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ICT Mentorship Core Content - Month 06 - Keys To Selecting Markets That Will Move Explosively
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ICT Mentorship Core Content - Month 06 - Keys To Selecting Markets That Will Move Explosively

Keys to Selecting Markets that Move Explosively

In this section, the speaker discusses the hallmarks of explosive swing trades and how to select markets with the highest probability for explosive price moves.

Market Profiles

  • Look for market profiles where all four asset classes (interest rate markets, stocks, commodities, and currencies) are trending.
  • At least two of the four asset classes should show a profile where there's a trending environment underway.

Intermarket Analysis Confluences

  • Use intermarket analysis confluences to confirm trade ideas.
  • If expecting a bullish dollar, look for commodities at resistance levels across major sectors in commodity markets. Commodities will fail to make higher highs even if they break out. Commodities will easily break their lows or fail to make a rally.
  • If expecting a bearish dollar, look for commodities to have very little resistance in terms of wanting to go higher and strong support levels. Highs are going to be broken on commodities and lows are going to be supported.

COT Hedging Program Alignment

  • Look back at the last 12 months on net positions held by commercial traders in the COT hedging program.
  • Divide the range in half and define it as bullish or bearish.
  • The more commercials holding net long positions in their hedging program, the more likelihood you're going to have an explosive move in your favor with a bullish foreign currency idea within a weaker dollar.

Open Interest

  • Track smart money movement of buying and selling through open interest.
  • Provides insight gleaned from commitment to traders that cannot be seen in spot market.

Volatility Filters

In this section, the speaker talks about volatility filters and how they can be used to gauge when the market is quiet or experiencing a contraction in ranges. This is an indication that there may be a big explosive move coming up.

Using Volatility Filters

  • Volatility filters are used to gauge when the market gets quiet or experiences a contraction in ranges.
  • A contraction in ranges indicates that there may be a big explosive move coming up.
  • If there is a seasonal tendency for the market to rally higher and volatility starts to squeeze into small little ranges, there's going to be a high probability that moves going to be explosive to the upside.

Major News Headlines

In this section, the speaker talks about how major news headlines can impact trading decisions.

Impact of Major News Headlines

  • If we have a condition staged and we think that the Market's going to go higher based on our major market analysis, markets as a whole on the four categories or asset classes stocks interest rates Commodities and currencies if two of the four groups are in trending environments because one can always be held in consolidation not really trending if we see at least half of the four major asset classes trending uh we we are in a good swing trading model environment.
  • If we are bullish on an environment or particular market and a news event comes out and starts jawboning it weak it's not as bullish or something's wrong with that idea don't expect it to go higher anything talking head would have in their headline that to me is fuel in the fire if I'm bullish so if I see there's headlines at a time when I want to be a buyer that to me helps my trade many times to be explosive in nature.

Major Market Analysis

In this section, the speaker talks about major market analysis and how it can be used to identify trending markets.

Identifying Trending Markets

  • Before getting into inter-market analysis, we have to look at whether the markets are now trending or held in consolidation.
  • We're looking for at least two of the categories (currencies, stocks, commodities, and interest rates) to be trending. If they are trending, that means that the other two may be just lagging and they're going to eventually go into a training environment too.
  • Preferably all four of them should be trending but there's not going to be times where it's going to be like that you have to demand at least just two of the major categories to be in a trending environment if that's the case then we're going to see uh swing Traders environment unfold in the markets.

Intermarket Analysis Confluences

In this section, the speaker talks about intermarket analysis confluences and how they can help traders make better decisions.

Using Intermarket Analysis Confluences

  • Commodities and stocks should be grouped together as one of those must always be in a trending environment. Currencies and interest rates should also be grouped together as one of those must always be in a trending environment.
  • One of these groups being in a training environment helps frame models that algorithms use to move price around not just in foreign exchange but also in all other asset classes with the exception of commodities which are really focused on real supply and demand factors.

Inter-Market Analysis and Confluences

In this section, the speaker discusses how to use inter-market analysis and confluences to trade Forex. He explains that if we are looking for a bullish dollar index, we should look for commodities to be at levels of resistance or an ability to rally higher. Conversely, if we are looking for a bearish dollar index, commodities would be easily trading through their old highs.

Using Commodities as Indicators

  • If we're going to be trading Forex and looking for the dollar Index to be bullish, we would look for Commodities to be at levels of resistance or an ability to rally higher.
  • Conversely, if we're looking for a bearish dollar index, Commodities would be easily trading through their old highs.
  • Commodities can indicate whether the Dollar is strong or weak relative to other markets. If they take out an old low while the Dollar is weak or expected to be weak, those lows in commodities would just be turtle soup longs.

