2022 ICT Mentorship Episode 21

Introduction

The speaker introduces the 21st episode of the 2022 free ICT YouTube mentorship and explains why they are looking at the hourly chart on the dollar index.

Risk On and Risk Off Market

The speaker discusses risk on and risk off markets, how they relate to the dollar index, and how this affects other asset classes such as foreign currencies and stock markets.

• The dollar going up puts pressure on foreign currencies, causing them to have sustained declines.

• A risk-off scenario occurs when the dollar is going up, causing money to pour into it as a safe haven while pouring out of risk assets like foreign currency.

• This concept applies to all asset classes, including forex and futures trading.

Using Dollar Index in Forex Trading

The speaker answers a common question about whether using the dollar index is useful in forex trading.

• When the dollar goes up, foreign currencies go down. When it goes down, foreign currencies go up.

• This concept is useful for understanding risk-on/risk-off scenarios in forex trading.

Dollar Index Chart Analysis

The speaker analyzes a chart of the dollar index and explains their previous predictions for its movement.

• Predicted that the dollar index would drop down to around 99.92 before running relative equal highs higher.

• Gave objectives for relative equal highs at 102 and 103.

• These predictions were accurate, with current chart movement matching these objectives.

Intermarket Analysis and Seasonal Tendencies

In this section, the speaker discusses how he used intermarket analysis and seasonal tendencies to make a prediction about the market.

Using Intermarket Analysis

• The speaker explains that he used intermarket analysis to predict the market.

• He mentions that there is an inverted relationship between the dollar and e-mini S&P, which helped him make his prediction.

• The speaker emphasizes that his approach is based on simple ideas and sound logic.

Seasonal Tendencies

• The speaker notes that May is usually a seasonally weak month for the market.

• He explains that he used this knowledge to look for downward pressure in the market.

• The speaker predicts that each daily candle should be expanding lower and reaching into a certain area.

Analyzing Charts for Trading Opportunities

In this section, the speaker analyzes a chart to identify trading opportunities.

Bearish Order Block

• The speaker points out a bearish order block on the chart.

• He notes that they did not reach the high level of this block before experiencing weakness in May.

Predicting Market Movement

• The speaker explains how he leaned on the bearish order block as a basis for his analysis.

• He predicts that they will run below certain levels on the chart before ultimately looking for a run below another level.

• The speaker notes some movement above previous days but still believes they are likely to go lower.

Admitting Mistakes and Adjusting Strategies

In this section, the speaker discusses how he adjusts his strategies when things don't go as planned.

Mistakes in Analysis

• The speaker admits that he was wrong about a recent prediction.

• He notes that he expected the market to rally higher before rolling over, but it did not happen.

Adjusting Strategies

• The speaker does not provide specific strategies for adjusting to mistakes.

Understanding the Power 3 Setup

In this section, the speaker explains how to use the Power 3 setup and how it relates to local time in New York.

Using Local Time in New York

• The London session starts at 3 AM New York local time.

• Use the area on TradingView to toggle to New York and set a clock on your computer that tracks local time in New York 24/7.

• This will help you avoid confusion about what you should be doing relative to time.

Interpreting Small Movements

• Small movements can throw you off if you're expecting something else.

• You may miss a setup or misinterpret market moves.

• Use a stop loss and be controlled about how many times you go into the marketplace.

Analyzing Market Times

In this section, the speaker discusses useful market times for analysis and what traders should be concerned about.

Useful Market Times

• The opening price at midnight local time in New York is useful for trading the London session at 2 AM and 5 AM.

• Look for something to rally above that opening price if bullish or decline below it if bearish.

Concerns for Traders

• Traders will miss moves, misinterpret them, or read them wrong.

• Have some measure of flexibility that comes with experience.

Opening Price and Judas Swing

In this section, the speaker discusses the opening price at 8:30 am and midnight in New York time. He explains how he uses these prices to identify bearish markets and look for short-term rallies that he can fade. The speaker also introduces the concept of a Judas swing or false rally, which he likes to fade.

Using Opening Prices to Identify Bearish Markets

• The opening price at 8:30 am and midnight in New York time are important indicators of market sentiment.

• A move above the opening price is a Judas swing or false rally, which the speaker likes to fade.

• If the market is bearish, it will not be able to rally above these key levels.

London Open Setup

In this section, the speaker discusses a sound entry that took place during the London open setup. He explains how traders can use fair value gaps and micro structure shifts to identify imbalances in the market.

