40-ICT Mentorship Core Content - Month 5 - Open Float

Last modified by Drunk Monkey on 2022-09-14 11:56
1 00:00:18,930 --> 00:00:29,220 ICT: Okay folks, we are looking at lesson 1.2 of long term analysis implementing macro analysis quarterly shifts and open float
2 00:00:37,440 --> 00:00:40,680 Okay, we're gonna be talking about open float on this teaching
3 00:00:46,050 --> 00:00:46,530 okay
4 00:01:00,810 --> 00:01:16,680 the quarterly shift with open float. And let's first start by defining what is open float. A float is the current open interest above and below current market
5 00:01:16,680 --> 00:01:27,360 price. And this is going to be in the form of pending buy orders. In other words, buy stocks that are resting above old highs. Or it could be just resting
6 00:01:27,360 --> 00:01:38,190 above market price doesn't have to be old highs and sell orders that can be below the market price by very little bit in terms of pips, or could be below
7 00:01:38,190 --> 00:01:53,310 significant lows. There are open interest in the form of sell stops for entry orders and sell stops for collapsing long positions. And there are buy stops to
8 00:01:53,310 --> 00:02:07,140 get long and buy stops to protect short positions. All of those are equating to open float. It's the total open interest of the players that are in the market
9 00:02:07,140 --> 00:02:25,200 now or hope to be depending on where price goes relative to those standing orders. Okay, when open float is used to determine buyside liquidity, shorts use
10 00:02:25,200 --> 00:02:42,270 protective buy stops above the last bearish shift. By stops above short term highs that could be in the form of a weekly high or a monthly high. By stops
11 00:02:42,270 --> 00:02:55,890 above the highest high in the last three months. buy stocks above the current six month high and buy stops above the current 12 month high. Now don't be
12 00:02:55,890 --> 00:03:09,540 discouraged by hearing these numbers because you can be really close to the 12 month high for a long period of time and never really get to it. By first
13 00:03:09,540 --> 00:03:18,690 remember reading about this type of idea, the range for the 12 month high and low. I thought to myself, you know it takes 12 months to get back to that level.
14 00:03:18,720 --> 00:03:29,370 And that just shows how myopic my viewpoint was when I first started trading the 12 month high and low you can be inside that range for a long time near the high
15 00:03:29,370 --> 00:03:39,810 or the low. It doesn't take that long to get to it. So some of the new traders that you see, send me emails, they asked me how often do I trade 12 month highs
16 00:03:39,810 --> 00:03:50,670 and lows? Well, you could see a 12 month high or low pretty quickly. It depends on what the range is in your market. The same thing is said for a six month
17 00:03:50,670 --> 00:04:00,480 high. The one we're going to focus on here primarily is the buy stops above the highest high in the last three months. Because we're looking at the quarterly
18 00:04:00,480 --> 00:04:13,740 shift that's going to be a very significant price level whereby stocks will be resting. So every three months you want to be noting more at the highest and
19 00:04:13,770 --> 00:04:22,470 there's going to be biceps definitely most likely getting targeted, if we have a market structure shift bullish and they're gonna be aiming for those by stops
20 00:04:22,470 --> 00:04:33,030 above the three month highs. Any run on biceps above a short term high which is a monthly high or a weekly high. That's gonna give us strong prognostication for
21 00:04:33,030 --> 00:04:49,230 short term volatility as well. When we're looking at the sell side of the liquidity long choose protective sell stops under the last bullish shift. sell
22 00:04:49,230 --> 00:05:05,580 stocks below short term lows that come in the form of a weekly low or a monthly low. sell stocks below the lowest low In the last three months sell stocks below
23 00:05:05,580 --> 00:05:22,350 the current six month low. And finally, sell stops below the current 12 month low. Now one of the questions I get a lot, and I get it actually sent to me by
24 00:05:23,100 --> 00:05:35,580 email, even in the free members area from my website and on YouTube. When I talk about running stops, or if I talk about turtle soup, false breaks above old
25 00:05:35,610 --> 00:05:48,270 highs or false breaks below a no low. The question always comes up is how do I know if the market spin stop just right above old high or below an old low and
26 00:05:48,270 --> 00:05:51,360 then reverse or keep on going.
27 00:05:52,649 --> 00:06:04,799 And I'm going to teach you the ideas that I use to get to that conclusion, what gives me the conviction that builds the confidence on believing that it's just
28 00:06:04,799 --> 00:06:13,049 going to punch above and all high and probably not continue going higher, not by much in other words, and then retrace and probably offer a shorting opportunity
29 00:06:13,049 --> 00:06:17,849 the same thing as reverse for buying an old low, much has been violated.
