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ICT 2024 Mentorship \ Lecture #19 August 28, 2024
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ICT 2024 Mentorship \ Lecture #19 August 28, 2024

Live Streaming Insights and Trading Concepts

Introduction to Live Streaming Challenges

  • The speaker discusses the technical difficulties faced while live streaming, particularly with OBS software.
  • Acknowledges the audience's expectations for a 1:30 PM session, indicating a casual atmosphere for the stream.

Overview of Today's Trading Session

  • Mentions participation in Tanya's trading community live stream earlier, encouraging viewers to check timestamps for specific insights.
  • Plans to teach about the day's range and opening range gap, focusing on key concepts from 9:30 AM to 10:00 AM.

Charting Techniques and Time Frames

  • Emphasizes the importance of charting techniques, advising viewers to replicate his charts closely for better understanding.
  • Introduces two specific time frames (15 seconds and one minute) that will be used throughout the session.

Addressing Audience Concerns

  • Responds to comments regarding the morning session's fair value gap presentation, stressing the importance of thorough learning rather than rushing through content.
  • Encourages viewers not to feel pressured about catching up; reiterates that concepts taught are consistent over time.

Importance of Historical Price Levels

  • Discusses how previous days' highs and lows can provide continuous trading setups by referencing liquidity levels.
  • Questions why historical price points remain relevant even after being tested multiple times by market movements.

Algorithmic Trading Insights

  • Explains that algorithms do not track how many stops have been hit but rely on reference points based on daily highs and lows.

Understanding Market Dynamics and Trading Strategies

The Role of Coder Logic in Trading Levels

  • Market levels are influenced by coded logic that anticipates buying and selling activity below historical lows, such as old daily lows or lows from previous days.
  • Bullish traders adjust their stop losses just below recent lows, allowing algorithms to focus on high and low points based on time intervals, particularly the daily timeframe.

Utilizing Daily Highs and Lows for Trading

  • Traders should mark the highest high and lowest low from daily candlesticks on their charts to identify potential liquidity draws.
  • Previous highs can serve as significant shorting opportunities for bearish traders, even for those not engaging in day trading.

Timeframe Considerations in Trading

  • While lower timeframes may seem appealing, traders can effectively use higher timeframes (daily, weekly, monthly) to identify trading conditions; patience is key.
  • Higher timeframes provide ample teaching opportunities with numerous examples available for study, enhancing both learning and execution skills.

Execution Strategies in Lower Timeframes

  • Once a trader understands what to look for, they can successfully trade lower timeframes without expecting large price movements typical of higher timeframes.
  • Focus should be on making precise trades ("surgical strikes") that allow manageable risk while targeting pools of liquidity or inefficiencies.

Analyzing Order Flow Around Key Levels

  • Annotating key levels like Tuesday's low helps traders understand market fluctuations; these levels correlate across different chart intervals.
  • Distractions during live analysis (e.g., delivery interruptions) highlight the importance of maintaining focus despite external factors affecting trading environments.

Navigating Intraday vs. Daily Lows

  • Distinguishing between intraday lows (formed within a day's range without creating a new lower low) is crucial when setting targets for trades.
  • When targeting old daily lows, it's important not to prematurely take profits at initial drops but rather wait for retracements before executing partial exits.

Dynamic Partial Taking Strategy

Understanding the Dynamic Partial Strategy

  • The speaker introduces a strategy for taking partial profits when shorting contracts, emphasizing the importance of maximizing returns on initial partials.
  • A method is described where traders wait for a previous swing low to be breached before placing buy stops above that level to manage their positions dynamically.
  • Instead of closing out a full position, traders can trail one contract with a dynamic stop loss, allowing them to capture more significant price movements while managing risk.

Managing Trades Effectively

  • The assumption is made that the trader is short two contracts; they should only close one and let the other run until stopped out at an optimal point.
  • The speaker illustrates how trailing stops can help capture larger moves without prematurely exiting trades, highlighting the importance of strategic exits based on market behavior.

Trade Management Techniques

  • Emphasis is placed on maintaining core positions while using dynamic trailing stops to weather retracements in price action effectively.
  • Traders are advised to adjust their stop losses as new lows are established, ensuring they remain protected against adverse movements while still allowing for potential gains.

Psychological Aspects of Trading

  • The speaker addresses common concerns about holding onto trades during volatile conditions and stresses the importance of taking partial profits correctly.
  • Understanding what type of low to hold for (previous day's low vs. intraday low) is crucial in determining trade management strategies.

Utilizing Market Conditions

  • Traders should be aware of market sentiment and news events that could impact stock prices significantly, such as earnings reports from major companies like Nvidia.
  • The discussion highlights how external factors can create volatility and affect trading decisions; thus, having a clear framework for holding through these conditions is essential.

