ICT Price Action: View Price With Institutional Perception

Introduction to Intraday Swing Trading

The lecturer introduces the concept of intraday swing trading and highlights key aspects to look for in price action analysis.

Understanding Price Action and Smart Money Technique

• Intraday swing trading involves studying past price swings to develop an understanding of smart money techniques.

• Traders often rely on oscillators like stochastic, RSI, CCI, or MACD, but the lecturer does not subscribe to this view.

• The lecturer emphasizes relying solely on price itself to gain perception and identify divergence patterns.

Importance of Price in Divergence Analysis

• The lecturer shares their experience with using stochastic indicators and how they initially sought divergence patterns.

• While indicators may sometimes indicate setups, their creators often lack accuracy in explaining when and how to apply them effectively.

• Understanding the market narrative, such as trending or range-bound environments, is crucial for accurate application of oscillators.

The Role of Price Action in Trading

This section discusses the significance of price action in trading and why it should be prioritized over indicators.

Price as a Comprehensive Indicator

• Indicators can be distracting from actual price movements.

• Price provides all necessary information: open, high, low, close (OHLC), smart money institutional order flow.

• Smart money cannot hide its footprints within price movements.

Concerns about Teaching Methods

The lecturer addresses concerns about whether their teaching methods will continue to be effective.

Teaching Methods Rooted in Fundamental Principles

• The lecturer assures that their teaching methods are rooted in large order flows between central banks and fund traders.

• As long as these entities exist, the principles taught will remain valid.

• However, human interpretation may lead to incorrect application or mistakes.

The Relationship Between Commercial Traders and Fund Traders

This section explains the relationship between commercial traders and fund traders in the market.

Commercials and Large Fund Traders

• Commercial entities (e.g., central banks, large producers) pair up with large fund traders.

• They are often diametrically opposed, with commercials providing liquidity to counterparty long-term trends of fund traders.

• The teaching principles are based on this relationship, ensuring their continued relevance.

Market Profile and Indicator Usage

The lecturer discusses the importance of understanding market profile and cautions against relying solely on indicators.

Market Profile Considerations

• Oscillators can be effective in range-bound environments when trading divergence.

• However, understanding the market profile (e.g., trending or range-bound) is crucial for accurate indicator application.

• Indicators should not be seen as an invitation to start using them but rather as a distraction from price action analysis.

Teaching Methods' Longevity

The lecturer reassures that their teaching methods will remain effective over time.

Teaching Methods Rooted in Fundamental Principles (Continued)

• As long as commercial entities and large fund traders exist, the principles taught will continue to work.

• Concerns about expiration dates on teaching methods are unfounded.

• Human interpretation may lead to mistakes but does not invalidate the underlying principles.

Lesson Focus Introduction

The lecturer introduces the focus of the lesson and mentions their preferred currency pairs for analysis.

Lesson Focus: Framework for Price Analysis

• The lecture will provide a framework for analyzing price movements.

• Preferred currency pairs include euro-dollar (fiber), British pound versus US dollar (cable), and the dollar index.

• These pairs are used to establish bias and guide analysis.

Relationship Between Central Banks and Fund Traders

This section explains the relationship between central banks and fund traders in different markets.

Central Banks and Commercial Entities

• Central banks, considered commercial entities in currency trading, engage in large trades with fund traders.

• The relationship between these two parties ensures the principles taught remain valid across various markets.

Market Dynamics of Commercials and Fund Traders

This section elaborates on the dynamics between commercials and fund traders in the market.

Counterparty Relationship

• Commercials provide liquidity as counterparties to long-term trends initiated by fund traders.

• Commercials have deeper pockets to withstand prolonged moves, knowing that prices will eventually revert to the mean.

Longevity of Teaching Methods

The lecturer reiterates that their teaching methods will not lose effectiveness over time.

Teaching Methods Rooted in Fundamental Principles (Continued)

• As long as commercial entities and large fund traders exist, the principles taught will continue to work.

• Concerns about expiration dates on teaching methods are unfounded.

• Human interpretation may lead to mistakes but does not invalidate the underlying principles.

