How to use this Bible

Think of this Bible as your trusted companion on your trading journey, a

knowledgeable friend who's always there to guide you. Whenever you
encounter uncertainties about ICT concepts, turn to these pages for clarity
and insight.

Consider this Bible your shortcut to understanding the world of trading

through the lens of ICT's wisdom. No need to scour endless hours of
mentorship videos or take exhaustive notes – I've done that for you. This
compilation is the result of my dedicated study, meticulous note-taking,
and countless revisions, all to simplify your learning experience.

Each chapter begins with a direct link to the corresponding ICT video. So,
if a specific topic leaves you wanting more, you can effortlessly reinforce
your understanding by watching the accompanying video. This way, you
can cement your knowledge and gain a rock-solid grasp of the material.

Remember, this Bible is a product of thorough research and dedication. It

contains all the core content from ICT's mentorship, meticulously
organized for your convenience. I spent countless hours studying this
material when I started my trading journey, wishing for a resource like this
to save me time and effort.

Now, it's my pleasure to share it with you. I hope you find value in this
comprehensive guide, making your trading experience smoother, more
informed, and ultimately more successful.

Enjoy your exploration of the ICT Trading Bible!

Twitter/X: https://twitter.com/DionTrades/

Youtube: https://www.youtube.com/@DionTrades

Telegram: https://t.me/+xII_PUGts6A4OGVk
Introduction
Hello, fellow trader! If you're here, you're about to step into the exciting world of
trading. Trading, at first glance, may appear to be a complex puzzle of numbers,
charts, and financial jargon. But don't be intimidated; it's not as complicated as it
seems. I'm here to simplify it all and equip you with the knowledge and skills to
navigate the financial markets successfully.

You might be wondering who I am. Just think of me as your 25-year-old trading
enthusiast. I've been through the highs and lows of trading, learned from the best
(and the not-so-best), and I'm here to share the strategies, wisdom, and insights that
have transformed my trading journey.

The ICT Trading Bible is not your typical trading manual. It's your comprehensive
guide to understanding trading, from decoding market sentiment to mastering risk
management, all while maintaining your composure during trading's most intense
moments.

Throughout this guide, we'll cover everything you need to know, from the
fundamentals of market analysis to the finer points of risk management. We'll delve
into patterns, setups, and psychological techniques that will elevate your trading
skills. And yes, we'll discuss the psychology of trading because, believe me, it's just
as important as knowing when to buy or sell.

But let's be clear – I'm not here to promise you overnight wealth or a shortcut to
becoming a millionaire. Trading is a journey, one that requires dedication, practice,
and patience. What I can assure you, however, is that if you're ready to learn, stay
disciplined, and put in the effort, the ICT Trading Bible will provide you with the
guidance to become a knowledgeable and confident trader.

Whether you aspire to trade professionally, boost your income, or simply demystify
the world of finance, this guide is your ultimate resource. So, get ready to start on
this exciting trading journey. The markets are open, and together, we're going to
navigate them successfully.
Chapter 1.1: Elements of a Trade Setup
Link to ICT Video

In this chapter, we will delve into the critical elements of a trade setup
according to the principles of ICT Trading. Understanding these elements is
essential for making informed and strategic trading decisions. There are two
primary concerns when assessing a trade setup:

A. Context or Framework Surrounding the Idea

When considering a trade, it's vital to assess the context or framework in
which it exists. This context can be categorized into four main conditions:

1. Expansion: This occurs when the price is making a significant move in

one direction. Recognizing an expansion phase is crucial as it often
precedes substantial price movements.

2. Retracement: After an expansion, prices may retract partially. Identifying

retracement levels helps traders determine potential entry points or
reversals.

3. Reversal: A reversal signifies a

change in the current price trend.
Recognizing reversal patterns is
essential for traders looking to
capitalize on trend changes.

4. Consolidation: Consolidation
refers to a period when prices move
within a relatively narrow range,
indicating a lack of a clear trend.
During consolidation, traders often
adopt a "holding pattern" and wait
for clearer signals.
B. Reference Points in Institutional Order Flow
To make informed trading decisions, it's crucial to consider reference points
within institutional order flow. These reference points include:

1. Orderblocks: These are specific price levels where significant

institutional orders are likely to be placed. Recognizing orderblocks can
help traders anticipate price reactions at these levels.

2. FVG and Liquidity Voids: Understanding Future Value Gaps (FVG) and
liquidity voids is essential for identifying potential areas where price may
experience rapid movement due to a lack of orders in the order book.

3. Liquidity Pool and Stop Runs: Recognizing liquidity pools (areas with a
high concentration of orders) and stop runs (intentional market moves
designed to trigger stop-loss orders) can provide insights into price
manipulation and potential reversals.

4. Equilibrium: Identifying points of equilibrium in the market can help

traders gauge the balance between buying and selling pressure.
Trade Setup Characteristics
To make the most of these elements, it's crucial to consider the
characteristics of your trade setup. Always ask yourself, "What characteristic
are we trading in?" The four primary conditions of trade setups are:

- Consolidation: Occurs during consolidation when prices move within a

narrow range, signaling indecision in the market.
- Expansion: Marks the start of significant price movements, either
continuing in the same direction or leading to retracement or reversal.
- Retracement: Follows an expansion and offers potential entry points or the
possibility of another expansion phase.
- Reversal: Indicates a shift in the current trend, presenting opportunities for
contrarian trading strategies.
It's important to note that these four conditions interchange throughout the
market, and traders must adapt their strategies accordingly. You will
typically encounter one of these conditions at any given time, so
understanding where price currently stands, where it might go, and where
it came from is essential.

In conclusion, remember that patience is key in ICT Trading. Always wait

for the first expansion before making trading decisions, as this provides
valuable insights into the market's direction and momentum. In the
following chapters, we will explore how to apply these principles in
practical trading scenarios.
Chapter 1.2: How Market Makers
Condition The Market
Link To ICT Video

In this chapter, we will delve into the intricate dynamics of market

conditions as influenced by market makers, a fundamental aspect of ICT
Trading principles. Gaining insights into these conditions is crucial for
developing a well-informed trading strategy that can navigate the
complexities of the financial markets.

We will explore the various phases and patterns that shape trading activity
and uncover the subtle maneuvers employed by market makers.
Understanding these nuances is paramount for traders seeking to make
informed decisions and ultimately achieve success in the world of trading.

Its a small group of traders that move the markets

We saw this in our last chapter:

Let’s fill this in more:

1. Price Equilibrium = Asian Range
The trading day often begins with a period of price equilibrium, known
as the Asian Range. During this phase, prices typically move within a
relatively narrow range as Asian markets set the initial tone for the day.

2. Manipulation = Judas Swing

Manipulation refers to deliberate market moves designed to trap traders.
One common form of manipulation is the "Judas Swing," where prices
briefly move in a direction to trigger stop-loss orders before reversing.

3. Reversal = London Open

The London Open often marks the start of a reversal phase. This is when
significant price shifts occur, leading to the establishment of the high or
low of the day.

4. Expansion = London Open

Conversely, the London Open can also trigger expansion phases,
characterized by substantial price movements. These expansions can
either continue in the same direction or lead to retracement or reversal.

5. Consolidation = 5 AM to 8 AM
The period from 5 AM to 8 AM is commonly associated with
consolidation, where prices move within a narrow range, indicating
indecision or a temporary balance between buyers and sellers.

6. Retracement = 8 AM to 8:30 AM
Following the consolidation phase, between 8 AM and 8:30 AM,
retracement often occurs. This retracement can provide potential entry
points or set the stage for another expansion phase.

7. Reversal or Expansion in New York Sessions

During the New York trading sessions, prices may experience either
reversal or expansion, influenced by various factors, news releases, and
trading sentiment.
 8. London Close Reversal
The closing of the London session can also trigger reversal patterns,
offering trading opportunities based on this market event.

9. Consolidation
Consolidation often follows other phases, providing traders with
opportunities to reassess the market and prepare for the next potential
move.

Trading Phases Sequence

- Everything Starts with Consolidation: Regardless of the phase, every
trading move starts with a period of consolidation, where prices consolidate
within a range.

- Next Stage Is Always an Expansion: Following consolidation, the next

stage is typically an expansion phase, characterized by substantial price
movements.

- Expansion Can Lead to Retracement or Reversal: Once in the expansion

phase, prices may either retrace to a previously established order block or
reverse, leading to another expansion or consolidation.

Possible Sequences:
- Consolidation ➔ Expansion ➔ Retracement ➔ Another Leg Up or Down
- Consolidation ➔ Expansion ➔ Reversal

Impossible Sequences:
- Consolidation Cannot Lead Directly to Reversal
- Consolidation Cannot Lead Directly to Retracement
- Consolidation ➔ Expansion ➔ Another Consolidation
General Trading Observations:
Understanding the High and Low (H/L) bias can be instrumental in
predicting price movements. The following pattern is often observed:

- Sunday Open = Consolidation

- Monday = Expansion
- Tuesday = Reversal
- Wednesday = Expansion
- Thursday = Consolidation (Midweek)
- Friday = Reversal or Retrace

These patterns provide valuable insights into weekly trading dynamics.

Understanding and recognizing these phases can significantly enhance your
trading strategy and decision-making process.
Chapter 1.3: What To Focus On Right
Now
Link To ICT Video

In this mentorship, the main focus is understanding the 4 pillars:

consolidation, expansion, retracement, and reversal. Understanding
emerges from exposure, and exposure creates experience.

A. Creating daily price action logs with price charts:

1) Daily chart - 12 months, no less than 9 months view.

2) 4-hour chart - 3 months view.
3) 60-minute chart - 3 weeks view.
4) 15-minute chart - 3 to 4 days view.

B. Resist the urge to forecast price movements right now:

1) Note where price has shown a quick movement from a specific level.
2) Note recent highs and lows that haven't been retested yet.
3) Note areas on the charts where price has left "clean" highs or lows.
4) Note on which days weekly highs and lows form and the corresponding
killzone.
5) Note the daily high and daily low every trading day and the respective
killzone it formed in.
Old Highs – Buy Stops or Buy Side Open Float

Old Lows – Sell Stops or Sell Side Open Float

Clean Highs – Liquidity Pool of Buy Stops

Clean Lows – Liquidity Pool of sell stops

Sharp Runs In Price – Liquidity Voids
Swing High – Three Candle Pattern. The Up Candle

Swing Low – The Three Candle Pattern – The Down Candle

Deal with 1 pair:
Start by marking the most recent highs and lows where markets have shown
a willingness to repel from on the daily time frame (TF).

Next, drop into the 4-hour TF and do the same thing, looking for areas where
it's too clean. Note where the market has moved quickly away from a level,
including Future Value Gaps (FVGs).

Afterward, go to the 1-hour TF. On the 1-hour chart, look at the individual
days over the course of 1 or 2 weeks, focusing on intraday highs and lows,
which serve as a good bellwether.

Keep this chart separate from the lower time frames when moving down, as
it helps maintain clarity.

Use 3 different charts:

1. Executable chart.
2. Multi-Time Frame (MTF), 15 minutes.
3. High Time Frame (HTF).

Finally, go to the 15-minute chart and do the same thing you did on the HT
charts, but only for the last 3/4 days. Note the Previous Daily Highs (PDHs)
and Previous Daily Lows (PDLs) and the days of the week.

Repeat this process every single day.

Chapter 1.4: Equilibrium Vs. Discount
Link To ICT Video

Fibonacci (Fib) by itself is of limited utility. To understand what a buyer is

truly seeking, we must focus on movement. Impulse represents
displacement, a crucial concept to grasp.

When applying this knowledge to your trading strategy, a valuable practice

is to wait for the occurrence of four candles and a swing high. Subsequently,
observe the price as it returns to the equilibrium (EQ). This principle applies
across all timeframes.

A swing high typically comprises three candles, and when the fourth candle
trades lower, it confirms a likely move lower with retracement. It's important
to note that Sundays' candles should not be counted in this context.

Markets tend not to linger in the premium or discount zones for extended
periods, especially when the market narrative supports this trend. The most
attractive buying opportunities often emerge at EQ or lower, as prices at a
discount are unlikely to persist.

Pay attention to the low from which the impulse originated; it should not
dip below this level. In a bullish market, whenever the market establishes a
low and subsequently surpasses it, it often signals a stop-run to push prices
higher. When anticipating higher prices and a low is breached, it can signify
a "turtle soup" scenario.

Operating within the Order of Execution (OTE) zone carries a high

probability of witnessing bullishness. Market makers distribute orders above
old highs, which can be any previous high, not necessarily the highest or
oldest high.

An interesting observation in the trading approach of ICT (Inner Circle

Trader) is the use of Fibonacci once the price returns to EQ and surpasses
the previous high. This is when the Fibonacci tool is employed on the new
leg that surpasses the old high, indicating a bullish sentiment.

Consolidation typically occurs at EQ before transitioning into an expansion

phase. Price often extends 10-20 pips or sometimes even 30 pips above a
high to trigger stop orders, a practice employed by market participants.

If price moves lower than the OTE, and you align with a bullish bias,
consider waiting for a "turtle soup" buy opportunity, as it may present a high-
probability trade.
Chapter 1.5: Equilibrium Vs. Premium
Link To ICT Video

In this chapter, we delve into the distinction between equilibrium (EQ) and
premium levels, shedding light on essential trading concepts.

When considering selling opportunities, it's crucial to aim for levels at or

above 62%, rather than solely focusing on EQ. This approach can help
optimize trade entries and increase the probability of success.

In the context of anticipating bearish price action, be prepared for a

potential "turtle soup" scenario when price moves through EQ and the
Order of Execution (OTE) levels. This is an important consideration for
traders looking to capitalize on bearish trends.
When you encounter a clear, pure, and evident price swing, it's advisable
to measure it and apply Fibonacci retracement levels using a Fibonacci
tool. This practice can aid in identifying potential reversal points and setting
profit targets.

In situations characterized by consolidation, traders often turn to trading

"turtle soups" or utilize the Fibonacci tool. These strategies can be valuable
when navigating markets with limited directional bias.

Selling in premium levels may initially seem intimidating, but with

experience, you'll become more comfortable with this approach.
Recognizing premium levels and understanding how to execute trades in
these areas can be a valuable skill for traders.

Remember that in certain market conditions, knowing the overall bias is less
important than understanding how to effectively trade within a range. This
chapter highlights the significance of mastering trading techniques that can
be applied in various market scenarios.
Chapter 1.6: Fair Valuation
Link To ICT Video

In this chapter, we explore the concept of fair valuation and its significance
in understanding price movements.

One of the simplest ways to gauge where price is headed is by assessing

whether it recently broke a swing high or swing low. This can provide
valuable insights into the market's directional bias.

Combining multiple ranges can offer a more comprehensive view of

whether the market is currently oversold or overbought. This analysis helps
traders make more informed decisions.

In the context of "turtle soups," it's important to note that once a high or low
is taken out, the market should move swiftly rather than consolidating.
Equilibrium (EQ) represents fair value, and deviations from this point can
indicate potential trading opportunities.
On a higher time frame (HTF), observing the strongest move out of EQ can
provide valuable clues about the market's intended direction. This can help
traders anticipate significant price movements.

Consider several factors, including:

- The total range within which you are trading.
- The EQ of the range.
- The presence of buy stops, sell stops, and buy stops within the market.
- The transition between fair value, discount, premium, and back to fair
value.
These dynamics often repeat on a daily basis, providing traders with
recurring patterns to analyze and act upon.

Don't be overly concerned if you miss a particular price move. Patience

can be a valuable asset in trading. Focus on evaluating your current position
relative to the existing range and consider the perspective of smart money
in the market. Determine where fair value lies for these influential players,
as this can offer valuable guidance for your trading decisions.

Another example to conclude this chapter:

Chapter 1.7: Liquidity Runs
Link To ICT Video

In this chapter, we explore the concept of liquidity runs and their

significance in trading.

Liquidity refers to the presence of buy and sell orders in the market. It plays
a crucial role in determining price movements.

Liquidity often exists both above old price highs and below old price lows.
These areas are important to monitor as they can influence market behavior.

A high resistance liquidity run is characterized by a low probability of long

positions being successful. To overcome this level, a high-impact news
driver or a significant market event is typically required. Traders are advised
to exercise caution and avoid entering long positions in these
circumstances.

*High Resistance Liquidity Run

Conversely, a low resistance liquidity run presents a high probability trading
opportunity. When the market returns to the order block (OB), it often
transitions into a high resistance zone. This can be a favorable setup for
traders.

