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ICT 2024 Mentorship \ September 04, 2024
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ICT 2024 Mentorship \ September 04, 2024

Good Morning and Market Overview

Introduction

  • The speaker greets the audience, wishing them a good morning and acknowledging it as "hump day."
  • The speaker expresses feeling lethargic and discusses the changing weather, indicating a preference for cooler temperatures.

Market Focus

  • The discussion shifts to Bitcoin, with the speaker initially confusing it with NASDAQ but emphasizes the importance of paying attention to market movements.
  • The speaker mentions analyzing daily fair value gaps from August 13, 2024, highlighting their relevance in current trading strategies.

Training Caleb: A Learning Journey

Teaching Approach

  • The speaker explains that his son Caleb is learning about trading and will be featured on his YouTube channel.
  • Emphasizes the need for engaging communication while teaching Caleb about chart annotations and trading concepts.

Audience Engagement

  • Clarifies that although it's Caleb's channel, he is being trained by the speaker; thus, viewers will receive educational content akin to lectures.

Market Analysis Techniques

Current Trading Conditions

  • Discussion of current market conditions includes a large discount gap observed during opening hours.
  • Reference to previous presentations on fair value gaps and their significance in understanding market behavior.

Trading Strategy Insights

  • Advises students to refrain from trading immediately after large range days until they gain more experience due to potential market volatility.

Navigating Market Volatility

Cautionary Advice

  • Highlights that new traders should avoid making trades right after significant price movements as markets can behave unpredictably.

Session Timing Recommendations

  • Suggestion for focusing on afternoon sessions rather than morning ones post-large range days for better outcomes.

Current Market Observations

Technical Analysis Review

  • Discusses specific price levels (e.g., mid-gap levels), indicating where traders might look for opportunities or reversals in trends.

Overall Trading Philosophy

Understanding Fair Value Gaps in Trading

Introduction to Fair Value Gaps

  • The discussion begins with the concept of fair value gaps, emphasizing their significance in trading strategies.
  • The speaker notes the importance of recognizing the first presentation of a fair value gap during market hours.

Market Behavior and Timing

  • Emphasizes that the first 30 minutes post-market open is crucial for observing algorithmic behavior; this period often sets up trade opportunities.
  • On trending days, traders have limited chances to capitalize on these setups, while non-trending days may present multiple opportunities.

Observations After Large Range Days

  • Cautions against high expectations after large range days, as morning sessions can be distorted and less predictable.
  • Suggests that flexibility is key for traders learning to navigate market fluctuations without undue pressure.

Liquidity and Market Sentiment

  • Discusses how latecomers to the market often look to short positions at opening, which can lead to liquidity being run for buy-side opportunities.
  • Highlights that bodies tend to remain within fair value gaps following large range days, but confusion may arise due to market distortions.

Key Takeaways on Midgap Trading

  • Notes a 70% likelihood that midgap levels are traded between 9:30 and 10:00 AM; encourages documenting this observation for future reference.
  • Clarifies that after a large range day, price action tends to be more uniform compared to other scenarios where it might appear muddled.

Understanding Gaps and Algorithm Behavior

  • Explains how lower openings create discount gaps likely leading towards buy-side trades; emphasizes understanding these patterns is essential.
  • Dismisses misconceptions about traps in smart money concepts (SMC), asserting clarity in algorithmic behavior rather than confusion or manipulation.

Teaching Approach and Student Engagement

  • Shares insights into teaching methods aimed at helping students grasp complex concepts like fair value gaps despite initial challenges.

Understanding Trading After Large Range Days

Importance of Timing in Trading

  • The speaker emphasizes the significance of waiting for high-probability setups after large range days, suggesting that traders should focus on afternoon sessions rather than morning trades.
  • Newer traders may struggle with premature trading decisions, leading to a cycle of buying and selling without clear strategy, which can result in emotional "tilting."

Risks and Expectations

  • Many students face financial setbacks due to over-leveraging and over-trading before fully understanding the concepts being taught.
  • The speaker stresses the importance of having rules and protocols to mitigate risks, highlighting that initial success is not guaranteed.

Celebrating Small Wins

  • It’s crucial for new traders to maintain low expectations during their first six months to a year; celebrating small milestones in their development is essential for motivation.
  • Keeping a journal or confiding in fellow students (rather than significant others) about progress can help reinforce positive learning experiences.

