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97-ICT Mentorship Core Content - Month 10 - Bond Trading - Trending Days

Last modified by Drunk Monkey on 2022-10-26 08:55
1 00:00:02,370 --> 00:00:12,060 ICT: Again, our topic is about commodities. Every thing mentioned in these teachings should be viewed in light of a paper trade only.
2 00:00:18,990 --> 00:00:26,070 Okay, folks, welcome back June 2017 content ICT mentorship, ICT bond trading lesson for trending days
3 00:00:32,340 --> 00:00:42,810 alright folks trending days, this is what we're all looking for as far as traders, we want volatility, we want movement, we want to see expansion,
4 00:00:43,560 --> 00:00:55,530 activity, animation, and price. All those things that promote easier trading. Well, before we can find them, let's look at some of the characteristics
5 00:00:55,530 --> 00:01:06,300 obviously overnight price action, again, can be trending or range bound, that's never a precursor. New York session news, we're expecting about till the
6 00:01:06,300 --> 00:01:20,130 injection. The economic calendar will show high to medium impact us reports do to release at 8:30am New York time. And formation characteristics are generally
7 00:01:20,130 --> 00:01:30,780 trending days or large range expansion days are seen typically after small Range Days or a series of small Range Days. They're directionally driven by the daily
8 00:01:30,780 --> 00:01:43,860 pdra matrix and their liquidity seeking movement, PDA Ray and order flow based. So what am I saying here, we're looking for that volatility filter where the
9 00:01:43,860 --> 00:01:54,450 range is gets smaller on the daily chart. And if that daily chart is showing a previous day, being small range compared to the last few days, or price has
10 00:01:54,450 --> 00:02:05,880 contracted over a series of trading days where it's now gotten smaller, smaller, smaller and stayed in small trading ranges. were due for a range expansion. And
11 00:02:05,880 --> 00:02:15,870 if you couple that with the fact if, for instance, if the small ranges have just recently traded down into a discount array, and economic calendar is calling for
12 00:02:15,900 --> 00:02:25,620 high to medium impact. News reports at 830. We're expecting volatility injection, so we have the stage set for an expansion from discount to premium.
13 00:02:26,460 --> 00:02:36,570 The reverse is seen when the ranges are small to daily chart, and price has recently traded up to a premium array. And again, volatility injections are
14 00:02:36,570 --> 00:02:45,960 expected at the 30 News embargo lifts high to medium impact news imports. When you see those things, we can expect a expansion day on the downside from a
15 00:02:45,960 --> 00:03:04,200 premium array. Alright, we're gonna take a look at the Treasury bond market. And I want you to focus in on these lows right here. Okay, notice, as price went
16 00:03:04,200 --> 00:03:14,640 lower here, that lower low in the treasury bond was a trigger. And we're going to look at the catalyst for that move that caused that big run up in the
17 00:03:14,640 --> 00:03:25,140 treasury bonds. But notice on the same trading day, in New York session, we had the Euro dollar vault higher, we didn't stay in small ranges, we exploded on the
18 00:03:25,140 --> 00:03:34,740 upside. So there was a lot of animation, a lot of movement, and a lot of energy. And the precursor in the release of that energy was directly related to the
19 00:03:34,860 --> 00:03:47,490 Treasury bond market. This happened to be on June 14 2017. And this is the economic calendar for the New York session at 8:30am. And it also was FOMC. Now
20 00:03:47,490 --> 00:03:59,640 I'm showing you this example here and another one as well, because the rules are that we're generally going to be waiting for FOMC notes, we're not trying to be
21 00:03:59,640 --> 00:04:10,380 active, we don't want to trade the FOMC afternoon session, but we can trade the morning session. If we have volatility squeeze small ranges. We know that we
22 00:04:10,380 --> 00:04:19,830 traded from a discount array or a premium array. So we know there's going to be an expansion we know that PDA array matrix and new institutional order flow is
