ICT - If I Knew Then - Part 3 of 4 - How Would I Practice.srt

Last modified by Drunk Monkey on 2021-05-25 08:40
1 00:00:10,559 --> 00:00:19,169 ICT: Okay, folks, welcome back. This is part three of a continuing series of four videos, if I could go back and tell myself what I knew Now, again, this is
2 00:00:19,169 --> 00:00:31,619 a hypothetical conversation with my younger self. Purely fiction. Just to give you a perspective on if I tell myself what to focus on, when I first started, he
3 00:00:31,619 --> 00:00:38,639 would hopefully have avoided majority of the painful lessons and losses that I had to incur.
4 00:00:45,150 --> 00:00:58,200 How would I practice? Where do you back test daily setups? Now, before I get into this, this whole series is really linked to the optimal trade entry pattern
5 00:00:58,200 --> 00:01:07,860 that I've that I've made public on my YouTube channel. I've also included 20 videos of daily setups, so that we kind of give you familiarity to what this
6 00:01:07,860 --> 00:01:19,290 pattern looks like across a wide array of different asset classes. But I'm covering a simplistic approach to how you should be practicing. First and
7 00:01:19,290 --> 00:01:31,020 foremost, everyone knows, broker demo platforms. Okay. So whenever you open up an account with a broker, generally they offer you a trial version of their
8 00:01:31,020 --> 00:01:40,800 platform. So you can test your strategies or whatever it is that you're utilizing for your framework for your setups. You can test drive it on a demo
9 00:01:40,800 --> 00:01:54,120 account. forex has the ability to offer demo accounts that for some brokers don't expire. And it's not a big deal. If it does expire, he just started
10 00:01:54,120 --> 00:02:05,430 another one. But you don't want to treat the demo account like Monopoly money, you want to sit down with it and say, Okay, how much of this hypothetical
11 00:02:05,730 --> 00:02:17,850 pretend money would I be utilizing, if I was trading, it wouldn't have been $50,000. To start with. And working with a demo with a sober mind about what
12 00:02:17,850 --> 00:02:29,430 you're doing, and building good habits and removing the opportunity to fall into bad habits. That means overtrading, looking for setups, even after you've made a
13 00:02:29,460 --> 00:02:38,400 correct decision in the market shows you that you would have been profitable, it's not an invitation to go right back in the same day, to try to get something
14 00:02:38,400 --> 00:02:48,900 else because it felt good. You're going to fall victim to that early on. So to avoid all that, don't have it in your mindset, you have to take a lot of trades
15 00:02:48,900 --> 00:02:59,490 every single day, you're gonna lose a lot of money, you don't know it yet, but you're gonna lose a lot of money trying to do that. And third party apps like
16 00:02:59,580 --> 00:03:13,260 forex tester, you can go to forex tester COMM And they have a medium where you can go back and back test strategies and such. And finally, tradingview.com
17 00:03:13,290 --> 00:03:25,770 today, which doesn't exist at the time of you coming up now, Michael, the tradingview.com website offers pretty much everything that was available when
18 00:03:26,250 --> 00:03:41,040 you started, meta stock, super charts TradeStation. All those things, and bells and whistles that you're liking right now aren't really that important. You're
19 00:03:41,040 --> 00:03:50,460 going to focus primarily on the open the high, the low and the close. It doesn't feel like that that's where you're going to be heading. But eventually, you're
20 00:03:50,460 --> 00:03:58,410 going to strip all the indicators off your chart, Michael. And you're not even going to consider any of that. It doesn't make sense to you right now. But trust
21 00:03:58,410 --> 00:04:11,370 me, everything becomes clear by not having anything on your charts. You're not have any overlays of your platform indicators you like stochastic right now.