Inter-Market Analysis and Confluences

  • Inter-market analysis suggests that we see the reflection of training environments in currencies and interest rates as well. One of those two have to be in a trending environment so between the two major asset classes we have to have at least two in a trending environment.
  • We look for training environments as a whole either stocks or commodities have to be in trending environments.
  • We use confluences by seeing these ideas across many sectors and commodities not just the CRB index that's being indicated here.

Commitment of Traders Report

In this section, the speaker discusses how to use the Commitment of Traders report to trade commodities. He explains that by looking at a range of 12 months, it gives an idea on how commercials should hedge pricing because they use the last 12 months data to frame their expectation of what may be normal or reasonable to expect going forward for the next 12 months.

Using the Last 12 Months

  • We look back over the last 12 months because hedging is usually done over a plan using the last 12 months data.
  • By looking at a range of 12 months, it gives them an idea on how they should hedge pricing because they use the last 12 months to frame their expectation of what may be normal or would be reasonable to expect going forward for the next 12 months.

Net Position

  • Many times, we're going to see long-term net short positions in a commodity through the use of the Commitment Trades Report.
  • By looking at their net position being heavily net longer and that short for instance if we're looking at a market that has a long term long natural position being held by commercials that would be seen with the red line here in this example you can see from January 2016 all the way to present they have been below zero line.

Understanding Commercials Trading Strategy

In this section, we will learn about the commercial trading strategy and how to analyze it.

Net Short or Net Long Basis

  • The commercials define a new range in the last 12 months of commercial activity.
  • They find the high level and low level of that range and divide it in half to create a new zero line.
  • If they are buying aggressively, it indicates a bullish scenario.

Open Interest

  • Open interest shows us what smart money is doing.
  • A reduction of open interest indicates short covering, which confirms a bullish scenario.
  • A decline in open interest with an increase in the red line is bullish because they are not holding onto a heavy short position.

Seasonal Tendencies

  • We want to find times when seasonal tendencies align with trending profiles for movement.

Market Analysis and Volatility Filters

In this section, the speaker discusses the market analysis and volatility filters that can be used to identify explosive price moves in a particular market.

Market Analysis

  • The speaker suggests that if there is a strong tendency for a market to go higher, there are five factors that suggest an explosive price action in that market.
  • If prices move higher, they should do so explosively and not in small ranges.
  • Major news headlines can also impact market sentiment for retail-minded traders. If bullish on a particular market, seeing headlines describing weakness or justifying why prices went down can build up market sentiment for buyers. Conversely, if bearish on a particular commodity or pair or market, seeing headlines talking about how good it's been moving or how it's hitting all historic highs can build up bearish sentiment for sellers.

Volatility Filters

  • A volatility filter is simply a contraction idea where price moves from a large range down to a small range. This concept can be applied to monthly weekly daily or any other time frame. An inside candle or inside bar conceptually represents volatility contraction where there's high probability of the next candle being large range especially if you have conditions poised to go higher or lower.
  • The smallest Range in the last seven days is another filter that can be used along with the last three days' smallest range to frame context around trades already seen coming.
  • Inside candles or inside bars give anticipatory expectations for price explosion but don't provide timing information.

Marcus Sentiment Indicator

In this section, the speaker discusses the Marcus sentiment indicator and how it is used to determine oversold and overbought conditions in the market.

Williams Percent R Indicator

  • The Williams percent R indicator is used to determine oversold and overbought conditions in the market.
  • A 15 period Williams percent R is plotted on a daily basis.
  • Anything at or below 50 level is considered oversold and a buying area.
  • Anything above 50 level is considered overbought or a selling area.

Equilibrium Point

  • If we are at a point of equilibrium or at the 50 level wherever we left most recently whether it be overbought or oversold, go with that sentiment.

Hallmarks for Explosive Swing Trades

  • These ideas will be referred to again later on in the mentorship when discussing Mega trades.
  • An outline will be given in lesson eight to incorporate some of these ideas.
  • The actual swing trading model will be broken down from step one to execution and management on the trade until next lesson.
Playlists: 2017 ICT Private Mentorship Core Content Month 06
Video description

2017 Premium ICT Mentorship Core Content Video Lectures Audio and visuals are exactly as they were distributed in February 2017. 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.