Defining Your Trading Framework

  • It’s important to define what constitutes a "runner" in your trading strategy and understand its purpose within different market conditions.

Understanding Trading Psychology and Futures Contracts

The Challenge of Adapting to Trading Strategies

  • Emphasizes the importance of personal growth in trading rather than blindly following advice from authorities like ICT, which can lead to confusion and overwhelm.
  • Mentions a previous discussion about analyzing higher time frame charts, specifically referencing the 19,100 level and its significance in identifying relative equal lows.

Navigating Futures Contracts

  • Discusses the upcoming trading period for futures contracts, highlighting the transition into September and December contracts as critical points for traders.
  • Explains the necessity of addressing common questions from new viewers to ensure they understand trading concepts, thus retaining their interest.

Contract Expiration and Rollover Process

  • Lists various futures contract symbols (e.g., NQ for September 2024), explaining how they repeat every four months with specific expiration dates.
  • Clarifies that futures contracts expire on the third Friday of each delivery month, emphasizing the need for traders to be aware of these dates.

Managing Trades Effectively

  • Advises on managing trades by recognizing short-term lows and making informed decisions about exiting positions based on market behavior.
  • Suggests using stop-loss strategies effectively while allowing room for potential gains through trailing stops.

Emotional Resilience in Trading

  • Highlights the importance of self-nurturing through journaling to maintain a positive mindset during trading challenges; encourages traders not to dwell on past mistakes.

Dynamic Study of Price Evolution

Observing Market Behavior

  • The study focuses on how price evolves, identifying daily range expansions and caps. Analysis occurs post-market close (after 5:00 PM).
  • Investigates catalysts behind market drops, referencing a return to Tuesday's low and the concept of relative equal highs.

Inefficiencies in Price Movement

  • Emphasizes the importance of minimizing time spent in inefficiencies; traders should avoid prolonged stays in these areas.
  • Highlights bearish or premium arrays where upper halves remain unfilled, indicating potential stop hunts and fake bull flags.

Understanding Market Patterns

Identifying Fake Breakouts

  • Discusses teaching methods for recognizing fake bull flags and bear flags from previous mentorship sessions.
  • Warns that inexperienced traders may misinterpret retracements as breakouts, leading to incorrect trend line placements.

Trading Models and Strategies

  • Introduces optimal trade entry models developed over years, emphasizing simplicity in trading strategies.
  • Mentions a new model introduced by the speaker’s daughter, showcasing its beauty despite her lack of interest in trading.

Effective Entry Techniques

Utilizing Multiple Models

  • All trading models discussed are profitable; they can be used together for pyramided entries to enhance position sizes.

Analyzing Order Flow

  • Describes rich order flow around previous day lows as valuable for traders looking to capitalize on market movements.

Behavioral Insights During Trades

Assessing Market Reactions

  • Traders should evaluate how prices behave when approaching significant lows—whether movement is lethargic or quick indicates market strength.

Anticipating Speed and Magnitude

  • Importance of expecting large down closed candles when targeting specific lows during trades is emphasized.

Common Pitfalls for Retail Traders

Misinterpretation of Market Signals

Market Structure and Trading Behavior Analysis

Understanding Stop Loss Behavior

  • Traders who set their stop losses too close to market lows may face significant losses when the price drops unexpectedly. Those who trail their stop loss as prices rise can protect profits, but stubborn traders risk being caught in downturns.

Market Structure Shifts

  • Observing behavior below the first low after a market structure shift is crucial for determining trading strategies. The narrative of how the market behaves at this level informs whether it will aggressively target lower prices.

Breakaway Gaps and Redistribution

  • Breakaway gaps often form during consolidations or at key distribution stages. These gaps indicate potential redistribution areas, signaling that smart money may be reversing positions.

Price Action Dynamics

  • When price trades below a significant low, it creates an opportunity to anticipate further declines. If a gap remains open after a drop, it suggests strong bearish momentum and indicates that traders should hold onto their positions rather than exit prematurely.

Identifying Heavy vs. Light Price Action

  • Heavy price action typically signals bearish conditions where prices struggle to climb higher. In contrast, light price action allows for easier upward movement, indicating potential bullish reversals.

Targeting Liquidity in Trading Strategies

Understanding Price Behavior in Trading

Key Concepts of Price Action

  • The discussion begins with an emphasis on understanding price behavior, highlighting the importance of observing market movements and consolidations.
  • A focus is placed on analyzing charts, particularly the relationship between different time frames (one minute vs. fifteen seconds), to identify price gaps and trading patterns.
  • Observations are made about volume imbalances and how they affect price movement, indicating that small volumes can lead to significant drops or rebounds.

