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ICT Mentorship Core Content - Month 05 - Defining HTF PD Arrays
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ICT Mentorship Core Content - Month 05 - Defining HTF PD Arrays

Lesson 6.1: Defining High Time Frame PD Arrays

In this lesson, the speaker discusses the importance of support and resistance levels in trading and introduces the concept of premium and discount markets.

Understanding Support and Resistance Levels

  • Traders analyze charts based on support and resistance levels.
  • Price patterns and valuations (cheap/expensive) are key considerations.
  • The algorithm also considers premium (resistance) and discount (support) markets.

Ambiguity in Technical Analysis

  • Different traders may interpret levels differently.
  • To remove ambiguity, a hierarchy of tools is used to frame trades.
  • Retracements from support levels vary based on different technical analysis methods.

The Problem of Predicting Support and Resistance Levels

  • Traders struggle to accurately predict these levels.
  • No one has a foolproof means of knowing future price movements.
  • Framing price action as premium or discount markets helps provide clarity.

Identifying Resistance Levels

  • A commonly agreed-upon resistance level is noted as red in the discussion.
  • Expectations vary regarding whether price will attempt to break through or fail at this level.

Thinking in Terms of Premium and Discount Markets

  • Viewing higher time frame charts in terms of premium and discount markets is beneficial for all types of traders.
  • This mindset helps determine expectations for both higher and lower prices.

Framing Trades with PD Arrays

The speaker explains how to use PD arrays to frame trades on higher time frame charts.

Using PD Arrays for Framing Trades

  • PD arrays help organize the use of tools for framing trades systematically.
  • They provide a structured approach to identifying support, resistance, retracement, impulse legs, etc.

Varying Interpretations of Retracements

  • Different technical analysis methods lead to different expectations for retracements.
  • Fibonacci, support and resistance, Elliott Wave, harmonic patterns, etc., all contribute to varying conclusions.

The Importance of a Structured Approach

  • Having a structured approach helps avoid disorganized use of tools.
  • PD arrays provide a framework for consistent analysis and decision-making.

Classifying Institutional Price Swings

  • Institutional price swings can be classified as setups for trading decisions.
  • Identifying false breaks or failure swings is crucial in this classification.

Understanding Resistance Levels

The speaker discusses the concept of resistance levels and how they impact price movements.

Commonly Agreed-Upon Resistance Levels

  • In a live setting, traders would have different opinions on resistance levels.
  • For the sake of discussion, a commonly agreed-upon resistance level is noted as red.

Expectations at Resistance Levels

  • Traders may expect one more attempt to reach the resistance level or anticipate an immediate reversal.
  • False breaks or failure swings are potential setups for trading decisions.

Thinking in Terms of Premium and Discount Markets

The speaker emphasizes the importance of thinking in terms of premium and discount markets on higher time frame charts.

Applying Premium and Discount Market Concepts

  • Thinking in terms of premium (resistance) and discount (support) markets helps determine expectations for both higher and lower prices.
  • This mindset aids day traders, scalpers, position traders, and short-term traders alike.

Understanding Support and Resistance Levels

In this section, the speaker discusses the importance of understanding support and resistance levels on different time frames. They emphasize that lower time frame charts can reveal levels that may not be apparent on higher time frame charts.

Importance of Lower Time Frame Analysis

  • Lower time frame analysis, specifically the daily chart, is crucial for identifying support and resistance levels.
  • Higher time frame analysis sets the context for market behavior, but lower time frames provide more detailed information.
  • Price swings occur across different time frames, and support and resistance levels exist in these swings.
  • Traders should primarily base their trades on monthly and weekly charts while using lower time frames to identify additional levels.

Mitigation Blocks and Liquidity Seeking

  • A short-term swing low at a failure swing can act as a potential mitigation block.
  • Orders used to go long but failed to reach the previous high are underwater, leading traders to mitigate losses by selling or hedging positions.
  • The market seeks liquidity below the low point, potentially driving price down to an old support level.
  • Price may retrace before reaching the old support level, providing another opportunity to sell off and take out liquidity.

