ICT Mentorship Core Content - Month 1 - Equilibrium Vs. Premium

Summary

The speaker discusses trading concepts like equilibrium, premium, discount, impulse price swings, Fibonacci retracements, optimal trade entries, turtle soup buys/sells, trading ranges, and identifying swing highs and lows. He explains how to identify premium and discounted markets using fib levels and price action, set up turtle soup buys/sells, sell at premium prices, define ranges to trade inside consolidation, and take profits below swing lows/above swing highs. The goal is providing actionable setups to trade profitably without needing a directional bias.

Takeaways

• 😊 The topics covered are premium vs equilibrium markets, identifying price swings, using Fibonacci retracements.
• 👍 Premium markets are above the 50% equilibrium level of a price range.
• 🌟 Optimal entries to go short are between the 62-79% Fibonacci retracement levels when in a premium market.
• 😎 Take profits at below recent swing lows after entering at premium areas.
• 📈 Impulse price swings make up larger price swings. Compare different swing timeframes.
• 🔍 Wait for 4 candles to confirm a swing low before considering buy limits below it.
• 🤔 Consolidation trading favors using turtle soup and premium/equilibrium concepts.
• 💡 The same concepts work on higher timeframe charts like daily and hourly.
• 🎯 Sell high buy low. Selling at premium prices and buying at discounts makes sense.
• ☝️ Focus on trading ranges rather than needing a bias of the overall trend direction.

Q & A

What is meant by a market being at a premium price?

A market is at a premium price when it is trading above the midpoint or 50% level of the current price range, defined by the most recent swing high and swing low. This indicates the market is at an overbought area.

Why is it advantageous to sell at a premium price?

Selling at a premium price allows you to sell into market strength and overbought conditions. This means there is an increased chance of the market reversing and moving lower after hitting your entry.

What defines an equilibrium price?

Equilibrium price refers to the midpoint or 50% retracement level of a price swing, as measured from the swing high down to the swing low. It is the balancing point between bullish and bearish control.

How can you trade profitably inside a consolidation range?

You can sell at premium levels when price goes above equilibrium and buy at discount levels when price goes below equilibrium. Taking profits near previous swing points.

Why is selling above an old high with stops such a high probability setup?

Old highs often have buy stops clustered above them from previous longs trying to get break even. Running through these stops adds fuel to drive price lower.

What defines a proper price swing?

A proper price swing consists of a visually obvious and structurally sound impulse move, typically consisting of a series of 3 pushes creating new highs or lows. The more clean the swing looks, the better.

Where should you anchor your Fibonacci levels?

The Fibonacci levels should be anchored from the most recent discernible swing high down to the most recent swing low. Using the most recent swings gives the most relevant levels.

Why not use the Williams Fractal indicator?

The Williams Fractal requires 5 candles to form a swing high or low. Price action trading only needs 3 candles, allowing you to define ranges faster and with less lag.

What is the optimal trade entry sweet spot referred to?

The optimal trade entry (OTE) sweet spot is the 62-78.6% Fibonacci retracement zone. This aligns price with previous swing points to offer high probability entries.

Where should your initial profit targets be placed?

Initial profit targets should be placed just below the most recent swing low when selling, or just above the most recent swing high when buying. Then trail stops to exit.

Outlines

00:00

😊 Defining premium versus equilibrium price ranges

Paragraph 1 discusses defining premium and equilibrium price ranges using Fibonacci retracement levels. It explains that premium occurs above the 50% retracement level (equilibrium), representing an overbought market expecting sellers. It provides examples of identifying impulse price swings, anchoring Fibonacci levels, and selling at premium levels between the 62-79% retracement area by running stops above old highs.

05:02

😃 Identifying misses and hits for selling at premium levels

Paragraph 2 continues examining trades based on selling at premium levels. It highlights cases of missed opportunities when price fails to reach optimal levels. It also shows examples of successfully selling at premium levels above equilibrium near the 62-79% Fibonacci retracements, taking profits below recent swing lows.

10:06

😊 Using equilibrium versus premium concepts to trade consolidations

Paragraph 3 demonstrates applying equilibrium vs premium concepts when trading long consolidations. It advocates using turtle soup setups to trade reversals by selling above old highs when the market is at a premium. Several examples are shown of defining ranges and selling above 62-79% retracements into strength during overbought conditions.

