ICT YT - 2020-09-08 - ICT Forex Price Action - Cross Currency Relationships and HTF Institutional Order Flow.srt

Last modified by Drunk Monkey on 2021-06-12 06:32
1 00:00:16,260 --> 00:00:24,960 ICT: Okay, folks, welcome back. Alright, this lesson is going to be on forex cross currency relationships and higher timeframe institutional order flow. Now
2 00:00:24,960 --> 00:00:35,670 this is going to be an example of precision price action theory. It's not a one video answers all questions. It relies on you having gone through a lot of the
3 00:00:35,670 --> 00:00:37,410 lessons that are taught on this YouTube channel.
4 00:00:43,110 --> 00:00:49,950 Alright crosscurrents relationships and higher timeframe institutional order flow. What are we talking about? Well, I'm going to unravel a mystery of cross
5 00:00:49,950 --> 00:01:05,460 pairs. I'm going to show you how to determine which period leads how to determine which pair stalls. How to use this insight in order flow. And find
6 00:01:05,490 --> 00:01:18,570 explosive price swings as a result. How do we do that? Well, it starts with the economic calendar. Alright, so let's zoom in here and take a quick look at what
7 00:01:18,570 --> 00:01:31,110 this particular week is. Now the time of this recording is Tuesday, the calendar week would be September 7 2020, to September 11 2020, we will see in the US on
8 00:01:31,110 --> 00:01:42,090 Monday, we had bank holidays for the US and Canada. Looking through the calendar, the only thing we have for Euro appears on Thursday. So we have
9 00:01:42,090 --> 00:01:56,400 Thursday's economic calendar having a large high impact event and nothing going on the cable front, nothing really to speak of. So the only economic driver we
10 00:01:56,400 --> 00:02:11,130 have for Euro is on Thursday. And it's high impact and nothing on cable. So if we are looking for explosive price action moves, that means that euro is likely
11 00:02:11,130 --> 00:02:24,720 to be stunted, okay, in other words, held back, because it's waiting on a big impact news driver on Thursday. And cable has nothing so it's allowed to trade.
12 00:02:24,840 --> 00:02:35,670 However it wants to trade, Euro has to wait for some impact news that comes out later in the week. So right away, there's your clue that euro is likely to be
13 00:02:35,670 --> 00:02:45,420 held in consolidation, and later in the week allowed to be more explosive, okay, I'm not the mean that it will be an explosive price action means it just means
14 00:02:45,420 --> 00:02:57,570 that using this idea helps you to focus on which pair will be strangled, okay, or held in consolidation. Whereas the other pair cable which is not being seen
15 00:02:57,570 --> 00:03:07,080 at all in economic calendar at all, that implies that it will be allowed to trade more freely, and less manipulation and manipulation will be where in
16 00:03:07,080 --> 00:03:14,160 Europe. So let's go to the charts. And I'll give you a little bit more insights on this and how we can flesh it out and give it a little bit more process
17 00:03:14,160 --> 00:03:29,430 oriented approach. Okay, folks, we're looking at the Euro pound on the right, and the dollar index or Dixie on the left. So now when we look at price action,
18 00:03:30,240 --> 00:03:40,080 and we're comparing the dollar index as a barometer, if we're looking for higher prices on dollar, we would be reasonably expecting lower prices in foreign
19 00:03:40,080 --> 00:03:51,930 currency. And if the dollar were expected to go lower, we wouldn't expect to see bullish prices or higher prices on foreign currency. Now, there isn't a simple
20 00:03:51,990 --> 00:04:00,150 always follow this procedure and you'll get the big price action moves, you'll you have to look at some other things. And that's kind of like we're going to
21 00:04:00,150 --> 00:04:09,510 talk about a little bit tonight. And it's the crosses. So the relationship between crosses now obviously there's a cross between dollar and euro and then
22 00:04:09,510 --> 00:04:17,820 we have that as the euro dollar. But when I say crosses, I'm referring to foreign currencies crossed with another foreign currency not that of the dollar