23 00:04:19,830 --> 00:04:32,760 suggesting a directional bias. We have injections of volatility based on the economic calendar FOMC is always typically a two o'clock pm New York time. So we
24 00:04:32,760 --> 00:04:44,850 can trade the morning session. But we cannot be in the afternoon trading because of the volatility that may be seen by way of the economic news release around
25 00:04:44,850 --> 00:04:57,270 the FOMC announcement or rate decision. But let me take your attention back to that small little area here in the treasury bond market. That lower low going
26 00:04:57,270 --> 00:05:11,310 into the opening or in this case it's The eight to 8:30am. That's the local New York time for me eight o'clock to 830 in the morning. The chart that's shown
27 00:05:11,310 --> 00:05:22,860 here is in Central time, so it's going to be an hour earlier. So what you see here in terms of seven o'clock to 730, is going to be eight o'clock to 830 in my
28 00:05:22,860 --> 00:05:23,220 time,
29 00:05:24,510 --> 00:05:33,720 so, or New York time. So when we see that lower low in the bond market, the stages set, we're expecting higher prices, I outlined that before the fact in
30 00:05:33,720 --> 00:05:43,950 the live session on the 14th, that we're expecting a buy, stop, run, or expand from the upside, we are at a discount on the two hour chart. And we have a lot
31 00:05:43,950 --> 00:05:55,200 of dollar based news events occurring and FOMC later on, so we have to keep our focus on primarily the am session. But look at the lows in the treasury bond
32 00:05:55,200 --> 00:06:06,600 here in relationship to the 10 year note, notice that it did not go lower. That's our trigger. That's where we see the professional accumulation, the
33 00:06:06,600 --> 00:06:17,820 buyers are coming in strong, they're going in buying up the debt instruments, because of their insight is greater than ours. And if they're stepping in
34 00:06:17,820 --> 00:06:28,380 remember back to sniper series, the displacement is caused by smart money. They don't call small little moves. When they step in, it's noticeable. As you can
35 00:06:28,380 --> 00:06:36,630 see here in price, you see the divergence between the 10 year and 30 year, I don't need to pull up the five year because we did it actually during the live
36 00:06:36,630 --> 00:06:49,500 session on the 14th. But long and short is we have the energy release in price, where no longer is price being shackled, where it's being held in consolidation
37 00:06:49,500 --> 00:06:58,830 or contraction, prices being permitted to move dynamically because of the bond markets condition. And notice also again, look at the euro dollar. At the same
38 00:06:58,830 --> 00:07:13,020 time in New York session, we had an explosion in price action, and volatility was allowed to be seen in price action. Let's take another day. And then we're
39 00:07:13,020 --> 00:07:23,220 gonna look at June 2 2017, as the economic calendar here for the New York session. So we had some heavy hitting news coming out around dollar based. And
40 00:07:23,250 --> 00:07:34,830 you can see the Euro dollar here while the Treasury bomb was permitted to trade higher and trend higher big explosive up day, that was also seen to allow the
41 00:07:34,830 --> 00:07:44,580 Euro dollar to have an explosive price action as well. So we had again, pricing small consolidation then permitted to expand. Again, I can't stress this enough,
42 00:07:44,610 --> 00:07:54,810 when you're looking for trades, you have to have the sponsorship behind that by way of the interest rate markets. And this is the reason why it's important to
43 00:07:54,810 --> 00:08:03,390 be following the bond market looking at the five year, the 10 year and the 30 year and comparing them doing your analysis on the higher timeframe charts, but
44 00:08:03,390 --> 00:08:12,210 focusing primarily on the daily, the four hour and two hour. And that will give you a really good feel for what price action is most likely going to do in the
45 00:08:12,210 --> 00:08:22,110 treasury bonds. So by looking at them and comparing the likes when you're bullish at the lows going into that time window of eight o'clock to 830 in the
