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ES Review & ICT Funded Challenge Discussion 05/04/2023
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ES Review & ICT Funded Challenge Discussion 05/04/2023

Market Analysis and Seasonal Tendencies

Introduction to Market Analysis

  • The speaker introduces a daily chart of the E-mini S&P June delivery contract for 2023, indicating a focus on market activity observed that day.
  • Comments from viewers often include both positive feedback and critiques about verbosity, highlighting the technical nature of market analysis.

Importance of Detail in Market Studies

  • Emphasizes the significance of understanding subtleties in market studies, which become clearer with experience over time.
  • Encourages students to delve into specific details shared during lectures, as they are crucial for grasping algorithmic principles governing market behavior.

Seasonal Trading Patterns

  • Discusses seasonal tendencies in trading, particularly favoring short positions in stock index futures from May into early June.
  • Introduces the adage "sell in May and go away," reflecting a historical trend where stock prices typically decline during this period.

Historical Context and Consistency

  • Shares personal experience spanning three decades observing strong seasonal tendencies influencing market movements.
  • Mentions that these patterns have been consistent year after year since 2016, reinforcing their reliability as indicators for traders.

Caution Against Overreliance on Past Performance

  • Acknowledges that while historical trends can guide expectations, they do not guarantee future performance; thus, caution is advised when trading based solely on past data.
  • Stresses the importance of combining seasonal tendencies with technical analysis to enhance trading strategies effectively.

Current Market Conditions and Technical Analysis

Non-Farm Payroll Week Considerations

  • Notes that the discussion occurs during non-farm payroll week, which can significantly impact market dynamics.

Price Action Observations

  • Analyzes recent price action where a swing high was established above previous highs before anticipating a downward movement.

Understanding Swing High and Low Dynamics

  • Describes how price movements create swing highs and lows within defined ranges, indicating potential buy or sell zones based on these formations.

Classical Price Pattern Recognition

  • Identifies current price action as forming a broadening or megaphone pattern but emphasizes the need for predictive insights rather than retrospective explanations.

Understanding Market Dynamics and Price Action

The Role of Risk Management in Trading

  • Effective risk management is crucial for making profits in trading, even with seemingly random decisions like flipping a quarter.
  • Traders should focus on price action and how the market moves towards liquidity and inefficiencies to make informed decisions.

Market Behavior: Liquidity and Inefficiencies

  • The market primarily operates by seeking out liquidity or correcting inefficiencies; if neither occurs, it will consolidate sideways.
  • An example of inefficiency is identified between two candles where the price needs to adjust to create balance.

Analyzing Specific Candle Patterns

  • A specific candle's high and low are analyzed to determine market behavior; this can indicate potential future movements.
  • The speaker shares a personal trading experience related to these patterns, emphasizing the importance of real-time analysis.

Understanding Contract Symbols and Expiration Dates

  • Explanation of futures contract symbols (e.g., ESM2023), including their expiration months (March, June, September, December).
  • Clarification on how contract symbols change as they approach expiration dates, aiding traders in tracking relevant contracts.

New Day Opening Gaps in Trading

  • Introduction of the concept of "new day opening gaps," which represent significant price differences between closing and opening prices across days.

Understanding New Week Opening Gaps

The Significance of Gaps in Trading

  • The formation of a gap is meaningful and significant; it indicates that the algorithm will revisit this area over time, potentially for weeks or months.

Introduction to New Week Opening Gaps

  • The concept of "new week opening gaps" was publicly introduced in February 2023, although the speaker has utilized it since the 1990s.

Learning and Documentation Practices

  • While there are introductory videos on YouTube about new week opening gaps, they lack depth. The speaker emphasizes the importance of understanding foundational concepts before diving deeper.
  • It is crucial to maintain a journal documenting at least five recent new week opening gaps, including Sunday’s opening price and Friday's closing price for reference.

Practical Tips for Traders

  • Keeping a record of previous Friday's closing prices alongside Sunday’s opening prices allows traders to have essential information readily available when needed.
  • A personal anecdote highlights the importance of maintaining organized notes; losing track can lead to confusion during trading sessions.

Application Across Different Markets

  • This method applies broadly across various assets like Forex but not necessarily crypto or synthetic indices, which the speaker does not trade or understand well.

Historical Context and Methodology

  • In earlier years, the speaker used a three-ring binder with graph paper to document market data systematically. This practice laid the groundwork for current methodologies.

