ICT 2024 Mentorship \ Lecture #5 August 9, 2024

Name: ICT 2024 Mentorship \ Lecture #5 August 9, 2024
Uploaded: 2024-08-09T14:25:27.000Z
Duration: 3 h 26 min 43 s

Welcome and Introduction

Opening Remarks

The speaker begins with a light-hearted audio check, indicating the start of the session.

After adjusting the microphone, the speaker welcomes viewers to his live stream, humorously claiming to be "the number one live streamer on YouTube."

Introduces his son Caleb, who is joining remotely due to traffic issues.

Personal Update

The speaker expresses gratitude for birthday wishes received from viewers as he turns 52 years old.

Turtle Soup Trading Concept

Overview of Turtle Soup

The term "Turtle Soup" is introduced as a trading strategy inspired by Richard Dennis's turtle traders, emphasizing reversal patterns rather than breakouts.

Discusses how turtle trading involves trend-following models that are simple yet challenging to execute due to low accuracy but high potential rewards during winning trades.

Key Influences

Recommends the book Street Smarts by Linda Raschke and Larry Connors for its insights into price action and trading setups.

Shares personal experience with the book, highlighting its impact on understanding stop hunts in trading.

Understanding Stop Hunts

Insights on Stop Hunts

Explains how recognizing stop hunts became clearer after reading Street Smarts, aiding in developing confidence as a trader.

Turtle Soup Strategy Explained

Describes how Turtle Soup plays off the low success rate of breakout strategies by suggesting traders take positions against breakouts above 20-day highs.

Live Streaming Context

Session Dynamics

Clarifies that while teaching his son about trading concepts, viewers are invited to join as if they were at the table with them.

Future Plans

Understanding the Asian Trading Session

Overview of Market Timing

The speaker discusses the unpredictability of live streaming schedules, indicating that sessions will occur within the next two weeks.

Focus is on the Asian trading session starting at 6 PM, following a one-hour break in indices at 5 PM.

Emphasizes that for working individuals, this time may be their only opportunity to trade after returning home from work.

Trading Strategies and Personal Insights

The speaker aims to provide resources and perspectives on how to identify setups during this specific trading window.

Acknowledges various trading sessions (London, New York, Asian), encouraging traders to find which suits them best based on personal schedules.

Personal Preferences in Trading Times

The speaker expresses a personal bias against trading during the evening hours post-work due to lower appeal.

Addresses potential discouragement for those who can only trade during these less enticing hours but encourages perseverance.

Utilizing Day Opening Gap Theory

Application of Trading Concepts

Plans to discuss using Day Opening Gap Theory specifically for the Asian session while integrating previously taught concepts.

Charting Techniques and Human Error

Introduces his NQ template for monitoring price movements and highlights common human errors in recording data.

Shares experiences of mislabeling market models due to distractions, emphasizing human fallibility in trading.

The Importance of Clean Charts

Chart Management Strategies

Advocates for minimal annotations on charts to avoid clutter and distraction while focusing solely on price action.

Suggests that beginners can use annotations initially but should aim for cleaner charts as they gain experience.

Learning Through Observation

Encourages traders to learn by observing price movements without excessive indicators or lines that could lead to confusion.

Understanding Trading Flexibility

The Importance of Flexibility in Trading

The speaker discusses the necessity of moving away from rigid trading annotations, emphasizing that stubbornness can hinder performance.

They highlight the significance of recognizing market signatures and price behavior, which indicate potential weaknesses or strengths in trades.

A bearish order block is mentioned as a reliable entry point when certain conditions are met, suggesting confidence in downward movements if specific price levels are not reached.

The speaker notes that failing to reach key price levels indicates weakness, reinforcing the idea that traders should be observant of these signals for better decision-making.

Analyzing Price Movements

There is an emphasis on understanding how prices gravitate towards certain levels over time, likening this behavior to a magnet.

The concept of structured randomness versus controlled algorithms is introduced, suggesting that consistent price behaviors imply underlying mechanisms at play.