*Low Resistance Liquidity Run

It's important to note that the level of price action around a low or high can
provide valuable insights into the strength of liquidity defense. The more
price action that occurs in these areas, the more likely it is that they will be
defended by market participants.

Understanding liquidity runs and their impact on price movement is

essential for traders looking to make informed decisions and navigate the
intricacies of the market.
Chapter 1.8: Impulse Price Swings &
Market Protraction
Link To ICT Video

In this chapter, we delve into the dynamics of impulse price swings and
market protraction, essential concepts for understanding price movements.

There are three primary protraction moves that occur within a 24-hour
trading cycle:

1. 00 GMT: The start of a new trading day.

2. Midnight New York: A significant transition in market activity.
3. 1100 GMT, New York open: The opening of the New York trading
session.

These moments, often referred to as MNO (Midnight New York), 7 am New

York, and 8 pm New York, mark key shifts in market behavior.

We will talk about specific Killzones later in this book.

Protraction is a form of manipulation and represents the opposite of the real
price move. Its primary objective is to seek liquidity in the market.

Following an impulse price swing, where prices move decisively in one

direction, the market typically enters a protraction phase. During this phase,
prices may consolidate or exhibit choppier movements as market
participants seek to establish positions. Ultimately, this protraction phase
leads to the formation of a new order block (OB), setting the stage for
another impulse swing.

Understanding the interplay between impulse price swings and protraction

is crucial for traders aiming to decipher market dynamics and make
informed trading decisions.
Chapter 2.1: Growing Small Accounts
Link To ICT Video

In this section, we explore strategies and principles for growing small trading
accounts, emphasizing prudent risk management and thoughtful decision-
making.

A. What You Need to Avoid

1) Do not try to rush to make massive gains in terms of pips or percentage

returns. Growing an account takes time and patience, and attempting to
expedite the process can lead to unnecessary risks.

2) Avoid exposing yourself to significant risk in the hope of equally

substantial returns or profits. High-risk trading can quickly erode a small
account, making it challenging to recover losses.

3) Do not assume that taking small risk trades will not contribute to
account growth. Small, consistent gains can accumulate and lead to
significant account growth over time.

4) Avoid sacrificing your trading equity due to poor planning or a lack

thereof. Proper preparation and strategy are essential to safeguarding your
trading capital.

B. What You Need to Aim For

1) Determine how to realistically anticipate a favorable reward-to-risk

model. Prioritize setups that offer a reasonable potential reward relative to
the risk involved.

2) Learn to respect the risk side of trade setups over the potential reward.
Assess and manage risk diligently to protect your account from significant
drawdowns.
3) Identify trade setups that allow for a minimum of three reward multiples
to one risk or higher. Favor trades with a strong potential for positive risk-
reward ratios.

4) Frame good reward-to-risk setups that have little impact if they turn out
to be unprofitable. Maintain discipline in your trading approach to
minimize the impact of losing trades.

Remember that growing a trading account, especially a small one, requires

time for compound interest to work its magic. Selectivity in choosing trades
is paramount. It may not take many trades to achieve a 50% return in a
month, but those trades should be highly selective and well-reasoned.

Pay close attention to drawdown, as it is a critical metric in risk

management. Strive to minimize drawdown and focus on limiting it to
around 6% of your equity per month. This disciplined approach can help
protect your account and promote steady, sustainable growth.
Additionally, it's important to have profit-taking strategies in place before
entering trades. Consider that banks often base their trading decisions on
daily levels, and having a clear plan for taking profits can enhance your
trading success.
Let’s look at an example:

Daily: price touched the bullish Order Block and also had was at OTE

When going to the 1H, it looks like this:

There are buy stops resting above those highs. Combined with an expective
BIG reaction from the Daily OB, this could be a low resistance liquidity run.
Your entry can be in the FVG/OB that is highlighted Blue.

Where will you take profit and partials?

If you know where the buy stops are, go can frame your trade to see what R
multiple you want to take partials at and take full Take Profit.

Preferably, take 100% profit here at RR5 (risk 1, reward 5)

Chapter 2.2: Framing Low Risk Trade
Setups
Link To ICT Video

In this chapter, we delve into the art of identifying low-risk trade setups that
offer not only potential profits but also enhanced risk management.

A. What makes the setup worth taking?

1) Selecting trade setups on higher time frame charts is ideal. By focusing

on higher time frames, we gain a broader perspective that can reveal more
reliable and long-lasting opportunities.

2) Large institutions and banks analyze markets on daily, weekly, and

monthly bases. Aligning our strategies with the practices of major market
players can significantly increase the likelihood of successful trades.

3) Locating price levels that align with institutional order flow is key. These
levels often serve as magnets for price movement and represent areas where
significant buy and sell orders are placed.

4) Higher time frame setups form slowly and provide ample time to plan
accordingly. Patience is a virtue in trading, and setups that evolve over
longer time frames allow for more thoughtful analysis and strategic decision-
making.
B. What can we do to lower the risk in the trade?

1) The higher time frame has more influence on price, so we focus there.
Recognizing the dominant time frame and trading in alignment with it can
reduce the risk of being caught in counter-trend moves.

2) The conditions that lead to a trade setup on a higher time frame can be
refined to lower time frames. This process enables us to fine-tune our entries
while maintaining the core principles of our strategy.

3) Transpose the higher time frame levels to lower time frame charts. This
technique helps us pinpoint precise entry and exit points while keeping a
close eye on market dynamics.

4) Refining higher time frame levels to lower time frame charts allows
smaller stop-loss placement and risk. Minimizing risk while maximizing
profit potential is a hallmark of low-risk trading.

Remember that merely going below old lows is not a sufficient reason to
expect a reversal. We must always seek a higher time frame premise behind
our trades to ensure that they align with the broader market context. In the
quest for low-risk trade setups, patience, analysis, and risk management are
our most valuable allies.

Let’s go back to our example from the last chapter, where we were looking
at the 1H timeframe
Our entry from the 1H was at 0.7542 with a 20 pip stop

But with the knowledge we now have, we should look at getting a better
entry while looking at the lower timeframes:

We can instead of the green square, take our entry at the blue square, with
the run on sell stops and entry on the OB at 0.7520 with a 17 pip SL
Let’s make this even better, and go to the 5M Timeframe:

We can even get a better entry from the 5M OB, at 0.7515 with a 8 pips SL

Look at the difference compared to the 1H entry:

With our better entries from the lower TF (15M and 5M), we get way higher
RR, more return for the risk we are taking,
Chapter 2.3: How Traders Make 10%
Per Month
Link To ICT Video

It's the management of small risks that paves the path to consistent
profitability.

Trade from levels that are likely to attract institutional sponsorships, such as
daily, weekly, and monthly levels.

Remember to reward yourself when the opportunity presents itself.

Chapter 2.4: No Fear Of Losing
Link To ICT Video

Why Losing On Trades Won’t Affect Your Profitability

A. What Trading With Fear Of Taking Losses Actually Does To Your

Trading:

1) Staying concerned about taking a loss promotes Fear-Based Decision

Making.

2) Equity that is managed by traders that cannot accept a loss often struggles
to profit long-term.

3) Losing is inevitable, but Fear-Based Decision Making keeps the focus on

the adverse outcomes.

4) Fear-Based Decision Making fosters trader paralysis or the inability to

execute trades efficiently.

B. Why Profits Are Achievable Despite Taking Reasonable Losses:

1) The professional equity manager understands that "losses are costs of

doing business."

2) Using sound equity management and high probability setups can yield
handsome percentage returns.

3) Trading scenarios that encourage potential 3:1 reward ratios provide the
initial foundation.

4) Defining trade setups that frame 5:1 reward to risk or more can efficiently
cover losses.
Chapter 2.5: How To Mitigate Losing
Trades Effectively
Link To ICT Video

Let’s do some recap of the OB and FVG:

Note the open to high on the order block; that's the fair value gap,
representing the highest probability support.
So again: OB + FVG = HIGH Probability

We aim to avoid seeing the mean threshold of order blocks violated with
bodies.

Remember that a 1% risk can pave the way to millionaires, while a 2% risk
is considered the industry standard.

When dealing with losing trades, consider the following strategies:

1) If you lose on the initial trade, then take 50% off the risk on the next trade
within the same trade idea.

2) As a beginner, if you experience a loss, focus on trying to go back to

breakeven (BE) and take off the risk. Especially if it's the end of the week,
consider taking it off, regrouping, and aiming to end the week at breakeven
or, at the very least, trail the stop loss.

Mitigating losses is an essential aspect of successful trading, and these

strategies can help you manage risk effectively.

Let’s look at the example again where you were entering on the OB/FVG
If you had a loss, go with the following game plan:

1. Go Long With 1⁄2 Of The Position Size Used On The Initial Loss.

2. If The Initial Loss Was 2% Of The Equity Base – This Trade Would Be
1% Of The Equity Base In Risk.

When you do this, as shown in the above picture, the price has not even
breached the High and you already have your loss from the first trade
mitigated.
Please check the following numbers to see how losing is NOT a bad thing
while becoming profitable:

30% hitrate with 3:1 trades = 2% return

30% hitrate with 5:1 trades = 8% return

Optimal Trading goal:

Chapter 2.6: The Secrets To Selecting
High Reward Setups
Link To ICT Video

This chapter delves into the core principles of the ICT (Inner Circle Trader)
mindset, emphasizing its significance in achieving trading success. This is
an high level overview of all the components. If you cannot follow all the
terms and definitions, don’t worry, we will discuss them in much detail in
later chapters.

A Microcosm of Trading Plan Development

This teaching serves as a condensed version of the comprehensive trading
plan development series. It is essential to recognize that ICT's approach
doesn't encompass every aspect covered in the full series.
The Holistic ICT Mindset
The ICT mindset is an integrated and systematic way of thinking about
trading. It involves:

- Determining the market direction: Are we planning to buy, sell, or remain

on the sidelines?
- Understanding the trading process: What steps must be followed to make
informed decisions?

Experience as a Guide
Experience plays a pivotal role in discerning when not to engage in trading.
It sharpens your ability to identify opportune trading scenarios.

The Power of a Defined Narrative

A clear and binary trading narrative is indispensable. Trading without a
well-defined plan often leads to impulsive and emotionally-driven
decisions.

Unique Trading Plans

Every trader's trading plan is distinctive, tailored to their specific objectives
and risk tolerance. It is advisable to keep your trading plan confidential and
not share it with others.

Developing Process-Oriented Thinking

The initial focus should be on cultivating a process-oriented mindset rather
than fixating on specific entry points. Total understanding of the trading
process is paramount before diving into the market.

The Pitfalls of Impulsive Trading

Many traders, especially beginners, fall into the trap of impulsive and
reactionary trading. They rush to make trades without a clear understanding
of what defines a trade setup. Trade setups are refined through experience
and exposure to various trading ideas.
Waiting for the Right Moment
Professional traders understand the value of patience. They do not rush into
trades but instead wait for scenarios that make sense. This patient approach
allows for better decision-making and reduces the likelihood of impulsive
actions.

Sharing Experience and Processed Thinking

ICT (Inner Circle Trader) emphasizes the importance of sharing decisions
made before executing a trade. These decisions are rooted in experience
and a well-thought-out process. By sharing insights, traders can benefit from
collective knowledge and refined thinking.

The Secrets to High Reward Trading Setups

A. Big Picture Perspective:

1. Macro Market Analysis
2. Interest Rate Analysis
3. Intermarket Analysis
4. Seasonal Influences

The key principle is to primarily focus on two of these factors that align with
each other; all four do not need to concur. The dynamics of inflationary and
deflationary markets have substantial impacts on both stocks and
commodities. Additionally, understanding the interplay of interest rates in
two different markets is vital.

When your big-picture perspective, intermediate outlook, and short-term

analysis all align, it creates the conditions for identifying high-reward
trading setups.

B. Intermediate Perspective:
1. Top Down Analysis
2. COT Data
3. Market Sentiment

To make sound trading decisions, it's crucial to have at least two of the
above factors in agreement. Intraday charts are often noisy and have
minimal impact on overall price movements, whereas daily, weekly, and
monthly charts provide a more reliable picture of market trends.

Top-down analysis, which involves examining various timeframes,

becomes particularly insightful when two aspects align. The chapter also
sheds light on the significance of conducting Saturday studies to gauge
where price may be heading.
Market sentiment, while noteworthy, is considered of lesser significance
compared to the other factors explored in this intermediate perspective.

C. Short Term Perspective:

1. Correlation Analysis
2. Time & Price Theory
3. IPDA – Interbank Price Delivery Algorithm

To achieve success in the short term, it's essential for at least three of the
above factors to align and provide a clear trading signal. Recognizing that
market shifts occur every three months, traders can anticipate consolidation
periods following extended trends.

To conclude:

- The big perspective and intermediate perspective are typically established

over the weekend before the next trading week.
- In contrast, the short-term perspective can change daily.

When ICT identifies a trading opportunity, it's primarily derived from his big
and intermediate perspectives.
While ICT operates as a day trader, short-term trader, and one-shot kill
trader, he predominantly relies on the short-term perspective page.

It's important to note that the big picture and intermediate perspective tend
to result in fewer losses.

In total, seven factors (2 big, 2 intermediate, 3 short- term) need to align

for high-reward setups, providing you with clarity.

Ultimately, entry signals are of lesser concern in comparison to these

factors.

This is the routine you will follow

Chapter 2.7: Market Maker Trap: False
Flag
Link To ICT Video

Trading is an intricate dance with financial markets, and not everything is

as straightforward as it appears. In this chapter, we delve into the
complexities of false flags in price action, a favorite tool of market makers
to confound traders. These traps can be particularly deceptive, especially
when markets stand at a crossroads. By comprehending the subtleties of
these patterns and learning how to spot them, you will enhance your ability
to navigate the intricate world of trading.

False Bull Flags In Price Action:

- Not all abrupt Price Rallies that shift into short-term consolidations are
genuine Bull Flags.
- In mature Bull Trends or within Higher Time Frame (HTF) Distribution
Levels, Price can masquerade with false Bull Flags.
- Retail Traders might perceive these as classic "continuation buy
patterns," but they can result in unexpected Reversals.
- Discerning these traps becomes easier when one grasps the dynamics
of Higher Timeframe Charts & Premium Markets.
False Bear Flags In Price Action:

- Contrary to popular belief, not every sharp Price Decline followed by

a brief consolidation is a Bear Flag.
- In mature Bear Trends or at HTF Accumulation Levels, Price can craft
convincing false Bear Flags.
- Retail Traders may be misled by these setups, viewing them as typical
"continuation sell patterns," but they often lead to surprising Reversals.
- The ability to identify these traps is sharpened through a deep
understanding of Higher Timeframe Charts & Discount Markets.
These patterns tend to appear when price is on the verge of changing
direction. Recognizing them can be pivotal in avoiding costly mistakes.

Nope… it is a trap:
It's crucial to remember that when evaluating these patterns, the mean
threshold is calculated from the body high/low to body low/high, excluding
the wicks. Additionally, traders should refine a daily order block to a 5-
minute unmitigated order block.

Market sentiment plays a significant role in these traps, in addition to

institutional order flow on a Higher Time Frame (HTF).

Trading is more than just numbers and charts; it's an intricate interplay of
human psychology and market dynamics. False flags represent one of the
many challenges traders face, but armed with knowledge and vigilance, you
can navigate these traps with confidence. By understanding the context of
these patterns, you'll enhance your ability to distinguish genuine market
movements from market maker manipulations, ultimately becoming a more
successful trader.
Chapter 2.8: Market Maker Trap: False
Breakouts
Link To ICT Video

As we continue our journey into the depths of trading, we encounter another

cunning tool employed by market makers – false breakouts. These
deceptions often occur within price consolidations and can catch traders off
guard. In this chapter, we explore the mechanics of false breakouts, both
above and below price consolidations, and equip you with the knowledge
to spot and navigate these treacherous waters.

False Breakouts Above Price Consolidations:

- This scenario predominantly unfolds within Primary Bearish Markets.

- When the market reaches a state of equilibrium in price, it often transitions
into a trading range.
- Novice Traders or those inclined towards breakout strategies may set
orders that straddle the price range.
- Market Makers, cognizant of these orders, frequently orchestrate a surge
in price above the range to trigger Buy Stops.