23 00:04:17,820 --> 00:04:30,330 index. Okay. So that way we understand each other going forward. We're going to assume for the moment that we have been bullish on the dollar index, okay for
24 00:04:30,330 --> 00:04:42,930 the sake of discussion, my students know we were and have been now for a period of about a week or so bullish on dollar. Now, if you look at the relationship
25 00:04:42,930 --> 00:04:59,820 between the dollar index daily and the Euro pound daily, they both from September beginning have seen a price rally higher. Now in the simplest of the
26 00:04:59,820 --> 00:05:13,740 terms bullish or bearish, if I'm expecting the dollar go higher, then I'm looking for shorts on foreign currency. Now there's a big jump from bullish
27 00:05:13,740 --> 00:05:25,290 dollar. To going short on foreign currency, there's a step in the middle we have to refer to. Now, again, my students are familiar with my favorite pet payers,
28 00:05:25,500 --> 00:05:36,300 that being the euro dollar in cable or pound dollar. Now I have traded other currency pairs, and I can trade other currency pairs. But I prefer to use these
29 00:05:36,300 --> 00:05:42,690 two as you'll see why tonight, because it's really easy to see which one is going to lead, which one's going to
30 00:05:42,690 --> 00:05:53,970 fall behind. And the only way you're going to be able to get that information clearly, is to use the Euro pound. Now the Euro pound is a currency pair that a
31 00:05:53,970 --> 00:06:06,570 lot of people just are focused on this pair as well, it makes the most money per Pip, it's this and it's that, and I never really trade this pair. And if you're
32 00:06:06,570 --> 00:06:16,800 new to my channel, it probably is very shocking. I never trade it, I use it as a selection tool. And I'll show you what I mean by that tonight. If you've been
33 00:06:16,800 --> 00:06:25,740 gone through my videos, you've probably seen lessons or discussions about this, but I want to give a little bit more meat to it tonight. So that we get
34 00:06:25,740 --> 00:06:39,030 something out of it and more value to your support of the YouTube channel. So again, we're gonna go in assuming that we have been bullish on dollar. Now, how
35 00:06:39,030 --> 00:06:47,670 you arrive at bullish dollar, you can get that information from studying the concepts and tutorials on his YouTube channel. This is not a silver bullet
36 00:06:47,700 --> 00:07:01,980 video, it doesn't answer all questions, it's specific, highly focused on one part one segment of a process that leads to finding explosive price action
37 00:07:01,980 --> 00:07:15,360 moves. Okay, so now when we look at Euro and contrast that with the dollar, now if we're expecting a large price move, you can expect the dollar to be moving in
38 00:07:15,360 --> 00:07:28,710 tandem with a cross like euro pound. If it does that, if it's starting to move in the same direction, that is highly indicative of a huge imbalance between
39 00:07:29,130 --> 00:07:39,510 otherwise closely correlated pairs. Now, that's a mouthful, I know. But what I'm saying is if the dollar is going higher, but not all foreign currencies will
40 00:07:39,510 --> 00:07:51,030 rally or decline the same. So if the dollar is bullish, this is how I start all my analysis. And now I teach my students, we start with the dollar. So if that's
41 00:07:51,030 --> 00:08:02,700 the case, and we're bullish on dollar, then we have to determine which foreign currency is more likely to go lower. So what we're doing is we're using relative
42 00:08:02,700 --> 00:08:16,200 strength analysis to find out which currency is likely to stall. And which currency is likely to go lower. If we can determine that and feared that
43 00:08:16,500 --> 00:08:26,460 solution out by studying price action in euro pound, and using the economic calendar, as I mentioned, before going to the charts, we have a very strong
44 00:08:26,670 --> 00:08:39,690 likelihood, okay, or probability that we'll find the right pair to trade now. Do I always get it right? No, you're going to get it wrong too. But over a large
45 00:08:40,080 --> 00:08:50,160 sample size and career in trading, you're going to find it this concept, this technique will help you find these really big explosive price action moves.
