in the red box.
Demand-Candle
The demand-candle is the candle with the lowest price-level; this is the point where the buying began, and we will label it as the entry of either a BFI or a group of BFI’s. In this scenario, it would be a BFI “buy” entry.
So, we can add two new terms to your BFI dictionary:
[BFI SELL ENTRY] & [BFI BUY ENTRY].
We know who it is, we know where they got in, and we know whether they have clicked “buy” or “sell”. A BFI Trader can use all this valuable information to operate and to trade the markets with extreme accuracy.
We understand that when a zone is created and is validated, the potential trade opportunity is to find a great deal at the valid Sell-Zone, when price returns to the valid Sell-Zone for the first time.
The first retest of a valid zone is the least risky. I do not recommend you trade the second or beyond. You must ask yourself why price would keep returning to a zone; if the BFI wanted to sell, they would have sold already. Typically this means Zone Wipeout. It is crucial to always keep in mind Zone-Wipeout and the Monthly Timeframe sections regarding the HTF (higher timeframes); you should rarely ever be on the wrong side of the order-flow.
Now let us see what happens AFTER this very special supply-candle or demand-candle print on a chart.
Remember, we have not yet validated our zone because this is before the impulsive move occurs. We are trying to understand what happens before a BFI-footprint. If you can catch a supply-candle or demand-candle in the early stages of a BFI accumulation or distribution process, then the rest of the trading process becomes rather straightforward, because you know how a Sell-Zone or Buy-Zone “movie” would play out. They sell a bunch and then price sells off again upon returning to that zone, where they sell more.
For a Sell-Zone scenario, as price goes up, it reaches a point where the supply-candle prints, which means that a BFI Sell Entry has taken place. We know that a sell-stacking occurs after a BFI Sell Entry, typically through the sell-off’s of one or multiple rally’s. This is the accumulation of a sell position. When enough Sell-OFV is accumulated, the price will experience an impulsive move to the downside, which will show very strong candles with large bodies, but we know that this movement is only a result of the heavy sell-stacking that occurred at its origin. Remember, BFI do not buy as price rally’s and they do not sell as price collapses.
They sell into peak buy-liquidity; it is the only way to smoothly fill all their Sell-OFV.
They buy into peak sell-liquidity; it is the only way to smoothly fill all their Buy-OFV.
These concepts may be hard to understand and grasp, but you must operate according to these principles when trading financial markets.
BFI participants in the currency markets are much more concentrated and powerful than in any other market, and the price flows more smoothly and more predictable than in other markets.
Buy-Zone Scenario
Classic Buy-Zone creation which is used for Buy-Stacking; notice every fake collapse is completely bought up.
Whether it is a Sell-Zone or a Buy-Zone, the BFI does not discriminate.
For the Buy-Zone above, notice how the candle with the low is usually the candle that creates our zone. This is typically the case, as these are where the BFI have entered large positions and the candle they enter on will typically be one that has reached an extreme. It will almost always be one that wipes many retail positions, coincidentally.
Upon the first BFI-footprint that validates the zone, we see that every temporary collapse is met with a large entry of Buy-OFV that pushes price a further distance. The distance price travels is in proportion to the amount of OFV that was transacted. Large amounts of OFV will force the price to travel further, while a small amount of OFV causes the price to travel not as far. Using arrow or lines from the origin of moves to their highest reaches as in the example above, can allow us to see the strength of the OFV in order to better determine which kind of OFV are the BFI's stacking.
This is your job as a BFI Trader in the end: to know and understand what the types of OFV the BFI's are transacting and knowing how to position yourself in order to benefit by their movements.
This section is titled Complexity Is The Enemy Of Execution because there are those traders who would rather prefer complexity in trading. They know who they are. Unfortunately, complexity makes the execution of trades and the management of trades and the whole idea of trading, harder to execute, because there are more things to execute.
You do not need to know every single thing that is going on in a chart. You only need to know if the BFI are the buyers or the sellers in the current market. They know how to buy low and how to sell high and we identify what they are doing and tag along. The only reason we are able to do this is because the BFI's have the largest position sizes on the planet, so when they enter and exit the market, the price clearly shows us.
