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ICT 2024 Mentorship \ Lecture #13 August 20, 2024 Begins 9:15am ET
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ICT 2024 Mentorship \ Lecture #13 August 20, 2024 Begins 9:15am ET

Market Opening Analysis

Overview of Market Conditions

  • The speaker greets the audience and notes the market is below the new day opening gap for August 20th, indicating a cautious approach to trading.
  • A brief mention of the "boing range" suggests an analysis of price movements within a specific range during regular trading hours.

Opening Range and Price Action

  • Discussion on previous session settlement and current opening range gap, emphasizing its importance in understanding market dynamics.
  • The speaker highlights a small gap observed on a 15-second chart, suggesting it could lead to upward movement but advises caution against premature conclusions.

Trading Strategy Insights

  • Emphasis on not needing immediate clarity about market direction; patience is key in reading price action during initial trading minutes.
  • Importance of monitoring volume imbalances as potential indicators for future price movements, particularly regarding liquidity above current levels.

Understanding Gaps and Liquidity

Gap Dynamics

  • The speaker encourages taking screenshots of significant gaps and volume imbalances that may influence trading decisions.
  • Analyzing wick behavior provides insights into potential upward trends; however, caution is advised if certain conditions are not met.

Framework for Trading Decisions

  • The speaker discusses providing a framework for viewers (specifically Caleb), allowing them to understand live market actions without real-time data pressure.
  • Mention of latency issues indicates that there’s a slight delay in information transmission, which can affect decision-making processes.

Trading Models and Patterns

Identifying Trade Setups

  • Discussion on common trade setups that do not require complex models; simplicity can be effective in identifying patterns.
  • Introduction of concepts like relative equal highs/lows as targets for bullish or bearish trades based on new day/week opening gaps.

Criteria for Successful Trades

  • Establishing criteria around liquidity draws helps traders identify potential entry points based on historical data from previous weeks or days.

Volume Imbalance Analysis

Daily Volume Imbalance Insights

  • Speaker emphasizes the significance of daily volume imbalances as they provide context for potential price reactions in upcoming sessions.

Recap of Previous Discussions

  • Reference to prior discussions about market bias at higher time frames aids in clarifying current trading strategies.

Market Analysis and Trading Strategies

Overview of Trading Series

  • The series began in 2024, focusing on higher time frame trading strategies without deviation from initial teachings.
  • A reversal occurred after trading into the upper quadrant, leading to a drop towards liquidity below.

New Day Opening Gap

  • The new day opening gap for Tuesday, August 20th, was established based on Monday's closing price at 5:00 PM.
  • Price action showed fluctuations around the low support level before selling off again.

Daily Volume Imbalance

  • Emphasis on understanding gaps; filling a gap can lead traders to disregard it prematurely, which is flawed logic.
  • Highlighting the importance of marking significant highs and lows on charts for better analysis.

Technical Analysis Insights

  • Discussion about daily volume imbalance and its significance in predicting market movements.
  • Interest lies in whether prices will reach untraded areas within the yellow shaded region identified as significant.

Price Action Segmentation

  • Review of specific price action segments discussed previously to understand market behavior better.
  • Focus on candle bodies rather than wicks when analyzing price connections between different candles.

Understanding Gaps and Midpoints

  • Wicks are treated as gaps; identifying midpoints helps anticipate future market movements effectively.
  • Differentiation between various types of gaps (e.g., bid imbalances vs. sell-side efficiency).

Anticipating Market Movements

  • Importance of dividing levels into quadrants to predict available market actions accurately.
  • Specific coordinates noted for potential future market interactions with highlighted levels.

Monitoring Opening Range Gaps

Market Analysis and Price Action Insights

Understanding Market Dynamics

  • The discussion focuses on assessing the market's strength and speed to reach a specific price level, particularly the lowest quadrant of daily volume balance. The expectation is to determine if there is market interest in moving upwards.
  • There exists an inefficiency between two price levels, indicating a potential upward movement where prices may stabilize or continue rising. This anticipation is based on current market behavior rather than immediate results.
  • A bullish outlook suggests that reaching higher price levels is reasonable, although it does not need to occur within the same trading day.

Analyzing Price Gaps

  • Observations are made regarding a Price Action Break (PA B) Gap visible on a one-minute chart, which forms in the upper half of this gap. This formation indicates potential future price movements.
  • The ideal scenario for price action involves sensitivity at the high end of the fair value gap, suggesting that optimal formations occur when prices only enter the upper half without dipping into lower areas.