False Breakouts Below Price Consolidations:

- In contrast, this scenario is more prevalent in Primary Bullish Markets.

- When price reaches equilibrium, typically within a trading range, traders
employing breakout strategies or inexperienced traders set orders spanning
the range.
- Market Makers, with their shrewd understanding of market dynamics, often
drive price below the range to trigger Sell Stops.

Navigating the intricate world of trading requires a keen understanding of

market maker tactics, including false breakouts. These traps, whether above
or below price consolidations, can disrupt even the most well-thought-out
strategies. By staying vigilant and recognizing the telltale signs of these false
moves, you'll be better prepared to protect your trades and capitalize on
genuine market opportunities.
Breakout traders Short and Breakout traders long are now trapped because
of the false breakouts in the picture above.

Not once, but twice…

But we know better by now: looking for liquidity

There u go.

Navigating the intricate world of trading requires a keen understanding of

market maker tactics, including false breakouts. These traps, whether above
or below price consolidations, can disrupt even the most well-thought-out
strategies. By staying vigilant and recognizing the telltale signs of these false
moves, you'll be better prepared to protect your trades and capitalize on
genuine market opportunities.
Chapter 3.1: Timeframe Selection &
Defining Setups
Link To ICT Video

Selecting the right timeframe is a pivotal decision in trading that can

significantly impact your strategy's success. In this chapter, we will delve
into the art of timeframe selection and explore various setups that align with
your chosen timeframe. Whether you are a patient position trader or a swift
day trader, understanding how to pick the appropriate timeframe and define
setups is crucial to your trading journey.

Timeframe Selection:

- Monthly Charts: These charts are best suited for position trading, offering
a comprehensive market perspective with a focus on long-term trends.

*Here price trades into Monthly PD Array and went into the SSL
- Weekly Charts: Ideal for swing trading, these charts capture intermediate-
term price movements, making them suitable for traders looking to hold
positions for several weeks.

*He uses that breaker because its lower then the other one

- Daily Charts: Commonly used for short-term trading, daily charts provide
a daily market bias, making them valuable for traders who want to hold
positions for several days.
At the grading swings setups should
form, every 25% of the range

Lots of Entry points!

- 4 Hours or Less: These timeframes are favored by day traders, focusing on
intraday price action and short-term market movements.

We look at OTEs (Optimal Trade Entries), orderblocks, stop runs (turtle soup,
false breakout), breakerblocks. They absorb orders on the buyside and then
quickly move to the downside. We look for these false breakouts when we
know price will likely be bearish; we can anticipate them.

First, you have to know why the stop run is happening, and you get that
context from, in this case, the monthly chart. Hold on to the bias until you're
clearly shown you're wrong; until it does that, we stay with the mindset of
going short.

You only need one good pattern. ICT has three: trading inside a range,
waiting for the pullback, or selling at a bearish orderblock. He also sells
short at a sweep of buy stops. Understanding when it's necessary to run the
stops or if it will hold comes with experience. These patterns include
orderblocks, stop runs, and liquidity voids, which are the only three patterns
ICT trades. With this knowledge, you'll have everything you need to know
how to trade any market profile.

Defining Setups For Your Chosen Model:

1) Trend Trader: This strategy involves trading exclusively in the direction

of the Monthly and Weekly Chart trends, aligning your trades with the
broader market sentiment.

2) Swing Trader: A swing trader concentrates on trading intermediate-term

price action observed on the Daily Chart, seeking to capture price swings
that last several days to weeks.

3) Contrarian Trader: Contrarian traders specialize in identifying reversal

patterns at market extremes. They go against the prevailing trend, looking
for opportunities when markets overextend.
4) Short Term Trader: Short-term traders focus on trading within the weekly
ranges, typically holding positions for 1-5 days. They aim to profit from
shorter-term price movements.

5) Day Trader: Day traders engage in intraday swing trading with the goal
of exiting positions by 2:00 pm New York time. They capitalize on short-
term price fluctuations.

The choice of timeframe and the corresponding setup model should align
with your unique trading personality, risk tolerance, and objectives.
Whether you prefer the patient and calculated approach of position trading
or the rapid-paced world of day trading, your strategy should cater to your
strengths and preferences.

Remember that trading is a highly individualized endeavor, and finding the

right combination of timeframe and setup model is a pivotal step toward
becoming a successful trader.
Chapter 3.2: Institutional Order Flow
Link To ICT Video

Institutional order flow is a crucial aspect of understanding market

dynamics. To grasp this concept effectively, let's delve into some key
insights and strategies.

When analyzing institutional order flow, it's essential to adopt a market

efficiency paradigm. Think about where the maximum liquidity lies
concerning where the market has traded from and where it stands currently.
In this analysis, we ignore the wicks of the candles and focus solely on the
bodies, as they reveal valuable insights into institutional liquidity.

Institutional volume typically accumulates above and below the bodies of

the candles, while the wicks are predominantly influenced by retail traders.
As a result, the bodies represent the real lows and highs, which are crucial
in identifying institutional liquidity levels.
The wicks, on the other hand, do not present significant barriers in terms of
institutional order flow. While there may be some stops below the wicks,
our primary focus remains on getting below the bodies of the candles.

Price movement doesn't necessarily have to pierce through the wicks of the
candles; what matters is that it goes below the bodies. The key ingredient in
this trading recipe is the high timeframe (HTF) liquidity. In essence,
institutional players are engaged in a constant dance of buying and selling
within the boundaries of price ranges. This intricate maneuvering is akin to
a hedge, allowing them to navigate market extremes with precision.

Understanding institutional order flow involves recognizing that institutions

continuously seek to hedge their positions. This involves both buying and
selling between range extremes. These institutions operate based on a
model that requires them to take long orders off at specific levels, often
leading to price unwinding.
At this point, they are obligated to close their long orders, which is why you
observe this unwinding phenomenon. This forms the foundation of the
market maker's selling model.

Institutional traders employ various strategies, such as order blocks, to

navigate the market efficiently. These order blocks serve as significant levels
where explosive price action often occurs. Institutions use these moments
to cover their shorts and initiate new positions.

ICT employs order blocks in a similar fashion.

Institutional order flow primarily manifests on monthly and weekly

timeframes but has a noticeable impact on daily charts. Trading around
these institutional levels allows traders to anticipate significant price swings
before they occur. Institutions often target stops on monthly, weekly, and
daily timeframes, either to remove traders from the market or to draw them
in as counterparties to their intended trades.

Mitigation block, thats where you will see explosive price action when price
reacts off of that level. Institutions covering their shorts and buying more

Conclusion

Understanding institutional order flow is fundamental to navigating the

intricacies of financial markets. It provides traders with valuable insights into
liquidity levels, which can inform their trading decisions and help them stay
ahead of significant price movements.
Chapter 3.3: Institutional Sponsorship
Link To ICT Video

In the world of trading, success often hinges on the ability to sell high, which
inevitably means looking for buyers willing to support prices above old
highs. To identify such buyers, we delve into the concept of institutional
sponsorship, a critical factor in assessing the viability of trading setups.

Institutional Sponsorship In Long Setups:

1. Higher Time Frame Price Displacement: This occurs in the form of

reversals, expansions, or a return to fair value.
2. Intermediate Term Imbalance In Price: Look for signs of a move to the
discount side or a liquidity run on the sell side.
3. Short Term Buy Liquidity Above The Market: Ideal for matching long
exits with willing buyers.
4. Time Of Day Influence: Pay attention to key moments such as the London
Open Low Of Day or New York Low Formation.

Institutional Sponsorship In Short Setups:

1. Higher Time Frame Price Displacement: Similar to long setups, keep an

eye out for reversals, expansions, or a return to fair value.
2. Intermediate Term Imbalance In Price: Observe indications of a move to
the premium side or a liquidity run on the buy side.
3. Short Term Sell Liquidity Below The Market: Look for opportunities to
match short exits with potential sellers.
4. Time Of Day Influence: Note crucial moments like the London Open
High Of Day or New York High Formation.
This chapter focuses on long setups, emphasizing the need for institutional
sponsorship to increase the probability of successful trades. Institutional
sponsorship reflects the willingness of major players to safeguard a
particular price swing with a high likelihood of holding. It's essentially the
influence of significant equity traders who step in to support a move in the
direction we anticipate.

Remember… Price is Fractal: Everything you see on one timeframe happens

on other timeframes as well

If we anticipate a move higher,

the first question that’s need to
be asked is: Where can it go to?
Daily charts are not moving this dynamic without institutional sponsorship
If they activate sell stops, they're likely in the process of accumulating buy
orders. When we observe indications of this accumulation, such as liquidity
voids and pending buy stop orders, it often suggests a high likelihood of a
bullish move.

To identify institutional sponsorship, we rely on a set of criteria:

1. HTF Displacement: Institutional sponsorship often involves significant

price shifts that are beyond the capability of daily charts to generate
independently.

2. Where Did It Start? We examine the origin of a move, which can often
be traced back to an order block. Understanding this starting point is crucial.
To identify institutional sponsorship in a particular segment of price action
you NEED to see immediate dynamic response.

If its lethargic and not willing to move right away that means there is no
institutional orders in that area. So if you see that when you are in a trade:
either reduce risk or just cut the trade completely.

Don’t marry the idea. If you are on the right side, price will move dynamic
immediately.

We got criteria (1) and (2) now: HTF displacement and price traded back
into a discount.
 4. Short Term Buy Liquidity: Institutional sponsorship involves the
presence of short-term buy liquidity, which is vital for their trade
execution.

Where is the short term buy liquidity? Where can institutions sell their orders
to willing buyers.

And if institutions are willing to hold to this point, what will be the next
likely target?
Once we hit that Buy Stop Liquidity, what is price doing? Its pairing orders
with buy stops.

So, whats the next institutional orderflow suggestion? The next high…

If the price intends to move upwards toward that level, it becomes highly
improbable for it to reverse all the way back to the bullish order block. This
shift in market structure occurred when we surpassed that previous high,
and institutional buyers had already entered the market at the order block
during the initial purchase.

The 4 Stages of a price swing (long):

1. First buying after sell stops

2. EQ/Midways point
3. 75% of the range
4. Ultimately Terminus, above the high (external range liquidity
Let’s Take A Closer Look…

1.

2.
The blue lines are Midnight Open New York Time

If we suspect price will be bullish, what we will see in the form of

institutional sponsorship: price below the Midnight Open (MNO) line
should be accumulated.

If were bullish we dont care what price does above the MNO, only below
it and where does it reach for below it, a liquidity void? Orderblock?

3.

When we find the New York opening price, were going to be looking for a
downcandle, it should be a capitilization of new longs. We see that come
to fruition when the downcandle is violated.

So when a downcandle forms, a candle trades trough it on the upside, at a

later time when we come back to it we can buy at it, and the buying has to
be below the opening price of that day.

This can happen during both London OR New York Session

When were at an EQ of a range we want to see an orderblock to see a

justification of wanting to go higher to expand away from EQ
4.

5. Power of 3

Accumulation, Manipulation, Distribution

Buy near the opening and exit at the close Sounds easy, but this is how you
do it:

1. Look at what happens at the old high, its consolidating trapping support
and resistance traders to then expand to the upside

2. Right before the terminus it stops, getting everyone excited that it will go
lower, tricking everyone. It will retrace back to an old high, thats when
support and resistance does work, because it has an unfullfilled objective to
the upside.
If there are multiple Order Blocks as in the images below, which one
should you choose?

Each order block mentioned here is closely tied to either the London or New
York trading sessions, typically from the previous day or a couple of days
ago.
Capitalizing on these order blocks is essential because there's a persistent
interest from market makers to drive prices higher, and they won't allow
significant retracements.

If a retracement occurs, it's likely to revisit logical areas, such as a bullish

order block or a previous low, which can also be the low from prior London
or New York sessions. They clear out these lows (SSL) and subsequently
rally.

The same principle applies to order blocks, and your focus should be on
those associated with the London and New York sessions. Utilize the down
candles from previous sessions to identify new buying opportunities.

If you observe these dynamics in the charts, you are effectively recognizing
institutional sponsorship. Every successful trade exhibits these
characteristics.

With this understanding, you'll find clarity in your trading, eliminating

anxiety when retracements occur. Concentrate on specific order blocks
occurring during the London and New York sessions. They serve as valuable
indicators of institutional sponsorship, and if you perceive their absence, it's
prudent to step aside or reduce your risk exposure.
Chapter 3.4: The Next Setup -
Anticipatory Skill Development
Link To ICT Video

Monthly charts are primarily influenced by significant capital movements.

To develop your anticipatory skills effectively, take a deep dive into the
nuances of these charts.

Begin your journey by thoroughly analyzing the open, high, low, and close
prices from the past three months. Focus your attention on identifying the
most recent downward candle on the monthly chart.

Then, shift your gaze to the upward candle that directly precedes this
monthly downward candle. Make a distinctive mark at this particular price
level.

By doing so, you will have successfully delineated your trading range. This
development of anticipatory skills will empower you to make well-informed
trading decisions based on historical trends and crucial price levels.
The key takeaway here is that when you designate the latest downward
candle and patiently observe price action as it surpasses this candle's level,
you should be prepared for a potential retracement back to the opening
price of that downward candle. This retracement presents a trading
opportunity, and your strategy should involve trading toward the closing
price of the last upward candle within your designated trading range.
As soon as we trade above the downcandles high, the downcandle becomes
a daily orderblock, so we can be a buyer at the open of the orderblock or
less
Use the left order block because that’s one is larger than the one on the right

Let’s Look At Another example:

Everything above the monthly OB we can refine to a lower timeframe OB
Conclusion: we use the monthly chart to get our orderblocks and define our
range, and then we look for lower timeframes to get closer to the market
and refine our risk.
Chapter 3.5: Institutional Market
Structure
Link To ICT Video

Understanding Institutional Market Structure

Institutional Market Structure analysis involves examining the relationships
between correlated and inversely correlated assets to discern the actions of
"Smart Money" – the institutional traders who wield significant influence in
the forex market.

This approach is particularly useful in the forex market, where currencies

are interrelated and can be analyzed in conjunction with the US Dollar
Index (USDX).

The key objective is to determine whether Smart Money is accumulating or

distributing assets.

To successfully identify Institutional Market Structure in forex trading,

consider the following steps:

Identifying Institutional Market Structure in Forex

1) Compare every price swing in the USDX (US Dollar Index) with the
foreign currency pair you are trading.

2) When the USDX is trading higher, anticipate a lower price swing in

foreign currency pairs.

3) If either the USDX or a foreign currency pair fails to exhibit symmetrical

movement, it suggests that Smart Money is actively engaged in trading.

4) Conversely, when the USDX is trading lower, expect a higher price swing
in foreign currency pairs.
5) Similar to the previous point, an absence of symmetrical movement in
either the USDX or a foreign currency pair indicates Smart Money's
involvement in trading.

Analyzing Institutional Market Structure allows traders to gain insights into

the actions of institutional players and make more informed trading
decisions in the forex market.
This is one of the ways we can anticipate a turtle soup likely will happen
before it actually happens.
An example:

GPBUSD makes a Higher High

USDX does NOT make a Lower Low

This will tell us that on USDX the Smart Money is accumulating orders on
the long side. So we will be bullish on the dollar, bearish on GBP
Chapter 3.6: Macro Economic To
Micro Technical
Link To ICT Video

Transitioning from Macro to Micro Perspective

The macro perspective is not designed for day trading; it primarily involves
analyzing long-term daily charts. In this realm, ICT utilizes this perspective
to gain a deeper understanding of the market. He emphasizes that relying
on information from banks is not a reliable strategy, as banks have no
incentive to disclose their intentions. It's akin to a football team revealing
its playbook for the Super Bowl.

ICT adopts a long-term outlook, typically spanning 3 to 6 months, for this

macro perspective. One of his key tools for this analysis is monitoring
interest rates, particularly in the bond market.
Using the December contracts, as an example, ICT relies on data from
Barchart.com. He observes that approximately every 3 to 4 months, there is
a quarterly shift in the market. This shift can manifest as either a reversal or
an extended period of consolidation, followed by a resumption of the
existing trend or a reversal.

While ICT doesn't heavily rely on fundamentals, he employs a visual

interpretation of data, focusing on the bond market and 10-year notes. These
indicators provide him with valuable insights into the likely movements of
interest rates.

