OTE Pattern Recognition Series - Vol 16.srt

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ICT: Welcome back, folks, this is volume number 16 in a

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continuing series of 20 videos for the inner circle trader

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optimal trade entry pattern recognition series for YouTube.

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Alright, today's example is going to be in crude oil is a

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commodity market. And we're looking at the daily chart and I

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want give me a little bit of finesse on bias little

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additional insights that we can see how these optimal trade

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entries also manifest in terms of longer term or broader

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objectives. If you look at this chart, I want you to take a

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look at it for a moment pause your video think about what

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you think you see in price action then take a look at the

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annotations once I released them on the screen.

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Okay, so let's take a look at what we have here. Right away,

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this gap in price should draw your attention. Whenever you

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see a price action gap in a commodity, or stock or Forex, or

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anything. If it trades, just think of this area here as a

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magnet. Now price has been slowly working its way towards

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this old high. Now when price went to this high here, it

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repelled and went lower. And I'm not going to go into the

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reasons why it did here. But as prices doing this, what is

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the retail trader thinking well, price stopped here before,

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so it's probably not going to go through that. And that is

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the logic behind 90% of how I decipher price action. I'm

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looking for those moments when the public or the retail

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trader or as I like to dub them Retail Rick, they see

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something in price action that is so loosely hinged on

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factual, real underpinnings of the market. In other words, I

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am waiting for moments where the public or retail traders

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mindset or opinion about marketplace is so obvious based on

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what's taught in books and I fell victim to back in the 90s.

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When I first started, I will look at opportunities and see

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the opposing view to what a retail trader would see or

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expect in price action. So they expect this to act as

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resistance. So therefore, they don't want to be vying, they

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don't want to see a run above that level to attack any kind

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of liquidity. They're thinking, I want to short this market

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and my stock is safe above this old high because look what

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it did in the past. It turned in never went back above it.

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So as it's been gravitating towards this old high, the

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natural tendency. And I admit, back in the 90s, I was being

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trained to see it just like this because of all the books,

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and I got nearly 3000 books in my library, and the multitude

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of them are useless. They're absolutely useless. I just

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can't separate myself from them by discarding them because

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they really framed who I am today, because I could go back

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and see where I followed that failed logic. And like I said,

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99.9% of everything that's written is garbage. It's all

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things that's going to end up leading you to monetary loss,

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confusion, and no real understanding about what it is you

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should be doing to be consistently profitable. This gap and

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price price will generally look to fill these gaps. Okay,

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that is a draw on liquidity. And what does that mean?

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There's going to be an interesting For price to get back up

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into between this level here and this level here, which is

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the low of this candle and the high of this candle, so

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there's no candle or price action trading in here. So that's

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what we call gap, the market will want to likely trade up

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into that. Now how can we use that as a bias or tool for

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bias, but right away, we are looking at a market that is

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predisposed to go higher, more likely to go higher then

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lower, regardless of this so called retail traders

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resistance. If we go forward in the future, we would expect

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to see the bias be bullish. And this is Thursdays trading

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here. May 28 of 2020. So the expectation would be to see

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that high which is 3421 to be blown out. And if we can get a

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run further, we could see it run to 3518 which is

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This high here 3518. Now, it's not that we're looking for

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just to get to that level, remember what was said about

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this. There's orders that's resting above that, or new

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orders entering, going short with our stop loss in the form

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of a buy stop, which builds What? Buy side liquidity. So if

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Smart Money investors or traders or people like you watching

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this video, see opportunities like this, and we can

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anticipate a run higher and you're buying low, and

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anticipate a run above that level, then we can no one,

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formulate a bias for the day, the next trading day. We know

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a time of day when we're looking to seek and discover a

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pattern that has been identified in the series as the

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optimal trade entry. And it's specific to time and price. So

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between 830 in the morning, 11 o'clock in the morning, we're

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looking for a rally higher, a sharp, rally higher, and then

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a pullback into that down to the 62% retracement level.