Evaluating Price Behavior

  • It’s permissible for prices to dip into lower areas; however, doing so could indicate weakness. Strong performance would leave gaps open as evidence of strength in upward movement.
  • Key considerations include how far prices can overshoot established gaps and their behavior upon reaching target levels—whether they fall short or move through decisively.

Monitoring Real Order Flow

  • Observations highlight perfect delivery when hitting upper quadrants and emphasize capturing real order flow without relying on complex data like depth of market or ladders.
  • Continuous assessment of where prices should gravitate helps identify support levels and damage zones while analyzing fair value gaps across different time frames.

Practical Application of Concepts

  • The analysis includes measuring candle bodies against fair value gaps to understand market intentions better. Respecting these gaps indicates strong directional moves in price action.
  • Emphasis is placed on understanding price delivery continuum theory as a method for reading real order flow without needing extensive contract data or external indicators.

Understanding Price Action and Algorithmic Trading

The Role of Price Action in Algorithm Repricing

  • Discussion on how price action supports algorithm repricing back to reference points, indicating a willingness to trade at higher levels.
  • Emphasis on the importance of capturing reference points through screenshots for effective market analysis, as demonstrated by Kaleb's model.
  • Explanation of Fair Value Gaps and their significance in trading strategies, particularly using 15-second charts for precision.

Market Behavior and Trader Psychology

  • Assurance that there is no urgency or panic in trading; traders should remain calm and focused on price indicators.
  • Clarification that market movements are algorithmic and not influenced by the number of contracts traded, highlighting the need for a relaxed approach to trading.

Inefficiencies in Market Pricing

  • Introduction of the concept of a "big magnet" drawing prices towards inefficiencies, emphasizing the lack of delivery buy-side movement.
  • Importance of recognizing open portions within market ranges that are exposed to inefficiencies, which can guide trading decisions.

Distribution Strategies and Volume Analysis

  • Insight into how algorithms cast prices into areas for traders to distribute long positions or enter short positions without focusing on contract volume.
  • Critique of tools like book maps; while they can provide visual representations, they may not be necessary for understanding price efficiency.

Practical Trading Insights

  • Personal reflection on learning without advanced tools; emphasizes focusing solely on price efficiencies during live streams.
  • Guidance on utilizing higher time frame reference points as liquidity draws while monitoring price behavior across different chart intervals.

Managing Trades Effectively

  • Advice on taking partial profits when reaching short-term highs to avoid missing opportunities at premium levels.
  • Encouragement to observe market behavior patiently rather than making hasty decisions based on assumptions about future movements.

Taking Partial Profits and Managing Trades

Importance of Taking Partial Profits

  • When trading long positions, breaking short-term highs is a signal to consider taking partial profits rather than adjusting stop losses.
  • Moving stop losses too early can increase anxiety and uncertainty, distracting traders from analyzing price movements.

Chart Management Techniques

  • The speaker discusses the importance of managing chart levels effectively, using notepads for reference instead of relying solely on digital charts.
  • A personal anecdote illustrates how the speaker used graph paper to track market movements while working as a vendor, noting highs and lows throughout the day.

Visualizing Market Movements

  • By tracking initial highs and lows with graph paper, the speaker created a visual representation of market trends without live charts.
  • This method helped identify relative equal highs and lows, which are crucial for understanding bullish or bearish trends.

Trading Gaps and Market Behavior

  • The discussion highlights opportunities in capturing setups formed by gap closures, emphasizing the significance of opening range gaps in trading strategies.
  • Traders should extend opening range gaps throughout the day as they serve as critical reference points for future price movements.

Strategies for Gap Trading

  • If prices gap lower at market open, marking out 50% of that gap can provide high-probability trade setups without needing to predict market direction.

Understanding Market Gaps and Price Action

Analyzing Gap Behavior

  • The discussion begins with the observation of market gaps, emphasizing the importance of recognizing fluctuations within these gaps. A bullish scenario is highlighted where a gap closes and then reopens above it.
  • The speaker notes the significance of the opening range gap, indicating that price action often reacts to this level, particularly when referencing previous settlement prices.

Candlestick Patterns and Trading Strategies

  • A detailed analysis of candlestick behavior is presented, focusing on how wicks interact with key levels. The speaker mentions using one-minute charts to track movements closely.
  • The concept of "mohawk" price action is introduced, describing permissible overshoots beyond fair value gaps while maintaining a bearish outlook during downward trading.

Managing Trade Psychology

  • Addressing trader psychology, the speaker discusses strategies for maintaining confidence in trades despite potential downturns. Emphasis is placed on having a framework for measuring reasonable price movement.
  • Confidence in trade decisions can be bolstered by observing wick formations and larger inefficiencies in the market.

