VIDEO
HIGHLIGHT
Log InSign up
ICT 2024 Mentorship \ Lecture #16 August 24, 2024
SummaryTranscriptChat

ICT 2024 Mentorship \ Lecture #16 August 24, 2024

How to Annotate Your Chart: A Guide for Beginners

Introduction to Chart Annotation

  • The video serves as an introductory guide on how to annotate charts, aimed at both the speaker's son, Caleb, and viewers interested in learning.
  • Viewers are encouraged to use their own charts during live streams rather than relying solely on the speaker's charts for better understanding.

Logging Price Action

  • The focus is on logging specific price action segments for each trading session, which helps build a deeper understanding of market behavior.
  • Suggested tools for capturing observations include PowerPoint or other notation mediums that allow saving screenshots and annotations.

Importance of Routine Practice

  • Emphasizes the importance of daily practice in chart annotation as a form of meditation that enhances comprehension over time.
  • Initial stages may feel monotonous and unproductive, but consistent practice will lead to improved recognition of price action patterns.

Learning from Live Streams

  • The speaker reflects on previous live streams where they focused solely on observing price action without distractions or tangents.
  • Viewers are advised to rewatch past live streams for foundational insights into anticipating market movements and making informed decisions.

Building Skills Through Documentation

  • Regularly taking screenshots and documenting observations is crucial for developing skills in recognizing market trends and behaviors.
  • The speaker stresses the need for neatness in charting and journaling practices as part of skill development.

Analyzing Market Conditions

  • Discussion includes analyzing the NASDAQ daily chart with references to volume imbalances and bearish order blocks as key indicators.
  • Highlights specific dates (e.g., August 13th, 2024), encouraging viewers to revisit those sessions for context regarding current market conditions.

Analysis of Market Dynamics and Trading Strategies

Understanding Sell-Side Balance and Buy-Side Efficiency

  • The discussion begins with a focus on a significant down close candle, indicating sell-side balance and buy-side efficiency (SIBI) observed on July 24th, 2024. This price action was analyzed to identify potential market movements.
  • A notable drop occurred on Thursday, followed by an examination of the bearish order block's main threshold. The speaker emphasizes the importance of monitoring Fed Chair Powell's speech scheduled for Friday at 10 o'clock as it could influence market behavior.

Importance of Annotations in Trading

  • Traders are encouraged to maintain detailed annotations regarding daily trading actions, including highest highs and lowest lows, which were outlined in advance on August 13th.
  • The concept of volume imbalance is introduced; it refers to candles that do not touch or overlap with previous candles' bodies. Understanding this helps traders gauge market sentiment.

Measuring Volume Imbalance Levels

  • The speaker measures the difference between the high of a volume imbalance on the daily chart to establish a consequent encroachment level at 19,943.
  • Observations from August 23rd indicate reluctance to go long due to prior price action below the volume balance levels. This highlights how historical data informs current trading decisions.

Price Delivery Expectations

  • If prices move lower while expecting weakness, respect for higher timeframe price delivery arrays is crucial. It’s noted that trading should ideally avoid entering the upper half of established volume balances.
  • A bearish order block is identified based on previous price action; this can be utilized for intraday trading strategies while maintaining awareness of upper limits set by earlier trades.

Transitioning to Lower Time Frames

  • As analysis shifts to lower time frames, traders are reminded to note all relevant levels indicated in higher time frames before making decisions.
  • On a one-minute chart, specific areas are highlighted as balanced price ranges where significant moves may occur. This segment emphasizes understanding smaller fluctuations within larger trends.

Identifying Propulsion Blocks and Order Blocks

  • The concept of propulsion blocks is discussed alongside bearish order blocks that change market delivery states. Recognizing these patterns aids traders in predicting future movements effectively.
  • A small sell signal indicates balance between certain candle highs and lows; this information is critical for determining entry points during volatile market conditions.

