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ICT Mentorship Core Content - Month 12 - Long Term Top Down Analysis
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ICT Mentorship Core Content - Month 12 - Long Term Top Down Analysis

Introduction

The speaker introduces the topic of long-term top-down analysis and explains how he personally goes through the monthly chart to arrive at levels that would be transposed and ideas to the weekly chart.

Personal Approach

  • The speaker reminds listeners that he has provided a lot of information over the last 12 months, which is flexible for them to adopt as their own.
  • He emphasizes that it's best to use this information in concert with other things that support the ideas.
  • The speaker explains his personal approach and how he internalizes everything in the actual daily process.

Focus of Presentation

  • The presentation will determine the impact of the monthly perspective on an asset or market and identify directional bias for higher time frame monthly charts.
  • It will classify PD arrays accurately to assist in key levels and complete institutional analysis on a monthly basis at the end.
  • It all starts with seasonal tendencies.

Seasonal Tendencies

The speaker discusses seasonal tendencies and how they can help traders align themselves with hard time frames.

Importance of Seasonal Tendencies

  • There are specific times of year when there are seasonal tendencies for certain assets or markets.
  • These tendencies can help traders align themselves with hard time frames if they have been away from trading for a period of time.
  • Traders should look for seasonal tendencies for upcoming months, not ones that have already passed.

Conclusion

  • Seasonal tendencies are important because they can help traders align themselves with hard time frames.

Introduction to Market Analysis

In this section, the speaker introduces his approach to market analysis and explains the importance of considering seasonal tendencies, quarterly shifts, interest rate differentials, market profile, and other correlated markets.

Key Points:

  • The speaker looks at how the market is predisposed to move every three to four months based on seasonal tendencies.
  • He reminds us that whatever has been happening in the last couple of months doesn't always equate to a continuation of that thought process.
  • The speaker considers interest rate differentials and their impact on various asset classes.
  • He overlays time studies with calendar-based quarterly shifts and seasonal tendencies to gain an edge from a statistical standpoint.
  • The speaker looks for reasons to justify why price should move in a certain direction based on fundamental support relative to interest rates.
  • He considers market profile and whether we are part of a trend or not.
  • The speaker looks at other markets that are closely correlated either positively or negatively with the one being analyzed.
  • Finally, he examines the market structure itself by looking at where we are in terms of higher highs and lower lows.

Monthly Bias and Long-Term Trading

In this section, the speaker discusses how to define a monthly bias and use it for long-term trading.

Defining the Market

  • Look at the PD array Matrix to define the market in terms of premium and discount.
  • Use reference points and focal points relative to the PDRA matrix to calibrate levels and come up with key price levels.
  • Key price levels are where trade ideas will come to fruition, either as an entry or objective/target.

Monthly Analysis

  • Define expectations for the monthly chart by going through a step-by-step process once a month.
  • Transpose information from monthly analysis onto a weekly chart for an intermediate-term perspective.
  • Do monthly analysis as soon as possible after the previous month closes, preferably before the new month starts.

Inflationary/Deflationary Conditions

  • Follow commodity prices to determine if we are in an inflationary or deflationary condition.
  • If commodity prices are generally going up, we are in an inflationary condition. If they are generally going down, we are in a deflationary condition.

Forecasting Price Action

  • Forecast three months of price action by arriving at a monthly bias that defines expectations for not only the next month but also potentially two more months after that.
  • Have flexibility when looking back at quarterly shifts; look back at last three months but potentially even four months to see if anything is missed.

Seasonal Tendencies and Long-Term Trends

In this section, the speaker discusses how to use seasonal tendencies and long-term trends to plan trades.

Using Seasonal Tendencies

  • Start with a calendar month and refer to the seasonal tendencies taught in the program.
  • Focus on markets that historically have a repeating nature in terms of how they come to fruition.
  • Seasonal tendencies help plan potential big movers without needing to know what price is at.

Determining Long-Term Trends

  • Refer to the long-term 9 to 18 month trend on a monthly chart.
  • If direction is bullish, try justifying why the next quarterly shift might be a buying opportunity.
  • If direction is bearish, try justifying why the next quarterly shift might be a selling opportunity.
  • Look at specific portions of price action and start with the 9 to 18 months range on a monthly chart as a bellwether.