Timeframe Analysis and Market Dynamics

  • The use of lower timeframes (e.g., 15-second charts) is discussed as a method for gauging market dynamics and identifying distribution patterns around target levels.
  • Reference points are established within an opening range gap to assess potential reactions from new day openings.

Liquidity and Inefficiency Considerations

  • Discussion shifts to liquidity levels below current prices, highlighting pockets of inefficiency that traders should monitor for potential opportunities.
  • The speaker reflects on session length adjustments to enhance learning experiences for students, noting that shorter sessions allow better digestion of complex concepts.

Distribution Strategies in Trading

  • Insights into distribution strategies are shared, emphasizing how traders can manage positions effectively even when facing adverse price movements.

Understanding Trading Models and Market Behavior

The Paradigm Shift in Trading Approaches

  • A new model allows traders to aim for targets without the pressure of hitting them, leading to more profitable exits. This shift reduces panic and fear during trading.

The Importance of a Relaxed Mindset

  • A calm environment enables traders to observe price movements without external pressures, enhancing their ability to recognize patterns through repetition.

Individual Perception in Trading

  • Each trader's perception of opportunities differs; exposure to price action is essential for developing personal recognition skills.

Diverse Strategies Yielding Profitability

  • Traders can adopt different strategies (long or short) on the same day and still be profitable, highlighting that there isn't a one-size-fits-all approach in trading.

Utilizing Price Gaps Effectively

  • Understanding market gaps is crucial; recognizing where prices settle can inform trading decisions, such as waiting for retracements at key levels like the midpoint of a gap.

Analyzing Price Action and Market Dynamics

Key Levels and Entry Points

  • Identifying significant price levels helps traders make informed decisions about entering trades based on mathematical probabilities rather than emotions.

Recognizing Support and Resistance

  • Price behavior around gaps indicates potential support areas; observing how prices react can guide future trading actions.

Institutional Order Flow Insights

  • Understanding institutional order entries provides insights into market dynamics, allowing traders to anticipate price movements effectively.

Strategic Trade Management

Importance of Taking Partial Profits

  • Taking partial profits during trades is essential for managing risk; it prevents winning trades from turning against you due to uncertainty about future movements.

Understanding Risk Management in Trading

The Importance of Taking Partials

  • When starting out in trading, the focus is often on making money, but traders lack the experience to understand when to exit a trade profitably.
  • Many novice traders are advised to take partial profits, as they may not yet grasp the nuances of risk management and profitability.
  • Social media often emphasizes being right over consistently making money, which can mislead new traders about their priorities.

Managing Expectations and Emotions

  • Traders must learn to manage their expectations; if a trade doesn't reach its target, it doesn't mean they failed if they made a profit.
  • It's crucial for traders to avoid panic selling when signs indicate that price movement may be slowing down.

Strategies for Risk Control

  • Teaching students about taking partial profits helps them feel rewarded for holding onto trades long enough to secure some gains.
  • As trades progress favorably, initial stop-loss levels should be adjusted rather than maintained at the original level.

Evolving Trading Techniques

  • Advanced trading involves frequent buying and selling throughout the day while managing multiple positions effectively.
  • New traders need a structured approach initially but should aim for flexibility as they gain experience in reading market movements.

Achieving Flexibility in Trading

  • Experienced traders can adapt their strategies based on time of day and market conditions without being tied to one bias or strategy.
  • Successful trading allows for multiple profitable trades within a single day while still accommodating losses without significant detriment.

Conclusion and Future Considerations

Trading Insights and Liquidity Analysis

Current Market Sentiment

  • The speaker expresses a commitment to trading despite the current market conditions, indicating that there is significant buy-side liquidity present.
  • A detailed analysis of the morning run is provided, highlighting where liquidity might flow and how price delivery can be assessed using a one-minute chart.

Price Action and Fair Value

  • The discussion emphasizes the importance of understanding price action in relation to fair value, with specific reference to lower quadrants and encroachment on price levels.
  • It is noted that reaching a draw on liquidity does not necessarily equate to success; rather, success should be measured by identifying starting points for potential price movement.

Trade Setup Considerations

  • The speaker outlines criteria for high-probability trades, suggesting that setups allowing for 15-20 handles indicate favorable conditions for taking trades.
  • Emphasis is placed on identifying inefficiencies in price action as part of the trading strategy, particularly focusing on gaps at the start of new days or weeks.

Broader Time Frame Analysis

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.