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ICT Charter PAM 10 - Trade Plan and Algorithmic Theory

Last modified by Drunk Monkey on 2024-02-11 09:45

Outline

00:04 - A swing trading model for 50-75 pips per week.

- Develop a weekly trade plan using price action model 10, focusing on liquidity runs and volatility injection.
- ICT seeks to identify 50-75 pip opportunities in charts for trading.

03:22 - Trading strategies and risk management.

- ICT: Identifies market trends and makes trades based on convergence of manipulation and price.
- ICT trader uses two limit orders for short and long trades, managing risk with stop loss adjustments.

06:26 - Trading risk management and leverage using a price action model.

- Trader uses $10,000 hypothetical account, 1% risk per trade, and 20 pips stop loss to calculate leverage.
- ICT explains how to use a trade plan to smooth equity curves and reduce drawdowns.

09:58 - Trading strategies using external range liquidity.

- Trader identifies and exploits short-term liquidity imbalances in the market.
- Trader identifies consolidated trading range in E-mini S&P, anticipates potential rally.

14:10 - Market analysis and trading strategies.

- ICT analyzes market setups by identifying dealing ranges and external range liquidity, looking for bullish or bearish signs.
- ICT expects a continuation higher in the market, with potential sell-side external range liquidity if the market breaks below a defined dealing range.
- ICT explains the "algorithmic price delivery" model, which involves identifying areas of liquidity and executing trades based on that information.
- The model is fractal and can be applied to various time frames, but understanding the measure of bias and time is crucial for success.