Market Structure Analysis

In this section, the speaker discusses market structure analysis and how it can be used for trading.

Understanding Market Structure

  • Market structure refers to how prices move over time.
  • The speaker uses candlestick charts for market structure analysis.
  • The speaker looks for patterns in price action such as higher highs or lower lows.

Identifying Key Levels

  • Key levels are areas where prices have previously reversed or consolidated.
  • The speaker uses support and resistance levels to identify key levels.
  • Key levels can be used for entry and exit points in trades.

Risk Management

In this section, the speaker discusses risk management and how it can be used to minimize losses.

Setting Stop Losses

  • Stop losses are orders placed with a broker to sell a security when it reaches a certain price.
  • The speaker recommends setting stop losses at key levels or below recent swing lows/highs.
  • Stop losses should be set based on the trader's risk tolerance.

Position Sizing

  • Position sizing refers to determining how much of a portfolio to allocate to a particular trade.
  • The speaker recommends risking no more than 1% of the portfolio on any given trade.
  • Position size should be adjusted based on the distance between entry and stop loss levels.

Trade Execution

In this section, the speaker discusses trade execution and how to enter and exit trades.

Entering Trades

  • The speaker looks for confirmation of market structure analysis before entering trades.
  • Confirmation can come from indicators such as moving averages or oscillators.
  • Entry points should be based on key levels or breakouts from consolidation patterns.

Exiting Trades

  • The speaker recommends using trailing stops to lock in profits as prices move in favor of the trade.
  • Trailing stops should be adjusted based on market volatility and price action.
  • The speaker also recommends using profit targets to exit trades at predetermined levels.

Anticipating Market Retracement or Reversal

In this section, the speaker discusses how to anticipate market retracement or reversal for the coming month or two.

Using Global Interest Rates to Form Forex Pairs

  • The speaker uses websites like investing.com to locate and compare Central Bank interest rates for every major country.
  • They look for high-interest rates to pair with a low-interest rate country and form a Forex pair.
  • The fundamental bias is adopted based on seasonal tendencies and quarterly shift expectations that are in alignment with interest rate differential trade ideas.

Defining Current Market Structure

In this section, the speaker defines current market structure and explains how they classify recent highs and lows.

Comparing Recent Highs to Determine Control of Price

  • The speaker compares recent highs with positively and negatively correlated markets to determine if long-term, intermediate-term, or short-term highs are in control of price presently.
  • If an intermittent term or potential long-term high is formed, they look for reasons to go short in pairs that are weak currencies paired against strong currencies during a time when lower prices are anticipated on a quarterly shift while season tendency calls for lower currency/market value.

Comparing Recent Lows to Determine Control of Price

  • The speaker compares recent lows with positively and negatively correlated markets to determine if long-term, intermediate-term, or short-term lows are in control of price presently.
  • If a long-term or intermediate-term low is formed, they look for instances where there's seasonal bullishness coming in the profile trending higher.

Trading Strategies

In this section, the speaker discusses his trading strategies and how he determines which trades to take.

Market Structure and SMT Divergence

  • The speaker looks for SMT divergences and market structures to support a price move higher or lower.
  • He only takes trades in the direction of the current market structure.
  • He does not try to fade moves when there is market structure, SMT divergence, and seasonal tendencies behind them.

Inter-Market Analysis

  • The speaker uses inter-market analysis to confirm his ideas about a bullish or bearish scenario.
  • He looks for positively correlated markets to support a bullish scenario and negatively correlated markets to support a bearish scenario.
  • He uses gold as an example of a supporting factor that can further confirm his idea.

Market Profile

In this section, the speaker discusses how he analyzes the market profile to determine whether it is consolidating or trending.

Analyzing Consolidation

  • The first thing the speaker wants to know is whether the market is consolidating because consolidation is the beginning of the next move.
  • If it is consolidating, expansions are likely to show evidence prior to the breakout.
  • If it is not consolidating, then the trend might be reaching an extreme.

Analyzing Trending Environment

  • If the market is under a trending environment, then he looks for continuation in those trades because trends tend to stay in place.
  • He looks for signs of retracement if stiff resistance is likely.

Understanding Market Structure

In this section, the speaker discusses how to anticipate retracements and determine whether the market is consolidating or trending. He also explains how to use the PDRA Matrix to locate institutional focus points.

