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ICT Forex - Market Maker Series Vol 2 of 5.srt

Last modified by Drunk Monkey on 2021-07-28 05:39
1 00:00:31,290 --> 00:00:41,850 ICT: Alright, folks, welcome back, this is Volume Two of a continuing series of five parts. For the ICT market maker series, this installment will be focusing
2 00:00:41,850 --> 00:00:55,650 primarily on foundations to institutional order flow and understanding liquidity. Right. So when we're considering what the large institutions are
3 00:00:55,650 --> 00:01:04,830 doing in how to operate and engage in the foreign exchange market, the premise I want to begin my trading with in my analysis with on the weekend is what I think
4 00:01:04,860 --> 00:01:13,080 the weekly chart is going to do. And that's what we're showing here is a weekly chart of the British Pound versus US dollar. Every candle in this chart
5 00:01:13,170 --> 00:01:25,320 represents the highest and lowest price for an individual, weekly range. And I sit down on my weekly chart, and I look for areas that are obvious. Okay, what
6 00:01:25,320 --> 00:01:37,950 do I mean by obvious? years ago, I taught that if you find a level that's too clean, okay, and it's just too straight edge, chances are, it's probably going
7 00:01:37,950 --> 00:01:51,030 to get swept. What do I mean by that? Well, if you look at this area, right here, there was how this candle goes to that low, the body stops here, the body
8 00:01:51,030 --> 00:02:02,640 stops here, doesn't really have any kind of jagged end, or bottom to it. Just real smooth and clean, just like this high in this high has a relatively clean
9 00:02:03,540 --> 00:02:17,430 level up there. And these two candles here have a really nice clean level to it. And these right here, pretty much the same thing. But my eye jumps to these
10 00:02:17,430 --> 00:02:30,690 levels. The significance about these levels is that below this level here is cell stops, traders that went long here, they had stop loss orders to protect
11 00:02:30,690 --> 00:02:45,270 that long in the form of sell stops. So this level in here, is saturated with willing participants that want to sell at the market. Because their belief is if
12 00:02:45,270 --> 00:02:54,270 it goes below this level here, they're probably wrong in their long idea and they want to get out before it causes them to lose more money. Conversely, there
13 00:02:54,270 --> 00:03:02,880 are traders that will see this level as support and if it breaks, their idea is well supports broken says probably bearish and they want to go short. So how do
14 00:03:02,880 --> 00:03:18,510 you go short you sell so the function of the liquidity that rests below these smooth or clean, equal lows is sell side in nature. So it's sell stops or sell
15 00:03:18,510 --> 00:03:35,070 side liquidity the market last week at the time of this recording, it is July 27 2021. And the market trades down last week and sweeps below these clean
16 00:03:35,070 --> 00:03:50,910 candles. Okay, so this area here gets attacked. And notice it comes off that low and closes here on the week. The week at present of this recording we opened
17 00:03:50,910 --> 00:04:04,350 here has small little movement below the opening on the week. And then we had this movement higher. Now prior to this candle closing up here, we didn't really
18 00:04:04,350 --> 00:04:15,750 know if it's going to go down there and continue going lower or if it's going to reverse that's not necessary. To find profitability and consistent setups, all
19 00:04:15,750 --> 00:04:23,880 we're looking for is runs on liquidity. Okay, so you have to know where the draw on liquidity is. And that's what I'm showing you here this is what you're
20 00:04:23,880 --> 00:04:38,130 looking for areas that are to clean that may draw price up into them or down into them. So just the opposite of what we saw down here. What would be resting
21 00:04:38,130 --> 00:04:52,410 about these relative equal highs by stops anyone that was short how well trader protect his bearish position with a buy stop. So any movement about here that
22 00:04:52,410 --> 00:05:01,140 would trigger by stops on shorts and or some traders that see this as resistance if it breaks that they would see it as what risk system's broken, therefore
23 00:05:01,140 --> 00:05:14,250 bullish. So this is the closest strong liquidity that's opposing this. So when we started the week here, we opened, traded down just a little bit and started
24 00:05:14,250 --> 00:05:25,500 to trade higher. Where's it likely to go? Read about these highs, doesn't mean it will absolutely do it. But this is what we do, we look for areas where the
25 00:05:25,800 --> 00:05:29,670 drop in liquidity acts like a magnet. Okay, imagine