Here's a simplified breakdown of how interest rates and market behaviors

relate:
- When interest rates rise, the value of the dollar tends to increase.
- Higher interest rates are associated with a drop in the bond market.
- Conversely, when the bond market rises, interest rates often decline.
- A lower bond market typically leads to higher interest rates.

Applying the Smart Money Tracker (SMT) methodology from Chapter 5 to

this macro perspective, ICT identifies correlations between the bond market
and the dollar. With this understanding, he can anticipate shifts in the
market, which typically occur every 3 to 4 months.

The goal of this macro-to-micro transition is to provide traders with a 3- to

4-month outlook on the potential direction of currency pairs. By analyzing
macroeconomics and then applying these insights to technical analysis,
traders can start looking for reasons to adopt a long or short position in USD
pairs.

This approach builds a market outlook based on fundamentals, without

getting bogged down in numerical data. ICT underscores that interest
markets play a fundamental role in controlling global financial movements,
making them a crucial focal point for traders.
Chapter 3.7: Market Maker Trap
Trendline Phantoms
Link To ICT Video

In this chapter, we delve into the concept of Trendline Phantoms, which are
essentially false trendlines that can trap unsuspecting retail traders.

It's crucial to understand that trendlines are often based on opinions and
lack a statistical edge. In reality, the market is driven by the search for large
pools of liquidity, including new buy stops, new sell stops, and even old
buy and sell stops. Market movements are primarily influenced by the
actions of large traders, making them the prey of the market. Consequently,
understanding their behavior is essential to gaining a trading edge.
Diagonal Trendline Support:
1) This scenario occurs when the market starts forming higher highs and
higher lows.
2) It gives the appearance of an imaginary diagonal line that repels price
higher.
3) Many retail traders extend these imaginary lines into the future and
formulate support theories around them.
4) Retail traders tend to buy when price reaches the extended imaginary
diagonal line connecting the higher lows.

ICT employs a strategic approach when dealing with Trendline Phantoms.

He looks for Order Blocks (OB) or turtle soup setups above the high after
the second touch and before the third touch of the imaginary trendline,
especially when bearish and trading at a Higher Time Frame (HTF) Price
Displacement (PD) array. Such setups often present a sell scenario.
Diagonal Trendline Resistance:
1) This situation arises when the market begins to establish lower highs and
lower lows.
2) It creates the illusion of an imaginary diagonal line that pushes price
lower.
3) Retail traders often project these imaginary lines into the future and
develop resistance theories.
4) Retail traders typically short when price hits the extended imaginary
diagonal line connecting the lower highs.

It's worth noting that many buy stops tend to accumulate at the second high,
making it a significant target for traders. Similarly, a considerable number of
sell stops gather below the second low, offering a potential target for trading
strategies.

Understanding these Trendline Phantoms and knowing how to navigate

them can be a valuable skill for traders looking to avoid common traps and
make more informed trading decisions.
Chapter 3.8: Market Maker Trap Head
Shoulders Pattern
Link To ICT Video

Picking Tops And Bottoms is the worst thing you can try..
Chapter 4.1: Interest Rate Effects On
Currency Trades
Link To ICT Video

Interest rates play a pivotal role in influencing currency market movements

and are a fundamental aspect of Smart Money Accumulation and
Distribution.

Smart Money Accumulation & Distribution [Fundamentally Speaking]

1) Interest rates stand as the single most influential driving force behind
market moves in the world of trading.

2) Gaining a deep understanding of Interest Rate Shifts and changes can

provide invaluable insights when it comes to selecting your trades.

3) Technical Analysis applied to key Interest Rates can unlock the door to
understanding professional money movements in the market.

4) Interest Rate Triads, which involve the analysis of various interest rates,
offer a visual representation of how Smart Money accumulates and
distributes funds strategically.

Interest Rate Triads

1) The 30 Year Bond represents a crucial Long-Term Interest Rate that plays
a significant role in the financial landscape.

2) The 10 Year Note is an Intermediate-Term Interest Rate that sits at the

core of market dynamics.

3) The 5 Year Note represents a Short-Term Interest Rate, which also has its
unique influence on market behavior.
4) Overlaying or employing Comparative Analysis on these three distinct
Interest Rates unveils critical insights into Price Action.

5) Identifying Failure Swings at opportune moments can serve as validation

of Institutional Order Flow, shedding light on the intentions of Smart Money
in the market.

Understanding the intricate relationship between currency trades and

Interest Rates is an essential skill for traders looking to make informed
decisions and navigate the complexities of the financial markets effectively.

To accumulate more of it, Smart Money will force it into premium, it wont
go into discount.

Confirming a long position on the dollar involves spotting a lower high in

the 30-year bond market as a sign of a potential trend reversal.
Keep in mind that interest rates play a crucial role in driving currency market
movements.

If there's a difference in the behavior of the three components, and the dollar
provides a clear order block for trading, it's a signal that you can consider
for a potentially successful trade.
Action Plan:
Chapter 4.2: Reinforcing Liquidity
Concepts & Price Delivery
Link To ICT Video

External Range Liquidity

1) The existing trading range will contain Buy Side Liquidity positioned
above the range or its High.
2) The existing trading range will encompass Sell Side Liquidity located
below the range or its Low.
3) Liquidity Runs - the objective is to match orders with the pending order
liquidity - forming Liquidity Pools.
4) External Range Liquidity Runs can either exhibit Low Resistance or High
Resistance characteristics.

Internal Range Liquidity

1) When the current trading range is expected to persist, Liquidity Voids will
be filled, posing Gap Risk.
2) When the current trading range is anticipated to persist, Fair Value Gaps
will be filled, also entailing Gap Risk.
3) Order blocks within the trading range will be populated with new Buy
and Sell orders.
4) Market Maker Buy and Sell Models will take shape within trading ranges.

Whenever the market establishes a new range, simply mark the newly
formed high and low, and you will find yourself trading within that range.
For instance, if you decide to trade at a bearish order block, you'll essentially
be planning for a return to internal range liquidity while simultaneously
searching for external range liquidity to use as your exit strategy.

ICT's entries predominantly revolve around internal liquidity, while his exits
are based on external liquidity. Once you gain an understanding of where
the higher timeframe (HTF) intends to go, you can structure your setups for
lower timeframes accordingly.
While we can execute external range liquidity runs on a daily timeframe,
on a monthly basis, it might still be categorized as internal liquidity. When
we grasp the trading levels that the weekly and monthly charts are willing
to reach, it sets the stage for low-resistance liquidity runs on the daily
timeframe.

So, when we anticipate a price surge due to monthly and weekly biases,
these surges translate into low-resistance liquidity runs because the price
has a predefined direction. This perspective enables us to differentiate
between high-resistance and low-resistance liquidity runs.
On the 4-hour chart, you can easily observe that there is minimal resistance
as price surges through the highs. This phenomenon occurs because it is
structured around low-resistance liquidity runs, primarily based on the
higher timeframe (HTF) monthly analysis.

This approach is how ICT identifies which stop orders are likely to be
triggered. He relies on HTF institutional order flow to delineate the
boundaries of internal range liquidity versus external range liquidity. This
enables him to pinpoint the locations of buy stops, determine the
appropriate entry strategy to employ, and align it seamlessly with the HTF
analysis.

It's important to note that ICT doesn't focus on the lows associated with
consolidation periods; instead, he targets the dynamic lows, particularly the
one highlighted with the red arrow in the chart below.
You're aiming to enter the market by either targeting internal range liquidity
or identifying a bullish order block within the previous range. The goal is to
secure profits at or above an old external high, all while staying aligned with
the higher timeframe (HTF) directional bias, determined through
institutional order flow analysis, which involves examining monthly ranges
and their intended destinations, as exemplified by a monthly Fair Value Gap
(FVG) in this case.

Given the bullish outlook, the strategy involves anticipating an upward

displacement followed by a retracement into an order block. However, if
there aren't any new ranges that present fresh buying opportunities, you can
shift your focus to lows. In this scenario, you should survey the market for
swing lows and patiently await price to breach them on the downside, a
strategy akin to "turtle soup."

The type of trader you become is largely determined by the setups that you
find most visually appealing and easy to spot on the charts. Whether it's
turtle soups or returns to fair value within the range, you don't need to force
yourself to identify setups every day; instead, aim to find a suitable
opportunity once a week.
When you're aware of the higher timeframe (HTF) being bullish, your focus
should shift towards locating the sell stops that market participants are
reaching for. If the market is aiming higher but experiences a drop, you
should be on the lookout for external range liquidity. Once you see a quick
reaction indicating institutional sponsorship, wait for the appearance of a
bullish order block. Keep in mind that the bullish order block may not
always materialize immediately. It typically involves a sequence starting
with external range liquidity and then transitioning into an internal range
liquidity setup to confirm the trade.

Understanding this concept helps you distinguish between low resistance

and high resistance liquidity runs. The monthly chart plays a crucial role in
framing low resistance runs. If you struggle to determine where the monthly
chart is headed, you can drop down to the weekly chart for additional
clarity.

Consider this: each time you plan to buy from a bullish order block, you
should anticipate that the market will aim to breach the previous high. On
the other hand, trading against the HTF narrative and institutional order flow
often results in a high resistance liquidity run.

Before taking a trade, glance at a monthly and weekly chart to gauge the
likely direction. In bullish scenarios, you'll search for long setups on lower
timeframes, such as turtle soups and order blocks, with the expectation that
the previous highs will be surpassed.

Keep in mind that when the 1-hour chart retraces back to an order block
and the target high is only 20 pips away, it might not be the most attractive
trade for ICT. Aiming for at least 40 pips is often preferable, though this can
vary depending on the timeframe.

The teachings provided in December emphasize the importance of properly

identifying the right swings and selecting the appropriate order blocks.
Remember that you don't need to predict every single market movement
perfectly. Aim for a 3:1 risk-reward ratio, and you're on the right track.

Select a timeframe that aligns with your trading model and stick with it.
Understanding and mastering the HTF is crucial, as everything in trading is
fractal. Staying aligned with the directional bias of the monthly, weekly, and
daily charts increases your chances of experiencing low resistance liquidity
runs, characterized by immediate responses, minimal drawdown, and swift
market actions – qualities that every trader desires.
Chapter 4.3.1: Orderblocks
Link To ICT Video

Bullish Orderblock:

- Definition - The Lowest Candle or Price Bar with a Down Close that
has the most range between Open to Close and is near a “Support”
level.

- Validation: When the High of the Lowest Down Close Candle or Price
Bar is traded through by a later formed Candle or Price Bar.

- Entry Techniques: When Price trades Higher away from the Bullish
Orderblock and then Returns to the Bullish Orderblock Candle or
Price Bar High – This is Bullish.

- Defining Risk: The Low of the Bullish Orderblock is the location of a

relatively safe Stop Loss placement. Just below the 50% of the
Orderblock total range is also considered to be a good location to
raise the Stop Loss after Price runs away from the Bullish Orderblock
to reduce Risk when applicable.

When people with a lot of money in the market get involved you will notice
it in price action. When we get a BIG candle we can be assuming we get a
orderblock.
Even in the candle that broke the high, if it immediately retraces, we can
enter on the same candle that broke the high. If you haven't entered yet,
we'll wait for a retracement after the displacement.

Our primary focus is on the candle

bodies. Consequently, we enter
positions based on the body's high.
However, there are situations where
we consider wicks, especially when
they overlap with orderblocks and
FVGs, and this is when ICT
incorporates wicks into the analysis.

When employing this strategy, set an

alert at the orderblock and exercise
patience. Waiting can be challenging,
but it's crucial. Ensure you have
determined your risk and established
your target levels in advance.

This is where you enter. If it is a

limit order, add some pips for
spread because you are buying.
The most favorable orderblocks typically won't see trading activity dip
below the 50% mark of the orderblock. To clarify, this 50% measurement
is based on the distance from the body's open to close, representing the
mean threshold.

For our stop-loss placement, it's common

practice to position it below the low of the
wick. However, our primary preference is to
set the stop loss below the body of the
candle.

With the lessons from the previous chapter,

here is where Internal and External Liquidity
is:

If you wanted to trade this, this is where you enter and exit and why:
Liquidity Bases Bias

Bearish:
Monthly Chart = Bearish
Weekly Chart = Bearish
Daily Chart = Bearish

Intraday Charts 4 hour and less will be

correcting or retracing higher. This is where
you anticipate the market to enter a
Premium and seek Buy Side Liquidity to Sell
to.

Protective Buy Stop Raids or Returns to

Bearish Orderblocks or Fair Value Gaps and
or filling of a Liquidity Void. Each offering a
potential Low Resistance Liquidity Run –
Shorting for a target under a recent Low.

Bullish
Monthly Chart = Bullish
Weekly Chart = Bullish
Daily Chart = Bullish

Intraday Charts 4 hour and less will be

correcting or retracing lower. This is where
you anticipate the market to enter a Discount
and seek Sell Side Liquidity to Buy from.

Protective Sell Stop Raids or Returns to Bullish

Orderblocks or Fair Value Gaps and or filling
of a Liquidity Void. Each offering a potential
Low Resistance Liquidity Run – Buying for a
target above a recent High.
Our primary approach revolves around trading in alignment with the
monthly chart's direction.

It's worth noting that the daily chart may exhibit more frequent shifts
between bullish and bearish tendencies, while the monthly chart tends to
sustain its overarching bearish bias. Weekly and monthly charts are higher
odds trades if you have a clear target.

Orderblocks are formed at Retail support levels

Smart Money is pushing price down to buy at a cheaper price.

A refined OB to the weekly that reacted off of the monthly OB

In a bullish context, our trading strategy revolves around capitalizing on
market dips for buying opportunities and selling when prices experience
rallies.

To refine our buy trades, ICT often seeks a scenario where the price has
advanced about two-thirds of the order block's size. Subsequently, he
patiently anticipates a retracement. It's important to emphasize that a
retracement doesn't qualify as "mitigated" if the price has merely touched
the order block immediately upon its formation.

Instead, it commonly retraces back to the order block after the price has
already moved two-thirds of the order block's size away. This refined bullish
order block should feature an open price higher than the original one and
exhibit a response from a support level, meeting all the necessary criteria.

In the examples below, you can observe three order blocks situated closely
together in succession.

OB 1:
OB 2:

OB 3:

If theres 2 downcandles in a row or more, then that counts as one full

orderblock.
In this particular scenario above, there was a clear run on stops, prompting
ICT to adjust his expectations. He did not anticipate the price to retrace all
the way to the refined order block due to the stop run it experienced.
Therefore, he opted for the larger order block and relied on the mean
threshold for his trading approach.

Wait for the price displacement and then exercise patience as these levels
are retested.
You have the option to refine these levels down to the 5-minute time frame
(5m TF) if desired. However, the primary focus should always be on the
monthly, weekly, and daily time frames (TF), as these are the order blocks
you want to consider for your trades.

Bearish order blocks can serve as profitable exit targets, especially if you
reach them during periods when profit-taking is likely, such as the London
close. In such cases, you can close your position at the bearish order block
and anticipate a retracement the next day, followed by a potential move
above the high.

It's essential to concentrate on bearish order blocks primarily when specific

times of the day come into play. If time of day doesn't have a significant
impact, you may want to disregard the bearish order block, as it could be
breached.

Sometimes, there may be a pause and consolidation at this level because

major players prefer not to take profit directly at an old high; instead, they
aim to secure profits above it, triggering stop-loss orders placed by other
traders in the process.

For bullish order blocks, it's crucial to consider them when they align with
the support indicated by the monthly, weekly, and daily time frames.
Chapter 4.3.2: Mitigation Blocks
Link To ICT Video

The Mitigation Block is a M pattern - swing failure.

Inside that range there have been buyers, but those buyers are now
underwater due to the drop of the price.
Inside that low, we will be focusing on the last down candle, because thats
where the last orders where placed before the short rally up
Let’s check out an example:

1.

2. If we anticipate prices going even lower, then we can use that as another
selling opportunity
3. Here we can go short, the buyers are out, their risk is “mitigated”

4. This is where you close the trade and wait for new opportunities
5. This is called: Buyer’s Remorse
Chapter 4.3.3: ICT Breaker Block
Link To ICT Video

To see what a breaker block is, let’s take a look at an example:

As you maybe are noticing, this looks a lot like a mitigation block… What
is the difference between a Mitigation Block and a Breaker Block?

A breaker is a 1-time thing, where as a mitigation block can form constantly

Ideal Set Up: In Major To Intermediate Term Downtrends

Bearish Breaker Block is a bearish range or Down Close Candle in the
most recent Swing Low prior to an Old High being violated.

