ICT Charter PAM 6 - Buyside Trade Plan
Last modified by Drunk Monkey on 2024-02-09 09:34
Outline
00:03 - Trading plan for market makers using price action.
- Identify market events and determine current dealing range.
02:36 - Market maker buy and sell models.
- Market maker buy model anticipates price move to premium PDRA supporting weekly bias.
- ICT expects the market to rally up to a premium array before selling off.
06:02 - Trading strategies using market maker models.
- Focus on scalable, short-term trades in premium PD arrays.
- ICT anticipates a volatility injection and buys discount fair value gaps or sell stops in a stage one or two accumulation.
09:36 - Managing risk in day trading.
- The trader uses a buy limit order with a standard deviation and PDRA convergence of 5 pips as their entry price.
- The trader places multiple orders with different entry prices to manage their trade idea, with the goal of capturing 60 pips and reducing risk as the trade progresses.
12:35 - Trade size, leverage, and risk management.
- Trader explains risk management strategies using equity, mini lots, and standard lots.
- ICT explains equity curve management strategy to reduce risk and avoid large drawdowns.
Transcription
| 1 | 00:00:03 --> 00:00:12 | ICT: Alright folks, welcome back. This is the price action model number six universal trade plan focusing primarily on the buy side of the market maker |
| 2 | 00:00:12 --> 00:00:13 | models |
| 3 | 00:00:24 --> 00:00:39 | Okay, ICT Price Action Model number six universal trade plan by side of the market maker models. Every trade plan video has this as well as the overview. So |
| 4 | 00:00:39 --> 00:00:54 | in each trading plan, we look for the five stages here preparation, opportunity, discovery, trade planning, trade execution, and finally trade management. |
| 5 | 00:00:57 --> 00:01:06 | Alright, for preparation, we're going to note all medium and high impact events for the markets that you're following. We're gonna study the events on the week |
| 6 | 00:01:06 --> 00:01:20 | to come and consider how the current market structure and the calendar events may suggest a specific weekly profile for that week's range. really determined |
| 7 | 00:01:20 --> 00:01:31 | the up to date range for the last 2040 and 60 days, we do not count Sundays. And note the highest high and the lowest low in the past 20 trading days. And this |
| 8 | 00:01:31 --> 00:01:41 | is your current dealing range. The reason why we're going to be looking at the 2014 60 is because this is a universal trading model. So it's allowing us to |
| 9 | 00:01:41 --> 00:01:54 | trade in multiple timeframes. So this begins with a 20 day look back, and then 40 day and in 60 days depending on what timeframe you're using. So if you're |
| 10 | 00:01:54 --> 00:02:07 | using like a weekly setup, or if you're using a daily setup, or a four hour one hour, that type of framework, you're going to look at the longer term for a |
| 11 | 00:02:07 --> 00:02:24 | weekly chart Nordson will look at the 60 day look back. And that will be attributed to weekly setups. Daily setups can be 40 to 20, and sometimes 60 days |
| 12 | 00:02:24 --> 00:02:33 | dependent fine if you've gone outside the range. But the point is, you're going to define the last 2040 and 60 trading days, and you got to determine that range |
| 13 | 00:02:33 --> 00:02:46 | the highest high and the lowest low. Splitting that range in half gives us our premium and discount PD array matrix. Seven we're looking for primarily buying |
| 14 | 00:02:47 --> 00:02:56 | in discount ranges. Okay, inside this dealing range, we're going to look for the next draw and liquidity. In this case, where is price likely to trade to next |
| 15 | 00:02:56 --> 00:03:07 | above which old high we look for a premium pdra in the direction of our weekly range bias. Now, you understand enough about the market maker buy and sell |
| 16 | 00:03:07 --> 00:03:18 | models to know that when we're looking at the market maker buy model, the original consolidation, we start near the low or inside of a discount market, |
| 17 | 00:03:19 --> 00:03:30 | the market will trade up to a premium reverse and trade lower and go below the original consolidation. In a market maker by model it starts at a premium |
| 18 | 00:03:30 --> 00:03:42 | consolidation. It declines down to a discount where it reverses and trades back above the original consolidation. So we're gonna be looking for that premise on |
| 19 | 00:03:42 --> 00:03:54 | the timeframe we're studying for our setups. Okay, we're going to anticipate price to move to a premium pdra that would support our weekly bias on a day and |
| 20 | 00:03:54 --> 00:04:05 | economic event found on the economic calendar with the current or next trading week. This volatility injection is what we wait for. This will be a run on the |
| 21 | 00:04:05 --> 00:04:23 | basis of a low resistance liquidity run. Okay, opportunity discovery. The image to the left is your mental framework on how the trade should pan out. And this |
| 22 | 00:04:23 --> 00:04:38 | is an example of a market maker sell model where it goes up first to drop down. You're gonna identify a premium PD array above the market. In this case it may |
| 23 | 00:04:38 --> 00:04:52 | be a bearish order block or a bearish breaker that you expect the market to trade up to and then react to going lower. So the framework on this is directly |
