VIDEO
HIGHLIGHT
Log InSign up
ICT Charter Price Action Model 2 \ Trade Plan & Algorithmic Theory
SummaryTranscriptChat

ICT Charter Price Action Model 2 \ Trade Plan & Algorithmic Theory

Short-Term Trading Plan: ICT Price Action Model #2

Overview of the Trading Model

  • Introduction to ICT Price Action Model #2, focusing on a short-term trading plan aimed at achieving 50 to 100 pips per trade.
  • Emphasis on the repetitive nature of slides in trade plans; understanding the logic is crucial for effective application.

Preparation Stage

  • The preparation stage involves reviewing the economic calendar for medium and high-impact news events relevant to the markets being traded.
  • Analyzing upcoming events helps determine a likely weekly profile based on current market structure and anticipated price movements.

Identifying Market Ranges

  • Determining the EPOD (Economic Price Opening Data) range by looking back over the last 20 days, excluding Sundays, to find highest highs and lowest lows.
  • In cases where there are insufficient data points within 20 days, traders may extend their look-back period to 40 or even 60 days.

Liquidity and Price Movement

  • Focus on identifying liquidity draws—where price is likely headed next—and recognizing old highs/lows or liquidity pools that could influence movement.
  • Anticipation of price moving towards PD arrays that align with weekly bias; bullish scenarios target premium arrays while bearish scenarios focus on discount arrays.

Opportunity Discovery

  • Identification of discount arrays under Tuesday's European opening price when bullish; conversely, premium arrays above Wednesday's European opening when bearish.
  • If setups do not materialize on Tuesday, they can still be considered for Wednesday trades.

Trade Planning Strategy

  • When market conditions are favorable, look for manipulation in price against your trade bias coinciding with volatility injections from economic events.
  • Traders should aim for sharp price movements opposite their intended direction before entering trades at predetermined levels.

Entry Criteria and Timing

  • Short entries are framed above European opening prices while long entries are below; this strategy aims to capitalize on market protraction against trade direction.

Trading Strategies and Execution Techniques

Bullish Trade Setup

  • When bullish, frame a long entry when the price moves into a 15-minute discount PD that aligns with a standard deviation of no more than three standard deviations lower.
  • Anticipate the market to create the weekly high during Thursday's New York session for targeting purposes, focusing on trades that pan out until that time.

Bearish Trade Setup

  • For bearish positions, target sell-side liquidity below an old daily low or fair value gap within the 20-day data range converging with a negative standard deviation.
  • Aim for targets offering 50 to 100 pips in profit, ensuring they align with a discount array and standard deviation levels within a five-pip variance.

Executing Long Trades

  • In bullish scenarios, target buy-side liquidity above an old daily high or fair value gap inside the 20-day data range converging with a premium standard deviation.
  • Note the European opening price on Tuesday to filter all longs at or below this level; anticipate optimal trade entries during London or New York open kill zones.

Alternative Trade Execution Strategies

  • After 2:00 AM, place a buy stop at the Asian Range High plus one pip to capitalize on strength without chasing prices downwards.
  • For bearish setups, note the Asian Range Low and place a sell stop minus one pip after 2:00 AM; anticipate price making highs above this level.

Trade Management Techniques

  • When entering short trades, use sell limit orders based on standard deviation and PD array convergence minus five pips as entry points.
  • Set objectives for short trades at 50 pips for one position and 75 pips for another; if capturing over 100 pips, close the trade contentedly.

Entering Trades and Managing Risk

Trade Entry Strategy

  • The strategy involves noting the discount array and standard deviation convergence to determine entry points, with a stop loss set 25 pips below the low.
  • If the trade is profitable by 25%, the stop loss can be reduced by 25%. At 50% profit, it can be reduced by 50%, and at 75% profit, it should be moved to break even or above.

Position Sizing and Money Management

  • Position size calculation is based on account equity multiplied by risk percentage (R%) divided by stop loss in pips. This determines how much leverage is assumed in each trade.
  • For example, with an account equity of $20,000 and a risk per trade of 1%, if the required stop loss is 20 pips, this translates into specific lot sizes based on pip value.

Adjusting Risk Exposure

  • When using a suggested stop loss of 25 pips instead of 20, all calculations for position sizing must adjust accordingly.
  • If a demo account incurs a full R% loss, reduce R% by half until recovery occurs. This helps manage risk effectively after losses.