15:08

🙂 Recapping examples and examining applicability across timeframes

Paragraph 4 concludes by recapping examples and noting the applicability of the concepts across timeframes. It emphasizes selling at premium prices into strength, despite the nerves it may cause new traders. An hourly chart example is shown to demonstrate universality across intraday and daily timeframes.

20:14

😉 Final example of selling at premium on hourly chart

Paragraph 5 provides one last example on an hourly chart of selling at the 79% premium level based on a defined price swing. It notes initial profit targets below a swing low, followed by an extension below the next low for an additional 70+ pips.

Keywords

💡premium

Premium refers to a market price that is high relative to the current trading range. It indicates an overbought market condition where prices are stretched too high. The video discusses selling short at premium price levels to capitalize on an expected move lower.

💡equilibrium

Equilibrium refers to the midpoint or 50% retracement level of a price swing. Prices need to move above equilibrium into the premium zone to signal an overbought condition suitable for selling short.

💡impulse swing

An impulse swing is a discernible price movement or leg within an overall larger price swing. Identifying impulse swings allows tighter analysis of retracements.

💡fibonacci retracement

Fibonacci retracements are technical analysis tools that identify support and resistance levels based on key Fibonacci ratios. In this case, they identify optimal shorting levels in the 62-79% zone.

💡turtle soup

Turtle soup refers to shorting setups where prices run stops above previous swing highs. It signals a potential momentum reversal to profit lower.

💡high/low

The video analyzes market moves in terms of discerning high and low swing points which define trading ranges to read overbought and oversold levels against.

💡order blocks

Order blocks refer to areas of significant buying or selling interest on a chart. They can act as profit targets for trades, like swing lows.

💡retracement

Price retracements refer to counter-trend moves against an impulse swing. Analyzing retracement levels identifies market overextensions to trade.

💡candlesticks

Candlestick chart analysis underpins all the taught price action concepts like swing highs/lows and overextension levels.

💡stop loss/profit take

The video discusses placing stop losses above recent swing highs to limit trade risk. Profit targets focus on swing lows and order blocks.

Highlights

We define price ranges using swing highs and lows, then look for trades when price moves into premium levels above equilibrium

Selling at premium prices is like selling your car when prices are high - it makes the most sense for maximizing profit

Turtle soup sells short on breakouts above old highs are good probability trades in premium markets

Concepts apply on any timeframe; daily, hourly etc. You don't need to break out of a range to make money trading

Taking profits below recent swing lows is key after entering at premium levels

4 pip spread on exits gives you room to close below a swing low profit target

You don't need a directional bias to trade well. Ranges exist in all market conditions

Wait for 4 candles to show willingness to move higher before trading a bounce off a swing low

Selling into strength at scary looking highs is optimal - it means we are at premium levels

The 50% fib level marks equilibrium. Above that is premium where we sell high probable shorts

