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ICT 2024 Mentorship \ NQ Tape Reading \ October 15, 2024
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ICT 2024 Mentorship \ NQ Tape Reading \ October 15, 2024

Forex and Indices Trading Insights

Introduction to the Session

  • The speaker greets the audience and requests confirmation of audio clarity, indicating an interactive session.
  • Emphasizes that the teaching is relevant for both Forex and indices, not limited to stock index futures.

Analyzing Daily Charts

  • Discusses a specific candlestick from July 17, 2024, as a reference point for trading objectives since the ENT shipment began.
  • Highlights key levels: low (20568), high (20646), and their significance in understanding market behavior during consolidation phases.

Understanding Market Dynamics

  • Notes the importance of distinguishing between different types of lines on charts; solid versus dotted lines represent various price levels.
  • Describes current market positioning relative to upper quadrant levels, suggesting potential bullish movement if conditions remain favorable.

Identifying Key Trading Ranges

  • Introduces concepts of daily highs/lows and opening ranges, stressing their relevance in determining market sentiment.
  • Mentions liquidity pools as critical areas that may impact trading decisions throughout the morning session.

Strategies for Bullish Markets

  • Advises on defining consolidation ranges during bullish trends by analyzing overnight price movements between midnight and 5:00 AM.
  • Explains how to identify highest highs and lowest lows within specified time frames to inform trading strategies effectively.

Utilizing Fibonacci Levels

  • Instructs on applying Fibonacci retracement tools to establish key price levels based on identified highs and lows.

Understanding the Overnight Range and Fibonacci Analysis

Defining the Overnight Range

  • The speaker explains how to draw Fibonacci levels from the highest to lowest points within a defined overnight range (1201 to 459), emphasizing its predictive capabilities.
  • It is noted that this method should not be used when the market is trending in one direction, as it applies specifically during periods of consolidation.

Market Behavior and Consolidation

  • The current market situation is described as consolidating, with no new highs or lows being established prior to the pre-market session.
  • A distinction is made between dotted lines on daily charts representing quadrants and solid dash lines indicating the overnight range.

Predictive Insights

  • Understanding these levels helps traders predict where price dynamics may occur, reducing unexpected movements in trading.
  • The speaker addresses common questions from students about predicting price proximity and emphasizes time consistency in trading strategies.

Quadrant Levels Explained

  • The speaker discusses lower, middle, and upper quadrants of the overnight range while reiterating their simplicity for traders.
  • Specific times are highlighted for reference, reinforcing why these concepts are relevant during periods of consolidation rather than trending markets.

Importance of Time Settings

  • Emphasis is placed on setting trading platforms to Eastern Time for accurate analysis; incorrect settings can lead to misinterpretations.
  • The overall market perspective remains bullish due to macroeconomic factors like election years influencing potential upward trends.

Daily Chart Reference Points

  • The discussion includes specific price levels related to daily charts that indicate significant candlestick formations and consequent encroachments based on inefficiencies or gaps in pricing.

Understanding Market Dynamics and Price Levels

Key Concepts of Order Blocks and Price Levels

  • The order block is defined as the midpoint of a specific candlestick, highlighting critical price levels for traders.
  • Emphasis on visual representation of price levels, often marked with color cues to draw attention to significant points in trading charts.
  • Smart money trading strategies dictate that prices must trade one tick below certain levels (e.g., 20,568) to create optimal buying opportunities without hindering market movement.

Market Timing and Session Transitions

  • Anticipation of price movements suggests that during market transitions (e.g., from Asian to European), prices may dip slightly below key levels for precision in execution.
  • Noting the time frame around 4:50 to 5:10 a.m. indicates a shift in market dynamics as different sessions overlap, impacting algorithmic price delivery.

Bullish Market Expectations

  • In a bullish market context, traders expect prices to react positively off identified support levels, leading to upward displacement rather than short-selling.
  • The importance of documenting chart patterns and movements is emphasized for effective learning and application by less experienced traders.

