84-ICT Mentorship Core Content - Month 9 - Trading In Consolidations

Last modified by Drunk Monkey on 2022-10-17 10:10
1 00:00:15,540 --> 00:00:26,010 ICT: Welcome back folks to Lesson four of the May 2017. ICT mentorship, ICT amplify day trading and scalping, this teaching is trading in consolidations.
2 00:00:31,950 --> 00:00:42,240 Okay, what's the secrets behind trading and consolidations? Well, the first thing you need to understand is the focus on the daily and or for our order flow
3 00:00:42,270 --> 00:00:54,750 subordination. What is order flow telling you on a daily basis on a daily chart is price suggested to go higher based on ELLIPTA, an order flow? What was it
4 00:00:56,130 --> 00:01:06,900 most likely going to go lower the four hour chart is your last line of defense in terms of determining directional bias, you want to be trading in preferably
5 00:01:07,170 --> 00:01:18,870 both the daily and for our both suggesting higher prices or lower prices and looking for consolidations, in price and a lower timeframe. So in other words,
6 00:01:18,870 --> 00:01:32,640 we could be looking at a consolidation around an hourly chart or a 15 minute timeframe. And that may be a buildup of new positions. Or it could be a buildup
7 00:01:32,670 --> 00:01:44,580 of orders to then look for a rejection. Basically, turtle soup. But when it comes to consolidations, I want you to think in two camps, obviously, what
8 00:01:44,580 --> 00:01:55,590 retail traders are thinking, trying to do the opposite of that in your own trading, and that of what smart money does with their trades. So retail traders,
9 00:01:55,620 --> 00:02:04,800 they're going to be looking for breakouts to establish a directional bias, they have no insights as to what the market may be telling them. They're looking for
10 00:02:05,220 --> 00:02:17,280 a cause and effect. If it does this, then I'll understand that okay, but they're basically chasing after price. Smart Money will engineer or fade breakouts of a
11 00:02:17,280 --> 00:02:33,180 consolidation. Smart Money is not trying to follow price, it's going to allow price to go to a specific level when entered when if to trades to a specific key
12 00:02:33,210 --> 00:02:47,100 level or a price or liquidity preference point, or a PT array. And it happens to be in agreement with a breakout of a consolidation. Many times you're gonna see
13 00:02:47,100 --> 00:03:01,080 a lot of institutional sponsorship on the move that fades that very thing. retail traders buy the previous low and sell the previous high. This is in
14 00:03:01,080 --> 00:03:10,080 keeping with the traditions of technical analysis, or what's known as classical Support Resistance. Obviously, we've seen many instances where Support and
15 00:03:10,080 --> 00:03:22,980 Resistance aren't limited to just the actual old low and the old high. Liquidity rests just above an old high or below an old low. Which obviously brings us to
16 00:03:22,980 --> 00:03:33,510 smart money's perspective by buying under an old low and selling above an old high when the markets are in consolidation, understand that the consolidation
17 00:03:33,510 --> 00:03:46,830 itself is permitting the open float, which is the buildup of orders above and below current market action. So market price being what it is, if markets are
18 00:03:46,830 --> 00:03:57,690 trading in a consolidation, that market price you want to be looking above short term and below short term for where the buy stops and sell stops will be that's
19 00:03:57,690 --> 00:04:06,090 your open float. When the market moves in consolidations in the long, sideways consolidation, the longer that consolidation is, the more orders are allowed to
20 00:04:06,090 --> 00:04:17,010 build up. Now obviously as a day trader, we're not going to expect a long phase of consolidation can be rather brief. But inside that consolidation, we have to
21 00:04:17,010 --> 00:04:27,360 understand what's being permitted. The orders are being allowed to stack up in terms of breakout orders in terms of trailed stop loss orders, stop orders that
22 00:04:27,390 --> 00:04:41,070 would key up a entry. For instance, buying on a stock for strength and selling on a stock for weakness. All those ideas overlap. And it creates a great deal of
23 00:04:41,490 --> 00:04:51,000 near term open float. So in other words, the open interest above the marketplace will start to concentrate the openings just below the marketplace. Begin to
24 00:04:51,000 --> 00:05:03,480 concentrate and you'll have a lot of liquidity basically bracketing the market price. When we look at The daily and or for our order flow, the subordination to
25 00:05:03,480 --> 00:05:03,900 that.
