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ICT YT - 2022-04-06 - ICT Mentorship 2022 Episode 17.srt

Last modified by Drunk Monkey on 2022-04-15 19:06
1 00:00:16,710 --> 00:00:31,830 ICT: Alright, folks, welcome back. This lesson is going to be on forex, and how we can apply this model to the FX market. Now, if you are a longtime student of
2 00:00:31,830 --> 00:00:41,520 mine, a lot of the things I'm going to talk about in here are going to be very familiar to you. I promise you the things that the newer students that just
3 00:00:41,520 --> 00:00:54,030 found this channel are going to feel like they're stuck on. Majority of it is in the free lessons in this YouTube channel. Okay, so I'm going to count you to go
4 00:00:54,030 --> 00:01:02,790 through those videos, and you'll get your answers there. Okay. Alright, so if we're looking at the Euro dollar, and I'll let you know, that's what this is,
5 00:01:02,790 --> 00:01:20,340 this is the daily chart for Euro, I want you to take a look at how price moved above these relative equal highs right here. Now what it did that this took the
6 00:01:20,340 --> 00:01:36,120 buy side or buy stops out of the marketplace here. They're sort of going lower. What would it likely be reaching for next? Well, it took by side out here. What
7 00:01:36,120 --> 00:01:53,610 do you think's resting below here? sell stocks or sell side liquidity. Now, just to the left, notice these two little devils here relatively close. And with this
8 00:01:53,610 --> 00:02:09,780 one, in this one, we have two areas of sell side liquidity. Notice this candle here, which happens to be Monday's trading. Or yesterday's trading. This low did
9 00:02:09,780 --> 00:02:22,860 not take out that low yet. Notice that. So we have unfinished business below here and potentially below here. So this is a daily chart, even though we've
10 00:02:22,890 --> 00:02:37,740 come from this high in had three consecutive down close candles. What is the bias? The very next candle. What's the bias going to be bearish, we're
11 00:02:37,740 --> 00:02:49,710 anticipating bearishness going in. So let's take that and flesh that out a little bit more. So here is your chart that would be annotated. And you'd have
12 00:02:49,710 --> 00:02:58,410 this level on your chart while you're learning. It's important to have these types of things on your chart. Over time. All you need is a pad and something to
13 00:02:58,410 --> 00:03:07,650 write with. And you'll write down the levels, majority of time. The only time I'm showing a level or my chart is for teaching purposes, I like to keep my
14 00:03:07,650 --> 00:03:19,800 chart clean. And that way I'm not forcing that bias if I see something that would allow me to like negate the whole premise that I went into the market with
15 00:03:20,220 --> 00:03:30,720 and either reverse or move to the sidelines, I want that clarity. Now I say that, and some of you purists in here, it just simply want to do everything I
16 00:03:30,720 --> 00:03:44,910 say and hang on every single one of my words, don't avoid or don't try to do it without having the annotations, like having levels drawn on your chart, because
17 00:03:44,910 --> 00:03:54,600 you need to train yourself to see it. And what I mean by that, well, having these relatively equal highs highlighted, your by stops would be resting above
18 00:03:54,600 --> 00:04:02,940 here, and the market will go just above that a little bit. And then once their spy stops are taken for anyone that's short, they're getting knocked down in a
19 00:04:02,940 --> 00:04:15,180 loss. And that flood of orders to be buying at the market is counterparty to individuals that want to sell short. So smart money is selling short up here
20 00:04:15,600 --> 00:04:27,330 with the expectation is going to go below this low here, below here and potentially below that low down there. So today's trading, we had the open, it
21 00:04:27,330 --> 00:04:38,760 rallies up a little bit, then careens through the short term low here and below the relatively close here. Not by much. We'll see it but it's still there. Now,
22 00:04:39,390 --> 00:04:50,010 what level on the downside after this day close, if we're looking for lower prices, what could be expected to draw to obviously below here and below here,
23 00:04:50,010 --> 00:04:51,540 but what price level
24 00:04:53,490 --> 00:05:05,640 109 big figure. So the big figure numbers, okay, or the zero levels there very influential because there's lots of liquidity that is used around those levels,
25 00:05:05,790 --> 00:05:15,930 a lot of commerce, a lot of business transactions that come in, just for the sake of simplicity 00 level, the 20 levels, the 50 levels and the 80 levels. So
26 00:05:15,990 --> 00:05:26,250 I dubbed them institutional price levels. I teach that in the free videos in this Youtube channel too. Alright, so we're going to drop down to an hour track.