22 00:04:12,300 --> 00:04:21,960 It's not going to ever appear on your chart anymore. You like MACD, it's never gonna appear on your chart anymore. Michael. You want to strip the chart down
23 00:04:21,990 --> 00:04:33,960 and focus on the four price levels that is the most paramount. It's the open the high, the low and the close. And looking at different intervals. The previous
24 00:04:33,960 --> 00:04:43,380 day's highs and lows, previous week's highs and lows and previous months highs and lows will offer a plethora of setups. He doesn't feel like that makes sense
25 00:04:43,380 --> 00:04:53,040 to you right now. But it will absolutely unlock all of the understanding that you'll need to carve out consistent steady setups. So let's go into trading view
26 00:04:53,610 --> 00:05:03,480 and look at how we can practice. Alright, so here is the trading view platform and I have the charts. With the euro dollar currency pair, on the left hand
27 00:05:03,480 --> 00:05:13,560 side, it is a 15 minute time frame. And on the right hand side, it's a daily chart. And the assumption is that we're focusing on the optimal trade entry on a
28 00:05:13,560 --> 00:05:26,520 higher time frame until it delivers to a key level. I'm going to show you right now what that would look like. Here we have a high that would be targeted. In
29 00:05:26,520 --> 00:05:40,680 here, as the price was rallying up, we can see before we got to this high back testing these types of setups is what you'd be doing. We're going to show a
30 00:05:40,680 --> 00:05:41,460 Fibonacci
31 00:05:43,350 --> 00:05:52,950 on this swing low. With this candles higher low in this candles higher low, surrounding this one particular candle. That's why I'm anchoring it to that. And
32 00:05:52,950 --> 00:06:03,330 I'm dragging it all the way up to this candles high. Because it's as it's making higher highs, I'm going to overlay the fib on every successive higher high,
33 00:06:03,690 --> 00:06:12,330 because that's going to be the range in which any retracement comes, it'll be within that range. And it'll be apparent when you see it here. So we draw this
34 00:06:12,330 --> 00:06:23,220 up for that. Okay, so you can see the Fibonacci that's anchored from this low up to this high. It captures this retracement of this candle right here is the 10th
35 00:06:23,700 --> 00:06:32,520 of July 2020. Here's the 10th on the 15 minute time frame, you can see how the 15 minute time frame drops down into the optimal trade entry. Which is the six
36 00:06:32,520 --> 00:06:42,900 to seven times adjacent level and 70.5. Sweet Spot. This level is going to be one of the levels you're gonna like a lot but you'll save yourself a lot of
37 00:06:42,900 --> 00:06:52,890 frustration if you just use the 62% retracement level Michael. Most of the trades that you're hunting in these next couple years are going to be unwilling
38 00:06:52,890 --> 00:07:02,580 to trade to the 70.5 or even 79% retracement level, but he would just simply use the 62% retracement level and defer the insatiable desire for you to find the
39 00:07:02,580 --> 00:07:13,620 perfect entry all the time. Later on in your 40s you're going to feel real comfortable with not having the absolute best entry and the absolute best exit.