26 00:05:05,279 --> 00:05:15,089 In terms of price action, when consolidations occur, whatever the direction of daily or four hour is, that's going to be the direction of the move outside of
27 00:05:15,089 --> 00:05:28,349 the consolidation most often. So, as price moves above the consolidation take out on all high and daily and our for our is bearish. That's usually going to be
28 00:05:28,619 --> 00:05:37,949 the best scenario for trading in the consolidation. Now if daily and for our order flow is bullish, any moves below the consolidation would be viewed as
29 00:05:37,949 --> 00:05:48,689 smart money accumulating the cell stops for move higher. If the daily or for our order flow is bearish. Any move above the consolidation above an old high is
30 00:05:48,689 --> 00:05:56,189 going to be viewed as smart money knocking out buy stops and accumulating short positions. The opposite is going to be seen with the retail crowd they're going
31 00:05:56,189 --> 00:06:11,879 to be basically chasing price. retail traders Chase expansions that originate from the equilibrium. And smart money fades the expansions that originate from
32 00:06:11,879 --> 00:06:22,529 the equilibrium. Now, let me explain this a little bit more clear. When the market is bearish on a daily or four hour in terms of its order flow, this
33 00:06:22,529 --> 00:06:32,339 subordination factor is going to be seen in the lower timeframe Charts, where if there's a consolidation, and price starts to trade away from the equilibrium
34 00:06:32,339 --> 00:06:43,919 price point higher. If it breaks the short term high, in the event of doing that, many times, retail traders are going to see that as something bullish.
35 00:06:44,339 --> 00:06:56,609 Okay. And they're going to look for experiences usually ABCD type movements. Smart Money does not see that they actually fade that in, they're gonna go the
36 00:06:56,609 --> 00:07:06,419 opposite direction. So any short term high that's broken, and as price moves away from the equilibrium price point or middle of the consolidation, they fade
37 00:07:06,419 --> 00:07:18,809 that is a short term stock run, and then they send it to the opposite extreme of the consolidation and just outside the consolidation range. Again, retail thinks
38 00:07:18,809 --> 00:07:29,849 in terms of Old High Classic retail resistance, although classic retail support, where we're more focused on the equilibrium price point, because we understand
39 00:07:30,059 --> 00:07:41,429 premium and discount, not just simply what price did at an Ohio low, because we understand if it turned at an old high liquidity is going to be just below that
40 00:07:41,429 --> 00:07:51,719 high for a bearish order block, or it's going to go above that high for the liquidity resting above it in the form of buy stops. Equilibrium, we want to see
41 00:07:51,719 --> 00:08:03,179 price moving expanding away from that now if we're looking for now the daily or four hour is bearish. Okay in the order flow, subordination, on the lower
42 00:08:03,179 --> 00:08:13,289 timeframe. We expect any consolidations, any rally away from the equilibrium price point that breaks the short term high, we will be looking to sell short.