Trailing Stop Loss Strategies

  • The speaker advises against using trailing stops on sub-one-minute charts due to their volatility; instead, a one-minute chart is recommended for better clarity.
  • Dynamic trailing partial strategies are discussed as a way to manage trades without setting specific exit levels, allowing traders to capture larger moves while minimizing risk.
  • Emphasis is placed on adjusting stop losses based on previous candle highs for swing trading rather than intraday trading, which requires tighter management.

Managing Trade Exits

  • The importance of being content with exits close to lows is highlighted; traders should avoid overthinking their exit points to prevent psychological barriers from affecting performance.
  • Effective trade management strategies are presented as ways to enhance exit quality without the need for precise targeting of partial exits.

Psychological Aspects of Trading

  • The speaker discusses the mental challenges traders face regarding perceived exit quality and urges them not to dwell on negative thoughts in their trading journals.
  • It’s suggested that managing only part of a position allows traders to ride larger market moves without increasing overall risk exposure.

Pyramiding Positions Effectively

  • An explanation is provided about pyramiding positions and how averaging entry prices can help mitigate drawdowns when multiple contracts are involved.
  • The strategy emphasizes maintaining awareness of average prices during trades and adjusting accordingly based on market movements.

Conclusion: Riding Market Trends

Understanding Dynamic Trail Partial Strategy

Key Concepts of the Strategy

  • The strategy emphasizes a mechanical approach to trading, removing emotional factors such as fear and second-guessing. It allows traders to focus on objective criteria rather than subjective feelings.
  • Traders are advised to monitor one-minute candles closely, adjusting their stop-loss orders to the previous candle's high as prices move in their favor. This method simplifies decision-making during trades.

Analyzing Market Conditions

  • The speaker discusses identifying liquidity levels by analyzing relative highs. A specific high is highlighted as meeting the criteria for a potential trade setup.
  • Reference is made to a live stream from August 28, 2024, where the speaker outlines key market conditions just before the opening bell that could influence trading decisions.

Fair Value Gaps and Candlestick Analysis

  • The concept of an "inversion fair value gap" is introduced, with emphasis on recognizing it through candlestick patterns. Viewers are encouraged to check timestamps in the chat for specific calls made during live sessions.
  • Clarification is provided regarding when a fair value gap can be considered valid based on market structure and timing within trading hours.

Addressing Common Questions

  • The speaker acknowledges feedback about session length and encourages viewers not to rush but instead absorb information at their own pace for better understanding.
  • Some questions raised by viewers will be addressed in future presentations, while others may not be answered if they have already been covered extensively in prior streams.

Identifying Fair Value Gaps

  • A detailed explanation of how fair value gaps form is given, emphasizing that certain candlesticks do not qualify under established rules until specific conditions are met post-market open.
  • The earliest formation of a fair value gap can only occur after observing initial market movements; thus, traders must wait for confirmation before acting on potential setups.

Conclusion of Analysis

  • The speaker expresses personal connections with other traders and clarifies intentions behind participation in various streams without inappropriate implications being drawn from it.

Understanding Fair Value Gaps in Trading

Introduction to Fair Value Gaps

  • The speaker discusses the concept of an inversion fair value gap, referencing a specific candle at 815 as a key indicator for minor buy-side liquidity.
  • The analysis is based on equal highs, indicating where buy stops are located and how they relate to market movements.

Market Behavior and Trading Strategy

  • The speaker emphasizes waiting for the market to trade down before making any buying decisions related to the inversion fair value gap.
  • Observations are made about price action rallying just outside the inversion fair value gap, highlighting its significance in trading strategies.

Opening Range Gap Analysis

  • A detailed explanation of how the opening range gap interacts with previous price levels is provided, including references to specific dates and times.
  • The importance of watching price movements during regular trading hours is discussed, particularly regarding gaps formed from previous closing prices.

Price Expectations and Market Dynamics

  • The speaker outlines expectations for price movement within the first 30 minutes of trading after a discount gap opens lower than the previous day's settlement.
  • Strategies for annotating charts are shared, focusing on identifying potential price rallies based on observed gaps.

Liquidity and Market Structure Shifts

  • Discussion centers around anticipating upward movement in prices (buy-side delivery), emphasizing that traders should be aware of their expectations when entering trades.
  • Key insights into market structure shifts are presented, noting how liquidity can influence trading decisions as it interacts with various gaps.

Timing and Execution Before Market Open

  • The timing just before market open is critical; traders must recognize when significant gaps occur that could affect their strategies.
  • An emphasis is placed on understanding whether to act as buyers or sellers within these identified gaps based on market conditions leading up to 9:30 AM.

Conclusion: Navigating Fair Value Gaps Effectively

  • Traders need to understand how inversion fair value gaps function as potential catalysts for price movements while being cautious about timing their entries correctly.

