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ICT Mentorship 2023 - Market Maker Models
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ICT Mentorship 2023 - Market Maker Models

Understanding Market Maker Models

Introduction to Trading Concepts

  • The speaker introduces the final teaching lecture on the Inner Circle Trader YouTube channel, emphasizing that this session reflects their actual trading approach.
  • A strong understanding of Price Delivery (PD) arrays is crucial for grasping market maker models; without this knowledge, traders may miss key price action insights.

Importance of PD Arrays

  • Familiarity with various PD concepts like breakers and mitigation blocks enhances a trader's ability to recognize market maker buy or sell models in real-time.
  • The speaker notes that some students quickly identify market maker models due to their comprehensive understanding of multiple PD arrays, highlighting the importance of depth in learning.

Challenges in Learning

  • The speaker warns that many will find this material challenging and stresses the necessity of prior knowledge from mentorship teachings.
  • Students are encouraged to document missed opportunities in their journals, framing these experiences positively to condition their minds for future recognition.

Framework for Trading Models

  • The discussion focuses primarily on market maker sell models but mentions that similar principles apply when considering buy models.
  • This teaching serves as an advanced framework for internalizing price action during trades, which may be complex for new learners.

Swing Trading Insights

  • The speaker explains swing trading strategies: bullish trades involve moving from discount to premium while bearish trades move from premium to discount.
  • Understanding liquidity versus delivery is essential; traders must anticipate price movements based on relative highs and lows rather than simplistic patterns.

Advanced Trading Techniques

  • Recognizing relative equal highs and lows is just one aspect; traders need insight into broader market narratives influencing price direction.

Understanding Price Action and Market Dynamics

The Importance of Observing Price Action

  • It is beneficial to analyze price action daily, weekly, and monthly to identify models that enhance understanding through personal observation rather than relying solely on external guidance.
  • Recognizing relative equal highs in price charts is crucial; the speaker uses a close line chart for simplicity but emphasizes the need for deeper analysis.

Market Behavior and Trading Strategies

  • A bearish stance involves viewing every rally with skepticism, looking for signs of reversal that meet specific criteria before engaging in trades.
  • Advanced strategies include anticipating market movements above relative equal highs and executing trades during both buy-side and sell-side phases of the market curve.

Learning at Your Own Pace

  • Students are encouraged to learn at their own pace without feeling pressured to keep up with others who may have more experience or knowledge.
  • The speaker highlights that some students have been learning since 1996, indicating a wide range of experience levels within the trading community.

Universal Application of Concepts

  • The principles discussed apply universally across various markets (futures, index futures, Forex), as long as there is a price feed available for trading.

Buy-Side Delivery Explained

  • "Buy side delivery" refers to upward price movement aimed at engaging liquidity above certain high points where pending orders exist.
  • Liquidity represents stagnant price levels where stop-loss orders reside; understanding this concept is essential for effective trading strategies.

Sell-Side Delivery Dynamics

  • When prices move lower after reaching relative equal highs, it indicates a shift towards "sell side delivery," which aims to capture liquidity from traders caught in long positions.

Analyzing Candlestick Patterns

  • Transitioning from line charts to candlestick charts allows for better visualization of market dynamics by showing open, high, low, and close prices over time.
  • The discussion includes identifying inefficiencies in price action where previous candle lows do not align with subsequent candle openings.

Understanding Fair Value Gaps in Market Dynamics

Introduction to Fair Value Gaps

  • The speaker introduces the concept of a "fair value gap," describing it as a specific price level that traders should recognize visually. This gap is identified between three candles, with one candle acting as a pivotal point.

Characteristics of Fair Value Gaps

  • A fair value gap is classified as a "CBI" (sell-side imbalance buy-side inefficiency). It indicates that market fluctuations are driven by algorithms targeting predetermined levels rather than mere buying and selling pressure.

Market Efficiency and Price Action

  • For an efficient market, prices must return to trade within the range defined by the low and high of the relevant candle. The discussion emphasizes how price action reflects this necessity.

Analyzing Candle Patterns

  • The narrative focuses on candle bodies over wicks, suggesting that while small wicks may appear, they do not alter the overall story told by the body of the candles during price rallies.

Liquidity Draws and Market Structure

  • The speaker discusses how to assess potential upward movements above relative equal highs by identifying close proximity inefficiencies. This involves analyzing previous candle patterns for insights into future price behavior.

Bid Balance and Sell-Side Inefficiencies

  • A bid balance sell-side efficiency is introduced, contrasting with fair value gaps created by up-close candles. These concepts help traders understand where prices might retrace or rally based on historical lows.