Price Movement between Levels

  • Price moves from a level of discount (blue line) to a level of premium (red line) or vice versa.
  • Equilibrium or balance exists between these extremes.
  • Buying imbalance occurs when price goes above equilibrium into the red level (premium), while selling imbalance occurs when price goes below equilibrium into the blue line (discount).

Framing PD Arrays on Higher Time Frame Charts

This section introduces framing PD arrays on higher time frame charts as part of money management for long-term position trades. It emphasizes understanding premium and discount levels in chart analysis.

Premium and Discount Levels

  • Premium refers to the red line, indicating a high valuation where price has moved away from an old high.
  • Discount refers to the blue line, indicating a low valuation where price has dropped significantly.
  • The market algorithm moves price back and forth between premium and discount levels until significant market impact creates a strong imbalance.

Understanding Price Movements based on Premium and Discount Conditions

This section further explores how price movements are influenced by premium and discount conditions. It highlights the repricing process and the search for liquidity based on these conditions.

Repricing Process

  • When price is too high (premium), it drops down from an area of premium to reduce valuation, resulting in lower prices.
  • When price is too low (discount), a premium is built into it, causing the algorithm to move price back and forth until significant market impact occurs.

Liquidity Search based on Premium and Discount

  • The market generates back-and-forth movements to find liquidity based on premium and discount conditions.
  • Buying imbalance occurs when price goes above equilibrium or into the red level (premium).
  • Selling imbalance occurs when price goes below equilibrium or into the blue line (discount).

Money Management for Long-Term Position Trades

This section introduces money management concepts for long-term position trades using PD arrays on higher time frame charts. It emphasizes understanding setup parameters and framing PD arrays effectively.

Using ICT Tools as Setup Parameters

  • Common ICT tools are used as setup parameters in chart analysis.
  • The order in which these setups form on charts determines how they should be used based on market context.

Establishing Foundation for Understanding PD Arrays

  • The discussed example serves as a foundation for better understanding framing PD arrays on higher time frame charts.
  • Money management concepts will be applied to the example of the dollar yen pair for a long-term position trade.

The transcript provided does not cover the entire video, and the summary is based on the available content.

New Section

In this section, the speaker discusses the importance of considering time and price in trading decisions. They emphasize the need to submit to the element of time and wait for price movements to align with expectations.

Submitting to Time and Price

  • The speaker explains that when price is at a resistance level, it is expected to move lower. However, the duration of time required for this movement is uncertain.
  • Time is described as a challenging aspect for traders, as it can lead to psychological and emotional reactions. Traders must accept that some ideas may take a long time to materialize.
  • Profitability and opportunities arise when both time and price align with each other. However, the length of time required for a trade setup to be profitable cannot be known in advance.
  • Traders need to understand that waiting for price movements requires submitting to an unknown amount of time. The objective is to see lower prices reach a discounted level in the future.
  • While studying and analyzing price action, traders should not try to force their will on price but rather observe institutional order flow and determine if it supports their expectations.

New Section

In this section, the speaker emphasizes that market movements are not linear but involve give-and-take dynamics. They discuss how understanding these dynamics can help traders stay committed to their trade ideas.

Non-linear Market Movements

  • Market movements do not follow a straight line; there are always fluctuations along the way.
  • Recognizing where certain arrays occur in market processes helps traders stay committed to their trade ideas without being shaken out prematurely.
  • Confidence to hold a trade until the objective is met or the stop loss is triggered comes from understanding the non-linear nature of market movements.

New Section

In this section, the speaker discusses the importance of studying price and institutional order flow when anticipating future price movements. They highlight that time and price are both essential elements in trading.

Studying Price and Institutional Order Flow

  • Traders must study price action and monitor PD arrays (price distribution arrays) that occur, as they provide insights into institutional order flow.
  • The expectation is for price to move from a discount level to a premium level. However, traders cannot predict how long it will take for this movement to occur.
  • Traders need to align themselves with central bank actions that influence price through interest rate adjustments. Technical analysis helps identify levels of support and resistance.
  • Traders should look for evidence supporting their expectation of reaching a premium market level between the current market price and the future forecasted price.

New Section

In this section, the speaker emphasizes that market movements do not follow a straight line. They discuss how traders need to study both time and price dynamics while anticipating future market levels.