| 24 | 00:04:52 --> 00:05:01 | linked to your understanding on how the markets going to swing higher to make a sell opportunity. Not just a Okay to sell right now, because I'm looking at the |
| 25 | 00:05:01 --> 00:05:13 | marketplace, you need to be able to forecast that the market is at present market conditions and market pricing, you expect the market to rally up once it |
| 26 | 00:05:13 --> 00:05:25 | goes up to a specific premium array. And again, as it may be a bearish breaker, bearish order block, it might be running an old high for like a turtle turtle |
| 27 | 00:05:25 --> 00:05:35 | soup and then sell off. Okay, so it's not like you're just waiting for it to keep going up in perpetuity, you're waiting for it to go up in in that movement |
| 28 | 00:05:35 --> 00:05:48 | from current market action and pricing up to that premium array number. It's think of it as we're in an oversold market, okay. And we expect it to trade up |
| 29 | 00:05:48 --> 00:06:02 | to an overbought condition into a resistance level. Now, they are retailed terms, but we look for things that are narratively driven. And we're going to |
| 30 | 00:06:02 --> 00:06:12 | look for stage one or stage two or re accumulation to go along and target the terminus at the premium pdra. Now, Terminus is where you think the markets gonna |
| 31 | 00:06:12 --> 00:06:21 | go up to stop and turn around and go the other direction. So it's important understand that we're not getting in this tray with the idea that it's going to |
| 32 | 00:06:21 --> 00:06:34 | explode and become a mega trade and go three, four or five months in one direction. We're looking for a very scalable fork forecasted move that sends |
| 33 | 00:06:34 --> 00:06:45 | price higher, but generally up to a point in which it creates a sell. So in this trade plan, we're focusing primarily on the buy side of the curve of both the |
| 34 | 00:06:45 --> 00:06:57 | buy and sell models. Okay, in the reverse aseema, we have a market maker by model, we're going to identify premium pdra Old High or in this case, the |
| 35 | 00:06:57 --> 00:07:06 | original consolidation above the market, that price will likely reach up to to complete a market maker by model. Again, we're going to wait for stage one and |
| 36 | 00:07:06 --> 00:07:17 | or stage two re accumulation period to go along and target the terminus at the premium PD array. In this case, because it's the market maker by model, we're |
| 37 | 00:07:17 --> 00:07:27 | going to be targeting the premium array in the form of old high or relatively equal highs that would describe the original consolidation prior to the drop |
| 38 | 00:07:27 --> 00:07:37 | down and then reversal. And when it starts to go up, that's the buy side of the curve of a market maker by model. We're focusing primarily on that so you would |
| 39 | 00:07:37 --> 00:07:45 | be really trading with this plan. As it goes short, you're just waiting for the trade down to that discount array, create a market structure break to the |
| 40 | 00:07:45 --> 00:07:59 | upside, and then you would start looking for reasons to be long in stage one or two re accumulation. Trade planning, when the market is primed to rally higher, |
| 41 | 00:08:00 --> 00:08:09 | we want to look for a convergence of both manipulation and price. Opposite to our trade bias in this case, something dropping lower for Judas swing at a time |
| 42 | 00:08:09 --> 00:08:20 | that the economic calendar suggests a volatility injection will likely unfold. We will buy discount fair value gaps or buy sell stops in a stage one or two re |
| 43 | 00:08:20 --> 00:08:34 | accumulation. When we're bullish, we will frame and long entry when prices move down into a 15 or five minute discount, fair value gap pdra. That converges with |
| 44 | 00:08:34 --> 00:08:46 | a standard deviation of no more than negative three standard deviations during London Open or New York open. We can implement scalping protocols on this stage |
| 45 | 00:08:46 --> 00:08:59 | as well for further reduction in risk. When we are in a market maker sell model, we will target the buy side liquidity above the old high as Terminus. If we are |
| 46 | 00:08:59 --> 00:09:06 | in a market maker by model, we will target the original consolidation of the market maker by model. |
| 47 | 00:09:14 --> 00:09:24 | When we are bullish, we will anticipate a five minute chart institutional order flow entry drill, trade entry to form inside of a retracement lower during |
| 48 | 00:09:24 --> 00:09:38 | London Open and or New York open kill zones or a sell stop raid that will go long when it unfolds. When we are entering in long, we will place a buy limit |
| 49 | 00:09:38 --> 00:09:49 | order on all positions we will execute with our demo account. We will use the standard deviation and pdra convergence plus five pips as our entry price when |
| 50 | 00:09:49 --> 00:10:02 | using the buy limit order. If multiple orders are used, all use the same entry price in the buy limit order when we're are entering along, we will place a |
| 51 | 00:10:02 --> 00:10:12 | limit order to take 20 pips as our objective on one position, we will place a second limit order to take 40 pips as our second objective. We will use multiple |
| 52 | 00:10:12 --> 00:10:22 | orders to manage the trade idea if you capture 60 pips objective, and this is assuming you have at least three positions on or three trade entries, separate |
