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Version 1.1 by Drunk Monkey on 2020-11-20 16:25
Show last authors
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3 ICT: Welcome back, folks, this is volume number 16 in a
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7 continuing series of 20 videos for the inner circle trader
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11 optimal trade entry pattern recognition series for YouTube.
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15 Alright, today's example is going to be in crude oil is a
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19 commodity market. And we're looking at the daily chart and I
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23 want give me a little bit of finesse on bias little
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27 additional insights that we can see how these optimal trade
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31 entries also manifest in terms of longer term or broader
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35 objectives. If you look at this chart, I want you to take a
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39 look at it for a moment pause your video think about what
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43 you think you see in price action then take a look at the
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47 annotations once I released them on the screen.
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51 Okay, so let's take a look at what we have here. Right away,
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55 this gap in price should draw your attention. Whenever you
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59 see a price action gap in a commodity, or stock or Forex, or
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63 anything. If it trades, just think of this area here as a
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67 magnet. Now price has been slowly working its way towards
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71 this old high. Now when price went to this high here, it
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75 repelled and went lower. And I'm not going to go into the
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79 reasons why it did here. But as prices doing this, what is
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83 the retail trader thinking well, price stopped here before,
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87 so it's probably not going to go through that. And that is
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91 the logic behind 90% of how I decipher price action. I'm
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95 looking for those moments when the public or the retail
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99 trader or as I like to dub them Retail Rick, they see
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103 something in price action that is so loosely hinged on
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107 factual, real underpinnings of the market. In other words, I
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111 am waiting for moments where the public or retail traders
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115 mindset or opinion about marketplace is so obvious based on
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119 what's taught in books and I fell victim to back in the 90s.
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123 When I first started, I will look at opportunities and see
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127 the opposing view to what a retail trader would see or
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131 expect in price action. So they expect this to act as
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135 resistance. So therefore, they don't want to be vying, they
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139 don't want to see a run above that level to attack any kind
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143 of liquidity. They're thinking, I want to short this market
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147 and my stock is safe above this old high because look what
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151 it did in the past. It turned in never went back above it.
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155 So as it's been gravitating towards this old high, the
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159 natural tendency. And I admit, back in the 90s, I was being
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163 trained to see it just like this because of all the books,
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167 and I got nearly 3000 books in my library, and the multitude
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171 of them are useless. They're absolutely useless. I just
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175 can't separate myself from them by discarding them because
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179 they really framed who I am today, because I could go back
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183 and see where I followed that failed logic. And like I said,
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187 99.9% of everything that's written is garbage. It's all
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191 things that's going to end up leading you to monetary loss,
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195 confusion, and no real understanding about what it is you
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199 should be doing to be consistently profitable. This gap and
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203 price price will generally look to fill these gaps. Okay,
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207 that is a draw on liquidity. And what does that mean?
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211 There's going to be an interesting For price to get back up
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215 into between this level here and this level here, which is
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219 the low of this candle and the high of this candle, so
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223 there's no candle or price action trading in here. So that's
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227 what we call gap, the market will want to likely trade up
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231 into that. Now how can we use that as a bias or tool for
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235 bias, but right away, we are looking at a market that is
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239 predisposed to go higher, more likely to go higher then
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243 lower, regardless of this so called retail traders
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247 resistance. If we go forward in the future, we would expect
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251 to see the bias be bullish. And this is Thursdays trading
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255 here. May 28 of 2020. So the expectation would be to see
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259 that high which is 3421 to be blown out. And if we can get a
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263 run further, we could see it run to 3518 which is
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267 This high here 3518. Now, it's not that we're looking for
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271 just to get to that level, remember what was said about
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275 this. There's orders that's resting above that, or new
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279 orders entering, going short with our stop loss in the form
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283 of a buy stop, which builds What? Buy side liquidity. So if
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287 Smart Money investors or traders or people like you watching
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291 this video, see opportunities like this, and we can
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295 anticipate a run higher and you're buying low, and
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299 anticipate a run above that level, then we can no one,
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303 formulate a bias for the day, the next trading day. We know
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307 a time of day when we're looking to seek and discover a
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311 pattern that has been identified in the series as the
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315 optimal trade entry. And it's specific to time and price. So
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319 between 830 in the morning, 11 o'clock in the morning, we're
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323 looking for a rally higher, a sharp, rally higher, and then
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327 a pullback into that down to the 62% retracement level.