Focused Trading Approach

  • Emphasizing focus in trading strategies is vital; attempting to apply every learned concept can lead to analysis paralysis and frustration among traders.
  • It's important not to overwhelm oneself by trying to integrate all knowledge into current trading situations; instead, limit focus to one or two key ideas within a bias.

Timing Considerations in Trading

  • Certain days are deemed unsuitable for trading by new traders, particularly Thursdays and Fridays during non-farm payroll weeks due to increased difficulty navigating market movements.

Non-Farm Payroll Trading Strategies

Understanding Non-Farm Payroll Events

  • It is advised to avoid trading during non-farm payroll events due to unpredictable market behavior that can lead to significant losses.
  • The speaker references a "blue shaded area" indicating fair value, which is crucial for traders who have previously engaged with the content shared on social media.

Analyzing Market Charts

  • A bearish order block is identified, emphasizing the importance of recognizing specific patterns in market charts.
  • The discussion includes examining swing lows and old imbalances, highlighting how these factors influence trading decisions.

Charting Techniques

  • The speaker critiques common charting practices where traders zoom in too much, suggesting a more compact view for better clarity on gaps and imbalances.
  • Emphasizes the need for clear visibility of price action by organizing chart space effectively to identify fair value gaps easily.

Identifying Key Price Levels

  • If prices drop below established daily imbalances, it indicates potential areas for further trades; this requires understanding previous price actions and ranges.
  • Transitioning to lower time frames allows traders to pinpoint critical levels such as order blocks and volume imbalances that inform trading strategies.

Volume Imbalance Insights

  • A specific order block at 4099.50 is highlighted, showing its relevance based on historical data from May 4th.
  • The concept of volume imbalance is introduced as a key factor in determining market efficiency between two price points.

Algorithmic Trading Perspective

  • The speaker contrasts retail trading mindsets with algorithmic approaches, arguing that markets are coded to reprice efficiently at certain levels.
  • A micro fair value gap is discussed as an essential element in understanding market movements and pricing dynamics.

Trading Behavior Analysis

  • New traders often lack proper order management skills (e.g., using stop or limit orders), leading them to rely heavily on market orders instead.

Understanding Order Flow and Market Dynamics

Introduction to Order Types

  • The speaker discusses the importance of understanding different order types, particularly limit orders, in trading. They emphasize that this knowledge is crucial for beginners who may encounter challenges with precision in their trades.

Execution Insights

  • The speaker assures viewers that they will demonstrate actual trade executions throughout the video, reinforcing the authenticity of their teachings by offering a complete history of trades.

Teaching Order Entry

  • A commitment is made to educate viewers on various order entry methods including market orders, limit orders, and stop orders. The speaker plans to provide practical examples of these concepts in action.

Algorithmic Trading Mechanics

  • The discussion shifts to how algorithms operate within market dynamics. The speaker explains that algorithms aim to create efficiency by filling gaps between price levels during trading sessions.

Price Action Analysis

  • An explanation is provided regarding how prices are offered multiple times as markets fluctuate. This highlights the algorithm's role in maintaining a continuous flow of buy and sell orders across different time frames.

Market Orders and Liquidity

Understanding Market Orders

  • The speaker elaborates on market orders and their impact on price movements. They explain how these orders can trigger significant changes when liquidity pools are hit.

Misconceptions about Retail Trading Tools

  • There’s a critique of common retail trading tools like level two data and depth of market analysis. The speaker argues that relying solely on these tools can lead to misconceptions about real order flow dynamics.

Order Blocks and Volume Imbalances

Identifying Key Price Levels

  • Discussion centers around identifying critical price levels such as closing prices and high points within specific candles. These levels are essential for understanding potential future movements in the market.

Concept of Volume Imbalance

  • The concept of volume imbalance is introduced as a proprietary idea from the speaker, emphasizing its significance in analyzing market behavior beyond traditional methods found in textbooks.

Premium vs Discount Areas

Understanding the New Day Opening Gap

Concept of Gaps in Trading

  • The speaker introduces the concept of the "new day opening gap," emphasizing that gaps are not a new idea but part of a broader trading theory.
  • The focus is on understanding how large institutions and fund managers perceive market movements, contrasting this with retail trader logic.

Sarcasm and Communication Style

  • The speaker acknowledges their use of sarcasm on social media, which may not always translate well across language barriers.
  • They describe their humor as akin to "Dad jokes" aimed at traders, indicating a light-hearted approach to serious topics.

