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ICT Charter Price Action Model 6 - Algorithmic Theory
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ICT Charter Price Action Model 6 - Algorithmic Theory

Algorithmic Discussion on Universal Trading

Overview of Market Maker Models

  • The discussion focuses on Model Number Six: universal trading, emphasizing buy-side low resistance liquidity runs and fractals.
  • Market maker models can be categorized into sell and buy models, which are fractal in nature, appearing across various time frames.

Accumulation Phases in Trading

  • When bullish, the first step is to analyze time frames from highest to lowest to identify a narrative that justifies price movement towards a key level (premium array).
  • In short positions, if there’s sufficient range before the market price reaches the anticipated entry point, traders should consider utilizing the buy side of a market maker sell model.

Practical Application and Experience

  • The speaker shares personal experiences with buying and selling instruments using this framework but emphasizes that understanding comes from years of experience rather than isolated examples.
  • A specific example involving S&P e-mini Futures illustrates how accumulation and reaccumulation lead to premium arrays despite uncertainties about exact targets.

Framework for Analyzing Price Movements

  • The speaker discusses using fair value gaps as objectives when uncertain about premium arrays during trades. This approach allows flexibility in exit strategies without needing precise targets.
  • Emphasis is placed on backtracking price runs to identify linked market maker models, reinforcing the importance of understanding these concepts over time through practice and study.

Importance of Continuous Learning

  • New traders may find algorithmic theory videos disjointed due to lack of foundational knowledge; thus, it’s crucial to have prior learning before engaging with advanced content.

Understanding Market Maker Models

Overview of Trading Models

  • The speaker discusses their trading model, emphasizing the importance of teaching models to convey concepts without revealing proprietary strategies.
  • They explain scenarios where pyramiding entries is not possible, particularly when the market has already moved significantly towards a target or premium array.

Accumulation Stages and Pyramiding

  • The speaker describes the necessity for at least two stages of accumulation to effectively pyramid entries; otherwise, only one stage limits trading options.
  • Emphasis is placed on identifying unrealized ranges in the market, which are crucial for determining potential targets and entry points.

Conceptual Entry Strategies

  • The integration of conceptual entry strategies with money management and pyramiding is highlighted as essential for successful trading.
  • The speaker reassures that all examples shared publicly are transparent and not secretive, reinforcing their commitment to providing evidence-based learning.

Trading Mindset and Strategy

  • Traders are encouraged to focus on setups that consistently repeat rather than rushing into trades for ego-driven reasons.
  • Acknowledgment that achieving elite trading status requires time and experience; traders should aim for gradual improvement through learned strategies.

Practical Application of Concepts

  • The discussion includes recognizing parabolic price runs based on accumulation stages, indicating bullish or bearish trends.
  • An example from May 31st, 2022 illustrates how price consolidation can signal potential buying opportunities within fair value gaps.

Execution of Trades

  • The speaker shares a personal trade experience involving a stop loss strategy below swing lows during market shifts.
  • They describe how initial buying expectations were met with subsequent price movements returning to original consolidation levels before further declines occurred.

Conclusion on Market Dynamics

Market Structure and Trading Strategies

Understanding Market Dynamics

  • The market trades down to a perceived discount level, prompting traders to wait for signs of reversal, indicating a low-risk buying opportunity followed by accumulation and reaccumulation phases.
  • The liquidity pattern discussed is applicable across various time frames (weekly, intraday, monthly), emphasizing that price swings are fractal in nature.

Consolidation and Distribution Phases

  • Price consolidation often precedes downward movement; however, this decline serves the purpose of setting up for higher prices. Distinguishing between retracements aimed at going higher versus those leading to short positions is crucial.
  • Identifying points where price indicates a desire to rise involves observing shifts in market structure. This can be simplified using models taught on the YouTube channel.

Accumulation and Reaccumulation Insights

  • During price swings, tracking upward candle formations on the sell side helps identify potential turning points. These areas of distribution can transition into new accumulation zones.
  • The most significant price movements typically occur during the second stage of reaccumulation. Traders should look for these patterns across all time frames while aligning with their trading biases.

Trusting Fair Value Gaps

  • Confidence in fair value gaps arises when they align with previous distribution areas. If such gaps appear without breaking lower, they are considered reliable indicators for trade entries.
  • A narrative supporting upward movement after showing signs of accumulation strengthens trust in fair value gaps or institutional order flow entries as valid trading opportunities.

Learning from Experience

  • Relying solely on one concept like fair value gaps can lead to ineffective trading strategies; comprehensive understanding requires integrating multiple concepts and narratives behind price action.

Understanding Market Dynamics and Trading Strategies

Key Concepts in Trading Models

  • The discussion revolves around various trading models, including fair value gaps, order blocks, and breakouts. These concepts are essential for understanding market behavior and price movements.
  • Despite collective learning within a trading community, individual traders will have unique approaches to entry points, stop levels, and targets due to personal trading styles.
  • The speaker emphasizes the importance of adhering to specific criteria when identifying setups; deviations from these criteria may indicate forced trades or misaligned strategies.

Price Movement Expectations

  • Anticipation of price movement is based on expected targets above original consolidation levels. A significant price run followed by retracement indicates potential accumulation stages.
  • Pyramiding positions is discussed as a strategy where additional contracts can be added if certain conditions are met during price retracements.

Analyzing Market Structures

  • The analysis includes examining market maker buy/sell models across different time frames. Understanding these models helps traders identify accumulation or distribution phases effectively.
  • A chart shared on Twitter illustrates the expectation of price trading above a specific level (4143.5), indicating areas of buy-side liquidity after clearing previous stops.

Stages of Accumulation and Distribution

  • The first two stages of accumulation are highlighted as critical moments before reaching premium arrays. Observing these stages aids in predicting future price actions.
  • The speaker notes that declines often occur without real retracements during distribution phases, which can lead to engineered liquidity events before rallies begin.

Practical Application in Trading

  • Personal experiences with trade execution illustrate the importance of logic over emotion; even when facing potential losses, maintaining a strategic approach is crucial for success.
  • A detailed breakdown of market structures shows how old distributions can become new accumulation zones, emphasizing the cyclical nature of market dynamics and trader psychology.

Advanced Chart Analysis Techniques

  • Transitioning to more granular charts (like 15-second charts), the speaker discusses how close candle patterns inform decisions about entering trades at optimal times based on prior consolidations.

Understanding Market Dynamics and Trading Strategies

Stages of Accumulation in Trading

  • The concept of accumulation is crucial; it involves identifying stages where buying occurs, leading to potential price increases. The first stage is a foundational point for buyers.
  • Emphasis on understanding market direction is vital. Knowing where the market will move allows traders to make informed decisions rather than focusing solely on entry points.
  • Traders can apply this knowledge across various time frames, from seconds to months, enabling flexibility and adaptability in trading strategies.
  • While it's important to be versatile in trading approaches, discipline remains essential. A balanced strategy that incorporates multiple teachings leads to better results.
  • Mistakes are part of the learning process; they should not be viewed as failures but as opportunities for growth and experience enhancement in trading.
Playlists: ICT Charter Content, ICT MMXM Lectures
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.