Essentials To ICT Market Structure

Introduction

In this section, the speaker introduces the module and explains that it will focus on helping traders educate themselves in determining trade direction.

Determining Trade Direction

• The primary function of a Forex trader is to find their way through price.

• There are many different timeframes to consider, which can be daunting for new traders.

• The first step is to know your timeframe and what type of trader you want to be (position, swing, short-term, day or scalper).

• Short-term trading and day trading can be rewarding for new traders as they provide immediate feedback.

Understanding Market Structure

In this section, the speaker discusses how market structure applies to position trades and swing trades.

Position Trades

• Position trades last anywhere from three months to a year.

• To break down market structure for position trades, use monthly, weekly and daily charts.

• If considerably overbought on a monthly chart, look for topping formation on weekly and daily charts.

Swing Trades

• For swing trades, use daily, 4-hour and 1-hour charts to break down market structure.

• Utilize the highest timeframe (daily chart) for swing trades.

• Setup based upon what you see on higher timeframe (daily chart).

Conclusion

In this section, the speaker concludes by summarizing that each trader is different and should find their own optimal way of trading.

Finding Your Optimal Way of Trading

• Each trader is different and should find their own optimal way of trading.

• As you grow and mature as a trader, you may become multi-timeframe based in terms of trading.

• Short term trading provides immediate feedback new traders need.

Trading Timeframes and Market Structure

In this section, the speaker discusses the different timeframes used in trading and how to analyze market structure across multiple timeframes.

Short-term Trading Timeframes

• Short-term trades can last from one day to a week or so.

• Use the 4-hour chart for trade premise or directional bias.

• Use the 1-hour chart for trade management or mid-level timeframe.

• Use the 15-minute chart for timing entry and possibly looking for early reversal signs.

Swing Trading Timeframes

• Swing trades last about a week or more.

• Use the daily chart to facilitate trade premise and give directional bias.

• Manage trades on the 4-hour chart.

• Use the 1-hour chart for timing purposes.

• The shortest timeframe would be the 60-minute chart.

Market Structure Analysis

• Focus on the highest of three time frames.

• Trades will be managed by highest or mid-time frames.

• Utilize key support resistance levels to frame directional bias.

• Market profiling is essential in measuring current market structure.

Understanding Market Structure

In this section, the speaker explains how to use market structure to identify optimal trade entries based on higher time frame charts.

Higher Time Frame Chart Analysis

• Price never moves in a straight line and there will be consolidations and retracements.

• Short-term swing lows breaking on the highest timeframe chart is an optimal trade entry point.

• Anticipate market structure shifts when price hits key resistance levels.

• Zoom in on shorter term timeframes to identify optimal trade entries or respective sell patterns.

• Gray area between entry and exit points where anything can happen.

Market Structure Framework

• Look for bullishness by seeing support being held and resistance being broken.

• Utilize trailing stop loss orders below important lows as price dips back down for another opportunity to get long.

Conclusion

• Be comfortable with price coming back and blowing out previous lows.

Market Structure and Consolidation

In this section, the speaker discusses market structure and consolidation. They explain how to study consolidations for shorter-term support and resistance levels, which are more easily tradable. The speaker also talks about how to anticipate bullish moves higher when there is a shift in market structure.

Understanding Market Structure

• When the market breaks above all short-term highs, it implies that we could see a leg from the low or whatever low would form back here to this high duplicated on the retracement.

• Every time we see a consolidation, we want to study these for shorter-term more dynamic support resistance levels because they have discernible price levels that are very clear.

• Inside every swing low deforms there's going to be a discernible hostile trade entries or reflection patterns or generally fractal patterns.

• When prices engineer to go lower down into a support level ultimately to trade higher, this is the building blocks that traders work with.

Anticipating Bullish Moves Higher

• We could be seeing a consolidation in here with this higher-level reason support level down here. If it's consolidating here, we could look for a move from whatever high forms here to this low duplicated from this high or whatever high forms in this area down to this low.

• As prices come down into support level, we're anticipating market structure to break lows and find resistance. Every new consolidation if we're expecting price reaching down to our higher-level support level on the highest level chart that's why we do our analysis on the highest level because you want to see where price is probably reaching for.