New Section

The speaker discusses the effectiveness of a trading strategy on different pairs and asset classes. They emphasize that the strategy works on every pair and asset class, not just special markets.

Strategy Works on Every Pair and Asset Class

• The speaker used to believe that the strategy only worked on special markets, but now they know it works on every pair and asset class.

• It is important to study old price moves and compare them to appreciate the strength of the strategy.

• In a range-bound market, instead of relying on oscillators like stochastic, MACD, or RSI for overbought/oversold signals or divergence, one can analyze price action alone.

• Equal highs in price action indicate resistance levels for retail traders. When price trades back up to these levels, it is expected to hit that level and go down.

• However, when equal highs are formed repeatedly, buy stops start forming just above these levels as traders anticipate a breakout.

New Section

The speaker explains how equal highs in price action can lead to the formation of buy stops and how traders approach buying after a move establishes itself.

Formation of Buy Stops

• Between two relative equal highs (equal highs within a certain range), buy stops start forming as traders want to buy on a breakout.

• Traders who believe this level is resistance may try to sell at this point.

• Successful traders do not necessarily sell tops or buy bottoms; they enter trades between turning points where there is high probability.

• It took time for the speaker to realize this concept and stop chasing perfection in trading.

New Section

The speaker reflects on their journey as a trader with obsessive-compulsive disorder (OCD) tendencies. They discuss how their unique perspective has led them to pursue unconventional analysis concepts.

Pursuing Unconventional Analysis Concepts

• The speaker's OCD tendencies have both been a blessing and a curse in their trading journey.

• They have pursued unconventional analysis concepts that may not have made their way into the trading community otherwise.

• Looking back at old trades, traders may discover if they were trading counter to the strategy being taught in this lesson.

• The speaker mentions measuring divergence using closely correlated markets and overlaying them for analysis.

New Section

The speaker discusses the tendency of new traders to chase price and provides insights on how to fight this tendency.

Fighting the Tendency to Chase Price

• New traders often make the mistake of buying something that has already been going up for some time, thinking it will continue going up.

• Buying above old highs is discouraged. Traders should not buy when price has just traded above previous resistance levels.

• Institutional-minded traders either look for selling opportunities to retail traders' buying interests or wait for price to drop away from those levels before considering trades.

• There are different approaches, including entering long positions below these levels or short positions above them.

New Section

In this section, the speaker discusses a pattern in trading and emphasizes the importance of identifying the last down closed candle as the new future resistance level.

Identifying Future Resistance Levels

• The speaker explains that the last down closed candle is the actual new future resistance level.

• This pattern can be found on various time frames, from five-minute charts to monthly charts.

• Traders should train their eyes to look for this pattern and use it as a basis for their trading decisions.

• Once the market trades below this low, traders should wait for it to trade back up into it before looking for a trade opportunity.

• After the market trades back up into the resistance level, traders can anticipate a move towards the low that formed prior to this retracement.

• This pattern alone can serve as a complete trading model.

New Section

In this section, the speaker discusses how to anticipate turning points by comparing relative equal highs between currency pairs.

Anticipating Turning Points

• Traders can compare relative equal highs between currency pairs to anticipate turning points.

• By using tools like the Compare tab, traders can analyze price action across different currency pairs.

• The speaker demonstrates an example using New Zealand Dollar (NZD) and Australian Dollar (AUD).

• If there is a higher high in one currency pair and a lower high in another, it indicates smart money divergence (SMT divergence).

• SMT divergence can be used as an indicator of potential reversals or turning points in price action.

• However, SMT divergence alone does not guarantee a trade opportunity; additional factors such as liquidity levels need to be considered.

New Section

In this section, the speaker emphasizes the importance of gradual training and development in trading skills.

Gradual Training and Development

• Traders should not expect to immediately execute advanced trading strategies without proper training and practice.

• The speaker advises against rushing into complex trades without sufficient experience.

• Gradual modular training is necessary to develop the skills required for successful trading.

• The breaker pattern introduced earlier serves as a foundation for building trading skills.

• Traders should start by observing and understanding trades in hindsight before attempting them in real-time.

