ICT Charter Price Action Model #4 Position Trading
Summary
TLDRThis video script discusses a price action model for trading, focusing on quarterly shifts and seasonal tendencies in the forex market. It outlines a strategy using the Commitment of Traders (COT) report, SMT divergence, and a hedging program to anticipate market movements. The model is exemplified with the British Pound, highlighting a bearish seasonal tendency in May, and demonstrates how to use COT data, SMT divergence, and liquidity pools for long-term position trading with a potential 5:1 reward-to-risk ratio.
Takeaways
- 📈 The video discusses Price Action Model Number Four, focusing on position trading and the effects of quarterly shifts and seasonal tendencies.
- 📊 The setup for this model combines SMT Divergence with a Commitment of Traders (COT) hedging program, targeting external range liquidity.
- 🔍 The market is analyzed for a specific data range of 20 to 40 or 60 days on the daily chart, looking for old highs and SMT Divergence.
- 📚 The video references content from January 2017 on long-term position trading, highlighting the importance of understanding seasonal tendencies.
- 🌐 The model anticipates a bearish monthly candle, which can be reversed for bullish scenarios, focusing on the monthly range as the primary driver.
- 💹 The British Pound is used as an example, with a focus on the seasonal tendency in the last week of April leading to June lows.
- 📉 The video emphasizes the importance of the COT hedging program, which looks back 6 months to anticipate a bearish scenario based on seasonal tendencies.
- 🔎 The model uses the Futures Contract symbol B6M18 for the British Pound, analyzing the COT line chart to focus on the commercials' net position.
- 🏦 The logic behind the model is based on the bearish seasonal tendency for the pound sterling in the month of May, looking for a COT hedging program to reflect excessive net short holdings by commercial traders.
- 📌 The video demonstrates how to use the last up closed candle's open to place a sell stop order, aiming for a long-term position trade with a potential 5:1 or 8:1 reward-to-risk ratio.
Q & A
What is the focus of the Price Action Model Number Four Position Trading Quarterly Shifts and Seasonal Tendencies?
-The focus of the model is to anticipate the effects of a quarterly shift in the majors, overlapping with a seasonal tendency, using a combination of SMT Divergence and a Commitment of Traders hedging program.
What is the significance of the Commitment of Traders (COT) in this model?
-The COT is used to analyze the net position of the commercials over the last 6 months, which helps in identifying the market's potential direction based on their net positions.
What is the role of SMT Divergence in this trading model?
-SMT Divergence is used to identify potential market reversals. It can be correlated with the USDX or a correlated pair like the Euro, indicating a potential mismatch between the market's price action and the underlying momentum.
How does the model utilize the concept of external range liquidity?
-External range liquidity is used to identify key support and resistance levels. The model looks for old highs or lows being taken out, indicating a potential shift in the market's range.
What is the importance of the seasonal tendency in this trading model?
-The seasonal tendency is crucial as it provides a context for the expected market behavior during specific times of the year. It helps in anticipating bullish or bearish scenarios based on historical patterns.
How does the model handle bullish scenarios?
-In bullish scenarios, the model looks for a data range of 20 to 60 days on the daily chart, targeting a liquidity pool, and expects the commercials to be net bullish or net long in the last 6 months.
What is the strategy for bearish scenarios in this model?
-In bearish scenarios, the model anticipates a monthly candle that would be bearish, focusing on the last week of April to the June lows, expecting a net short position by the commercials.
What is the role of the British Pound in this specific example?
-The British Pound is used as an example in the script, demonstrating how the model can be applied to anticipate a bearish seasonal tendency in the month of May.
How does the model use the concept of 'turtle soup' in trading?
-The term 'turtle soup' is used to describe a scenario where the market is expected to break an old high or low, indicating a potential trend reversal or continuation, which is a key entry point in the model.
What is the significance of the 'monthly range' in the model?
-The monthly range is the primary driver in the model, used to anticipate the market's behavior within a month. Traders look for buy or sell opportunities based on the expectation of a bullish or bearish monthly candle.
How does the model incorporate the concept of 'time and price'?