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331 That's the optimal trade entry. And it has to occur between
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335 830 and 11am. If it doesn't, we don't do anything, we just
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339 wait for the next trading day or trade another pair or
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343 market. But this is how we can use very simple things in the
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347 daily chart to arrive at a bias. Not an everyday bias. But
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351 this is a bias model. So if we drop down into a five minute
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355 chart, here's your five minute chart and again you know the
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359 drill pause the video and take a look at what you think you
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363 see here. And then when you're ready, unpause the video and
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367 I'll add the annotations. Okay, so here is the annotations
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371 for the five minute chart as I mentioned on the daily chart
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375 for the 28th of May, which is Thursday of 2020 The previous
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379 highs here as I mentioned, the 3421 price level, this line
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383 here is that old daily high or daily retail resistance
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387 coming in at 3518. Our time day is 8:30am to 11am. And we
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391 can see a price run here. It clears a high and we trade back
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395 down into it. Now this candle right there is the candle
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399 you'd be filled on. It's inside of our time window. It fits
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403 the criteria, so it's this low up to this price high down.
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407 So it's trading back down in our hypothetical entry would be
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411 32.75. it suffers an eight point drawdown or tick so one
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415 point or tick in the crude oil market equals $10 per
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419 contract. Now they do offer a mini contract, but I'm going
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423 to show this example in light of a regular standard contract
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427 for crude oil. You're using point two six or 26 ticks or
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431 point stop. So that would be a $260 loss if you got stopped
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435 out, and trading back just to the old high offered more than
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439 35 points or $350. One half standard deviation is 75 points
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443 or ticks or in monetary terms, it would be hypothetical
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447 $750. Then over 1000 to $1,090 at one standard deviation.
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451 Now that's even before you get to the previous day's high
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455 one and a half standard deviations takes us to 34 point 18.
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459 And that doesn't quite get us above the daily high from the
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463 previous day. The next one is your two standard deviations
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467 at over 175 points, so that's $1,750 per contract.
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471 This is the model for taking your intraday trade but because
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475 the logic as outlined on the daily chart Suppose that we
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479 could see a run and didn't have to happen on Friday. Okay,
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483 or the 29th of May, it could have happened into the
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487 following week. But if you'd leave a leader in Now, again,
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491 what's a leader, a leader is where you keep a small piece of
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495 the original trade on. Now, the rules for this model is you
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499 collapse at two standard deviations. But if you have a
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503 criteria in price action that lends well to a likely outcome
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507 of reaching for a higher target, then at this point here,
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511 you absolutely have to have 80% off and then leave 20% on
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515 and you have to scale that for your own account or as close
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519 as you possibly can, the majority of your trade should be
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523 closed here. And then if you capture any kind of
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527 continuation to run that daily level, this is what you can
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531 participate in. So offers as much as 290 points or $2,900
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535 per contract. Now If you risk $260, and you walk away with
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539 $2,900, that's over 10 to one. That's enormous. Okay? So if
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543 you can see these patterns forming, and you can determine
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547 the likely direction, think about the power that that's
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551 given you. It tells you exactly when to train your attention
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555 in the marketplace, relative to time. So you can treat it
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559 like a business, you have operating hours between 8:30am and
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563 11am. You're looking for a particular pattern to get in
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567 sync, okay, or move in a opposing direction to where you
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571 think the markets gonna go. Remember, we're looking for the
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575 previous day's high and maybe even a longer term high to be
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579 taken out. This rally up we don't want to chase that we want
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583 to see it drop when it drops down in optimal trade entry.
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587 62% retracement levels our entry between 830 and 11. This is
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591 our entry. And then again with only $80 draw down, that's
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595 the most to trade would have hypothetically taken. So 80
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599 bucks of suffering using the 62% retracement levels or
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603 entry, and then riding all the way up to 290 points. And
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607 ultimately, we still have that gap did likely trade up into
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611 now it doesn't mean it's going to go there on Monday doesn't
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615 mean it's going to go there Tuesday. It just means over a
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619 period of time. This is an upside draw on liquidity. So it's
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623 gonna act like a magnet and pull price up there, which is
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627 going to lend well for daily bias. So again, study this
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631 example. And you can see there's lots of things that you can
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635 mind from this particular episode but It's just one more
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639 evidence to this model, I created a model very simple, very
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643 easy to understand in terms of time, you only have to
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647 determine if you're going to be looking for the previous
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651 day's high or previous day's low to be traded to. And then
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655 you wait for this pattern. It's very simple. You have
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659 logical levels to take profits at and partials and now they
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663 included a little bit longer term bias idea to help frame a
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667 likely scenario that we could continuation or explosive
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671 price action move like we see here. So hopefully you found
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675 this insightful until next time, I wish you good luck and
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679 good trading.