30 00:06:25,230 --> 00:06:38,790 Okay, this chart is basically outlining the same levels that we had for the quarterly shifts. And every three months, the intervals are shown here, I kept
31 00:06:39,150 --> 00:06:49,410 the majority of the vertical lines off, others use little segments to delineate what those reference points would still be relative to date. And I want you to
32 00:06:49,530 --> 00:06:58,710 take a look at this chart for a minute, focus and study on it. And if you can pause the video for a couple minutes and note significant price highs and lows.
33 00:07:11,310 --> 00:07:34,560 Obviously, you can see the one that's here and the low down here. So we have two pretty significant runs above an old high and below an old low. I want you to
34 00:07:34,560 --> 00:07:48,690 draw your attention to this short term low here. When price traded below that low. That was a break in market structure. Okay, so we had a market shift below
35 00:07:48,690 --> 00:08:02,490 that low. And the market continued trading all the way down until we got to the 105 30 level, whenever we see the bearish shift lower in price, your eyes need
36 00:08:02,490 --> 00:08:15,840 to go rate to the high that just came from because on a daily chart, that's going to have a lot of liquidity above it. That liquidity is in the form of a
37 00:08:15,990 --> 00:08:32,760 liquidity pool for buy stops. The folks that were fortunate enough to be short, from that old high trading down into 105 34. Their position would have a run on
38 00:08:32,760 --> 00:08:41,130 the buy stops that's residing, holding on to a long term position. Now you're probably asking yourself, what retail trader in their right mind would have a
39 00:08:41,130 --> 00:08:51,870 buy stop on a short held on that long just to see it come all the way back up there and get knocked down? Well, again, the markets not trading against the
40 00:08:51,870 --> 00:09:02,370 retail traders, it's trading against the large liquidity offered by the big funds. Because funds are traditionally long term trend following traders. These
41 00:09:02,370 --> 00:09:13,410 reference points on the daily timeframe are going to be salient to understanding how open float has a big impact on where future price movements are going to
42 00:09:13,410 --> 00:09:28,920 take you. As you see here after creating a low 105 34 market does in fact have one more market structure shift and since price higher pay attention to the
43 00:09:29,280 --> 00:09:42,390 quarterly shift markers that we have here. Every three months there is a significant run on liquidity. The move off of the 105 34 level has a break in
44 00:09:42,390 --> 00:09:55,410 market structure. Then you could see the subsequent retracement back to the short term high and then price rallies away. fills in liquidity void from
45 00:09:55,410 --> 00:10:15,870 October retraces back down you To the 108 60 level, then rallies again, and ultimately making a run up for the buy stops above the 115. Big figure. That
46 00:10:15,870 --> 00:10:35,310 market structure break there foolishly is the catalyst that sends the market higher to make the stops above 115, big figure targeted. Below that low, there's
47 00:10:35,310 --> 00:10:44,040 going to be a large liquidity pool on a daily timeframe. Again, it's not for retail traders, it's going to be for the large funds, because there was a
48 00:10:44,040 --> 00:10:59,640 significant displacement among many months. About six months or so, the market rallied from 105 34 to one to 115 70s, or thereabout. So it's a pretty
49 00:10:59,640 --> 00:11:11,880 significant move for the Euro dollar there's going to be sell side liquidity or sell stops in the form of a liquidity pool below that low. You see price did in
50 00:11:11,880 --> 00:11:19,080 fact sweep down here and grab that liquidity. Neutralizing all the cell stops.
51 00:11:24,720 --> 00:11:34,560 So let's take a look at what takes place, and how we can use open flow and help answer some of the confusion you have about why the market should be expected to
52 00:11:34,560 --> 00:11:45,450 go a certain level and then retrace or reverse and how we can look forward to one side of the market being predominantly controlled and staving off any
53 00:11:46,680 --> 00:11:58,890 continuation after the move blows through in Ojai or below, no love. As you see here, we have a short term high here, right before the market runs through that
54 00:11:59,190 --> 00:12:11,370 that retracement back down into the 107 50s. The BizStats it will be resting above that high. They're targeted in the market runs right through that and also
55 00:12:11,430 --> 00:12:21,630 fills in liquidity void to the left from October in the market retraces deeper, and then we have a short term high that was created by that rally above, taking
56 00:12:21,630 --> 00:12:32,520 the buy stop sell. That short term high eventually gets ran out as well, making a run on the buy stops that will be resting above that. Now, what bisects will
57 00:12:32,520 --> 00:12:44,430 be resting above that people that wants to sell short, every time price makes a impulse price swing, there's always invariably going to be orders that want to
58 00:12:44,430 --> 00:12:54,870 be selling there. And they're going to be sometimes short positions. Funds will go in and start working their positions in early. And sometimes they get knocked
59 00:12:54,870 --> 00:13:03,600 out. And that's what's happening here. Many times you're seeing that same phenomenon you end up going through, it's just going through a larger scope in
60 00:13:03,600 --> 00:13:19,920 terms of order size. And finally making a run on that 115 big figure clearing out the buy stops above the previous October high. Now I'm going to draw your
61 00:13:19,920 --> 00:13:32,520 attention to how do you know when the markets going to reach for one side of the liquidity or the other. Notice while the market was trading from the low at
62 00:13:32,520 --> 00:13:46,320 105 34, all the way up to 115. Big figure there wasn't any significant move on sell stocks at all. They were driving price up to take the liquidity out at 115.
