 Hi, my name is Leon Rowe, currency trader and trading coach at Trading180.com and in this video I'm going to talk about why you should consider trading ranges and not trends and I understand the usual Paradigm that people are actually currently in the trend is your friend and it's been repeated You know over and over again. You should you know wait for the trend higher highs higher lows lower highs lower lows But I'm going to really kind of shift that paradigm Into and hopefully make a compelling case as to why you should think about Trading ranges and not trends. I'm going to be covering in this presentation in this video is going to be fair value auctions What are they? What the market consists of fair value auctions FVAs come in different sizes and time horizons Institutional big business FVAs and it takes them, you know business big businesses time to do business Due to market illiquidity and iceberg orders and I explain those as well as small FVAs within big FVAs and Trends within FVAs so a lot to go through In this video. I hope you stay tuned So let's get into trade languages not trends, right? So fair value auctions. What are they? And basically fair value auctions are are ranges, right? They are ranges now a range is known You know to everybody to look like this on the price chart where prices are not basically trending, right? It's just, you know prices are within Certain high and a certain low now. It's important really to understand that You know to call Whatever it is you're interacting with by it's it's pretty it's proper name and what it is, right? And these concepts that I'm going to be talking about with regards to fair value auctions really from Mark Chapman who's a friend of mine and please check out his underground traders alliance YouTube channel Fantastic fantastic high level the highest level information you will get on YouTube about You know these types of concepts and trading in general, right? It's not, you know, your typical where Elliot wave or Wycoff stuff this, you know His market makers business model is is absolutely the the highest level of analysis that you can get And I'm not going to get into necessarily market makers in this video Or at all really but there was obviously elements of of Market making that come into this but one of the things that Mark says is that You know, if you don't call on the the thing that you're interacting with by its proper name then You're not going to interact of it in the way that you should so What I mean by that is you know in his analogy is also is if you you know treat a dog Like not like a dog but like a chicken then you're not treated like a dog, right? And you're gonna miss basically mistreat that dog because you're treating it like a chicken You have to recognize a dog for what it is. It is a dog, right? And you've got to treat it as such if you're, you know trading, you know Forex markets or any market for example, yeah any asset class if you don't understand what and how to interact and what is really going on Then you're always gonna be on the wrong side of the market, right? You might be on the right side, you know here and there and of course you might get big wins small wins big losses Small losses, right? That's gonna happen. That's just the nature or the randomness of the market But ultimately you're always gonna be at a disadvantage Therefore, you know, the statistics are still the same in terms of you know, no is it eighty ninety percent of traders Don't make money and you know the ones that are not in that statistic the vast majority of them just break even over time, right? One of the reasons is because if you're not if you're not understanding what you're interacting with You know to the fullest extent then You're not gonna interact with it in the way that you should and so what is a really a market? What does the market consist of market consists of you know buyers and sellers We always talk about the market, you know, the market is bullish the market is bearish, right? But what are we actually really saying is that you know buyers basically the market consists of buyers and sellers and they are constantly doing business and Around what they think are cheap expensive and fair value You know prices for that particular asset at a particular point in time, right? So the market is really just an auction of buyers and sellers, right? Sometimes you can you know you go to an auction and you might see something that is undervalued You're obviously gonna get a floor price and buyers will think that is cheap But then you'll get a time in the auction where You know the auctioneer is gonna say is anyone gonna go higher than this price and then people gonna go no because that's too expensive, right? And that's basically what a Range actually is or not and what is known as a fair value auction, right? Where you have buyers and sellers? Yeah, have a greed that You know, this is pretty much expensive Yeah from a buying perspective and this is cheap or what is known as a bargain price? Yeah, we know that to be absolute fact because buyers came in and drove the price higher, right? And this is where sellers You know were wanting to definitely, you know get out and sell the market, right? So that applies to any market again, whether it's forex whether it's gold whether it's stocks whether it's the housing market You know, it doesn't matter. There is usually a What is known as a range or you know in in in the retail