Analyzing Price Movements and Liquidity

  • Observations reveal how markets rally above relative equal highs, indicating potential buy-side liquidity resting above these points due to previous lower highs.
  • Identification of inefficiencies in pricing leads to the creation of fair value gaps which are crucial for understanding future price actions.

Fair Value Gaps and Market Reactions

  • When bullish conditions exist, fair value gaps can indicate areas where price redelivery is expected; this aligns with trader expectations for upward movement.
  • The timing of candlestick formations plays a vital role in predicting market behavior; specific times correlate with significant shifts in price action.

Conclusion on Trading Strategies

  • Traders should be aware that unexpected movements can occur after reaching certain thresholds; recognizing these patterns aids in making informed decisions.

Understanding Market Dynamics and Trading Strategies

The Concept of Fair Value Gaps

  • Discussion on the significance of fair value gaps in trading, emphasizing that they are crucial when determining market positions. The speaker notes that being below equilibrium indicates a discount.
  • Clarification that if traders do not understand their charts, they should reconsider their trading activities. The importance of recognizing specific price levels is highlighted.

Learning from Experience

  • A strong admonition to those who experiment without proper knowledge, stressing the need for structured learning to avoid financial losses. The speaker emphasizes their reputation for precision in teaching.
  • Critique of individuals who find trading concepts complicated, suggesting that such confusion reflects a lack of foundational understanding.

Timing and Market Movement

  • Explanation of how timing affects market movements; manual interventions can lead to stagnation or retracement. Emphasis on the necessity of stop-loss orders and avoiding over-leveraging.
  • Description of price behavior around fair value gaps and expectations regarding market rallies based on overnight range analysis.

Anticipating Market Volatility

  • Insight into pre-market conditions, particularly around 8:30 AM when significant news often impacts volatility. Traders are advised to be prepared for potential price runs at this time.
  • Assertion that algorithmic price delivery occurs consistently at 8:30 AM regardless of scheduled news events, which can create trader sentiment and influence market direction.

Price Behavior Analysis

  • Discussion about the likelihood of precision in upper quadrants during trading sessions; less precision is expected as prices move higher within ranges.
  • Examination of daily highs and buy-side resting orders above certain levels, indicating potential upward movement if conditions align with historical patterns.

Understanding Pre-Market Trading Dynamics

Overview of Price Action and Market Behavior

  • The speaker discusses the concept of "redelivery" in trading, emphasizing that simply returning to a previous price level does not equate to market rebalancing.
  • Acknowledges the disorganization in current market conditions, indicating a need for patience until 10:00 AM for clearer price direction.

Utilizing Overnight Ranges

  • Introduces the overnight range defined from midnight to 5:00 AM New York time, explaining how to measure price action across different quadrants (high, equilibrium, low).
  • Reminds viewers about maintaining a patient mindset and avoiding entitlement when engaging with free educational content.

Opportunities in Pre-Market Sessions

  • Highlights the pre-market session from 6:00 AM to 9:30 AM as rich with trading opportunities without needing to trade during regular hours.
  • Stresses that while there are ample opportunities, not every day will yield winning trades; emphasizes the importance of skill development over immediate results.

Understanding Market Trends

  • Discusses the significance of recognizing whether the market is trending or consolidating; this understanding influences trading strategies.
  • Explains how traders should assess their bullish or bearish stance based on overnight ranges and adjust their strategies accordingly.

Identifying Trading Levels

  • Describes how traders can identify key levels (lower quadrant, equilibrium, upper quadrant) based on prior price action data.
  • Outlines expectations for bearish scenarios where traders look for shorting opportunities above established levels.

Timing and Algorithmic Trading Insights

  • Details specific timeframes within pre-market sessions that present multiple trading opportunities linked to algorithmic behavior.
  • Emphasizes that understanding these patterns is crucial for effective trading decisions rather than relying solely on surface-level observations.

Fair Value Gaps and Market Reactions

  • Discusses fair value gaps in relation to equilibrium prices and highlights common misconceptions among traders regarding their effectiveness.
  • Encourages viewers to focus on learning rather than complaining about perceived failures in applying concepts discussed.