40 00:07:14,040 --> 00:07:24,510 There's lots and lots of opportunities in between. So 60% retracement level one here is ideal. And we actually see a key reaction off of that 62% retracement
41 00:07:24,510 --> 00:07:38,220 level, price starts to move higher. Now, your focus is to imagine every daily candle moving higher, open, near the low of the day, close near the high the
42 00:07:38,220 --> 00:07:51,150 day, up close is the mode of delivery. And we're expecting until we get to this high. So when we get up to it and through it. Okay, remember that slogan to it,
43 00:07:51,570 --> 00:08:03,720 and through it to it. And through it. That's how you're going to find the easiest bread and butter setups there is in every market asset class. The idea
44 00:08:03,720 --> 00:08:13,830 is the framework is this optimal trade entry is going to keep delivering until we get to this high and slightly above it. Here is one half a standard deviation
45 00:08:13,890 --> 00:08:28,290 and it's calling for 114 46 and two pipettes. Okay, the actual high of this price when as of the time of this discussion, the high comes in at 114 52. And
46 00:08:28,290 --> 00:08:37,500 one bit bit, so it goes a little bit above it. But that's a good idea as a target, if not just simply at the old high. Now we're going to take our
47 00:08:37,500 --> 00:08:46,320 concentration away from the daily chart, because we can clearly see with the benefit of hindsight here that we had a series of up close candles. And each day
48 00:08:46,350 --> 00:08:55,890 you'd be hunting a New York setup. Now this is going to be the easiest framework, Michael, if you just submit to it early on, stop trying to find
49 00:08:55,890 --> 00:09:05,220 trades outside of this timeframe. focus in here, and you're going to find everything that you would ever need. So all of our attention is going to go over
50 00:09:05,220 --> 00:09:16,380 to this chart here. Scrubbing forward a little bit, you can see the daily dividers. And what you're going to do is you're going to take a line segment and
51 00:09:16,380 --> 00:09:27,060 you use the rectangle if you want. And you're going to delineate on the chart each day 830 to 11 o'clock in the morning New York time. So when you've studied
52 00:09:27,060 --> 00:09:35,850 this time, you're going to be able to see a retracement lower, because remember the framework is every day the daily candles are going to go higher. That is
53 00:09:35,850 --> 00:09:48,900 what you'll litter dope as the power three. This high is going to be attacked, but each day is going to be accumulation manipulation and distribution. The
54 00:09:48,900 --> 00:09:57,570 accumulation is going to be near the low of the day there are killing long positions. You're going to see that movement up going into New York, New York
55 00:09:57,570 --> 00:10:07,830 session is 830 to 11 o'clock. And as the market retraces lower in there, inside that consolidation and retracement, you're going to find a five minute optimal
56 00:10:07,830 --> 00:10:18,960 trade entry. That means a low swing high down in that doesn't take out the previous swing low trades to the 62% retracement level, your stop would be below
57 00:10:19,560 --> 00:10:32,310 the low that creates the optimal trade entry. You would go long at 62 plus spread and reach for previous day's high or a combination of that and the
58 00:10:32,310 --> 00:10:35,190 standard deviations on the Fibonacci. That being
59 00:10:37,710 --> 00:10:48,120 like this is one standard deviation. This is one half a standard deviation, and so on. So each day you can start to see and back test how many pips that using
60 00:10:48,120 --> 00:10:56,970 the 62% retracement level would give you plus the spread for your entry that you would have risked to get that trade on and how many pips it delivered, how long
61 00:10:57,270 --> 00:11:11,550 the trade took from entry to delivery to your target. How much of a drawdown did each setup take? You want to consider that because if you have a large sample
62 00:11:11,550 --> 00:11:20,220 set of data, not every trade is going to start and turn right at the 62% retracement level, you might have to incur some drawdown. And don't make a big
63 00:11:20,220 --> 00:11:29,460 deal of it, Michael, because you're going to have a lot of trades. And they're not always going to be reacting as soon as you get in many times. The fact that
64 00:11:29,460 --> 00:11:38,640 they don't react right away is indicative of you being of you being offside, and it's probably better for you to just kill the trade altogether. But that's
65 00:11:38,640 --> 00:11:51,930 another lesson all the time. The next day, again, 830 to 11, you're going to look for the price structure, that one then creates a run and then a retracement
66 00:11:51,960 --> 00:12:03,030 down into between 830 and 11. There's your optimal trade entry. And when you see that, again, six to a certain tracing level, aiming for a previous day's high
67 00:12:03,210 --> 00:12:13,380 previous day's highs here. So you're gonna aim for a run through that and then add your standard deviations on your Fibonacci tool for targets. same premise.