62-79% fib retrace is optimal for entering short sales in premium conditions

Ignore unclear swing high/lows. Focus only on obvious, visually solid swings

Daily charts can give 100+ pips for swing trades using these concepts

Stops above old highs confirm our premium selling zone shorts

Let price swings go if they don't reach premium levels - wait for the next one

Transcripts

welcome back folks this is ict with a

fifth installment of the eight in the

continuing series for the first month of

the ict mentorship for the month of

september

uh the previous tutorial in session four

we looked at equilibrium versus discount

in this session we're looking at

equilibrium versus premium

we went through a great deal of content

in regards to

discount versus equilibrium so

we won't have to spend so much time with

this tutorial because everything we're

selling here is basically diametrically

opposed to what you would expect to see

in the equilibrium versus

discount

teaching

so looking at what we have

when we look for

premium markets markets that are in a

premium now when we talk about

commodities later on in this mentorship

uh the the topic of premium will come up

again

but when i'm referring to premium as it

relates to price action uh i'm actually

referring to the current range that

we're uh trading in

and

the first thing we look for is an

impulse price swing which is we have an

impulse price point here we have another

impulse price one here we have another

impulse price swing here

so the first thing we look for in price

is an impulse swing

and we see one here

we see another one here we see another

one here

and

these three

price swings actually make up one larger

price swing

which is an impulse leg or impulse swing

by itself by its own right

so

when we define our ranges

okay the use of the fibonacci is

helpful in this case because we can take

the fib draw from a high

down to a price low

and i'm using this low here because it's

the most

lowest

in contrast to this high

and price comes all the way back up

to what i have taught in many years

the optimal trade entry which is a

standard 79 to 60 retracement level on

the fib now i didn't create that

but

if it was just simply looking at

that alone 62 percent to 700 levels uh

looking for buys and sells there

everywhere we loaded it would be no no

work at all in terms of uh taking trades

but obviously you probably learned very

quickly there's much more to it than

just pulling a fib over top of price

swings

we have

in

this larger price swing we have a

smaller price swing here okay

and we have the high down to this low

and the market starts to retrace

equilibrium or half of the impulse price

swing

has to be at least touched and then once

it hits that we watch for price to reach

up into

this area here then there's other

disciplines out there and other mentors

other teachers will say that the 50

retracement level is a good level to

trade at based on price swings i don't

agree with that um i understand that

sometimes it's going to work but what i

want to do is i want to be selling at a

market that's at a premium level

for a market to be at a premium in this

current price range here and it's

assuming none of the price action from

this high

down all the way to the right has not

happened yet so you'd be watching price

in this initial range

and price did not get back up to the

midway point or 50 percent of the uh

the range that was created from the high

to low that's all equilibrium is is

fifty percent on the fit let's have to

tell them describing it but the concept

is is you have to see a

market price

a move above the halfway point once it

does that start it starts going into

what is referred to as a premium market

that means it's at a really high price

relative to its current trading range

we don't need overbought never sold

indicators to help us

classify an overvoter we're sold market

we just simply need to know the current

price range we're trading in and if we

get above the 50 level okay we start

getting into what would be deemed as

overbought or at a premium level

on this pricing here it obviously never

gets above the 50 and everything touches

it so it never gives us an opportunity

to get short

relative to this time frame or this

price swing

so there would be nothing to do there

the next price leg

here

okay the same thing from this high to

this low not nothing in terms of that

price swing there it doesn't get back up

to the 50 uh level but look closer

there's another smaller price swing that

has formed right in here

okay so we could look at that

measure the high

to the low and the market gets right to

a pre uh i'm sorry equilibrium but does

not stay above to go to a premium market

it only goes right to the fibonacci 50

level or what we deem as equilibrium so

price goes to an equilibrium price point

and then immediately sells off this

would be a missed opportunity in regards

to looking at

equilibrium to premium the reason why we

want to focus primarily on the 62 or 79

trace levels in that range to be selling

short

is because the market's going to be

really pressed higher and would be

really

in terms of overbought never sold it

would be very overbought and it would be

expecting a willingness to to sell

softer and go lower there's going to be

times when the market does not give that

scenario to you and you just got to let

those

particular price links go without you

the next price swing

is this high to this low market trades

back up to equilibrium here

and move this over so you can see a

little bit better

okay so market trades back to

equilibrium goes back above it into a

premium market

and it goes right on through

what would be deemed as an optimal trade

entry okay or selling at a premium so

here's a wonderful thing about this

you can look at this and say okay if i'm

measuring this high to this low

and i'm going to be selling i'm above

equilibrium i want to get short

in this area between 62 and 79 chasing

level okay

you look over here

maybe there's something over here

institutionally um in terms of a bearish

order block or something like that you

can define we're going to say that

that's not there we're going to say that

we went short just purely on price

action retracing back into the fibonacci

level here it comes all the way up and

hits you where your stop would be

when you see these conditions where the

market trades above equilibrium and goes

through the levels of 62 and 79 certain