Managing Winning Streaks and Losses

Adjusting R% After Wins

  • After five consecutive winning trades, it's advisable to drop R% by half to mitigate potential future losses. This approach aims for smoother equity growth rather than volatile fluctuations.

Importance of Consistent Equity Growth

  • A smooth equity curve is preferred over one that resembles a roller coaster; maintaining steady growth reduces the likelihood of significant drawdowns.

Transitioning to Algorithmic Theory

Changes in Teaching Approach

  • The speaker discusses shifting from creating slides to teaching more interactively like a college professor due to issues with content misuse.

Focus on Practical Application

  • Emphasis will be placed on practical application through visual chart analysis rather than theoretical slides. Key processes will be simplified for better understanding.

Utilizing Tools for Analysis

Understanding Trading Models and Weekly Ranges

Introduction to the Trading Plan

  • The speaker emphasizes the importance of a structured trading plan, noting that it can be easy to get lost in details when producing video content.
  • There is a common skepticism about trading models; however, the speaker asserts that these models do work despite some individuals' laziness in applying them.

Analyzing Weekly Charts

  • The discussion focuses on analyzing weekly charts to predict market movements, particularly looking at the most recent closed week as of April 9, 2022.
  • The speaker highlights their bullish outlook on the dollar and bearish stance on Euro-dollar without providing all details during live commentaries, encouraging viewers to engage actively with the material.

Expectations for Market Movements

  • The next candle's expected movement is discussed; it was anticipated to be bearish based on prior analysis and market conditions.
  • The speaker stresses that understanding the rationale behind predictions is crucial for traders rather than relying solely on provided insights.

Volume Imbalance and Price Levels

  • A volume imbalance is identified as a critical factor influencing price movements; this includes examining previous highs and lows within specific ranges.
  • Traders are advised to look back at a 20-day range to identify discount arrays which help in making informed trading decisions.

Utilizing Model 2 for Predictions

  • Model 2 involves analyzing hypothetical scenarios before new weekly candles form, focusing on identifying key price levels from past data.
  • The model aims for capturing short-term gains (50 to 100 pips), emphasizing discipline in taking profits once targets are reached.

Key Price Levels and Discount Arrays

  • Specific price levels such as rejection blocks and consequent encroachments are marked for analysis, aiding traders in understanding potential market behavior.

Understanding Trading Strategies and Timeframes

Overview of Trading Process

  • The speaker emphasizes that explaining the trading process takes longer than executing it, highlighting the importance of understanding rejection blocks and weekly candle tails.
  • A timeline of trades from April 4th to April 8th, 2022, is introduced, indicating a focus on analyzing market movements throughout the week.

Key Trading Days and Closing Strategies

  • Thursday is identified as a critical day for closing trades; if a trade exceeds 50 pips, it should be closed regardless of its current status.
  • The New York open on Thursday is emphasized as the optimal time to close trades, even if this means leaving some profit on the table.

Flexibility in Trading Models

  • The model allows flexibility; traders can choose to hold positions until Friday's New York open based on their strategy preferences.
  • The speaker discusses potential price movements leading up to significant levels before selling off again.

Analyzing Price Imbalances

  • Reference is made to previous commentary regarding expected price movements into imbalances before selling off.
  • Traders are encouraged to analyze charts actively and identify what they may have missed in their trading strategies.

Detailed Chart Analysis

  • An imbalance from Tuesday’s trading (April 5th) is highlighted as crucial for understanding market behavior.
  • Transitioning down to a 15-minute timeframe allows for more granular analysis of price action and imbalances.

Importance of Time in Trading Decisions

  • Emphasis is placed on identifying optimal trade entry points within hourly imbalances while considering time factors.
  • A shift to a 5-minute chart illustrates how specific timeframes can influence trading decisions, particularly focusing on bearish opportunities.

Understanding Standard Deviations in Trading

Utilizing the Asian Range for Projections

  • The Asian range serves as a basis for standard deviation projections, identifying one, two, and three standard deviations.
  • A specific level is established based on these deviations to guide trading decisions.

Premium Array Considerations

  • Focus is placed on using candle bodies rather than wicks and tails for more accurate volume representation.
  • Three standard deviations are identified; traders can choose between different methods of calculating these based on personal preference.

Price Filtering Techniques

  • Traders should not exceed three standard deviations when searching for premium arrays, especially in bearish conditions.
  • The analysis includes both wick-to-tail and body measurements to clarify optimal trade entries without violating set standards.

