ICT Mentorship Core Content - Month 1 - Equilibrium Vs. Discount
Summary
TLDRThe speaker introduces the concept of equilibrium versus discount to explain optimal trade entry timing. Equilibrium represents the midpoint of a price swing, while discount refers to prices below equilibrium. The speaker advises waiting for the market to reach equilibrium or dip below into 'discount' territory before entering long trades, as this indicates the market is at a favorable valuation to buy. Specific techniques like tracking impulse price swings and swing highs are detailed to identify equilibrium points and prime discount entry areas that precede explosive upside moves, especially when combined with order flow analysis.
Takeaways
- 😀 Understanding equilibrium vs discount is key for discerning optimal trade entry points
- 😯 Impulsive price swings indicate market willingness to move price higher
- 🔍 Wait for 4 candles after high forms to start watching for retracement to equilibrium
- 👌 Equilibrium = midway point between swing high and low, around 50% fib level
- 💡 Below equilibrium = discount area where banks will buy - optimal entries here
- 📈 If bullish, expect explosive moves up from discount area back to equilibrium and beyond
- ❗ Lows taken out below equilibrium may signal stops being run - anticipate bounce
- 😎 Taking trades at equilibrium provides flexibility for swing, day, position trading
- 🤓 Blend order flow concepts like order blocks and turtle soups with equilibrium ideas
- 🧠 Understanding foundations of price action critical for indicators or systems to work
Q & A
What is equilibrium in relation to price action?
-Equilibrium is the midway point between the high and low of a price range or price swing. It represents fair market value where price is not overbought or oversold.
When is price considered to be at a discount relative to equilibrium?
-Price is considered to be at a discount when it moves below the 50% equilibrium level, with the optimal discount area typically between the 62-79% Fibonacci retracement levels.
How can you identify an impulsive price swing?
-An impulsive price swing consists of a strong directional move over 3-4 candles, followed by a pullback. It indicates conviction behind the price action.
What should you anticipate when price breaks below a previous swing low in a bull market?
-Typically this indicates a stop run designed to take out resting sell stops. This injects new buyers as those stops are triggered. Expect bullish rejection back above the low.
Where are optimal areas to take profit on long trades?
-Areas of previous structure resistance like swing highs or order blocks offer optimal areas to take profits on bullish trades.
How can you use the daily time frame while still day trading?
-Use the daily chart to map overall bullish/bearish context and key levels. Then drop to lower time frames when price reaches daily support/resistance for entry triggers.
What precedes explosive moves higher from areas of discount?
-The market will often break below a swing low to run stops before rejecting strongly back above it when coming from an area of discount.
How do institutions distribute long positions?
-Institutions will let price rise to areas of liquidity above previous swing highs where buy stops congregate. They distribute as those stops are run.
What dictates whether indicators or signals will be effective?
-The underlying price action context is what determines if indicators or other tools will work reliably. They must align with the market structure.
Why is patience important for this style of trading?
-It takes patience to properly identify shifts in structure and areas of discount/equilibrium. Chasing often leads to forcing low probability trades.
Outlines
😄 Introducing the concepts of equilibrium and discount
The paragraph introduces the concepts of equilibrium, which is the midway point of a price range, and discount, which refers to prices below the equilibrium level. It explains that prices below equilibrium indicate good buying opportunities in a bullish market, as prices are unlikely to stay discounted for long.
😃 Illustrating equilibrium and discount on a price chart
The paragraph demonstrates equilibrium and discount on a price chart, using the Fibonacci tool. It shows an impulsive price swing, then waiting for a retracement to the 50% equilibrium level before considering buys. Below 50% is the discount area offering the best entries.
😊 Identifying impulse swings and waiting for discount levels
The paragraph explains the process of identifying impulse price swings to the upside, waiting for a pullback, then looking to buy when the price reaches equilibrium or discounts below that. This offers good risk/reward ratio trades with stops below recent swing lows.
🙂 Buying rules - wait for discount levels after impulse moves
The paragraph summarizes the buying rules - after an impulsive upside price swing, wait for a retracement back to at least the equilibrium level before considering buys. The best buy levels are in the discount zone below equilibrium, especially the 62-79% Fibonacci levels.
😉 Taking profits by distribution above old highs
The paragraph explains taking profits on buys made in discount zones - distribute/exit positions when the price rallies up through old highs levels. This is where the institutions place buy stops to exit positions.
🤩 Multiple examples illustrating the concepts
The paragraph provides several annotated chart examples that demonstrate the concepts of identifying impulse moves, waiting for retracements to discount levels, entering buys, and taking profits at areas of liquidity above like old highs.
😍 Current market levels and discount areas
The paragraph examines the current market price levels, equilibrium point and shaded discount areas to work with. It emphasizes buying within these discounted areas per the principles outlined earlier.
🥰 Anticipating moves from discount levels
The paragraph discusses anticipating upcoming market moves from various discount levels, like sweeping recent swing lows and reacting higher. It emphasizes combining these concepts with order flow tools taught elsewhere.
😘 Summary of key equilibrium vs. discount concepts
The paragraph provides a helpful summary recap of the core concepts covered - identifying equilibrium on impulse swings higher, waiting for 4 candles to turn down, then buying discount levels below equilibrium with stops below recent swing lows.
🤓 Applying to lower timeframe charts
The closing paragraph examines how these equilibrium/discount principles can be applied effectively to lower timeframe charts like hourly, while blending in order flow concepts like order blocks and algorithm expansion points.