Anticipating Retracements

  • Use the PDRA Matrix to anticipate retracements.
  • Determine if consolidation or trending and use above ideas as outlined on slide.
  • Look for supporting ideas of a seasonal tendency calling a direction.

Locating Institutional Focus Points

  • Use the PDRA Matrix to locate institutional focus points.
  • Build potential trade ideas based on PD arrays and refer to previous analysis points mentioned in presentation.
  • Note key price levels by rounding each PD array to nearest 10 level, zero level, or five level.

Calibrating Key Price Levels

In this section, the speaker explains how to calibrate key price levels using premium and discount arrays.

Premium Arrays

  • Round down to nearest adjusted number above market price or wherever trading at time.
  • Get as close as possible by getting nearest zero or five level that closely aligns with PD array matrix premium level.

Discount Arrays

  • Round up to nearest zero level, 10 level, or five level below market price or wherever trading at time.
  • Have actual key price levels from monthly standpoint calibrated and supported with institutional mindset of PDRA matrix discount and premium.

Framing a Trade

In this section, the speaker discusses how to frame a trade within a selected portion of market structure and determine current market profile.

Determining Market Profile

  • Determine current market profile by confirming analysis with correlated pairs or markets for entry market analysis.
  • Anticipate specific quarterly shift directionally by pairing strong to weak interest rates relative to trade idea.

Framing a Trade

  • Select portion of market structure to frame a trade within.
  • Define PD array matrix to get supporting ideas from time, price, fundamentals because of interest rates.
  • Use internal range or external range liquidity for trading inside a range.

Understanding Seasonal Tendencies in Trading

In this section, the speaker explains how to use seasonal tendencies in trading and gives an example of how to apply it to the Australian dollar.

Using Seasonal Tendencies for Trading

  • The speaker explains that by breaking down a market into its individual components, traders can better understand seasonal tendencies.
  • By understanding these tendencies, traders can ask better questions and make more informed trades.
  • The speaker then gives an example of using seasonal tendencies to trade the Australian dollar.
  • He outlines the seasonal tendency for the Australian dollar, which involves lows forming in January, March leading up to May, and June/July. There is usually weakness from August down into October.
  • The speaker focuses on the June/July period as an example and uses a monthly chart of the Australian dollar to explain his thought process.

Applying Seasonal Tendencies to Trading

  • The speaker blocks off May on the chart and notes that there has been a quarterly shift towards lower prices over the last few months.
  • He asks what will happen in June based on past price action and notes that there have been three months of downward movement leading up to June.
  • However, he also notes that there has been consolidation with higher lows forming. He concludes that further analysis is needed before making any trades.

Understanding Interest Rates and Market Profiles

In this section, the speaker discusses interest rates for the Australian and US dollars, as well as market profiles for these currencies.

Interest Rates

  • The Reserve Bank of Australia's interest rate is 1.5%, while the Federal Reserve's interest rate is 1.25%.
  • Prior to June 14th, 2017, the Federal Reserve's interest rate was at 1%, making Australia's interest rate higher than that of the US dollar.
  • The yield attraction is better in Australia than it is for the US dollar due to a higher interest rate differential.

Market Profiles

  • The market profile has been in consolidation for about 18 candles or a range.
  • To determine if there will be an upside or downside break, inter-market analysis must be conducted.
  • The monthly chart for the dollar index shows prices dropping lower from May to August/July/June.
  • From a quarterly standpoint, we need to determine if there will be a reversal or if prices will continue to drop.
  • Consolidation was broken above equal highs which could potentially lead to a stop run even on a monthly basis.
  • If prices come back deeper and go through the midpoint of consolidation after breaking out on one side, we have to look for potential price drops below low-end range.
  • There was no lower low in Aussie compared to Dollar Index so there is structural divergence.

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Analysis of the Australian Dollar

In this section, the speaker discusses how the Australian dollar is supported by its correlation with the S&P index.

Correlation with S&P Index

  • The Australian dollar moves well with the S&P index.
  • If the S&P index is going up, it supports the AUD/USD pair as well.
  • This correlation can be used to confirm and qualify analysis of the AUD in monthly charts.
Playlists: 2017 ICT Private Mentorship Core Content Month 12
Video description

2017 Premium ICT Mentorship Core Content Video Lectures Audio and visuals are exactly as they were distributed in August 2017. 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.