Sound Entry During London Open Setup

• The displacement fair value gap rallies up bear shoulder block fair value gap runs into it.

• Traders should hold onto their position until there is a micro structure shift below the short term low.

• This imbalance indicates that there is an opportunity for traders to enter on a lower fair value gap.

• Traders can use a stop that allows for trading up into this one but may need to consider risk parameters when deciding whether or not to take this trade.

English Understanding Price Action: 8:30 to 9:30 AM

In this section, the speaker discusses the price action between 8:30 and 9:30 AM. He talks about a model that he teaches and how it did not exist in today's price action on the five-minute chart. He also gives coaching on how to get in sync with the move.

The Model

• Normally, the model requires looking for something to the left prior to 8:30.

• The model did not exist in today's price action on the five-minute chart.

• Coaching is given to help get in sync with the move.

Holding Overnight

• The speaker stopped holding overnight like 24 hours ago due to too much risk in the marketplace.

Power Three Framework

• The speaker looks for a framework that offers power three which is a fractal element of accumulation manipulation and distribution.

• Smart money would accumulate short positions then anticipate manipulation above the opening price before distributing their short positions at some important low.

Time of Day

• It is relative to those daily equal lows and old daily lows and projections with fib all those ideas come into agreement as well with time of day.

• A movement down into around lunch hour beginning at noon creates an important low there.

Understanding Timeframes

In this section, the speaker discusses the importance of timeframes in trading and how to use them effectively.

Opening Price and Equity Market

• The opening price at 8:30 am is important for determining whether there will be a rally above it.

• The equity market or stocks start trading at 9:30 am, which can create initial volatility.

Unfolding of the Day's Move

• Wait for the real move of the day to unfold after initial volatility at 9:30 am.

• If there is no rally at 9:30 am, it may continue in the direction set during the London open session.

Using Bearish Order Blocks

In this section, the speaker explains how to use bearish order blocks to identify potential shorting opportunities.

Refining Imbalances on a Three-Minute Chart

• A little imbalance gets refined and trades up into it before breaking down.

• Look for reasons to get short when an imbalance is too heavy and not likely to rally.

Drawing Down into Relative Equal Lows

• Anytime there is an imbalance above relative equal lows on a daily chart, prices will draw down into that level.

• Prices keep going lower because they are gravitating towards those relative equal lows on the daily chart.

Recap of Trading Strategy

In this section, the speaker recaps his trading strategy and how he uses the opening price at midnight New York time to trade the London open session.

Using Opening Price to Trade London Open Session

• Use the opening price at midnight New York time to trade the London open session from 2:00 am to 5:00 am.

• Look for scenarios that would be traded if awake during London, such as a rally above the opening price.

Creating Short-Term Rally

• If there is a bearish bias and it creates a rally above the opening price at midnight New York time, it will likely create another short-term rally.

• If prices remain heavy below both opening prices at midnight New York local time and 8:30 am New York local time, everything is extremely bearish and may not mount any meaningful rallies.

Trading and Missing Big Moves

In this section, the speaker talks about how trading can be difficult, especially for millennials who expect perfection. He shares his experience of missing big moves in the market and emphasizes that it's okay to miss some trades.

Missing Big Moves

• The speaker missed a huge run in Bitcoin that would have otherwise paid out a lot of money.

• He has also missed a lot of moves in the futures markets and commodities.

• The reality is that you're not going to participate in every single move, and it's okay.

• Give yourself permission to be human and accept that you're going to do it wrong sometimes.

Dealing with Missed Trades

• Don't get mad or curse on social media when you miss a trade. Reason with yourself ahead of time and accept that you won't be able to do everything.

• Just because you miss some trades doesn't mean your model is broken. Over time, the model will deliver like it has done in the past.

• There will be times when the market structure is too overwhelmingly bullish or bearish for your model to permit entry. Use fair value gaps to participate instead.

Trading Setups

In this section, the speaker discusses trading setups and the courage required to trade them.

Key Points:

• It takes courage to trade certain types of setups.

• Study fair value gaps and shoulder blocks to identify potential trades.

• Don't move your stop loss too quickly, wait for time and price confirmation before adjusting it.

Using Fibonacci on TradingView

In this section, the speaker announces that in the next episode they will show how to set up Fibonacci on TradingView.

Key Points:

• The next episode will cover how to set up Fibonacci on TradingView.

• This tutorial is aimed at those who are new to TradingView.