Mindmap
Keywords
💡equilibrium
💡discount
💡impulse price swing
💡optimal trade entry
💡order blocks
💡turtle soup
💡high probability
💡explosive price action
💡liquidity
💡distribution
Highlights
To be a buyer, there has to be a willingness of somebody with bigger pockets than you - the banks - to move price higher
Banks will let price go higher when it suits their purpose - to make money
To identify buying opportunities, first look for impulsive price swings on the daily chart to frame higher timeframe ideas
Equilibrium is the midway point of a price move, measured using the 50% Fibonacci level between a swing high and low
The market is permitted to be bought at fair market value when price reaches equilibrium, but not above that level
Below equilibrium is a discount market which doesn't stay there long in bullish conditions, leading to explosive moves
If price breaks below a previous swing low in a bull market, anticipate a stop run leading to a strong move up
Optimal trade entry for buys is between the 62-79% Fibonacci levels below equilibrium, in discount markets
Markets move from equilibrium/consolidation to expansion, reaching for liquidity above old highs and key levels
Take profits on longs near bearish order blocks like the bottom of bullish candles, below key highs
False breaks below swing lows in bull markets anticipate stop runs, injecting sellers to pair with buyer demand
You need the price going to discount for buys to get explosive signals - not just entry techniques
Wait for impulses to equilibrium or below for high-probability trades, don't chase - have patience
Apply order flow concepts like blocks and stop runs to optimize trades in discount zones
Indicators only work if aligned with the foundations of price action and market conditions
Transcripts
welcome back folks this is the fourth
of eight
installments for the first month of the
ict mentorship
we are
covering
equilibrium versus discount
now
again
just as a forewarning uh for some some
of you were actually uh
pupils of mine
prior to me starting this mentorship
this is going to seem a little bit
elementary initially but i promise i'll
add something to it that
may
bring a little bit more
depth the understanding of what optimal
trade entry is
a long time ago
back in 2010 i introduced a
simple idea of
looking at swing projections
retracements and identifying what would
be deemed as optimal trade entry
and everyone knew that saw it obviously
fell in love with they liked it it was
easy for them to see they would apply it
really quick to the chart and i think
the reason why is because it had a
indicator applied to it
and that being the fibonacci now
fibonacci doesn't have any magic doesn't
have any uh you know significance by
itself and yet to understand
where the market may want to reach for
so there's going to be a certain measure
of prognostication on your part the fib
doesn't do everything for you so
i want to draw your attention to
looking at where
markets are most likely to create
by conditions now this is not by signal
entries this is just framing a context
initially as a new trader someone new to
technical analysis someone new to my
principles it's going to give you a
foundation so that we can go into the
charts and start looking at these things
and measure them and then study them
okay
so
all this is meant is to give you a
framework to work within in your demo
account
everyone should be working inside the
forex ltd demo account as i established
um at the beginning of this mentorship
so
we have multiple price swings in here
on this daily chart we're looking at
primarily a daily chart uh initially for
our setups
if you're a new trader okay and you
seemed overwhelmed you probably heard me
talk about certain things already in
this mentorship
maybe you've watched some of my videos
on youtube or on my website's tutorial
section
and
you heard terms that went right over
your head
some of the terms are created by me some
of them are industry standards uh some
are going to require a little bit more
uh description about what they mean
later on in the mentorship so if you
hear something even in this
presentation just make a note of it in
your notes and then obviously you know
you'll pick up the understanding as we
go deeper every month or something new
but for now i want you to focus on
a simple question
if a trader believes that the market's
going to go higher
what would frame that context what would
give the the trader that
a conclusion to trust
buying a specific market like what goes
in what goes into making that decision
well the first thing i want you to
understand is this is going to be like
the very first baby step to
understanding institutional order flow
the first thing you need is movement you
have to understand that to be a buyer
there has to be a willingness of
somebody with bigger
uh bigger pockets than you more money
than you and they are the ones that move
price around and they are the banks okay
uh they're they're only going to let
price go higher when it suits their
purpose
okay so it's not going to be a supply
and demand factor it's going to be a
greed factor they want money okay
they're in the business of making money
after all that's their nature their
business that's a bank
so
if we are looking for buying
opportunities okay
many retail traders look for
all of these patterns and indicator
based ideas
and i want you to focus primarily on
price price alone will give you
everything you'll ever need in terms of
indicating higher or lower price and
it'll actually give you the actual
specific entries and your exits you
don't need anything else outside of a
price chart okay the open high low
enclosed does everything for you
i want you to look at this low down here
and i want you to look at this high up
here
okay do you see how that is the biggest
price swing
on this entire
chart
so between
august 14th all the way to the present
time in september
there is only been one major price swing
higher and lower
so if we take a fibonacci level
okay and i'm only going to use fibonacci
to illustrate equilibrium okay because i
first have to establish what equilibrium
is
this is the largest price range okay or
the market range that's presently being
traded in now what do i mean by
present market range this is the highest
range we've seen
okay
in the last month or so
so if we look at this range and i'm
going to scroll back here so you can see
there's nothing
more significant than that except for
this one back here but we're going to
primarily use this because it has a very
strong reaction we can use these back
here
okay and i'll do it for completeness
sake later on in the video but for now i
want you to see we have very strong
impulsive move away
then it comes back retraces and then
have another strong impulsive move away
and comes all the way up here to the
high
okay when we say impulsive price move or
what we refer to as
impulsive price swing going forward
throughout this mentorship
that is the indication that there has
been displacement now displacement is
where
someone with a lot of money okay comes
in the marketplace and they have a
strong conviction to move price higher
we already know that price is going to
be set by central bank so if they're
letting price run this high they're
offering at a higher price as long as
there's buyers coming in
they're going to keep offering that
price there
as long as they keep finding buyers as
they keep raising price up they'll keep
expanding price higher higher until
there is no longer any interest for them
to pair up orders with participants