Preparing for Upcoming Sessions

Trading Strategies and Market Analysis

Morning Session Trading Insights

  • The speaker advises that a significant gap of 45-50 handles is the minimum threshold for trading, with a preference for 75 handles to ensure better opportunities.
  • Upon market opening, the speaker plans to trade immediately without waiting for the first fair value gap, operating under a 70% likelihood that prices will revert to half the gap if it exceeds 75 handles.
  • If the gap is small (anemic), traders should be cautious; an example is given where yesterday's closing price was weak compared to today's opening price.

Managing Trade Timing

  • In cases of weak openings, traders are encouraged to wait until 10:00 AM for clearer signals and liquidity before making trades.
  • The importance of patience is emphasized; if no clear opportunity arises based on bias or market behavior, traders should refrain from acting impulsively.

Risk Management in Trading

  • A small gap indicates a higher risk environment (50/50 delivery), suggesting that day traders may have more time available and can defer trading until later sessions.
  • Traders are advised to remove themselves from charts during low volatility periods and return at strategic times like 1:30 PM for potential opportunities.

Professional Trading Mindset

  • Professionals avoid impulsive trading; they seek optimal setups rather than forcing trades due to market activity. This approach minimizes emotional decision-making.
  • The speaker emphasizes teaching students how to remain patient and disciplined in their trading strategies, avoiding unnecessary risks.

Analyzing Market Liquidity

  • When gaps are small or anemic, it's crucial for traders to sit still rather than feel pressured to enter trades unnecessarily.
  • The speaker discusses observing specific candlestick patterns and levels of liquidity around key times (like 1:30 PM), which can indicate potential market movements.

Time-Based Trading Strategies

  • Identifying session highs and lows within specific time frames helps establish reliable patterns in market behavior over consecutive days.

Understanding Market Liquidity and Trading Dynamics

The Role of Time in Market Movements

  • The market's liquidity is influenced by specific time intervals, particularly between 1:30 and 2:00 PM, where price movements are likely to revert to established levels.
  • Observations during electronic trading hours indicate a breakdown into previous lows, suggesting the presence of liquidity that could impact future price actions.

Overnight Trends and Their Significance

  • Losing the overnight low can significantly affect the morning session's trading dynamics, indicating potential volatility.
  • Morning sessions often see price runs unless there has been a strong directional trend during the Asian session; this highlights the importance of assessing overnight ranges.

Measuring Price Levels and Market Protraction

  • If there’s no overnight trend, measuring price levels becomes crucial as it indicates whether the market is consolidating or trending.
  • Traders should focus on specific time frames (20-minute intervals around each hour) for identifying potential price runs driven by liquidity needs.

Institutional Trading Strategies

  • Large institutions manage their orders through staggered movements rather than executing all at once; this strategy helps achieve better average prices.
  • Dealers facilitate these large trades by timing their execution to optimize order flow without overwhelming the market.

Misconceptions About Market Indicators

  • Many traders rely on chart patterns without understanding underlying market mechanics; true insights come from recognizing how large entities operate within time constraints.

Understanding Market Protraction and Fair Value Gaps

Anticipating Price Action

  • The speaker emphasizes the importance of anticipating price movements leading up to market openings, particularly from 6:00 AM to 9:30 AM. This anticipation is crucial for understanding where PD arrays will form.
  • Discussion on how retail traders often abandon bullish positions due to short-term bearish price action, despite potential long-term bullish trends.

Market Behavior and Trader Psychology

  • Many retail traders are discouraged by immediate price drops, which can cloud their judgment about longer-term market trends that may still be bullish.
  • The concept of "market protraction" is introduced, describing a one-sided market movement that can last for a short duration (e.g., 30-40 minutes).

Tools for Analyzing Market Conditions

  • The speaker mentions having tools available for analyzing market protractions but notes that teaching these tools requires more time than available in the current session.
  • In cases of large consolidations without one-sided protractions, traders should focus on high and low points while adhering to higher time frame biases.

Practical Trading Strategies

  • A metaphor involving horseshoes illustrates the strategy of placing orders at key levels to secure profitable exits as prices approach those levels.
  • Emphasizes the importance of understanding fair value gaps and their relation to overnight ranges when determining entry points.