The Buyers that buy this Low and later see this same Swing Low violated –
will look to mitigate the loss. When Price returns back to the Swing Low –
this is a Bearish Trade Setup worth considering.
The same is for a bullish scenario:

Ideal Set Up: In Major To Intermediate Term Uptrends

Bullish Breaker Block is a bullish range or Up Close Candle in the most

recent Swing High prior to an Old Low being violated.

The Sellers that sold this Low and later see this same Swing High violated –
will look to mitigate the loss. When Price returns back to the Swing High –
this is a Bullish Trade Setup worth considering.
Example:

ICT employs the highest up-candle that precedes the downward movement
and the subsequent raid on sell stops, encompassing the entire range.

In addition, ICT prefers utilizing the bodies of the breaker candles rather
than considering the entire candle, as I observed in another video.

It's important to note that this point in price action often witnesses traders
exiting their short positions while also opening new long positions. This
phenomenon contributes to the explosive nature of price movements that
follow.
Chapter 4.3.4: ICT Rejection Block
Link To ICT Video

What do you see in the blow chart?

Turtle soups, the classic signs of buying and selling.

Whenever a new high or low appears, we expect some Rejection. This is

the first skill you should work on because it can be challenging.

Bearish Rejection Block:

Ideal Set Up: In Major To Intermediate Term Downtrends

Bearish Rejection Block is when a Price High has formed with long wicks
on the high(s) of the candlestick(s) and Price reaches up above the body of
the candle(s) to run Buy Side Liquidity out before Price Declines.
This is when we step into a Premium/Discount (PD) array, which also
resembles a bull flag pattern.

You don't necessarily need price to reach a higher high for a failure swing
to occur.

To understand price action better, focus on the open, high, low, and close
prices. Pay specific attention to the swing highs and lows, and chart the
open and close. This will help you identify distribution and accumulation
patterns at these turning points.

In this analysis, we're not giving much attention to the wicks; they mainly
emphasize the pattern forming.

Our focus is on finding the highest close or open at the swing high,
regardless of whether the highest candle is bullish or bearish when it closes.

We view the wick as a bearish Orderblock.

In rare instances, ICT employs selling on a stop order as an entry pattern.

You could also enter immediately at the close or wait for it to trade slightly
below the close. Alternatively, like ICT does, you can use a sell stop order,
placing it at the close to execute when price retraces downwards.

These patterns can span multiple candles; they are not limited to just one.
Bullish Rejection Block:

On a bullish rejection block its the opposite, so we take the lowest open
(incase of a bullish candle) and the lowest wick and that is in theory our
bullish orderblock, the wick.

Ideal Set Up: In Major To Intermediate Term Uptrends

Bullish Rejection Block is when a Price Low has formed with long wick(s)
on the low(s) of the candlestick(s) and Price reaches down below the body
of the candle(s) to run Sell Side Liquidity out before Price Rallies higher.
We don't consistently require price to extend beyond the wicks; in fact, we
primarily focus on the candle bodies. These bodies provide the closest
approximation to institutional levels.

In cases where the old low or high exhibits numerous lengthy wicks, your
objective shifts from sweeping the wicks to sweeping the bodies, and you'll
be seeking a rejection block instead.
Chapter 4.3.5: Reclaimed ICT
Orderblock
Link To ICT Video

The Market Maker Buy Model comes into play when we descend into a
Higher Time Frame (HTF) Price Displacement (PD) array. This model
involves a distinct market behavior.

As the price is in a downtrend and we observe a slight upward displacement,

this is indicative of the smart money accumulating long positions. However,
it's important to note that the real impulsive upward movement begins when
we reach the HTF PD array. Unfortunately, many traders attempt to enter
these early rallies while smart money is still in the accumulation phase and
often get stopped out.

The essence of the Market Maker Buy Model is recognizing that the market
initially heads lower to eventually move higher.

In the context of the provided image, the same principle applies in reverse.
On the buy side of the curve, smart money initiates hedging, which is why
you'll notice premature bearish orderblocks forming.
As you can see in the examples above: price reacts off the reclaimed OBs.
Same goes for the opposite, on the buyside of the curve smart money starts
hedging their positions. That is why you already see premature bearish
orderblocks forming.
Chapter 4.3.6: ICT Propulsion Block
Link To ICT Video

The newly formed higher orderblock is quite delicate; it should never

breach the mean threshold, which is the 50% level of the candle's body.
Typically, it retraces back to the high of the candle and experiences an
immediate reaction, resulting in a rapid upward movement.
If it breaks the mean threshold (50%) of the propulsion block, chances are
its not a good trade and you should collapse it or take something off.

ICT uses the lowest wick here,

so not the body.

This gives you very little

drawdown and immediate
price response, it repulses
price.
Chapter 4.3.7: ICT Vacuum Block
Link To ICT Video

The ICT Vacuum Block is a peculiar market occurrence that frequently takes
place during significant events, session openings for futures, or the Sunday
market opening.

To better understand the Vacuum Block,

it's essential to consider the context of the
preceding price action. If a swing low
forms after a period of lower trading,
there's a higher probability of this being a
Vacuum Block. Conversely, if the price
was already in an uptrend, this might
indicate an exhaustion gap, signifying the
last burst of momentum in that direction.

Vacuum Blocks are particularly intriguing

when we're in a retracement within a
bullish market or when we anticipate
bullish news after a downtrend, which has
driven the market into a discount.
When the price starts to trade lower, two scenarios come into
play:

1. If we're bullish, we examine whether there's a bullish

orderblock capable of closing the gap entirely. Witnessing this
occur provides immediate feedback.

2. In cases where we don't want to

buy immediately, perhaps due to
stronger conviction that the price will
trade to the lowest downcandle and
fill the gap, time of day sensitivity
becomes critical.

For instance, if it's the beginning of

the New York session, it's more likely
that the entire gap will fill.

Conversely, if the gap appears late in

the afternoon, chances are it might
remain open. A gap like this is more
likely to happen during a news
embargo at 8:30 AM but is highly
improbable in the London session.

If the gap remains open late in the day, after 10 o'clock in the morning New
York time, it can provide a fair value gap for a later time, with expectations
of price returning to fill it in.
A fully rebalanced gap can be a buying
opportunity at the blue arrow if we have
bullish liquidity. It signifies a complete
return on the Vacuum Block.

When the gap is closed, and a rally ensues, it's

essential to note that we should not see the price
drop below the level that closed the gap. There's
no valid reason for it to retrace in this manner.

The ICT Vacuum Block essentially represents a breakaway gap. Since it

trades within a liquidity vacuum, it may not always fill completely. If a
bullish orderblock is present, the price might only return to that level within
the gap and then rally higher, leaving a small gap. In such cases, we can
use that gap as a reference for future trading. However, if the gap remains
open, especially when we're in a bullish stance, we categorize it as a
breakaway gap. It showcases determination and strength in the market,
suggesting an inclination toward higher prices.

If we anticipate a bullish market and the price has successfully filled the
gap, meaning we had an initial gap up followed by selling and then a rally
back up with both selling and buying activities, there should be no reason
for the price to drop below the low of the first upcandle. If it does, it raises
suspicions, as there should be no justification for such a retracement when
the gap has already been closed.
Chapter 4.4: Liquidity Voids
Link To ICT Video

A liquidity void represents a situation where absolutely no trading activity

occurs, creating a stark absence of both buy-side and sell-side participation.
It's essentially a scenario where a significant price move takes place, and
during that move, no trades are executed. An excellent example of this
phenomenon is the CPI candle from October 11, 2022, where a massive
candle formed without any trading occurring within it. This is a prime
example of a liquidity void.

Liquidity voids, where there is a

complete absence of trading,
provide a prime opportunity to
capitalize on liquidity. These
scenarios are the ideal hunting
grounds for drawing in liquidity.

In the world of trading, when the

price is confined within a narrow
trading range or consolidation, it is
referred to as being in balance or at
equilibrium. However, this state is
not permanent, and at some point,
the price will break free from this
equilibrium, creating a price
imbalance or what we call
displacement.

The duration for which a price imbalance or liquidity void remains open
can vary widely. It is closely tied to the price action surrounding the void
and is relative to what is observed on the charts.
A liquidity void is characterized by significant price swings occurring
predominantly in one direction, with occasional small gaps separating these
substantial price moves.
Occasionally, during consolidations, market participants may trigger buy
stops and then initiate a drop in price. However, the focus of this discussion
is not on this specific pattern.

In the future, the liquidity void created during such price movements is
typically filled by bullish price action that covers the entire price range.
When this occurs, the price imbalance is rectified, and trading has now
taken place on both the sell-side and the buy-side. This you can see in the
image above.

While it's expected that the price will completely fill the void, it's worth
noting that sometimes it may not happen instantly. In certain instances, the
price may initially drop lower, potentially catching traders off guard, before
ultimately filling the void, as illustrated in the example on the right.

This will be a perfect buy scenario:

When the price moves away aggressively with a noticeable gap, there's a
high likelihood that it will continue to move in the same direction. In such
cases, the price may make several attempts to reach a particular level, often
running away from it and then gradually returning to that level before selling
off again. This process represents institutional order stacking, where orders
are strategically accumulated to drive the price lower.

In summary, a liquidity void is characterized by a gap in price trading,

usually from the close of one candle to the opening of the next. Recognizing
a liquidity void provides insight into the likelihood of the price moving
lower, making it a potential opportunity to initiate a sell trade.
Chapter 4.5: Liquidity Pools
Link To ICT Video

Liquidity is the “open interest” of

buyers and sellers in the market and
can be further defined by those
entities at or near specific price levels.

We want to make smart trades –

selling when others are eager to buy
and buying when others are keen to
sell. Our aim is to sell at a higher price
and buy at a lower one. Interestingly,
many regular traders do the opposite –
they buy when prices are high and sell
when prices are low.

When the market is in a bearish mode (prices are generally falling), our focus
shifts to selling above previous high points. Why? Because we expect to find
less-experienced buyers who either already own assets at higher prices or
have placed orders to buy at levels just above these prior highs. These
buying orders are often called "buy stop orders."

Our strategy involves entering the market at these levels where there's a
cluster of such buying orders above past high points.

To do this effectively, we use a bit of role-playing. We ask ourselves

questions like, "If I were currently in a short (sell) position, where would I
put an order to buy?" Conversely, if we were in a long (buy) position, we'd
think about where we'd set our order to sell. This exercise helps us
understand where other traders are likely to have their buy and sell orders.
But here's the key: We need to figure out the market's overall direction,
whether it's more likely to go up or down in the higher time frames (HTF).
Once we've got that figured out, we can be patient and wait for the right
moments to make our trades. For instance, if the market seems inclined to
go up, we patiently wait for an old low point to be crossed before we start
buying.

Run On Bullish Liquidity Pool:

Definition - The Low that is Under the current market price action will
typically have Trailed Sell Stops under it on Long Traders. Or Sell Stops for
Traders who wish to Trade a Breakout Lower in Price for a Short Position.

Validation: When the Low is Violated or Price moves below the recent Low
– the Sell Stops become Market Orders to Sell At Market. This injects Sell
Side Liquidity into the Market – typically paired with Smart Money Buyers.

Entry Techniques: When underlying is Bullish. Before Price trades Under

the recent Low – place a Buy Limit Order just below or at the recent Low.
You are Buying the Sell Stops like a Bank Trader or any other “Smart Money”
entity would.

Defining Risk: The Low

you are Buying Under –
can see a swing of 10 to
20 pips in mos tcases. A
30 to 50 pip stop is ideal
if your entry is Under the
Low and not above it –
fearing a missed entry.
When trading this: Expect a 10-20 pip sweep - if you instantly want to buy
under the low then use a 30-50 pip stop loss.

Don’t FOMO by buying at the low or above it, buy under it.

If it starts moving beyond 25 pips its probably not a sweep and its likely a
contuniuation of the decline.

Accumulation sellside for longs and distributing the longs to buyside

Another example:
Chapter 4.6: ICT Fair Value Gaps
(FVG)
Link To ICT Video

A Fair Value Gap is a range in Price Delivery where one side of the Market
Liquidity is offered and typically confirmed with a Liquidity Void on the
Lower Time Frame Charts in the same range of Price. Price can actually
“gap” to create a literal vacuum of Trading thus posting an actual Price Gap.

Daily:

The gap occurs on the timeframe you are looking at, you can break it down
further on smaller timeframes but then it would probably be a liquidity void
and not one gap
4H:

Why do we anticipate the gap will get filled? Well, it's because we've
already initiated a trade by taking out the SSL below that low using a turtle
soup strategy. Additionally, we've identified EQH in that area, and above
EQH, there's an FVG. This combination makes it a high-probability trade.
During December, markets often move within a range, and in such
situations, this trading style comes in handy. We're on the lookout for stop
orders and Fair Value Gaps (FVGs).

It's worth noting that Fair Value Gaps, liquidity voids, orderblocks, and
liquidity pools often coincide. When there's a run on liquidity, like when a
liquidity pool encounters an FVG, it frequently results in the creation of a
liquidity void on lower timeframes.

That circled range is already efficient price, once we break the orange line
to the downside thats where only sellside is delivered.
Chapter 4.7: Divergence Phantoms
Link To ICT Video

There are two types of Divergences to consider:

1. Type 1 Divergence: This occurs when the price chart makes a higher
high, but other relevant factors do not confirm this upward movement. It
suggests a potential change in the current trend.

2. Type 2 Divergence: This is a form of divergence that indicates a

continuation of the current trend. It happens when the price chart forms a
higher low, but something else (which could be various factors) moves in
the opposite direction, suggesting that the trend is likely to persist.

ICT likes to see that happen when we’re looking for higher prices, while
retail looks at the bearish divergence on the top.

Banks are not looking at what indicators are doing, but they are looking at
where the stops are.
Here you can see a Bearish divergence for retail and we expect higher
prices still so we buy

We Do the opposite of retail.

Chapter 4.7: Double Bottom Double
Top
Link To ICT Video
This is wat retail thinks:

THIS IS INCORRECT

The algorithm recognizes double tops and bottoms as key points of

reference. We can use them to execute calculated sweeps for liquidity.

It's important to understand that double tops and double bottoms are not to
be trusted. We should always anticipate that they will be cleared or swept.

High-probability trading often occurs at the extreme ends of a range, while

the middle presents lower probability opportunities.

While we typically think of 10-20 pip sweeps on a 15-minute chart, we can

be more precise on the 1-hour chart. The algorithm is aware of these
reference points and their significance.
Chapter 5.1.1: Quarterly Shifts & IPDA
Data Ranges
Link To ICT Video

If markets were completely random, it would be challenging to gain an

edge.

These quarterly shifts apply to all markets and occur to generate new
interest.

To analyze price effectively, always consider it on a broader scale, looking

at monthly, weekly, and daily timeframes.

Approximately every 3 to 4 months, the market experiences a shift, which

might result in either consolidation or a retracement of the prevailing price
trend.

During a strong uptrend, you may see consolidation rather than a

retracement. This allows market participants to build new long positions
while potentially taking a short-term dip on the daily chart before resuming
the uptrend.

In this discussion, we're primarily focused on the daily timeframe. Buy

programs can be implemented on various timeframes.

It's essential to understand the underlying asset you're trading, like the dollar
in the case of USDJPY.

When the underlying asset forms a lower low while the benchmark makes
a lower high, this can be observed in pairs like GBPUSD and the dollar. Our
primary emphasis at the moment is on the daily timeframe.

Let’s take a closer look at the quarterly shift:

When things like this happen, you can anticipate it being a turtle soup on
the daily timeframe

If the old low/high has a lot of long wicks then you’ll be looking for a
rejection block, instead of a sweep of the wicks it will be a sweep of the
bodies.
Look Back Period:

The algo will do a shift between 60 and 20 days in the look forward phase
We expect a setup in the next 60 trading days, you dont have to trade the
daily if it doesnt suit you, this also helps with daily bias context

Applying this to the chart:

Cast Forward

This will help map out WHEN the setups occur, time is very important.

The algo will seek to do something in the first 20 days, 40 days, 60 days
after the most recent market structure shift.
Let’s look at an example with a SMT on the Daily:

There's a SMT relationship between the dollar and the EU, where the
underlying asset is forming higher lows, and the benchmark is creating
higher highs. This pattern occurs within the 3 to 4-month timeframe and
aligns with the 60-day look forward phase.
Price movements exhibit a certain rhythm, characterized by a sentiment
shift happening approximately every 3 to 4 months.