46 00:08:50,370 --> 00:08:59,880 Alright, so again, I'm not trying to draw your attention to or sell the idea that this euro pound move is to the discussion. That euro pound move is the
47 00:08:59,910 --> 00:09:13,590 catalyst to determine which currency pair to trade whether it be euro dollar or pound dollar. Okay, so let's go into a little bit more detail. THE DOLLAR traded
48 00:09:13,590 --> 00:09:23,550 down into its fair value gap as I mentioned in the previous discussions, and I challenged everyone that was in my mentorship if I was lying about you expecting
49 00:09:23,550 --> 00:09:33,870 these levels to be traded to while way back over here even before that, that there would be a large number of thumbs down. can see there wasn't a large
50 00:09:33,870 --> 00:09:45,870 number of thumbs down. So if we expect price to trade higher, okay, you can clearly see we have relatively equal highs in here. So it's not a stretch to
51 00:09:45,870 --> 00:09:56,070 imagine that it could reach up to that point now we're gonna stop and just say that is all there is for our analysis. Okay, say that was all that was possible
52 00:09:56,340 --> 00:10:05,790 at your level of understanding. Okay, and from trade. Down here up to here. Great, that's wonderful, you had a bias, the bias is bullish dollar, all foreign
53 00:10:05,790 --> 00:10:16,140 currency should go lower. But we have to use the step between just simply dollar going higher all foreign currency going lower, we want to look for the weakest
54 00:10:16,380 --> 00:10:27,990 of the two currencies in closely correlated pairs. Because if you look at all foreign currency, they should be declining over the last few days. But not all
55 00:10:27,990 --> 00:10:42,240 of them fell as much as others. There were other currencies that were extremely weak. And they lead downside draft on delivery on price versus the upside on the
56 00:10:42,240 --> 00:10:43,080 dollar index.
57 00:10:43,349 --> 00:10:56,339 So, if we look at the relationships between euro versus pound, we start with the Euro pound cross. So what causes the Euro pound to rally higher? Well, there's
58 00:10:56,339 --> 00:11:06,809 only two instances that will cause that euro dollar goes up, while at the same time pound dollar consolidates it means euro dollar is allowed to go higher
59 00:11:06,809 --> 00:11:18,419 trade higher, and pound dollar or cable stays in a range. Now it doesn't have to be a very clear range, it could be a muddy choppy trading session or sessions in
60 00:11:18,419 --> 00:11:31,919 plural, or euro dollar consolidates. And pound dollar drops, the same thing would be seen in this chart, with the Euro pound going higher, regardless of
61 00:11:31,919 --> 00:11:51,359 which scenario over here is true. Now, as I shown on the economic calendar, the Euro dollar has strong economic news coming out. So no real indication that
62 00:11:51,509 --> 00:12:04,739 cable has any news this week at all. So which pair is going to be likely to wait around for the big news for the for the trading week, it's euro. Pound doesn't
63 00:12:04,739 --> 00:12:15,569 have anything really allowed to inject volatility. And it's a high impact news event. And after that there's nothing cable related either a pound related. So
64 00:12:16,259 --> 00:12:26,369 the probabilities are euro dollar will likely be held in consolidation until it's big news event for the week. That's why I teach my students to use the
65 00:12:26,369 --> 00:12:37,079 economic calendar and how you plug that little component into the entire process. So we look for euro dollar to consolidate because of the economic
66 00:12:37,079 --> 00:12:50,609 calendar. So if the economic calendar hints at, it's likely to consolidate, then what does that imply if we are also bullish on euro pound, the scenario is going
67 00:12:50,609 --> 00:13:03,869 to be euro dollar consolidates and pound dollar drops. So right away, we can clearly see that there's an advantage to not trading short euro, not going long