Analyzing Market Movements

  • A specific example from March 5th illustrates how new week opening gaps can be identified and analyzed for trading opportunities.
  • The speaker encourages viewers to closely observe chart patterns without explicit guidance, promoting independent analysis.

Understanding Candle Patterns

  • Discussion about candle formations highlights the importance of recognizing price action between closing prices and opening prices, noting areas with no trading activity (wicks/tails).
  • These wicks are treated as gaps by algorithms, suggesting that they play a significant role in market behavior.

Order Flow Dynamics

  • The need for order flow analysis is emphasized; both buy-side and sell-side movements must be considered for comprehensive market understanding.
  • The speaker critiques simplistic interpretations of gap closures, advocating for deeper insights into market dynamics rather than surface-level observations.

Market Behavior Insights

  • Observations about bearish trends highlight how specific price levels (e.g., 40.68.75 mentioned by ICT) can influence trader sentiment and expectations.
  • Emphasizes the importance of experience in interpreting market signals correctly, urging followers to trust his expertise based on years in the field.

Economic Events Impacting Trading

  • Reference to employment numbers released at 8:30 AM indicates how economic data can affect market rallies and subsequent rejections at key levels.

Understanding the Opening Range Gap in Trading

Overview of Trading Concepts

  • The speaker introduces the concept of the "overnight gap," clarifying it as the "opening range gap" and mentions upcoming lectures that will delve deeper into this topic.
  • The speaker emphasizes their expertise in trading, asserting that they have authored unique concepts that cannot be taught better by anyone else.

Addressing Misconceptions

  • The speaker responds to inquiries about other traders teaching their content, stressing that while many are interested, learning directly from them is preferable.
  • They highlight the importance of due diligence for students when evaluating others who claim to teach their methods.

Real vs. Demo Trading

  • A distinction is made between hindsight analysis and real-time trading, with a focus on live audience engagement without safety nets.
  • The speaker discusses demo accounts used in funded challenges, noting that all traders start with demo accounts before transitioning to real trading.

Personal Experience and Lessons Learned

  • The speaker shares a personal anecdote about their son failing multiple times at trading due to lack of knowledge but now being more teachable after those experiences.
  • They emphasize humility as a necessary trait for learning and improving in trading.

Clarifying Funding Account Misunderstandings

  • The speaker addresses skepticism regarding their use of demo accounts for training purposes, explaining that even funded accounts begin with demo trading.
  • They express reluctance to partner with funding companies despite offers, preferring not to appear biased or affiliated.

Execution Logic in Trading

  • The importance of understanding execution logic is highlighted; the speaker shows how trades were executed based on specific market conditions rather than relying on market replay features.
  • They explain how they communicated bearish sentiments through social media platforms like Twitter during significant market movements.

Market Analysis Insights

  • The speaker reflects on numerous requests for funded account demonstrations while reiterating confidence in their strategies and executions during trades.
  • Specific trade executions are discussed, showcasing how positions were built without hitting maximum loss limits set by funding companies.

Trading Strategy Insights

Overview of Trading Decisions

  • The speaker discusses a trading strategy involving an old low and how they managed to cut off losses while still securing profits on a balance.
  • Upon reaching the new week opening gap from March 5th, the speaker re-entered the market with a short position, employing a pyramiding strategy by scaling in with ten contracts.
  • The typical approach involves starting with six contracts, followed by three and then one, allowing for flexibility based on market conditions.

Position Management and Profit Taking

  • As the market traded downwards, partial profits were taken at strategic levels; this included monitoring specific lows to determine exit points.
  • The target was set below a significant low (4063.50), indicating careful planning around key price levels for potential sell-offs.

Market Analysis Techniques

  • A focus on breakpoints is highlighted; the speaker identifies a breaker pattern that indicates potential selling opportunities within specific price ranges.
  • The analysis extends to lower time frames to confirm breakpoints and validate entry points for short positions.

Timing and Market Conditions

  • Emphasis is placed on timing trades around significant events like non-farm payroll Fridays, which can influence market behavior.
  • During lunchtime trading hours in New York, there’s an expectation of stop runs leading to potential rallies; this influences decision-making regarding profit-taking.

Re-entry Strategies and Gaps

  • After being stopped out at profitable levels (4072.25), the speaker discusses re-entering trades based on previous gaps observed in the market.
  • There’s skepticism towards common beliefs about gap filling; instead, the speaker argues that algorithms often refer back to these price levels repeatedly.

