ICT Setup Part 2- Market Analysis Method & Fair Value Gaps
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This section provides an introduction to conducting a professional market analysis and highlights key factors to identify on a price chart.
Identifying Key Factors on the Price Chart
- Identifying the most recent liquidity sweep zones: Look for zones where liquidity has recently been swept, indicating stop orders being triggered.
- Detecting buy or sell side liquidity resting zones: Identify areas where buy or sell side liquidity is accumulated and potentially targeted by price movements.
- Flagging fair value gaps: Fair value gaps are zones created by inefficiency in the market, representing trading opportunities when coupled with order blocks.
- Spotting order blocks: Identify areas where significant buying or selling activity has occurred, often acting as support or resistance levels.
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This section continues discussing key factors to identify on a price chart, including premium and discount zones, the general outline of the market, and ICT concepts.
Additional Key Factors on the Price Chart
- Identifying premium and discount zones: These zones represent areas where price deviates significantly from fair value, providing potential trading opportunities.
- Spotting the general outline of the market: Understand the overall structure and trend of the market using higher timeframes and key swing points.
- Exploring basic ICT concepts: Gain knowledge about Information Communication Technology (ICT) concepts related to market analysis.
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This section focuses on the importance of liquidity and its impact on market analysis.
Understanding Liquidity
- Defining liquidity: Understand the concept of liquidity in the market, including areas where it can be found.
- Exploring liquidity sweep zones: Identify zones where liquidity has been swept, indicating stop orders being triggered.
- Analyzing buy and sell side liquidity: Detect buy and sell side liquidity resting zones to anticipate potential price movements.
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This section delves into fair value gaps and their significance in price action trading.
Fair Value Gaps
- Understanding inefficiency in the market: Inefficiency occurs when there is an imbalance between buyers and sellers, resulting in gaps within candle patterns.
- Identifying fair value gaps: Fair value gaps are created by inefficiency and represent zones with less trading activity, providing trading opportunities when coupled with order blocks.
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This section provides practical examples of identifying fair value gaps on a price chart.
Spotting Fair Value Gaps
- Identifying fair value gaps above current price: Marking up fair value gaps that may potentially be filled by price movement.
- Importance of marking fair value gaps near current price: Highlighting the significance of considering nearby fair value gaps in trading strategies.
Conclusion
In this video, we learned about key factors to identify on a price chart, including liquidity sweep zones, buy/sell side liquidity resting zones, fair value gaps, and order blocks. Understanding these factors can help traders conduct a professional market analysis and identify potential trading opportunities.
New Section
This section discusses the concept of order blocks and their significance in identifying market structure.
Identifying Order Blocks
- An order block is detected as the last bearish candlestick before a heavy bullish move or the first weak candlestick before a drastic move.
- For a valid order block, the recent market structure must be broken.
Premium and Discount Zones
- Premium and discount zones are areas on the price chart that indicate high probability setups.
- The Fibonacci tool is used to determine if price is in the premium or discount zone.
- Buying is done in the discount zone, while selling is done in the premium zone.
- These zones can also help identify valid order blocks and fair value gaps.
Drawing Premium and Discount Zones
- The Fibonacci tool is used by connecting the swing high and swing low of the price.
- The zone below the 0.5 Fibonacci level is known as the discount zone, while the zone above the equilibrium line is known as the premium zone.
- These zones are reliable only if impulsive movement breaks recent structure.
Analyzing Market's General Outline
- It is important to spot market direction and structures created in the market.
- A market structure shift occurs when price fails to make a new higher high or breaks a higher low to the downside.
- Liquidity sweeps may occur during these shifts, indicating potential future movements.
Significant Fair Value Gap
- Sell-side liquidity has been swept, creating three fair value gaps on lower time frames.
- The most significant fair value gap is located in the premium zone with good liquidity resting below it.
- Price may rise to sweep buy-side liquidity before continuing its bearish movement.
ICT Trading Strategies
- ICT trading patterns and strategies can be used to take short positions from the fair value gap zone.
- These strategies can greatly improve win rate and support trading systems.
Conclusion
- The market structure has changed, indicating a potential bearish price movement.
- Traders should keep an eye on the significant fair value gap for potential trading opportunities.