space? But actually in fact, it should be known as now a fair Value auction. Yeah, and that is what you're interacting with. Yeah, and it's our mission as traders, yeah to trade and do business ultimately at Areas, right where we think there are bargains or Expensive that's it. Yeah, that's our Our mission as traders to do business around those areas Yeah, our business is Not to try to predict, you know certain Trends although of course, I'll get into that in a sec. It's if you can, you know, have the foundation as to understand where Bargain prices are where expensive prices are that is the starting point or that should be your starting point Because that's where you understand that business the majority of business is being done, right and so With that being said on to the next slide You know fair value auctions, yeah come in different sizes and time horizons We know this instinctively if you look at a price chart, you can go down to the one minute and see, you know and look at, you know Price, you know go into some sort of fair value auction, right on a one-minute chart Yeah, you can see it go into it and and and last for maybe, you know A few minutes to a few hours or so, right or you can go up to the daily time frame Chart and see that, you know fair value auctions, you know Lasting for days weeks and even months, right? And the institutional, you know big businesses, right? They do business typically, right? Fair value auctions over, you know, 200 to 600 pips on average, right? Depending on obviously the currency pair and the volatility at the time, right? Because fundamentally and resentment-wise there could be things going on that drives volatility higher or lower But typically what you'll see and especially if you're if you go to You know certain bank forecasts You'll see a lot of the ones that we use a trading 180 you'll see they actually publish what they still consider as ranges But they'll consider they'll they'll say for example the euro dollar is in they think that the euro dollar would be In a particular range over the next month, right or a particular auction as we know, they'll save me know maybe the In the month for or for the first quarter, they think the higher of the range will be, you know, 110s for example and then the Low might be for example the 105s, right, which is basically would be like a 500 pip auction And they'll say that they'll openly say that in in these publications And so the financial institutions the big business right are telling us. Yeah, that that is What? They are expecting right as far as an auction and where to do business and again What we want to do is if you know, they're telling us that this is actually Considered a bargain and that might be considered expensive Depending on whether you're buying the base or the quote currency now You know businesses not all businesses do business at you know At every level right there were some businesses where Banks and institutions that won't do business at a lot of different price points because they consider that to be You know either expensive or they're just not interested in in in doing business at those prices but there are And nobody really knows to the extent of Exactly where prices will exactly reverse, right? It's you know, it's it's like trying to you know Predict where you know 10,000 fish are likely to swim in which direction right you every everybody has got a different valuation of what they think is expensive and what they think is cheap but The consensus normally there's a normally a consensus Right there is normally a consensus when it comes to Auctions and this is obviously due to fundamental analysis, which I'll probably touch on maybe a bit later Right now It takes time for big big business to do business, right? And so when we're looking at this from a from for example a higher time frame chart, which I always suggest that you do start off As a as a from an absolute minimum perspective from a daily and if you want to work your way down fine It's up to you Well from a daily or a weekly time frame chart Because that's what institutions do they look at the bigger picture and they have to do business It takes time for institutions to do big business. Yeah And so hence the reason for the you know 200 to 600 pip fair value auction sizes, right And the reason why that is is because of you know, the market is highly illiquid, right? And so what do I mean by that now? Let's say for example, you have a bank who wants to Who wants to do business right who wants to buy? Let's say for example, we want to buy euros, right and they want to place a one billion order Right, so let's just call it, you know bank a Yeah bank a They want to uh, you know place a one billion pound order and buy one billion pounds worth of euros against the dollar yeah Now what you're going to find is that um There needs to be they want to buy they needs to be at least at absolute bare minimum, right There needs to be at least one billion pounds worth of Sell orders, right Sell orders needs to you know to facilitate all that buying at a particular price. Yeah, because if this is obviously price And this would be time Yeah, they want to do business probably somewhere around here, right the lows, right? Whatever that price whatever that price is Yeah, so they need at least one billion Uh sell orders. Yeah to facilitate their one billion Buy orders, but guess what? They're not the only you know bank in town that are