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Wiki source code of OTE Pattern Recognition Notes

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1 {{box cssClass="box floatinginfobox" title="**Quick Links**"}}
2 {{toc start="2" depth="5" numbered="true"/}}
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4
5 == {{id name="Primer"/}}Optimal Trade Entry Primer ==
6
7 * one of many trading patterns, one of the easiest
8 * trading plan needs to be simple:
9 ** what's your risk model
10 ** how to frame that?
11 ** what makes your entry
12 ** what gives you indicators of bullish/bearish market?
13 ** how do you execute the trade?
14 ** how do you manage the trade?
15 ** where do you take profits?
16 * what make the market predisposed to go higher or lower?
17 ** look at HTF (M, W, D, 4h) and look for key levels where price has moved away from in the past
18 ** HTF shows where the big players are most likely going to push things around.
19 ** LTF is too noisy to show this detail.
20 * Assuming bullish market, we are looking for where the market wants to trade higher.  {{glossaryReference glossaryId="Glossary" entryId="OTE"}}OTE{{/glossaryReference}} is based on buying during the retracements that occur before the further push upwards.
21 * The impulse move has to incorporate a break in Market Structure.
22 * Using Fib Retracement as a visual guide, set the following levels
23 ** -1 - Symmetrical Price Swing
24 ** -0.62 - TP2
25 ** -0.27 - TP1
26 ** 0 - First Profit - Scaling
27 ** 0.5 - Equilibrium
28 ** 0.618 - 62% retracement
29 ** 0.705 - {{glossaryReference glossaryId="Glossary" entryId="OTE"}}OTE{{/glossaryReference}} 70.5%
30 ** 0.79 - 79%
31 ** 1 - 100%, or likely SL
32 * {{glossaryReference glossaryId="Glossary" entryId="OTE"}}OTE{{/glossaryReference}} (70.5%) is an ideal target.  getting deeper is better, but you run the risk of not filling your order.  62% retracement is also acceptable, but it results in smaller profits because our SL range will be larger, necessitating smaller order sizes to maintain our risk profile.
33 * First Scaling, or slightly before, represents the place to take initial profits.  It should be a decent return, preferable better than 1:2 risk/reward, but slightly less than 2 (1.5? 1x75?) is also acceptable.
34 * Setups on 1h charts better than 5m charts because the pip movements will be larger.
35 * Key levels xxx.00, xxx.20, xxx.50, xxx.80, yyy.00
36 * Place the fibs on the body of the candles
37 * Market structure - example given:
38 - monthly view
39 [[image:Screenshot 2020-06-29 at 03.11.56.png]]
40 \\- daily view
41 [[image:Screenshot 2020-06-29 at 03.14.02.png]]
42 \\- 15m view[[image:Screenshot 2020-06-29 at 03.06.46.png]]
43
44 * Note the following:
45 ** institutional levels
46 ** old monthly high at 1.1720 (1.17137 rounded)
47 ** price runs down until it hits the 20 level (1.1720), rallies and creates a new short term high (old - middle red line, new STH, top red line. It's also called a "market structure break"
48 ** the new STH makes for a more likely trade opportunity. (market maker model) and opens up the chance for an {{glossaryReference glossaryId="Glossary" entryId="OTE"}}OTE{{/glossaryReference}}.
49 ** also, a high, with two lower highs on either side makes that high more significant.  when this high is broken, it's a more convincing move than breaking the other shorter term highs, thus giving us the opportunity to find a likely {{glossaryReference glossaryId="Glossary" entryId="OTE"}}OTE{{/glossaryReference}}.
50 ** at the fib, we see price rockets away from a STL
51
52 * when old highs/lows are broken, trades will tend to reach back to those old positions (retail calls it "support")
53
54 ====== ~[[[top>>doc:WebHome]]] ======
55
56 == {{id name="Intro"/}}Introduction - AUDUSD ==
57
58 * how to annotate the charts to look for specific price patterns
59 * study for the patterns for a month, and it'll start to become more easily recognizable as you train your brain to recognize it, then see if you can see it live
60 * the pattern should appear every day, but not necessarily on the same pairs
61 * daily chart - audusd, 20-apr-2020 contains two down candles, showing orderblock
62 [[image:Screenshot 2020-06-29 at 04.21.46.png]]
63
64 * the two equal lows in May are sensitive to prices in that order block
65 [[image:Screenshot 2020-06-29 at 04.23.52.png]]
66
67 * we are primarily looking for reactions to the previous days range. (last visible green candle in the picture above)
68 * can we determine whether the price is going to be able to break the previous days high or low?