68 00:13:03,869 --> 00:13:17,759 euro. But selling short pound dollar. So now if we take a look at Euro versus the Dollar. Alright, so here's the euro dollar daily chart. And you can see we
69 00:13:17,759 --> 00:13:30,149 are in a rather large consolidation on euro. And my students know that this whole entire time, we have been really reluctant to have large intermediate term
70 00:13:30,149 --> 00:13:41,339 analysis calls on this pair at after where we've traded to here. I wanted 120 we got 120. And now we've been sitting our hands for euro. Couple that with what
71 00:13:41,339 --> 00:13:50,519 I'm showing you here tonight, it leads very well into shorts on cable, and you'll be able to see some of the things I've actually taught on this YouTube
72 00:13:50,519 --> 00:13:58,289 channel how they fall into place just perfectly. So we can see there's consolidation in here on euro, we don't have to really go through a whole lot
73 00:13:58,289 --> 00:14:14,129 with this, this pair if you break it down into a hourly chart and compress this a little bit. You can see while we are drifting with the strength in the dollar
74 00:14:14,129 --> 00:14:27,959 lower. It's still consolidated in not really expanding on the downside. In other words, there's not a lot of momentum for this pair eurodollar to cross a lot of
75 00:14:27,959 --> 00:14:39,839 ground on a bear spread price swing. So we did take out equal relative equal lows, we did sweep through that it just hasn't had a lot of experience on the
76 00:14:39,839 --> 00:14:52,859 downside. If we look at the cable market in relationship to what we've seen here, there's a stark contrast. Right away you can see that this market has a
77 00:14:52,859 --> 00:15:05,279 lot more symmetry. That means the price action is much easier to read. It's much more explosive, it wants to reach down for lower price objectives. And I'm going
78 00:15:05,279 --> 00:15:15,899 to show you this magnified. And we'll zoom in a little bit. I see here's Friday's price action. And I'm showing Friday's high in Friday's low and
79 00:15:15,899 --> 00:15:25,679 splitting that range in half. So if we were going to be bearish, the best sell scenarios are going to be in the lower half of that range, or that Friday's
80 00:15:25,679 --> 00:15:35,189 daily range. You can see each trade here on this candle, it's 4am, New York time. So that's the woman open kill zone. You all are familiar with that. If
81 00:15:35,189 --> 00:15:37,289 you've been studying my content on this channel,
82 00:15:38,580 --> 00:15:49,620 that closed candle here, that's your bearish order block price trades up into that close in balance traits of this candles low what's that low 132 38 and one
83 00:15:49,620 --> 00:16:05,970 PIP bet. And the high on this candle comes in at 132 38 and seven bit bets. So 38 738 one, so it went six bit bets a little bit further than it needs to just
84 00:16:05,970 --> 00:16:16,230 to trade into this candle green behind the London session and price breaks down and then we start to consolidate. Now we are in a long period of consolidation
85 00:16:16,230 --> 00:16:28,920 in here. But look where it's staying. Okay, it's staying below the previous day's low. And the next trading day starts here at midnight, on the eighth of
86 00:16:28,920 --> 00:16:42,000 September, and the high forms, whereas the form is a cross over the Mondays 50% of the daily range No. So the short forms in the lower half of the previous
87 00:16:42,000 --> 00:16:52,170 day's range, which is Monday's trading. And again, in London, open two o'clock in the morning, New York time creates the hind lung, and then we sell off
88 00:16:52,260 --> 00:17:02,370 aggressively. And then during this period here, that little shaded box that is the 830 to 11 o'clock, New York trade session I taught for the YouTube channel.