Establishing Biases for Trading Sessions

New week and day opening gaps are identified as primary factors for determining market bias, which can be narrowed down to specific trading sessions or hours.

Traders should analyze biases based on different time frames (e.g., hourly or daily), allowing them to make informed decisions about their trades.

Practical Steps for Identifying Gaps

The speaker explains how to annotate new day opening gaps by comparing closing prices from previous sessions with current opening prices at 6 PM.

Understanding whether the new day opening gap is high or low helps traders identify potential market directions and set reference points accordingly.

Utilizing Midpoints and Equilibrium

Midpoints within new day opening gaps are crucial; if significant price movement occurs (over 20 handles), it warrants careful annotation for future reference.

By visually assessing upper and lower quadrants without excessive annotations, traders can maintain clarity while still being aware of critical levels.

Learning Process and Resources

Emphasis is placed on the importance of learning through observation before attempting naked trading strategies; experience over time builds understanding.

Video Launch and Content Structure

Overview of Video Schedule

The video is set to launch on Sunday evening, with a potential midweek update to monitor progress and chart annotations.

Emphasis on the importance of midweek insights to prevent the development of bad trading habits.

Mentorship Approach

The mentorship experience aims to provide students with real-time feedback on their trading decisions without direct Q&A.

A link will be available for viewers to access the content directly from the YouTube channel.

Addressing Unauthorized Use

Warning against unauthorized copying of videos; copyright strikes will be issued against channels that replicate entire lectures.

Specific mention of channels translating content into other languages without permission, highlighting strict enforcement of copyright policies.

Language Accessibility

Encouragement for users to utilize closed captioning options for translations instead of unauthorized reproductions.

Clarification that transcripts must be completed by YouTube servers before captions can be translated into various languages.

The Importance of Authentic Trading Education

Critique of Attention-Seeking Behavior

Discussion about individuals seeking attention through misleading price action techniques, which can misguide aspiring traders.

The metaphor "the blind leading the blind" illustrates the dangers in following unqualified sources in trading education.

Effective Learning Goals

Students should aim for independence in their trading skills, minimizing reliance on ongoing mentorship after completing training.

The ultimate goal is self-sufficiency where students do not need continuous guidance or validation from mentors.

Real Mentoring vs. Quick Fixes

Expectations from Mentorship

True mentoring involves preparing students for challenges rather than providing quick solutions or superficial advice.

Emphasis on understanding complex concepts thoroughly rather than relying on simplified explanations that may lead to failure during difficult times.

Long-Term Success Mindset

Acknowledgment that many seek shortcuts but true success requires enduring hardships and learning how to cope effectively with challenges in trading.

Understanding New Day Opening Gaps

Importance of Training and Understanding

The speaker emphasizes the importance of thorough training, aiming for a deep understanding to ensure success.

Mentions that discussions will focus on daily charts, specifically referencing a significant gap observed in the market.

Highlights the clustering of inefficiencies with new day opening gaps and new week opening gaps as critical concepts.

Addressing Questions and Clarifications

Acknowledges that many questions may have arisen during the week, promising to address them throughout the session.

Indicates that understanding can often come from related concepts rather than direct answers to specific questions.

Analyzing Market Movements

Discusses the significance of the closing price at 5:00 PM and its relation to the opening price at 6:00 PM, establishing a new day opening gap.

Explains how this gap indicates a discount when the market opens lower than it closed.

Practical Application of Concepts

Advises against cluttering charts with unnecessary lines; instead, encourages intuitive analysis based on key levels.

Notes that there are no significant news events impacting trading today, which is essential for planning trades around market movements.

Timing and Trading Strategy

Stresses not to trade immediately upon identifying a gap; timing is crucial for effective trading strategies.

Introduces algorithmic factors influencing market movement, emphasizing that markets will only move when conditions are right.

Market Analysis Techniques

Chart Maximization and Liquidity Pools

The speaker plans to maximize chart visibility while explaining liquidity pools formed by recent highs and lows.