Conclusion

In this section, the speaker concludes by summarizing the key points discussed in the video. They emphasize that traders need to live in the gray area and not expect a simple black and white premise to trading. The speaker also encourages traders to apply these concepts with all other concepts previously discussed.

• Traders need to live in the gray area and not expect a simple black and white premise to trading.

• Apply these concepts with all other concepts previously discussed.

Trading Strategies for Price Action

In this section, the speaker discusses trading strategies for price action and how to identify profitable trade opportunities.

Short-term Trades within a Range

• A short-term bounce in the range between the high and low of a price action could create an opportunity for profitability.

• Taking short-term trades with a bias towards reaching higher levels of support can be profitable.

• Inside the range concepts involve looking at lower lows and lower highs to identify potential trade opportunities.

Swing Projections

• When market structure is broken, retracements can provide new selling opportunities.

• Swing projections can be used to measure swings from one point to another and project them lower.

• It's important to exit trades before the objective is met, as support/resistance levels may not always be clear-cut.

Measurable Swings

• Measurable swings are engineered moves that can be projected using simple price action analysis.

• Support/resistance levels may not always be black and white, so it's important to allow some flexibility with price movements.

• Short-term retracements could act as catalysts for additional entries using smaller time frames.

Blending Concepts

• Combining swing projections with bearish market structures can help identify optimal trade entries.

• Retracements back into previous support levels that have been broken should act as resistance for new leg down opportunities.

• Measurable legs can also be used in conjunction with swing projections to identify potential trade opportunities.

Understanding Market Structure

In this section, the speaker explains how to identify market structure and build a framework for discerning long-term and short-term price swings.

Identifying Long-Term Highs and Lows

• Note respective time frames when identifying swing highs and lows.

• Use symbols or markers to denote swing highs and lows on charts.

• Nesting out swing highs and lows helps classify them as long-term or short-term.

• Lower highs on either side of a term high classify it as a long-term high.

Building a Framework for Market Structure

• The framework of market structure is derived from the highest level of three time frames being traded with.

• Mid-level chart is used to zero in on smaller time frame support/resistance levels.

• Lowest time frame is used for entry.

Trading within Kill Zones

• Entries should be made during kill zone times (London open, New York open, London close, or Asia).

• Key support/resistance levels should already be identified before making any trades.

Understanding Directional Bias

In this section, the speaker explains how traders can establish a directional bias based on their trading style and time frame.

Establishing a Bias

• The bias is both directions every day.

• Traders need to decide on their trading style and profile to determine the bias they are holding.

• The higher time frame of the three used for market structure study gives the bias.

• If price trades back down to a specific support level within a kill zone, traders should take action to buy.

Trading with Price Action

• Use an entry technique or concept at a key support/resistance level with the higher time frame giving you your bias.

• Don't try to force more out of the concept than intended.

• Traders should look for a bias for their style of trading and get themselves in sync with whatever price action is doing based on their premise or style of trading.

Simplifying Directional Bias

In this section, the speaker emphasizes that traders should avoid overcomplicating directional bias by adding too many tools and expecting to know what direction the market will move every single day.

Keeping it Simple

• Wait until everything lines up that you'd like to see based on your understanding of what markets suggest.

• Use market profiling as building blocks and then look at actual individual market structure concepts on three time frames used for whatever type of trading you're doing at that time.

• Move from one dynamic to another and wait for opportunities where price aligns with your trading style.

• The speaker cannot teach the premise of moving from one dynamic to another, but can give concepts and approaches to do specific styles of trading.

Understanding Trading Bias and Profitability

In this section, the speaker discusses how traders should approach bias and profitability in trading.

Approaching Bias and Profitability

• Traders should look for bias that may exist inside the realm of other traders' sell bias.

• Being profitable is more important than being correct.

• Trades with perfect foresight do not exist, so traders must be comfortable with less-than-perfect visibility trades.

• Traders should find their timeframe, determine the market structure given for that time frame, trade within that respective market structure, and perform targeting on the highest and mid-level time frames.

• Consistently harvesting profits out of the marketplace while keeping risk low is key to successful trading.

Controlling Trading Actions

• Traders should keep their trading controlled to control emotions, keep expectations realistic, and live comfortably in the gray.