Anticipating Market Movements

  • As markets shift structure, traders should look for retracements back down after initial rallies. Recognizing these patterns can aid in predicting future price movements toward established highs.

Practical Application of Concepts

  • Traders are encouraged to annotate charts when identifying fair value gaps and liquidity draws. This practice helps maintain focus on potential trading opportunities beyond immediate market conditions.

Understanding Market Structure and Fair Value Gaps

Transitioning Time Frames

  • The discussion begins with a shift from a 60-minute to a 15-minute time frame, indicating an increase in the number of candles observed.
  • The speaker notes that the body of the candlesticks respects certain levels while only the wicks pierce them, suggesting market behavior is indicative of potential price movements.

Analyzing Price Levels

  • A focus on specific lows and their implications for future price action is highlighted; rejection blocks are identified as key areas to watch.
  • The market structure shows a retracement back into fair value gaps, prompting questions about consolidation and accumulation of long positions.

Consolidation Insights

  • Observations are made regarding how the market may consolidate before making further moves, allowing smart money to accumulate positions.
  • A transition to an even lower time frame (five minutes) is introduced to analyze more detailed price actions within a balanced price range.

Balanced Price Ranges

  • The concept of balanced price ranges is explained as areas where both buy-side and sell-side deliveries overlap, creating potential trading opportunities.
  • An example illustrates how trapped traders can influence market dynamics when significant candles indicate rapid shifts in price direction.

Trap Traders and Market Dynamics

  • The speaker describes trap traders caught in classic commodity trading patterns, emphasizing their impact on subsequent market movements.
  • Reference points are established based on previous rapid declines followed by quick recoveries, suggesting bullish sentiment may emerge from these patterns.

Anticipating Future Movements

  • Discussion continues around inefficiencies in pricing and expectations for future consolidation as part of swing trading strategies.

Market Dynamics and Trading Strategies

Understanding Market Behavior

  • The market operates on principles of liquidity and inefficiencies rather than harmonic patterns or Elliott Wave theories. It often consolidates or is subject to manipulation.
  • Speculators face inherent risks from unpredictable events such as rate announcements or geopolitical instability, which can destabilize the marketplace.

Analyzing Consolidation Levels

  • When identifying consolidations, it's crucial to focus on levels that consistently repeat rather than just overlaying highs. This approach helps in framing market behavior clearly.
  • Historical examples illustrate the importance of recognizing specific consolidation patterns. Traders should review their past annotations for better understanding.

Liquidity and Market Reversals

  • Understanding that markets may not return immediately to original consolidation areas is vital; it could take varying amounts of time before revisiting these levels.
  • Successful trades are identified by the market's movement towards liquidity and inefficiencies, reversing back against original consolidations perceived as support levels.

Challenging Retail Trading Theories

  • The speaker opposes traditional retail trading concepts like support/resistance and harmonic patterns, arguing they contribute to a high failure rate among traders.
  • Properly framing original consolidations allows traders to identify potential exits when the market leaves these zones, emphasizing algorithmic price delivery characteristics.

Entry Points and Market Gaps

  • Recognizing how markets leave original consolidations can indicate potential entry points for trades based on algorithmic signals rather than traditional methods.
  • High-frequency trading algorithms look for long entries at specific candle formations, suggesting that returning to previous consolidation levels can present trade opportunities.

Inefficiencies and Market Movements

  • Markets may rally but also create inefficiencies that signal potential drops back into lower price ranges. Identifying these gaps is essential for strategic trading decisions.
  • A buildup of interest in higher prices may lead to aggressive moves upward before potentially retracing downwards, indicating complex dynamics at play within market movements.

Fair Value Gaps Explained

Understanding Market Dynamics and Accumulation Strategies

Analyzing Price Action and Consolidation

  • The discussion begins with the importance of recognizing original consolidation areas, highlighting how price rallies within these zones can indicate potential buy-side trades.
  • Emphasis is placed on the necessity of pausing to analyze candlestick patterns in detail, which aids in understanding market behavior and identifying trading opportunities.
  • Observing price movements from consolidation to rally provides insights into market dynamics; traders are encouraged to actively engage with the material for better comprehension.

Identifying Key Trading Signals

  • A down-close candle below a bullish breaker indicates a significant point for potential entry, showcasing how specific candle formations can signal trading opportunities.
  • The initial target for trades is identified as liquidity above previous highs, emphasizing the need to recognize fractal price actions when planning entries.

Stages of Accumulation

  • Different stages of accumulation are discussed; traders may not always identify original consolidations correctly but can still classify their entries based on their understanding and experience level.
  • The distinction between first-stage accumulation and second-stage reaccumulation is clarified, stressing that both approaches can be valid depending on individual trader perspectives.