Identifies relative equal highs as areas of liquidity above current prices, suggesting these should be annotated for future reference.

Learning Through Observation

Encourages students to study market behavior post-event rather than trying to predict outcomes actively.

Understanding Liquidity Engineering in Trading

Initial Range and Liquidity Pools

The goal is to observe price movements crossing below the new day gap, indicating a short-term low being taken out. This sets an initial range for building liquidity.

Price annotations are crucial; using different colors helps differentiate between highs and lows on the chart.

Techniques learned from students enhance trading skills, such as copying lines on charts for better visualization of market structure.

Annotating charts with clear labels (sell-side below old lows, buy-side above) aids in understanding market dynamics.

Keeping chart annotations neat and organized is essential for clarity during analysis, especially around key trading times like 7 AM to 9 AM.

Trading Sessions and Market Behavior

Emphasis on focusing trading strategies during specific time frames that align with personal availability enhances effectiveness.

The principles discussed apply not only to indices but also to Forex trading, demonstrating versatility across markets.

Acknowledgment of a short-term sell-side liquidity pool indicates strategic points of interest for traders at 6 AM.

Algorithmic Calibration and Market Dynamics

Observing how price moves away from the new day opening gap is critical; it establishes initial ranges for liquidity engineering.

Traders should be aware that if they find this process overwhelming without immediate profits, they might consider alternative methods like indicators temporarily.

Identifying short-term highs and lows helps classify liquidity pools effectively after the new day's opening at 6 AM.

Chart Management and Analysis Techniques

Maintaining awareness of inefficiencies created by gaps allows traders to anticipate potential market movements effectively.

New highs and lows established post-opening serve as reference points for stop-loss placements among traders during active sessions.

While it's important to document these levels visually, keeping them muted on charts prevents clutter while still retaining their educational value.

Practical Application of Trading Strategies

Taking screenshots during significant price movements can help track changes over time, providing valuable insights into market behavior patterns.

Market Dynamics and Trading Strategies

Understanding Market Movements

The speaker discusses the importance of recognizing market characteristics that indicate predictable movements, particularly around key times like 7 PM when the Asian session begins.

Initial sell-side and buy-side liquidity are established for the day, emphasizing the need to identify larger pools of liquidity in trading strategies.

A new day's opening gap is crucial; traders should observe price movements away from this gap to understand market behavior better.

Analyzing Price Action

The speaker highlights common misconceptions among traders regarding price levels and fair value gaps, stressing the importance of understanding these concepts deeply.

Traders should look for price action that moves away from the new day opening gap before seeking short-term highs or lows, indicating potential liquidity runs.

Timing and Execution

Emphasizing simplicity, the speaker outlines a straightforward approach to trading during specific timeframes, particularly focusing on 7 PM as a critical moment for market activity.

Observations about how markets behave at 7 PM are discussed; traders should note whether prices challenge previous lows or highs during this time.

Algorithmic Trading Insights

The discussion includes how algorithms signal market movements by touching previous gaps and setting boundaries for buy/sell stops.

The speaker provides guidance on what individual traders should look for daily in their trading routines to align with algorithmic behaviors.

Practical Application of Concepts

Traders are encouraged to study price actions closely during specified hours (7 PM - 9 PM), even if they do not intend to trade at those times.

Key insights include observing how prices interact with initial sell-side liquidity and understanding that certain patterns indicate market intentions.

Understanding Price Action and Market Dynamics

Analyzing Short-Term Highs and Momentum

The discussion begins with the importance of identifying short-term highs in price action, focusing on momentum and speed when breaking through these levels.

A metaphor is used comparing price action to nitrous oxide in racing, emphasizing the need for explosive movement rather than a quick fade back into previous ranges.

The speaker stresses the significance of observing speed and magnitude in price movements, indicating that these elements are crucial for successful trading.

Entry Points and Order Blocks

An entry point is identified when the market trades back down into a specific range after gapping up, highlighting this as an opportunity to buy.