Non-linear Market Movements Continued

  • Market movements may not reach the expected target but instead reverse halfway or go even lower.
  • Understanding arrays can help traders know what to expect at different stages of market prices.
  • Outlining arrays in a specific order helps traders understand what they should be looking for at any given point in terms of order blocks or gaps.

New Section

In this section, the speaker discusses how to analyze a monthly chart and outlines the importance of identifying old highs and lows as reference points.

Analyzing Monthly Charts

  • Traders should identify the current trading range on a monthly chart by considering old highs and lows.
  • The speaker suggests that outlining the marketplace in terms of these reference points is an effective approach for analysis.

Understanding Price Movement

In this section, the speaker discusses the factors to consider when analyzing price movement.

Key Points:

  • The first thing to look for in price movement is an old high and old low above equilibrium. These levels indicate a trading range.
  • The next important factor is a rejection block, which is located just above the candle's body. This indicates potential resistance.
  • Other factors to consider include bearish order blocks, liquidity voids, bearish breakers, and mitigation blocks.
  • When moving away from a premium level or resistance, it is important to identify the nearest mitigation block or bearish breaker.
  • If there are no clear mitigation blocks or breakers, look for a liquidity void or fair value gap.
  • Bearish order blocks are typically found at higher premium levels and can be considered selling opportunities.
  • Rejection blocks may be used as alternative indicators if there is a lack of obvious bearish order blocks.

Bearish Breakers and Order Blocks

This section focuses on understanding bearish breakers and their relationship with bearish order blocks.

Key Points:

  • A bearish breaker occurs when an old high is taken out by a down candle before the second high is made. It prevents reaching the bearish order block.
  • Bearish breakers are dominant indicators that keep prices lower in most cases.
  • Liquidity voids can be viewed as ranges that need to be closed in. They may lead to fair value gaps or bearish order blocks.
  • While breakers are lower on the hierarchy list, they are often encountered first when looking for potential selling opportunities after moving away from resistance levels.
  • If there is no obvious bearish order block, rejection blocks located just above the candle's body can serve as alternative indicators.

Analyzing Old Highs and Lows

This section discusses the significance of old highs and lows in price analysis.

Key Points:

  • Old highs and lows are important reference points, especially when analyzing downtrends on higher time frames.
  • The low end of a downtrend on a monthly chart can provide valuable information about potential support levels.
  • When analyzing price movement, it is essential to consider both old highs and old lows to gain a comprehensive understanding of the trading range.

The transcript provided does not include any further sections or timestamps.

New Section

In this section, the speaker discusses the importance and order of various factors when analyzing price movements.

Importance of Factors in Price Analysis

  • The speaker emphasizes that it is crucial to prioritize and scale the importance of different factors when analyzing price movements.
  • When at equilibrium or moving up from a discount, the first factor to consider is any mitigation block that may affect the price movement.
  • A bearish breaker can set the tone for a downward trend or halt bullish rallies.
  • If expecting a new selling opportunity or at an equilibrium price point, one should look for areas such as old highs or lows in ascending order of importance.
  • The highest level of importance is given to premium arrays, followed by rejection blocks, bearish order blocks, fair value gaps, liquidity voids, bearish breakers, and mitigation blocks.

New Section

This section focuses on the order of importance and expectations when analyzing price movements below premium levels.

Order of Importance Below Premium Levels

  • When below premium levels and anticipating higher prices, the first factor to expect is a mitigation block. However, it may not always appear in price action.
  • If there is no mitigation block present, the next factor to anticipate is a bullish breaker. Again, this may not be seen in price action.
  • Traders should focus on whether these arrays appear in past price action when looking at lower prices on the left side of their charts.
  • The order of importance from equilibrium in terms of discounts includes: mitigation block (bullishly), bullish breaker (if no mitigation block), liquidity void (if there's a bullish breaker), fair value gap (if no breaker but there's a gap), bullish order block (below gap), and rejection block (lowest candle).

New Section

This section discusses the importance and order of factors when analyzing price movements from an equilibrium point.