69 [[image:Screenshot 2020-06-29 at 04.50.28.png]]
70 We can see that the recent lows pushed slightly into the order block, but returned indicating that prices doesn't currently want to run lower.
71
72 * AUDUSD 5M example[[image:Screenshot 2020-06-29 at 04.58.02.png]]
73 Mark out the previous days high and low.
74 \\The black line (6450) represents the closest institutional or key level near the previous days high.  The blue lines above and below are a 10 pip spread.
75
76 * The {{glossaryReference glossaryId="Glossary" entryId="OTE"}}OTE{{/glossaryReference}} pattern occurs during the 8:30 to 11:00am NY session.  That's when the major news and reports tends to come out. 
77 [[image:Screenshot 2020-06-29 at 05.02.49.png||queryString="width=385&height=579" height="579" width="385"]]
78 The green box represents the 62 to 79% Fib retracement levels in the {{glossaryReference glossaryId="Glossary" entryId="OTE"}}OTE{{/glossaryReference}} pattern
79
80 * The Fib box is drawn from the low to high when the previous days high has been broken.
81 * Trade
82 ** lot size that allows taking the partials (0.04, take a bit off each time? 
83 ** SL will be set below the 100 level.
84 ** Profit taking
85 *** take at 1st scaling at -0.5 or 15 pips or more
86 *** take next at -1.0 or 15 pips or more (or slightly before - round down to the nearest 10 level)
87 *** take a scaling at 100 pips regardless of where you are
88 *** take next at -1.5
89 *** take next at -2.0
90 *** once price moves beyond the 1st scaling, move the SL up (just beyond BE)
91 *** 2nd scaling - move SL above SL.
92 *** other scalings - watch the trades, then set SL beyond BE, not to close so there is room for the trade to run.
93 *** get out by the last scaling
94 * Fib settings for Trading View:
95 [[image:Screenshot 2020-06-29 at 05.10.27.png||queryString="width=363&height=533" height="533" width="363"]]
96 We could also at -1.5 level
97
98 * key things learned
99 ** when to move a stop
100 ** what entry price to look for
101 ** where stop loss should be
102 ** where do you take partials
103 ** what you avoid doing to your revised stops (choking them out)
104
105 ====== ~[[[top>>doc:WebHome]]] ======
106
107 == {{id name="Ex02"/}}Example 2 - USDJPY ==
108
109 * Daily Chart
110 [[image:Screenshot 2020-07-07 at 01.38.28.png]]
111 \\fib drawn from the swing low, to the swing high
112
113 * previous days high (2nd last candle) broke the high from the day before that.  This means we could potentially see a turn, or an expansion to the upside
114 [[image:Screenshot 2020-07-07 at 01.40.40.png]]
115 \\Our high is 106.65(7)
116
117 * Dropping into the 5m chart:
118 [[image:Screenshot 2020-07-07 at 01.43.50.png]]
119 \\Where do you think the {{glossaryReference glossaryId="Glossary" entryId="OTE"}}OTE{{/glossaryReference}} is going to be?  Look before scrolling further.  Remember the magic hours of 08:30 - 11:00 NY time. 
120
121 * Fib added from the previous low at point 1, to the last recent high at point 2
122 [[image:Screenshot 2020-07-07 at 01.47.47.png]]
123
124 * Trading View chart, 15m
125 [[image:Screenshot 2020-07-07 at 02.10.10.png]]
126
127 * On the above chart is a second {{glossaryReference glossaryId="Glossary" entryId="OTE"}}OTE{{/glossaryReference}} occurring just after the {{glossaryReference glossaryId="Glossary" entryId="OTE"}}OTE{{/glossaryReference}} period opening
128 [[image:Screenshot 2020-07-07 at 02.19.10.png]]
129 \\From the swing low, to the new high breaking the previous high.  The {{glossaryReference glossaryId="Glossary" entryId="OTE"}}OTE{{/glossaryReference}} opportunity crosses the weekend.  
130
131 * 5m chart view
132 [[image:Screenshot 2020-07-07 at 02.22.17.png||queryString="width=591&height=819" height="819" width="591"]]
133 \\the recent low marked, right side showing the new high forming the {{glossaryReference glossaryId="Glossary" entryId="OTE"}}OTE{{/glossaryReference}} pattern.