The concept of order blocks is introduced; the speaker explains their strategy of buying below the body of a down closed candle to capitalize on discount opportunities.

Clarification is provided regarding misconceptions about order blocks, stressing that understanding their true nature is essential for effective trading.

Stop Loss Strategies and Market Signals

The speaker discusses setting stop losses below significant market gaps to protect against potential losses while allowing room for upward movement.

Observations are made about market behavior around new day opening gaps, indicating how traders can identify key moments for entering or exiting positions.

Timing and Market Characteristics

Emphasis is placed on recognizing "Hallmark signatures" in price action that signal impending moves, suggesting that timing plays a critical role in trading success.

The importance of not rushing stop loss adjustments is highlighted; patience during market fluctuations can lead to better outcomes.

Understanding Displacement and Trade Efficiency

Discussion revolves around displacement in price action; it’s noted that efficient trades often do not return to bid balance after significant movements.

Understanding Market Movements and Targeting Strategies

The Logic Behind Trading Decisions

The speaker emphasizes that trading outcomes are not random; they follow a logical framework developed over decades. This logic is crucial for making informed trading decisions.

A discussion on identifying price movements, likening them to a slingshot effect where prices retract before making significant upward moves.

Analyzing Price Legs and Confidence in Trades

The importance of measuring previous price legs to establish confidence in potential trades is highlighted. Understanding these movements helps traders anticipate future actions.

The speaker notes the significance of market momentum and interest, indicating that strong initial movements can lead to successful trades without anxiety about losses.

Identifying Buy Side Liquidity

There’s an analysis of buy side liquidity pools, with emphasis on recognizing when the market shows signs of strength and how this influences trade decisions.

Traders should be aware of market dynamics, particularly when new participants enter the market looking for buying opportunities.

Range Finding Techniques

The use of Fibonacci measurements is discussed as a method for range finding, helping traders identify potential exit points based on historical price data.

By duplicating ranges from high to low, traders can set realistic targets for their trades while considering standard deviations.

Precision in Targeting

The concept of using midpoints between targets allows traders to navigate uncertainties in pricing effectively. This approach aids in setting more achievable goals.

Emphasis is placed on understanding measured moves versus traditional methods, suggesting that aiming beyond typical expectations can yield better results.

Adapting Strategies Based on Market Behavior

Traders are encouraged to think critically about price action blocks and how they influence future movements. Recognizing patterns can enhance targeting strategies.

A call for precision beyond conventional thinking is made; traders should aim for higher accuracy by anticipating extreme market behaviors rather than settling for average expectations.

Understanding Measured Moves in Trading

The Concept of Low Hanging Fruit

Discusses the idea of identifying "low hanging fruit" in trading, where traders can target easily achievable goals without overextending themselves.

Emphasizes the importance of recognizing optimal exit points based on measured moves rather than complex calculations.

Utilizing Historical Price Levels

Suggests measuring price legs from previous bullish runs to identify potential exit points, particularly at old highs or relative equal highs.

Highlights the challenge of market unpredictability and the need for flexibility between ideal targets and more conservative exits.

Managing Expectations in Trading

Shares personal insights on exiting trades, indicating a balance between aiming for perfect exits and accepting satisfactory outcomes.

Acknowledges that while achieving precise highs is desirable, it’s often unrealistic; thus, contentment with good results is essential.

Continuous Improvement as a Trader

Stresses that consistent methodology is crucial for successful trading, contrasting his approach with those lacking structured strategies.

Encourages traders to maintain a mindset focused on improvement rather than complacency to avoid poor decision-making.

Protocol for Effective Trading Sessions

Warns against becoming lazy or engaging in untrained behaviors that lead to losses; emphasizes discipline in following learned protocols.

Outlines a structured approach to trading during different sessions (Asia, New York), advocating daily chart analysis for better understanding.

Understanding Market Dynamics

Explains how observing price movements helps traders adapt their strategies according to market behavior.

Introduces concepts like opening gaps and their significance during specific time frames (e.g., London session).