Learning Environment and Mindset

  • A competitive mindset among learners can be detrimental; instead, collaboration with like-minded individuals is encouraged for idea exchange without rivalry.

Technical Analysis Insights

  • The discussion shifts towards technical analysis, focusing on buy-side balance and sell-side efficiency while analyzing market ranges.
  • The speaker introduces Fibonacci settings as part of their trading strategy but humorously warns against sharing these secrets.

Market Behavior Post Large Range Days

  • Following large range days, the market often shows bearish tendencies; understanding this behavior helps traders anticipate potential movements.
  • Practical tips are provided on capturing chart images effectively during live trading sessions for better analysis later.

Contextual Understanding in Trading

  • Emphasizing the importance of context, the speaker advises against impulsive trading based solely on recent market performance without proper analysis.
  • Knowledge about opening gaps and ranges significantly aids traders in making informed decisions rather than reacting emotionally to market fluctuations.

Understanding Trading Strategies and Educator Responsibilities

The Role of an Educator in Trading

  • The speaker emphasizes the importance of demonstrating trading skills to students, highlighting that they can execute trades effectively despite not being able to trade directly with them.
  • Caution is taken after holidays due to the educator's respect for their role as a mentor, aiming to provide students with advantages by sharing lessons learned from personal experiences.
  • The speaker shares their past struggles, stating they lost significant amounts of money before mastering trading, which serves as a cautionary tale for students.

Trading Sessions and Market Behavior

  • Students are advised against trading during morning sessions immediately following holidays; however, afternoon sessions remain open for potential trades.
  • The educator explains the timing of the PM session starting at 1:30 p.m. Eastern Time and discusses market behavior around macroeconomic events occurring between 2:00 p.m. and 2:10 p.m.

Execution and Strategy Insights

  • A specific entry point is mentioned regarding short positions taken at market openings, encouraging students to refer to additional resources for clarity on strategies discussed.
  • The speaker reflects on how they would manage trades during specific time periods while emphasizing the importance of understanding execution logic behind their decisions.

Overcoming Doubts in Learning

  • New students are cautioned against underestimating themselves; many successful learners initially doubted the educator’s methods but later found value in them through experience.
  • The concept of "smart money" traps is introduced, where skepticism leads individuals to explore and ultimately embrace new trading perspectives after attempting to debunk them.

Market Analysis Techniques

  • An overview of recent market activity is provided, including initial drops followed by rallies that create fair value gaps—key concepts in understanding price movements.
  • Discussion includes how opening prices relate to previous settlement prices, explaining discount versus premium opening range gaps based on market conditions observed during regular trading hours.

Understanding Opening Range Gaps in Trading

Analyzing the Opening Range

  • The discussion begins with an analysis of the previous day's opening range, highlighting that the market opened lower and failed to reach even a quarter of the opening range.
  • A gap opening lower typically indicates a 70% chance of trading back into the middle of that gap, suggesting initial upward movement is likely.
  • When there’s a new day or week opening gap above the midpoint, it signifies a strong potential for price movement based on historical data from 1987.

Market Reactions and News Impact

  • The speaker notes significant market reactions to news events at 10:00 AM, indicating how these can influence trading behavior.
  • Emphasis is placed on identifying sell-side opportunities after hitting new day opening gaps, encouraging traders to document their observations.

Price Movement Dynamics

  • The importance of monitoring price movements within defined ranges (like blue shaded areas representing gaps) is discussed as critical for making informed trades.
  • Observations are made about sudden downward movements in price when sellers dominate, particularly after long positions fail to take profits.

Liquidity and Market Structure

  • The concept of liquidity below daily lows is introduced, explaining how traders use these levels for stop placements and market entry points.
  • A fair value area forms as prices fluctuate around key levels; understanding this helps traders anticipate future movements.

Learning from Experience

  • The speaker shares insights gained over 32 years in trading, emphasizing the importance of recognizing patterns and inefficiencies rather than relying solely on trend lines or other traditional methods.

Understanding Market Dynamics and Trading Strategies

The Importance of Perspective in Trading

  • Emphasizes the value of having a minority perspective in trading, likening it to being a predator on the outskirts of a watering hole, which allows for strategic opportunities.

Analyzing Market Behavior

  • Discusses the daily influx of traders at market opening (9:30 AM), highlighting the need for traders to identify opportunities amidst competition for resources.