Market Analysis and Trading Strategies

Understanding Fair Value Gaps

  • The discussion begins with the concept of fair value gaps, particularly focusing on the gap formed between 9:31 and 10:00. The importance of observing whether the price closes in the upper half of this gap is emphasized.
  • A strategy for shorting when trading back into an inversion fair value gap is introduced, suggesting to use the high plus one tick as a stop loss.
  • The formation of wicks during price action is discussed, indicating that if a wick forms while trading within it, traders should place their stop loss just above this high.

Trading Psychology and Strategy Execution

  • The speaker reassures that understanding market logic reduces anxiety in trading decisions. Confidence stems from knowing what to look for in price movements.
  • Emphasis is placed on journaling trades over months to recognize patterns and setups, reinforcing that these setups are not hidden but require practice to identify.

Key Levels and Market Behavior

  • Observations about how often certain levels (like new week opening gaps) are revisited by prices highlight their significance in market behavior.
  • The speaker notes how algorithms reference key levels throughout specific times of day, which can be crucial for traders' strategies.

Breakaway Gaps Explained

  • A breakaway gap's characteristics are outlined; it signifies an initial run that leads lower. Traders should anticipate such occurrences as they indicate potential market direction shifts.
  • It’s suggested that ideally, traders want to see gaps remain unfilled as this indicates strength in the market movement towards their target.

Observational Insights During Live Trading

  • The speaker reflects on live trading experiences shared with students, emphasizing real-time analysis and decision-making based on observed price actions.
  • As the session progresses into its final hour, there’s a shift towards observational commentary rather than active trade calls, allowing participants to absorb teaching moments without pressure.

Understanding Price Runs and Market Imbalances

Identifying Gaps in Price Action

  • The speaker emphasizes the importance of taking screenshots of price runs, noting that these occurrences happen frequently throughout the trading day.
  • A specific gap is identified between a candle's high and low, which indicates an imbalance in the market.

Recognizing Patterns in Trading

  • The discussion highlights how traders can identify recurring patterns by analyzing one-minute charts, training their eyes to recognize familiar behaviors in real-time.
  • An order block is mentioned as a critical point where price rallies above a certain candlestick's opening price, indicating a change in market delivery.

Understanding Sensitivity Levels

  • The speaker explains that prices should not drop past the halfway point of a significant candle because this level represents the most sensitive price point.
  • Volume imbalances are discussed as key indicators for market behavior; algorithms react to these inefficiencies when trading on lower time frames.

Analyzing Market Delivery and Inefficiencies

  • The absence of fair value gaps or swing lows suggests that previous stops have been taken, leading to new delivery patterns below established lows.
  • When algorithms detect inefficiencies at 250 seconds into the session, they initiate trades based on volume imbalances and seek higher targets.

Managing Trading Ranges Effectively

  • Traders are cautioned against assuming prices will only reach previous daily lows without considering broader ranges; effective range management is crucial.
  • A breakaway gap is defined as an area where institutional orders enter, leaving maximum range open for potential upward movement.

Observing Algorithmic Behavior

  • As prices rally into inefficiencies, they may consolidate before moving higher; this behavior reflects algorithmic trading strategies at play.
  • The concept of "accumulation" before reaching deeper premiums is introduced, highlighting how markets behave around volume imbalances.

Evaluating Price Targets and Expectations

  • Discussion revolves around whether prices will target specific gaps or revert back to previous lows; understanding these dynamics aids in setting realistic expectations.
  • The speaker reassures listeners that concepts will become clearer with repeated exposure to similar scenarios over time.

Key Takeaways from Trading Dynamics

  • Emphasis on recognizing middle points within wicks as significant levels for potential upward movements reinforces algorithmic trading principles.

Understanding Trading Algorithms and Market Behavior

The Nature of Trading and Live Data

  • The speaker emphasizes the importance of quick execution in trading, comparing it to a fishing rod that should pierce through market movements without hesitation.
  • Acknowledges criticism regarding the use of delayed data for trades, asserting that live trading cannot be accurately replicated with pre-recorded videos.
  • Highlights the necessity for traders to become familiar with price behaviors over time before engaging in actual trades.

Price Dynamics and Algorithmic Trading

  • Discusses how certain price levels, like previous day lows, attract buying interest, likening this to fish gathering around a baited hook.
  • Uses a fishing analogy to explain how traders target specific price points based on market behavior and algorithmic triggers.
  • Refutes claims against the existence of algorithms in trading, expressing confidence in their influence on market movements.

Addressing Doubts and Learning Process

  • The speaker welcomes skepticism about trading methods as it fosters discussion but insists on the validity of his approach backed by observable patterns.
  • Encourages learners not to set unrealistic expectations for themselves while mastering trading techniques; patience is key.

Upcoming Sessions and Engagement

  • Announces future live sessions scheduled for August 29th and 30th, 2024, indicating potential delays but assuring consistent attendance.
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.