Order of Importance from Equilibrium

  • When analyzing price movements from an equilibrium point, the first factor to anticipate is a mitigation block in a bullish direction.
  • If there is no mitigation block, the next factor to expect is a bullish breaker.
  • A liquidity void may follow if there is a bullish breaker.
  • Traders should pay attention to whether these arrays appear in price action when looking for higher prices.
  • The order of importance from equilibrium includes: mitigation block (bullishly), bullish breaker, liquidity void (if there's a breaker), fair value gap (if no breaker but there's a gap), and bullish order block (below gap).

New Section

This section explains the concept of a bullish breaker and its impact on price movement.

Understanding Bullish Breakers

  • A bullish breaker refers to an upward candle between two swing lows, with the most recent swing low being lower.
  • It indicates a stop run in the past and forms the swing height between the two lows.
  • When price reaches this bullish candle, it tends to find support.
  • If there is a bullish breaker present, it takes precedence over other factors such as closing voids or filling gaps.

New Section

This section discusses additional factors that may come into play when analyzing price movements.

Additional Factors in Price Analysis

  • In the absence of a breaker or void, if there is a gap present, price may reach down into a fair value gap where only one side of the marketplace has been traded.
  • Below the fair value gap lies the bullish order block. Without any intervening factors like breakers or gaps, price would be expected to reach this level directly.
  • The rejection block is located just below the lowest candle and its body, serving as another important factor to consider.

The transcript provided does not contain any further sections or timestamps.

Understanding Resistance Levels

In this section, the speaker discusses how prices can trade up to old highs and very old long-term lows, creating resistance levels. This information provides a framework for analyzing markets.

Resistance Levels and Framework

  • When prices reach an old high, they can also reach a very old long-term low, both of which act as resistance levels.
  • These resistance levels provide a framework for understanding market behavior.

Monthly Premium and Discount Arrays

The speaker introduces the concept of monthly premium and discount arrays, which are used for bearish premium array trading or identifying bullish targets at specific price levels.

Monthly Premium Arrays

  • Monthly premium arrays are used primarily for bearish premium array trading.
  • Traders can use these areas to frame trades or identify bullish targets at these levels.

Monthly Discount Arrays

  • Monthly discount arrays are used to identify bearish targets or potential entry points based on current market conditions.

Weekly Chart Analysis

The speaker explains that similar concepts apply to the weekly chart analysis as well. Both bullish discount arrays and premium arrays can be observed in price action.

Bullish Discount Arrays

  • Bullish discount arrays on the weekly chart indicate potential bearish targets or opportunities to go long based on market conditions.

Expecting Higher Prices

When expecting higher prices, traders should look for certain indicators such as mitigation blocks, bearish breakers, fair value gaps, and rejection blocks.

Mitigation Blocks and Bearish Breakers

  • Traders should check if there are any mitigation blocks or bearish breakers that could prevent prices from going higher.
  • If there is no bearish breaker, traders can look for a void to close in or a potential trade up into the bearish order block.

Rejection Blocks and Historical Highs/Lows

  • If there is no strong bearish order block, traders should look for rejection blocks, which are movements above the candles' bodies.
  • A market with long wicks at the top may indicate a possible run above the old high or a return to a historical low.

Weekly Premium and Discount Arrays

The speaker emphasizes that similar concepts seen in monthly analysis also apply to weekly analysis. Both premium and discount arrays follow the same hierarchy in price action.

Similarities with Monthly Analysis

  • The same hierarchy of premium and discount arrays can be observed on both monthly and weekly charts.
  • Traders should analyze these arrays to understand potential trading opportunities.

Daily Chart Analysis

The speaker explains that the same principles discussed earlier also apply to daily chart analysis. Mitigation blocks, bullish breakers, and fair value gaps are important factors to consider when expecting lower prices.

Mitigation Blocks and Bullish Breakers

  • Traders should check if there are any mitigation blocks or bullish breakers on the left side of the chart.
  • Bullish breakers take precedence over other factors in determining market direction.

Example with Dollar Yen

The speaker mentions briefly that they will provide an example using dollar yen to illustrate all the information discussed so far.

The transcript ends here without providing further details about the example mentioned.

Playlists: 2017 ICT Private Mentorship Core Content Month 05
Video description

2017 Premium ICT Mentorship Core Content Video Lectures Audio and visuals are exactly as they were distributed in January 2017. 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.