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OTE Pattern Recognition Series - Vol 16.srt

Last modified by Drunk Monkey on 2021-06-10 10:03
1 00:00:11,040 --> 00:00:19,350 ICT: Welcome back, folks, this is volume number 16 in a continuing series of 20 videos for the inner circle trader optimal trade entry pattern recognition
2 00:00:19,350 --> 00:00:28,170 series for YouTube. Alright, today's example is going to be in crude oil is a commodity market. And we're looking at the daily chart and I want give me a
3 00:00:28,170 --> 00:00:41,730 little bit of finesse on bias little additional insights, that we can see how these optimal trade entries also manifest in terms of longer term or broader
4 00:00:42,180 --> 00:00:52,230 objectives. If you look at this chart, I want you to take a look at it for a moment, pause your video, think about what you think you see in price action,
5 00:00:52,290 --> 00:00:54,660 then take a look at the annotations once I release them on screen.
6 00:01:01,230 --> 00:01:13,560 Okay, so let's take a look at what we have here. Right away, this gap in price should draw your attention. Whenever you see a price action gap in a commodity,
7 00:01:14,880 --> 00:01:29,460 or stock or Forex, or anything. If it trades, just think of this area here as a magnet. Now price has been slowly working its way towards this old high. Now
8 00:01:29,460 --> 00:01:39,300 when price went to this high here, it repelled and went lower. And I'm not going to go into the reasons why it did here. But as price is doing this, what is the
9 00:01:39,300 --> 00:01:53,070 retail trader thinking well, price stopped here before. So it's probably not going to go through that. And that is the logic behind 90% of how I decipher
10 00:01:53,070 --> 00:02:04,800 price action. I'm looking for those moments when the public or the retail trader, or as I like to call them retail Rick, they see something in price
11 00:02:04,800 --> 00:02:17,490 action that is so loosely hinged on factual, real underpinnings of the market.  And other words, I am waiting for moments where the public or retail traders
12 00:02:17,640 --> 00:02:29,010 mindset or opinion about a marketplace is so obvious based on what's taught in books and I fell victim to back in the 90s. When I first started, I will look at
13 00:02:29,070 --> 00:02:40,770 opportunities and see the opposing view to what a retail trader would see or expect in price action. So they expect this to act as resistance. So therefore,
14 00:02:41,010 --> 00:02:51,720 they don't want to be vying, they don't want to see a run above that level to attack any kind of liquidity. They're thinking, I want to short this market. And
15 00:02:51,780 --> 00:03:01,860 my stock is safe above this old high. Because look what it did in the past. It turned in never went back above it says it's been gravitating towards this old
16 00:03:01,860 --> 00:03:13,950 high the natural tendency, and I admit, back in the 90s, I was being trained to see it just like this because of all the books. And I got nearly 3000 books in
17 00:03:13,950 --> 00:03:25,140 my library. And the multitude of them are useless. They're absolutely useless. I just can't separate myself from them by discarding them because they really
18 00:03:25,140 --> 00:03:35,280 framed who I am today, because I could go back and see where I followed that failed logic. And not like I said, 99.9% of everything that's written is
19 00:03:35,280 --> 00:03:45,060 garbage. It's all things that's going to end up leading you to monetary loss, confusion, and no real understanding about what it is you should be doing to be
20 00:03:45,060 --> 00:03:59,070 consistently profitable. This gap in price price will generally look to fill these gaps. Okay, that is a draw on liquidity. And what does that mean? There's
21 00:03:59,070 --> 00:04:08,490 going to be an interest for price to get back into between this level here and this level here, which is the low of this candle in the high of this candle. So
22 00:04:08,490 --> 00:04:17,700 there's no candle or price action trading in here. So that's what we call gap, the market will want to likely trade up into that. Now how can we use that as a
23 00:04:17,700 --> 00:04:28,170 bias or tool for bias? Well, right away, we are looking at a market that is predisposed to go higher, more likely to go higher than lower regardless of this
24 00:04:28,320 --> 00:04:44,010 so called retail traders resistance. If we go forward in the future, we would expect to see the bias be bullish. And this is Thursday's trading here may 28 of
25 00:04:44,010 --> 00:04:59,370 2020. So the expectation would be to see that high which is 3421 to be blown out. And if we can get a run further, we could see it run to 3518 which is
26 00:05:00,630 --> 00:05:10,260 This high here 3518. Now, it's not that we're looking for just to get to that level, remember what was said about this, there's orders that resting above
27 00:05:10,260 --> 00:05:22,860 that, or new orders entering, going short with their stop loss in the form of a buy stop, which builds What? Buy side liquidity. So if Smart Money investors or
28 00:05:22,860 --> 00:05:34,020 traders or people like you watching this video, see opportunities like this, and we can anticipate a run higher and you're buying low, and anticipate a run above
29 00:05:34,020 --> 00:05:49,290 that level, then we can no one, formulate a bias for the day, the next trading day, we know a time of day when we're looking to seek and discover a pattern
30 00:05:49,320 --> 00:05:56,970 that has been identified in the series as the optimal trade entry. And it's specific to time and price. So between 830 in the morning, 11 o'clock in the
31 00:05:56,970 --> 00:06:10,950 morning, we are looking for a rally higher, a sharp, rally higher, and then a pullback into that down to the 62% retracement level. That's the optimal trade
32 00:06:10,950 --> 00:06:20,550 entry. And it has to occur between 830 and 11am. If it doesn't, we don't do anything, we just wait for the next trading day or trade another pair or market.