In May, there was a notable shift in market structure following six months
of bearishness in the dollar, particularly in relation to the SMT with the EU.

This suspected rally can be considered as part of the SMT dynamics.

To assess the market's potential, it's crucial to examine the past liquidity
zones while also looking forward to identify potential setups and estimate
the timeframes involved.

When pinpointing such shifts, it's advisable to begin by referencing the

previous closed month as your starting point for IPDA (lines, especially
when a clear market structure shift becomes apparent.
Chapter 5.1.2: Open Float
Link To ICT Video

Open Float is the total open interest. It is every order in the market. We
look at Open Float to answer the question in which direction the market
will likely go to next.

Let’ look at the example below:

Whenever we get a bearish shift, your eyes should go right to the high it just
came from thats going to have a lot of liquidity above it on the daily chart.
Market is not trading against retail, they are trading against large funds.
1.

2.
3. Market Structure Shift in the red box, after that there is a stop raid, see 4

4. Notice how there wasnt any significant move on sell stops during the
push above BSL of 1.1515 from 1.0530. Once we took the liquidity above
1.1515 we took sell stops.

This is your first clue that were probably going to work towards sellside now.
We came a long way from 1.0534 (the low) without taking sell stops once
and now we took sellstops after an important high was taken.
5. Now you see more unraveling: another buy stop-raid into SSL. The SSL
at the low is highly favorable now.

6. And yes there it goes, into the SSL.

The chances of it going above 1.1515 are very low right now. That's because
it keeps hitting stop-loss levels (SSL) and with each hit, it drops further. Even
when it has short bursts of rising, it struggles to make substantial gains on
the upswing. It's clear that every high point is being sold off.

On the flip side, it's making more headway in the downward direction.
When a market consistently moves in one direction, it indicates a strong
bias in that direction.

If it keeps moving lower, it's a sign that it wants to explore stop-loss levels
and trade below the current market price. This information can help you
determine which side of the market it's favoring.

An Intermediate Term High (ITH) is a high point with smaller Short-Term

Highs (STH) on its sides, and a Long-Term High (LTH) has Intermediate Term
High (ITH) on both sides, resembling a head and shoulders pattern. The
same idea applies to market lows when you reverse it.

By studying daily charts as we did today, you can grasp the concept of "open
float." Understanding how the price moves above and below the market
price provides you with a framework for identifying which side of the market
is likely to dominate. This analysis on daily charts gives you a long-term
perspective and insight into institutional support for your trades.
Chapter 5.1.3: Using IPDA Data
Ranges
Link To ICT Video

Author’s note: As this is the longest lecture from the whole ICT Course and
most overlooked by students, it’s recommended to watch this video to get
a more in depth understanding of the application of the IPDA Ranges.

To establish a longer-term market bias, it's valuable to consider the futures

contracts of currencies in addition to the forex market. This is because
certain data points, like accurate volume information, can be less reliable
in forex but are readily available in futures trading.

When seeking to identify displacement and Market Structure Shifts (MSS) on

a daily basis, keep an eye out for quarterly market shifts.

These quarterly shifts tend to occur every three months.

Here's a practical approach involving various lookback and cast-forward

ranges:
- A 20-day lookback and cast-forward range.
- A 40-day lookback and cast-forward range.
- A 60-day lookback and cast-forward range.

Once you've identified a liquidity grab and a quarterly market shift, draw a
reference line at the beginning of the month when these events transpired.
This reference point is crucial as it marks the starting point. Consider what
the Interbank Price Delivery Algorithm (IPDA) has most recently executed,
and identify the most prominent instances of liquidity grabs and quarterly
market shifts. Then, extend your analysis forward by 20 days, starting from
the beginning of the relevant month.
Chapter 5.1.4: Defining Open Float
Liquidity Pools
Link To ICT Video

Intermediate term basis is around 3/4 months. Every quarter a large liquidity
pools is going to be targeted.

Open float is simply taken the last three months or taking last 1.5 months to
the next 1.5 months in the future and marking that time.

You are basically looking at three months of data (orange lines are months):
When you have the high and low of the lookback of 20, 40, 60 days and
you cast forward then thats your open float. You want to find the highest
high and lowest low in between those 2 reference points in time

On a near term basis we can look back 60 days and look what the range
was (the high and low)

As you can see below, the High and the Low of the previous 60 days are
marked with a green line:
In the above illustration, we're focusing on the overall open float.

Here's the breakdown:

- Consider the recent 20-day period to identify the near-term highs and lows.
- Examine the 40-day timeframe to pinpoint short-term highs and lows.
- Extend your analysis to the last 60 days to identify intermediate-term highs
and lows.

Now, let's break it down further:

- Within the next 20 trading days, anticipate the formation of a high and low
range. By noting the high and low within the previous 20 days, you can
identify the liquidity pool for the near term. These near-term highs and lows
are particularly useful for scalping and intraday trading.

- Expanding your view to the past 40 days provides a better understanding

of short-term liquidity pools on the daily chart. Look for the most recent high
and low within this timeframe.

- A 60-day forward projection gives you a boundary point for the

culmination of the open float in terms of time. This involves looking ahead
60 days and back 60 days to encompass a total of 120 trading days, defining
the open float. Identify the highest high and lowest low within this range.

One noteworthy observation is that buy stops tend to be triggered, whereas

sell stops are rarely hit. This default behavior suggests a bullish inclination
in institutional order flow.

Large funds, often resembling long-term trend traders like the turtle traders,
influence these dynamics. The term "turtle soup" derives from their
approach.
You can do this for every month:

October:

November:
December:

January
Important:

What makes these false breakouts particularly profitable is our awareness

that large fund traders have their stop orders positioned just above and
below these price lows. Every 20 trading days, a fresh liquidity pool
emerges, encompassing both the buy and sell sides. The key is identifying
these ranges based on where the most conspicuous swing highs and swing
lows have materialized. We then project forward to determine the high and
low for the next 20 days.

When we analyze the past 60 days and anticipate the next 60 days, we gain
insight into the open float's range. This involves identifying the highest high
and lowest low within a span of 120 days, which corresponds to the macro
perspective of large funds. This is where they strategically aim to trigger buy
and sell stop orders.

Our approach is to continuously monitor price action as it establishes new

highs and lows. We position ourselves relative to the last 60 trading days:
Are we currently forming a higher high above the highest point within that
timeframe? Conversely, are we setting a lower low beneath the lowest level
in the past 60 days? We also look ahead 60 trading days into the future
while maintaining this forward-looking basis each month. Over time, this
allows us to naturally discern the flow of institutional orders.

One noteworthy observation is that institutional traders consistently target

buy stops for activation while rarely triggering sell stops. This trend signals
their intent to drive prices higher and reflects the persistent efforts of large
funds. The opposite holds true when the market sentiment turns bearish. If
we find ourselves below the lowest low of the past 60 days during a bearish
phase and start witnessing the activation of buy stops with sell stops rarely
hit, it indicates the potential onset of a quarterly shift and a new market
direction.

Integrating open interest data with our quarterly shift analysis, especially
when the market approaches a support level, can provide valuable insights.

When open interest is in decline, it signifies a reluctance among market

participants to make sell-side liquidity available to potential buyers. This
hesitancy can induce rapid price drops, essentially unsettling these market
participants.

In simpler terms, low open interest implies that the smart money,
represented by institutional traders, is not inclined to take short positions.
Conversely, high open interest serves as an indicator that a substantial
liquidity program is in place for buyers. Usually, this program is facilitated
by a bank willing to bear the associated risks.

However, if open interest experiences a decline, and simultaneously the

market's value decreases, heading toward a support level, it suggests a
noteworthy change.

This transformation can be attributed to the influence of long-term

fundamental factors that guide the market's trajectory. Nonetheless, it's
crucial to acknowledge and capitalize on the opportunities presented by
market manipulations that occur during the periods between these
fundamental shifts.
When analyzing market dynamics, particularly at critical support levels, the
interplay between open interest and stop hunts can provide valuable
insights.

Firstly, when open interest is low and coincides with a support level,
especially after a series of stop hunts below the market price, it suggests the
potential for market strength. This scenario indicates that the market has
likely cleared out many traders' stop loss orders and may be poised for an
upward movement.

Secondly, it's essential to pay attention to the frequency of stop hunts. If the
market is consistently triggering stop loss orders (SSL) and rarely triggering
buy stop orders (BSL), it implies a bearish sentiment driven by institutional
order flow. This bearish sentiment is expected to persist until a significant
directional change occurs.

To simplify this concept, consider a revolving 120-day range, known as the

"open float." Regardless of the specific trading day, you examine the highest
high and lowest low within the past 60 days while also looking ahead 60
days. This ongoing monitoring provides crucial insights into the locations of
buy stops and sell stops within the range.

The "lookback phase" within this range identifies the potential locations of
hard stops, representing actual buy and sell orders. Meanwhile, observing
new price action as it unfolds allows you to gauge where you are within the
last 60 days' trading range. Are you near a high or a low? This positioning
provides hints about the likelihood of the next quarterly shift.

In most cases, markets move from one range to another, following the
principles of supply and demand. Understanding your position within these
ranges and which side of the market is being targeted for stop hunts can
guide your trading decisions. When a range is about to break, signaling a
significant price move, you can prepare and execute trades accordingly,
even on daily charts.
Chapter 5.1.5: Defining institutional
swing points
Link To ICT Video

Let's break down these concepts in a straightforward manner.

Conceptually, there are two primary forms of swing points: the stop run and
the failure swing.

1. Stop Run Swing Point:

The first swing point is known as the "breaker." It typically starts with a
higher high (HH) in price, followed by a failure to sustain that high.
Eventually, it breaks down and often experiences a rejection at the previous
highs. In a selling scenario, the market usually rallies toward a resistance
level but fails to reach it. Instead, it falls slightly lower before rallying above
the prior swing high (STH). When price hovers below a significant
institutional reference point, it suggests an impending move toward those
levels.

Example: Consider an order block just above the breaker. Many times, the
order block isn't immediately filled with every Fresh Versus Original Gap
(FVG). Instead, the market may rise to fill all the FVGs into the order block
before a potential drop occurs.
Having these levels on your chart allows you to anticipate setups, providing
a valuable edge. Without these levels, you might find yourself surprised by
market movements.

- You can choose to sell at the breaker level.

- Alternatively, you can sell when stops are triggered, but this requires
experience and confidence.
- Ideally, the recent high or low that was breached is the most significant,
as this concept is fractal and applies across various timeframes, including
daily charts.

The breaker structure offers the highest probability for trade setups.

2. Swing Failure:
In a swing failure, the market cannot surpass a specific reference line, such
as the Price Delivery (PD) array we trade above or below. This failure to
breach the reference line can signal a potential change in market direction.

- Example: Imagine a scenario where price attempts to cross a blue line

representing the PD array but fails to do so.
We’re aiming for breaker swing points, but if we dont get that we can use
this.

We dont know if it will give a breaker before we get the swing failure. The
SL can be placed above the swing failure, doesnt have to be above the
extreme

The magnitude at which they

move away indicates that they
have already trapped sizeable
number of orders. They won’t
take out the STH/STL.

Breaker is the best, because it

allows you to buy/sell in super
discount or premium

These concepts provide valuable insights into market behavior, and having
them on your chart allows you to anticipate potential trading opportunities
with greater confidence. Understanding the breaker structure and swing
failures can be instrumental in your trading strategy.
Chapter 5.2.1: Using 10 Year Notes In
HTF Analysis
Link To ICT Video
Let's simplify the discussion of the seasonal tendencies in the dollar:

1. Bearish Tendency Mid-June to July:

From mid-June to July, there's a bearish tone in the dollar. This means that
during this period, the dollar tends to weaken.

2. Rallying at the Beginning of the Year into March:

At the start of the year and into March, there's often a rally in the dollar.
During this time, the dollar can strengthen.

3. Seasonal Decline from March to May:

From March to May, there's a seasonal tendency for the dollar to decline.
However, this decline occurs in bearish markets. In bullish markets, you
might observe buying opportunities in November, May, and January for the
dollar index. The selling tends to happen in March, June, July, and one in
September.

4. Interest Rates Impact:

The direction of interest rates plays a crucial role. If interest rates are
decreasing, yield-oriented trades tend to avoid the dollar index. When
interest rates drop, it's not a signal to buy dollar-based assets.

5. Inverse Correlation with Notes:

It's important to note that the notes (likely referring to U.S. Treasury bonds)
and the dollar are inversely correlated. This means that when one goes up,
the other tends to go down, and vice versa. This correlation provides
valuable information for understanding quarterly market shifts.

Understanding these seasonal tendencies and their correlation with interest

rates and other assets can help you navigate the dynamics of the dollar in
different market conditions.
Analyzing Dollar and 10-Year Note Movements

When the dollar and 10-year note move together, it suggests a scenario of
large consolidation. In this situation, we watch for previous highs and lows
to be broken, as this can indicate a potential trade back toward the middle
of the range.

In essence, when these two assets move in sync, it often means the market
is in a period of consolidation, and we monitor key price levels for potential
trading opportunities within that range.
Again: When the dollar and the 10-year note move together, it indicates a
prolonged period of consolidation in the market. This happens because both
assets are moving in sync, reflecting long-term uncertainty. The likelihood
of a sustained trend in either direction becomes highly unlikely during such
times. In such situations, we shift our focus to activities like stop raids or
analyzing IPDA data ranges for both the treasury and the dollar index. This
pattern also tends to affect foreign currencies, causing them to enter long-
term consolidation phases.

However, if we observe the treasury following its seasonal trend while the
dollar aligns with its seasonal pattern, there's a strong probability of a long-
term trend forming. This is where major funds tend to allocate their capital,
and the market can move consistently in one direction for several months.

There are two scenarios to consider when trading:

1. Consolidation: If the 10-year treasury note follows its seasonal trend or

moves in sync with the dollar, it suggests a period of significant
consolidation in the market. During such times, we focus on short-term
trading opportunities, which have lower probabilities for long-term success.
Explosive trending trades are less likely in this situation.
2. Trending: When the 10-year treasury note aligns with its seasonal trend,
and this alignment is supported by contrarian price action in the dollar, we
have a higher probability of experiencing a strong, long-term trend. This is
when we look for trades that can potentially be highly profitable.

Additionally, if we notice that the usual seasonal tendency, like a strong buy
signal in June or July for the 10-year treasury, is absent, we shift our focus
to identifying where the highs are forming in the 10-year treasury. This helps
us align our trading strategies with the opposite market direction. So, if the
seasonal tendency doesn't hold, we might concentrate on bearish trades for
the 10-year treasury, which could lead to opportunities around the
November high.
Chapter 5.2.2: Qualifying Trade
Conditions With 10 Year Yields
Link To ICT Video

How can we predict the seasonal tendency? It starts by looking at the swing
patterns in relation to the dollar index and the 10-year T.

In the 10-year T, we see lower lows, which should ideally correspond with
a series of higher highs in the dollar index. However, we notice that the
dollar is forming lower highs, indicating a mismatch or a Shift of Market
Type (SMT). This mismatch suggests a potential trading opportunity in the
10-year T against the dollar index.

To strengthen this idea, we check if the interest rate market is also following
the seasonal tendency, usually decreasing as yields go down. Additionally,
we observe that the futures price on the 10-year note is experiencing an
upward rally. These factors combined provide further confirmation of the
trade idea in the 10-year T against the dollar index.

2015:
Do you see in the above images: that the yield stayed in the consolidation
which also led to a consolidation in the dollar index, 10 year note and
foreign currencies at the same time.

And again notice the consolidation, and its a contributing factor as to why
the currencies also had consolidation

2017:
When we examine the relationship between the 10-year T-note and the
dollar, we typically expect to see a lower high on the 10-year T-note
corresponding to higher lows in the dollar. However, we often notice a
lower low in the dollar instead. This divergence signals a break in
correlation, indicating an underlying trend or manipulation in progress.

Another piece of evidence supporting this idea is the decline in open

interest, which suggests short covering in the dollar index. Additionally, as
interest rates on the 10-year bond increase, the dollar tends to rally. So,
when interest rates rise, the dollar usually strengthens.
To make informed trading decisions, we combine these observations with
quarterly shifts. Typically, these trade ideas materialize within 1.5 months,
although they can extend for the full 3-4 month duration. ICT primarily
focuses on 3-month trends.