A full Sell-Zone cycle: BFI enter – then begin sell-stacking – and then the typical downwards continuation movement occurs as price is pushed down and away from the Sell-Zone. The first retest of this valid zone is the trade with the least risk.
A full Buy-Zone cycle: BFI enters – then begins buy-stacking – and then the typical upwards continuation movement occurs as price is pushed up and away from the Buy-Zone. The first retest of a valid zone is the trade with the least risk.
Your analysis determines how high and how low, and the entry into the position determines your exact timing of the click. As a BFI Trader, you must understand that every cycle will look different, and some financial instruments undergo their cycles in different ways; but the essence of it remains the same. The BFI's have large positions and this is how they are able to transact these large amounts of volume at the best prices.
The image may look complicated, but it should make sense given all the analytical concepts you have been learning. First, we prepare for a potential supply-candle to print after Buy-OFV exhaustion, or we prepare for a potential demand-candle to print after Sell-OFV exhaustion.
Of course, it will take some time to identify exhaustion and these two special candles, but with time you will be able to identify, and trade the entire movie, up, down and sideways, if that is your desire.
A Sell-Zone Cycle.
Large amounts of Sell-OFV are unloaded at a place where the BFI decides that this is the price range in which they desire to transact sell-orders. A large amount of Sell-OFV is transacted here, and price performs a downwards continuation market movement.
When price returns to our Sell-Zone (which is nothing but a specified area where BFI's have decided that these are attractive price levels for selling) we see again large amounts of Sell-OFV being transacted there and price performs another downwards continuation market movement to complete a full Sell-Cycle. Remember, the first retest of a valid zone is the trade with the least risk.
Notice in the above case, a Buy-Zone was formed and validated with the following impulsive move. Notice the period of consolidation that formed after the impulsive move, and notice the liquidity that would be building up above and below its boundaries. Price performs a reversal pattern [Up - Pause - Down]. When price returns to our Buy-Zone, notice how large amounts of Buy-OFV enters the market. The first retest of a valid zone is the trade with the least risk.
Keeping It Simple
To keep it simple and summarize, it is a specific candle that forms the high or low, where the BFI enters the market; always at the highs and the lows for the best deals on the planet; they own this game and control it, so they always get the deals they desire.
After a BFI entry, stacking begins. Notice that the stacking is usually within a “choppy” period or a period of consolidation, in which buy liquidity builds above it, and sell-liquidity builds below it. The liquidity is triggered on both sides and we have an impulsive move that breaks the consolidation and typically a complete cycle plays out; either a full Sell-Zone cycle or a full Buy-Zone cycle, if it is not in a period of consolidation on the macro.
We will now begin a powerful part of this trading education which you will receive in completion in the coming days. However, it is not “information” that you are missing. After seeing many traders from different countries, and understanding their mistakes as well as their successes, the key missing piece that most are missing ends up being “simplicity”. Add a bit of “stupid-simple” rules and methods and principles for your trading, and lo-and-behold things magically get better.
We are trying to keep things simple here; this is not a detailed textbook on the subject matter. This is a very rudimentary simple and basic introduction to BFI Trading and becoming an elite BFI Trader. I would say that they are 0.01% of the 0.01% that are out there. A decade later and I can still count the true BFI Traders on my two hands; they are the few but truly the elite few because this is a competitive sport; and there are no gold or silver medals. There are only two options: adding zeros to your accounts, or removing zeros from your accounts. We are in the “additionals'' business and our goal is to do that efficiently and with little effort, because we have been trading for years and years and we will eventually learn how to do all this and think that way, effortlessly and without thinking about it. But this mental "inner-game" aspect will be discussed in minute detail in the coming days, which is the last and final Part, the up & coming Part 3: Psychology, where we try to understand the "why" in why traders do what they do.
But for now, let us begin Part 2: Flawless Execution. You should revisit Part 1: Analysis constantly in the future as new sections and videos will be added, making things more clear and concise to get you to understand these complex concepts in a very simple way.
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