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ICT Charter Price Action Model 12 - Trade Plan & Algorithmic Theory
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ICT Charter Price Action Model 12 - Trade Plan & Algorithmic Theory

Price Action Model Number 12: A Scalping Strategy

Overview of the Scalping Model

  • Price Action Model Number 12 is introduced as a scalping model designed for intraday trading, specifically targeting 20 pips.
  • This model is characterized as a "bread and butter" setup, implying it is reliable but not overly complex or high-risk.
  • The speaker emphasizes maintaining a stop loss around 20 pips to ensure manageable risk levels while trading.

Importance of Stop Losses

  • Caution against using extremely tight stop losses (e.g., 2 or 5 pips), which are often unrealistic in volatile markets.
  • The model's framework includes five stages of trade plan development: preparation, opportunity discovery, trade planning, execution, and management.

Preparation Phase

  • In the preparation phase, traders should note all medium and high-impact market events that could influence price movements.
  • Analyzing upcoming economic events helps establish a weekly profile for potential price ranges based on current market structure.

Identifying Market Direction

  • Focus on determining whether the market is likely to expand higher or lower rather than predicting specific price levels.
  • Traders should assess the highest highs and lowest lows from the last 20 trading days to identify current dealing ranges.

Liquidity and Trade Execution

  • Look for liquidity draws above old highs or below old lows within identified ranges to inform trading decisions.
  • Target external range liquidity by anticipating price movement towards order blocks with fair value gaps that align with weekly bias.

Opportunity Discovery and Trade Planning

  • Identify 20 pip ranges on a 15-minute chart when bullish institutional order flow indicates buying opportunities; conversely target sell-side liquidity during bearish conditions.
  • When preparing to short, look for convergence between manipulation and opposing prices at times suggested by economic calendars for volatility injections.

Order Blocks and Kill Zones

  • Utilize premium fair value gaps with bearish order blocks when expecting market declines; similarly apply discount fair value gaps with bullish setups during anticipated rallies.
  • Note that order blocks can form outside traditional kill zones but must return within these zones (New York or London sessions).

Understanding Trading Strategies and Risk Management

Fair Value Gaps and Order Blocks

  • The discussion introduces the concept of fair value gaps and order blocks, emphasizing their relevance during specific trading times, particularly in relation to Central Bank deals.
  • It is crucial that trades involving these elements occur within an ICT Kill Zone for them to be considered viable; otherwise, they may not yield favorable outcomes.

Trade Execution Strategy

  • The setup for trades is based on a 15-minute timeframe, with execution occurring on a 5-minute chart during key market openings (London or New York).
  • For bearish trades, traders should look for a premium fair value gap alongside a bearish order block; conversely, bullish trades require a discount fair value gap plus a bullish order block.

Entry Orders and Profit Objectives

  • When entering short positions, traders place sell limit orders targeting 20 pips profit. If achieved, they close the position via buy limit orders before waiting for new opportunities.
  • Similarly, long positions involve placing buy limit orders with the same 20-pip target. This structured approach minimizes emotional decision-making during trading.

Stop Loss Management Techniques

  • Initial stop loss settings are established at 20 pips risk. As profits accumulate (e.g., reaching 10 pips), traders can adjust their stop loss to reduce risk significantly.
  • A more aggressive strategy allows reducing the stop loss to break even once profits reach 15 pips of the expected objective.

Money Management Principles

  • Position size calculations are critical: it involves determining account equity multiplied by risk percentage divided by stop-loss in pips.
  • An example illustrates how to manage risks effectively using hypothetical account equity of $10,000 with a standard model requiring a 20-pip stop-loss threshold.

Practical Application of Position Sizing

  • Using micro lots as an example shows how leverage impacts potential earnings while maintaining consistent risk management practices across different lot sizes.

Understanding Risk Management in Trading

Adjusting Risk Percentages After Losses

  • If a demo account incurs a full R% loss, reduce the risk percentage (R%) by 50%. Once the loss is recovered by 50%, return to the maximum R% per trade.
  • In case of consecutive losses, continue to lower R% until previous losses are partially recovered. This strategy helps manage equity and minimizes large drawdowns.

Importance of Backtesting and Sample Sets

  • Begin backtesting with multiple sample sets using the outlined trading plan. Revisit lessons on price action models for clarity.
  • Model number 12 focuses on scalping strategies targeting 20 pips per trade, which are common setups that occur frequently in daily trading.

Market Behavior and Trading Strategies

  • Anticipate market movements towards previous day's highs or lows; if a setup offers 20 pips before reaching these points, it aligns with this model's criteria.
  • Recognize overlapping patterns among different trading models. With time and study, traders will see connections between various strategies.

Intraday Trading Techniques

  • The ability to switch between buying and selling during volatile market conditions can enhance intraday trading effectiveness.
  • Caution against overtrading; avoid entering trades out of fear of missing opportunities or due to an addiction to market action.

Daily Range Expansion Insights

  • The model relies on daily range expansion without bias towards direction. Traders should assess whether the market is likely to run towards previous highs or lows while allowing for a target of 20 pips.
  • Emphasize understanding intraday volatility rather than solely focusing on directional buys based on daily ranges; this approach can uncover profitable moves even in choppy markets.

Developing Personal Trading Models

  • As students progress through various models, they may create hybrid strategies that resonate more personally with their trading style.

Trading Strategies and Personal Experiences in Futures Market

Understanding Market Patterns

  • The speaker discusses trading strategies involving short positions in the mini S&P and NASDAQ, focusing on fair value gaps and liquidity dynamics.
  • Emphasizes the repeatability of certain market patterns, suggesting traders can operate in different directions during morning and afternoon sessions based on market knowledge.
  • Highlights the potential profitability of trading one mini contract, equating five handles to $250, which is significant compared to average daily earnings.