-The model blends time and price by considering the duration of the seasonal tendency and the potential market movement within that time frame, helping to determine the optimal entry and exit points.
Outlines
📈 Price Action Model 4: Quarterly Shifts and Seasonal Tendencies
This paragraph introduces the fourth price action model, focusing on quarterly shifts and seasonal tendencies in trading. The model combines Commitment of Traders (COT) analysis, divergence, and hedging strategies to anticipate market movements. It specifically looks for a 20 to 60-day data range on the daily chart, an old high being taken out with a higher high, and a divergence in the small traders' (SMT) positions. The importance of seasonal tendencies is highlighted, with the expectation of a bearish monthly candle. The model is demonstrated using the British pound, with a focus on a bearish seasonal tendency in late April to early June.
📊 COT Analysis and Seasonal Trading Strategy
The second paragraph delves into the specifics of the Commitment of Traders (COT) analysis, which is central to the trading strategy. It emphasizes the importance of focusing on the commercial traders' net position over the last six months and the anticipation of a bearish scenario based on seasonal tendencies. The paragraph explains the process of identifying the right time to trade by looking at the net short position of commercial traders and the use of the COT hedging program. It also discusses the symmetry of the market when using COT analysis and the logic behind the model, which is to find an excessive net short holding by commercial traders in anticipation of a quarterly shift in the majors.
📉 Seasonal Tendency and Entry Strategy for GBPUSD
The final paragraph discusses the application of the model to the British pound, highlighting the seasonal tendency for the currency to be bearish in May. It outlines the entry strategy for a short position, which includes looking for an SMT divergence against the dollar index and trading the open of the last up-closed candle on a stop. The paragraph also explains the use of the price action model to identify key levels for potential profit and stop-loss placement. It concludes by emphasizing the potential for significant profit without the need for day trading, as demonstrated by the model's application to the seasonal tendency and COT analysis.
Mindmap
Keywords
💡Price Action
💡ICT Mentorship
💡Quarterly Shifts
💡Seasonal Tendencies
💡SMT Divergence
💡Commitment of Traders (COT)
💡External Range Liquidity
💡Monthly Candle
💡British Pound
💡Stop Order
💡PD Array
Highlights
Introduction to the Price Action Model Number Four, focusing on quarterly shifts and seasonal tendencies in trading.
The model combines SMT Divergence with a Commitment of Traders (COT) hedging program for trading strategies.
External range liquidity is identified as a key pattern for this trading model.
The importance of looking for a dip or rise in data range of 20 to 60 days on the daily chart for setup identification.
The Commitment of Traders net position over the last 6 months is crucial for anticipating market movements.
The concept of old highs and lows being ran out with SMT Divergence as a signal for trading entries.
Seasonal tendencies play a significant role in anticipating monthly candle outcomes for bullish or bearish scenarios.
The model's application to a bearish seasonal tendency using the British Pound as an example.
The use of the B6M18 futures contract symbol for identifying trading opportunities on barchart.com.
Focusing on the commercial traders' net position for a 6-month look back to anticipate bearish scenarios.
The logic behind using the COT hedging program to reflect excessive net short holdings by commercial traders.
The identification of a bearish seasonal tendency in the month of May for the British Pound Sterling.
The strategy of shorting the open of the last up-closed candle on a stop as a trading entry method.
Using a 130 pip stop as a risk management strategy in long-term position trading.
Targeting old lows as potential profit-taking levels based on the PD array matrix.
The significance of blending time and price to identify the end of a major move in the market.
The demonstration of the model's practical application in live trading scenarios with real-time examples.
The opportunity for further study and application of the model through the forum for additional learning.