43 00:08:14,699 --> 00:08:25,319 Retail is going to want to see that as a break in structure, if you will, okay, for folks that want to trade empowered, they're going to see those types of
44 00:08:25,319 --> 00:08:38,039 things that would, in their minds indicate a ABCD correction to the upside, if daily or for our orderflow is moving lower, as we understand it, and we see an
45 00:08:38,039 --> 00:08:44,969 expansion away from the equilibrium price point or the middle of the range and it breaks the short term high. That is our sell scenario. And we're looking for
46 00:08:44,969 --> 00:08:54,689 the opposite end or the old low or retail support. That's what's going to be targeted next and then move below that. The opposite said for when equilibrium
47 00:08:54,689 --> 00:09:05,459 is expanding downward, when the order flow on the daily or four hour is bullish. If we see a short term low, it's broken. On an expansion away from equilibrium,
48 00:09:05,699 --> 00:09:14,999 we'll see that as a run by stops not a break in structure for lower prices, we see that as a sweet one cell stops to killing new Long's in they're gonna run
49 00:09:14,999 --> 00:09:27,989 for the other end of the consolidation or just outside of it for the liquidity for the buy stops, pair that out. Okay, some of the scenarios, conceptually,
50 00:09:28,049 --> 00:09:41,909 this is what it looks like. We have price moving away from equilibrium all the way up to the outside of a consolidation. So we're going to be referencing old
51 00:09:41,909 --> 00:09:49,889 highs and old lows, wherever that defined range would be. We're just classically defining in terms of support resistance here. Whenever you see price in a
52 00:09:50,099 --> 00:10:01,859 consolidation, it's clearly definable and price rallies above that consolidation when daily and or four hour is bearish. retail traders are going to see this as
53 00:10:01,859 --> 00:10:04,439 a bullish breakout. And they're gonna be wanting to buy that.
54 00:10:07,140 --> 00:10:17,970 That buying if they're surging into the marketplace, as a buyer that creates the perfect opportunity as counterparty to us who mimics the smart traders. Smart
55 00:10:17,970 --> 00:10:26,220 money's going to be selling that breakout when daily Endor, four hour is bearish. So we want to see consolidations, in a rally outside of that
56 00:10:26,220 --> 00:10:37,140 consolidation to entice retail or less informed traders to buy thinking they're buying strength, when a higher timeframe, daily or four hour orderflow is going
57 00:10:37,140 --> 00:10:44,880 to cause the lower timeframes to be subordinate to those higher timeframes. So we're going to be doing the same thing as the smart money, we're gonna be
58 00:10:44,880 --> 00:10:57,660 selling those breakouts, and consolidations. When the daily or four hour is bullish, and the price breaks down below the consolidation, retail traders are
59 00:10:57,660 --> 00:11:07,770 gonna see that as a break in structure, they're gonna see that as weakness, okay, and they're gonna look to sell short on weakness. So retail traders are
60 00:11:07,770 --> 00:11:18,810 trying to sell that as a breakout entry, or a short position. Smart Money, we'll see the opposite of that if the daily or four hour is seeing bullish order flow.
61 00:11:19,710 --> 00:11:27,690 When we see this break below an old consolidation, we understand that that's accumulation of sell stops in the form of pairing up their orders to go long.
62 00:11:32,310 --> 00:11:42,060 Now inside of the range, or the consolidation, when the daily or for our order flow is bullish, what I like to anticipate is traders seeing that old low that
63 00:11:42,060 --> 00:11:49,080 choke a short term, it'll bounce, when price trades back down to that same equal low, they're going to be buying there and guess where they're gonna put their
64 00:11:49,080 --> 00:12:00,030 stop loss just below that previous short term, low. So when retail traders see this, they're trading the old low as classic Support and Resistance theory
65 00:12:00,540 --> 00:12:12,990 doesn't work. That right there is what we anticipate seeing. And then when we get the opposite, when price trades down below the previous low outside of the
66 00:12:13,020 --> 00:12:21,210 consolidation, that's where we're looking to be a buyer and we're buying up those sell stops. When again, the daily into a four hour is in a bullish order
67 00:12:21,210 --> 00:12:33,540 flow. That creates our low risk, high probability entry. Now, when we have these conditions, we're looking for price to return back to equilibrium. We do not
68 00:12:33,540 --> 00:12:44,280 anticipate or always hold for the opposite end of the consolidation, we don't know that we have no idea if that's going to occur with any validity. We just
69 00:12:44,280 --> 00:12:53,250 simply take the move back to the equilibrium because price wall and consolidations is always going to want to gravitate back to the mean in
70 00:12:53,250 --> 00:13:04,170 equilibrium is the middle of what we deemed as fair value. So always when we're in consolidations anticipate price, expanding away from the equilibrium price
71 00:13:04,170 --> 00:13:13,050 point than outside of the consolidation, but maintains it'll snap back up into the middle range or go back to equilibrium. If the daily are four hours bullish
72 00:13:13,050 --> 00:13:25,740 here, even if we are going to bounce lower after hitting equilibrium. Many times This in itself will provide an opportunity to get long, have a tradable rally.