63 00:13:47,490 --> 00:13:57,900 Once that liquidity was taken out in the form of the buy, stop read at 115. Big figure the market broke down and created a violation of a short term low at
64 00:13:57,900 --> 00:14:08,430 short term low had trailing sell stops resting below it. No sell stocks would now would be violated and cancelled. So any Long's would be knocked out at this
65 00:14:08,430 --> 00:14:23,670 point. Now you need to be paying close attention because this is where the rubber meets the road. This short term low and that run on the sell stops right
66 00:14:23,670 --> 00:14:34,380 below that low here. You want to draw special attention to that right now. Because this is your first clue that we are probably going to work to sell side
67 00:14:34,380 --> 00:14:42,900 of the liquidity. We all know at the time when it first forms we had to start watching what price does. We already know we have a strong rejection about the
68 00:14:42,900 --> 00:14:55,290 115 big figure. And we've came a long way from 105 30 fours with none of the cell stops taken except for this one here. Now we have a short term hide it's
69 00:14:55,290 --> 00:15:08,700 violated just briefly but Question is, is that short term little violation above an old high? Is that making new ground for new highs? No, it didn't even
70 00:15:08,700 --> 00:15:24,540 challenge the old high. But look at the strong rejection rate above that high. It creates another lower low. So this short term low, right here, also sees its
71 00:15:24,540 --> 00:15:37,140 liquidity in the form of the sell stops, ran out as well. My question to you is this at this moment, right now, it's at the midway point or equilibrium between
72 00:15:37,140 --> 00:15:40,230 the 105 34 into 115. Big figure.
73 00:15:42,900 --> 00:15:52,890 The chances of this creating a higher high, where we're at right now, relative to the 115, big figure is not likely not because it's hindsight. And it's right
74 00:15:52,890 --> 00:16:02,220 in front of me. But because it's showing indications that it can't create new ground once the buy stops side of the liquidity is taken. But it's creating new
75 00:16:02,220 --> 00:16:13,530 lower ground every single time, the short term low is violated, it gathers up more momentum and gathers more distance between the range of 115. Big figure in
76 00:16:13,530 --> 00:16:22,680 105 34. So every time it drops, it drops a little bit more. But every time it rallies, it fails to make a new high, even if it takes a short term high out.
77 00:16:23,280 --> 00:16:35,190 It's not gaining any more ground on the upside, every rally is being distributed. We have a short term high here as well. And those BizStats are ran
78 00:16:35,190 --> 00:16:46,710 out as well. Same question. Does this rally above a short term high create a new high? No, it can't even get above the previous failed attempt to make another
79 00:16:46,710 --> 00:16:49,590 higher high at the 114 bit figure.