Identifying Market Patterns

Describes common patterns such as bull flags and warns about misinterpretations leading to false expectations in market movements.

Understanding Support and Resistance in Trading

The Nature of Support and Resistance

The concept of drawing lines for support and resistance is emphasized, noting that price often turns at these levels, but the market may not always respect them.

Initial reference points are crucial for algorithms when identifying support and resistance; there's a distinction between retail traders' understanding and more experienced traders' insights.

Experienced traders can better identify classic support and resistance levels compared to beginners who might oversimplify their importance.

Challenging Conventional Wisdom

A challenge is posed to those who believe only basic support or resistance levels work; they are encouraged to demonstrate this in a live trading environment.

The speaker commits to daily live streams, inviting skeptics to participate actively in demonstrating effective trading strategies based on support and resistance.

Market Dynamics Around Gaps

Discussion on market behavior after touching initial liquidity reference points, highlighting how the market reacts around new day opening gaps.

Reference is made to the new week opening gap high as a significant level for potential price movement.

Analyzing Price Action

Observations about price gyrating around previous liquidity levels indicate how past highs/lows influence current trading decisions.

The speaker reflects on the consolidation phase before a rally back up towards the new day opening gap, emphasizing its significance in trading strategy.

Tools for Analysis

Personal preferences regarding tools (e.g., using Samsung over Apple products) highlight the importance of reliable technology in trading analysis.

A critical view of retail trader expectations versus actual market behavior is presented, particularly regarding perceived bullish patterns like bull flags.

Opening Ranges as Key Indicators

Explanation of the London session's opening range as an essential indicator for future price movements; it sets high/low benchmarks for subsequent trades.

Emphasis on how markets refer back to established ranges over time, reinforcing their relevance in ongoing trading strategies.

Importance of Previous Day Levels

Insights into how many trades form around previous day's highs/lows; these historical levels serve as critical reference points for current market activity.

Market Analysis and Trading Strategies

Understanding Market Movements

The discussion begins with an analysis of price movements as the market approaches the 8 o'clock hour, highlighting low relative equal lows and expectations for a potential drop.

If traders miss a significant move, they should wait for fair value gaps or volume imbalances to identify new entry points. A specific short position is suggested targeting previously identified relative equal lows.

The speaker emphasizes that the market often reacts to these levels, referencing a "new week opening gap" and its implications on price action.

Critique of Trading Education

The speaker expresses frustration towards others in the trading community who claim to have reinvented trading concepts without acknowledging their origins.

They assert that their teachings are unique and not found elsewhere, claiming a long history of understanding price action over three decades.

Price Reaction Insights

Observations are made about market reactions at key levels, particularly how prices may reach for midpoints after reacting off significant lows.

The concept of inefficiencies in pricing is introduced, suggesting that markets will often return to fill these gaps.

Technical Analysis Techniques

Precision in hitting target levels is highlighted as crucial; successful trades depend on accurately identifying these points.

The speaker clarifies that their approach differs from traditional supply and demand methods by focusing on technical science rather than merely renaming existing strategies.

Trading Discipline and Strategy Execution

Emphasis is placed on the importance of discipline in trading; traders should focus on executing one good setup rather than overtrading.

A warning is given regarding trading during electronic hours; understanding session timings can be confusing but essential for effective strategy execution.

Navigating Electronic Trading Hours

Traders are advised to complete trades before high volatility periods (like 9:00 AM), emphasizing quality over quantity in trade setups.

An explanation follows about how electronic trading operates beyond regular hours, which can lead to confusion if not properly understood.

Understanding Market Dynamics During Opening Hours

The Importance of Regular Trading Hours

The perspective on regular trading hours is crucial as it highlights market behavior, particularly when the market runs up to a certain level and then moves lower, indicating an initial sell signal set at the opening.

Opening Range Analysis

The opening range is defined from 9:00 to 9:30 AM, with the actual opening bell at 9:30. This period establishes initial buy and sell sides in the market.

Sometimes, markets may not exhibit any significant impact from the opening range; they can simply open and start moving without establishing a clear range.