okay other open interest in the
marketplace so they'll allow price to
retrace a little bit
until they can get more
buy stops above the marketplace it is
not
a
buyer buyer buyer buy a buyer market and
they keep um
stretching price they have already
bought down here and then they're
allowing price to be
uh offered to the marketplace at higher
prices
okay and as that happens
there all they're doing is is selling
off their positions they establish at a
lower low okay
from here the banks are assume long
positions in here they accumulate long
positions once they accumulate a
position they allow price to go higher
okay once that price goes higher higher
higher it keeps going higher
until
their position
is funded and they no longer want any
more
position held
so they're going to be looking for
liquidation areas where they know that
they're going to be willing participants
to buy that's going to be above this old
high back here why would they want to
take price above that oh high here
because there's going to be buy stops on
a fund level that means big money
managed funds will have stop loss orders
right above that high and i'm going to
go into details in this mentorship
about where stops are how to how to pick
out institutional funds
levels where their stops are at where
high
target big money moves are going to
occur all those things will be taught to
you but for now i just want to start you
very small because then there's a lot of
folks that just started with this
mentorship and they've never really been
through the complete library of my uh
concepts or they haven't really exposed
themselves to technical analysis so all
this seems greek to them
and i don't mean that to offend anybody
that may be greek but it's an expression
in the states it means it's alien to
them
but
the first thing i want you to look for
in price is you want to see impulsive
price swings
okay and since we're primarily looking
for discount markets okay and relative
terms to equilibrium
we first have to understand what an
impulse price swing is so let me take
the fib off real quick and go back to
that
price leg right here let me take all
this stuff off over here
okay so we have one big strong impulsive
price swing right here comes off
this low and rallies up
we don't need to know what caused the
buy down here it's not interesting at
all to me i don't care okay
we don't know this price link is gonna
start until
i'm sorry we don't know this price leg
is here okay until it forms so i'm
giving you a perspective
studying in hindsight
the low
to this high in here
okay that rally up or that impulsive
price swing
we only require price to start
coming down off of that and it takes at
least four candles no matter what time
frame you're on you need four candles
okay from when the market makes a low
and starts rallying up
what you're going to look for is once
you see a high form let me zoom in
once you see a high form you need four
candles why four candles you need to
have one candle to the left one candle
in the center of the most highest one
then a lower candle to the right that's
a swing high and then you've got to see
price go lower
when that happens you start waiting for
price to retrace back to equilibrium
now what is equilibrium
equilibrium is a midway point of a price
move
okay so we're measuring the high
from this low you take your fib you draw
it up to
the low and you drop it
equilibrium is over here let me scrunch
this up a little bit more
okay so we have this price leg up
so impulsive price swing goes higher
as soon as we get three candles then and
only then
will we start watching
for price to come down to the
equilibrium price point and that is
basically the fibonacci level 50
okay
we're looking for price to come down to
that level and soon as it comes back to
that level and we're on a daily chart we
go down into a lower time frame and we
hunt buying opportunities now i'm not
teaching you buying entry signals okay
i'm giving you context of how to discern
when the market goes to discount and
when it's at a premium and we're not
trading at premiums okay well i'll teach
you how to use premiums uh the first
video of next week okay so
we're only focusing primarily on
equilibrium versus discount
we have a price swing
that moves from a low aggressively up
we don't do anything
until we start seeing
a down move and it has to happen after
three candles basically making a swing
high
now swing high looks like this
okay you can see it has a high
and a candle to the left that's lower
and a candle to the right that's lower
that's a swing high
and once that swing high forms we're
waiting for the fourth candle
okay to start coming lower in other
words we're looking for four candles to
start turning around when that happens
okay it gives you now you're allowed to
start looking for the market to come
down into equilibrium that means the 50
level okay once you're on a 50 level and
you're in a higher time frame and we
start everything at a daily chart at the
daily chart we know we know now that
between the low here
and the high here
the market now has gone back to
equilibrium so it's at fair value
or at fair market value
if you get something at fair market
value obviously you're not paying a
premium but you're not really getting a
discount either but it's still a neutral
to bullish condition that means you're
not buying at an inflated price
so
this time period right here the market
is offering an opportunity to be long
i'm not going down the lower time frames
today i'm not going to teach you that
today only thing i'm giving you right
now is developing context
around the daily institutional price
levels that are derived at on the daily
chart and all you're looking for is
impulsive price swings first
letting price settle back down into
equilibrium
and then we discern what we're going to
do once we when we get to that level
as you can see without going into lower
time frames the price does rally again
where does it rally back up to its old
institutional order flow reference point
which is an old high back here so it
goes right above that previous high
see that
now the market trades off again and goes
lower so
we have now a new
new range we have to now put the
fibonacci on this high keeping it off
the same low now why did i do that
because this price low has not been
violated
it only retraced down to here and
rallied up again
then we wait for three candles
the high candle to the left there's a
lower one to the right there's a lower
one this is probably a sunday and even
still this is one here
either way you don't want to count
sundays by the way mt4
one else forex ltd does give you the
sunday candle so you gotta factor that
out don't don't count on these candles
because it's a non-event
so that's probably going to end up
becoming
this candle here once you get the down
candle here that the market has
in fact turned it's starting to go lower
notice what's happening here we're not
rushing we don't need to catch the high
okay it gives us all kinds of time to
wait and plan and build an idea about
what it is specifically we're going to
do when price gets to equilibrium
price drops down a little bit more then
it goes up what do we do the whole time
this is happening nothing we're not
doing anything this is a higher time
frame principle most of you are all
begging for a higher time frame
principle to trade with this is the
beginning building blocks to that okay
market trades lower lower what do we do
here nothing
we're not doing anything here yet okay
nothing trading lower lower lower lower