26 00:05:31,259 --> 00:05:42,239 how this candles gravitating towards this level here to attack and absorb the liquidity, which rests in the form of buy stops, which is opposite of what we
27 00:05:42,239 --> 00:05:56,069 saw down here. So the buy stop here are the near term drawn liquidity. So institutional order flow for the week, should be bullish. Until we get up into
28 00:05:56,069 --> 00:06:04,979 this area. At that moment, we'd have to reassess everything continuation if it's likely or reversal if it's likely or just consolidation. But we don't need to
29 00:06:04,979 --> 00:06:20,429 know that right now. That starts the week here with the likelihood of running up into this area. So the inability for price to make a significant price run lower
30 00:06:21,479 --> 00:06:30,329 is the tip off that we're going to see institutional order flow, or bias or trend or momentum to the upside until we get into this area right here. For the
31 00:06:30,329 --> 00:06:45,179 purpose of attacking this buy side liquidity pool for the buy stops. So if we zoom in here, I want you to think about the weekly range in the context that the
32 00:06:45,179 --> 00:06:56,999 open in decline from the opening price anywhere in this area close to the opening price, or below, it is ideal for going long, this is the cheapest it's
33 00:06:56,999 --> 00:07:10,229 likely to get and the closest you can buy around that opening price, the better. As we get closer and closer to this area up here, the idea of probability or low
34 00:07:10,229 --> 00:07:20,969 risk starts to dissipate, because we have the likelihood that this could retrace back in this range. Now the time is recording, it's only Tuesday evening in my
35 00:07:20,969 --> 00:07:33,689 local time on the East Coast of the United States. But it could very easily continue and trade well beyond these levels here into Wednesday and Thursday,
36 00:07:33,839 --> 00:07:43,919 maybe even Friday. I don't need to know that. The premise starts with we're down here, we came off the low after taking stops, it's probably going to make a run
37 00:07:43,949 --> 00:07:54,149 for this area up here for liquidity. So the ideal scenario is if I'm thinking that that means the weekly range is likely to be bullish, or at least I'm
38 00:07:54,569 --> 00:08:04,769 outlining it as that. So for my qualitative analysis, this is what I'm doing. Remember, in the first one, we did quantitative analysis where they were
39 00:08:05,429 --> 00:08:17,279 measures that were data oriented, this is a little bit more subjective. So that's why it's qualitative. And the idea is, if I'm bullish for the week, I'm
40 00:08:17,279 --> 00:08:31,649 expecting Monday and Tuesday and early parts of Wednesday to be bullish. Until we get to an area where the drawing liquidity is reached. We're gonna drop down
41 00:08:31,649 --> 00:08:45,449 to a daily chart here, you can see Monday's trading. This is the candle for the entire range of trading on Monday, July 26 2021, and then Tuesday's trading
42 00:08:45,449 --> 00:08:58,739 daily range for July 27 2021. And notice how Monday we had a nice little rally higher. And on Tuesday, we opened here and we traded down into this candle right
43 00:08:58,739 --> 00:09:10,439 there. This candle is what I teach as a bullish order block. The markets already bullish or the underlying narrative is bullish. And we had a confirmation the
44 00:09:10,439 --> 00:09:23,999 market wants to go higher. On Monday trades higher. On Tuesday, we trade down into that level, the opening price hits it trades off of that rallies back
45 00:09:23,999 --> 00:09:36,689 through. It makes a higher high than that of on Monday. Remember, the candle opens here and then trades down. This is a Judas swing. retail traders get
46 00:09:36,689 --> 00:09:42,719 caught up in that on a lower timeframe. They think it's bearish and they start selling short. And then when hits the higher timeframe level like this that's
47 00:09:42,719 --> 00:09:55,049 key or significant. It'll reverse and start to trade higher and it catches them off guard. Some of you have probably noticed that I posted a trade or result of
48 00:09:55,049 --> 00:10:05,759 a trade that I did today in British Pound versus US dollar this very market. I'm showing you the framework and context because I knew I was teaching this today
49 00:10:05,939 --> 00:10:14,789 in the second volume of this teaching series. So I'm teaching you on the level of my YouTube content. And everyone's familiar with my concept of the order
50 00:10:14,789 --> 00:10:26,819 block through this YouTube channel using the bias that suggests that this is likely to reach up into these by stops.
