Trader Theory

Trader Theory

25-10-2022

14:11

The ICT Mentorship Core Content Month 3 Summarized:

Timeframe Selection & Defining Setups For Your Model: A. Timeframe Selection 1. Monthly Charts - Position Trading 2. Weekly Charts – Swing Trading 3. Daily Charts – Short-Term Trading 4. 4-Hour or Less – Day Trading

B. Defining Setups For Your Model 1. Trend Trader: Trading the direction of the Monthly & Weekly Chart 2. Swing Trader: Trading intermediate-term price action 4. Short-Term Trader: Trading the weekly range for 1-5 days in duration 5. Day Trader: Intraday swing trading

Monthly Chart Long-term price action trading. Biggest price swings. Takes lots of time to form but when they unfold they do so over many months. Trading in this direction can yield low risk & high reward. Can be several hundreds of pips over a long time period.

Weekly Chart Intermediate-term price action. Tend to unfold over many weeks. Due to the length of time, trading in this direction can yield low risk & high reward. Several hundred pips over an intermediate-term time period.

Daily Chart Short-term price action. Takes little time to unfold, and trades last for 1-3 weeks. Swings can be 50 - 300 pips over a shorter time period.

Price will seek to balance old imbalances and seek the largest levels of liquidity. Once the price has absorbed a large area of liquidity it will seek the next area. When we know where the price will go we can refine these levels down to the lower time frames for trade setups.

How To Identify Institutional Sponsorship For Setups 1. HTF price displacement - Reversals, expansions or return to fair value 2. Intermediate-term imbalance - moves to discount/premium 3. Liquidity above/below the market 4. Time of day - London/New York Low/High of day

The daily chart shows the price dropping below an old low - where sell stops are. The aggressive trader can at that time look for LTFs to show similar price action of a low being violated and a long can be taken.

Institutional Market Structure A. What is it? 1. The study of correlated assets or the relation to inversely correlated assets. 2. To decide what smart money is accumulating or distributing. 3. Easy to study with the DXY. 4. Price should be studied to find market symmetry.

B. How do we identify it in Forex? 1. Compare every price swing in the DXY with the pair you trade. 2. As DXY trades higher, expect lower in your pair. 3. If DXY or the currency pair fails to move in tandem - smart money is actively trading. Same for DXY trading lower.

DXY SMT Divergence In symmetrical market conditions: When DXY makes a lower low; Foreign currency makes a higher high. This confirms the trend is likely to continue. Stalking a reversal pattern in this condition is not high probability and should be avoided.

DXY SMT Divergence In non-symmetrical market conditions: When DXY makes a lower low; Foreign currency fails to trade higher - this is DXY SMT. This confirms the trend is likely to reverse. Stalking a reversal pattern in this condition is high probability.

Trendline Phantoms: False Trendlines The market appears to have imaginary diagonal lines that support or resist price. Retail traders will extend these lines into the future and attribute support and resistance theories to them. Retail will buy or sell respectively when hit.

Does price have an awareness of trendlines? Do banks associate β€œvalue” on the basis of trendline theory? Is the nature of trendlines flawed? How can market makers capitalize on this fallacy?

Retail: Bullish Trendline Support The use of trendline support will be used by retail traders. This provides market makers liquidity. The chart may appear bullish but it is the opposite. Retail will buy at a moment when price will be devoid of support.

Retail: Bearish Trendline Resistance The use of trendline resistance will be used by retail traders. This provides market makers liquidity. The chart may appear bearish but it is the opposite. Retail will sell at a moment when price will be devoid of resistance.

Head & Shoulders Pattern False Top & Bottoms In Price Due to the low understanding of most retail traders - they seek this pattern on the lower timeframes. Many times these patterns will fail and go against their position.

Credit: Here you can watch this month's module for free on ICTs YouTube Original creator @I_Am_The_ICT Graphics @daytradingrauf

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