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ICT Charter Price Action Model 2 \ Amplified Lecture
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ICT Charter Price Action Model 2 \ Amplified Lecture

Price Action Model Number Two: Short-Term Trading

Overview of the Price Action Model

  • Introduction to the second price action model focused on short-term trading, emphasizing weekly range expansions.
  • The aim is to simplify concepts from mentorship without overcomplicating them, organizing content logically for better understanding.

Key Components of the Model

  • The model consists of three main components: stage (weekly direction), setup (range expansion), and pattern (PD array Matrix).
  • Weekly direction requires a bias based on the weekly candle's behavior; setups focus on identifying range expansions.

Understanding Market Dynamics

  • Bullish scenarios target buy stop liquidity pools or old highs, while bearish scenarios focus on fair value gaps and old lows.
  • Emphasis on using fair value gaps, old highs/lows, and liquidity pools as primary indicators for market movements.

Practical Example: Dollar CAD Analysis

  • Analyzing a bullish example with the dollar CAD pair, highlighting equal highs and an old down close that indicates potential upward movement.
  • Discussion of institutional order flow and how it relates to fair value gaps in determining market direction.

Trading Strategy Insights

  • Explanation of how price fills fair value gaps during trading sessions; observing price actions post-opening can inform trading decisions.
  • Focus on using Tuesday's opening price for trades due to its tendency to create higher lows within the week.

Execution Considerations

Understanding Short-Term Trading Strategies

Key Concepts in Short-Term Trading

  • The focus is on short-term trading, where precision timing (like exact midnight in New York) is less critical. The strategy uses price levels as filters for bullish trades.
  • Traders should look for buying opportunities below a specific price level, ideally identifying a discount array and short-term swing lows to place limit orders.
  • A protective stop loss of 50 pips is recommended below the entry point to manage risk while aiming for an expansion during the week.
  • Trades should be held from Tuesday until Thursday's New York open, as this period captures most of the weekly range.
  • If no trading opportunity arises on Tuesday, traders should wait until Wednesday to enter long positions if prices drop below the identified level.

Weekly Chart Analysis

  • The model emphasizes not trading on Mondays; instead, it focuses on analyzing weekly charts to determine potential upward movements based on previous price action.
  • The concept of "power three" is introduced, indicating that traders should identify significant price levels and gaps within the weekly chart context.
  • Understanding that the opening price may vary helps traders adjust their strategies without needing it to align perfectly with prior highs or lows.
  • By focusing solely on weekly candles rather than daily fluctuations, traders can simplify their analysis and decision-making process regarding market direction.
  • Ideal scenarios involve observing Monday's trading behavior to anticipate potential upward movements later in the week based on established patterns.

Execution Strategy

  • When bullish conditions are met after a Monday dip, traders can sell above certain price levels with a 50 pip stop loss targeting Thursday's New York open as an initial objective.
  • This model does not require capturing Monday’s low or high but seeks opportunities within Tuesday’s opening range up until Thursday’s close for effective trade execution.

Homework and Practical Application

  • Traders are encouraged to analyze charts for similar setups that allow capturing expansions either when bullish or bearish using insights from weekly candles.
  • Emphasis is placed on focusing primarily within the weekly range while utilizing various time frames (weekly, daily, hourly), with flexibility in using shorter intervals like 15 minutes for timing purposes.

Reversal Conditions and Market Dynamics

Understanding Market Reversals

  • Building upon short-term strategies involves recognizing that institutional order flow may shift due to resistance or support levels impacting momentum shifts in market trends.
  • The European open serves as a critical pattern where expectations of higher closes may lead into stiff resistance zones—potentially setting up reversal opportunities.

Liquidity and Market Dynamics

Understanding Market Reversals

  • The discussion focuses on the implications of reaching liquidity levels in both bullish and bearish scenarios, emphasizing potential market reversals when objectives are met.

Seasonal Trends in Currency Markets

  • A pre-week analysis indicated a seasonal tendency for the Dollar Index to decline while the Euro and British Pound were expected to rally, particularly noted during February 2019.

Correlation Between Currencies

  • The Euro and British Pound have indeed rallied alongside a weaker dollar, suggesting that if these currencies reach significant discount arrays, they may continue to rise due to seasonal tendencies.

Impact of Dollar Weakness on Other Currencies

  • The principle "all boats rise in a rising tide" implies that even weaker currencies can find support when the dollar is weak, enhancing their chances of gaining strength.

Trading Strategies at Key Levels

  • When price approaches targeted levels (like old highs or lows), traders should anticipate potential weakness in the market. This requires careful entry strategies rather than impulsive trades.