all of a sudden boom it hits equilibrium
over here now we can start studying
price we want to study price
on the lower time frames we'll look for
entries but i'm not teaching you entry
signals here i'm giving you context as
soon as we get to equilibrium we are now
at fair market value so the market is
permitted
to be bought
okay at the banking level they will be
able to buy at these levels because
they're not at a premium
based market
the levels that are trading at this
level here
are at fair market value
now banks are just like anyone else if
you go to the grocery store and you see
steaks for ten dollars of uh i don't
even know what they cost because my wife
does all the shopping the uh if a state
costs ten dollars at the market
and it drops down to eight dollars and
fifty cents a steak that's probably you
know a discount and it may not be that
price i don't know but for the sake of
analogy we're using it
that means that we are now at a discount
anything below equilibrium is now a
discount market
when markets go below equilibrium
they do not spend much time below
equilibrium and there's usually a very
dynamic price move away from that
especially if the context behind the
marketplace is bullish
now
looking at this framework we have here
we had an impulsive price swing here
a little tiny little tracing came back
to equilibrium rallied one more time
took out the high over here and then
sold off
okay went back down into equilibrium
again and went to a discount
below 50
of the impulse price swing
that is now at a discount
so the market on
the banking perspective is that this now
is now at a discount
it is allowed to be bought now you just
don't go indiscriminately in there
trying to buy it just because it goes
back to 50
or less that's not enough you got to
have more information
but for now i just want to give you
when we have a bullish scenario for a
marketplace okay if we think it pairs
bullish
we look for impulsive price swings on
the daily chart the frame higher time
frame ideas there's other trades that
you can take in lower time frames in
between these but for now i want you
primarily focused on just this
because it'll give you all the things
that you've probably been lacking with
higher time frame ideas and
the beginning blocks of directional bias
because it's daily
it gives you a lot of time too you don't
have to be sitting in front of an
intraday chart
you don't have to worry about the boss
catching you doing something and
stealing time at the job
this gives you a lot of flexibility and
time to prepare for an idea to trade on
so
when we get the equilibrium we know that
we are at fair market value it's a
market that could be bought if we are
bullish but we can't buy it
we can't buy above this level up to here
okay that's that's the point what i'm
saying
the best buys come at equilibrium
or less
anything below equilibrium or 50 level
is viewed as a discount
now
the wonderful thing about understanding
this is
when a market's at discount and its
underlying
uh basis is bullish discount prices
don't stay
in the market very long the market's
going to want to run away from that
really quick
because this is a daily chart this isn't
that bad in terms of how much time it's
spent down here
below equilibrium but you can see
finally it
explosively moved away from that and
rallied up through what i asked you guys
to do
in the third
tutorial which was to on your charts
mark out areas of where equal highs
would be
and where old highs would be
the market rallies from that price point
and goes right back up and clears out
these equal highs
when these equal highs are taken out if
you were a trader that only took a long
in this area and it don't have to be an
exact science as far as where it was
we're going to speak in general terms if
you went along somewhere in this small
little consolidation before the
expansion
okay
between buying the 95 big figure roughly
up to
these equal highs that's about 98.50
yeah about 98.50 and you bought around
95.50
sets 300 pips move
on a signal that would have formed it
took a little bit a while
to
come to fruition but based on
equilibrium
and discounting okay you can frame the
ideas in which the market should react
it should be
viewed as a discount across the board
and if it is in fact bullish the banks
will dog pile on this and send the price
higher and it should be with quick
dynamic price action
understanding where it should be
reaching for
above old highs above equal highs
okay above
um
closing a range
okay which we don't really have in here
but i'm just showing you just in one
example here already the first one it's
300 pips
okay
then we have another price move
all the way up here this there's no real
retracements in here because lots we
have a high
equal a little bit lower here and then
here's one here
if we were to measure the low
to this high it doesn't come down to 50
it's nowhere near i can eyeball that you
can probably do that too
but i probably might
let's just do it because i'm probably
going to have
so you folks that are from different
countries have a hard time understanding
my english let alone
4x if we would have measured just this
impulsive price swing right here
notice that even though we had
the the candle here lower on the fourth
one it kind of up close but it was still
lower
nothing came back down the equilibrium
it stayed at a high price
and it just kept going higher and higher
and higher and higher higher
so if we go back to adding the fib to
that initial
price low
here
and we stretch it because now we we bro
we broke this high
we're going to keep drawing the fib up
on swings that move up
dynamically so we have this big parent
price swing
so now we're going to wait until price
gets back down to equilibrium when do we
start waiting for that when the market
shows a swing high which it does here
then we start counting to the fourth
candle where it drops so the fourth
candle has to move
lower or be lower
than the highest candle that makes the
swing high it's all it's a very simple
thing and then from there we just start
waiting and we count down every time it
goes down to a newer low low lower low
lower low and finally what's a hit right
here
equilibrium that's that 50 mark since it
does that the market is at a fair market
value so that it can be bought on the
banking level it cannot be bought until
it gets to that level or below
it they won't come in they won't do it
it's not based on fibonacci i'm just
showing you in terms of
equilibrium between old highs and old
lows assists evaluation marker that's
all it is okay so the algo will kick
into a buy mode in here especially if
they have orders
at that level or just a little bit below
it and if they are there you'll know
because the price will react immediately
like it does here it hits it one time it
doesn't have another camera touch it
this one gets close to it but it still
rallies away
okay so now watch what happens we have
another impulse swing here
price moves away from an area where we
expect it to rally why do we expect it
to rally there because between this low
and this high
price should be sensitive here on the
upside and it rallies now watch what
happens this is a big big step i'm going
to keep this fibonacci just like it is
i'm going to add another one
right on the low that starts here and it
runs up
here
see that so between this low
up to this high why are we counting this
swing why are we using this fibonacci
price swing michael and not something
else because this one showed reaction to
want to move away
from an area we would expect it to move