Transcript

1 00:00:04 --> 00:00:11 ICT: Welcome back folks, this is Price Action Model number 10 trade plan for a swing trading model 50 to 75 pips per week
2 00:00:21 --> 00:00:34 all right, I see the price action model number 1050 to 75 pips per week trade plan swing trading model okay your five stages of trade plan development,
3 00:00:35 --> 00:00:49 preparation, opportunity discovery, trade planning, trade execution, and trade management. Preparation note all medium and high impact events for the markets
4 00:00:49 --> 00:00:56 that you're following. Study the events on the week to come and consider how the current market structure and the calendar events and they suggest a specific
5 00:00:56 --> 00:01:11 weekly profile that weeks range okay for the if the data ranges that will be returning to the 2040 and 60 day look back any one of those ranges for a
6 00:01:11 --> 00:01:22 potential liquidity run for both entry and exit, so we will determine the IP to data range for the last 2014 60 trading days we do not count Sundays note the
7 00:01:22 --> 00:01:32 highest highs or lows low in the past 2040 and 60 trading days. This is your current dealing range. Inside this dealing range, we will look for the next draw
8 00:01:32 --> 00:01:42 on liquidity Where's price likely to trade to next, below which old low above which old high. We look for a PD array in the direction of the weekly range
9 00:01:42 --> 00:01:53 bias. We anticipate price to move to a pdra that would support our weekly bias on a day and news release found on the economic calendar for the current or next
10 00:01:53 --> 00:02:06 trading week. This volatility injection is what we wait for. This would be a run based on low resistance liquidity run condition. Opportunity discovery, we look
11 00:02:06 --> 00:02:15 for 50 to 75 Pip ranges that will enable a run to buy side liquidity when bullish institutional order flow is present or target the sell side liquidity
12 00:02:16 --> 00:02:25 when bearish institutional order flow is present. Now the chart to the left here is the idea that you want to have when you look at your charts. There's a range
13 00:02:25 --> 00:02:39 here that indicates a 50 pip range relative to this chart scale, and one that is 75 pips and range, I primarily look to take the bulk of my weekly objectives at
14 00:02:39 --> 00:02:55 the 50 and use the 75 as some kind of remainder of the initial positions. Okay, in other words, when I take my short term or swing trades, for 50 to 75 pips,
15 00:02:55 --> 00:03:07 I'm looking for opportunities that are going to potentially pay out at 50 pips as a bulk, okay, or the highest percentage of leverage on holding. In this
16 00:03:07 --> 00:03:16 model, I'm going to give you two orders, okay, so you'll be doing one that gets you in with 50 as the objective and then the other may not really get to 75
17 00:03:16 --> 00:03:27 pips, but that's usually the best case scenario for this model. Trade planning, when the market is poised to decline, we want to look for convergence of both
18 00:03:27 --> 00:03:38 manipulation and price. Opposite to our trade is at a time the economic calendar suggests a volatility injection will likely unfold. We will short premium by
19 00:03:38 --> 00:03:49 side liquidity polls. When the market is poised to rally, we want to look for a convergence of both manipulation and price opposite to our trade bias at a time
20 00:03:49 --> 00:04:03 the economic calendar suggests a volatility injection may likely unfold, we will buy discount, sell side liquidity pools, trade executions, when we are bearish,
21 00:04:03 --> 00:04:14 we will anticipate a 15 minute chart by side liquidity pool arrayed for entry to form from a retracement higher during London Open and or New York open kill
22 00:04:14 --> 00:04:26 zones. When we are bullish, we will anticipate a 15 minute chart sell side liquidity pool raid entry to form from a retracement lower during London Open
23 00:04:26 --> 00:04:39 and or New York open kill zones. short trade management when we are entering a short we will place a sell limit order we will execute with our demo account. We
24 00:04:39 --> 00:04:51 will use the pdra convergence minus five pips as our entry price when using a sell limit order. Long trade management when we are entering along we will place
25 00:04:51 --> 00:05:03 a buy limit order. We will execute with our demo account. We will use the pdra convergence plus five pips at Our entry price when using the buy limit order
26 00:05:04 --> 00:05:13 short trade management. When we are entering a short we will place a limit order to take 50 pips as our objective only single position. A second limit order will
27 00:05:13 --> 00:05:24 be used to capture anything above 50 pips and up to 75 pips we will use two orders to manage the trade idea. If you capture a 75 Pip objective, close the
28 00:05:24 --> 00:05:36 second order via limit order and wait for another opportunity. Long trade management when we're entering along we will place a limit order to take 50 pips
29 00:05:36 --> 00:05:46 as our objective only single position. A second limit order will be used to capture anything above 50 pips and up to 75 pips we will use two orders to
30 00:05:46 --> 00:06:00 manage the trade idea. If you capture a 75 Pip objective close the second order via limit order and wait for another opportunity. Stop Loss management, when we
31 00:06:00 --> 00:06:11 are in profit 50% of our expected objective stop loss can be reduced by 25%. When we are in profit 75% of our expected objective stop loss can be reduced by
32 00:06:11 --> 00:06:26 breakeven money management position size calculation formula position size equals account equity times our percent divided by stop loss in pips. position
33 00:06:26 --> 00:06:34 size is the amount of leverage a trader trades assume account equity is the total amount in your trading account. Our percent is the percent of risk you're
34 00:06:34 --> 00:06:44 willing to take on portrayed. The difference between the entry price and your stop loss is the number of pips you will use to divide the result of equity
35 00:06:44 --> 00:06:58 times our percent. Our example here now we're gonna be using a $10,000 hypothetical account, and risk per trade is 1% now, or 10,000 times 1% which is