27 00:05:26,250 --> 00:05:38,370 But before we get into that, I want to revisit the swing trading idea that taught high stock close or opening in this retracement up, and the lowest open
28 00:05:38,370 --> 00:05:49,920 or close is here. So I left the highlighted candles. So you can match that up on yours. And then we have this old low. So below this hola if it goes below that,
29 00:05:50,190 --> 00:06:08,100 how many pips can it go below that? Well, we have the big figure 109, right. Remember the previous chart here? Over here, that's essentially the 1.09 big
30 00:06:08,100 --> 00:06:21,540 figure. So do we have any levels in here on the FIB that correspond to that? Well, we have 1.0919, that's possible, then we have 1.09101. That's another
31 00:06:21,540 --> 00:06:36,360 level that's possible. And we have 1.09011, essentially, almost the big figure, right? So we have a standard deviation from this swing to here. If this is
32 00:06:36,360 --> 00:06:48,120 broken, these are only true if this low is broken. Okay, so this is a fulcrum point. And this is a fulcrum point. So how do we know which level we're going to
33 00:06:48,120 --> 00:06:59,850 aim for? Well, we have those relative equal lows at the 109 big figure level. And then we have our fib. Calling for these levels down here. And the lowest one
34 00:06:59,880 --> 00:07:13,650 without going through 1.09 Is this one here. Alright, on the hourly chart, with our buyside liquidity pool level here, the market trades up into that area
35 00:07:13,680 --> 00:07:29,430 absorbing all of that liquidity and breaking down. Take some short term low here and here. And here retraces up in breaks lower, then we go into today's trading
36 00:07:29,460 --> 00:07:40,380 the fifth prior to the day starting we know that it's likely to drop below here. And then down to that one or nine big figure have a lot of convergence around
37 00:07:40,650 --> 00:07:53,460 that one nine big figure at the beginning of the day at midnight, New York local time. That's going to be right in here. If we see the market rally up, which is
38 00:07:53,460 --> 00:08:01,380 what we want to see, we want to see a protraction in the marketplace where it starts to go against the expected direction on the move intraday. So if we're
39 00:08:01,380 --> 00:08:10,230 bearish and we're looking for that 109 level to be traded to and attack liquidity below here. Preferably we want to see it rally first that's due to
40 00:08:10,230 --> 00:08:20,250 swing. Okay, that market protraction is what we're looking for for manipulation part of Mike concept power three, which is accumulation, manipulation,
41 00:08:20,370 --> 00:08:32,490 distribution. Okay, so, once the day begins at midnight, we're anticipating a move up, what's it gonna be trading up into this imbalance in here? Okay, so
42 00:08:32,490 --> 00:08:40,620 once it does that, it kind of like forms the daily high, and then the rest of the day, you're gonna be looking for distribution throughout the day looking for
43 00:08:40,620 --> 00:08:55,170 lower prices. So inside that little shaded area, we're going to use that going forward. So it's dropped down to a lower timeframe. 15 minute timeframe, here is
44 00:08:55,170 --> 00:09:05,250 that imbalance that doesn't look that clean on a 15 minute timeframe. But the hourly is what we're framing it on. Okay. So the market trades up into that.
45 00:09:05,700 --> 00:09:16,950 Here is the midnight New York local time candle on the 15 minute timeframe. Chart. Opening prices here extended out throughout the day. That is your
46 00:09:16,950 --> 00:09:34,470 midnight New York candle opening price. Preferably, if we're selling short, we want to see price trade above this opening price. This is where smart money is
47 00:09:34,470 --> 00:09:48,030 accumulating short positions. See that. So the algorithm goes higher, once more higher, once more higher, and again right here and then begins its descent into
48 00:09:48,030 --> 00:09:48,960 the daily range low.