you know fundamentally the thinking that they want to be You know buyers of of the euro because for example, maybe the euro are still hiking rates And maybe the federal reserve are coming to an end, right of their hiking cycle and hiking typically does appreciate currency and so What you have to understand is that because they're not the only bank in town Um, you know, even though there might be one billion Pounds worth of sell orders at a certain area There's other businesses doing business down here for maybe other reasons maybe speculation Uh and and and you know the like now If you know the bank a want to you know Get involved in that and there's not enough liquidity. Let's say or let's say for example, there is there's there's there's one billion pounds worth of sell orders here Maybe again the average daily Orders that come into the market and maybe somewhere around the 50 million Right 50 million Uh, uh, you know order size, right? And this is where iceberg orders comes in and what iceberg orders really are basically just breaking down Um, the one billion pound order into smaller orders, you know, 20 million pound here You know, maybe 30 million pound here Right until it all adds up to one billion so What the banks are trying to do by basically Breaking down their one billion pound order if the average order size, you know on a particular day is 50 It's 50 million and they place of one billion pound order then You know this it's going to basically spook the market It's going to tip the market off as to why is this big entity bank a Looking to you know place a one billion pound order and also as well filling those orders does take time And so, you know, there's algorithms competing with each other to fill orders, etc And so they might not actually get filled at that particular price Or they're one billion, right by the next order up the next order up because they got sell orders, right? And this is what's known as avoid. This is what's known as slippage, right where banks are really trying to avoid slippage And that's the whole point in iceberg orders is that when they get filled They want to get filled at the at a good price By the time maybe, you know, maybe I don't know 500 million, you know Pounds worth of their order gets filled everyone else is rushed into the market And then it drives prices higher and then the next 500 Million pounds of that one billion pound order might get filled in various degrees a lot higher when really Ultimately, they wanted to you know do business at these areas here, right? So they try not to tip the market off try not to, you know, get everyone else in at the same time and if bank a also wants to You know do business and thinks that the euro is going to go higher You can, you know bet with, you know, like night follows day as certain as that that Other banks bank b bank c bank e bank f all these banks, right are also thinking the same thing They want to be long on the euro, right? And so You know getting you're not necessarily getting into market makers But understand that the market makers job is to provide liquidity for the banks and they can't do it all at once It's impossible, right? They need to provide the liquidity They need to buy the buy orders and the sell orders because remember not everyone wants to be a buyer They don't want to be sellers as well. And so there are multiple market makers multiple orders You can see how complex this gets Right, but ultimately it takes time for the financial institutions to do business Yeah, and so that's the reason why you see, you know, pullbacks, right pullbacks occur Um, I just can't get into the exact reason but just know that market makers, right? You know are are in the market, you know buys and sellers are in the market and you have pullbacks, right in the market And so it gives opportunities for You know big businesses to do business over a certain period of time And sometimes this can be this could be one week. This could be even one month, right? And so it takes time as I said for big business to do business Yeah, and that's due to market illiquidity and I spoke orders in the market Just as you know, just just so you know is that the market is highly illiquid, right is highly illiquid and so If you understand this if you can understand this It's brilliant because then it gives you an insight as to how the market is really working. Yeah, and so with that being said Um, that's the reason why you get these, you know, big fair value auctions, you know 600-pip auctions in size as well as the reasons why You know, you have auctions and big auctions that can last for weeks and even several months I'm going to go into an example on a chart in a sec. But before I do um You also need to understand that, you know, there are small Fair value auctions within big fair value auctions, right because you have again from You know institutions, if you, you know, look at CLT reports, you have asset managers, you have leveraged funds, etc They all have different motives In order to, you know, get involved and why they're buying and selling. Yeah Some for speculation some for, you know, the pension funds are probably looking at more long term You know more of a nine to 12 to 18 month time horizon, right? Whereas leverage funds hedge funds are looking at maybe just speculating and getting in on, you know on on shorter term time frames And so what you'll have is even within an auction, right? Where you have Um, you