Price Behavior Post-Opening

After the market opens, it often trades back towards previous levels but does not necessarily return fully to prior closing prices. Observing where trading stops is essential for understanding price movements.

The first trade at 9:30 shows that the opening price can be low, which sets a reference point for traders to monitor how price behaves within this range.

Gap Dynamics and Market Reactions

A large gap down typically leads to specific behaviors; markets may initially drop before rallying or retesting lows formed during early trading.

Understanding whether a gap will close completely involves analyzing various factors that influence market dynamics.

Probability of Midgap Recovery

There’s about a 70% chance that after a significant gap down, prices will recover to midgap levels. This insight helps traders identify potential opportunities even in bearish conditions.

Chart Interpretation Techniques

Traders should focus on key reference points rather than cluttering charts with excessive information. Notation methods help keep track of important levels while observing price action closely.

Current Market Sentiment Analysis

Current charts can appear confusing; having clear reference points aids in making sense of market movements amidst uncertainty.

Understanding Market Dynamics and Trading Strategies

The Influence of External Events on Market Behavior

Many factors can negatively impact stock prices, often leading to market drops. However, the perception that specific events cause these declines is frequently misguided.

It's essential to analyze various elements over time in your trading development, particularly how market fluctuations relate to significant events.

Time and Price: Key Concepts in Trading

When discussing "time," it's crucial to consider the price aspect at that moment—whether it indicates inefficiency or liquidity.

Price references include levels above an O high or below an O low, which are not hidden but rather visible on charts for traders to identify.

Navigational Tools for Traders

Having clear reference points in trading is akin to using a navigation system; it helps traders understand potential market movements and destinations.

These annotated levels on charts guide traders toward understanding where price may move next based on identified opportunities.

Fair Value Gaps as a Trading Strategy

Focusing on fair value gaps simplifies visual analysis for traders, making them more apparent and easier to trade effectively.

Even if traders initially struggle with identifying fair value gaps, they will develop a foundational understanding of market behavior through observation.

Managing Trade Anxiety and Following Rules

Traders often experience anxiety when entering trades due to uncertainty about their decisions compared to others who might wait for confirmation before acting.

It’s critical for traders not to break established rules or deviate from their strategies; observing without action can sometimes be the best approach during uncertain times.

Analyzing Market Movements Without News Drivers

On days without significant news drivers, markets can exhibit erratic movements. For instance, observing price actions around opening gaps can provide insights into potential trends.

Market Analysis and Trading Strategies

Market Behavior Without Major News Drivers

The market tends to be aimless and choppy when there are no medium or high-impact news drivers in the morning session, leading to unclear trading conditions.

External factors, such as geopolitical events or domestic election campaigns, can significantly influence market behavior, prompting caution in overnight positions.

Developing a Cautious Trading Approach

New traders should focus on avoiding bad habits by adopting a cautious trading perspective from the start.

Observing the market's reaction to opening gaps can provide insights into potential price movements throughout the week.

Weekly Range and Retracement Insights

A one-sided movement during the week suggests that Friday may see a retracement back into the range formed since Sunday’s opening.

Traders should anticipate a 20% to 30% retracement without trying to predict Friday's closing price; this is part of understanding weekly trends.

Short Selling Considerations on Fridays

Taking short positions on Fridays could be viable if they align with historical patterns of retracement based on weekly highs and lows.

The market often experiences reduced activity towards the end of Friday, which can lead to sideways movement after initial price adjustments.

Analyzing Indices: S&P, Dow, and NASDAQ

The speaker expresses skepticism about trading in indices like ES (S&P), noting it appears too clean for reliable trades at present.

The Dow is described as unreliable ("dirty30"), indicating a preference for analyzing broader market trends rather than engaging directly with it.

Divergence Signals Among Indices

Divergences between NASDAQ and S&P highs signal potential weaknesses; traders should consider partial exits if these divergences occur.

Monitoring divergences helps identify underlying weaknesses not visible through individual index analysis alone.