49 00:09:50,309 --> 00:10:00,569 Now what's occurring here. This is not buying and selling pressure. The algorithm is offering constantly price above this opening price. Now every
50 00:10:00,569 --> 00:10:10,079 single time it rallies up, just because it does, that doesn't necessarily mean that's the time for you to get in. But when you couple that with time of day and
51 00:10:10,259 --> 00:10:24,989 price, it becomes a lot better. Notice we have an imbalance in here. So it favor how you got there. And price runs up during the New York open kill zone. Okay,
52 00:10:24,989 --> 00:10:34,109 so I dubbed this specific time of day between seven o'clock in the morning, New York time to 10 o'clock in the morning. This is specific to Forex. Okay, these
53 00:10:34,109 --> 00:10:45,419 times are specific to FX pairs. If you're going to trade an index, don't worry about that. You can work with the 830 to 11 o'clock, New York local time. But
54 00:10:45,419 --> 00:10:54,899 for forex, the algorithm is going to operate on these specific elements of time. So if we're looking at this imbalance here to market runs up and overshoots the
55 00:10:54,899 --> 00:11:01,589 imbalance a little bit but what's it really go to the last close candle, which is a bearish order block? How do we know it's a bearish order block, because we
56 00:11:01,589 --> 00:11:13,709 have the imbalance here and trade back up into after a nice move lower. So there's displacement, fill a gap last up close candle touches it, there's a
57 00:11:13,709 --> 00:11:27,239 bearish order block. Dropping down into a five minute chart, everything being as it was on the 15. That's that order block here, just being shown on a five
58 00:11:27,239 --> 00:11:35,249 minute chart. And I'm adding now the annotation of the New York open kill zone. Seven o'clock in the morning begins here at the end of that line segment, and 10
59 00:11:35,249 --> 00:11:46,289 o'clock is here. So everything underneath this end, the trendline here and below this part of it. This all is during the New York open kill zone. So you're
60 00:11:46,289 --> 00:11:56,339 hunting your setup for forex pairs within that little block of time. So during this time you're hunting your setup, what price are you looking for, preferably
61 00:11:56,369 --> 00:12:08,579 at or just above the opening price at midnight. Now, if you are a New York session trader, you want to refer to the opening price at midnight, but then you
62 00:12:08,579 --> 00:12:19,049 want to recalibrate at 830. And we'll look at that in a moment. But for now, just notice, looking at this particular day, on the economic calendar, we had a
63 00:12:19,049 --> 00:12:30,779 high impact news driver at 10 o'clock in the morning, it was the ITSM services PMI number. Now, before you want to start sending me emails, or start sending me
64 00:12:30,779 --> 00:12:43,199 essay questions in the comment section of this video about what does the ITSM PMI number, do what I don't care what these numbers are really discussing. I
65 00:12:43,199 --> 00:12:53,189 don't care. I don't care about the raw data. I don't care what the expectation is, I don't care. Okay. What I'm expecting is the volatility in the marketplace
66 00:12:53,249 --> 00:13:06,149 at or around these specific times, because the algorithm is going to use that injection of volatility to facilitate trades. Now, is it trying to give you good
67 00:13:06,149 --> 00:13:19,649 trades? No, it's trying to move and rebook and reprice to levels to allow those in the know, to participate. It's a rigged game, you're not supposed to be in
68 00:13:20,609 --> 00:13:27,899 not consistently profitable, let's say that way. But for those that are in the know, they're looking for these types of signatures and price action, so they
69 00:13:27,899 --> 00:13:35,909 know what they're looking for in terms of when they're gonna operate. So as a technician, they're looking for a specific element of time, which is
70 00:13:35,999 --> 00:13:45,119 encapsulated with this segment, right here, seven o'clock to 10 o'clock. So that little bracket of time, right there on a five minute chart, you're hunting your
71 00:13:45,119 --> 00:13:52,619 setup. What is the thresholds that make it high probability? Well, if you're going short, or looking to go short, you want to be above the midnight opening
72 00:13:52,619 --> 00:14:04,289 price. That's here, extended downtime. But now once we hit this order block here, that was during the early stages of the New York open, right around the
73 00:14:04,289 --> 00:14:20,429 seven o'clock hour, the market drops. And then retraces back into that news driver here at 10. So what's happening here is look closely with this swing low.