46 00:08:22,110 --> 00:08:30,330 morning, New York time when you see that divergence there. And the stage is set for an expansion and we have volatility injections by way of the economic
47 00:08:30,330 --> 00:08:39,270 calendar. We will know beforehand, that price will be allowed to expand dynamically across other asset classes. And since we're primarily Forex,
48 00:08:39,270 --> 00:08:50,970 traders, we're using this insight to look for opportunities, how big ranges large moves can occur in the FX market again here on June 2 2017, Euro dollar
49 00:08:50,970 --> 00:09:03,900 created a nice learning opportunity in the New York session. Lots of volatility. Okay, we're looking at the same June 2. So the criteria is still the same as far
50 00:09:03,900 --> 00:09:13,350 as it relates to the economic calendar and Treasury bond market. But the Aussie dollar also was permitted also to have a trending day and exploded on the upside
51 00:09:13,350 --> 00:09:23,550 as well. So there's a lot of movement seen in the Aussie dollar on an intraday basis. And it's all seen by way of a precursor in the treasury bond market. Now
52 00:09:23,550 --> 00:09:33,630 on the second of June, I'm going to save the idea of going in and looking at the lows. But if you go into bar chart.com You can literally pull up the individual
53 00:09:33,630 --> 00:09:54,300 days by the calendar day and load up Zn u one seven and ZV u one seven to get the 10 year, the five year and the 30 year on this particular day in June
54 00:09:54,300 --> 00:10:05,160 2 2017. And you can see the divergence between the three debt instrument Stick give us the trigger for sponsorship in the bond market with so in the interest
55 00:10:05,160 --> 00:10:14,130 rate market kicks off, and it's allowed to move and energetically, that's going to promote the idea for all the asset classes to be able to move. As a short
56 00:10:14,130 --> 00:10:15,360 term trader as a day trader,
57 00:10:15,420 --> 00:10:27,390 this is one of those things that helps you have a higher odds, not perfect, not panacea, not be all end all. It just means that we have the proper stage to
58 00:10:27,390 --> 00:10:36,420 allow for big movement. Big movement as a day trader is essential, because you're going to get chopped up if you try to trade like we've been seeing, day
59 00:10:36,420 --> 00:10:45,480 by day, just going in there trying to force an opportunity without any real relationship to the bond market, because we have to teach it first. When that is
60 00:10:45,930 --> 00:10:53,010 not incorporated, and we're trying to trade every single trading day, you can say that it's not going to be optimal results. Now, you might get lucky, you
61 00:10:53,040 --> 00:11:02,430 might get something in your favor once in a while, but generally, losses across the entire month, every single trading day China trade, they will whittle away
62 00:11:02,490 --> 00:11:13,350 at the big juicy winning days. So you want to really keep your opportunities few and far between and highly, highly selected cherry picking situations where the
63 00:11:13,590 --> 00:11:24,120 perfect criteria is there before you take the trade. As you see here, there's a common recipe that's occurring throughout the trading opportunities is being
64 00:11:24,120 --> 00:11:33,450 shown here. Big impactful news in New York, the bond market has a condition where it's small ranges, we're expecting expansion, it's trading at a discount
65 00:11:34,230 --> 00:11:41,970 price is permitted to expand in the bond market. So interest rates are active. Therefore, the currencies are going to chase yield. That's why we see these
66 00:11:41,970 --> 00:11:54,450 dynamic moves so far in the euro and on the Aussie dollar on June 2. Another example here for June 2 to the economic calendar here is the same Treasury bomb
67 00:11:54,480 --> 00:12:06,690 chart is the same. Now we can see also that the dollar yen also had an explosive move, but this time, just in reverse terms, the dollar index was bearish.
68 00:12:07,590 --> 00:12:17,340 foreign currencies is bullish, or that's going to be seen by way of $1 yen decline. It wasn't on a modest decline. It was not a slow, lethargic, decline.