Trade Entry Analysis

  • Optimal trade entry aligns with the dealing range high and low while respecting the established standards of deviation.
  • The price runs above a short-term high where buy-side liquidity is expected to be present.

Preparing for Market Movements

  • Prior to market opening, traders should prepare by projecting potential movements up to 5:00 AM based on retracement levels (62% and 79%).
  • Identifying premium arrays that align with optimal trade entry within the London open time frame is crucial.

Identifying Imbalances and Entry Points

Fair Value Gaps and Imbalances

  • A fair value gap (Cy) appears after running a short-term high, indicating potential market movement.
  • The lowest band of optimal trade entry coincides with significant retracement levels, reinforcing trading strategies.

Calculating Entry Levels

  • Specific price levels are calculated for entry points; adjustments must account for spreads in trading strategies.
  • An ideal entry point is determined at 83.5 pips below a specified price level due to spread considerations.

Risk Management Strategies

  • A stop loss of 25 pips is recommended when entering trades under bearish conditions after reaching target prices.
  • Alternative entries may require larger stop losses (50 pips), depending on market behavior during execution.

Finalizing Trade Setup

Adjusting Measurements Pre-Trading

  • Before market activity begins, traders should finalize their calculations regarding the Asian range's impact on pricing.
  • Both wick-to-tail measurements and broader ranges (100 pips downwards from entry points) are essential for comprehensive analysis.

Clustering Insights

Understanding Candle Measurements and Trading Strategies

Analyzing Candle Ranges

  • The discussion begins with the measurement of candle bodies, focusing on the highest close or opening to the lowest opening or close.
  • A double-check is performed on specific candle values (679 open and close), establishing a clear range for analysis.
  • The speaker emphasizes the importance of standard deviation in relation to price projections, aiming for a precision within five pips.

Trading Expectations and Objectives

  • There’s an expectation to trade below a rejection block, which is crucial for setting trading strategies.
  • The objective is set at 1.5 times the anticipated target, aligning with weekly expansion goals rather than limiting it to 100 pips.
  • A visual representation of objectives is created by changing line styles on charts for clarity.

Price Movements and Consolidation

  • Price movements are tracked into specific levels over several days, indicating consolidation before further movement.
  • A notable move yields 100 pips from entry; however, traders are advised not to fixate on exceeding this amount as per model predictions.

Timing and Entry Techniques

  • Discussion shifts to market timing; traders should exit positions by Thursday's New York open due to potential reversals.
  • The focus then turns to using European market openings as strategic entry points for trades.

Short Selling Strategy

  • Traders are instructed to place sell orders above the opening price after 2:00 AM while ensuring they have a stop one pip below the Asian range low.
  • Emphasis is placed on waiting for market rallies post-opening before executing short sales based on established highs.

Risk Management in Trading

  • A risk management strategy involves setting a 50 pip stop loss when entering trades based on market conditions observed during early morning hours.

Trading Strategy Insights and Stop-Loss Management

Understanding the Asian Range High and Entry Points

  • The strategy involves waiting for a rally above the Asian Range High before placing a sell stop order, which serves as an entry point rather than a traditional buy.
  • Once the price trades above the Asian Range High, a sell stop can be placed below this level to avoid guessing how far it will rise before potentially falling.

Managing Stop Losses and Profit Objectives

  • A 50 pip stop loss is recommended upon filling an order; traders should ensure they are filled at the right candle low to minimize risk.
  • After placing orders, traders should set their limit orders at 100 pips while allowing the market to move without constant monitoring.

Order Placement Strategy

  • Two separate orders can be placed: one short with a 50 pip stop loss and another aiming for 100 pips profit. This allows for partial profit-taking while holding onto part of the position.
  • The first contract is exited after gaining 50 pips, while the second remains open until reaching the target of 100 pips.

Handling Market Fluctuations

  • If market conditions change (e.g., consolidation), traders may still get filled on subsequent drops without suffering significant drawdown.
  • Implementing a trailing stop-loss protocol helps manage risk effectively by adjusting stops based on expected profits.

Protocol for Stop-Loss Management

  • A structured approach to trailing stops includes moving them down by percentages (25%, 50%, or break-even), depending on how much profit has been realized.
  • This method ensures that once profits reach certain thresholds, risks are minimized by securing gains through adjusted stop-loss levels.

Recap of Trading Models and Future Plans

  • The discussion covers model number two in detail, illustrating its application in real trading scenarios like Euro lower movements.
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.