33 00:06:21,150 --> 00:06:36,660 But this is how we can use very simple things in the daily chart to arrive at a bias. Not an everyday bias. But this is a bias model. So if we drop down into a
34 00:06:36,660 --> 00:06:43,590 five minute chart, here's your five minute chart. And again, you know the drill pause the video and take a look at what you think you see here. And then when
35 00:06:43,590 --> 00:06:55,290 you're ready, unpause the video and I'll add the annotations. Okay, so here is the annotations for the five minute chart, as I mentioned on the daily chart for
36 00:06:55,290 --> 00:07:08,430 the 28th of May, which is Thursday of 2020. The previous highs here as I mentioned 3421 price level, this line here is that old daily high or daily
37 00:07:08,430 --> 00:07:25,980 retail resistance coming in at 3518. Our time day is 8:30am to 11am. And we can see a price run here. It clears a high and we trade back down into it. Now this
38 00:07:25,980 --> 00:07:37,860 candle right there is the candle you'd be filled on it's inside of our time window, it fits the criteria. So it's this low up to this price high down. So
39 00:07:37,860 --> 00:07:48,150 it's trading back down in our hypothetical entry would be 32.75. it suffers an eight point drawdown or tick. So one point or tick in the crude oil market
40 00:07:48,180 --> 00:08:00,540 equals $10 per contract. Now they do offer a mini contract. But I'm going to show this example in light of a regular standard contract for crude oil. You're
41 00:08:00,540 --> 00:08:13,140 using point two six or 26 ticks or point stop. So that would be a $260 loss if you got stopped out and trading back just to the old high offered more than 35
42 00:08:13,140 --> 00:08:28,080 points or $350. One half a standard deviation is 75 points or ticks. Or in monetary terms, it would be hypothetical $750. Then over 1000, so $1,090 at one
43 00:08:28,080 --> 00:08:38,880 standard deviation. Now that's even before you get to the previous day's high.  One and a half standard deviations takes us to 34 point 18. And that doesn't
44 00:08:38,880 --> 00:08:53,730 quite get us above the daily high from the previous day. The next one is your two standard deviations at over 175 points. So that's $1,750 per contract. This
45 00:08:53,730 --> 00:09:03,870 is the model for taking your intraday trade. But because the logic as outlined on the daily chart supposes that we could see a run and it didn't have to happen
46 00:09:03,900 --> 00:09:14,160 on Friday. Okay, or the 29th of May, it could have happened into the following week. But if you'd leave a leader in, again, what's a leader, a leader is where
47 00:09:14,160 --> 00:09:24,330 you keep a small piece of the original trade on. Now the rules for this model is you collapse at two standard deviations. But if you have a criteria in price
48 00:09:24,330 --> 00:09:34,560 action that lends well to a likely outcome of reaching for a higher target, then at this point here, you absolutely have to have 80% off and then leave 20% one
49 00:09:35,550 --> 00:09:47,010 and you have to scale that for your own account or as close as you possibly can the majority of your trade should be closed here. And then if you capture any
50 00:09:47,010 --> 00:09:59,730 kind of continuation to run that daily level, this is what you can participate in. So offers as much as 290 points or $2,900 per contract. Now
51 00:10:00,810 --> 00:10:19,710 If you risk $260, and you walk away with $2,900, that's over 10 to one. That's enormous. Okay. So if you can see these patterns forming, and you can determine
52 00:10:19,740 --> 00:10:30,000 the likely direction, think about the power that that's given you, it tells you exactly when to train your attention in the marketplace, relative to time. So
53 00:10:30,000 --> 00:10:46,200 you can treat it like a business, you have operating hours between 8:30am and 11am, you're looking for a particular pattern to get in sync, okay, or move in a
54 00:10:46,230 --> 00:10:52,770 opposing direction to where you think the markets gonna go. And remember, we're looking for the previous day's high and maybe even a longer term high to be
55 00:10:52,770 --> 00:11:02,910 taken out. This rally up, we don't want to chase that we want to see it drop.  When it drops down in optimal trade entry. 62% retracement levels our entry
56 00:11:03,510 --> 00:11:18,000 between 830 and 11. This is our entry. And then again, with only $80 drawdown, that's the most that the trade would have hypothetically taken. So 80 bucks of
57 00:11:18,000 --> 00:11:36,240 suffering using the 62% retracement levels or entry, and then riding all the way up to 290 points. And ultimately, we still have that gap did likely trade up
58 00:11:36,240 --> 00:11:43,950 into now it doesn't mean it's going to go there on Monday doesn't mean it's going to go there Tuesday, it just means over a period of time. This is an
59 00:11:43,980 --> 00:11:53,940 upside draw on liquidity. So it's gonna act like a magnet and pull price up there, which is going to lend well for daily bias. So again, study this example.
60 00:11:54,750 --> 00:12:05,190 And you can see there's lots of things that you can mind from this particular episode. But it's just one more evidence to this model. I created in model very
61 00:12:05,190 --> 00:12:12,960 simple, very easy to understand in terms of time, you only have to determine if you're going to be looking for the previous day's high or previous day's low to
62 00:12:12,960 --> 00:12:22,080 be traded to and then you wait for this pattern. It's very simple. You have logical levels to take profits at and partials and now they included a little
63 00:12:22,080 --> 00:12:32,280 bit longer term bias idea to help frame a likely scenario that we could continuation or explosive price action move like we see here. So hopefully you
64 00:12:32,280 --> 00:12:34,980 found this insightful until next time, I wish you good luck and good trading