and now watch we have a swing high
here's a high lower high lower high and
this candle is lower than the one on the
highest portion of the swing high so now
we start counting down until price gets
to what equilibrium or less
the next candle doesn't do it this
candle does it goes right down through
equilibrium
down into what we call optimal trade
entry
so when we get below equilibrium
all this time in here look how much time
it gives you opportunities to get in at
62 to 70 and a half percent which is the
optimal trade entry sweet spot
if you look at that
price
gathers up more orders
and rallies away aggressively
watch it happens again now we have
another reference point
this is where we expected price to react
and it did it gives us another price leg
we pull it all the way up here
from this low to this high
we get a high a low a lower low on this
one and we're already below equilibrium
look at the buys of the candle we wick
through it
i'm not going to talk about order blocks
here as much as i want to right now
it's for some of you guys that do know
and block you probably know what i'm
talking about before i would say it
but in here we expect price to be
sensitive in here
okay because we're below 50 percent or
equilibrium we're at a discount price
should not spend much time there at all
it quickly rallies away
okay and it comes back down
i could draw a fib on this low to this
hot matter of fact let me just do it
after all that's the context of what
we're teaching here today right
pulling the fib on all these levels
where there should be reaction
okay market rallies up
here's the swing high the next candle
the fourth candle has got to be lower it
does it trades through equilibrium right
into optimal trade entry does it stay
there long no it rallies up comes back
it doesn't break the high comes back one
more time to equilibrium and then
aggressively moves away
and expands expands expands expands
expands and then finally it gives us a
reversal but nonetheless that right
there from buying in here
to here let's look at that in terms of
range
300 pips again
okay you're not it's not every
not every
day setups okay but it's giving you
significant setups if we look at the
moves that we called in here using what
i'm showing you
if you bought down in here
just to this level here's 140 pips
to here it's 272 pips if you held on to
it
it's 400 pips
this price move in here
price should be sensitive right here
i'll throw it in here order blocks right
here you'll learn about those but the
fibonacci we just showed you it's still
there and watch this
we had a price swing here that reacted
off of a level that should be bullish
here's our new price leg here
we have a high and a higher high so we
have a
higher
magnitude price swing that's going
higher
we wait for the swing high to form down
candles right here equilibrium is right
here into the optimal trade entry which
is discount it's got to be below
equilibrium
if the market is below equilibrium we
are in a discount market and it should
not
go below the old blow it forms
in other words wherever the impulse
price swing is
that low it starts from
it can't go below that so think about
what it's already giving you it's giving
you a framework to work within okay i
don't need to know exactly where i'm
buying at i just know a general area i
can fine tune that down into lower time
frames when we do top-down analysis i'll
teach that but for now
if we understand this is the low we draw
our fit from that that a stop loss has
to be below there
on this time frame
so we can buy in this area here put a
stop loss down here define the risk
between that and then how much of a risk
the reward will we get based on how far
should reach up
every time
every time that price
makes an impulse price swing higher
we just wait for it to come back down
and there's no rush we just wait it
takes three candles on the third candle
it can hit equilibrium and go below it
but we need to just simply wait for the
swing high to form and then you watch it
drop down
once it drops down you know what you're
going to be expecting
the price move should be explosive to
the upside because the market goes back
to a discount
below equilibrium it can be as sensitive
at equilibrium but here's what we're
supposed to be focusing primarily on you
want high odds trades you want high
probability explosive price action moves
in your favor
that happens when it goes below
equilibrium because the market will go
to a very
very suppressed levels and when they go
below equilibrium to a discount level
markets will not sustain discount prices
very long if the underlying pinnings of
the marketplace is bullish so it gives
you two things it gives you a context to
work within when you
for buys and it gives you also
a relative strength study that's built
in it should be sensitive it should be
dynamic price action moves away from
that equilibrium or less
more specifically below equilibrium so
that's where the optimal trade entry
idea came from when i was using the 62
percent of 79 tracement levels that you
see on my fibonaccis
well it's this area 62
70.5
and 79 percent okay and
those levels are very very sensitive not
because of fibonacci sake but because
it's really just measuring how far the
per the current price range has been
the algo had a low down here and it had
a high here this is the total range that
we're trading inside of right now
okay right now
this is
this is right now current as of today um
friday's close of september 16th
okay
so right now we are in the range that's
been defined by the high and the low
here
so that level of equilibrium still
exists which is here
so any by condition that occurs below
this level here
is high probability
what does that mean that means you just
measure every single impulsive price leg
higher
when it moves up
actually let's do this let's shade this
area
and that way we'll understand
that anything below
anything below here
that's in a high probability
or
discount market
okay
so now when we when we understand that
we can define every single price leg
that moves up which is an impulsive
price swing
when it moves higher
all we have to do is measure the new
equilibrium point that which it's
created
and here i'm going to start right here
there's the impulse price leg right
there so we have the low up to the high
swing high
fourth count is going to be down it does
hit equilibrium should it respond yes it
should be dynamic does it go higher yes
it does
makes a new high
where does it go to michael
above a previous high over here and then
it trades back down now here we have
equilibrium again it trades the
equilibrium and then aggressively trades
through it you're probably thinking oh
it failed it does
that's what's going to happen sometimes
you're going to lose money i want you to
understand that it's not going to be
perfect but it's going to give you more
context than you have right now
especially if you're new if you have
been looking at price action before you
probably have never looked at it like
this in terms of valuation between
equilibrium and discount and we're going
to teach the the importance of that the
rest of this month and the remaining
teachings but for now i want to
introduce you the idea of viewing price
in this context
below equilibrium here no discount we
come all the way back down and take out
a stop stop runs is what's going to be a
different profile and if you take a loss
that's what you expect you expect this
occurrence to happen where the market
takes the low out well if it does take
that low out what is it probably really