You can identify high-probability trade opportunities by aligning seasonal

tendencies, qualifying SMT divergences between the dollar index and the
10-year note, and considering the interest rate triad or foreign currency pairs
against the dollar index. This alignment enhances the accuracy of your
trades, filters out market noise, and provides valuable insights into
institutional order flow, even if you don't primarily trade long-term
positions.
Chapter 5.2.3: Interest Rate
Differentials
Link To ICT Video

You can go to FXstreet.com for more details

1. Look for a country with high interest rate
2. If you want to buy, it makes perfect sense to buy Australian Dollar (1.5%)
or New Zealand Dollar (1.75%)
3. The low interest rates on other currencies means their currency is weak,
like the Swiss National Bank
4. With this informationwe can look at long term trades
5. Funds will seek to trade high yielding currencies against weak yielding
currencies

Complete Action Plan:

Chapter 5.3: How To Use Intermarket
Analysis
Link To ICT Video

All 4 groups are all moving closely related.

Stocks and bonds usually move together, with bonds impacting the stock
market. When the bond market rallies, it generally supports a bull market
for stocks. Conversely, if the bond market declines, it can make it
challenging for stocks to rally. This doesn't mean stocks can't go up, but the
downward trend in the bond market will eventually catch up with the stock
market, requiring a correction to align with the bond market trend.

If you're a stock trader, it's essential to consider the bond market as an

indicator of underlying strength. If the bond market is trending upward and
you're buying stocks, you have solid fundamentals on your side, which is a
high-probability scenario. However, if bond prices drop, it indicates rising
interest rates, and both the stock and bond markets tend to react negatively
to rising interest rates.
Export sales of commodities and production significantly impact various
currencies.
To spot signs of inflation, just keep an eye on commodity prices. But here's
the thing: while bond prices can go up, commodity prices might take a dip,
and you won't see the effects right away. It usually takes about 6 to 12
months for the impact to show up.

The CRB index mainly covers agricultural stuff like soybeans, wheat, corn,
cattle, and hog prices. If you're interested in energy-related prices, check
out the Goldman Sachs Commodity Index.

And when you see the Goldman Sachs Industrial Metal Index on the rise,
that's a solid indicator of a strong global trend. Just remember, it focuses on
industrial metals, not gold and silver.
If you spot these things
lining up with your
technical analysis, you're
likely heading in the right
direction. But here's the
tricky part: getting the
timing right for long-term
trends is tough.

However, this approach

benefits all types of
trading, whether it's day
trading, scalping, or swing
trading.

It'll boost your confidence by aligning with long-term trends and save you
the trouble of sifting through heaps of data every month. Essentially, it
provides similar insights to fundamental data, but keep in mind that, like
fundamentals, it can have a delay.

Just because the data is out

doesn't mean it'll
immediately show its
impact; sometimes, it takes
time.
Chapter 5.4.1: How To Use Bullish
Seasonal Tendencies In HTF Analysis
Link To ICT Video

Seaonal tendency is just another confluence.

Let’s look at the Canadian dollar seasonal tendency:

 - When were clearly bearish on USDCAD technical then don’t expect
the seasonal bullish tendency to play out.

- Now we can couple the seasonal tendencies with quarterly shifts.

Seasonal tendencies give us a roadmap, which quarter we want to be a

buyer and which quarter to be a seller

Another example, Crude Oil:

- Crude oil seasonal tendency is mostly bullish March-July.

- Canadian dollar is closely related to crude oil because its the number
one export.

- Certain markets have really strong seasonal tendencies.

Chapter 5.4.2: How To Use Bearish
Seasonal Tendencies In HTF Analysis
Link To ICT Video

Use seasonal tendencies as a roadmap

When the blue line and red line move in tendum direction, thats high
probability seasonal tendency, when its choppy and back and forth its lower
probability.

if we look at the seasonal chart, you want to be focusing on the June and
December contract because that is where the moves will happen.

Is there something technical in price that supports the seasonal tendency

idea?

This can lead us to the next quarterly shift

This is the big picture view of the kiwi (New Zealand Dollar).

We're not solely relying on seasonal tendencies; instead, we're searching

for clues. We'll examine various factors and determine whether buying or
selling makes more sense.

Sometimes significant macro events, like the 2008 crash, can override other
factors.

For example, if there's a seasonal tendency suggesting bullish prices, and it

aligns with a bullish market, during a time of day when the market tends to
be bullish, and this is supported by interest rates and the dollar index, when
all these factors align, you have a high-probability situation. Sticking to this
approach can lead to significant success.
Chapter 5.4.3: Ideal Seasonal
Tendencies
Link To ICT Video

Seasonal tendencies are good to have for your MACRO analysis of the
market. Let’s look at some examples:

This is the ideal seasonal tendency for AUDUSD, AUD goes up dollar goes
down.
Other Dollar-Bases Seasonal Tendencies:

As you can see, when the Dollar goes down, the asset goes up and vice
versa.
- Here's how you can identify the most promising seasonal tendencies:

- Keep a handy list of things to watch for this month and the next.

- Make it a habit to begin your trading day with a review of macro

analysis.
Chapter 5.5: Money Management
Link To ICT Video

This primarily pertains to managed funds and high-frequency (HTF) trades,

unless specified otherwise.

The size of your trading account isn't the crucial factor.

What truly matters is if you can demonstrate a consistent equity curve with
minimal drawdown. This consistency will attract investors, regardless of the
percentage gain, as long as it remains steady.

In the case of HTF trading, ICT preaches to a maximum allocation of 30%

of equity. For instance, if he has $100,000, he would utilize $30,000.
Therefore, when he risks 2%, it's 2% of the $30,000, not the entire
$100,000. This approach ensures there's no excessive leverage, margin
calls, or significant dips in equity, which is something investors appreciate.

Managing other people's money can be exceptionally stressful for ICT.

For managed funds, achieving an annual return of 18% to 25% is considered
good and aligns with industry standards. If you can consistently deliver these
results year after year, ICT assures you that attracting investors will never be
a problem. He will provide guidance on how to reach out to investors later
in the series.

ICT focuses on managing funds using high-frequency trading (HTF), which

means there aren't numerous setups available throughout the year.

When you allocate 30% of your equity to long-term trades, it provides you
with the margin needed for short-term trades. In the United States, traders
cannot hedge their positions, but they can engage in trading correlated pairs
alongside their long-term positions. If the long-term position experiences a
retracement, you may encounter some drawdown. To counteract this, you
can short and hedge the long-term position on a short-term basis. For
instance, if you have a long position in USDJPY and a retracement occurs
in the long-term position, you can hedge it through a short-term position in
EURUSD, among other options. Intraday market analysis is essential for this
strategy.

High-frequency trading requires patience, so it's important to resist the

temptation to move your stop loss too early.
It's advisable for everyone to incorporate long-term trades into their
approach; it's an invaluable learning experience.

Direct your attention to identifying two exceptional setups each year. This
approach is one of the reasons why large fund managers often seem to be
on vacation; they don't trade every day.

Strive to pick the low-hanging fruit, as this will endear you to investors who
will eagerly share their positive experiences with others. The key is to keep
drawdowns to a minimum, as excessive drawdowns often result from being
in the market too frequently.

Many individuals may initially test your abilities by investing smaller

amounts of money.

The goal isn't to impress anyone once you have more substantial funds
under management; it's about maintaining a consistent strategy.

Efficient money management means working smart, not hard. Achieving

excellent results on higher timeframes often requires minimal effort.
Chapter 5.6.1: Defining HTF PD
Arrays
Link To ICT Video

There exists a hierarchy of PD arrays that govern market movements.

As we analyze charts, our goal is to determine whether we are in a premium

or discount market.

For higher timeframes (HTFs), it's essential to acknowledge the potential

presence of lower timeframes' (LTFs) PD arrays, even if they are not

immediately visible on the HTF charts.

Price fluctuates between discount, premium, and equilibrium levels. The

extreme points are marked by red and blue lines, while balance is in the
middle.

A buying imbalance happens when the price goes above equilibrium (EQ)
or into the red premium area, suggesting resistance. A selling imbalance
occurs when the price falls below EQ, entering the blue discount area,
indicating support.

Let's explore how these imbalances form and how to use them based on our
market position.
When analyzing price movements, pay attention to instances where the
price moves away from an old high and drops from a premium area to a
discount. The algorithm orchestrates this back-and-forth motion until
something significant triggers a one-sided market move. Otherwise, it seeks
liquidity within the premium and discount zones.

Profitability relies on aligning time and price, but the duration of a

displacement is unpredictable. The path to a target is rarely straightforward.
Price transitions from discount to premium because the discount level
typically doesn't last for extended periods.

This lesson will guide you in determining which PD array to focus on.

What are PD Arrays?

The PD arrays are in order of importance:

When we find ourselves at EQ (equilibrium), and we're seeking premium

PD arrays to sell at, we follow a specific hierarchy. We start by looking for
a mitigation block, but if there isn't one, we move on to the next step, which
is searching for a breaker. If there's no breaker either, we proceed to check
if there's a liquidity void that needs to be filled.

In case there isn't a clear liquidity void, we then examine whether there's
an FVG (fresh weekly level) to consider. If none of these conditions apply,
we move on to the next level in the hierarchy: the bearish orderblock.

The hierarchy guides us in determining the significance of each PD array.

The order of importance starts with mitigation blocks, followed by bearish
breakers, and so on. It's essential to note that as we move up the hierarchy,
we enter deeper into the premium level of the market.

For instance, the most premium PD array includes old highs and lows.
Rejection blocks are next in significance, followed by bearish orderblocks,
and so forth.
It's important to understand that certain PD arrays can act as barriers
preventing us from reaching higher ones. For example, if we encounter a
breaker, it's less likely that we'll reach the liquidity void above it. In essence,
the presence of a breaker may keep the liquidity void open.

However, without a breaker, we anticipate that the liquidity void will be

filled, allowing us to trade into an orderblock.

These PD arrays serve as both entry points and profit-taking targets in our
trading strategy.

The same is for the Weekly And Daily Chart:

Chapter 5.6.2: Trade Conditions &
Setup Progressions
Link To ICT Video

This teaching will be for discount reaching into premium (PD Matrix)

When financial markets are either at a premium or discount, there is a

natural tendency for them to seek a rebalance, ideally returning to at least
the equilibrium (EQ) level of the most recent price range. This rebalancing
reflects the market's constant effort to find a fair and balanced price point.
Whenever we are in an uptrend, it's essential to pay close attention to the
downward-moving candlesticks because this is where institutional buyers
tend to step in.

When analyzing a supportive bullish PD (Price Distribution) array on the

daily chart, if it fails to provide a buy signal or support the price, the next
step is to examine the weekly PD array. Similarly, if the weekly analysis
doesn't yield favorable results or buy signals, you should then look at the
monthly PD array. This approach acknowledges that retracements can
extend beyond what is observed on the daily chart. It's recommended to
have the weekly and monthly PD arrays displayed on your daily chart, even
if you don't place them on your executable trading chart. This practice is
valuable for both day trading and swing trading.

For instance, if you

are monitoring the
market on a daily
chart, and you
notice it entering
an order block or
filling a gap, and it
appears to be
bullish, don't
assume that this momentum will necessarily persist. Price could retrace
further on the daily chart.

During bearish periods when prices are falling, and you observe small
rallies, this is typically where banks engage in buying. They are engaging in
long-term hedging because they cannot execute all their orders in one go.

Regarding old weekly highs, new daily order blocks tend to form around
them. This provides an opportunity to anticipate the formation of an order
block and potentially buy from it, especially when the higher timeframe
(HTF) objective has not yet been reached.

If you lose a level on the daily chart, it's advisable to drop down to the
weekly chart to gain further insights because the price might experience a
deeper retracement. If you can't find relevant information on the weekly
chart, which is relatively uncommon, then you may need to examine the
monthly chart.

When you observe significant spikes in price movements, especially on

lower timeframes (LTF) like the daily chart, and they don't seem to make
sense, it's a good idea to analyze higher timeframes (HTF) as this can help
clarify the underlying market dynamics. The algorithm primarily operates
on the daily timeframe, but if all potential liquidity has already been
absorbed, it may extend its analysis to larger open float levels, often dipping
into weekly ranges.
Chapter 5.7.1: Stop Entry Techniques
For Long Term Traders
Link To ICT Video

*This would be a daily orderblock, we should be trading higher after it forms

This entry technique can be effectively applied to both higher timeframe

(HTF) and daily Price Distribution (PD) arrays:

1. Use Buy Stop on New Downcandles: Whenever a new downcandle

forms, adjust your buy stop order to match the new downcandle's level. This
allows you to enter the market when the price exhibits downward
momentum.

2. Re-Entry after Price Moves Down and Back Up: If the price moves away
from the open and then retraces downward, you can consider entering as a
buyer again, but only if you have already taken partial profits. You can use
the same position size as when you took partial profits. This approach
allows you to capitalize on favorable price movements while managing risk.
3. Consider Entry at or Below EQ: It's essential to be mindful of the price
level concerning the monthly and weekly objectives or PD arrays. As you
move higher and closer to these objectives, the likelihood of candle
formations promoting buying diminishes. Therefore, it's preferable to look
for buying opportunities at or below equilibrium (EQ) levels, which can offer
a more favorable risk-reward ratio.

For setting stop-loss levels, it's recommended to place your stop-loss orders
below the most recent swing low. Additionally, ICT will provide specific
reference points for stop-loss placement in Chapter 5.8.

This entry technique is particularly valuable for long-term trading strategies

and can enhance your trading approach. It's a technique that can be
beneficial in the future, and it offers a structured way to enter and manage
trades with a focus on risk management and maximizing profits.

- The opening price a lot of the times it is not traded back to.
Your stop loss will be positioned below the most recent swing low, and it
will also be situated below a specific reference point that ICT will detail in
Chapter 5.8.

This is an excellent long-term trading entry technique that we can

incorporate into our trading strategy. I anticipate using this approach in the
future because I find it highly appealing and effective.
Chapter 5.7.2: Limit Order Entry
Techniques For Long Term Traders
Link To ICT Video

Your stop loss will be positioned below the most recent swing low, and it
will also be situated below a specific reference point that ICT will detail in
Chapter 5.8.

This approach works most effectively when

price has already indicated its intentions
through a market structure shift, and when it's
situated within a DAILY PD array.

By buying at an extreme discount, you'll receive immediate feedback, even

on the daily chart.
When applying this, you can catch amazing moves, but you need to wait a
little longer to get them.
Chapter 5.8: Position Trade
Management
Link To ICT Video

Your stop loss will be positioned below the most

For effective intermarket analysis,

it's essential that at least three
elements (confluents) are in
agreement to increase the
likelihood of success.

Using limit orders might cause you

to miss out on more trading
opportunities, while stop orders
can increase your risk.

When seeking a bullish move, it's

likely that the lowest low of the
past 40 moves will not be
touched. This concept ties back
to the IPDA data range videos. It's
crucial to allow some flexibility
in long-term trading and let your
trades breathe.

Once the price moves 50% of the

range target, you should adjust
your stop loss to the lowest low
of the last 20 days. The range target is based on the actual expected range
and its equilibrium, not the 50% level from your TradingView risk-reward
tool. If you're targeting a 3R fixed trade, your stop loss would still be at 1.5R.

Using a wider stop loss is generally more favorable for long-term trading.

For a 40-day lookback, your stop loss is calculated from the day you place
the order. You then look back 40 days from that specific day. Once you're
in the trade, every day, look back 20 days and trail your stop accordingly.
When you reach 50% of your target, adjust your stop loss daily while
looking back 20 days.
Chapter 6.1: Ideal Swings Conditions
For Any Market
Link To ICT Video

Let’s take a closer look at what Swing Trading is:

When we exit a consolidation area, there's a higher likelihood of entering a
trending environment.

Trending markets typically have significant institutional support.

It's advisable to avoid trading in consolidating markets since they often lack
clear buying and selling opportunities.

Don't let your intuition push you to go against the trend; stick with it.

If you're experiencing losses, it might be a sign of a market shift or changing

conditions.

Keep in mind that even if the monthly chart is moving higher, it doesn't
necessarily indicate a trading setup. You should consider other factors as
well.
Consolidation Profile:
Consolidation profiles can be traded, but they are not ideal for swing
trading. Swing trading is best suited for trending markets.