Understanding Balanced Price Ranges

Dynamics of Price Movement

  • The market exhibits a pattern where prices are expected to decline, leading to lower lows after retracing into a propulsion block before breaking down further.
  • A balanced price range is characterized by oscillating movements between defined highs and lows, indicating efficient delivery of buy and sell orders.
  • For a price range to be considered balanced, it must show consistent back-and-forth trading activity rather than just moving up or down.

Challenges in Trading Within Balanced Ranges

  • Trading within balanced price ranges can be challenging; significant movement is required to break through established resistance levels.
  • High resistance liquidity exists above certain highs, necessitating substantial market intervention for any upward movement.

Impact of News Events on Market Behavior

  • Major news events (e.g., payroll reports, CPI, PPI) can disrupt normal trading patterns; it's advisable to trade post-event due to unpredictable market reactions.
  • Keeping track of these events helps traders understand potential impacts on price action and develop informed strategies.

Learning and Observational Strategies

  • Collecting information about price action is crucial for developing a trading journal that aids in recognizing past setups and improving future decision-making.
  • Understanding the mechanics of price action—what constitutes balance versus inefficiency—is essential for effective trading.

Analyzing Opening Ranges

  • The opening bell marks the beginning of the trading day; observing initial movements helps identify key levels within the first 30 minutes.

Market Analysis and Trading Strategies

Understanding Market Dynamics

  • The discussion begins with a focus on market structure, emphasizing the importance of identifying equal highs and lows. The speaker instructs to wait for the first one to be taken, indicating that the buy side was taken first, suggesting a potential fake run.
  • The speaker expresses a desire to see price action accumulate within specific candle ranges but prefers a sharp drop followed by an upward movement instead of gradual accumulation.
  • A reference is made to daily charts and significant levels such as the Daily CBI sell sign and balance buy sign efficiency from July 23rd. The speaker notes that price should not accumulate at certain levels but rather create higher highs.

Key Price Levels and Reactions

  • Discussion continues about relative equal highs and lows, highlighting that the market should not accumulate in specific areas. Instead, it creates higher lows which indicate bullish sentiment.
  • The analysis includes gaps created during trading sessions, with emphasis on treating these gaps as support or resistance levels. There’s an expectation for price to reach buy-side liquidity without trading above certain thresholds.

Market Sentiment Indicators

  • The concept of "Turtle Soup" is introduced as a strategy where if the market fails to reach expected levels (like new day opening gaps), it indicates weakness. This failure becomes a signal for shorting opportunities.
  • A critical moment is identified when price action fails to reach new day opening gaps; this serves as an indicator of weakness in bullish momentum.

Shorting Opportunities and Market Manipulation

  • The speaker discusses how any cross above certain price points can present shorting opportunities, particularly between key thresholds established earlier in July 2024.
  • Validation of bearish order blocks is emphasized; traders are encouraged to build positions while monitoring market movements closely after crossing significant gaps.

Anticipating Future Movements

  • As the market reacts below previous gaps, there’s anticipation for aggressive rejections if prices attempt to revisit those upper levels again.
  • Relative equal lows are highlighted as potential targets for future trades; however, caution is advised regarding untagged sell sides during high volatility periods influenced by external factors like news events.

Final Thoughts on Trading Strategy

  • Emphasis on manual intervention during trading hours suggests that traders need to remain vigilant against sudden moves designed to shake out existing positions.

Market Analysis and Trading Strategies

Understanding Opening Gaps and Price Action

  • The speaker discusses the importance of observing market behavior around opening gaps, particularly focusing on the new day opening gap for August 23rd, 2024. They express anticipation for price movement based on these gaps.
  • The analysis highlights that the current price action is nested within an old week opening gap from August 18th, 2024. This nesting creates a significant area of interest, described as a "black hole" that draws price towards it.
  • The speaker expresses boredom with current market conditions, indicating a lack of interest in long positions. They predict lower prices later in the trading session, showcasing their confidence in market movements.
  • An "event horizon" is introduced as a critical concept; it represents the area between new day and new week opening gaps where price is expected to gravitate. This concept aids traders in anticipating potential price targets.
  • The event horizon is further explained through Fibonacci quadrants, emphasizing how they can help identify relative highs and lows within this framework. The algorithmic nature of trading is highlighted as it tends to draw prices into these zones.