73 00:13:29,010 --> 00:13:38,040 Okay, the opposite here when the daily are four hours bearish. And we see price trade back up to an old high while it's inside the consolidation. Again, retail
74 00:13:38,040 --> 00:13:44,370 traders going to see this as an old High Classic Support Resistance theory, it's going to be an operation, they're going to sell short right there. And you know
75 00:13:44,370 --> 00:13:51,510 what they're going to do to stop their buy stocks going to be placed just above the previous high that was inside the consolidation, the new understanding of
76 00:13:51,540 --> 00:14:02,280 order flow, they have no understanding of how markets have building up of liquidity around specific price levels and they have no appreciation for how
77 00:14:02,430 --> 00:14:13,320 that liquidity is sought after in price. So when retail traders see this as their entry point we're anticipating this and then a buildup of buy stops just
78 00:14:13,320 --> 00:14:14,370 above that previous high.
79 00:14:16,080 --> 00:14:25,590 So when we wait for that exercise patience, we're looking for the consolidation break out above the previous high. And when that happens, we're doing the same
80 00:14:25,590 --> 00:14:33,240 thing by mimicking what smart money does by selling above scooping up those buy stocks that retail traders are less informed traders are going to be placing
81 00:14:33,240 --> 00:14:43,200 because there's going to be a build up of that buy side liquidity. So when price trades up there if that will permit an opportunity for short sellers at the bank
82 00:14:43,500 --> 00:14:55,980 to pair up their shorts with obvious level of buy stops that we've resting above that previous high. Okay, when the daily or for our order flow is bearish and we
83 00:14:55,980 --> 00:15:06,720 see a price move moving away from and higher away from that equilibrium price point and it breaks a short term high short term highs broken, retail traders
84 00:15:06,720 --> 00:15:15,630 going to see that as a break in structure. And they're going to look to buy going long and then look for an ABC type formation and expect to see strength in
85 00:15:15,630 --> 00:15:25,950 that particular market. Smart Money On the other hand, we see that as a opportunity to sell away from the expansion because again, the subordination,
86 00:15:25,950 --> 00:15:33,480 the lower timeframe charts are going to have to follow what's been dictated on the daily and our four hour chart. So if it's bearish order flow that we're
87 00:15:33,480 --> 00:15:43,320 seeing on the daily and for our chart, and we see a consolidation, we have to identify where equilibrium is, and then look for short term highs or just above
88 00:15:43,320 --> 00:15:53,130 equilibrium. And in a rally above that, many times, we're going to see this as the ideal entry point for shorts. Once that short term highs broken. That's an
89 00:15:53,130 --> 00:16:04,050 accumulation on buy stops. So if you're going to run the buy stops in a daily for our bearish environment, that's where we look to go short. And we aim for
90 00:16:04,050 --> 00:16:16,830 the liquidity resting below the previous low that creates the consolidation support, we're going to pair up our buying to cover are short, with those
91 00:16:16,830 --> 00:16:29,490 individuals that have sell stops resting below an old low. All facilitated by a run on buy stops from a short term high that was created just above the
92 00:16:29,490 --> 00:16:37,770 equilibrium price point that we used to sell into those willing buyers. So what we're doing is we're pairing orders just like the smart money does at the bank
93 00:16:37,770 --> 00:16:51,600 level, using institutional order flow from a daily and or four hour chart. When a dealer for our is bullish, retail traders are gonna see that sell opportunity
94 00:16:51,600 --> 00:17:00,600 in their mind by having the expansion lower, that breaks below old short term low, they're gonna see that as a break in support a break in market structure.