doing it's taking stops out so that it
should be a turtle soup turtle soup's a
false breakout pattern it went below
that low we should see a responsiveness
that's aggressive that moves higher we
see that here okay
market trades up makes an impulsive
price leg
from that low
all the way up to
here
now watch here's the cool part about
this we have a swing high you have the
high the lower high the lower high and
the fourth candle is down does it ever
get down to equilibrium no so we have no
trade we don't catch anything that keeps
going up no problem i'm worried about
you ain't worried about it
next price leg we look for
okay we have this price leg here
we're only focusing on inside the yellow
area that's the shaded discount
portion of this market the dollar swissy
this current market is a discount below
below
this
line here this this is equilibrium the
top of the yellow shaded area and below
is discount
so the market should be responsive
at levels of discount
after we after we see this high form we
look for the high the swing higher form
and the fourth kilo has got to show
willingness to be lower it does and then
we simply just wait we get wait wait
wait wait wait wait wait wait until it
hits the equilibrium and then we go down
to lower time frames and we look for
trading signals
there may or may not been
they may or may not have rather been one
here okay
i'm gonna say maybe you took one there
and maybe it took and you took a loss
great no problem you took a loss here's
a here's a losing trade here and here's
a losing trade here no problem
we had a winner here the market's gone
down into a deeper discount
look at this swing low over here okay
this is the building blocks of
understanding how institutional overflow
will incorporate
bullish order blocks
when market comes down into a discount
and a deep retracement of this impulsive
price swing
you're looking at the down candles right
at the low
okay if you have two of them
consecutively it begins at the top of
this candle right here
so draw that out in time the market goes
into that area this is a buying
opportunity you would go down to a lower
time frame again the daily chart
is very high it's it's high time frame
so you're going to be able to break that
down into four hours 60 minute 15 minute
and five minutes
look for buying opportunities in that
that area for discounting market
immediately aggressively
moves away
when we get that we get another price
leg and we can take our fibonacci and
measure it to
come up with another
equilibrium
doesn't come back down to discount or
equilibrium in here so we don't have any
trade here the market rallies again
from that level we put our low on our
fibonacci
and here's our
high here
so we have a high a lower high and a
down candle
it hits equilibrium we get a response
rallies up
trades right back up to an old low
rejection
i'm not looking for sell signals we're
not teaching that here
now we have a higher
magnitude price swing
all this impulsive price swing even
though it's broken up into three legs
you still have to measure that because
that's the end
there it's the parent price swing that's
currently being traded in right there
okay so
this movement here when price gets down
to equilibrium we would study and see if
there's a reason to be a buyer there's
an order block over here so it may be in
something to look at in a lower time
frame
maybe there was a loss maybe you didn't
take a trade i don't know but price goes
down into a deeper discount trades right
into
bullish overblock
price hits it does it spend much time
there no it rallies aggressively and it
fills in an area where price had already
moved in rather quickly
and i'll just toss this in there from
for
teasing purposes it goes right up to the
bottom
of this bullish candle which is a
bearish order block and that's an area
where you would look to take profits on
a long position
if you did something like that
buy and say you bought it right here in
the middle less range here and you got
out there
that's 175 pips
factoring sped by 170 pips
how can anyone be upset with something
like that when you're waiting around
you're not getting a million trades okay
there's not a lot of this is the daily
chart so you're getting about one per
week
really good high odds opportunities so
when you see moves like this okay you
can see uh there's a willingness to to
recapitalize these levels based on the
fact that market goes to a discount
uh we have the same price swing back
here you always use the same ranges that
we're
currently in
this range is still in effect
mark comes back down into the 79 certain
channel level which is still a deep
discount market
and also it blows out an old low so
there may be some stops down here that
the market takes out now think if the
market's going to go higher generally
now think if the market's going to go
higher
and it's bullish and it comes down below
an old low
that's generally going to be a stop loss
run that was the first thing i taught in
2010 to look for dynamic price moves if
you understand what a bullish market is
okay you want to define every time the
market creates a low and then violates
that low if it does that generally that
means that the market makers or the
institutional banking algo will go down
below the lows and gather up any orders
that will be resting below those orders
i'm below that low this low here it's
violated here immediately rejects and
goes higher this low here
it goes below here rejects immediately
and goes higher
this low here it goes down below it
rejects immediately goes higher so now
think about what i've just given you
i've given you framework to map out what
equilibrium is okay what is that
and then i told you what the benefit of
knowing what below equilibrium is it's
discount
so when you're looking for a market when
you're looking at a range in the
marketplace and the market goes below an
old low that gives you context to look
for what stop raids below the lows and
there should be a reaction going higher
if the market's bullish
if the market's underlying tone is
bullish then we're going to frame all
that stuff but for now i want you to
study go in your charts and you'll see a
plethora of these things occurring all
the time
and it gives you the building blocks of
knowing what trading setups form how the
market should react and you'll start
seeing these things before they happen
you want to study them in the past first
but then start looking for them to
anticipate
future moves based on what i'm teaching
here
so again in summary we understand that
equilibrium is the midway point of a
range we need an impulsive price leg
higher
once we identify that an individual
impulse price swing
we
run our fibonacci from the low up to the
high and then we wait for four candles
once this fourth candle is lower than
the highest one we start waiting for
price to come down into equilibrium when
it does that
we can go in and hunt for buying
opportunities on the lower time frames
we blend in institutional order flow
ideas like the order blocks mitigation
blocks breakers turtle soups
okay and optimal trade entries all those
things either one of them any one of
them can be applied for a buying
scenario but if you ever see the
conditions that's bullish and a low is
swept out
that's when you anticipate a turtle suit
the question i get all the time is how
do i know if the market's going to keep
going lower or if it's going to just go
below an old low and then rally up this
is the beginning basis point of knowing
when that occurs and when not to expect
it to uh to turn around