Risk Assessment in Trading

  • Compares trading to hunting, stressing that traders must assess risks and understand their environment before engaging in trades to avoid potential losses.

Criteria for Successful Trades

  • Introduces specific criteria provided by his concepts that define high-probability trading conditions, emphasizing the importance of situational awareness.

Understanding Market Characteristics

  • Notes that post-large range days can lead to unpredictable market behavior, which requires careful analysis rather than impulsive trading decisions.

Navigating Misconceptions in Trading

Addressing Trader Frustrations

  • Shares experiences with students who misunderstand market dynamics; expresses relief when they leave as they may not align with his teaching philosophy.

Clarifying Market Analysis Techniques

  • Critiques common misconceptions about market analysis and emphasizes understanding how price movements work beyond popular retail strategies.

The Reality of Institutional Trading

  • Contrasts institutional trading methods with retail approaches, asserting that many claims about intraday volatility are misleading or incorrect.

Technical Analysis vs. Real Market Insights

Critique of Retail Technical Analysis

  • Dismisses traditional technical analysis tools as ineffective for serious traders, advocating instead for a deeper understanding of market mechanics without reliance on indicators.

Pure Market Observations

  • Encourages viewers to appreciate the clarity and purity of observing market behaviors without clutter from unnecessary indicators or tools.

The Role of Algorithms in Trading

Defending Algorithmic Approaches

Understanding Market Dynamics and Trader Psychology

The Nature of Market Logic

  • The speaker argues that markets are not rigged but rather operate on retail-oriented logic, suggesting that those who defend against this perspective may struggle to justify their stance.
  • Emphasizes the importance of specific liquidity points and market structures, such as the midpoint of gaps and fair value gaps, in understanding market movements.

Trader Sentiment and Behavior

  • Discusses how "Street Money" traders often mimic previous profitable strategies without understanding underlying market dynamics, leading them into traps set by smart money.
  • Highlights a scenario where traders wanting to short the market may be drawn into positions that smart money is ready to exploit for profit.

Observations on Trading Mindset

  • The speaker shares personal anecdotes about needing glasses, humorously noting that such details are irrelevant to the audience's learning experience.
  • Describes a potential upward movement in the market beyond certain thresholds, indicating a possible gap closure while reinforcing the beauty of trading principles being taught.

Mentorship Philosophy

  • The speaker expresses humility about their abilities and stresses that they do not seek adoration from students; instead, they aim for realistic expectations in trading education.
  • Encourages students to focus on specific trading models like buying at fair gaps rather than expecting to capture entire moves right away—a common misconception among beginners.

Progress Tracking in Trading

  • Stresses the importance of maturity in trading mindset; many new traders expect quick success but need to understand gradual progress through journaling and reflection.
  • Warns against believing one can be an exception in trading success; emphasizes realistic expectations based on extensive experience with common pitfalls faced by traders.
  • Advises against measuring progress solely through financial outcomes or immediate results; true growth comes from understanding concepts before applying them practically.
  • Addresses concerns from students about tracking progress amidst losses; suggests focusing on learning rather than immediate profitability as a measure of advancement.

Understanding the Mindset for Trading Success

The Importance of Mindset in Trading

  • Emphasizes that a negative mindset can hinder success, pushing it further away rather than bringing it closer.
  • Warns against rushing into trading for immediate profit without proper learning and self-reflection through journaling and observation.
  • Highlights the need to manage emotions when trades go as expected, advising against letting ego inflate one's confidence prematurely.

Learning from Experience

  • Discusses how focusing on ego can blind traders to their mistakes and prevent them from recognizing opportunities for improvement.
  • Shares insights on live trading sessions, encouraging students to focus on setups that resonate with them rather than feeling pressured to perform.

Analyzing Market Behavior

  • Explains market behavior during specific times, noting a 70% chance of returning to midgap but acknowledging that this is not guaranteed.
  • Reflects on missed opportunities due to market trends moving downward without providing buy signals, emphasizing the importance of patience.

Managing Expectations in Live Trading

  • Observes that many traders feel apologetic when they cannot find trades during live streams, which can lead to anxiety about performance.
  • Stresses the importance of waiting for high-probability setups instead of forcing trades out of pressure or anxiety.

Recognizing Market Patterns

  • Describes how successful traders accept losses as part of the process and do not let external influences dictate their trading decisions.
  • Points out that many traders become overwhelmed by rapid market movements and fail to adapt their strategies accordingly.