Transcripts
[Music]
okay folks welcome back this is price
action model number four position
trading and this is the ICT mentorship
quarterly shifts and seasonal
[Music]
Tendencies okay IC price action model
number four position trading quarterly
shifts and seasonal
Tendencies now for our stage for this
model is going to be a quarterly shift
or anticipating the effects of a
quarterly shift in the majors
overlapping with a seasonal
tendency our setup is going to be a
combination of smt
Divergence and a Comm trator hedging
program and our pattern is going to be
external range
liquidity okay the conceptual idea again
this is what I see internally how I
internalized the setup the market move
the whole process for this
model is we obviously look for a nip to
data range of 20 to 40 or 60 days on the
daily chart the commitment of Traders
net position on the commercials are
going to show a net position over the
last 6 months look back and on the daily
chart we are looking for an old high to
be ran out with a higher high
and at the same time smt Divergence
forming now this could be a corelated
smt or could be a USDX smt
Divergence and we're coupling that with
now the importance of the seasonal
tendency now everything for this model
obviously you can find in the January
2017
content on long-term position
trading and we're going to be
anticipating a
monthly candle that would be
bearish everything is reversed obviously
for bullish scenarios I'm throwing this
in there so you can apply it to a
seasonal tendency that's
bullish again everything here with the
seasonal tendency if the data range of
20 40 or 60 on the daily chart targeting
a liquidity
pool in this case we're going to be
looking for an old low being taken out
it's a lower low being in price coot
hedging peram
the commercials are net bullish or net
long in the last 6 months we're getting
that total range anticipating a bullish
monthly range expansion and an S&T
Divergence either at USDX or correlated
pair okay and again we're focusing on
the monthly range as our
primary driver if you will uh we're
going to be looking for buy stock
liquidity
pull equal highs on The Daily when we're
bullish and we're coupling this idea or
model with a bullish seasonal tendency
with bullish net long positions by the
commercials but on this example we're
focusing on a bearish seasonal tendency
so we're going be looking at the monthly
range seen with the expectation of equal
lows on The Daily or a sell stop
liquidity pool being our objective or PD
right okay for this model we're going to
be using the British pound obviously
this is the seasonal tendency you guys
saw this in the January 2017 content
long-term position
trading now I want you look at this
chart okay and there is a highly highly
bullish scenario or seasonal tendency to
occur in the beginning of March mid
March and running up in into the May
highs I'm not electing to use that we'll
come back to that type of seasonal
tendency when we go back into position
trading for another position trading
model for this one uh position trading
can be several weeks long to several
months so I want to give you the shorter
side of it and we're going to focus on
the seasonal tendency in the the last
week or so of April going down into the
June lows you you see that
here okay so primarily the month of May
is bearish but the seasonal tenden kick
in a little bit early as you can see in
the seasonal tendency graph
[Music]
here all right so we're looking at the
British pound this is the Futures
Contract and the symbol is B6 M18 you
can find that on barchart.com I uploaded
the cot commitment
Traders now this is an interactive chart
so you can use that on their feature and
I want you to take a look at the
standard coot line chart here the red
line that's going to be the commercials
that's what we're focusing on primarily
the other two which is small specs and
you know public Traders we're not
interested in those so again our focus
is going to be on now that black line
that was red okay
and what I'm doing here is my hedging
program as taught in the mentorship and
we're looking back 6 months okay
so using the criteria that may is
bearish we go back as late as November
to the previous year so by having that
we'll have an expectation of seeing a
bearish scenario the last week or so of
April was which is reasonable based on
the seasonal tendency because we know
the seasonal Tendencies are not locked
to the actual calendar day it's a shift
of seasonal impact so again I like to
look about mid April to the second week
of June that's the duration I like to
have
but you can be a stickler and say I'm
going to only trade like the last week
of April with this seasonal tendency
anticipating lower prices that's fine
but the entire month of May you want to
be expecting lower prices for British
pound you see that the month of April
going into may we have a heavy net short
position by the commercials by my coot
hedging program application again this
is taught in the
mentorship so the seasonal High the last
6 months and the seasonal low in the
last 6 months is delineated
here and notice how perfectly
symmetrical the market becomes when you
use coot like
[Music]
this okay so what's the logic behind
this model the seasonal tendency for the
pound sterling is bearish in the month
of May so we're going to be looking for
a cot hedging program to reflect an