Personal Success Stories

  • Shares a personal anecdote about his son making substantial profits from trading, equivalent to two weeks' income from a single trade.
  • Describes his son's bi-weekly pay structure and how they utilize a specific trading model to enhance earnings without relying on complex systems.

Learning Process and Decision Making

  • Clarifies that his son is learning through observation rather than using advanced tools; he prompts him to reconsider poor decisions before executing trades.
  • Discusses the importance of recognizing market structures like old highs/lows and fair value gaps for effective trading.

Setting Realistic Expectations

  • Encourages traders to lower their expectations regarding trade sizes; smaller consistent gains can lead to significant profits over time.
  • Suggests that achieving multiple small moves (e.g., 10-point moves in index futures) can accumulate substantial weekly earnings.

Time Management in Trading

  • Advocates for managing time effectively while trading; emphasizes that being constantly engaged with charts can be exhausting despite its potential profitability.
  • Introduces "kill zones" as a strategy for limiting trading hours while maximizing efficiency, warning against neglecting personal relationships due to excessive focus on trading.

Flexibility Across Markets

  • Reiterates that traders should adapt their strategies across different markets (e.g., Forex or bonds), emphasizing flexibility in approach based on individual goals.

Understanding Trading Expectations and Strategies

Setting Realistic Goals in Trading

  • The speaker emphasizes that students should not feel pressured to meet expectations set by mentorship; personal goals vary.
  • Acknowledges that while some may aim for high achievements like winning the Robins Cup, others may simply seek a stable income through trading.

Short-Term Trading Techniques

  • Introduces the concept of "hit and run trading," focusing on daily range expansion rather than holding positions long-term.
  • Discusses looking for price action models that indicate potential expansions within the daily candle, rather than trying to predict closing prices.

Analyzing Market Structure

  • Uses the dollar-swissy pair as an example, highlighting a fair value gap and potential swing low formation on the daily chart.
  • Explains how market behavior can provide opportunities for short-term trades based on previous highs and order block levels.

Practical Application of Trading Models

  • Describes a familiar model where traders look for market structure shifts after breaking previous highs, indicating potential upward movement.
  • Illustrates entry points using specific price levels (e.g., 9605), demonstrating how to capture profits without needing complex indicators.

Simplifying Trading Approaches

  • Encourages traders to practice identifying patterns in pairs they are less familiar with during major trading sessions to build confidence.
  • Stresses that successful trading does not require extensive knowledge or complicated strategies; simplicity can lead to profitability if it aligns with one's personality.

Understanding Bias and Market Timing

  • Highlights the importance of practicing bias recognition in trading decisions, acknowledging that accuracy is not guaranteed every day.

Understanding Trading Models and Strategies

Navigating Confusion in Trading Models

  • The presence of multiple trading models can lead to confusion; it's essential to explore each model to determine which one aligns with your trading style.
  • Blending concepts from different models is common, allowing traders to create a unique strategy that suits their needs.

The Importance of Precision in Trading

  • Avoid the pitfalls of overconfidence seen on social media; successful trading requires understanding market movements rather than relying on unrealistic claims.
  • Focus on executing small, precise trades ("hit and run" trading), where quick entries and exits are prioritized for consistent gains.

Trade Management Techniques

  • After entering a trade, take 80% off once it reaches a predetermined target (e.g., previous day's high), then adjust your stop loss to secure profits.
  • Use trailing stops effectively by moving them under closing candles to protect gains while allowing for potential further movement.

Learning from Experience

  • Reflecting on past experiences as a trader can provide valuable lessons; missed opportunities often stem from not adhering strictly to strategies or being stopped out prematurely.

Commitment to Learning and Improvement

  • While not everyone will become millionaires through trading, dedication and hard work can lead to better-than-average results compared to casual traders.
  • Engaging actively with content and practicing consistently is crucial; passive consumption of educational material won't yield significant improvements.

Overcoming Mental Barriers in Trading

  • Many traders hesitate due to fear of failure, preferring entertainment over genuine effort. A shift in mindset towards active participation is necessary for growth.

Final Thoughts on Mentorship and Resources

Grace Period Extension and Forum Changes

Important Updates on Forum Access

  • The grace period for downloading content has been extended to Friday at 9:00 AM. Users are encouraged to download videos for future reference.
  • The forum will only feature a charter member area, with no commentary or price action model threads available.

Transitioning to Efficient Learning

  • Emphasis is placed on communication through typing and sharing charts, similar to the Baby Pips community, which allows for quick and efficient learning without lengthy video sessions.
  • Acknowledgment of the effort put in by members who have persevered through challenging learning experiences; this resilience deserves recognition.

Understanding Personal Growth Through Trading

Reflection on Learning Challenges

  • Learning trading can be difficult, often leading individuals to give up; however, those who persist deserve applause for their commitment.
  • Charts serve as mirrors reflecting personal emotions such as anger or fear, influencing trading actions and decisions.

Mindset Alignment for Success

  • Achieving a grounded mindset is crucial; being unaffected by emotions leads to consistent progress in trading practices.
  • Members are encouraged to eliminate negative habits from their journaling and discussions within the forum.

Strategies for Overcoming Adversity

Managing Emotions Effectively

  • It’s important not to vent frustrations in journals or forums but rather process them privately before returning with a positive mindset.
  • Taking actionable steps is essential; without effort and change in approach, improvement in trading skills will stagnate.

Commitment to Continuous Improvement

  • Members are urged not to quit despite challenges; understanding that others succeed due to continuous improvement can motivate personal growth.
Channel: The Inner Circle Trader
Video description

Government Required Risk Disclaimer and Disclosure Statement 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.