Advanced Trading Concepts

  • The speaker emphasizes their unique insights as an Inner Circle Trader (ICT), suggesting that they will reveal information not typically visible to retail traders. This includes understanding dark pools or gray pools related to price action.
  • Event horizons are defined more clearly: they serve as midpoints between various types of gaps (new day vs. new week). There’s no strict preference for which type of gap is used; proximity matters more than specific categorization.
  • A guideline for using historical data is provided: only consider new week opening gaps from the last 60 days to maintain relevance in trading strategies. Older data may dilute predictive accuracy.
  • The speaker illustrates how they identified inversion fair value gaps before they formed, demonstrating their analytical prowess and ability to anticipate market movements effectively.

Practical Application in Trading

  • Emphasis on capturing real-time price action through chart annotations during live trading sessions is discussed. Traders are encouraged to mark key levels such as opening range gaps immediately after market opens at 9:30 AM EST.

Market Analysis and Fair Value Gaps

Understanding the Opening Range Gap

  • The speaker discusses their anticipation for the market to drop below a certain level, indicating interest in trading only if it reaches premium levels.
  • They highlight an "undelivered portion" of the opening range gap from the previous day's settlement, emphasizing its importance for future projections.

Price Action and Algorithmic Behavior

  • Observations are made about price action during lunch hours, noting how bodies respect the new week opening gap, suggesting algorithmic influences on market behavior.
  • A change in delivery state is identified when a candle trades above another's open, indicating potential bullish movement towards premium levels.

Insights from Past Commentary

  • The speaker reflects on past Twitter commentary sessions where they shared insights on trading strategies and internalizing price action.
  • They mention concepts like Event Horizon and inversion fair value gaps, stressing that not all fair value gaps should be treated as inversion opportunities.

First Presentation Theory

  • Introduction of the "first presentation theory," which states that a fair value gap must form after 9:31 AM to be valid; this is crucial for accurate trading analysis.
  • Emphasis on aligning electronic trading hours with regular trading hours to validate fair value gaps; discrepancies can lead to misinterpretation.

Practical Application of Fair Value Gaps

  • The speaker addresses viewer comments regarding missed references to specific fair value gaps, reinforcing their teaching methodology through live stream discussions.
  • They illustrate how first presented fair value gaps behave over time and encourage journaling these events for better understanding of market dynamics.

Market Movement Analysis

  • Detailed analysis of market movements shows how prices interact with established levels throughout the day; this includes selling off at noon after reaching certain highs.

Market Dynamics and Price Action Analysis

Understanding Price Action During Fed Speeches

  • The price action on Friday demonstrated a significant movement, with over 200 handles of price run that aligned with prior expectations despite the chaotic environment during the Fed Chairman's speech.
  • Manual intervention is likely when a Fed chairman speaks; initial market reactions are often misleading and can lead to losses if traders chase after them.

Fair Value Gaps and Market Timing

  • A critical time frame for observing market behavior is between 3:15 PM and 3:45 PM Eastern Time, where significant price movements often occur around fair value gaps.
  • The first fair value gap presented at 9:31 AM on August 23rd, 2024, was crucial in predicting market behavior throughout the day.

Analyzing Market Behavior

  • The market reached its lowest point at 3:45 PM within the first fair value gap discussed earlier, indicating a strong correlation between time and price action.
  • When time and price align perfectly, it creates opportunities for trading; this phenomenon is described as "magic" in trading terms.

Importance of Live Trading Insights

  • Traders are encouraged to take notes during live streams for better learning; capturing screenshots of key moments can enhance understanding of market dynamics.
  • It’s essential for traders to annotate their own charts based on insights gained from live sessions rather than relying solely on others' charts to foster independent learning.

Developing Trading Skills Over Time

  • New traders should focus on identifying what creates daily highs and lows; this skill was demonstrated live on August 23rd, 2024, attracting significant viewer engagement.
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.