• Keeping a study journal, making annotations, and capturing screen captures are essential for effective learning and development.

New Section

In this section, the speaker highlights the importance of practical application and self-training in becoming a successful trader.

Practical Application and Self-Training

• Simply watching videos or studying materials without practical application is ineffective for developing trading skills.

• Traders need to actively engage with charts, make annotations, and capture screen captures to enhance their learning process.

• Learning from others' examples in hindsight is valuable but does not substitute for personal experience and decision-making abilities.

• Traders should aim to gradually progress towards executing trades based on their own analysis and understanding of market dynamics.

New Section

This section discusses the placement of stop loss and the importance of accepting losing trades.

Placing Stop Loss

• The stop loss should be placed above the bearish order block.

• The stop loss is determined by comparing the order block with the location of the breaker candle.

• It doesn't have to be a big stop, but it should be above the relevant candle as price trades up into that level.

Accepting Losing Trades

• New traders often worry about losing trades.

• It is important to understand that losses are part of trading and not every trade will be a winner.

• Having a sound trading model and understanding setups can help overcome fear of losing.

• Repetitive study and analysis of charts can help identify patterns and opportunities.

New Section

This section emphasizes the importance of repetitive study, taking snapshots, and recording timeframes in a trading journal.

Repetitive Study

• Weekly, this pattern forms repeatedly.

• Knowing what to look for requires repetitive study and taking snapshots of charts with annotations.

• Recording additional notes such as the number of candles it takes to reach certain levels can provide valuable insights.

Timeframe Analysis

• Capturing examples in your study journal helps understand how much time it takes for setups to form.

• Appreciating varying examples and timeframes is crucial for successful trading.

• Impatience can lead to poor decision-making, so understanding time requirements is essential.

New Section

This section highlights the benefits of going through personal charts and capturing examples for studying market opportunities.

Benefits of Personal Chart Analysis

• Going through personal charts allows you to observe market behavior in real-time.

• By capturing examples, you can see how many opportunities form over different periods (week, month) and the time it takes for setups to develop.

• Personal chart analysis helps determine appropriate stop loss levels and potential pip gains.

New Section

This section emphasizes that a complete trading model can be sufficient without the need for additional courses or videos.

Complete Trading Model

• Following a sound trading model like the one discussed can be all you need.

• Additional courses or videos may not be necessary if you understand and apply this model effectively.

• However, understanding relationships between correlated pairs or markets is important.

New Section

This section explains how to identify weak and strong currency pairs based on price action patterns.

Identifying Weak and Strong Pairs

• Comparing price action patterns of closely correlated pairs can reveal underlying strength or weakness.

• Lower highs in one pair compared to higher highs in another indicate selling pressure in the weaker pair.

• Recognizing these patterns can help anticipate reversals or rejections in the market.

New Section

This section discusses using relative equal highs in consolidating markets to identify potential fakeouts and reversals.

Relative Equal Highs

• In consolidating markets, identifying relative equal highs is crucial.

• A failure to make higher highs indicates a potential fakeout or run on stops.

• Combining this pattern with closely correlated assets can provide strong trade setups.

New Section

This section explains how combining weak and strong currencies can lead to profitable trade setups.

Combining Weak and Strong Currencies

• Finding underlyingly weak currencies coupled with strong currencies can create favorable trade opportunities.

• Analyzing cross pairs like Euro/Aussie when major pairs are consolidating can yield profitable trades.

• Understanding these combinations enhances trading analysis and decision-making.

New Section

This section discusses the potential for outperformance in cross pairs and the importance of thorough analysis.

Outperformance in Cross Pairs

• Cross pairs like Euro/Aussie can have significant moves, sometimes exceeding 1 to 300 pips.

• Thorough analysis can identify times when cross pairs may outperform major pairs.

• Traders should consider their comfort level with trading majors versus cross pairs.

New Section

In this section, the speaker discusses the importance of finding the strongest leadership in institutional sponsorship in all currency crosses during an underlying consolidation.

Analysis of Currency Crosses

• The highest form of analysis is to find the strongest leadership in institutional sponsorship in all currency crosses.