so
we have the market reacting off of this
it rallies up now we have another price
leg right in here it took out an old
high so
we can go over here draw our fibonacci
on that low
up to this high
price comes down to equilibrium we start
hunting for buying opportunities right
in here in a lower time frame i don't
know if there's anything there yet
you'll have to go and look in your
charts yourself but we go down into 62
percentation level which is now discount
okay so
when we identify equilibrium that's the
50 level
when price goes below 50 percent it it's
at a discount when is it the highest
probable
degree of bullishness at a discount
price
that's when you have this
the 62 to 79 tracement level
in that area right there that's the deep
discount that we look for
in bullish conditions and why fibonacci
62 to 79 transfer levels work
any other time fibonacci is going to
fail you all the time it's the
foundations behind price action that
cause these indicators to work sometimes
even overbought sold indicators will
work if you apply these ideas to them
bullish divergence uh trend following
hidden diversions okay or type 2 trend
following which is uh really what it is
developed and discovered by nick van
nice and not george lane by the way
the
the ideas have to come by way of
sound
price action understanding if it's not
there based on what the foundations of
price action are implying then it's not
going to work it doesn't matter what in
here you slap on your chart you need to
have the underpinnings of the market
being dictated by price action not by
mathematically derived or crunching of
past price to give you some
prognostication it doesn't work like
that the market will not respond to an
indicator the indicator is only
reflecting a mathematical historical
reference of something that price has
already done
that has no basis on what the market's
going to do going forward so when we
look at markets we have to number one
define what these price ranges are that
means number one if we're bullish all
we're doing is waiting around what are
we waiting around for michael we're
waiting for a price move well i'm
missing all that yeah you probably are
and that's patience
traders that make money professionally
or manage funds are not chasing
everything that goes on in the
marketplace they know exactly what
they're looking for
once you get a price run like this it's
an impulsive price swing then you wait
what are you waiting for four candles up
here when the fourth one comes then you
simply wait for it to come back down the
equilibrium once it gets to equilibrium
you can look for a signal
but i'm stressing the difference between
equilibrium versus discount is you want
it to now go below equilibrium into
62
minimum
down into 79 tracement when it does that
that's when you have the highest
probable degree of bullishness while the
markets in a discount
then you should see
explosive price acting to the upside
if you're using a daily chart you'll be
able to use this as a day trader as a
short-term trader a position trader a
swing trader
nothing has been changed in the delivery
of what i look for
relative to bullish order blocks
turtle soups all that business here's
the cool thing
if we understand that we're bullish in
the discount zone like we've had here
defined by this fibonacci level okay
down in this area here
we're looking for specific things to
happen we're not just looking at um well
i just use the term
zone but not like zone like supply and
demand zone in this
section or or well let's say here it's
not because it's not really defined in
the sense that it's supplying demand
zones but
it's a total area of valuation
where between equilibrium and less
then it's in a discount
so
if you're going to have this as a range
to work with them what inside of the
range are you really specifically
looking for okay well you're looking for
specific reference points in terms of
institutional order flow that means a
stop run like we defined here
and here
where the market went lower than a
previous low in here and then you
anticipate what the market to expand to
the upside
if we understand that that's the
occurrence that should take place
when we're down here and we're looking
for bison areas so if it goes below
equilibrium and blows out a fibonacci
level and you take a loss just find the
low that it just blew out and then
expect the buy signal there
then and then you're buying at a really
deep discount then you're going to get
it explosive move the upside so now if
we're using
false breaks below previous lows down
here what can you do to get out
of a profitable position the same thing
you look for a high
if you're buying down here after stops
been run you take your profit once this
market goes above a previous high
over here
the market makes a lower low it rallies
okay it rallies up
starts to retrace where you want to get
out at when it gets above
old high here's an ohio you take your
profits right there but wait a minute
michael wait a minute it didn't go above
this one here what if i would have held
on to that one then you would have been
greedy
he gave you two chances to do it the
market made a new high here
turn back a little around and then one
more time punched above it
get out above an old high
markets will distribute or let me say it
this way market makers and
smart money will distribute long
positions above old highs it doesn't
have to be the oldest high
it didn't go over above this one either
you didn't go above this one you don't
need it to once it creates a high they
they only allow price to retrace to
allow stops to build up above an old
high that's how they engineer liquidity
so when engineered liquidity comes in
the marketplace in the form of a buy
stop protecting a short position that
somebody out there
you know foolishly put in there then the
run price above it hitting those buy
stops those buy stocks become market
orders to buy the market and they sell
to those buy stops their long positions
they accumulated back here that's all
institutional order flow is
understanding the storyline between what
the highs and the lows are giving you
if you frame the ranges
based on your understanding of what the
market should be bullish or bearish and
that's easy don't worry about that
we'll get to that but for now i'm trying
to trying to institute
a
foundation for looking at price on a
higher time frame and then
managing your expectations based on what
you see on this time frame and and also
building the beginning basis to your
anticipatory skills for looking for
future moves
wait a minute michael
this is this is it you just form-fitted
this one
this is probably just only working on
this chart here
what happens if you go into
um
what happens if you go into a hourly
chart
suddenly it's all going gonna be
different right
it's gonna be different
it's all gonna be different well
here we have a price leg here okay
impulsive price swing
you map that out okay
swing high fourth candle doesn't get
back down to equilibrium no problem we
wait for it to uh do it it doesn't do it
makes another leg higher what happened
we missed it don't worry about it don't
chase it
you know exactly what you're waiting for
price makes the new higher high so we
have the low to the high what are we
waiting for price to get down to
equilibrium okay great but what happens
when it gets below that we're in a
discount market it has to go into the
what 62 retracement level minimum right
here it does does it stay there long no
way it doesn't stay that long what
happens the price moves away from it