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That's the optimal trade entry. And it has to occur between

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830 and 11am. If it doesn't, we don't do anything, we just

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wait for the next trading day or trade another pair or

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market. But this is how we can use very simple things in the

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daily chart to arrive at a bias. Not an everyday bias. But

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this is a bias model. So if we drop down into a five minute

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chart, here's your five minute chart and again you know the

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drill pause the video and take a look at what you think you

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see here. And then when you're ready, unpause the video and

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I'll add the annotations. Okay, so here is the annotations

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for the five minute chart as I mentioned on the daily chart

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for the 28th of May, which is Thursday of 2020 The previous

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highs here as I mentioned, the 3421 price level, this line

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here is that old daily high or daily retail resistance

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coming in at 3518. Our time day is 8:30am to 11am. And we

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can see a price run here. It clears a high and we trade back

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down into it. Now this candle right there is the candle

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you'd be filled on. It's inside of our time window. It fits

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the criteria, so it's this low up to this price high down.

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So it's trading back down in our hypothetical entry would be

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32.75. it suffers an eight point drawdown or tick so one

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point or tick in the crude oil market equals $10 per

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contract. Now they do offer a mini contract, but I'm going

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to show this example in light of a regular standard contract

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for crude oil. You're using point two six or 26 ticks or

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point stop. So that would be a $260 loss if you got stopped

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out, and trading back just to the old high offered more than

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35 points or $350. One half standard deviation is 75 points

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or ticks or in monetary terms, it would be hypothetical

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$750. Then over 1000 to $1,090 at one standard deviation.

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Now that's even before you get to the previous day's high

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one and a half standard deviations takes us to 34 point 18.

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And that doesn't quite get us above the daily high from the

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previous day. The next one is your two standard deviations

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at over 175 points, so that's $1,750 per contract.

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This is the model for taking your intraday trade but because

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the logic as outlined on the daily chart Suppose that we

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could see a run and didn't have to happen on Friday. Okay,

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or the 29th of May, it could have happened into the

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following week. But if you'd leave a leader in Now, again,

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what's a leader, a leader is where you keep a small piece of

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the original trade on. Now, the rules for this model is you

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collapse at two standard deviations. But if you have a

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criteria in price action that lends well to a likely outcome

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of reaching for a higher target, then at this point here,

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you absolutely have to have 80% off and then leave 20% on

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and you have to scale that for your own account or as close

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as you possibly can, the majority of your trade should be

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closed here. And then if you capture any kind of

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continuation to run that daily level, this is what you can

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participate in. So offers as much as 290 points or $2,900

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per contract. Now If you risk $260, and you walk away with

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$2,900, that's over 10 to one. That's enormous. Okay? So if

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you can see these patterns forming, and you can determine

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the likely direction, think about the power that that's

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given you. It tells you exactly when to train your attention

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in the marketplace, relative to time. So you can treat it

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like a business, you have operating hours between 8:30am and

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11am. You're looking for a particular pattern to get in

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sync, okay, or move in a opposing direction to where you

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think the markets gonna go. Remember, we're looking for the

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previous day's high and maybe even a longer term high to be

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taken out. This rally up we don't want to chase that we want

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to see it drop when it drops down in optimal trade entry.

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62% retracement levels our entry between 830 and 11. This is

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our entry. And then again with only $80 draw down, that's

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the most to trade would have hypothetically taken. So 80

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bucks of suffering using the 62% retracement levels or

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entry, and then riding all the way up to 290 points. And

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ultimately, we still have that gap did likely trade up into

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now it doesn't mean it's going to go there on Monday doesn't

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mean it's going to go there Tuesday. It just means over a

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period of time. This is an upside draw on liquidity. So it's

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gonna act like a magnet and pull price up there, which is

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going to lend well for daily bias. So again, study this

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example. And you can see there's lots of things that you can

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mind from this particular episode but It's just one more

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evidence to this model, I created a model very simple, very

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easy to understand in terms of time, you only have to

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determine if you're going to be looking for the previous

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day's high or previous day's low to be traded to. And then

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you wait for this pattern. It's very simple. You have

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logical levels to take profits at and partials and now they

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included a little bit longer term bias idea to help frame a

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likely scenario that we could continuation or explosive

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price action move like we see here. So hopefully you found

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this insightful until next time, I wish you good luck and

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good trading.