• Currency pairs only move like this when there is an underlying consolidation in the market.

• When the dollar index is consolidating, it indicates that there may be big moves in the currency crosses.

• It is important to compare and contrast relative equal highs or lows of different currency pairs to identify the strongest and weakest pairs.

• Look for strong versus weak currencies to find potential trading opportunities.

New Section

The speaker explains that while carry trade ideas are based on interest rate differentials, they may not always hold true. They provide an example using EUR/USD.

Carry Trade Ideas and Interest Rate Differential

• Carry trade ideas involve buying a currency with a higher interest rate and selling a currency with a lower interest rate.

• However, this strategy does not always guarantee upward movement due to interest rate differentials.

• The speaker uses EUR/USD as an example where interest rates alone did not predict the observed price movements.

• This year has been challenging for trading due to various factors such as global illness and political events.

New Section

The speaker reflects on their experience as a trader during a challenging year and emphasizes the need for adaptability and managing risk effectively.

Challenging Year for Trading

• This year has been particularly difficult for trading due to conflicting signals caused by various factors such as global illness and political events.

• Traders should not solely rely on classical trading techniques or concepts like interest rate differentials during unusual market conditions.

• The speaker has learned a great deal about themselves as a trader and has become more risk-averse.

• It is important to adapt to the current market environment and rely on other indicators or techniques for trading decisions.

• Despite the challenges, the speaker's teachings have still held up well in this environment, demonstrating the importance of adaptability.

New Section

The speaker discusses their increased appreciation for risk management and highlights the importance of making informed trading decisions.

Appreciation for Risk Management

• The speaker now has a greater appreciation for risk management, possibly due to getting older and having more people under their guidance.

• They emphasize the need to talk about risk and manage it better in trading.

• This year's challenging market conditions have highlighted the importance of making informed trading decisions based on available information.

• Conflicting signals may require traders to make difficult determinations, but it is crucial to manage risks effectively.

• Despite the difficulties, the speaker's teachings have continued to yield positive results overall.

New Section

In this section, the speaker discusses the analysis of metals such as gold and silver.

Analyzing Metals

• The speaker suggests looking at metals like gold and silver for analysis.

• Generally, there is a formation or pattern that can be observed in these metals.

• High-grade copper, palladium, and platinum have their own unique characteristics. There has been a separation between these metals over time.

New Section

This section focuses on using the concept of analyzing price movements to trade agricultural commodities.

Trading Agricultural Commodities

• The speaker shares an example of using this concept to analyze soybeans, which resulted in a significant move of over ten thousand dollars per contract.

• While corn and wheat also experienced price increases, soybeans showed strong leadership in the market.

• The technique of reading price without relying on indicators was used to identify potential trading opportunities. Trend lines were used as visual aids but not relied upon for trading decisions.

New Section

This section demonstrates how to use overlays and opacity settings on charts for better visualization.

Using Overlays and Opacity Settings

• The speaker adds an overlay line on the chart for the Australian dollar (AUD) against the New Zealand dollar (NZD).

• Adjusting the opacity setting allows for better visibility of divergence patterns between AUD and NZD.

• By observing divergence patterns, such as higher highs in AUD compared to NZD's lower lows, one can gain insights into relative strength and weakness between currencies.

New Section

This section explains the significance of divergence patterns in currency pairs and how they can be used for trading decisions.

Understanding Divergence Patterns

• Divergence patterns, such as a lower low in one currency while another currency makes a higher low, indicate relative strength and weakness between the two currencies.

• The speaker emphasizes that understanding these patterns is crucial for making informed trading decisions.

• By identifying a strong currency and pairing it with a weaker currency, traders can take advantage of the underlying bullishness or bearishness in their directional premise.

New Section

In this section, the speaker reflects on teaching market analysis and clarifies that valuable information can be found both in free resources like YouTube videos and paid mentorship programs.

Teaching Market Analysis

• The speaker expresses their passion for teaching market analysis and sharing insights beyond their mentorship program. They emphasize that valuable information can be found on their YouTube channel as well.

