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ICT Charter Price Action Model 4 \ Trade Plan & Algorithmic Theory
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ICT Charter Price Action Model 4 \ Trade Plan & Algorithmic Theory

Price Action Model Number Four: Position Trading Trade Plan

Overview of the Trade Plan

  • Introduction to Price Action Model number four, focusing on position trading with a target of 500+ pips per trade.
  • The process begins with an overview slide that outlines the stages: preparation, opportunity discovery, trade planning, execution, and management.

Preparation Stage

  • Emphasis on using the economic calendar to identify medium and high-impact events for the upcoming week.
  • Analysis of current market structure in relation to calendar events to predict weekly price ranges; focus is primarily on monthly charts and seasonal tendencies.

Understanding Market Dynamics

  • Discussion on how daily economic drivers can create volatility that may lead to longer-term trades; integration of smaller time frame strategies into higher time frame plans for risk management.
  • Importance of maintaining consistent protocols across different models while refining them for specific processes.

Data Range Determination

  • Establishing ITA data range by analyzing the highest high and lowest low over 20, 40, and up to 60 trading days (excluding Sundays).
  • This data range will inform the current dealing range used in further analysis.

Liquidity and Price Movement

  • Identifying potential liquidity draws within the established dealing range; aiming for a minimum target of 500 pips.
  • Focus on PD arrays aligned with monthly bias—premium arrays when bullish and discount arrays when bearish—to anticipate price movements based on economic events.

Seasonal Tendencies in Trading

  • Recognition of seasonal tendencies as critical components in long-term position trading; reference to previous teachings about commodity markets.
  • Encouragement to analyze historical seasonal trends during quieter market periods (e.g., January after Christmas break).

Risk Management Considerations

  • Acknowledgment that while seasonal tendencies provide guidance, they are not foolproof; importance of having stop-loss measures in place.

Quarterly Trading Strategies

Overview of Quarterly Shift Model

  • The trading plan is designed for moves lasting around two months or longer, focusing on quarterly shifts discussed in core content.
  • Emphasis is placed on identifying high-probability seasonal trends that indicate strong bullish or bearish movements, targeting setups that could yield 500 pips or more.

Identifying Market Conditions

  • Traders should limit their focus to the highest probability seasonal tendencies and analyze monthly and weekly charts to frame a 60-day ifto data range.
  • When bearish, identify discount arrays within the 20, 40, and 60-day ifto data ranges; when bullish, identify premium arrays in the same ranges.

Trade Execution Strategies

  • Look for convergence of manipulation and price against trade bias during times of expected volatility; short premium fair value gaps while buying discount fair value gap setups when bearish.
  • Frame short entries when prices rise into a 4-hour premium fair value gap with a standard deviation no greater than +3 during London or New York open.

Risk Management Techniques

  • Implement scalping protocols to reduce risk further; target sell-side liquidity below old daily/weekly lows when bearish and buy-side liquidity above old highs when bullish.
  • Set initial objectives at logical points (e.g., 500 pips), using multiple daily/weekly lows/highs as reference points for potential trades.

Weekly Profile Considerations

  • Note the European opening price on Tuesday (or Monday/Wednesday); filter all longs at or below this level overlapping with the 4-hour discount fair value gap.
  • Generally expect a low of the week to form between Monday and Wednesday's New York open, with higher odds on Tuesday based on historical patterns.

Entry Points and Order Flow

  • Anticipate institutional order flow entry drills forming inside retracements during key market openings (London/New York).
  • For bearish positions, filter shorts at or above European opening prices overlapping with the 4-hour premium fair value gap; use sell stop raids for entry strategies.

Order Execution Guidelines

  • Place sell limit orders for short positions using standard deviations minus five pips as entry prices; manage multiple orders effectively.

Trade Management Strategies

Closing Positions and Entry Strategies

  • Close 80% of all orders or total position when achieving 500 Pips, then assess if there's potential for further price movement.
  • For short entries, monitor premium array and standard deviation convergence; place stop loss above the high plus 25 Pips.
  • When entering long positions, use a buy limit order at the standard deviation and PD array convergence plus 5 Pips as the entry price.
  • Set objectives for multiple orders: one at 100 Pips profit and another at 250 Pips profit to manage trade effectively.

Scaling Out of Trades

  • Ensure that each order targets specific profits (e.g., first at 100 Pips, second at 250 Pips), while managing risk by closing portions of trades.
  • After capturing significant profits (e.g., 500 Pips), close out 80% of the remaining position to minimize risk on the last portion.
  • If using four orders, consider taking profits progressively: one at 100 Pips, another at 250 Pips, and a third at 500 Pips while letting the last run with reduced risk.