36 00:06:58 --> 00:07:09 100 US dollars. The stock required for this model 20 pips, so in microwatts 1k Each is 10 cents per pit. So if we're using 20 pips as a stop times 10 cents,
37 00:07:10 --> 00:07:26 that would equate to $2 us. So $100 risk divided by $2 per pip equals 50 Micro lots portrayed or 1% of the account equity, always round down. This example,
38 00:07:27 --> 00:07:40 using the same hypothetical $10,000 account 1% risk or $100 risk per trade, the stock required is 20 pips, in many lots that's 10k leverage, or $1 per pip 20
39 00:07:40 --> 00:07:51 pips times $1 equals 20 hours, you're less than 100 hours total risk divided by that $20 gives us the leverage of five mini lots per trade, or 1% of the account
40 00:07:51 --> 00:08:06 equity, always round down. And finally, using standard lots, where 10,000 hours of our hypothetical account balance 1% risk $100.20 pips required using a
41 00:08:06 --> 00:08:21 standard lot, it's 100k leverage, or $10 per pip. If we're using a 20 Pip, idea or framework, and each PIP is worth $10, it's $200 risk, it's a neatly overtop
42 00:08:21 --> 00:08:34 the amount of risk that we can have for 1%. So in this case, $100 divided by two and ours is not applicable for standard lots. If your demo account takes a loss
43 00:08:34 --> 00:08:43 on a trade, and it is the full our percent you assumed dropped the R percent by 50%. And when the loss is recovered by 50%, you are permitted to return to the
44 00:08:43 --> 00:08:52 maximum R percent per trade. If the reduced R percent trade assumes a loss reduced the R percent by 50% until the previous trade loss is recovered by 50%.
45 00:08:55 --> 00:09:03 If you take a series of five winning trades in a row, drop your art percent by 50% You're likely to assume a loss eventually, and this will build an equity
46 00:09:03 --> 00:09:11 leveling and reduce the likelihood of a large drawdown. You want to smooth equity curve that slopes and stairsteps higher, not with a jagged or deep
47 00:09:11 --> 00:09:22 decline. Start back testing collect multiple sample sets with this trade plan. If you are unclear about some of the process rewatch the lessons on this price
48 00:09:22 --> 00:09:31 action model, I will provide sample sets but do not rely or wait on mine. Dig into your charts and study what is provided here. This is the algorithmic theory
49 00:09:31 --> 00:09:43 lecture and discussion for price x amount of number 10. It is a swing trading model stalking 50 to 75 pips per week. And again, focusing on the weekly range
50 00:09:43 --> 00:09:53 expansion specific to day of week and we use external range liquidity in direction of the weekly range expansion.
51 00:09:58 --> 00:10:10 So when we're looking at this Model, we're looking for external range liquidity with external range liquidity. So as an example, we can see this high here.
52 00:10:12 --> 00:10:23 Right above this high would be buyside liquidity it runs it, we look to short that and wait for a short term low in a discount to form. When the market trades
53 00:10:23 --> 00:10:35 below that, then we cover or offset distributed there with the resting sell side liquidity. So we're selling buy stops to get short. And we're buying sell stops
54 00:10:35 --> 00:10:48 to cover our short. So basically, we're waiting for short term highs to form when we're bearish. And we expect the range expansion to be down, we'll wait for
55 00:10:48 --> 00:11:00 our short term high V pierced will sell short today's buy stops, write it down to a future short term low, it's always going to be waiting for a low to form.
56 00:11:00 --> 00:11:11 And then once it dries below that, then we'll pair that side liquidity pool with our cover or buying it back from those willing sellers below the marketplace.
57 00:11:13 --> 00:11:27 Now, this can be obviously a little bit scary. And the rules and sets have been shown to you in the presentation in the model and plan. But you see me doing
58 00:11:27 --> 00:11:40 this a lot. But when you hear terms like external race liquidity, it can be a point of confusion. Because one could argue that from this high to that low
59 00:11:40 --> 00:11:49 isn't that internal rates, liquidity, yes, if you're gonna refer to that range there. But I'm looking at this range from that low to high. So when we're going
60 00:11:49 --> 00:11:56 above it, the buys thoughts that would be resting above here, because it is short, that took place here, traders would be putting their stop right above
61 00:11:56 --> 00:12:06 that. And if I'm bearish, I'm going to see it run above that knock them out, disrupt their short position, let me assume that short position with smart
62 00:12:06 --> 00:12:20 money, then write it down to a discount. from low to high equilibrium, fair value gap, we trade down into it wait for short term low and dry down below and
63 00:12:20 --> 00:12:34 then cover. Okay, so this is the idea. And this is when you're expecting it to go lower. If we look at the E Mini s&p, same premise here, but I'm going to be
64 00:12:34 --> 00:12:48 using it for a bullish scenario on something actually executed on so you can see it. So we have a low to high equilibrium we're resting in here. And when the
65 00:12:48 --> 00:13:02 market trades down into that small little gap we're in a discount and a fair value gap so we can anticipate a rally. And we want to see if it can run above
66 00:13:02 --> 00:13:05 the short term high here or rebounds some of this in this period
67 00:13:10 --> 00:13:21 so if we're looking at Emini, s&p, and this is a one minute chart, the question is going to be is what is the range, but what is the range, the fine external
68 00:13:21 --> 00:13:30 range? Well, you want to think about dealing ranges, okay. And when I say dealing ranges, I want you to kind of think of it as a trading range, okay, just
69 00:13:30 --> 00:13:39 how the market will stay within like a consolidated, rectangle ish kind of area, it may not look like a rectangle to you, but over time, when you start referring
70 00:13:39 --> 00:13:55 to dealing ranges like this, you'll see why and how I frame them out. And this is one example here, where we have sellside external range liquidity. And I want