• While there may be differences between free resources and paid mentorship programs, the intention is not to withhold knowledge but to highlight the additional value provided through mentorship.

New Section

This section highlights the effectiveness of using SMT divergence analysis in range-bound markets.

SMT Divergence Analysis in Range-Bound Markets

• The speaker demonstrates how SMT divergence analysis works particularly well in range-bound markets. They recommend beginners start with this approach when learning about market analysis.

• While other models are suitable for trending markets, range-bound markets provide clearer setups for SMT divergence analysis.

New Section

This section concludes the video by summarizing the importance of understanding currency relationships and divergence patterns in trading decisions.

Importance of Currency Relationships and Divergence Patterns

• The speaker reiterates the significance of observing currency relationships, such as when one currency fails to make a lower low while another makes a higher low. This indicates buying strength in the former currency.

• Understanding these patterns allows traders to identify potential stop runs and find correlated forex pairs that align with their directional premise.

• The speaker acknowledges that the video may have been overwhelming for some viewers but emphasizes their passion for sharing market insights and teaching others about trading strategies.

Relationship between Higher Highs and Lower Lows

The speaker discusses the relationship between higher highs and lower lows in the Australian dollar. They explain that if there is a lot of selling in the Australian dollar, it indicates heavy distribution in the market.

Understanding Institutional Selling

• Institutional selling creates cracks in correlation or divergence.

• Heavy selling in any asset shows an overwhelming desire to sell on an institutional level.

• Deviation between higher highs and lower lows indicates heavy distribution.

Larry Williams' Relative Strength Market Analysis

• Larry Williams introduced relative strength analysis.

• His book "How I Made a Million Dollars Trading Commodities" provides valuable insights.

• The concept involves comparing the actual price action of different markets to determine relative strength.

Smart Money Technique

• The speaker refers to Larry Williams' technique as a smart money tool.

• This technique can be applied at every liquidity pool of importance.

• It helps identify accumulation and distribution patterns.

Blending Relative Strength Analysis with Dow Theory

The speaker explains how they blended Larry Williams' relative strength analysis with Dow Theory to gain a better understanding of market turning points.

Influencer: Larry Williams

• Larry Williams stimulated the speaker's thought process regarding market analysis techniques.

• The speaker credits him for their pursuit of understanding market dynamics.

Deciphering Market Phenomena

• The speaker sought recurring phenomena that could indicate major turning points in the market.

• By blending relative strength analysis with Dow Theory, they found a way to decipher these phenomena.

Using Price Action Alone for Accumulation and Distribution Analysis

The speaker emphasizes using price action alone, without indicators, to analyze accumulation and distribution patterns in the market.

Price Action vs. Indicators

• Price action alone can provide insights into accumulation and distribution.

• The speaker demonstrates how overlaying charts can reveal relationships between different markets.

Price Action Model

• The speaker presents a complete price action model that can be used in various trading scenarios.

• This model is scalable and applicable to different time frames and markets.

Understanding Heavy Distribution and Manipulation

The speaker explains the concept of heavy distribution and manipulation in the market, highlighting its impact on traders' behavior.

Cracking Correlation

• When there is a cracking correlation, heavy distribution is occurring in the marketplace.

• In this scenario, the Australian dollar fails to make higher highs while other currencies do.

• Heavy selling indicates a belief that the Australian dollar will go lower.

Knocking Out Traders

• The rise of New Zealand dollar aims to knock out traders who use resistance levels.

• Once stops are cleared, the market drops.

A Complete Price Action Model for Trading

The speaker concludes by summarizing the benefits of using a price action model for trading.

Key Times for Market Analysis

• Range-bound markets with equal highs provide opportunities for analysis.

• Look for SMT divergence during these times to determine whether to trade higher highs or wait for a breakdown.

Versatility of Price Action Model

• The presented price action model can be applied across various trading styles and timeframes.

• It allows traders to identify accumulation, distribution, and manipulation patterns.

Conclusion

The transcript provides insights into understanding market dynamics through techniques such as relative strength analysis, blending it with Dow Theory, and utilizing price action alone. By analyzing accumulation, distribution, and manipulation patterns, traders can make informed decisions.