80 00:16:54,840 --> 00:17:12,180 Then once again, we have a rally through an old high does it gain new ground? No, but it's quickly rejected and trades lower and then violates two times it
81 00:17:12,180 --> 00:17:26,160 goes below the 109 10 level once briefly before running up and taking that run on 112 95. And then rejecting that level after taking the bus stops out and
82 00:17:26,310 --> 00:17:44,760 making a run for another pass through the 108 50s. This short, from this high at 112 95 was on the heels of the US elections we saw strong dollar in the market
83 00:17:44,760 --> 00:18:01,470 quickly rejected all of the rallies in foreign currencies. The movement below every short term low and gaining more ground. On the downside. That's the
84 00:18:01,470 --> 00:18:10,350 indication you look for regardless of whatever timeframe you're trading. But on a daily chart, you're looking for clues that it wants to gain more momentum on
85 00:18:10,350 --> 00:18:19,890 one side of the market or the other. You're going to reference where the buy stops are available highs and where the sell stops are below old lows. But what
86 00:18:19,890 --> 00:18:31,170 you're watching for is the tug of war that takes place between each new rung on stocks below the market and above the market. If you notice, where the
87 00:18:31,170 --> 00:18:40,410 intermediate term highs are, if intermediate term highs keep creating lower intermediate term highs, and intermediate term lows and short term lows keep
88 00:18:40,440 --> 00:18:50,820 going lower each time. It's telling you that it wants the open float the low the marketplace. In other words, it wants to seek the sell side of liquidity. It's
89 00:18:50,820 --> 00:19:01,410 going to draw lower to now think about what this has done for you. It gives you a directional bias on the daily chart. It takes a long time for these moves to
90 00:19:01,410 --> 00:19:11,940 take place. But once you're studying price, and you look for these clues, don't cross many pairs and many asset classes. You'll see that this is in fact what
91 00:19:12,000 --> 00:19:23,790 leads you to daily chart directional bias, which also will serve you very well in other disciplines of trading, whether it be day trading, scalping, short term
92 00:19:23,790 --> 00:19:33,630 trading or swing. This will give you what you're looking for in terms of how do I know what side of the market is going to make to run on? Is it going to run
93 00:19:33,630 --> 00:19:41,700 the bias or is going to run the cell stops. But think about what timeframe you're looking at here. This is a daily chart. If the daily chart is indicating
94 00:19:41,700 --> 00:19:52,440 that it wants to run lower because it has no problem getting down below short term lows. But every rally has a failure to make new ground and can't make a
95 00:19:52,440 --> 00:20:06,030 higher high. When it does make a higher high it's punished immediately. But the high that it makes is always above of short term, insignificant high. Every time
96 00:20:06,030 --> 00:20:18,210 it does this, it solidifies a intermediate term high, that is now lower than the previous intermediate term high. And intermediate term high is any high that has
97 00:20:18,210 --> 00:20:30,360 a short term high to the left of it, and to the right of it. Think of it like a head and shoulders top formation. Every time you see a area term high that has a
98 00:20:30,360 --> 00:20:38,220 lower intermediate term high to the left of it, and intermediate term high to the right of it, that's actually a long term high in the middle. Again, think
99 00:20:38,250 --> 00:20:49,110 like a head and shoulders pattern. Now, invert that. And you'll have the same thing that would be said for an intermediate term low or a long term low. Once
100 00:20:49,110 --> 00:20:59,100 you see that in price, you'll actually see the market structure that I actually learned from studying Larry Williams as a new trader, you can see the market
101 00:20:59,100 --> 00:21:11,730 structure in this entire sample size of data. It's multiple intermediate term highs, and long term highs that are significantly signaling that the market in
102 00:21:11,730 --> 00:21:29,100 fact wanted to go lower. There was a liquidity void, around 106 at level two, one or 635, it filled that in when all the way down to the short term low at
103 00:21:29,130 --> 00:21:43,950 105 34. bounce a little bit there. And then ultimately, once breaking that low at 107, big figure it reached down below to take the Southside liquidity out.
104 00:21:45,750 --> 00:21:58,500 Now, when you study the daily charts like this, you can look at a lot of examples. But they require time. And unfortunately, they don't give you a lot of
105 00:21:58,650 --> 00:22:07,860 turnaround time for study. But in hindsight, you can go back and look at a plethora of really nice trading examples where you can see where liquidity was
106 00:22:07,860 --> 00:22:24,000 ran on one side, the market was drawn up for three to six months. Okay, look at the move from the December low of 2015, up to the high made in May of 2016. It's
107 00:22:24,000 --> 00:22:42,630 about six months, then the move from there high in the spring of 2016. It traded all the way down to a low meet in December of 2016. Again, about six months or
108 00:22:42,630 --> 00:22:54,990 so a little bit more than six months. But you're seeing the effects of how the quarterly shift takes place. Also have the runs on liquidity. And the
109 00:22:55,380 --> 00:23:08,910 implementation of open float. Open float is the study of how the market reaches for the buys and the cells that are above market price. Knowing where orders
110 00:23:08,910 --> 00:23:18,990 will be building and stacking above old highs and below old lows that will give you the framework to map out what side of the marketplace that market makers and
111 00:23:18,990 --> 00:23:32,280 smart money are seeking to make a run on. If you can determine that on a daily chart like this. It will give you trend daily bias long term bias and it'll give
112 00:23:32,280 --> 00:23:41,130 you prognostication for having Smart Money perspectives in institutional vantage point with all of your trades. Until next time, I wish you good luck and good
113 00:23:41,130 --> 00:23:41,550 trading