| 53 | 00:10:22 --> 00:10:34 | orders, you're going to close 80% of the trade and see if it has more room to run. When we're entering along, we will note the discount array and standard |
| 54 | 00:10:34 --> 00:10:45 | deviation convergence we aim to enter it we will place our stop loss below this low minus 20 pips we will re enter if the trade stops out, we can monitor it for |
| 55 | 00:10:45 --> 00:11:00 | secondary entry day trades may require multiple attempts to secure a solid entry. Do not fear that when we are in profit 25% of our expected objective stop |
| 56 | 00:11:00 --> 00:11:12 | loss can be reduced by 25%. When we are in profit 50% of our expected objective stop loss can be reduced by 50%. When the position is at 70% of the expected |
| 57 | 00:11:12 --> 00:11:24 | profit objective stop must be at breakeven. Now when you look at this, it seems like you're holding a lot of open risk. But remember, we're taking something off |
| 58 | 00:11:24 --> 00:11:36 | at 20 pips, we're taking something off at 40 pips and something at 60 80% is coming off, and then the remainder, there isn't much risk remaining in the trade |
| 59 | 00:11:36 --> 00:11:50 | because we're banking as we go further in progression. Money management, obviously these slides don't change. position size calculation formula is |
| 60 | 00:11:50 --> 00:12:01 | position size equals account equity times risk percent divided by stop loss and pips. position size is the amount of leverage or trade or trades assume account |
| 61 | 00:12:01 --> 00:12:09 | equity is the total amount in your trading account. Our percent is the percent of risk you are willing to take on and portrayed. Now if you're using multiple |
| 62 | 00:12:09 --> 00:12:18 | orders, you have to divide that in the total number of orders you're going to have. So if you're willing to risk 2% And you're going to be using four orders |
| 63 | 00:12:18 --> 00:12:29 | to say so four separate orders at one half of 1% would give us the same thing as 2% risk. The difference between the entry price and your stop loss is the number |
| 64 | 00:12:29 --> 00:12:42 | of pips you will use to divide the result of equity times our percent. As an example, equity of 20,000 US dollars. risk per trade is one and a half percent, |
| 65 | 00:12:42 --> 00:12:56 | or 20,000 times one and a half percent. In this case it would be 300 US Dollars stock required for trade is 20 pips in micro lots 1000 Each, or 10 cents per pip |
| 66 | 00:12:56 --> 00:13:10 | 20 pips times 10 cents equals two US dollars. So $300 divided by $2 equals you can have a 150 Micro lots portrayed or one and a half percent of the account |
| 67 | 00:13:10 --> 00:13:25 | equity always round down. Next example would be using mini lots, same idea one and a half percent with $20,000 as your equity base. Each mini lot is 10,000 |
| 68 | 00:13:25 --> 00:13:42 | Each and leverage or $1 per pip 20 pips at $1 per pip equals 20 US dollars. So $300 divided by $20. For 20. pips stop loss at $1 per pip equals the same thing |
| 69 | 00:13:42 --> 00:13:58 | as 15 Mini lots per trade, or one and a half percent of the 20,000 our equity, again, always round down. And finally, a standard lot would be $100,000 and |
| 70 | 00:13:58 --> 00:14:10 | leverage, or $10 per pip, using a 20 pip stop loss in this trade plan at $10 per pip would be a risk of 200 hours and with 300 hours, which would be a maximum of |
| 71 | 00:14:10 --> 00:14:19 | one and a half percent of $20,000 would be 300 hours divided by 200. And that would be one and a half standard lot or in this case one lot per trade because |
| 72 | 00:14:19 --> 00:14:33 | you can't break a standard lot. That's why we like to use minis always round down many lots are always more flexible. If your demo account takes a loss on a |
| 73 | 00:14:33 --> 00:14:44 | trade and is at a full our percent that you assumed you're going to drop your our percent by 50%. And when the loss is recovered by 50% you're permitted to |
| 74 | 00:14:44 --> 00:14:56 | return to the maximum our percent per trade. This is to say that if you lost $100 Okay. You cannot trade the same amount of leverage that you used when |
| 75 | 00:14:56 --> 00:15:06 | taking that $100 loss until you make $50 back Back in new profit, then you can round back up to the same leverage you were using before you took the 100 our |
| 76 | 00:15:06 --> 00:15:17 | loss if you reduced our percent trade and it assumes a loss as well, you reduce the our percent by 50% again until the previous trade loss is recovered by 50%. |
| 77 | 00:15:20 --> 00:15:29 | If you take a series of five winning trades in a row, drop your our percent by 50% You're likely to assume a loss eventually, and this will build in equity |
| 78 | 00:15:29 --> 00:15:39 | leveling and reduce the likelihood of a large drawdown. You want a smooth equity curve that slopes or stairsteps higher, not a jagged roller coaster with deep |
| 79 | 00:15:39 --> 00:15:49 | declines. Alright, so now we're going to start back testing, you're going to collect multiple sample sets with this trade plan. If you're unclear about some |
| 80 | 00:15:49 --> 00:15:56 | of the process, rewatch the lessons in this price action model. Dig into your charts and study what was provided here. Until next time, I wish you good luck |
| 81 | 00:15:56 --> 00:15:56 | and good trading |