trace levels what that does is it gives

you a condition that we saw

in the equilibrium to discount if it

takes out a previous low when it's in

discount it's probably going to be a

turtle suit by

in this case it's going to be a turtle

soup cell it's going to be reaching for

stops above

the impulse

swings high

and you see that here it goes up runs

out the stops here and then goes lower

where is it going to go where do you

take profits at below lows it's already

established in the marketplace here and

here you see that's exactly what the

market does

you can also use

when you're defining your ranges

all price swings from high down to low

okay you you want to anchor your your

fibonacci on

the market goes down from this high all

the way down to here okay and creates

that low

as soon as we start seeing it bounce up

you need four candles remember it's the

same thing we just saw on the

equilibrium to discount

teaching once you see a a swing low form

you're watching that fourth candle to

show willingness to go higher it does

but then you simply wait here's the

equilibrium price point this this fifty

percent level in the fifth

price goes through that so now you're

gonna be watching it you're gonna want

to see if price gets to sixty two the

seven tracing levels it does

and it does it while it's running out

that high here so two scenarios one you

could have used this high down to this

low and got a stop out

in the initial

uh 62 to 700 tracement levels where we

saw earlier but it ran right through it

if you had not anchored your fib to this

high to this low

you would never see this

optimal trade entry okay or return to a

premium to go short

is above the equilibrium price point and

it takes out an old high

so we're running stops at an old high

and we're going back into what would be

a premium market we're above the

equilibrium price point of the range

high

and the range low and we take stops out

that's really really good in terms of

probabilities and the market goes down

and sweeps out a previous low remember

when we were looking at the equilibrium

discount every time we were buying we

were taking profits at above an old high

okay so when you see that all we're

seeing is the reverse of that in the

equilibrium versus premium market so

we're always looking to sell at a

premium premium is defined by has to be

above the equilibrium price point or 50

50 level of the fibonacci anchored on a

swing of

clear

discernible price action in other words

if it looks sloppy if you if it doesn't

really look like a solid price swing and

obviously obvious price swings are the

ones we look at we're not looking at

anything it looks questionable if it's a

pure price swing we measure it and

this is a high

this is a low and we went through all

potential stages of all these high to

low high to low high low scenarios

really nice scenario here again taking

profits initially below this low here

when it would hit that and then you'd

hold out for a potential run for some of

your trade to be taken off below this

low here

now the market goes into another uh area

of

premium relative to equilibrium

we go back to this larger price swing

here

this low all up to this high the market

goes right into the 79

79 retracement level hits it perfectly

to the pit

and then rolls down where do you take

your profits at

you're gonna be looking to take profits

at below this low here

okay and into

the order block down in here which is

what you see right there

okay

you have another range

that you can use

this high

to this low

okay

now what's up what's really nice about

this is if the market's in a

consolidation this type of trading

is your go-to okay a long protractionary

state in the marketplace where it goes

up and down no no real movement higher

in one direction or lower in one

direction it just stays in a large

consolidation you want to be trading

turtle soups or understanding where

premium and discount are

if you have the high here and you pull

it down to the low here when the market

gets above equilibrium right in here it

goes right into the 17.5 or what would

be the optimal trade entry sweet spot

okay or ote

and the market is a sell-off there where

where do you look to take your profits

at

below and old low

or

below this low right there

every time the market makes a swing low

you have to take a look and it only

takes three candles this is why i do not

use the

williams uh fractal it requires five

candles i only need three candles so we

have a candle low here a lower candle

low here a small smaller little candle

in here

the market

blows through that that would be your uh

your target right there you would take

first profit then you would come back

and end up taking your stop out right

there now

if you get a stop

and say you don't take first profit the

slave doubles advocate for a moment say

you're greedy you're impatient you're

developing you just

don't want to do anything to take some

profits out

or it couldn't happen for you you didn't

do it like that the mark comes back and

takes your stop loss out

if you see that scenario

okay you're gonna be looking for old

highs to be breached

while we're above the fifty percent uh

level so we're in pre we're at a deep

premium okay so markets are overbought

right in here the market runs through

this previous high so we're in turtle

soup scenario

we could be looking for turtle soup

cells

mark comes up starts to come down

one more time runs through you takes

your stop out again this is going to

happen in your trading

do not try to avoid it because it's

going to happen

same scenario

we have an old high mark goes back above

it if it's at a premium

and you've defined the range here

you take this scenario as a cell on

turtle suit basis

for each above an old high sell short

we're going to take profits at below the

first low that's here the next low is

right here

then we have another range created here

so while we're watching this form soon

as we see a swing low form this candle

here we know they're probably going to

want to run back up into this range here

now we have a new range

the impulse price swing

is this high

down to this low

here's equilibrium price expands to

equilibrium once we start seeing that we

watch does it get to 62 it does the

bodies of the candle stop perfectly

right there you could sell short right

there what's nice is you're going to see

the bottom of this candle is up candle