know a high an expensive area and a and a bargain area high and low You can also have auctions within those Um, within within auctions, right? You have smaller auctions sometimes You can see price do something like this right Maybe something like that And then you get maybe something like that and you might get Something like that and then you might get something like that, right? Where Might not make sense at the moment, but let's say for example, you know, we have an auction Then we might have something like this happen Yeah, and again, we're going to go over a chart and maybe something like that And then you have smaller Period and this whole large You know auction might actually Be over the space of a year, right? As far as the the the big affair value auction and within that year you have situations like this now to the Uh to the uninformed trader. Yeah, it might look like for example, this move here is a trending move, right? The market is trending down, but in fact you'll find many times and uh, is that with even within a trend you'll have You know an auction You have many auctions You know take place All right, and you'll see something like this probably Oh, sorry. I'm just getting a bit tired with the doing this, but you you get the point, right? You get the point These are what you will see, right? So Because these periods here which that might be for example a couple of weeks that might be maybe a month or two That might be another maybe a couple of weeks. That might be a couple of days That might be for example, a couple of hours, etc, etc, right? Different businesses are doing different business. Uh, sorry different businesses are doing Are doing business. Sorry. Let me get my words out. Um, for different reasons and motivations but ultimately what we want to do is Choose to do business where we can see objectively from a higher time frame where The You know the big business are doing a business. That's really in the banks. That's really what we're attempting to do Is trying to maybe filter out The lower time frame filters and of course you can trade these lower You know time frame auctions, right if you choose to but Um, just understand where you are in the bigger Auction in the bigger time frame of auctions, right? So actually in fact, that's this would be a good time to actually look and give an example Uh, maybe on the dollar index or something like that something a bit more neutral Exactly what I am talking about Right. So here we are on the dollar index, right? And we've gone back all the way to the data, which is basically goes back to like 1986 Right and what you're going to see is you're going to see an auction, right? And this is really kind of an extreme view, but this should really get the point across, right? The dollar has been in a massive auction. This is a monthly chart You know the high if you consider Since 19 Since april 1986 or may is april year 1986 since from here To march the third of march 2008 The dollar has auctioned between the one two ones and the 70 senses. I think it's well, okay. Oh, well that's uh That's a massive that's a massive auction, right? But even within this auction Yeah, even within this multi decade auction What you will have and what you will find is that you have periods where Remember each candle represents a month. Yeah, this is what you have to be aware of Right each can represents a month. So within for about four months prices were auctioning between that price and that price For another maybe four months five months prices were auctioning between that price and there Prices were auction in between there and there. Yeah prices will auction in between there and there prices auction between There and there you had another auction between there and there Yeah, we can go through it in fact you'll see Is that you get even larger? Longer-term auctions multi decade auctions within those auctions, right between there and there. Yeah See month monthly auctions. You see one right there Yeah, you see some right there You see probably one around there and even within that auction you can see something there track prices across course You know, you start to see more and more and more Auctions that could go on and on and on Yeah, but you're getting Hopefully you're getting the actual point of this Yeah, is that prices can auction within auctions Yeah, and we can go down to for example, you know the last five years, right Where you'll start to see You know this being the uh being the auction right here. Yeah there Right that was like 2015 to 2022 we were in that auction now within that auction at large Fair value auction you had a period where prices were auctioned in between there and there, right there and there There and there Weeks remember this is this this is a weekly chart. So each candle represents a week Get an auction between Now you can see even between That as well Yeah, and even given prices kind of broke out Once they or something there Yep, and prices do trend Within auctions. Yeah, so somebody might look at that as being, you know a trend. Yeah, and they're not wrong He definitely not wrong About, you know trending markets But if you're thinking about this in terms of of it being an auction and even when prices recently over the past, you know Year or so Made this, uh, you know new high for example It was still in the context of Where are we in the actual auction Of where the dollar is right what is expensive Right