69 00:12:17,580 --> 00:12:28,230 It was dynamic. It was quick, it was energetic, because of the bond market unlocking the volatility, you can't get explosive price action. Without the
70 00:12:28,230 --> 00:12:38,250 participation in the interest rate. Interest rates, I said this on baby pairs back in 2010. The key is knowing the interest rates. If you follow that and you
71 00:12:38,250 --> 00:12:49,590 follow the bond market, it unlocks everything. It's like tumblers in a lock. So if you're trading without this insight, you're really trading blind. You're
72 00:12:49,590 --> 00:12:58,500 going to attribute your wins as skill set based when it was really luck base because you chances are you're going to see that the interest rate market
73 00:12:58,500 --> 00:13:09,510 actually helped you behind the scenes and you may not have known it up until now. Okay, we're gonna look at it another day here. This is April 18 2017. You
74 00:13:09,510 --> 00:13:19,530 can see the economic calendar going into the New York session 830. So we had a high impact building permits dollar based treasury bond market also was at a
75 00:13:19,530 --> 00:13:31,110 discount array allowed to trade from a discount expansion small ranges on the daily large ranges expected big impactful news throughout New York price
76 00:13:31,110 --> 00:13:42,900 expanded up created a rather large day for bond market. British Pound as a result also in the New York session had an amazing day in the British pound,
77 00:13:43,080 --> 00:13:56,280 large up day, huge upside potential, all precursor directly related to the bond market. Another opportunity looking at the same day of April 18 2017, the
78 00:13:56,280 --> 00:14:06,720 economic calendar is the same, the Treasury bond market chart is the same again you'd be looking at the lows going into that seven o'clock on the chart a bar
79 00:14:06,720 --> 00:14:13,080 chart because that's going to be eight o'clock New York time. And you want to be comparing the lows there because you're going to see the trigger occur between a
80 00:14:13,080 --> 00:14:21,750 five year tenure and a 30 year note. When that occurs, that buying signal gives you confirmation to your expansion moves is about to take place. That way you
81 00:14:21,750 --> 00:14:32,130 can see the expansive move take place and the other foreign currencies. Incidentally, since we're seeing the bond market rally examples here, what
82 00:14:32,130 --> 00:14:41,820 that's showing is the interest rates are actually decreasing. So if interest rates are decreasing, that's going to more times than not pressure US dollar
83 00:14:41,820 --> 00:14:52,110 down in foreign currencies will chase higher yield in relationship to that. So that way you see higher foreign currencies when bond markets rally and the
84 00:14:52,110 --> 00:15:01,980 dollar index generally looks for lower prices or recesses to lower prices. As seen here in this example in the previous example With the dollar yen, lower
85 00:15:01,980 --> 00:15:05,880 prices in the New York session, clearly in order, and we saw that true to form.