Execution of Short Positions

  • The importance of understanding market dynamics is emphasized as the speaker critiques conventional wisdom regarding gaps and their significance in trading strategies.
  • A specific trade execution example illustrates how orders are placed just below critical candle lows to maximize profit potential while minimizing risk exposure.

Market Dynamics and Trading Insights

Understanding Market Movements

  • The discussion revolves around the market's behavior when it shifts from sell-side to buy-side, emphasizing the importance of short-term highs and midpoints between high and low prices.
  • The speaker highlights the significance of old order flow levels, indicating that current price movements are influenced by previous liquidity pools rather than isolated price points.
  • A reference is made to relative equal highs and their connection to significant historical levels, such as the March 5th, 2023 new week opening gap high, suggesting a pattern in market gravitation towards these levels.

Critique of Common Trading Practices

  • The speaker critiques common trading tools like market profiles and VWAP (Volume Weighted Average Price), arguing that they do not accurately measure price action intricacies.
  • Personal experiences with live accounts are shared, illustrating how quick gains can be achieved through strategic trading within a short timeframe.

Performance Metrics in Trading

  • The speaker discusses aiming for a target return of six percent per month, explaining that while this may not always be achievable, it could lead to doubling an account over time.
  • Emphasis is placed on transparency during live trading sessions where every trade is called out in real-time without any edits or deletions.

Demonstrating Trading Success

  • Details about specific trades are provided to showcase successful strategies; the speaker mentions starting with a hypothetical funded account challenge and exceeding profit expectations significantly.
  • Transparency continues as the speaker encourages viewers to pause videos for detailed insights into each trade executed.

Teaching Philosophy and Student Engagement

  • The speaker emphasizes hands-on teaching methods by involving his son in executing trades, demonstrating practical learning alongside theoretical knowledge.
  • A strong stance against using trade copiers is taken; the speaker believes in individual skill development rather than mimicking others' trades.

How to Become an Independent Trader

Teaching Independence in Trading

  • The speaker emphasizes the importance of learning to trade independently, stating that they will stop teaching by November 2023 and want their life back.
  • They express confidence in their trading abilities, claiming they can perform well in any market condition and achieve results with minimal trades.
  • The speaker provides models for success, asserting that many traders mislead others for personal gain or attention, contrasting this with their own commitment to free education.

Results and Partnerships

  • They highlight the success of their students who are now making real money through trading, emphasizing the potential for partnerships even without initial funding.
  • The speaker discusses the legality of forming partnerships where profits from trading can be split, stressing that skill is more important than capital.

Transparency and Challenges

  • They assure listeners that all results shared are genuine and not manipulated or hidden, dismissing challenges as trivial compared to their capabilities.
  • The speaker critiques requests for complex setups or multiple accounts, insisting they can achieve significant results with a single account.

Mentorship Dynamics

  • They describe mentoring their son in trading while maintaining transparency about performance issues he faces due to his lack of experience.
  • The speaker explains how they guide their son through mistakes rather than resetting accounts, highlighting the importance of learning from errors.

Final Thoughts on Trading Challenges

  • They mention using various charts and strategies consistently while allowing their son to execute trades at random times for practical learning experiences.

Understanding Trading Concepts

The Challenges of High-Frequency Trading

  • New traders should avoid high-frequency trading as it requires advanced navigation skills and understanding of market dynamics.
  • Initial exposure to trading charts can be overwhelming; they often appear as a foreign language without proper guidance.

Navigating Time and Price in Trading

  • Key concepts help traders understand the logical presentation of time and price, emphasizing that market phenomena are repetitive over time.
  • Upcoming lectures will focus on "New Week Opening Gap" and "New Day Opening Gap," aimed at providing foundational knowledge for new traders.

Teaching Philosophy: Beyond Magic Tricks

  • The goal is to impart knowledge rather than showcase tricks; learning should resonate personally with each trader.
  • Emphasis on understanding core concepts like premium discount, liquidity, and specific gaps in the market for effective trading strategies.

Market Behavior Insights

  • Observations from past trading days illustrate that even during choppy markets, disciplined trades can be executed successfully.
  • New traders may struggle with traditional methods (e.g., v-wop, Elliott wave), which may not align with actual market behavior.

Commitment to Education and Community Support

  • The instructor expresses indifference towards skepticism but remains committed to teaching those willing to learn.
Playlists: 2023 ICT Mentorship
Video description

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.