excessive net short holding by the
commercial Traders trading on the
anticipation of a quarterly shift in the
majors so when gbpusd or cable runs an
old high going into last week or last
week of April going into
May and it's inside a 20 40 or 60-day if
the daily range looking back for an old
high and there's this smt Divergence
between either the dollar Index or a
correlated pair like the dollar versus
the Euro okay in this case it's the euro
dollar or Fiber as we call it we're
going to be looking to short the open of
the last up closed candle on a stop now
again you can find all this in the
January content of 2017 position
Trading
[Music]
okay and now obviously as I mentioned
earlier the month the range of May the
calendar month is typically bearish okay
so when it's bearish we are likely to
see a strong impulse move lower inside
that monthly range or candle there are
four weeks or ranges typically and we're
going to be seeking the range inside
that monthly range before the candle
completes on a new monthly range
beginning that is to say that we want
one or more of the four weeks that
construct a monthly range to
[Music]
profit okay as you can see here we have
an old high using the at the data ranges
we can find that old high here in the
January 2018 period going into uh a
rally up into that old high if it's
broken all it has to do is trade through
it by one pip if it does that while the
criteria which is that orange shaded
area that's the midpoint of April that's
I like to Define it and I'm anticipating
some weakness to come into it seasonally
so I want to see a turtle soup type
scenario or a run on external range
liquidity but I want to be able to trade
this from a long-term position and also
teach it to you all so you don't have to
use intraday trading
Concepts using the last up closed
candles open we can sell on a stop so
all you have to do is look at the
previous day and see what the open is
and if we run that previous old high
just look for the last up closed candle
you all know what that is in terms of a
bearish order Block in this case we're
actually going to use the open to sell
on a stop so in our demo account we'll
place a sell stop at that opening price
so if Price ever trades down to that
level it's going to be moving in our
direction we don't need to get up and
look at kill zones we don't need to
worry about what the Market's doing on a
minute-by-minute
basis
eventually the market does make a higher
high than that old January high and it
does so by forming an SMD Divergence
against the dollar Index so the dollar
was unable to make a lower low as you
would expect it to do when the cable
makes a higher high says S&T Divergence
or USDX S&T
Divergence and it's occurring at that
seasonal
tendency so now we have the 14248 short
entry that would be our price to get
filled on a stop price trades through
that you would be filled short your stop
goes to the high and this this case
would be a 130 pip stop now know some of
you are probably thinking whoa that's
way too much we're trading a long-term
position trade okay so we're going to be
using the same liquidity based Concepts
looking at Old lows as our discount PD
array so using the PD aray Matrix using
the daily chart expecting the monthly to
be the expansion range we're going to be
looking for these two levels here and
now think about it this is exactly what
I showed live each week calling these
levels and all I did was use this model
here so price trades down again 130 Pips
is our stop or risk and taret
targeting our first run to that old low
there is 5 to
one using a daily
chart so you can see with five to one
reward the risk it's still possible and
you don't need to be day trading to get
it and notice the nice deep decline all
through the seasonal tendency that's
shaded
here and ultimately trading down to 8
to1 reward the risk and and what we do
is we look for the discount AR raise in
this case as I indicated for the last
several months that we would be
expecting these lows to be taken out
that's where Lota was resting but until
we get to the seasonal tendency
overlapping with coot and S&T Divergence
driving that we can see a heavy
distribution cycle coming in or self
program and we look for the discount
raise to Overlay with the season seon
tendency so in other words if there was
more time in the seasonal tendency which
I think we're kind of like getting close
to the very end of it now um we could
anticipate it to keep going lower so
you're blending time and price so words
if we would have taken a lot longer in
in terms of time and should it down to
13712 and say it would be the first week
of June at the time then I would think
that would probably be the end of the
major move okay but because we have more
time in Seal tendency as indicated by
that shaded area at the bottom of the
chart that's
orange time and price met Terminus which
is the sell stops and the length of the
seasonal tendency going into June so
hopefully you found this insightful
again we'll have examples um you can go
back and study the charts I'm going to
give you an opportunity to do so in the
forum for this particular model and also
for the previous models and the
remaining models that would uh be taught
in the 12 models I'm going to give you
for the Post mentorship content until
I'll talk to you next time I wish you
good luck and good
Trading
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