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2022 ICT Mentorship Market Review - August 01, 2022
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2022 ICT Mentorship Market Review - August 01, 2022

Market Review - August 1, 2022

Overview of Market Analysis

  • The speaker introduces the market review for August 1, 2022, emphasizing a brief commentary and advanced study on tools used for analysis.
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  • Focus is placed on the dollar index with daily charts; a potential drop below a certain level is anticipated, which may lead to retracement.

Dollar Index Insights

  • The speaker predicts that if the dollar index drops further, it could clear sell-side liquidity before moving higher.
  • Observations are made regarding buy-side liquidity in the British pound; an old imbalance is noted as significant for future movements.

E-mini S&P Analysis

  • The E-mini S&P shows price movement above a short-term high; an objective of 12,973.75 was previously set.
  • A fair value gap associated with an order block is discussed; price trades into this gap before rallying higher.

SMT Divergence Discussion

  • An SMT (Smart Money Technique) divergence between E-mini S&P and Nasdaq is highlighted; despite this divergence, upward movement was expected.
  • Caution against interpreting short-term divergences as selling opportunities while aiming for buy-side liquidity.

Trading Conditions in August

  • The speaker reflects on trading conditions during August, noting lower participation due to summer vacations leading to uncertainty in equities.
  • Emphasis on reducing trading activity during this month as volatility typically increases in fall months; personal plans include minimal trading and vacation time.

Hourly Chart Breakdown

  • Transitioning to the hourly chart of E-mini S&P, the speaker prepares to provide insights based on previous analyses without hindsight bias.

Market Analysis and Trading Strategies

Anticipating Price Movements

  • The speaker discusses the likelihood of drawing higher prices, referencing specific daily levels: 40.30.5 and 41.07.25.
  • Emphasizes the importance of understanding market imbalance, indicating that the algorithm is expected to reprice higher but is not yet balanced.
  • Suggests a potential retracement into half of the range before moving higher to target buy-side liquidity.

Economic Influences on Trading

  • Mentions non-farm payroll data and its timing in August as a factor influencing trading decisions; emphasizes a cautious approach this month.
  • Highlights the fair value gap on the daily chart, illustrating how it impacts trading strategies.

Intraday Charting Techniques

  • Discusses various time frames for intraday charts (1-minute to daily), stressing their significance in understanding market movements.
  • Explains that algorithms utilize multiple time frames, with daily charts providing major bias for buy/sell programs.

Understanding Market Dynamics

  • Defines key concepts such as "buy program" and "PD array," explaining how they influence price movement towards higher time frame targets.
  • Reflects on previous predictions made via social media and YouTube, showcasing real-time mentorship effectiveness.

Analyzing Recent Trades

  • Advises viewers to review past videos for context on current discussions; stresses learning from historical trades for better future performance.
  • Describes recent price action within a fair value gap, noting significant upward movement after reaching lower levels.

Strategic Trading Approaches

  • Outlines specific target levels (4075 and 4107.25), emphasizing their importance in building a solid trading model based on strong setups.
  • Encourages traders to focus on one solid setup per week while also considering day-to-day fluctuations in price action.

Weekly Trading Patterns

  • Discusses typical weekly patterns where bullish markets often make lows early in the week; notes variability depending on economic events.

Market Analysis and Algorithmic Insights

Understanding Market Patterns and Technical Alignment

  • The speaker discusses analyzing historical market behavior, particularly focusing on instances where the market closes higher than it opens on Mondays, suggesting that Tuesdays often create the week's low.
  • Emphasizes a 70% likelihood of Tuesday being the week's low due to economic data releases throughout the week, indicating a pattern in market movements.
  • Introduces an algorithmic perspective on market analysis, hinting at deeper insights into price movements beyond simple patterns.

ICT Bearish Breaker Pattern

  • The speaker shares their teaching methodology from past experiences, introducing the ICT bearish breaker pattern involving old lows and highs.
  • Clarifies misconceptions about support levels in markets; emphasizes that traditional views may not hold true in live trading scenarios.

Smart Money and Market Makers

  • Discusses "smart money" accumulation strategies within lower price ranges, highlighting how algorithms facilitate this process.
  • Differentiates between market makers and dealers; asserts that true market makers set prices while dealers manage order flow without controlling pricing mechanisms.

Misconceptions About Market Dynamics

  • Critiques common beliefs about beating market makers; stresses that retail traders cannot outmaneuver those who control pricing structures.
  • Points out that large banks can influence instrument pricing significantly, which is often misunderstood by retail traders.