Trending Profile:
If it shows a willingness to leave a consolidation, thats very strong for swing
trading:

Let’s look at the example below (Weekly, Daily):

- Each Line is a new month
- You hold swing trades for about 2 weeks or longer, this gives you an
idea of where you want to get involved
- We look for strong trending plays, you can combine this with month
5 the long term position trading month and build long term positions
and swing trade positions
Chapter 6.2: Elements To Successful
Swing Trading
Link To ICT Video

Let’s take a closer look at what elements are required for successful Swing
Trading:

SMT divergences to back up institutional sponsorship

When we talk about accumulation, we pay close attention to downcandles
because they usually indicate it's a good time to buy.

The more clear and obvious a PD (Premium/Discount) array appears, the

better the trade opportunity it represents.

If the price breaks out of a consolidation phase, we can expect it to move

toward a premium buyside imbalance or a discount sellside imbalance.

The trades that are the easiest to spot and make sense without much
convincing tend to have the highest chance of success. These
straightforward setups are typically the best ones.

Institutional levels often align with significant rounded levels in the market.
If you see a better setup somewhere then you have to cut the trade youre
currently in, or take something off. But dont stay in the trade fully.
Have a clear understanding of what you're searching for, and then assess
whether it qualifies as a valid swing trade.

Thoroughly research and

analyze your trade setups;
this preparation is crucial
and will benefit you.

Additionally, identify the

factors that could
invalidate the trade.
Establish clear rules for
your trading to avoid
emotional decision-
making.
Chapter 6.3: Classic Swing Trading
Approach
Link To ICT Video

Apply the same approach to analyzing the monthly, weekly, daily, and 4-
hour timeframes as explained by ICT.

Identify which side of the market has experienced recent displacement and
whether smart money has made significant moves. Trading in the direction
of these developments is likely to yield high-probability setups.
A sell program refers to a trading strategy that starts by analyzing the
monthly chart to identify when price is moving away from a resistance level,
indicating a potential downtrend. This approach is used to find
opportunities for selling in various timeframes, including monthly, weekly,
daily, and even the 4-hour chart for swing trading.

In essence, the idea is to look for alignment in these four timeframes, with
price moving away from premium Price Displacement (PD) arrays, to
identify high-probability shorting opportunities. Conversely, when seeking
buying opportunities, the same principle applies, but in the opposite
direction, with all four timeframes indicating a potential uptrend.

The goal is to trade in the direction supported by all four timeframes for the
highest probability and ease of execution in swing trading.

You don't necessarily need all factors to align perfectly; having a few key
elements in your favor can be sufficient. It's particularly important to have
interest rates on your side, especially when there's an interest rate
differential in play.
Here's a breakdown of the process:

1. Identify a Likely Bullish Market: Look for signs of a market that's likely to
move in a bullish direction. This could be supported by macroeconomic
factors.

2. Market Rallies with Displacement: Once you've identified a potential

bullish market, observe how it rallies higher, ideally with a displacement (a
significant upward move).

3. Wait for the Retracement: After the initial rally, expect a retracement or
pullback in prices.

4. Hunt for Retracement Opportunities: During the retracement phase,

look for conditions in the market that signal potential resistance, such as
premium arrays (important price levels).

5. Counter Trend Ideas: While this approach primarily focuses on trend-

following strategies, there may be opportunities for counter-trend trading.
These counter-trend ideas will be discussed in more detail in future
materials.

6. Discount Matrix: Within the green area (the range between the impulse
low and the impulse high), focus on identifying the discount range. This is
the range where you'll be seeking discount matrix opportunities to align
with bullish prices on the Higher Time Frame (HTF).
The goal is to enter the market during the retracement phase and find
opportunities that align with the overall bullish trend on the HTF.

When checking the market profile, especially during consolidation, focus

on how price behaves as it comes out of that consolidation. Look for signs
of strong and decisive movement in the price action as it breaks away from
the consolidation. This kind of forceful movement can signal potential
trading opportunities.

Price should flow smoothly through premium arrays, which include moving
through bullish setups, breaking bearish barriers, and surpassing previous
highs. If the price moves in this manner without significant retracements, it
indicates a high-probability trend continuation and presents a favorable
trading opportunity.
The price swings in the market occur at different timeframes, which are all
interconnected. For instance, within a weekly impulse and expansion
swing, there may be smaller daily swings that are not as visible on the
weekly chart. This pattern continues, where daily swings can have 4-hour
swings within them, and so on. This fractal nature applies from monthly
down to 4-hour timeframes.

In each of these price swings, you can find discount arrays. If you enter a
trade at one of these levels and it doesn't go as expected, you can drop
down to the next higher timeframe (HTF) discount array. There, you can
look for opportunities to enter trades that align with the larger monthly
and/or weekly macro uptrend. This approach allows you to adjust your
trading strategy based on the prevailing market conditions and higher
timeframe trends.

Bearish scenario is vice versa:

Chapter 6.4: High Probability Swing
Trade Setups In Bull Markets
Link To ICT Video
We search for price displacement that rebounds from a discount array. This
means we're keeping an eye on price movements that show a shift away
from a discount level, which can provide potential trading opportunities.

We buy all the discount arrays on the daily and 4-hour charts. This means
we consider buying opportunities at various discount levels within these
timeframes.
ICT rounds the levels to institutional levels.

Every time the daily chart retraces back into a downcandle, we can consider
becoming a buyer. This happens because we now have alignment between
the monthly and weekly charts. We waited for the monthly reference point
to be reached first, as the weekly and daily charts initially showed a bearish
bias.

In this approach, we focus on specific levels rather than broad zones. These
levels are determined using the open and high prices.

Next, we transition to the 4-hour executable timeframe, incorporating all

the daily downcandles as well as the 4-hour downcandles.

It's worth noting that when ICT performs his analysis, he accumulates
numerous lines on his chart. However, he typically removes older lines to
keep only the most recent ones. This is one of the reasons why he doesn't
share his analysis chart.
In addition to buying during downcandles, we also consider buying below
old short-term lows. ICT expects lows to sometimes be tested or breached
before an upward move occurs, especially when there is no order block to
reference or the order block has already been breached. (Minute 27 of the
video)

These levels are where you would anticipate a liquidity void to be filled,
and they serve as potential targets for your trades.
ICT prefers to avoid taking long positions in premium and short positions in
discount. He typically looks for opportunities when the market is at a
significant discount, ideally greater than 20, before considering long
positions.

By focusing on higher discount levels and avoiding premium levels, ICT

effectively filters out potentially less reliable order blocks and trade setups.
This approach helps him identify higher-probability opportunities and avoid
those that may have less favorable conditions or greater risks.
Drawing out the various levels, order blocks, and price structures can be a
helpful visual aid when learning and analyzing the market. It can make it
easier to identify potential trade setups and understand the market's
dynamics. Over time, as traders gain experience and confidence, they may
rely less on manual drawings and develop a more intuitive sense of the
market's movements. However, drawing and annotating charts can remain
a valuable tool for both novice and experienced traders.

Swing trading often involves following a set of predefined rules and

guidelines to identify high-probability trade setups. These rules help traders
make informed decisions and reduce ambiguity in their trading strategies.
On the other hand, day trading can be more dynamic and requires quick
decision-making based on intraday price movements.

In swing trading, traders typically look for well-defined structures such as

bearish order blocks in premium areas that may serve as potential entry or
exit points. Breaking these structures in discount areas can indicate a shift
in market sentiment, providing opportunities for swing trades.
It's important to remember that while rules and guidelines are essential for
trading, they should be flexible enough to adapt to changing market
conditions. Traders should continuously analyze the market and refine their
strategies as needed to stay profitable.
Chapter 6.5: High Probability Swing
Trade Setups In Bear Markets
Link To ICT Video

Author note: this chapter is the same as Chapter 6.4, but now its vice versa.
Let’s take a look at an example:

1. Look at the big candlesticks on your charts, especially on monthly and

weekly timeframes. They're more important for finding key levels.

2. When you see multiple levels close together, pay extra attention. These
areas are likely to be strong support or resistance zones.

3. Levels from monthly and weekly charts are super important. They can be
used for trading multiple times because they're based on longer-term data.

In a nutshell, focus on big candlesticks, watch for overlapping levels, and

give extra weight to monthly and weekly chart levels when making your
trading decisions.
Chapter 6.6: Reducing Risk &
Maximizing Potential Reward In Swing
Setups
Link To ICT Video

Structure your trades using the monthly and weekly timeframes, both for
entry and objective setting.

Orderblocks are shown because displaying every PD array would make the
videos excessively lengthy.

When selling, target entry from a monthly premium array into the initial
monthly discount array as per the PD array matrix.

Maintain a conservative approach to risk management.

If you have a busy schedule, consider the 4-hour (4h) timeframe.

Use stop orders and limit orders for swing trading, specifically on the 4-hour
chart rather than the daily chart.
You don't require high leverage, such as 1:50, to build wealth.

If you believe that trading frequently is the key to success in this industry,
you are mistaken.

You have plenty of time to plan and execute your trades, even if you have
another business to manage on the side.

When your funds reach the $2 million mark, it's advisable to explore prime
brokers. Prime brokers typically restrict leverage.

Finding a 1:10 risk-to-reward ratio is quite feasible in swing trading.

Chapter 6.7: Keys To Selecting Markets
That Will Move Explosively
Link To ICT Video

1. We assess the four major asset classes - interest rates, stocks,

commodities, and currencies. We look for trends that are not conflicting
with each other and not stuck in consolidation. Ideally, we want to see at
least two of these asset classes trending.

2. This approach involves using other asset classes to validate our trade
ideas. For instance, if we anticipate a bullish dollar, we would expect
commodities to struggle to reach higher highs and to easily break through
lows. Conversely, if we are anticipating a bearish dollar, the opposite
behavior would be observed in commodities.

3. We analyze the net positions of commercial trades over the last 12

months. By looking at the lowest low and highest high within that
timeframe, we establish a range and then divide it in half to determine
whether we should be bullish or bearish.

4. Open interest is another factor we consider.

5. We also take seasonal tendencies into account.

6. This method helps us gauge when the market becomes quiet before a
significant explosive move.

7. Major news headlines can influence our decisions. If we notice that two
out of the four major asset classes are trending, and we have a bullish bias,
but a news event suggests weakness, we may take the opposite stance and
continue buying, ignoring the news.

8. We pay attention to market sentiment as well.

We assess the major four asset classes, and we look for signs of whether
they are currently trending or in a state of consolidation. Our goal is to
identify at least two of these asset classes that are exhibiting clear trends.

Specifically, if stocks are in a consolidation phase, we would expect to see

commodities trending, and vice versa. Additionally, within the pair of
interest rates and currencies, at least one of them should be showing a clear
trend.

In summary, we group the asset classes as follows:

1. Stocks and commodities - At least one of them must be trending.
2. Interest rates and currencies - At least one of them must be trending.

Intermarket analysis is about checking if one asset class supports the trading
idea of another. For instance:

- If you're bullish on the US dollar, see if commodities are confirming it.

They should generally be falling, and watch for strong resistance levels.
- When the US dollar is weak, commodities often break previous lows. Look
for easy breaks lower and resistance after moving up.

In both cases, observe how commodities behave. Are they consistently

moving in one direction, or do they meet strong resistance after changing
direction? This analysis helps validate your trading ideas and gives you a
more complete view of the markets.
We examine the Commitment of Traders (COT) report, focusing on data
from the past 12 months. This is a common approach because the last 12
months' data is typically used for hedging purposes. You can access the
COT report on http://barchart.com.

ICT uses a simple method with the Commitment of Traders (COT) report:

1. Look at the highest high and lowest low in the last 12 months.
2. Divide this range in half to create a new zero (0) line.
3. This new range represents the net long or net short position.

For instance, if most positions are slightly below the new zero line in January
2016, it suggests a neutral or slightly bearish sentiment. Conversely, when
positions hit their lowest point in July, forming a new range and dividing it
in half helps determine the new zero level, indicating a bullish or bearish
stance.
If this data aligns with the broader market trend and intermarket analysis,
ICT proceeds to the next step: examining open interest.

If we're dealing with a bearish market and observe the Commitment of

Traders (COT) data showing positions above the newly established zero
line, it's not conducive to a robust sell. In such cases, it's advisable to wait
until the line returns below the new zero line before considering a strong
sell position. This approach helps confirm a more bearish sentiment in
alignment with the COT report.

When open interest decreases by 15% or more, it's often a sign of banks
engaging in short covering. This suggests they anticipate a potential price
increase; otherwise, they would maintain their short positions. This signal is
further confirmed when you observe the Commitment of Traders (COT)
report trending higher toward the zero line. In this situation, the red line in
the COT report should either remain flat or move lower.

Conversely, if open interest experiences an increase of over 15% and the

COT data shows a decline, it can be considered bearish confirmation. This
means that despite the rise in open interest, the COT report is not aligning
with bullish sentiment, signaling a potentially bearish market outlook.
We aim to enter trades when seasonal tendencies support our trading
direction.
We use a volatility filter, which can be applied to any timeframe. This filter
helps us identify when price transitions from large price ranges to smaller
ones. We focus on the candle's body, not the wicks, to gauge this volatility.

The volatility filter helps us identify inside bars, which are candles with
smaller price ranges. When we spot an inside bar, there's a high probability
that the next candle or the one after that will have a larger price range.

This is especially significant if other conditions indicate a potential upward

or downward movement.
For instance, if we're near a support level and other factors suggest bullish
prices, the next few candles should show strong bullish momentum. This
filter doesn't precisely predict timing but indicates that a significant price
move is likely imminent.

We can also interpret this as the smallest price range in the past 7 or 3 days,
and ICT uses any inside bar as an opportunity, comparing it to a spring ready
to release its energy.

ICT suggests that if we have a bullish bias, supported by various factors, it's
advantageous to look for headlines or news suggesting a bearish sentiment.
Conversely, when we're bearish and approaching resistance levels, it's ideal
to observe bullish news.

As a specific approach, ICT recommends using sources like Futures

Magazine and doing the opposite of what they suggest. Similarly, with
platforms like MarketWatch or CNBC, consider taking a contrary position
to their recommendations. This strategy is based on the idea that mainstream
news sources may not always reflect the true market sentiment, and going
against the grain can be a strategic move.
ICT utilizes an indicator called "William %R" to gauge overbought and
oversold conditions. This indicator is most accurate when plotted with a 15-
period setting. It helps traders identify potential reversal points in the market
when an asset becomes overbought (typically above -20) or oversold
(typically below -80) on the William %R scale.

In the context of the William %R indicator, a reading below -50 is

considered oversold, which can be interpreted as a potential buying area.
Traders may look for opportunities to enter long positions or consider that
the selling pressure might be exhausted, and a reversal to the upside could
occur.
When using the William %R indicator:

1. Readings below -50 are considered oversold, suggesting a potential

buying area.

2. Readings above -50 are seen as overbought, indicating a potential selling

area.

3. If the indicator is around the 50 level after leaving the oversold area, it
may favor a potential buy.

4. If the indicator is around the 50 level after leaving the overbought area,
it may favor a potential sell.

In essence, traders often consider the recent direction and level of the
William %R indicator to help determine their bias, whether it's toward
buying or selling opportunities.
Chapter 6.8: The Million Dollar Swing
Setup
Link To ICT Video

Step 1:

If there is no seasonal tendency in a market, it can make swing trading more

challenging because you may not have historical patterns to rely on for
making trading decisions. Seasonal tendencies are based on historical price
behavior during specific times of the year, and traders often use them to
anticipate future price movements.
Without a clear seasonal pattern, swing traders may need to rely more on
other technical and fundamental analysis techniques to identify potential
trading opportunities. This could include analyzing price trends, support
and resistance levels, technical indicators, and market sentiment.

In summary, while seasonal tendencies can be a helpful tool for swing

trading, traders should have a well-rounded approach to trading that
includes multiple strategies and analysis methods to adapt to different
market conditions.

Both of these have to be in agreement. We only need 1 of each group to be

trending
Bullish Trading Idea:

Bearish Trading Idea:

Step by Step plan:
Trading is based on clear rules. ICT, in particular, prefers to focus on
seasonal tendencies when engaging in swing trading. It's important to note
that ICT primarily engages in short-term and day trading.

For swing trading, the setups typically unfold over a period of about 4-6
weeks. If you find that a setup doesn't have all the necessary components,
it's best not to force the trade. Instead, exercise patience and wait for the
right conditions to develop before taking action.