at one point this was seen as expensive and one point this was seen as the bargain price And value does change depending on obviously the fundamentals But this is a great example A really good example of, uh, you know what you're seeing in terms of, um, you know auctions within within, um Or trade trends within auctions, right and you can go down to the daily Get a bit more fractal a bit more granular, right? You can start to see auctions. Oh, sorry wrong, uh Wrong Indicator on tool, right you can start to see even on a daily time frame chart We went up to the weekly now we're seeing on a daily within this trend You can start to see the auctions take place, right and remember each candle is a day, right So you can start to see prices we're auctioning between here and here Auctioning as we're trending Prices are auctioning, right? This is auction between there and there And right here within that one there So you can start to see Where the auctions are Within the trend Yeah, and we can go on on on on all right And again, we can go down to maybe the uh the four hour time frame and within those Daily auctions you'll see More auctions. Yeah, and that's just again how it goes, right? It's it's it's um You know businesses doing business And some businesses will be doing business and some some won't right some businesses not all businesses are and banks are interested in doing Business here, right? Whereas a lot of them will obviously interested in doing business Further down here or up here, right? But it's our job as um as as traders is to try to trade around Obvious auction highs and obvious auction lows and obviously lower you get The the more difficult it obviously becomes right to spot certain auctions, which is the reason why Ultimately you should Can't tell you what to do I can tell you what I do I always look at the daily as an anchor right and look at where the institutions are You know auction in between right and even when you look at the size of certain auctions You can look at that as being a looks like about a 500 Uh pit auction you can see there is a Is a 300 pit auction that auction there is about a 400 pit auction You know on the daily we've got you know another 400 or so pit auction So you can see these auctions on the daily time frame charts Right to be around that 200 sometimes they're a bit lower, right depending again on volatility Um, but you can start to see where they are And even when you get you know this auction here, right auctions within auctions until it breaks out so that auction there Is again Where we are And that's another 500 pit auction so going back to the uh The presentation so you know looking at trends within large fair value auctions Um, you know, you have small fair value auctions within big fair value auctions Not every single bank is going to do business at every single level Some businesses will stay out some businesses will get in it's an auction at the end of the day You don't have to be involved in every single auction, right? But that's funny enough what what uh traders are attempting to do when they switch, you know time frames And are going from five minute time frames to daily time frames, etc. etc. Right, so It's um, it's you know, it's really kind of just understanding where to do business And ultimately trading supply and demand zones, right? Or support and resistance levels or I say and support and resistance levels because you still want to combine It's not either or you know, I I trade both and use both, right? I really an attempt to trade fair value auctions whether you realize it or not That's exactly what you've been doing But unbeknownst to you Right, you've um, you've you've the narrative really has been just trade its support of resistance and looking at it from a pattern trading perspective And ultimately what you're actually doing is actually trading Uh highs and lows of potential auction. So let me just I guess, uh draw this out, right? So We know typically yeah, this is what we see from a support and resistance Uh perspective, right where resistance Becomes potential support here now Prices do something like this What does that actually become or what does that look to become? Another auction, right? This is an auction where at the moment buyers are considering that to be a bargain Sellers or buyers are looking at that to be expensive And then you might get something like this, right? And even if prices break down and then go higher, what is this? That is going to be the next auction where buyers have agreed Yeah That looking back that was uh an area that made a new high. So this would be more of a demand zone Yeah, this would be more Support and resistance. So that'd be resistance there and that'd be support Yeah, this is an area that led to a new high. This was a previous expensive area Maybe from a previous, you know, auction Yeah, prices broke above that new auction which was considered expensive In the past And so When prices come back to this area, which made a new high Right, there was so much buying here that you know, even when it reached the previous expensive area It was still seen as a buying opportunity. So this is the strongest place to look to do business Right or the the most obvious place to do business because if prices come back down here Then look to the left That made a new high So we see prices hopefully depending on, you know, obviously the fundamentals and the sentiment, you know, do the same thing