89 00:17:02,820 --> 00:17:14,250 Now there is a new york session kill zone. Okay, and or New York open kill zone. Then if you watch my tutorials here, you'd learn about that. But this specific
90 00:17:14,520 --> 00:17:24,720 opportunity is limited to 830 in the morning to 11 o'clock in the morning. So it really refined it to a time window where you can literally open up shop. And
91 00:17:24,720 --> 00:17:33,690 that would be your your operating time for trading. only focusing on the New York session, not having to worry about trading London not having to worry about
92 00:17:33,690 --> 00:17:45,960 trading Asia, nothing doing in London close or even late in New York sessions. This is a very short window of opportunity that gives you a lot of potential
93 00:17:45,960 --> 00:17:57,690 trades. So if we look at this only 15 minute time frame, you can see the 15 minute time frame, again, very clean price action, lots of expansion down, we
94 00:17:57,690 --> 00:18:10,050 create this retracement here ahead of New York open this low forums at 930. So there's your dealing range, you have the low and the high here. So that's your
95 00:18:10,050 --> 00:18:18,660 optimal trade entry, you would pull your fib across that. And it takes you right up into optimal trade entry right here during the 830 to 11 o'clock in the
96 00:18:18,660 --> 00:18:25,740 morning timeframe. And then you can expect price to trade lower this line right here, I'll take you out into a daily chart and show you what that is. But it's
97 00:18:25,740 --> 00:18:36,420 just a liquidity pool, very easy, obvious level that reach for using higher timeframe price action. So now if we look at how price has delivered one cable
98 00:18:37,140 --> 00:18:49,200 in relationship to everything I've shown so far, which is bullish dollar, looking at the economic calendar to determine Is there any clues to which pair
99 00:18:49,380 --> 00:19:01,050 of a closely correlated group of markets for instance, euro and pound, they're very, very correlated, they're highly correlated. So when they trend higher,
100 00:19:01,200 --> 00:19:10,590 they usually tend to trend together. But there's times when that won't happen. There's a crack in that correlation. So by using an economic calendar first
101 00:19:11,040 --> 00:19:20,730 determine Is there any real heavy hitting news for one currency over another, and then you study price action, when the new week starts, which one's having a
102 00:19:20,730 --> 00:19:32,340 lot of struggle to go in the direction that the dollar index implies. So if we're bullish on dollar, that means euro dollar should go lower cable or pound
103 00:19:32,340 --> 00:19:41,790 dollar should go lower. But if we see bullishness on euro pound, then we go through the scenario that I outlined at the beginning of this video, looking for
104 00:19:41,790 --> 00:19:52,260 which one is likely to occur in terms of scenario. As you can see here, cable has led on the downside. And we're gonna look at this little portion of price
105 00:19:52,260 --> 00:20:02,670 action right there. I'll add the fib so you can see without having to trade in London session not that there's Anything wrong with trading on the session,
106 00:20:03,030 --> 00:20:18,270 because it's, to me, it's the biggest opportunity for the day, you don't need the biggest opportunity, you can do New York session trading every single
107 00:20:18,270 --> 00:20:29,190 trading session and do very, very well, because you have the advantage of knowing what London did. And this actually didn't go where I wanted to go right
108 00:20:29,310 --> 00:20:37,410 there. Alright, so I'll zoom in here. And let you take a look at what cable did.
109 00:20:41,670 --> 00:20:52,560 So here's that range the high to the low with the 79% retracement level, trading up into it here. And yes, we consolidate a little bit before breaking down. If I
110 00:20:53,040 --> 00:21:01,500 recall, in the last few videos I've been talking about this is the reason why I am never in a hurry to move my stop loss. Because this is what can happen, the
111 00:21:01,500 --> 00:21:11,580 algorithm can keep price in a range longer than it's comfortable for you to stay in the trade or without moving your stop. See, the first impulse you have as a
112 00:21:11,580 --> 00:21:19,110 retail trader is I want to protect my open profits and I don't want to get a loss, I don't want to have a losing trade. And that's one of the things you're
113 00:21:19,110 --> 00:21:27,750 going to have to grow into allowing happening. If you're going to lose, you're gonna have a stop out it there's nothing wrong with that. I stopped out of
114 00:21:27,750 --> 00:21:36,450 trades. Sometimes the trade doesn't work for me and runs right to my start when I first get in, I'm not infallible, you're not going to be infallible. So it's
115 00:21:36,450 --> 00:21:46,020 important to welcome that in your development, because you learn a whole lot about doing it wrong in the beginning. But some of you on early most of you are