Qualifying Fair Value Gaps

  • The speaker explains how to identify fair value gaps based on specific criteria rather than ambiguous terms, focusing on timing and context within the market structure.

Understanding Fair Value Gaps and Market Dynamics

Introduction to Fair Value Gaps

  • The speaker addresses common questions from paid students, emphasizing the importance of focusing on effective strategies rather than external criticisms.
  • The primary method discussed for trading fair value gaps is highlighted as a straightforward strategy that can help traders formulate their market approach.

Learning Process and Strategy Application

  • The speaker stresses that understanding the material requires multiple reviews, as initial comprehension may be challenging due to preconceived notions about trading models.
  • As new concepts about fair value gaps are introduced, traders must adapt their thinking when market sentiment shifts from bullish to bearish.

Market Maker Models and Inversion Concepts

  • A shift in market sentiment transforms bullish fair value gaps into bearish order blocks, illustrating the dynamic nature of market roles.
  • Traders can utilize overnight ranges to set targets for partial profits or potential reversals by defining key levels within those ranges.

Analyzing Daily Charts and Candlestick Patterns

  • The speaker discusses specific candlestick patterns on daily charts, particularly focusing on significant candles like the "CB" (closed candle).
  • Key price levels are identified based on historical data, which serve as critical reference points for current trading decisions.

Trading Insights and Personal Experiences

  • A personal anecdote illustrates the balance between personal life and trading insights shared via social media platforms.
  • Observations about market behavior during an election year suggest a bullish trend, prompting traders to note important highs from previous days for future analysis.

Support and Resistance vs. Order Flow Analysis

  • The speaker clarifies that they do not rely solely on traditional support and resistance but instead focus on order flow around historical highs and lows.
  • Emphasizing the need for awareness of past daily highs/lows over recent weeks provides traders with valuable setups for making informed decisions.

Understanding Market Dynamics and Trading Strategies

The Concept of Endless Setups

  • The speaker encourages listeners to envision having access to an endless supply of trading setups that are consistent and unchanging, emphasizing the reliability of this knowledge.
  • Listeners are urged to feel excitement about these setups, which will never be exhausted, particularly when bullish trends are anticipated based on recent price highs.

Analyzing Price Movements

  • The discussion highlights the importance of identifying key price levels, such as the high from October 10th, and how traders can use these levels for analysis.
  • Observing price behavior around significant highs is crucial; a drop back into a range after reaching a high indicates potential buying opportunities.

Understanding Market Behavior

  • Traders should not rush to buy when prices return to previous highs; instead, they should wait for confirmation that the market does not want to go lower.
  • If the market shows signs of strength by not reaching relative equal lows, it suggests a bullish sentiment and readiness for upward movement.

Identifying Fair Value Gaps

  • When analyzing price drops below previous highs, traders should look for inefficiencies in pricing known as fair value gaps that may indicate future movements.
  • Volume imbalances play a critical role in understanding market dynamics; they can serve as entry points or help manage stop losses effectively.

Execution Timing and Strategy

  • The speaker shares personal execution strategies during live trading sessions, emphasizing timing and awareness of market conditions at specific moments (e.g., 8:30).

Understanding Algorithmic Price Delivery

Key Concepts in Trading Candlestick Patterns

  • The speaker emphasizes the importance of observing inefficiencies between candlestick bodies, which indicate algorithmic price delivery. This observation is crucial for making informed trading decisions.
  • The concept of volume imbalance is introduced, suggesting that traders can add to their positions when prices are within a specific range of balance, allowing for potential upward rallies or trades in fair value gaps.
  • The speaker notes the significance of timing and market conditions, particularly around 8:30 AM when algorithmic trading begins to influence market movements.

Critique of Traditional Charting Methods

  • A strong critique is directed at those who dismiss time-based charts as ineffective. The speaker argues that many lack understanding and have not been taught how to utilize these charts effectively.
  • The speaker claims to have codified a unique approach to reading candlesticks based on time elements, asserting that this method has never been taught before.