The Role of Dealers vs. Market Makers

  • Explains how dealers provide liquidity but do not create markets; they operate within existing frameworks set by larger financial entities.

Understanding Market Dynamics and Central Bank Influence

The Role of Market Makers

  • The concept of market making is discussed, emphasizing that there are multiple entities in the market capable of providing liquidity, not just traditional market makers.
  • It is highlighted that true market makers in forex and currencies are central banks, which set prices beyond the influence of individual traders or firms like Goldman Sachs or Barclays.
  • Central banks can manipulate prices significantly without regard for retail trading strategies or technical analysis tools used by traders.

Smart Money Accumulation Strategies

  • The discussion shifts to how markets drop below previous lows algorithmically to allow smart money to accumulate sell orders positioned below those lows.
  • A specific price level (39.20) is identified as a target for accumulation, illustrating a strategic approach to trading based on historical data and patterns.
  • Retail traders often place stop losses below perceived support levels; smart money takes advantage of this behavior by accumulating positions at these points.

Distinguishing Smart Money from Retail Traders

  • Smart money does not rely on traditional support and resistance levels but instead focuses on understanding retail trader psychology and behavior in the market.
  • The speaker claims a high accuracy rate (90%) in predicting market movements due to an analytical approach linked with algorithmic behaviors rather than conventional charting methods.

Teaching Methodology and Market Predictions

  • Emphasis is placed on using statistical data points related to algorithms for teaching purposes, aiming to provide students with actionable insights before events occur in the market.
  • A 70% probability is mentioned regarding creating weekly lows during specific days, reinforcing the predictive nature of their analysis.

Critique of Traditional Analysis Techniques

  • Classic support-resistance theories are critiqued for being ineffective as they fail to account for deeper market dynamics; examples illustrate how these theories can mislead traders.
  • The speaker challenges common practices among retail traders who analyze candle bodies as support/resistance, suggesting that such methods lack reliability.

Understanding Market Algorithms

The Role of Algorithms in Market Movements

  • The speaker emphasizes the existence of a real algorithm driving market behavior, challenging skeptics to present counterarguments.
  • Focus is placed on a specific bullish order block, identified as the last up candle before a downward movement, which is crucial for trading decisions.

Analyzing Market Trends and Imbalances

  • The market's behavior is analyzed as it approaches key levels; expectations are set for potential price movements based on historical data.
  • Discussion includes liquidity dynamics within fair value gaps and how these factors suggest potential lows for the week.

Weekly Chart Insights

  • A bearish order block is identified on the weekly chart, indicating areas where traders can re-enter long positions after price corrections.
  • The speaker discusses anchoring levels based on significant down-close candles, highlighting their importance in predicting future price actions.

Price Reaction and Trading Logic

  • Emphasis is placed on understanding higher time frame price dynamics rather than traditional supply and demand concepts that may not apply effectively.
  • The speaker encourages viewers to analyze their winning trades through the lens of algorithmic pricing logic to better understand both successes and failures.

Practical Trading Applications

  • A specific example from July 26, 2022, illustrates how prices reacted at predetermined levels based on previous analysis.
  • Key objectives are outlined for traders to aim for during market rallies, emphasizing strategic planning around midpoint levels.

Learning from Algorithmic Trading Strategies

  • The discussion highlights why certain price reactions occur at specified levels, contrasting this with traditional trading theories like Wyckoff or Elliott Wave.
  • The speaker advocates for focusing solely on one effective trading model combined with sound money management principles to enhance trading success.

Conclusion: Embracing New Trading Paradigms

  • A call to action encourages traders to adopt new methodologies presented by the speaker instead of relying solely on conventional teachings.

Understanding Trading Discipline and Market Timing

The Importance of Discipline in Trading

  • Emphasizes the need for discipline and personal responsibility in trading, particularly during specific market conditions like August, which is not ideal for aggressive trading.
  • Advises new traders to avoid overextending themselves; suggests aiming for one trade setup per week with minimal leverage to mitigate risk.

Market Conditions in August

  • Describes August as a generally unproductive month for trading, often characterized by sloppy market behavior. Recommends taking time off during this period.
  • Warns that traders may misinterpret market signals due to decreased precision and skewed insights prevalent in August.

Learning from Experience

  • Shares wisdom gained from years of experience, highlighting the importance of recognizing when market conditions are unfavorable for trading.
  • Acknowledges skepticism from some traders regarding free advice but encourages them to return after experiencing losses to gain perspective.

The Reality of Trading Challenges

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Channel: The Inner Circle Trader
Video description

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.