Variability in Trading Approaches

  • Traders may misinterpret market signals; some might see equal highs being taken as a bearish sign without considering broader narratives outlined earlier in the discussion.
  • It’s noted that sometimes only one point of accumulation will present itself before prices move rapidly higher or lower, indicating variability in market behavior.

Understanding Trader Mindsets

  • Different trader mindsets are explored; some prefer waiting for returns to original consolidations while others may act on immediate setups based on their strategies.
  • The rhetorical question posed encourages self-reflection among traders regarding their preferred entry points and strategies based on current understanding.

Advanced Trading Concepts

  • The concept of "unicorn" setups is introduced—ideal conditions where everything aligns favorably for a trade. This highlights the significance of thorough analysis before entering positions.

Trading Strategies and Market Dynamics

Understanding Low Resistance Liquidity Runs

  • The speaker emphasizes the importance of identifying high-speed, low-resistance liquidity runs in trading. These are often found during the second stage of redistribution in a market maker sell model.

Buy Balance and Fair Value Gaps

  • A concept called "buy balance sell sign efficiency" is introduced, focusing on midpoints of inefficiencies. The bullish fair value gap indicates potential reaccumulation opportunities.

Trading Techniques for Experienced Traders

  • Advanced traders may opt to short at specific levels (referred to as "Mohawks") when price action suggests overbought conditions outside a 60-minute fair value gap.

Smart Money Reversals Explained

  • The speaker discusses smart money reversals, highlighting that picking tops in bearish markets can be more predictable than attempting to do so in bullish markets.

Risk Management and Entry Points

  • Emphasizes the need for patience and experience when anticipating smart money reversals. Proper risk management strategies include setting stop losses above recent highs or wicks.

Market Behavior and Delivery Curves

  • The discussion shifts to market behavior regarding buy-side and sell-side delivery curves, explaining how these concepts relate to original consolidation lows and trader psychology.

Understanding Market Dynamics and Trading Strategies

Key Concepts in Price Action Trading

  • The discussion begins with the concept of a "fair value gap" created when a low is taken out, indicating potential trading opportunities within the context of bearish breakers.
  • Emphasis on identifying low-risk short positions and understanding market behavior through tape reading, which involves analyzing price movements to gauge market sentiment.
  • A critical perspective on traditional support and resistance levels; the speaker argues that relying solely on horizontal or diagonal lines is ineffective without understanding underlying price dynamics.

Understanding Order Blocks and Market Phases

  • Introduction to bearish order blocks as key areas for redistribution, highlighting their significance in anticipating rapid downward movements in price.
  • The importance of entering trades at specific points to avoid chasing prices; missing initial entries can lead to confusion during sharp market drops.

Navigating Market Sentiment and Reversals

  • Discussion on recognizing different stages of distribution; traders may misinterpret these phases based on their experience level, leading to unexpected market reactions.
  • Clarification that not all traders will see the same opportunities due to varying levels of experience; allowances are made for differing perspectives during teaching.

Advanced Trading Techniques

  • Explanation of how misclassifying distribution stages can result in being unprepared for sudden market shifts, emphasizing the need for awareness and adaptability.
  • Insights into how bullish order blocks function differently depending on whether one is viewing them from a buy-side or sell-side perspective.

Time and Price Relationship in Trading

  • The concept that time sets the stage for price action; understanding this relationship is crucial for effective trading strategies.
  • Discussion about how previous support levels can become resistance after a reversal, stressing the need for dynamic analysis rather than static assumptions.

Conclusion: Application Across Asset Classes

  • Reinforcement that these principles apply universally across various asset classes, not just limited to Forex pairs like GBP/USD.

Market Maker Sell Model and Trading Insights

Understanding the New York Open Kill Zone

  • The speaker discusses an order block that indicates a market reversal profile, highlighting its significance during the New York open at 7 AM.
  • Within the New York open Kill Zone, there are key trading elements such as a breaker and a bearish order block, which serve as potential entry points for trades.
  • The concept of "Silver Bullet" is introduced, emphasizing the importance of understanding fair value gaps and market narratives during specific trading sessions.

Timing and Volume in Trading

  • The speaker stresses the importance of trading during high volume periods when order flow is increasing rapidly, suggesting traders focus on short time frames like one to three hours.
  • A discussion on market reversals highlights how traders should anticipate price movements based on established models and timing strategies.

Reflections on Mentorship and Teaching

  • The speaker reflects on their teaching journey, emphasizing the need for comprehensive knowledge beyond basic trading models to succeed in trading.
  • Gratitude is expressed towards students for their support; however, personal commitments are leading to a reduction in mentoring activities.

Commitment to Educational Content

Playlists: 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.