The Impact of Market Manipulation

  • Illustrates how post-holiday market conditions can lead to unpredictable price movements, causing frustration among traders eager to engage.
  • Compares successful trading strategies to waiting for optimal moments at a casino, highlighting the value of timing in both scenarios.

Understanding Trading Setups and Market Behavior

The Importance of Setup Timing

  • The speaker emphasizes the significance of waiting for specific trading setups, which they expect to appear consistently throughout the trading week.
  • They contrast their approach with others who rely on indicators for buy/sell signals, labeling such methods as ineffective and misleading.

Analyzing Price Action

  • Discussion on price action reveals various setups like fair value gaps and mid gaps that traders can utilize effectively.
  • The speaker mentions a contrarian setup where traders can short an inversion fair value gap, demonstrating practical application through student experiences.

Real-Time Trading Insights

  • Students are observed engaging with live charts while maintaining focus on their strategies without external influence from the speaker's commentary.
  • A critique is made regarding misconceptions about fair value gaps shared by uninformed individuals on social media platforms.

Market Dynamics and Perceptions

  • The speaker reflects on how precise market behaviors can feel like a "cheat code," challenging the notion that markets operate randomly.
  • A strong warning is issued against those claiming they can time the market using intraday charts, branding them as con artists based on insider knowledge.

Long-Term Investment vs. Intraday Trading

  • Insights from a Goldman Sachs alumni highlight differences in skill sets between long-term investment strategies and intraday trading complexities.
  • Criticism is directed at conventional wisdom surrounding stock market averages, questioning the reliability of advice given by traditional investors.

Conclusion: Understanding Market Realities

Understanding Market Dynamics and Personal Trading Journey

The Nature of Market Anticipation

  • The speaker discusses the ability of individuals with live data to anticipate market movements, emphasizing that while "chop" (market fluctuations) may not be real, the underlying concepts are significant and valuable.

Personal Experience in Trading

  • The speaker reflects on their 27+ years of trading experience, mentioning various online personas they've adopted and expressing skepticism towards others' promotional tactics in trading.

Insights on Stop Hunts and Market Behavior

  • A distinction is made between simple stop hunts and a broader understanding of market behavior, highlighting the importance of timing and liquidity in trading strategies.

Learning from Mistakes

  • The speaker encourages new traders to explore different methods before committing to one approach, suggesting that personal failures can lead to deeper insights when they eventually seek guidance.

Influential Figures in Trading

  • Mentioning influential figures like Ed Sakota and Linda Raschke, the speaker acknowledges their impact on their own trading philosophy while also critiquing some mainstream trading literature as less effective.

Finding a Mentor or Mastery

  • The speaker shares a personal anecdote about seeking a "Jade Master" figure for mentorship but ultimately realizing they needed to become that mentor themselves through self-discovery.

Importance of Filtering External Noise

  • Emphasizing the necessity for new students to filter out external distractions, particularly from social media, which can cloud judgment and hinder learning effectiveness.

Consistency in Performance

  • The speaker asserts their consistent performance over years in front of live audiences as evidence against critics who question their abilities or methodologies.

Adult Responsibility in Learning

  • A call for adult learners to take responsibility for their education by critically evaluating information rather than passively accepting outside opinions or narratives about the speaker's methods.

Overcoming Poor Techniques

  • Reflecting on past mistakes with ineffective techniques, the speaker stresses the importance of developing sound strategies based on solid principles rather than relying solely on popular indicators.

Understanding Market Analysis Techniques

Critique of Audience Knowledge

  • The speaker expresses frustration with the audience's lack of historical knowledge, suggesting they rely too heavily on internet opinions rather than understanding foundational concepts.
  • Emphasizes the importance of starting with a blank chart to focus solely on price action, encouraging students to strip away distractions for better comprehension.

Learning Process and Insights

  • Describes the initial challenge of interpreting candlestick patterns as akin to learning a foreign language; highlights how familiarity transforms this into an intuitive process.
  • Discusses a specific market gap that was previously analyzed, indicating its significance in guiding future price movements and setting expectations for potential recovery above key levels.

Engagement and Feedback

  • Encourages viewers who are there to learn to appreciate the insights shared during the session, particularly regarding price delivery and liquidity seeking within trading ranges.
Channel: The Inner Circle Trader · Playlists: ICT 2024 Mentorship
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.