How to Time Expansions | Part 1; Reversals

Summary

The presenter explains a discretionary, price-action approach to identifying market reversals and timing subsequent expansions. The method combines liquidity levels, candlestick swing formations, and divergences between correlated markets. It is presented as the speaker’s personal trading framework, not as a fundamental or valuation-based investment approach.

Core Market Framework

The speaker describes three recurring price paths:

• Internal liquidity to external liquidity (IRL → ERL): A continuation pattern. Internal liquidity includes fair value gaps (FVGs) and other price inefficiencies; external liquidity refers to prior swing highs and lows.
• External to internal (ERL → IRL): A pullback, often framed as a higher-timeframe retracement that returns to rebalance an FVG.
• External to external (ERL → ERL): A move from one side of a range to the other, treated as a potential higher-timeframe reversal.

In this terminology, a reversal should show a decisive change in price delivery—often described as a V-shaped turn and an impulsive move back into the range. The presenter distinguishes this from a routine pullback or consolidation.

Candlestick and Swing Framework

The speaker uses “C1,” “C2,” and “C3” for consecutive higher-timeframe candles. Reversals are evaluated using the candle’s wick, time remaining, and correlated-asset behavior:

• C2 reversal: C2 takes the prior candle’s high or low, then closes back within C1’s range.
• C2 reversal-expansion: A relatively small wick and an early reversal leave more of C2’s range and time available for expansion. The speaker considers this a potential C2 entry.
• C3 reversal: If C2 does not close back within C1’s range, a C3 close across C2’s open can confirm that C2 formed a swing. The speaker then looks for a C3 or later continuation entry.
• Filtering: A large C2 wick implies a wider invalidation level, so the speaker generally prefers waiting for C3. A late reversal leaves less time for C2 to expand, also favoring a later entry.

A reversal trader may enter before the higher-timeframe candle closes, while a trend-continuation trader can wait for confirmation and trade subsequent candles.

Correlation and Reversal Confirmation

The method compares correlated markets in “triads.” A divergence or failure to move in sync is treated as a possible reversal clue, but the speaker emphasizes that it needs confirmation from a change in relative strength: the asset that had moved furthest in one direction should turn with relative strength.

Terms used include:

• SMT divergence: Correlated markets make different swing highs or lows.
• Consecutive-candle SMT: One market updates a prior candle’s high or low while another does not.
• SMT within a gap: Divergence inside an FVG, also discussed as relevant to continuation setups.
• PSP (precision swing point): A higher-timeframe candle-close relationship between correlated assets that the speaker treats as a precise reversal signal.
• Two-stage correlation break: A second divergence or swing confirmation validates the first. The speaker treats this as the key evidence for a “true reversal.” Examples include SMT confirming PSP, PSP confirming SMT, or repeated SMT/PSP signals.

Reversal Types and Trading Logic

• Type 1 — synchronized reversal: Assets reach a key level, a two-stage correlation break forms, relative strength shifts, and the assets then expand together. The speaker generally prefers waiting for the next candle when PSP is the confirming signal, but may enter during C2 when the reversal is early, the wick is small, and the setup is otherwise supported.
• Type 2 — asynchronous reversal: Correlated assets turn at different times. The speaker outlines two patterns:
  1. Disjoint expansion and resynchronization: One asset fails to manipulate a key level while others continue or diverge. A later correlation break and strength shift precede the assets catching up and moving together.
  2. Average-asset SMT breakout: A leading asset fails to manipulate a level, another asset breaks through an SMT level, and the group then reverses and resynchronizes. The speaker says the failed manipulation and strength shift are important to the setup.

For entries, the presenter describes using lower-timeframe price action—such as an FVG, order block, or reversal pattern—within a higher-timeframe setup. The speaker recommends prioritizing resynchronization confirmation over simply trading a breakout. Manipulation-phase trades are described as something to attempt only with more experience.

Assets, Instruments, and Markets Mentioned

• Equity indices and futures: Nasdaq, Dow Jones, and S&P; the speaker also uses NQ, YM, and ES in chart examples.
• Metals: Gold futures (GC).
• Energy futures: Heating oil (HO), gasoline (RB), and crude oil (CL).
• Currency references: “GU” and GBP/EUR are mentioned in the gold-market triad discussion; the exact intended instruments are unclear from the subtitles.
• Chart concepts and instruments: FVGs, order blocks, and swing highs/lows. No individual stocks, ETFs, bonds, or cryptocurrencies are discussed.

Numbers, Timing, and Cautions

• The presenter says about 90% of their reversal trades resemble the Type 1 pattern. This is the speaker’s own characterization; no performance data or backtest results are provided.
• Common chart times in the examples are 6:00 a.m., 9:30 a.m., and 10:00 a.m. The speaker describes disjointed moves around 6:00 a.m. and possible resynchronization around 10:00 a.m., with some examples using the 9:30 a.m. market open.
• Timeframes used include daily, 6-hour, 4-hour, 1-hour, 30-minute, 15-minute, 5-minute, and 1-minute charts. Example pairings include daily-to-4-hour and 4-hour-to-1-hour or 30-minute.
• The speaker cautions against treating every divergence as a reversal. Without a two-stage correlation break, they say they would not trade the setup as a true reversal.
• The speaker emphasizes placing invalidation at the true swing extreme. A large wick can make that level too distant for a suitable C2 entry, in which case they prefer waiting for C3.
• No specific prices, yields, valuation multiples, portfolio allocations, quantified returns, or risk/reward statistics are given.

Disclosures and Sources

The speaker describes the method as a personal approach and uses examples from their own trades, including ES trades. The spoken subtitles contain no explicit “not financial advice” disclaimer.

Presenter/source: Afyz, the channel presenter, who also references their own YouTube videos and Twitter examples.