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ICT Charter Price Action Model 10 - Trade Plan & Algorithmic Theory
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ICT Charter Price Action Model 10 - Trade Plan & Algorithmic Theory

Trade Plan for Swing Trading: ICT Price Action Model #10

Overview of the Trade Plan

  • Introduction to ICT Price Action Model #10, focusing on a trade plan aimed at achieving 50 to 75 pips per week through swing trading.
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  • Emphasis on the five stages of trade plan development: preparation, opportunity discovery, trade planning, trade execution, and trade management.

Preparation Stage

  • Importance of noting medium and high impact events in the market; understanding how these events influence weekly price ranges.
  • Analysis of historical data ranges (20, 40, and 60 days) to identify potential liquidity runs for entry and exit points.

Opportunity Discovery

  • Identification of current dealing ranges by noting the highest high and lowest low over selected trading days.
  • Focus on finding 50 to 75 pip ranges that align with bullish or bearish institutional order flow for liquidity targeting.

Trade Planning

  • Strategy involves looking for convergence between market manipulation and price movements opposite to the intended bias during volatility injections from economic news.
  • When bearish, target buy-side liquidity pools; when bullish, focus on sell-side liquidity pools based on anticipated market behavior.

Trade Execution

  • For bearish trades: anticipate a buy-side liquidity pool raid during key market openings (London/New York).
  • For bullish trades: expect a sell-side liquidity pull during similar key market openings.

Trade Management Strategies

Short Trade Management

  • Use sell limit orders with PD array convergence minus 5 pips as entry points; aim for a primary objective of capturing 50 pips.

Long Trade Management

  • Similar strategy applies for long trades using buy limit orders with PD array convergence plus 5 pips as entry points; also targeting an initial objective of 50 pips.

Stop-Loss Management

  • Adjust stop-loss levels based on profit milestones—reduce by 25% at 50% profit and move to break-even at 75% profit achieved.

Position Size Calculation

  • Formula provided for calculating position size based on account equity, risk percentage (r%), and stop loss in pips. Example given using a hypothetical $10,000 account risking $100 per trade.

Practical Examples

Understanding Risk Management in Trading

Managing Leverage and Risk

  • Discusses the implications of using high leverage (100K) in trading, where a $10 per pip with a 20 pip framework results in a $200 risk. This exceeds the acceptable risk for maintaining 1% of capital.

Adjusting Risk Percentages After Losses

  • Advises on adjusting the risk percentage (R percent) after experiencing a full loss. If a loss occurs, reduce R percent by 50%, and only return to maximum R once half of that loss is recovered.

Building an Equity Curve

  • Emphasizes the importance of reducing R percent after consecutive wins to prepare for potential losses, aiming for a smooth equity curve rather than one with sharp declines.

Backtesting and Learning

  • Encourages backtesting various sample sets with the trading plan and suggests reviewing lessons on price action models to solidify understanding.

Price Action Model Insights

External Range Liquidity Concept

  • Introduces external range liquidity as crucial for identifying trade opportunities, particularly focusing on weekly range expansions.

Short Selling Strategy

  • Describes a strategy involving selling buy stops when expecting market downturns, waiting for short-term highs to form before executing trades.

Understanding Market Dynamics

  • Clarifies confusion around internal vs. external range liquidity by explaining how traders place stop orders above recent highs, which can be exploited when bearish trends are anticipated.

Trading Strategies Using Fair Value Gaps

Anticipating Market Movements

  • Discusses using fair value gaps to identify potential market rallies or declines based on previous price action and equilibrium levels.

Dealing Ranges Explained

  • Defines dealing ranges as consolidated areas where price action remains until significant movement occurs outside these bounds, highlighting their fractal nature across time frames.

Liquidity Considerations in Trading

Understanding Market Liquidity and Algorithmic Trading

Analyzing Market Behavior

  • The speaker emphasizes the importance of identifying where the market is likely to draw liquidity, focusing on whether the market is bullish or bearish.
  • The analysis begins with an expectation of a push higher in index futures, indicating a strategic approach rather than merely reacting to closing prices.
  • A critical aspect of trading involves recognizing when the market breaks below a defined range to target external range liquidity.

Liquidity Dynamics

  • The discussion highlights how algorithms prioritize larger pools of liquidity, suggesting that price movements are often driven by these underlying mechanisms rather than mere buying pressure.
  • Misconceptions about buying pressure causing price increases are addressed; instead, it’s explained that algorithms anticipate price levels before executing trades.

Trading Models and Patterns

  • The speaker notes that understanding dealing ranges and liquidity tagging is essential for effective trading strategies, particularly in bearish markets.
  • Emphasizing the fractal nature of trading patterns, the speaker encourages traders to recognize setups across various timeframes (e.g., second charts to hourly charts).

Simplifying Complex Concepts

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Channel: The Inner Circle Trader
Video description

Government Required Risk Disclaimer and Disclosure Statement CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN Trading performance displayed herein is hypothetical. Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance trading results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results. U.S. Government Required Disclaimer – Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with money you can’t afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results. Trade at your own risk. The information provided here is of the nature of a general comment only and neither purports nor intends to be, specific trading advice. It has been prepared without regard to any particular person’s investment objectives, financial situation and particular needs. Information should not be considered as an offer or enticement to buy, sell or trade. You should seek appropriate advice from your broker, or licensed investment advisor, before taking any action. Past performance does not guarantee future results. Simulated performance results contain inherent limitations. Unlike actual performance records the results may under or over compensate for such factors such as lack of liquidity. No representation is being made that any account will or is likely to achieve profits or losses to those shown. The risk of loss in trading can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. If you purchase or sell Equities, Futures, Currencies or Options you may sustain a total loss of the initial margin funds and any additional funds that you deposit with your broker to establish or maintain your position. If the market moves against your position, you may be called upon by your broker to deposit a substantial amount of additional margin funds, on short notice in order to maintain your position. If you do not provide the required funds within the prescribed time, your position may be liquidated at a loss, and you may be liable for any resulting deficit in your account. Under certain market conditions, you may find it difficult or impossible to liquidate a position. This can occur, for example, when the market makes a “limit move.” The placement of contingent orders by you, such as a “stop-loss” or “stop-limit” order, will not necessarily limit your losses to the intended amounts, since market conditions may make it impossible to execute such orders.