116 00:21:46,020 --> 00:21:56,760 trying to avoid that uncomfortable period of struggling and fumbling in this not knowing what you're doing. So if you can just allow yourself and give yourself
117 00:21:56,760 --> 00:22:05,430 permission to make mistakes in a demo, where you're not hurting yourself financially, and you're not really scoring or measuring up to whether or not
118 00:22:05,430 --> 00:22:18,030 you're making money in a demo account or not. The first objective is to not show a huge drawdown, okay, if you can go back and forth, you make a little give it
119 00:22:18,030 --> 00:22:26,430 back make a little and not really make money or not make a huge decline in the equity for your demo. That's actually very good. That's a good goal to have
120 00:22:26,430 --> 00:22:34,350 initially try to aim for breakeven is most traders, when they first start, they have no ability to trade like that. It's always like a train wreck where it just
121 00:22:34,350 --> 00:22:42,330 completely blows out the account. And you have to reset and restart a new demo. You don't want to learn those lessons on a Live account. The only thing that's
122 00:22:42,330 --> 00:22:56,190 going to do is teach you to be fearful of trading. And there should be no apprehension, no reluctance, no fear, or uncertainty about why you're putting
123 00:22:56,190 --> 00:23:05,520 the trade on. And using a hard stop, not a mental stop a pretend stop. If it goes here, I'll get out. Those never work. Okay, they always do more damage than
124 00:23:05,520 --> 00:23:15,360 they help. So by looking at the things I've taught you, on this YouTube channel, using the concept just walked you through here, you can clearly see that
125 00:23:15,360 --> 00:23:23,670 everything still works. We have the range, optimal trade entry, this candle is the highest one in here and it's still 10 o'clock in the morning. You have until
126 00:23:23,670 --> 00:23:37,980 11 o'clock to find the setup. And the 11 o'clock hour is here. So it's this candle right there. So you have that range. From here to hear it retraces and
127 00:23:37,980 --> 00:23:47,340 then you let it go stop about here and you just let it trade. It's going around sideways. I always always, does it break this low yet no, it doesn't break that
128 00:23:47,340 --> 00:23:56,850 low until this candle, then and only then would you be considering moving your stop but not before then. Because you have to give the market time to gyrate
129 00:23:56,850 --> 00:24:08,190 move around and then leave the dealing range. See the problem with most traders is that they look at these candles and they attribute much more significance to
130 00:24:08,190 --> 00:24:22,860 them than they really have the algorithm trades on time and price. Okay, not price and time it's time and price. So, the most significant factor is the
131 00:24:22,890 --> 00:24:33,720 element of time. The algorithm can stay in a predetermined range longer than traders are comfortable holding. And this entire time it stays within this low
132 00:24:33,720 --> 00:24:43,110 and this high. All kinds of ideas have changed from being bullish to bearish trade has been put on trades have been taken off. trades have been stopped out
133 00:24:43,110 --> 00:24:55,050 moving them too tight because most people do not know how to trade. So looking at this example here and then thinking about how you've seen live examples where
134 00:24:55,050 --> 00:25:04,410 I'm executing and entering and managing the trade. This is the reason why I do not rush to move my stop loss because I understand this component and price
135 00:25:04,410 --> 00:25:16,410 action, it can stay in a range or a consolidation before moving into my expected you know, move below this low here, and then we would see it reach below this
136 00:25:16,440 --> 00:25:26,160 low here, the blue line, I promise you, I will tell you what that is, let's go out to a daily chart. And let's take this off for a moment. Daily.
137 00:25:31,440 --> 00:25:41,700 Okay, and you can see this low rate there, you see that. So we have this low, all up to here. So this is the dealing range, we've been working on a daily
138 00:25:41,700 --> 00:25:50,100 chart, so liquidity rest below that low, and I'll add annotations back on and you'll see it, there's that low, that blue line and it straight down into it and
139 00:25:50,100 --> 00:25:58,290 below. Alright, so I'm certainly not saying that's the actual end of the move. I'm not implying that at all under saying that that was a level that you could
140 00:25:58,290 --> 00:26:07,560 reasonably expect to see a drawl to. Alright, so. Alright, so hopefully you got something out of this. A lot of things I've provided here, if it went over your
141 00:26:07,560 --> 00:26:17,190 head, I promise if you've spent more time in the tutorials on this YouTube channel, it'll fill in the gaps, not all the gaps. It won't fill in everything.
142 00:26:17,460 --> 00:26:24,390 But it will give you a greater understanding about why these pairs do what they do, and how to use the crosses to find the explicit price and action moves.
143 00:26:25,380 --> 00:26:27,720 Which I'll talk to you next time. I wish good luck and good trading.