that's a bearish overblock which you'll

learn more about

that's a cell by itself where you look

to take profits at below the old low

right in here

it goes right down below that and does

what

trades back up higher

if we use the price swing

from that high we just anchored two to

this low

the same thing occurs here we have this

high all the way down to this price low

price comes all up into the 79 trace

level above equilibrium we start

watching it now we're in an area where

the price is going into equilibrium i'm

sorry from equilibrium up into premium

okay premium is above equilibrium in a

range that's been defined from high to

low

and look what's happening we're running

out an area of stops above it or high

again very very good

uh probabilities for getting short

take that as a turtle suit inside of a

premium based market

and you could look to take profits on a

swing low

here's your swing low here the market

trades down through that you'd have to

take profits below here

market trades down in two

small little consolidation here and i'm

not going to define anything else that's

in this chart because i could do all

kinds of other things to it would look

like sugar coating but

you'll learn other things to look at and

it has to do with this can over here

so we'll refer to this candle later on

and uh

recapitalize bullish shoulder blocks and

bear shorter blocks but

the market creates another range

this high down to this low here

so this high down to this low market

goes above equilibrium here where is it

going to go to we want to watch it go to

at least 62 percent tracing level it

does that goes right after the 70.5 ote

optimal trade entry and then sells off

where you take profits at below swing

low right here's the swing low take

profits right there now they're not

astronomical trades okay they're not

enormous trades but

to get short in here at 98 big figure

and covering below the low on this

candle here at 96.94 that's over 100

pips

nothing wrong with that this is a daily

chart we're trading off of

again this is helping these folks that

cannot be doing

day trades okay you don't need a great

deal of movement

on a daily chart to make a decent amount

of pips we're going to go back to this

high

and use that same old low here okay

from this high down to this low if you

went short here based on stop run above

here and we're at a premium we're above

the equilibrium we've defined our range

we're looking to sell into strength it's

scary when you first start looking at it

as a new trader

but that's exactly what you want to be

doing as a professional trader you want

to be selling at premium prices

think about it you could sell something

if you own it say you own a car and you

want to sell your car do you want to

sell it at a discount that doesn't make

any sense you want to sell at a premium

so professional traders sell their long

positions or they sell new short

positions at premium prices

ain't no better place in the world to

sell short or sell longs above an old

high because there's going to be willing

buyers right there in the form of buy

stops

so when we see this area here we get

short

from this area here going short and if

you just took profits once this low

formed

that low comes in at

39 97 39 and the open is

97.99 so we're going to say we went

short somewhere around about 98 big

figure the low comes in at 97.39 so that

means your stop i'm sorry your limit

order take profits would be below 97.39

so you get the low here say you're

aiming for 10 pips below that low

below this low right here

you'd be looking for

97.29 roughly 97 30.

that's 70 pips using a setup that's on a

daily chart you're not interested

trading you're not looking at five

minutes 15 minute charts you know you're

not you're not being forced to do what

ict does most of his teachings through

intraday uh trading but the same

concepts appear in these higher time

frame charts so don't discount it that

i'm teaching you in a 15-minute basis

because all the concepts are universal

and i know it's hard for you to

understand that as a new trader because

it just seems like i can't be watching

that chart so therefore i can't trade

that's not true that's not true at all

so

by having these ideas

of looking at price over the course of a

premium market if we go down to a

say we go down to an hourly chart

okay and what's nice is you don't have

to trade with a bias

most people are always asking me hey

looking can you give me a a a way of

trading with a a daily bias give me the

trend direction michael i need to know

that well you don't really need to know

that you don't need to know it

and the reason why you don't need to

know it is because you need to know how

to trade inside of a range

because those ranges are always there

whether you're in a trending market

whether you're in consolidation or

whether in a reversal market

those profiles will always give you

ranges to trade in and you don't need to

break out of the range to make money

we have a swing high here

why am i using that swing high michael

not this one here not this one here

because this is the most recent one

prior to this down move i could use this

one here but i'm going to use this

because it has more price action around

it

this high

down to the lowest low okay market

trades up to the equilibrium in here

okay does it get to premium no it

doesn't get up there yet it comes down

off of this a little bit then trades

right up into 79 tradesmen level right

in here

closes in a range which we'll talk about

in the next teaching

over here

the market sale that sells off

and where you're going to be looking to

take profits at you have a small little

swing low here you have a certain real

good swing low here

so if you're getting short up here

and on an hourly basis

say we got short at 97.70

nice round number

to get out that level here's 42 pips to

get out below this low here 60 pips so

if you go 10 pips below that

that'll give you

oh

nice 70 pips

and give you a nice 70 pips and there

look at the reaction

going 10 pips below here yeah this range

low

from that high up here where we would

have been selling at based on the

concepts again it's all hypothetical in

hindsight here but the conceptual idea

is the same going forward

range is 60 pips 10 pips below will be

70. you got at least four pips below

that for uh for spread to take you out

and absolutely does that and it doesn't

go very much a little at all