Engagement with Audience and Market Dynamics

  • There’s an acknowledgment of audience engagement through video content creation. The speaker finds humor in how others are inadvertently promoting his teachings by engaging with his content.
  • As the market fluctuates, the speaker discusses execution strategies while emphasizing that this analysis is not based on market replay but real-time trading scenarios.

Trading Strategies and Techniques

  • The discussion includes specific entry points within fair value gaps and volume imbalances, highlighting the challenges faced when trying to execute trades on short time frames like a 30-second chart.
  • Emphasis is placed on entering trades during downward market movements rather than chasing bullish trends after they have already begun.

Time Frame Preferences in Trading

  • The ideal scenario for trading involves identifying bullish candlesticks opening lower and then moving higher, indicating favorable entry points near volume imbalances.
  • Timing entries into fair value gaps requires precision; the speaker suggests refining techniques further if using limit orders for better accuracy in trade execution.
  • Preference for a 30-second chart over shorter intervals (like 15 seconds or less), as it provides cleaner price action without excessive volume imbalances complicating decision-making processes.

Entry and Trade Management Insights

Understanding Entry Points

  • The speaker discusses the importance of timing entries, indicating that they entered a trade as a down close candle formed, signaling an opportune moment to act.
  • They mention observing price movement and volume balance, which confirmed their position before expecting a significant price increase.

Trade Execution and Stop Losses

  • The speaker emphasizes the necessity of having stop losses in every trade execution, contrasting their disciplined approach with critics who do not show their trades or risk management strategies.
  • They recount a specific target (20,538), explaining how they set limit orders to exit trades efficiently while managing time constraints during personal commitments.

Market Analysis Techniques

  • The speaker describes entering trades based on market behavior observed on a 30-second chart, highlighting the need for additional information before adding more positions.
  • They explain using quadrant levels and fair value gaps to determine entry points, showcasing their analytical approach to trading decisions.

Trade Strategy During Market Conditions

Timing and Market Behavior

  • The speaker reflects on the advantages of trading over traditional education methods, suggesting that practical experience can be more beneficial than formal schooling.
  • They discuss adjusting strategies based on market conditions such as holidays affecting trading sessions and potential reversals.

Exit Strategies

  • The importance of setting limit orders just above key levels is highlighted as part of their exit strategy to secure profits without waiting for lower targets that may not materialize due to market conditions.

Fair Value Gaps and Trading Patterns

Identifying Fair Value Gaps

  • The speaker mentions annotating charts with labels for better clarity in identifying fair value gaps from previous weeks' analysis.

Trading Conditions Overview

  • A recap of various factors influencing trading decisions is provided, including understanding when certain patterns are useful or detrimental based on overnight market movements.
  • They stress the significance of recognizing larger consolidation patterns versus trending markets when planning trades.

Conclusion on Trading Strategies

Understanding Price Action and Market Dynamics

The Role of Premium and Discount in Trading

  • Trading strategies are based on premium and discount levels, which refer back to previous price ranges. This is a consistent pattern observable in charts.
  • If price action does not reflect these elements, traders should refrain from making trades. Manual intervention is advised when price dynamics do not align with highlighted PD arrays.

Fair Value Gaps and Order Blocks

  • Fair value gaps should be defined according to market bias, particularly using the overnight range as a reference for potential order block formations.
  • Timing plays a crucial role; significant market movements often occur around 8:30 AM due to algorithmic trading activity that influences prices before the market opens at 9:30 AM.

High Volume Trading Dynamics

  • During high volume periods, such as economic data releases, dealers facilitate large orders without competing directly against retail traders.
  • Large entities may not trade for profit but rather manage risk or adjust portfolios across asset classes. Dealers help execute their requirements by managing order flow effectively.

Understanding Market Movements

  • High traffic times allow for quick consumption of orders in the marketplace; however, this does not guarantee significant price movement up or down.
  • Large volumes are processed throughout the day rather than all at once. Orders are strategically broken up to maintain average costs during transactions.

Conclusion on Market Behavior

  • Despite high trading volumes and dealer facilitation, actual market prices will move independently based on broader conditions and cannot be controlled by any single entity.
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.