Market Structure and Entry Timing

Importance of Market Structure

  • Traders should wait for specific market structures before entering short positions; this includes observing price action around key levels like breakers or premium arrays.

Timing Entries with Weekly Ranges

  • For short-term trading, it’s suggested to focus on Tuesday entries after Monday's analysis. If no setup occurs by Tuesday, traders must adapt their strategy for Wednesday or Thursday.

Avoiding Daylight Savings Confusion

  • Emphasizing standard time over daylight savings time helps maintain consistency in trading strategies across different markets that may not observe such changes.

Identifying Shorting Opportunities

Criteria for Shorting at Premium Arrays

Trading Strategies and Market Analysis

Buying Strategy Overview

  • The strategy involves buying below a 400 opening price on Tuesday or Wednesday, utilizing a 50 pip stop loss, with the aim to hold until Thursday's New York open.
  • Emphasis is placed on being cautious about potential reversals when approaching significant price levels, rather than continuously buying.

Anticipating Market Movements

  • The analysis suggests that market conditions may lead to a reversal; seasonal factors and Brexit news are highlighted as influential elements for the Euro Dollar and GBP USD pairs.
  • Acknowledges that after reaching trading objectives, traders should not blindly follow previous models but adapt strategies based on current market conditions.

Key Levels and Price Action

  • Traders should shift focus from selling above the 400 level to looking for buying opportunities below the 600 European open if market structure shifts occur.
  • The discussion highlights how external events (like Brexit) can create volatility in currency pairs like GBP USD, prompting traders to be alert for potential upward movements.

Analyzing Specific Currency Pairs

  • Focus shifts to analyzing the dollar CAD pair, referencing previous charts indicating expected price ranges.
  • Identifies key price levels such as 13468 and discusses their significance in relation to nearby zero or five levels for better calibration of trading strategies.

Understanding Price Imbalances

  • Highlights the importance of recognizing segments of price action that indicate imbalances between buy-side inefficiencies and sell-side imbalances.

Understanding Market Dynamics and Trading Strategies

Importance of Accountability in Trading

  • The speaker emphasizes the significance of foundational studies and mentorship in trading, warning against making trades based solely on personal assumptions about market highs or lows.
  • A strong message is conveyed regarding personal responsibility; traders must be accountable for their actions, particularly when using demo accounts to practice.
  • The speaker stresses that blaming others for trading losses is misguided; individuals should take ownership of their trading decisions.

Analyzing Price Movements

  • Discussion on potential price reversals includes mapping out balanced price points and identifying inefficiencies in the market.
  • The concept of liquidity pools is introduced, highlighting how they can influence price movements and trader strategies.
  • Equal highs are noted as significant levels to watch, with specific prices (3316 rounded to 3320 or 3315) identified for potential trading decisions.

Understanding Balanced Price Ranges

  • The importance of a balanced price range is discussed; it serves as a context for future price movements and potential targets.
  • If prices drop below this balanced range, it could indicate a run on liquidity below previous lows, which traders should monitor closely.

Identifying Key Levels and Order Blocks

  • Transitioning to an hourly chart reveals additional levels of interest, including down closed candles that act as order blocks crucial for decision-making.
  • The speaker explains the cascading effect of discount arrays and highlights the use of order blocks as primary drivers in trading strategy.

Market Structure Breakdowns

  • Specific high levels are mentioned (e.g., 51 A2), indicating where prices might stall before moving lower towards liquidity pools.
  • Sensitivity around highlighted levels suggests that traders need to be aware of stop-loss placements by other market participants.

Entry Points and Reversal Patterns

  • Criteria for selecting entry points are outlined, focusing on key areas where market structure breaks occur after consolidations at significant levels.
  • A breakdown in market structure from last Friday indicates critical resistance levels that were tested again leading into current discussions.

Shorting Opportunities and Market Analysis

Identifying Shorting Opportunities

  • The speaker discusses a consolidation phase with equal highs, indicating potential shorting opportunities as the price breaks down.
  • Transitioning to a 15-minute time frame allows for a detailed analysis of price action over Monday, Tuesday, and Wednesday.
  • Viewers are encouraged to pause the video and analyze the current price action based on their understanding from previous mentorship content.

Analyzing Price Action

  • The speaker emphasizes that there is no trading on Mondays; thus, focus shifts to Tuesday's European open at 13358.
  • Extending the opening price out in time helps filter out market spikes influenced by news embargoes lifting at 8:30 AM.

Asian Range Theory

  • For traders with a bearish bias, using sell stops for entries can simplify decision-making without needing precise analysis of market swings.
  • The expectation is for prices to move out of the Asian range; if they break below it, this indicates potential continuation of downward movement.