95 00:17:01,620 --> 00:17:10,770 And they'll see that as selling short on weakness, and we're gonna be looking for continuation or break down in that particular market, we anticipate this
96 00:17:10,770 --> 00:17:21,150 very thing. And by them doing that, we're going to fade that whole move that move that breaks that short term low retail sees that as an opportunity to sell
97 00:17:21,150 --> 00:17:34,620 short. Again, there's selling weakness. That's an opportunity for us to fade that and do the very opposite. Smart Money On the other hand, when they see that
98 00:17:34,620 --> 00:17:46,770 short term low, and a daily or four hour is bullish, what they see is a run on sell stops. That short term low is going to be building up a liquidity pool for
99 00:17:47,610 --> 00:17:57,240 sell stops that would create an immediate injections of selling liquidity. Why would they want to seek selling liquidity because they need to buy the market
100 00:17:57,240 --> 00:18:07,050 long their counterparty going to be this run on that short term low or expansion away from equilibrium. When daily or four hours bullish. What we're looking for
101 00:18:07,050 --> 00:18:17,340 is this particular account position right here where price comes down, snaps up. Short term sell side liquidity, they use that sell side liquidity to be
102 00:18:17,340 --> 00:18:29,040 counterparties to buy long. When that occurs, they expect it anticipate a move outside of the consolidation to pair up their orders with the buy stops that are
103 00:18:29,040 --> 00:18:40,950 resting above the old consolidation high. So what we do here is we do the same things that the bank traders do we anticipate it and we use the generic price
104 00:18:40,950 --> 00:18:50,190 action characteristics that are inside of a consolidation that retail traders don't think they don't think about price like this. They think about selling
105 00:18:50,190 --> 00:18:58,560 weakness and buying strength and they have no understanding what fair value is and how to use it with the equilibrium. So now when we look at price action, on
106 00:18:58,560 --> 00:19:01,770 the lower timeframes for day trading and on higher timeframes as well.
107 00:19:03,060 --> 00:19:12,720 The daily are for our order flow. If it's bullish or bearish. Are we respecting a bullish order block? Are we reaching them to a premium PD array? That means
108 00:19:12,960 --> 00:19:21,210 we're going to be bullish, that means the consolidations that we're seeing here, this is a pattern that we would like to see for our day trades. That short term
109 00:19:21,870 --> 00:19:34,110 low could be in many cases, the Asian session low or it could be a previous day's low. And either one of those scenarios would create a wonderful
110 00:19:34,110 --> 00:19:44,490 opportunity to get long as a day trade. And everything I just said here could be reversed for going short. So I want you to think about when markets go into
111 00:19:44,490 --> 00:19:53,160 consolidation. There's some very generic characteristics that we look at, or at least I do as a trader, and it helps me build an idea but it all stems from the
112 00:19:53,160 --> 00:20:04,170 subordination that price is going to hold relative to the daily and for our directional bias based on institutional order flow by using what the pdra matrix
113 00:20:04,200 --> 00:20:15,870 would be suggesting it's in play right now of discount or premium market. We use our pdra matrix to determine what those levels that are reaching for basically.
114 00:20:16,260 --> 00:20:24,930 And that's, that's our directional bias. So if we see that directional bias arrived at from a daily chart or a four hour chart, we have higher timeframe
115 00:20:24,930 --> 00:20:34,350 directional bias on our side than any consolidation, we know what side we need to be working on. Any short term load is violated below the equilibrium. We're
116 00:20:34,350 --> 00:20:45,960 gonna look to go long on that. If it's bullish on the dealer for our any move below the old lows or the consolidation, we anticipate that as Iran sell side
117 00:20:45,990 --> 00:20:54,420 liquidity, why they want to run the sell stops because they want to pair those up with their buying. So again, we have to focus primarily on the daily and for
118 00:20:54,420 --> 00:21:04,050 our for day trades, that give us the high probability directional plays and also how to not get beat up by cheating and consolidations and working on one side of
119 00:21:04,050 --> 00:21:10,530 the marketplace and seeking that liquidity like the banks do. So until next lesson, I wish you good luck and good trading