68 00:12:14,100 --> 00:12:22,680 How long did it take you to get to profitability and cover the dealer spread?  How many pips Did you incur in drawdown? How much time did it take to get to
69 00:12:22,680 --> 00:12:39,480 target all of that is building up a sample set of backlogs. This backlog is what you go back through and study for a hindsight derived experience. And by doing
70 00:12:39,480 --> 00:12:51,240 this, it will program your expectations to not perfect, but it will also show like we're showing here an instance where an optimal trade entry doesn't really
71 00:12:51,240 --> 00:13:01,260 necessarily form. Even if you use this one and down in getting in long. Your stop below this would have been tagged so you would have a loss. So how much
72 00:13:01,260 --> 00:13:10,110 time did you take? Before getting stopped out? How many pips did it move against you from your initial entry and how it traded for the day. All of these ideas,
73 00:13:10,500 --> 00:13:20,790 give you again, perspective, if you would have held on to this trade, and didn't use a stop loss, or kept moving your stop loss down as you will have done
74 00:13:21,600 --> 00:13:27,810 because you've made those mistakes early on already. And you're going to make those mistakes for another year and a half, because you're gonna wrestle with
75 00:13:27,810 --> 00:13:38,130 the idea of being right. It's not about being right, Michael, it's about being consistent and flexible. When you can see the signals that are indicating you're
76 00:13:38,130 --> 00:13:47,760 wrong or offside. You have to kill it. Don't arm wrestle it, there's so many opportunities. If you try to blow your account on one particular trading day,
77 00:13:47,760 --> 00:13:56,400 because you can't accept the fact that you were wrong. You can't accept that you're human, then you're going to struggle more than you have to. And that's
78 00:13:56,400 --> 00:14:06,810 why I'm talking to you right now. I don't want you to go through all that.  Because at 47 turning 48 soon, these problems that you're going to encounter, if
79 00:14:06,810 --> 00:14:21,180 you don't listen to me, are still going to be painful to relive or remember how much information do you use from this bad example? In terms of profitability,
80 00:14:21,180 --> 00:14:30,450 but good example for learning. You don't want to torture yourself and say, Well, I was stupid because it was really, really screaming against me or I should have
81 00:14:30,450 --> 00:14:38,760 saw these multiple attempts to go higher in and break down. I just picked a really bad trade and I was foolish for doing it. Don't do those types of things.
82 00:14:38,760 --> 00:14:48,810 Michael, don't fill your journal up. with toxic thinking. You're going to fill up the first three years of journals with a lot of things that are going to be
83 00:14:50,400 --> 00:14:58,440 linked to your subconscious. And you're going to look at the markets and you can remember and this looks like that time I lost X amount of money and didn't use a
84 00:14:58,440 --> 00:15:06,990 stop or didn't Get out when I should have gotten out and you're reliving all those painful moments that you journaled. You're going to use your journal to
85 00:15:06,990 --> 00:15:13,920 have positive, constructive, not negative criticism, but positive criticisms, it's
86 00:15:15,330 --> 00:15:25,740 important for you to frame your annotations in your journal in such a way that there's no emotions whatsoever. None. But you still want to pull out the
87 00:15:25,740 --> 00:15:35,370 information that's salient to the lesson. Because when you're wrong, you need to study what led to you being wrong. So that way, eventually, you're going to key
88 00:15:35,370 --> 00:15:43,350 up on the things that you're doing that are problematic, and you're falling victim to over and over again. But until you study them with a sober mind, and
89 00:15:43,350 --> 00:15:49,980 objectively, you're going to keep falling victim to it, and you're not gonna understand why it's happening. Not only will you lose a lot of money, but you're
90 00:15:49,980 --> 00:16:02,100 going to have a lot of frustration that's completely avoidable if you just do that this gave you right now. The next day, same thing we're not looking for
91 00:16:03,150 --> 00:16:12,480 every single day to be a winner, we're expecting it's going to be a trade there may not pan out. But we're staying with the same narrative we're looking for
92 00:16:12,570 --> 00:16:24,240 this day, here's a 16th. And that is on the daily, right here, that's this day here. Now that's a down closed candle. When you see this, okay, you're gonna see
93 00:16:24,240 --> 00:16:33,840 this high, and the next candle has a lower high, that swing high is gonna make you think early on that it's creating a top and there's no more buy signals to
94 00:16:33,840 --> 00:16:42,240 take. Don't believe that. Just because it's making a swing high doesn't mean it's not going to likely give you another buying opportunity. Even on that
95 00:16:42,240 --> 00:16:50,670 particular day. It gives us an optimal trade entry here. And you want to study again, 62% retracement level, how much time did it take to cover the dealing
96 00:16:50,670 --> 00:16:59,760 spread and move the target? How many pips did it offer. And even though it didn't get to the previous day's high, by taking out scaled profits, you don't
97 00:16:59,760 --> 00:17:09,750 have to be right about the next trade running to the previous day's high when you're bullish. Short term highs in here as it runs up, you want to take profits
98 00:17:09,780 --> 00:17:18,000 off there. And when you back test and practice, you would be doing the same thing. Assuming that if you were in a trade, you would take something off here.