134
135 ====== ~[[[top>>doc:WebHome]]] ======
136
137 == {{id name="Ex03"/}}Example 3 - S&P 500 E-Mini Futures (June 2020) ==
138
139 * Daily Chart
140 [[image:Screenshot 2020-07-07 at 02.43.11.jpg]]
141
142 * currently inside of an OTE 
143 [[image:Screenshot 2020-07-07 at 02.46.32.jpg||height="696" width="687"]]
144 \\The fib provides a framework - old low, old high, retracement back to the 79 level.  On the daily chart, the momentum is likely to go higher.  It could be reaching for the old high, it could break through, or it could fail.  It doesn't matter.
145 \\What we do care is that it is likely to run the previous day's high.
146
147 * Previous day's high marked
148 [[image:Screenshot 2020-07-07 at 02.53.30.jpg||height="167" width="848"]]
149
150 * 5m chart
151 [[image:Screenshot 2020-07-07 at 03.24.45.jpg]]
152
153 * Marked up
154 [[image:Screenshot 2020-07-07 at 03.28.25.jpg]]
155 \\The "big figure" is 2900.  Price has traded down into that during the NY session.  Whenever a big figure is swept, either down into, or up into, it generally creates a tradeable bounce or retracement, even if it is very short lived. 
156
157 * Focus on the NY session time to find the {{glossaryReference glossaryId="Glossary" entryId="OTE"}}OTE{{/glossaryReference}}
158 [[image:Screenshot 2020-07-07 at 03.31.40.jpg||height="417" width="313"]]
159
160 * {{glossaryReference glossaryId="Glossary" entryId="OTE"}}OTE{{/glossaryReference}} marked
161 [[image:Screenshot 2020-07-07 at 03.34.05.jpg||height="850" width="775"]]
162
163 * and here is how it played out
164 [[image:Screenshot 2020-07-07 at 03.36.45.jpg]]
165 \\In this example, the market tends to want to gravitate towards the old high because the market is bullish, and will catch out the market short sellers.
166
167
168 ====== ~[[[top>>doc:WebHome]]] ======
169
170 == {{id name="Ex04"/}}Example 4 - GBPUSD ==
171
172 * 1H chart
173 [[image:Screenshot 2020-07-07 at 04.22.04.jpg]]
174
175 * Marked up using "support and resistance" paradigm. Note that this is a retail trading mindset and it is wrong.
176 [[image:Screenshot 2020-07-07 at 04.31.28.jpg]]
177 \\Again.  Wrong.
178
179 * ICT Markup - [Market Efficiency Paradigm] (link to definition later)
180 [[image:Screenshot 2020-07-07 at 04.34.19.jpg]]
181 \\It's basically the narrative of why price goes where it does and why it reacts the way it does when it gets there and where it is reaching to next.  The ICT Bearish Breaker cuts to the whole narrative immediately. 
182 \\Why?  You want to look at price and look for areas where they run an old high because above that is going to be buy stops.  And this is buy side liquidity.  This could be in the form of buy stops for new long entries, or stops protecting existing shorts.
183 \\The big candle to the right runs through that zone to gather the liquidity.  Also, ICT calls this candle pattern a "Judus Swing" because it's a fake move because it appears to signal a bullish move.
184 \\When we see these sharp runs that that run previous highs/lows, it's highly suspect to ICT.  If we get back down below the lowest down candle (ICT Bearish Breaker), breaking that low (which it does in the 3-6am bull candles above), the narrative changes to Bearish.
185 \\So what we do is go to that Breaker, draw the line out in time and then you'll be able to see the real turning point, or the real support/resistance level if you like.  Look at the 7-9am candles on the right where it touches the 1.2371 line.
186
187 * This provides the narrative behind finding and {{glossaryReference glossaryId="Glossary" entryId="OTE"}}OTE{{/glossaryReference}} with this structure in place.  It can occur in a trendless market environment, and doesn't have to have a bullish or bearish trend on the daily chart, so go into the lower timeframes.
188
189 * 1h chart marked up showing the previous days low as our highlighted candle is a ICT Bearish Breaker and tends to indicate that we are going for new lows and it is likely we will target the previous days low.
190 [[image:Screenshot 2020-07-07 at 04.59.43.jpg]]
191 \\The new ICT bearish breaker is highlighted in the pink box.