51 00:10:29,070 --> 00:10:39,000 So anticipating its continuation into Wednesday, to attack this now, does it need to do it? No, because I've already been profitable on the entry and
52 00:10:39,000 --> 00:10:53,340 management of Tuesday's trading. Dropping down to an hourly chart, that blue line I use on a daily chart to identify the bullish order block level is now
53 00:10:53,340 --> 00:11:02,250 green here. Okay, so I don't want to trip you up, I just want to have a contrast, because of the timeframe. This level is that same bullish order block
54 00:11:02,280 --> 00:11:13,320 level on the daily just transposed to the hourly chart, notice how the hourly chart trades down hits it rebounds and starts to trade higher. This is that area
55 00:11:13,320 --> 00:11:28,470 where the buy stops are this level and higher is where those buy stops reside. So it's drawing price up there. Zooming in here, you can see again, this is the
56 00:11:28,500 --> 00:11:36,780 daily bullish order block level. And I want you to look closer think about what I was showing you on the weekly chart. There's clean levels, well, there's
57 00:11:36,780 --> 00:11:48,030 singular candle lows and highs, or swing point highs and swing point lows or swing lows and swing highs. Depending on how you want to say it. They have stops
58 00:11:48,090 --> 00:12:01,680 above and below those as well. This candle right here is a case in point, we have a swing low, a single candle that has a higher low to the right, and a
59 00:12:01,680 --> 00:12:13,440 higher low to the left, one single candle there that swing low, is going to be seen as a short term, swing low, where sell stops are sitting right below that.
60 00:12:14,010 --> 00:12:22,920 Because the markets rallied up it consolidate rallied again. And when it's up in here, all in this consolidation, those that bought down here or even over here,
61 00:12:22,950 --> 00:12:32,790 they have their stop loss trail right below that low in the market drops down that take those participants out. And then rallies, why is it going down here to
62 00:12:32,790 --> 00:12:43,050 accumulate sell stops? Why are they attacking the sell stops, because this is attacking participants that are willing to sell at a lower price lower than what
63 00:12:43,290 --> 00:12:55,860 when it was up here. Institutional traders will not buy up here, they're going to wait for it to drop down to attack a very deep discounted price and pool of
64 00:12:55,860 --> 00:13:07,680 liquidity of sellers that want to sell at a cheap price. Because they try to stop loss up there. So these sell stops flood the market with sell orders. And
65 00:13:07,710 --> 00:13:22,140 smart money buys them at the market set between here and buys them. So this is called pairing of orders. The market hits this and then price rallies. Now this
66 00:13:22,140 --> 00:13:32,220 has that same swing low zoomed in. But I'm drawing your attention to these consecutive down closed candles because this is a bullish order block the high
67 00:13:32,250 --> 00:13:42,030 to the opening price. Now why not the entire range like a supply and demand zone would be? Well this is not supply and demand. So it's the high down to the
68 00:13:42,030 --> 00:13:54,180 opening price extending out in time and market drops down into that that's a bullish order block. And it's taking out sell stops. So a high probability order
69 00:13:54,180 --> 00:14:04,650 block is when it takes out stops and returns down to the word block itself. Not every down closed candle is a bullish order block and not every upclose candle
70 00:14:04,650 --> 00:14:16,860 is a bearish order block. But if you are in a context that is bullish, as I've outlined here, and clearly proven I was trading with this bias today. The
71 00:14:16,860 --> 00:14:29,370 underlying pinnings of the market is it's bullish. So therefore, down close candles to have a market move away from it and has a swing low just above it
72 00:14:29,400 --> 00:14:37,200 like we do here. That's a confluence of specific things that make it high probability for the order book. The order block is the consecutive down close
73 00:14:37,200 --> 00:14:46,440 candles, all three of them make up the order block. But the sensitive price point is the high in the opening. So you can be a buyer at this high or at the
74 00:14:46,440 --> 00:14:58,830 opening price. The easiest one is using the high end allowing your stock to absorb any adverse price movement against you. That would if it was going to go
75 00:14:58,830 --> 00:15:08,730 back into say the Opening price, you have to consider that when you're placing your stop. So how does that affect your trade? Well, when you're starting out
76 00:15:08,850 --> 00:15:20,700 without lowering any timeframe beyond the 15 timeframe here, you can be buying at the high and use the low of all the consecutive down close candles, your stop
77 00:15:20,700 --> 00:15:24,240 loss needs to be just below that. Now you may look at this and say, Oh, no, it's