99 00:17:18,180 --> 00:17:25,890 And you'll take something off here. And as it goes up into this area here. You may have been expecting it to trade above here. But in this case, it turns
100 00:17:25,890 --> 00:17:37,800 around. How much time did you stay in the trade? While I was drop dropping down here? How long would you expect to hold on to that trade before you realize that
101 00:17:37,800 --> 00:17:48,600 you were wrong? and be honest about it. Because what you pour into your back testing and practicing. While it's hindsight, if you are not honest with
102 00:17:48,600 --> 00:17:59,430 yourself, if you put in poor expectations, you're going to get ridiculously backwards results, you're going to expect certain things that aren't realistic
103 00:17:59,430 --> 00:18:10,080 to see in terms of outcome. And you're going to be at the mercy of your emotions. And you're going to be pulled around by a psychological tug of war
104 00:18:10,290 --> 00:18:18,780 about being right or wrong if you don't do these things. The next day, even though we had a losing day here in this trade while it was profitable, it didn't
105 00:18:18,780 --> 00:18:29,340 deliver to the previous day's high. It's fine. You stick with the narrative.  Next trading day. Here it is 830 to 11 optimal trade entry it's dropping down.
106 00:18:29,490 --> 00:18:38,250 And it gives us two opportunities. It drops into it here and it gives us another one here and then takes out the previous day's high here. So we have now
107 00:18:38,250 --> 00:18:49,140 delivered a setup that takes out the previous day's high. And this is Friday, so you can't trade the next day. It's a Saturday. But how many pips did it take
108 00:18:49,590 --> 00:19:00,810 from entry to scaling at your previous day's high? How many pips was that? How much time did it take? How many pips did you have in drawdown? All of those
109 00:19:00,810 --> 00:19:11,370 ideas, you build a backlog of and then on the weekends, you want to study how each one of these work together to complement one another. In other words, how
110 00:19:11,370 --> 00:19:21,630 did the previous day's trading setup the situation he saw on the next day and look at it from a hourly perspective, a daily perspective. And you'll help you
111 00:19:21,630 --> 00:19:33,540 frame out the institutional order flow that you'll become known for in the Forex division. So in this case, following this criteria, and practicing every single
112 00:19:33,540 --> 00:19:40,950 day, just keeping a backlog of it. You're going to not only train yourself to see the setup, but you're going to grow in your understanding about how the
113 00:19:40,950 --> 00:19:51,690 characteristics repeat over and over and over again and staying with just one currency. But framing all the ideas on a higher time frame basis. That leads to
114 00:19:51,720 --> 00:20:03,120 high consistency without having to need perfection. So hope you found this one insightful, I will be back again Next week with the final portion of the series,
115 00:20:03,450 --> 00:20:08,370 how to transition into practice into live funds. Until then, I wish good luck and good trading.