ICT Explains Bias in 100 Seconds

Summary

The speaker emphasizes the importance of a top-down approach to trading, starting with the weekly chart to establish a strong market bias. They argue that relying on higher strike rates or quick, high-leverage trades is a form of gambling. The key to successful trading lies in understanding market inefficiencies, fair value gaps, and liquidity zones. Discipline, patience, and the ability to wait for favorable conditions are crucial. The speaker warns that without these factors, trading outcomes become random and speculative.

Takeaways

• 😀 Use a top-down approach to trading, starting with the weekly chart to determine market bias.
• 😀 Focus on price expansion rather than predicting exact closes. This will give you 80% of your market bias.
• 😀 Patience and discipline are key; avoid jumping into trades based on impulse or short-term chart patterns.
• 😀 A higher strike rate does not guarantee success; you need to manage risk properly, using leverage carefully.
• 😀 Identifying inefficiencies (fair value gaps) and liquidity points (old highs/lows) should guide your trades.
• 😀 Ensure there’s enough market range to allow for profit before executing trades—wait for favorable conditions.
• 😀 Your bias should always be aligned with the larger market trend, not short-term fluctuations.
• 😀 You must use multiple timeframes and different conditions (economic calendar, time of day, etc.) to make informed decisions.
• 😀 Trading randomly without a clear strategy is gambling—wait for market confirmation before entering trades.
• 😀 Risk management is critical: trading with leverage without proper control can lead to significant losses, but disciplined trading can reduce the likelihood of blowing your account.
• 😀 Focus on price action and patterns that emerge from the market’s natural inefficiencies rather than trying to predict every movement.

Q & A

What is the main issue with the trading strategies discussed in the script?

The main issue highlighted is that traders often rely on high-risk strategies, like heavy leverage trades, to recover from drawdowns. This approach is seen as gambling rather than a systematic, thoughtful trading strategy.

What does the speaker mean by 'gambling' in trading?

The speaker refers to trading as 'gambling' when traders cannot confidently determine whether they are on the right side of the market. This lack of clarity in market positioning leads to high-risk and uncertain trades.

What is the significance of the weekly chart in the speaker's trading approach?

The weekly chart is used by the speaker to establish a general market bias. By analyzing the weekly chart, traders can gain a feel for the market’s likely direction, which helps in making more informed decisions on shorter timeframes.

Why is the weekly chart considered the 'number one bias' in the speaker's strategy?

The weekly chart is considered the 'number one bias' because it provides a broader, more reliable view of market trends. It helps traders identify long-term patterns and market dynamics that guide trading decisions.

What is the speaker’s approach to maximizing leverage and risk management?

The speaker emphasizes the importance of trading in the direction of the market’s broader trend, identified through the weekly chart. They focus on combining leverage with maximum risk management by entering trades aligned with the identified market direction, which reduces the likelihood of large losses.

What are the two conditions that determine market direction, according to the speaker?

The two conditions that determine market direction are: 1) whether the market is moving towards an inefficiency or fair value gap, and 2) whether it is heading towards an old high or low to trigger buy-side or sell-side liquidity.

How do inefficiencies or fair value gaps factor into the speaker’s trading strategy?

Inefficiencies or fair value gaps are important because the market is likely to move towards them. The speaker uses these gaps as reference points to predict whether the market will move up or down, which informs their bias and trade decisions.

What role does discipline play in the speaker's trading strategy?

Discipline is crucial in the speaker’s strategy. By maintaining discipline, traders are more likely to stay aligned with the market’s broader trends, avoid impulsive decisions, and prevent large account blowouts.

What does the speaker suggest to do when there is no significant range to profit from?

When there is no significant range in the market, the speaker advises sitting still and waiting for a better opportunity to present itself, rather than forcing trades in unfavorable conditions.

What is meant by the 'agreement of multiple facets' in trading?

An 'agreement of multiple facets' refers to aligning several factors—such as different timeframes, logic, the economic calendar, and market conditions—before making a trade. The speaker suggests that trading without this alignment leads to random and unreliable results.