Risk Management Techniques

  • For long entries, set stop loss below the low minus 25 Pips; re-enter if stopped out. Monitor for secondary entry opportunities without fear of multiple attempts.
  • Adjust stop losses based on profit milestones: reduce by 25% when reaching 25% of expected objective; move to break even after hitting 75%.

Trade Execution Considerations

  • Avoid over-managing trades; take partial profits as they become available to mitigate potential losses from market gaps beyond stop losses.
  • Use a consistent stop loss strategy (e.g., starting with a lower percentage like 1%) to avoid excessive drawdowns in long-term trading scenarios.

Equity Management Principles

  • If experiencing losses in demo accounts, reduce risk per trade by half until recovering previous losses. This helps smooth equity curves rather than creating jagged declines.
  • After winning streaks (five consecutive wins), also drop risk percentage by half to prepare for inevitable losses while maintaining an upward equity trajectory.

Analyzing Market Trends

  • Utilize commitment of traders reports alongside historical data analysis to inform trading decisions. Focus on bearish foreign currency trends against bullish dollar movements.

Understanding Seasonal Tendencies in Forex Trading

Introduction to Seasonal Tendencies

  • The speaker emphasizes the importance of seasonal tendencies in trading, noting that they are strong and generally repeat annually.
  • A reference is made to a study PDF from month five, encouraging viewers to review the euro dollar's seasonal tendency, particularly its behavior in April.

Analyzing Euro Dollar Trends

  • The speaker discusses how historical patterns indicate that the euro dollar tends to make a high in April before declining into May.
  • A monthly chart for March 2022 is presented, highlighting expectations for lower prices based on previous commentary.

Monthly Range Expectations

  • The model anticipates an expansion of the monthly range either higher or lower; currently, the expectation is for a downward movement.
  • The analysis indicates that April has performed as expected with tools provided by the speaker.

Simplifying Trading Models

  • Viewers are encouraged to simplify their trading models rather than overcomplicating them with too many tools or concepts.
  • Model number four is introduced as a streamlined approach, referencing techniques from established trading literature.

Trading Strategies and Execution

  • The discussion includes strategies for entering trades when old highs are violated while maintaining a bearish outlook on euro dollar movements.
  • Emphasis is placed on placing sell stops at specific price points without needing constant market monitoring.

Managing Trade Risks

  • The speaker addresses concerns about being unable to monitor trades due to job commitments and reassures viewers about participating without day trading.
  • A methodical approach is suggested where traders can set up trades ahead of time using stop orders based on market movements.

Conclusion: Autopilot Trading Strategy

  • The strategy involves setting sell stops at calculated levels while managing risk through appropriate stop-loss placements.

Trading Strategies and Seasonal Tendencies

Protective Buy Stop Strategy

  • A protective buy stop should be placed at the high of the current candle. If this level breaks down, an alert is necessary to notify you that your position has been filled, with a stop maintained at that high.
  • The strategy involves targeting the old monthly low while considering SMT (Smart Money Technique) Divergence and offset distribution for effective targeting.

Understanding SMT Divergence

  • The model highlights a bearish SMT Divergence where the Euro is not making higher highs compared to its correlated pair, the Pound.
  • In trading scenarios, risk management is crucial; for instance, if risking 2%, it should be calculated based on equity and pip value to determine leverage when shorting.

Offset Distribution Explained

  • Offset distribution involves identifying a low and waiting for price action to drop below it again. This technique aims to maximize profit by exploiting market behavior around perceived lows.
  • When price breaks below a short-term low, traders can expect sell stops to accumulate beneath this level due to market participants attempting to buy at what they perceive as a low.

Utilizing Daily Charts for Trading Decisions

  • While daily charts provide significant insights into offset distribution levels, four-hour charts can also be utilized effectively without losing sight of broader trends.
  • Seasonal tendencies play an important role in trading strategies; understanding these patterns can lead to more informed decisions during specific times of the year.

Importance of Seasonal Tendencies

  • Traders are encouraged to recognize seasonal tendencies as "treasure maps" that guide their trading decisions throughout the year. Patience is key in waiting for optimal trading conditions.
  • Engaging in trades only during favorable seasonal periods can prevent frustration and enhance overall trading performance by aligning with market behaviors.

Strategic Trade Execution

  • An example scenario illustrates how bullish sentiment on the dollar leads to bearish outcomes on the Euro. Traders should consider taking partial profits as prices approach significant levels like 1.04.
  • By employing strategic trade execution based on seasonal tendencies, traders could achieve substantial returns—illustrated by a potential 14% gain from a single trade while managing risk effectively.

Conclusion: Timing Your Trades Wisely

Playlists: ICT Charter Content
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.