ICT Charter Price Action Model #4 Position Trading
Position Trading and Seasonal Tendencies
Overview of Position Trading Model
- Introduction to price action model number four, focusing on position trading and the impact of quarterly shifts and seasonal tendencies.
- The setup involves a combination of SMT (Smart Money Technique) Divergence and a commercial trader hedging program, targeting external range liquidity.
Key Concepts in Position Trading
- Emphasis on analyzing a 20 to 60-day data range on the daily chart, with attention to the commitment of traders' net positions over the last six months.
- Anticipation of bearish monthly candles while also considering bullish scenarios for seasonal tendencies.
Liquidity Pools and Market Dynamics
- Focus on identifying liquidity pools by looking for old lows being taken out when anticipating bullish movements, coupled with net long positions from commercials.
- Discussion about using the British Pound as an example, highlighting its seasonal tendency towards bearishness in May.
Seasonal Tendencies Analysis
- Examination of historical charts indicating strong bullish trends from March to May but focusing on bearish tendencies leading into June.
- Reference to specific futures contracts (B6 M18), emphasizing the importance of tracking commercial traders' positions through COT (Commitment of Traders).
Application of Hedging Programs
- Explanation of how hedging programs can reflect excessive net short holdings by commercial traders during anticipated market shifts.
- Logic behind expecting lower prices based on historical patterns observed in April leading into May, aligning with seasonal tendencies.
Impulse Moves and Market Ranges
- Anticipation of strong impulse moves lower within typically bearish monthly ranges during May.
Understanding Monthly Ranges and Trading Strategies
Monthly Range Construction
- The discussion begins with the importance of understanding monthly ranges, emphasizing that one or more of the four weeks should construct a profitable monthly range.
- An old high from January 2018 is identified as a significant level, with expectations for price action to rally towards this high.
Anticipating Market Movements
- A strategy is introduced where traders can sell on a stop based on the previous day's open, specifically targeting bearish order blocks.
- The concept of SMD Divergence against the dollar index is explained, highlighting how it indicates potential market movements when certain highs are broken.
Trade Execution and Risk Management
- A specific short entry point at 14248 is proposed, with a stop loss set at 130 pips. This reflects a long-term trading approach rather than intraday strategies.
- Emphasis is placed on using liquidity-based concepts to identify old lows as discount PD arrays for better risk management in trades.
Reward-to-Risk Analysis
- The speaker shares insights from live trading sessions, demonstrating how to achieve a reward-to-risk ratio of 5:1 using daily charts without day trading.
- A deeper decline during seasonal tendencies is noted, reinforcing the idea that strategic planning can yield significant returns over time.
Seasonal Tendencies and Price Dynamics
- Discussion includes blending time and price dynamics; if seasonal tendencies extend longer into June, further declines could be anticipated.
- The importance of aligning seasonal tendencies with market cycles is reiterated, suggesting that traders should remain aware of these patterns for optimal decision-making.
Conclusion and Further Learning Opportunities