and then what does it do
it comes back down into equilibrium
again and it expands again
it consolidates a little bit makes a
short-term high
where do you take your profits at
michael above old time uh short-term
high
boom it rallies above it knocks that
high out and even comes back and clears
this one out too just by a little bit
and then look what happens it retraces
all the way back down to equilibrium
again does it spend time much there no
rallies back up where does it go back to
the bottom of this bullish
uh candle which is a bearish order block
fills it right to the right to the pip
and i'm gonna tell you something i hate
this pair i literally hate this pair
with a passion because it's just a
sneaky pair like the japanese yen and
you swiss folks and uh japanese folks
please don't take offense to that i'm
just i don't like your currencies put
that way
the uh the open online candle is 97.68
and the high on this candle comes in at
exactly 97.68 so you take your profits
right there not at that high you exit
before you get to that remember we
always want to get out before we get to
the actual price leg now we have another
higher high
right here see that so we're going to
wait for price to get down to
equilibrium and less it does it here
again 62 percent
62 retracement level should it stay
there long no does it no it doesn't it
rallies away retraces it back to
equilibrium again and then what do we
expect at equilibrium what did i teach
you about the algo it goes from
consolidation which is always going to
be at equilibrium
to expansion what's it expanding to
to liquidity where's the liquidity at
right here before it takes off going
vertical where is the liquidity at it's
above this high and above this high here
what is it buy stops somebody wants to
protect a short position so if they're
going to buy down here as smart money
they're going to sell it to who somebody
that wants to buy at a higher price the
buy stops here and the buy stops here
look what happens it goes up a little
bit small little retracement and then
expands aggressively what's it going for
it stops right here and then right here
then once we go above look what happens
this movement here what did i teach you
i teach
that markets move in intraday price
action
in
grades of
10
which is 10
10 and
20 pip ranges above a high that's how
far they'll reach for a stop
boom
there you go there's your stop run on
equal highs remember i told you on your
charts mark out areas where there's
equal highs they're too clean
the market's going to want to run there
so anything below 50 is discount
but it can go back to equilibrium and
consolidate and then expand
so i'm blending
two components
giving you introduction to the uh
the interbank algo where you'll know
what the
what the price engines were gonna do
before they do it they're going to offer
the price higher when it's time to do so
but they're going to have to capitalize
discounted markets
before it goes higher it won't just go
straight up for no reason it doesn't it
doesn't operate like that the market has
to come back down to a discount and
below equilibrium
then you get explosive moves then it may
come back to equilibrium
to consolidate and wait for an expansion
then the expansion comes and you look
for the locality above the marketplace
so the difference between equilibrium is
yes it's fair market value at
equilibrium
we as traders we want to trade at
discounts we have to get below
equilibrium when it gets into 62
retracement level or down into 70.5 or
even 79 traditional levels you really
need to be considering being interested
in being long on those markets when your
underlying bullishness is there
waiting for expansion
blending in all the tools that you'll
learn
look at the low here
okay we're below equilibrium here's a
low it comes all the way down hits those
right there what would you expect even
if you didn't see the fibonacci what
would you expect
that this is a turtle suit
it's a run on stops it quickly rejects
comes back down what if it's going to go
lower michael it shouldn't why because
it already took the stops out
so it's only retracing a little bit if
you took another fibonacci
and you put it on this range because
we're looking at an hourly chart here
this would be a smaller price leg in a
lower time frame look what it does it
goes right back down into optimal trade
entry again below equilibrium
optimal trade entry and does it spend
much time down there no it rallies up
hits the 62
62 retracement level again and then
expands boom takes off
there's no magic in fibonacci none
the only thing it helps you do is
visually see what equilibrium is in
price
and then
below equilibrium where is a good price
to enter at a discount and here's the
benefit
if it goes lower than the optimal trade
entry between 62 and seven times chasing
labels and your online bullishness is
there wait for the turtles to buy
boom it's that easy it's that easy
and you don't believe me i know you
don't believe me that's the beautiful
part about this and that's why i want
you to go into your charts and look for
it
if we have a bullish market
okay and we know that markets are
retracing you won't need to see the
fibonacci you can just eyeball it
between this low and this high midway
points about right here
this market move below that is below
equilibrium it's at a discount and guess
what it cleared out stops over here
what's it going to do rally
it rallies up
equal lows in here too clean market
drops down what's it doing coming down
the equilibrium fibonacci levels
optimal trade entry i'm not going to put
the fib on it you can do it from this
low to this high
goes right down into optimal trade entry
explodes why because it cleared out the
equal lows down here boom explodes up to
the outside
what about this low over here michael
sure comes down cleans it out what
should happen it should expand it's
bullish we're in a discount market
they're only coming down to take the
stops below the marketplace out these
are sell stops why would the market
makers want to take the market down to
take out sell stops because it injects
people that want to sell to them that
want to buy
they get counter parties to their buy
orders by having the sell stops tripped
below that low boom explodes
this low right here
violated right here not by much it
doesn't need to be much once it hits
that level then the orders go hot bang
it explodes up the upside
well it doesn't make a new high michael
it doesn't have to you get exited right
here at your old order blocks
you don't need to have
everything out there to come in
alignment the stars don't have to align
to give you a profitable trade you just
need a couple things that make sense
they have to start with
equilibrium to discount for buys it has
to happen if you don't get that
you're not going to have these explosive
buy signals it's going to fall on your
lap it's not just knowing give me a buy
signal michael tell me when to get in
get out this stuff this is why i told
you you have to understand things
before just looking for bullish order
blocks before turtle suit longs before
optimal training entry longs before
stochastic divergence bullishly
none of those things work outside of
understanding the central tenant to what
a market is at equilibrium or below it
at discount that's a favorable buying
market anything apart from that
you stay away from it you wait
or look for the opposite side of the
market which is what we'll talk about
next week when we look at equilibrium
versus premium
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