74 00:14:23,070 --> 00:14:34,020 It went below this low here, and then it rallied back up once more above the opening price at midnight. Does it take out this high? No. Why doesn't it take
75 00:14:34,020 --> 00:14:43,350 out this high? Because it has an imbalance here. That imbalance tells you this is an intermediate term high. If we're bearish. It shouldn't take this high out.
76 00:14:43,590 --> 00:14:54,930 Now again, I mentioned this in a recent video I think if I'm not mistaken, it was episode 12. I'm going by memory so please don't roast me in the comment
77 00:14:54,930 --> 00:15:01,560 section if that's the wrong one. But it's basically what I'm talking about intermediate term, short term and long term. Hi some lows, or swing highs and
78 00:15:01,560 --> 00:15:15,300 lows, a imbalance or a fair value gap associated with a swing higher swing low. In this case, this is a term high, not because it just simply has a imbalance
79 00:15:15,330 --> 00:15:26,220 but because the narrative is we're expecting lower prices. And it won't about the opening price at midnight. And the unbalance there when it retraces back up
80 00:15:26,220 --> 00:15:35,760 into this fake run ahead of the news driver at 10 o'clock. The news, if you will, this movement here is only running right back up into the bearish order
81 00:15:35,760 --> 00:15:47,430 block. Last up close candle the body we don't I don't like to use these long tails and wicks. I'll refer to them. But I'd like to prefer to annotate if I'm
82 00:15:47,430 --> 00:16:00,930 going to show it in my examples or look to price returning back to the body of the candle right there. So this return into that order block sets the stage for
83 00:16:00,930 --> 00:16:12,330 another move lower, we get a swing high, lower high to the right of this candle and a lower high to the left of it here. So we have three candles making a swing
84 00:16:12,330 --> 00:16:24,000 high. So we start looking for this placement and movement lower. But looking closer. After we had that shift in market structure here, on a five minute
85 00:16:24,000 --> 00:16:36,270 chart, it retraces back up fear of a gap, parish order block, and news. This is the wildcard Okay, when you have high impact news drivers, this is going to many
86 00:16:36,270 --> 00:16:42,870 times scare you out of the trade or stop yet. In other words, if you went short back here, and you started trailing your stop loss, this is what that's designed
87 00:16:42,870 --> 00:16:53,280 to do take you out. So if you're short back here, or here or here, how are you protecting the trade you're putting up a buy stop above recent swing highs. So
88 00:16:53,280 --> 00:17:01,860 they're jamming up against that back above the opening price. Because your buy stop is going to flood the market with buyers willing to pay the higher price
89 00:17:01,860 --> 00:17:11,160 than it was here before it runs higher. And you're going to buy or those individuals who have their stuff, they're gonna buy the counterparty side of the
90 00:17:11,160 --> 00:17:19,020 smart money that wants to sell short. Because every buyer has to have a seller, every seller has that buyer. So that's what's occurring here. But inside this
91 00:17:19,020 --> 00:17:31,470 shaded area, I want to show you how this model is applicable here in FX. So here's the four minute chart. We were just looking at five. So we start
92 00:17:31,470 --> 00:17:49,170 stripping down this price leg here. And we're looking for any fair value gap. Do you see it? Pause the video look for it. I'm about to show you this candles low.