here, right? Where is support and resistance traders? You know, maybe looking at, you know, that area thinking that that might be the auction and of course it happens, right? Not to say that that doesn't happen. It happens all the time. But ultimately regardless of whether you're trading Supply demand support resistance or combination of both what you're actually doing Yeah And I hope this is, you know, this is a light bulb moment for you is actually attempting to trade at areas Where it is cheap or expensive. Yeah, you're trading within auctions Yeah Yeah, just let that sink in let that sink in anyways, so um A bit of a caveat to this I say a caveat but a bit of a um Uh, I guess a side note to this matter of fact is is and I have to kind of mention this is basically as well Depending on, you know, whether you're swing trading or whether you're intraday trading Um, especially this is more towards those who do more a bit more swing trading. Um, uh, You know, it's really important to notice and is that the number of trades you take Does not equate to the amount of profit or loss that you will make right in this context profit A lot of traders think that well the more opportunity you have to make money the more money you will make that is not true um Because you can have a trader that can take, you know, 10 trades a year 12 trades a year Maybe once a month and be profitable Whereas you could have a trader who might take a hundred trades or a thousand trades in the year and break even Yeah There's no correlation to the number of trades that you take Equate into the amount of profit that you will make so Don't feel that you have to Take, you know, you have to go down to these lower time frames. Look for these lower time frame auctions Um And and feel that you have to take, you know, 10 trades a day. It's not it's not necessary. It really isn't, you know Um, you know, the the brokers will convince you to uh Take as many trades as possible because they make money off the spread, right? That's, you know, that's it's their job And so, um, you know, uh, the job of a trader really is just to trade profitably follow the process Um, and however that process, um, you know, whatever that process is Right, whether you trade, you know, once a month, whether you trade once a week Whether you trade twice a week twice a month It doesn't matter as long as you follow the process and you understand obviously good risk reward risk management Exceptional or that that is really what is key and also as well to wrap this up that you're trading Attempting to trade at, uh, you know highs and lows or expensive or or or cheap areas or bargain areas really of auctions, right and so You can go out there now into the wilderness and uh, you know, I'm with this new knowledge Do a bit of backtesting of course as you should do and uh, hopefully, you know, your eyes have really been opened to, uh, this way of looking at the market. If not, then, um, you know, Maybe you'll go back to the matrix in it, right? But, um, you know, if you really want to make the most of Trading around auctions, right? One of the things I would definitely suggest or two things I would suggest is either Um, you know, get some mentoring some fundamental risk sentiment analysis mentoring because ultimately Trading with auctions or trading alongside banks goes hand-in-hand with understanding fundamental risk sentiment analysis And if you don't understand it on a really high level, um, you know with me at trading 180.com Yes, you can trade like this, but ultimately You won't really understand, um to a higher degree why certain areas you shouldn't be trading on why certain areas Maybe you should look towards right? It just becomes another technical, um, and I wouldn't even call this a strategy, right? It just becomes another technical, um Uh, I guess string to your bow. Yeah But you won't fully again interact with How the market is supposed to be fully interacted with and the second, uh, you know Thing I would say is the only other person I know, right? Who you will get the most out of this type of, uh, this this concept Is with mark Chapman at the underground traders alliance Um, and mark really, um, you know, uh, teaches the the business model of market makers and it's not, um Anything that you've seen online, you know, he's actually, uh, you know an actual market maker has showed him the business model Why so and his group are doing very well, uh, you know, my group are doing very well Um, you know combining, uh, both, um, you know approaches And, uh, yeah, so if you really want to take full advantage of, um, you know, your understanding of this video Please please please, you know reach out to either myself or you know contact mark and, um, We will show you how to really take advantage of the information that you've just learned. If not, um, I do Sincerely wish you all the best And, um, you know, let me know how your results are going and, uh, whether this has really helped maybe, you know, Spark some sort of, uh Light in your in your head to say, ah, I know it. That's it. Brilliant. That's that's what's been going on Oh, whether you think actually in fact, this is absolute nonsense, right? This could be absolute BS, right? You're like, nah, nah, nah, nah. Leon's talking absolute nonsense. Well, uh, I'd like I still like to hear it anyway and your reasons why but guys take care I hope you found this useful and, uh, speak to you soon all the best