78 00:15:24,240 --> 00:15:32,940 too much of a stop. Well, that's all relative. In the beginning, it's good for you to try to trade like that. Because you don't want to be trying to be too
79 00:15:32,940 --> 00:15:42,510 precise, because many times the market will slice and dice you. If you're trying to be too finicky about your entries and your stops. It can be very easy for the
80 00:15:42,510 --> 00:15:56,730 marketplace to take your two pips stop loss, three pips stop loss, it can do it, okay, because the broker has the right and freedom to do that. And they will not
81 00:15:56,730 --> 00:16:05,610 say you can't use a very small, ultra tight stop loss, but doing it as consistently over and over and over again, the broker will just widen the spread
82 00:16:05,610 --> 00:16:16,260 and take you out. And there's nothing you can do about it. So to repeat, a bullish order block that's high probability is when the markets already
83 00:16:16,260 --> 00:16:28,830 predisposed to go higher. It's shown a willingness to go higher, and leave this area here. And we have a short term low. So it has stops in a bullish market,
84 00:16:29,160 --> 00:16:37,410 and it trades down below that level here and into consecutive down close candles. So you would be buying at the high plus the spread and your stop will
85 00:16:37,410 --> 00:16:51,120 be below this low right there. And that would be your underlying risk. Does the market stay there very long once it trades into it No. leaves it consolidates
86 00:16:51,330 --> 00:17:03,810 rallies again, because back down into another order block here. trades lower, accumulates and rallies again, trades one more time retracement, and then blasts
87 00:17:03,810 --> 00:17:19,230 off and attacks, all the buy stuff that we're asking about these clean highs. Notice also before the market starts to rally, it generally takes out some short
88 00:17:19,230 --> 00:17:36,570 term swing low. This low took out this swing low. This low took out this swing low. This low took out this swing low. Each time is a dynamic rally higher. This
89 00:17:36,570 --> 00:17:48,330 swing low was taken out by this swing low and it rallies higher. This swing low is taken out by that swing low, not by much. But it's all it takes and then
90 00:17:48,330 --> 00:17:58,320 starts to move higher. So when there's a run on liquidity that's opposed to the underlying direction and the words, if we're bullish on the market like this,
91 00:17:59,010 --> 00:18:07,170 get comfortable with the market reaching underneath lows and stop thinking that it's going to be breaking down entirely or reversing most of the time, you're
92 00:18:07,170 --> 00:18:20,790 going to find that it's taking those cell stops out and absorbing them to offer smart money buying opportunities at deep discount prices. Finally, we're looking
93 00:18:20,790 --> 00:18:30,000 at price on Monday and today is Tuesday. And I want you to notice how the market does what it creates the low in London, which is exactly what I teach on my
94 00:18:30,030 --> 00:18:42,180 YouTube channel, and then a continuation in New York session. On Tuesday, it creates the low of the day and a continuation in New York. And it rallies up
95 00:18:43,080 --> 00:18:54,600 it's consolidating in here. And where does the liquidity reside? Again, this blue line is that weekly line I drew out that was a clean level where the buy
96 00:18:54,600 --> 00:19:05,640 stops are. So the market's most likely going to draw up into that 139 big figure 139 10 and institutional level 139 20 could potentially be trade two as well, to
97 00:19:05,640 --> 00:19:17,130 make sure it really sweeps out all those biceps. Now what's the vested interest for the market to send price that high? Because smart money has bought down
98 00:19:17,130 --> 00:19:29,190 here. They bought down here and they bought down here. Where do they want to get out at at a high price, who's willing to buy it from them at a high price. The
99 00:19:29,190 --> 00:19:40,380 buy stops resting just above that level here I noted on the weekly chart. So we covered several things in here. foundations to institutional order flow, how we
100 00:19:40,380 --> 00:19:47,790 frame that we look for the weekly range, we look for clean levels, very clean levels, your eyes needs to be trained to look for them and the easiest way to do
101 00:19:47,790 --> 00:19:59,670 that is go through back logging and look at old historical price moves and mark them up on your chart. That historical study will train your eye and activate
102 00:19:59,670 --> 00:20:08,310 your rig activating system. And that means when you see something over and over again, it makes you sensitive to it so that way you will start to anticipate it
103 00:20:08,310 --> 00:20:16,170 when you see familiar patterns and live price action, and it makes you better at reading the tape. Reading the tape is to simply understand what the markets
104 00:20:16,170 --> 00:20:18,330 doing live or what's about to do next.
105 00:20:18,480 --> 00:20:26,100 Okay. So hopefully you found something in this that was helpful and insightful and I'll talk to you in the next installment. Be safe.