86 00:15:09,809 --> 00:15:18,059 Another example on April 18 2017, again, the economic calendar stays the same, the Treasury bond market chart stays the same. But now we're looking at the euro
87 00:15:18,059 --> 00:15:29,519 dollar. Again, Euro dollar, with the higher treasury bond move higher interest rates are be declining. So if the US interest rates are declining as a result,
88 00:15:29,639 --> 00:15:36,839 that's going to put pressure on the dollar on the downside and allow foreign currencies to rally. So it's giving you directional bias. It's giving you
89 00:15:36,839 --> 00:15:47,519 magnitude volatility, it's giving you the energetic side of the marketplace is going to reach for as as a result, you can see here your dollar had no problem
90 00:15:47,519 --> 00:16:01,739 rallying at the New York open. Okay, our last example here for another day. We're looking at March 15 2017. Our economic calendar is seen here and loaded
91 00:16:01,739 --> 00:16:12,329 with high impact news, dollar based treasury bond market, small consolidation on a daily chart in the 15 minute chart here, we can see that there was absolutely
92 00:16:12,329 --> 00:16:26,429 no problem for to rally at the 730 time period on the chart, which means it's 830. In New York time. The up move in the treasury bond market is going to send
93 00:16:26,459 --> 00:16:37,529 interest rates lower, which is going to pressure dollar lower. Allowing foreign currencies to rally you can see that the dollar fell to the British pound and in
94 00:16:37,529 --> 00:16:46,679 your session as cable made it really easy attempt to rally in the New York session and then eventually trading higher. Now, I'm highlighting this because
95 00:16:46,679 --> 00:16:58,979 it's FOMC again, and FOMC. We saw that huge move up later on in the afternoon around the two o'clock hour. Typically when FOMC news drivers hit the
96 00:16:58,979 --> 00:17:11,669 marketplace. Okay, our last example here and looking at the same date, march 15 2017. The economic calendar stays the same treasury bond chart just stays the
97 00:17:11,669 --> 00:17:22,679 same. Again, it's rallying up from the New York 8:30am time period when the news hits the market. It's in a discount Ray moving away in institutional order flow
98 00:17:22,679 --> 00:17:32,159 bullish on the daily chart to 15 minute timeframe shows the expansion higher Euro dollar as a result is allowed to trade higher at the New York session.
99 00:17:32,369 --> 00:17:44,369 Because higher bond market, which is lower interest rate, it's going to send dollar lower as a result, allowing Euro dollar to rally against the dollar rate
100 00:17:44,369 --> 00:18:01,259 in New York session. Again, later on in the day, we see a nice big move taking place as a result of FOMC. Knowing these characteristics known these generic
101 00:18:01,289 --> 00:18:13,619 principles, about price action about how the interest rates unlock the moves in the marketplace. If you look at how the stock market is allowed to trade also,
102 00:18:14,339 --> 00:18:24,599 when we talk about stocks, we're going to come back to this topic as well. When we talk about index, trading, s&p trading next week, when we do next week's
103 00:18:24,749 --> 00:18:36,629 teachings on index futures trading, we're gonna refer to this phenomenon as well. So I pulled out a few that I've observed over the last few months that
104 00:18:36,629 --> 00:18:49,109 stood out, I want you to go through the bond market. Looking at the five year the 10 year and the 30 year, when the market was moving freely, you find areas
105 00:18:49,109 --> 00:18:57,569 on the daily chart of the of the bond market, it did that, then go into those days individually on bar chart.com. And pull up the individual days. And look at
106 00:18:57,569 --> 00:19:08,309 the relationship of the trigger that we look forward to diverge between the 10 year the five year and a 30. And what we saw as a result in the foreign exchange
107 00:19:08,309 --> 00:19:15,989 market, so I only gave you a handful a sampling of not just what recently happened in the last couple of weeks, but going back all the way to march. And
108 00:19:15,989 --> 00:19:24,629 there's a few more examples where you can find a few more moves. But I gave you ones here that you can really focus on and obviously there's going to be times
109 00:19:24,629 --> 00:19:34,169 when the treasury bond market actually sold off. I save those examples for you to go and look as a contrast study. When the bond market was looking to trade
110 00:19:34,199 --> 00:19:43,289 aggressively lower or expansion move lower from a premium array on the daily chart, you're gonna see the opposite where the bond market is declining, which
111 00:19:43,289 --> 00:19:52,949 means interest rates are increasing, which is going to cause the dollar to rally and foreign currencies decline. So that's your homework going forward and put
112 00:19:52,949 --> 00:19:57,599 some of the your observations on the forum, make them available to other members
113 00:19:58,770 --> 00:20:09,210 and I will look forward to You getting back to me with positive feedback because I promise you, if you go through the markets looking for scenarios when the bond
114 00:20:09,210 --> 00:20:21,480 market is poised to move in a strong directional based idea and when the range has been small, that's a loaded deal for obvious movement in price. Until next
115 00:20:21,480 --> 00:20:23,700 lesson, I wish you good luck and good trading.