ICT January 03, 2018

Welcome to 2018: Analyzing Cable and Euro Dollar

Introduction to Trading in January

• The speaker welcomes viewers to the first episode of the year, focusing on the British Pound (GBP) against the US Dollar (USD).

• Emphasizes the importance of reviewing price action even when not actively trading, using this time for journaling and chart marking.

• Mentions a small position taken in Euro Dollar earlier that day, indicating cautious engagement with market movements.

Caution During Early January Trading

• The speaker expresses skepticism about trading during the first two weeks of January due to unpredictable market behavior post-holidays.

• Shares personal experiences highlighting risks associated with trading at this time, advising caution based on historical patterns.

• Warns that while some may find success early in January, it can lead to false confidence; emphasizes learning from experience.

Market Analysis: Daily Chart Insights

• Discusses a daily chart for GBP/USD, noting recent price movements above previous highs as indicative of market sentiment.

• Highlights the significance of new year effects on market behavior and potential retracement before resuming trends.

Intraday Price Action Examination

• Shifts focus to a 15-minute chart for intraday analysis of GBP/USD price action.

• Identifies a "market maker sell model," illustrating consolidation phases followed by price drops and accumulation areas.

Live Account vs. Demo Account Data

• Clarifies that data presented is from a live account rather than a demo account, which may have inaccuracies due to holiday disruptions.

• Describes how prices reached specific levels according to market maker models, emphasizing real-time trading insights.

Chart Markup Techniques

• Introduces personal methods for marking up charts and maintaining privacy in notes while sharing key insights with viewers.

Understanding Market Consolidation and Equilibrium

What is Consolidation?

• Consolidation occurs when prices create a box or rectangle formation, indicating equilibrium. This is the point where supply and demand balance out.

• The measurement of consolidation involves identifying the lowest low and highest high within this range, which helps in understanding market behavior.

Measuring Equilibrium

• To analyze equilibrium effectively, draw a line to represent it on the chart, allowing for clearer reference points without relying solely on Fibonacci levels.

• Important reference points include an old daily high and an equilibrium measurement that can indicate potential price movements above or below these levels.

Price Action Dynamics

• The New York opening price serves as a trigger mechanism for buying and selling within the daily range, highlighting key concepts like Judas swings.

• Observing how prices react around the opening price can reveal patterns of consolidation before significant moves occur.

Projecting Price Levels

• After consolidation, expect potential trades lower as liquidity targets are reached. This includes analyzing previous lows for further insights into market behavior.

• It’s crucial to differentiate between entry points based on volume versus overall range measurements when assessing equilibrium.

Advanced Concepts in Trading

• Emphasizing total range measurements (highest high and lowest low), rather than just candle bodies, provides deeper insights into market dynamics.

• Aligning Fibonacci levels with equilibrium points enhances understanding of market symmetry and precision in trading strategies.

Insights from Market Behavior

• Recognizing patterns during specific times (like post-holidays in January) can lead to more accurate predictions about price movements.

• The interbank price delivery algorithm plays a role in determining daily highs/lows, showcasing how mathematical factors influence trading outcomes.

Market Analysis and Trading Strategy for Euro Dollar

Overview of Market Behavior

• The speaker discusses the market's recent behavior, indicating a significant run-up in price for the euro dollar, which was anticipated based on previous trends.

• Despite expectations from others to breach previous highs (120.80 and 120.91), the speaker did not share this sentiment, suggesting a different trading perspective.

Technical Analysis Insights

• The analysis focuses on measuring entry points by evaluating the lowest open/close and highest open/close relative to market swings, emphasizing volume over wicks.

• The speaker notes that they identified an overbought condition without relying on traditional indicators like RSI or MACD, asserting that technical analysis alone sufficed.

Trade Execution Strategy

• A shift to a 15-minute time frame is made to analyze potential trade entries; the speaker emphasizes using body references rather than wick extremes for optimal entry points.

• An entry point was determined based on swing highs and candle formations, with specific attention paid to price movements during Asian trading hours.

Risk Management Techniques

• The speaker describes their risk management approach, including setting a stop-loss of 35 pips while entering trades early around the Asian open.

• They mention mitigating risk around New York's opening price and highlight how they would have executed trades had they been active during that time.

Final Thoughts on Trading Approach

• The speaker expresses confidence in further downward movement in prices but remains cautious about leveraging too heavily during this period of consolidation.

Market Behavior Post-Holiday: Insights and Observations

Anticipating Market Trends

• The speaker expresses caution about predicting market behavior immediately after the holidays, noting that markets can be unpredictable and lack symmetry.

• Despite the unpredictability, there is a recognition of some level of symmetry in current market trends, even if they appear "sloppy."

• The discussion highlights a pattern where the market reaches expected lows but does not deviate significantly beyond those points.