71 00:13:55 --> 00:14:11 you to imagine this little area here as a box or rectangle, the market is dealing between this high and that low until we get below that low here. So
72 00:14:11 --> 00:14:27 liquidity above would be by psi. And below would be sell side. I'm only interested if I'm bullish for the sell side. So sell side external range
73 00:14:27 --> 00:14:40 liquidity external to this dealing range or trading range. Okay. So obviously, I called this bullish. And you can see the example that on my Twitter was shared
74 00:14:40 --> 00:14:51 this week, my entry here. As we went down below, I'm buying those sell stops in the form of external range liquidity with the anticipation that I'm going to
75 00:14:51 --> 00:15:02 pair it up with the buy side, external range liquidity above this high. Well, what does that mean? Well, if you Look at that range here, the dealing range
76 00:15:02 --> 00:15:14 high in the low range low. And then we remain inside that dealing range. Dealing ranges, just like consolidations are fractal, this large consolidation until we
77 00:15:14 --> 00:15:24 went above it here housed all of this price action. Within this larger shaded area, there was this dealing range here, there's a dealing range right in here.
78 00:15:25 --> 00:15:34 There's a dealing range right in here. Okay, so, and even on a smaller timeframe, and the seconds timeframe, you can see a small little dealing range
79 00:15:34 --> 00:15:46 right there. All of these things fit together like a puzzle. Okay, so if I'm going along here, and I'm buying Southside external rings liquidity, I need to
80 00:15:46 --> 00:15:56 find opposing buyside external rates liquidity, so my mind was set up to think that this high would be unlikely draw on liquidity, the buy side, liquidity
81 00:15:56 --> 00:16:04 resting above that would be in the form of external range liquidity, because it's outside the range that price has been trading in until we get to it here,
82 00:16:04 --> 00:16:18 where my orders were filled. Okay, so, again, I recorded show the trade, if it is what it is, the point is this. I look at this setup, probably a dozen times a
83 00:16:18 --> 00:16:29 week. Because the markets usually working inside of a consolidation of some degree, all I need to know is where's the next likely draw on the Quiddity? So
84 00:16:29 --> 00:16:39 I'm stripping the market down into where's the drawl? Is it bullish or bearish. And if it's in line with what I'm expecting, and that was expecting you, some
85 00:16:39 --> 00:16:50 push higher on index futures early on in the week. Now, I'm not trying to claim the closing price being higher or lower, I just opened up the idea this week
86 00:16:50 --> 00:17:02 that I would look for a continuation higher. So that's where we're at. That's what we saw here. So if you're looking at this model, it's just a matter of
87 00:17:02 --> 00:17:13 knowing what it wants to do going higher or lower. And if it's gonna go higher, or if you're correct in your analysis, we wait for the market to break below a
88 00:17:13 --> 00:17:29 dealing range for external range liquidity in the form of sell side. So that range that's defined here. And the bigger shaded area here, both sides of their
89 00:17:29 --> 00:17:39 bias on liquidity. Here in here, were the drawn liquidity. So you can see when we got to this point here, right equal with that high, then an accelerated ran
90 00:17:39 --> 00:17:49 real quick for this one. Because this is the larger pool of liquidity, so the algorithm is not going to waste time, just because it goes here that's not doing
91 00:17:49 --> 00:17:58 anything. And this might be taught by other educators, books, authors, whatever, those that don't really know what you're talking about. They're gonna say that
92 00:17:58 --> 00:18:09 the buying pressure sent price up here, when in fact, all it was was the algorithm spooling to get to this price level before all the orders are pulled
93 00:18:09 --> 00:18:18 out of the marketplace. So it's not buying pressure that ramps it up here. They'll say, Oh, the buy orders here, cause that short covering rally to take it
94 00:18:18 --> 00:18:25 up to here, no, the algorithm already knew down here, that it wants to go for these. And here, because that's where smart money would look to offset
95 00:18:25 --> 00:18:36 distribute. Like you see me executing here. Okay, so it's not a matter of buying pressure that pushes it up there. It's a matter of algorithmic price delivery.
96 00:18:37 --> 00:18:47 So if we're bearish, we're looking for dealing ranges to see by side external range liquidity tagged, entered into the marketplace, they're short, and then
97 00:18:47 --> 00:18:59 look for external range liquidity in the form of sellside. To pair that up with with this model. This pattern repeats very often, because it's fractal it
98 00:18:59 --> 00:19:09 appears in second charts, minute charts, 15 minute charts, hourly charts, it's all over the place. So many, there's a plethora of setups that are available to
99 00:19:09 --> 00:19:22 you. But you still have to incorporate the measure of bias and understand time, day and day of week. So by blending those elements, you'll be able to find
100 00:19:22 --> 00:19:36 setups, a great deal of them across the spectrum of a week or a month. You can make this model very complicated. Or we can strip it down to what I'm showing
101 00:19:36 --> 00:19:46 you here. Okay, the ideas and foundation to using this model I've already given you in the trading plan and in the presentation about this particular model. But
102 00:19:46 --> 00:19:57 if you can just look at price like this, understand this part of it. When you go back into studying this model through the presentation and trading plan, it'll
103 00:19:57 --> 00:20:07 mean a whole lot more to you. You Because the foundation needs to be understood here. And once you understand what it is you're looking for, you don't have to
104 00:20:07 --> 00:20:17 complicate it. It's just a matter of buying below old lows and then selling it to old highs when you're on side with the bias. So hopefully you found us on the
105 00:20:17 --> 00:20:19 cycle. Until next time, be safe