Execution Strategy

  • To sell on weakness when bearish, traders should place sell stops just below the Asian range low after observing a rally.
  • As prices rise, traders should adjust their stop-loss orders accordingly while maintaining risk management principles.

Risk Management Considerations

  • Adjustments in leverage may be necessary based on how far market swings project beyond reasonable limits for money management.

Trading Strategies and Protocols for Market Open

Entry Strategies for Thursday's New York Open

  • Traders can aim to get closer to the daily high or use a sell stop below the Asian range as an entry point for model number two. The protocol involves holding until Thursday's New York open, targeting a collection of 50 to 100 pips.

Managing Trades Before New York Open

  • If traders achieve 100 pips before the New York open, they should scale off at 50 and then at 100 pips. Once reaching the New York open, traders are advised to close their trades regardless of external opinions or market noise.

Importance of Following Trading Models

  • It is crucial for traders to adhere strictly to their trading models and rules without being influenced by others' analyses or opinions. This discipline allows the trading strategy to function effectively.

Utilizing Market Profiles and Opening Prices

  • During reversal market profiles, traders should wait for specific opening prices (e.g., at 400 or 600). These openings serve as filters in normal trading practices, enhancing clarity in decision-making.

Selling Short Above Opening Price

  • To sell short effectively, traders should focus on selling above the opening price. They can extend their analysis using the Asian range; if prices break below it after significant time markers like European open (600), it signals a potential selling opportunity.

Analyzing Market Behavior Post-European Open

  • After breaking below the Asian range post-European open, traders should place sell stops with appropriate risk management strategies (e.g., placing stops above the day's high). Observing market behavior around these times helps refine entry points.

Transitioning Between Time Zones

  • When transitioning from Standard Time to Daylight Savings Time, it's beneficial for traders to adjust their strategies based on European opens rather than solely relying on New York time due to potential discrepancies in market behavior.

Understanding Standard Deviations in Trading Ranges

  • Traders often look for standard deviations within specific ranges when analyzing price movements. For instance, identifying key levels such as standard deviation four can help predict potential lows during trading sessions.

Central Bank Dealers Range Settings

  • Adjustments may be necessary when utilizing Central Bank dealers' ranges versus agent ranges. Familiarity with these settings enhances understanding and application in personal charts without needing excessive detail.

Flout Measurements and Projections

Understanding Charting Techniques

Managing Chart Elements

  • The speaker discusses the importance of removing unnecessary elements from charts to maintain clarity and focus on key indicators.
  • A box is used to represent half of a range, which helps in visualizing potential price movements without cluttering the chart.

Handling Accidental Information Sharing

  • The speaker expresses concern about accidentally sharing sensitive information during recordings, emphasizing the need for careful editing due to time constraints.

Visualizing Price Levels

  • The use of mid-level indicators allows for better visualization of price action, helping traders identify significant levels without overwhelming detail.
  • There are gaps in core content that necessitate a charter membership for deeper understanding; this highlights the complexity and depth of trading strategies.

Seasonal Trends and Market Behavior

  • Discussion on seasonal tendencies affecting currency pairs, particularly how the Canadian dollar may strengthen against the US dollar as April approaches.

Entry Strategies and Price Action Analysis

  • The speaker explains entry strategies based on institutional order flow, focusing on balanced price ranges and candle patterns to determine optimal entry points.
  • Emphasis is placed on analyzing opening prices relative to closing prices to understand market inefficiencies and potential trade setups.

Importance of 50% Levels in Trading

  • The concept of using 50% levels within price ranges is highlighted as crucial for identifying areas where price action may reverse or consolidate.
  • Observations about volume concentration at specific price points indicate that traders should focus on these areas rather than expecting full gap fills.

Trade Execution Insights

  • The discussion includes insights into executing trades based on observed weaknesses in market behavior, particularly when prices fail to fill gaps effectively.

Understanding Market Profiles and Trading Strategies

Utilizing Reversal Market Profiles

  • The discussion focuses on using model number two in conjunction with reversal market profiles to identify trading opportunities. The European open serves as a critical filter for bearish strategies, emphasizing the importance of selling short above this level.
  • For traders who are bearish but uncertain about price movements, an effective strategy is extending the Asian range low. This involves placing sell stops below this level after specific time frames, such as U6 100 or European open time.

Adjusting Time Zones for Kill Zones

  • The speaker clarifies that daylight savings does not affect kill zones; instead, an additional hour is added to the end of existing kill zone times. For example, if the New York open was previously set from 11 to 13, it now extends from 11 to 14.
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