93 00:17:49,440 --> 00:17:57,720 This candles. Hi, there's your fair value cup. Isn't it interesting how this goes right up in there, close that in, then and only then the market starts to
94 00:17:57,720 --> 00:18:07,020 aggressively run below the short term low here. And then reaching into our objective down here at that one or nine big figure. Now it doesn't quite get to
95 00:18:07,020 --> 00:18:16,470 1.09 even. But it does get to our Fibonacci extension for the standard deviation. It does get down to the overall to be koulos on the daily chart,
96 00:18:16,680 --> 00:18:30,360 which is what that blue line is looking at the bodies respecting that level. Not much moving below it. Now for all of you raw dogs out there, okay. It's too
97 00:18:30,360 --> 00:18:37,950 much, Michael, you're over complicating it. You're confusing me, Michael, you're talking about the midnight candle for the opening price. Now you talking about
98 00:18:37,950 --> 00:18:48,870 the 830? Which one do I use? Why do I use it this thing? Alright, if you're only trading FX, you're gonna be using the 830 in the morning for New York session
99 00:18:48,870 --> 00:19:02,970 trades. But refer to the New York open at midnight as well. If the opening price is lower at 830 than that of the opening price at midnight, use the lower one
100 00:19:04,349 --> 00:19:12,299 reason why is you want to set the minimum threshold for a Judas swing or market protraction to the upside when you're bearish. And obviously, everything I've
101 00:19:12,299 --> 00:19:21,989 just said we'd be reversed. If you're bullish, you'd be looking for a move below opening at 830 to go long, after moves below it. But we're focusing primarily on
102 00:19:21,989 --> 00:19:31,589 the shorting opportunity here in hindsight, so that way you can get a better feel for how to use this model with FX. So there's a subtle little group of
103 00:19:31,589 --> 00:19:43,079 nuances that you have to be aware of when you're looking at FX, but it's not terribly, you know, harsh, it's pretty easy to work with. So we have the market
104 00:19:43,439 --> 00:19:55,079 trading above the opening price here. Market protraction due to swing, it rallies up and then breaks down in here. Now this run here about the opening
105 00:19:55,079 --> 00:20:08,069 price. Does it have a fair Vega? Here's the four minute chart. opening price now doesn't look the same because we're looking at a four minute chart. So it was
106 00:20:08,069 --> 00:20:21,629 anchored on the five minute chart. It rallies up in break lower, fair value gap right there, trades up into it hammers it beautifully. And in displacement
107 00:20:21,659 --> 00:20:39,149 trades lower down into that 109. Was it 1.0901 something or other I can't remember. But it hit it. And I think the low of the day was 1.0901. So not bad.
108 00:20:39,299 --> 00:20:50,099 I mean, it's pretty close to perfect, right? But by itself, you don't want to try to aim for just that level, because that's the best exit strategy. You don't
109 00:20:50,099 --> 00:21:00,269 want to do that. You want to fluff up your exits with a couple pips, I like to teach my students three to five pips. And if you're thinking a target is going
110 00:21:00,269 --> 00:21:10,139 to be like for instance, we'll say 1.0900 level, okay, if that's what you think it's going to trade to put your limit order to cover your shorts if you're
111 00:21:10,139 --> 00:21:21,959 short, at 1.0905. Okay, you're not going to get the best exit that way, but you have a spread that you have to incorporate when you're working with FX, forex
112 00:21:21,959 --> 00:21:34,349 and FX pairs. Sometimes, and I've had a lot of this happen over the years as a FX Trader where my limit order was a little too overzealous. I was trying to be
113 00:21:34,349 --> 00:21:48,929 a little too perfect. And I've had many amazing exits elude me because of my overzealous targeting. So be a little bit more forgiving when you're trading
114 00:21:48,929 --> 00:21:55,469 especially Forex. You got to incorporate the spread. And some of you have brokers where it's like, oh, I have a really tight spread. Let me tell you
115 00:21:55,469 --> 00:22:04,529 something. Every broker has the ability to open that spread up on you. You're seeing the best case scenario when that ticker showing. But trust me when it's
116 00:22:04,529 --> 00:22:14,609 advantageous for them. They'll work it in their behalf, not yours. So make it easier for yourself. This fluff up your exits with five pips. Okay, and if