192
193 * 5m with the NY Session highlighted
194 [[image:Screenshot 2020-07-07 at 05.01.46.jpg]]
195 \\
196 * and here is the {{glossaryReference glossaryId="Glossary" entryId="OTE"}}OTE{{/glossaryReference}} Fib marked.
197 [[image:Screenshot 2020-07-07 at 05.04.42.jpg]]
198 \\stops will be above the 1.0 point
199 \\We see the high, down to the low, and then the price returning to the {{glossaryReference glossaryId="Glossary" entryId="OTE"}}OTE{{/glossaryReference}} where we can fill our order.  Our -2 level is the 1.23 big level and the institutions reaching for the old lows and the liquidity that can be found there.
200
201 * Also note, that we have not yet taken our previous days lows, so there is a second possible {{glossaryReference glossaryId="Glossary" entryId="OTE"}}OTE{{/glossaryReference}} entry.  The price starts to retrace at at 11am - which is just outside of our session window, but still acceptable.  So, place the fib and see if this retracement suggests a trade
202
203 * Fib placed
204 [[image:Screenshot 2020-07-07 at 05.17.16.jpg]]
205 \\We see the high, low, the retracement into the 62 {{glossaryReference glossaryId="Glossary" entryId="OTE"}}OTE{{/glossaryReference}} region and we'll be targeting the previous days low with a short.  The stop would be above the high
206 \\Our targets: 
207 - 1.2282 - 1.2283 for our 0.5 level
208 - 1.2265 for our 1.0 level, or we could target the 1.227 level as a more likely target rather than getting a full fib.
209 \\We're rounding down our numbers and being content with not being too greedy so we don't make a winning trade a losing one.
210
211 * Results:
212 [[image:Screenshot 2020-07-07 at 05.25.06.jpg]]
213 \\\\0.5 taken.  1.0 taken.
214
215
216 ====== ~[[[top>>doc:WebHome]]] ======
217
218 == {{id name="Ex05"/}}Example 5 ==
219
220 * example
221
222 ====== ~[[[top>>doc:WebHome]]] ======
223
224 == {{id name="Ex06"/}}Example 6 ==
225
226 * example
227
228 ====== ~[[[top>>doc:WebHome]]] ======
229
230 == {{id name="Ex07"/}}Example 7 ==
231
232 * example
233
234 ====== ~[[[top>>doc:WebHome]]] ======
235
236 == {{id name="Ex08"/}}Example 8 ==
237
238 * example
239
240 ====== ~[[[top>>doc:WebHome]]] ======
241
242 == {{id name="Ex09"/}}Example 9 ==
243
244 * example
245
246 ====== ~[[[top>>doc:WebHome]]] ======
247
248 == {{id name="Ex10"/}}Example 10 ==
249
250 * example
251
252 ====== ~[[[top>>doc:WebHome]]] ======
253
254 == {{id name="Ex11"/}}Example 11 ==
255
256 * example
257
258 ====== ~[[[top>>doc:WebHome]]] ======
259
260 == {{id name="Ex12"/}}Example 12 ==
261
262 * example
263
264 ====== ~[[[top>>doc:WebHome]]] ======
265
266 == {{id name="Ex13"/}}Example 13 ==
267
268 * example
269
270 ====== ~[[[top>>doc:WebHome]]] ======
271
272 == {{id name="Ex14"/}}Example 14 ==
273
274 * example
275
276 ====== ~[[[top>>doc:WebHome]]] ======
277
278 == {{id name="Ex15"/}}Example 15 ==
279
280 * example
281
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283
284 == {{id name="Ex16"/}}Example 16 ==
285
286 * example
287
288 ====== ~[[[top>>doc:WebHome]]] ======
289
290 == {{id name="Ex17"/}}Example 17 ==
291
292 * example
293
294 ====== ~[[[top>>doc:WebHome]]] ======
295
296 == {{id name="Ex18"/}}Example 18 ==
297
298 * example
299
300 ====== ~[[[top>>doc:WebHome]]] ======
301
302 == {{id name="Ex19"/}}Example 19 ==
303
304 * example
305
306 ====== ~[[[top>>doc:WebHome]]] ======
307
308 == {{id name="Ex20"/}}Example 20 ==
309
310 * example
311
312 ====== ~[[[top>>doc:WebHome]]] ======