117 00:22:14,609 --> 00:22:23,639 you're really new, just use 10 pips. Okay? And if you're struggling with the idea that oh, I don't want to do that I'll give up 10 pips. Well, let me show
118 00:22:23,639 --> 00:22:37,289 you this. This would be your entry candle, trading right back to this Oh, hi here. So one pit that or there abouts. Once it hits that candle. With this run
119 00:22:37,289 --> 00:22:45,719 here, that right there would be your entry candle, your stop would be right above this candles high. Now if you're scared or whatever, you can use this
120 00:22:45,749 --> 00:22:59,459 swing high and it's fine. Now in terms of math, the entry price would be 1.09653. And your stop would be 1.09728. Hypothetically, that's not a lot of
121 00:22:59,459 --> 00:23:11,729 pips, I would generally round that to 10. Even though it's not technically 10 pips here, I would round it to 10 and just be done with it. And looking at that
122 00:23:11,729 --> 00:23:21,299 model here, and you're aiming for that, a sensitive 1.09 big figure, fluffing it up a little bit. So our exit price would be a little bit higher than that. You
123 00:23:21,299 --> 00:23:33,749 guys see these things all the time. And I just felt like using it, just because I want to be cool. The risk is here, entry to stop and the distribution to your
124 00:23:33,749 --> 00:23:47,609 target down here. risk reward ratio better than eight to one. And using a hypothetical $100,000 demo account if you're doing one of those 100 account
125 00:23:47,609 --> 00:23:56,309 challenges or whatever. In this trade here. This gives you basically what you're looking for in one trade. So
126 00:23:58,680 --> 00:24:11,820 I don't know if this scratches the itch for you. But this stuff works in forex, it works in index trading. So it's a matter of adjusting to what it is you're
127 00:24:11,820 --> 00:24:21,270 trying to trade. And and there's a little bit of rule following that you have to now when it comes to index trading and FX, FX, predominantly, you're working
128 00:24:21,270 --> 00:24:33,420 with seven o'clock in the morning to 10 o'clock in the morning. That's your new york open kill zone. Okay. Index trading and focusing on 830 to 11. And I can
129 00:24:33,420 --> 00:24:47,220 take a trade all the way up to 1040 1045 and still be okay. I'm not interested in taking new trades generally after 10 o'clock in the morning in the FX pair
130 00:24:48,000 --> 00:25:00,900 unless there is a new driver like we had this morning. With the ICM number, the PMI number I mentioned earlier in the video. So that was allowing Need to be a
131 00:25:00,900 --> 00:25:13,650 little bit more forgiving. With expectations for price, you may not want to trade high impact news drivers. And that's understandable if you don't know what
132 00:25:13,650 --> 00:25:23,940 you're doing. But don't be afraid of them. Now, with the economic calendar, having a high impact news driver at 10 o'clock, that extends the New York
133 00:25:23,940 --> 00:25:37,980 session kills him into the 1111 30 time window, because the volatility that it will bring in. Now, I didn't take this trade. I haven't taken any FX pair trades
134 00:25:38,250 --> 00:25:53,100 at all. Not for 2022, at least. But if you're looking at a model that works in index futures, you're looking at that 830 to 11 o'clock window. And if you're
135 00:25:53,100 --> 00:26:01,920 trying to apply this model to FX, it's seven o'clock in the morning to 10 o'clock in the morning. Now, the high impact news drivers that come out after 10
136 00:26:01,920 --> 00:26:12,480 o'clock. Like for instance, if you're a Canadian dollar trader, and the crude oil inventory number comes out, usually like 1030 in the morning, you have to
137 00:26:12,480 --> 00:26:25,740 make allowances for that. And just expect there to be a likely move on that oral number at 1030. So to something that they're out there, and a lot of you've been
138 00:26:25,740 --> 00:26:37,740 barking, wanting to see something FX related, because you know, predominantly, I've been doing that since 2010. But I humbly submit this for your inquiry. And
139 00:26:37,740 --> 00:26:49,110 that way you can study this and listen to it a few times. It has a couple things in me one of your head, it's not terribly, you know, demanding in terms of note
140 00:26:49,110 --> 00:26:56,610 taking, but there's some things in here that are noteworthy for you to have in your study journal. And for the most part, it looks like it works pretty good in
141 00:26:56,610 --> 00:27:03,450 this pair two, or in this asset class. So until I talk to you again on Thursday, be safe