2022 ICT Mentorship [No Rant] ep. 3 - Internal Range Liquidity & Market Structure Shifts
Summary
TLDRThis lecture focuses on identifying market structure shifts in e-mini NASDAQ 100 futures contracts using a 15-minute timeframe. It explains how to spot potential shifts by analyzing old lows and highs, sell and buy stops, and the significance of equal highs. The presenter emphasizes the difference between intraday market structure shifts and breaks, highlighting the importance of high-frequency trading algorithms and how they influence the market. The lecture also covers the concept of internal range liquidity and provides practical tips for identifying and trading market structure shifts during key market sessions.
Takeaways
- 📈 **Market Structure Shifts**: The speaker emphasizes the importance of understanding intraday market structure shifts, which are not necessarily breaks but can indicate a change in market direction.
- 🔄 **Liquidity and Stops**: The concept of sell stops below old lows and buy stops above old highs is introduced as a way to anticipate market movements.
- 📉 **Internal Range Liquidity**: Focusing on short-term highs and lows within a retracing price leg to identify potential areas for market structure shifts.
- 📊 **High-Frequency Trading (HFT)**: The impact of HFT algorithms on market structure is discussed, highlighting how they can influence short-term price movements.
- 🎯 **Identifying Key Levels**: The speaker advises using specific price points, such as old highs and lows, to anticipate market structure shifts.
- 🌐 **Global Market Sessions**: The significance of different global market sessions (London, New York, Asia) and their session highs and lows are highlighted for trading opportunities.
- 📅 **Time Frame Importance**: The speaker suggests specific times of the day to look for key intraday highs and lows that can lead to profitable trades.
- 🚫 **Avoiding Problematic Hours**: It's advised to avoid trading during certain hours, like noon, as they can be problematic and less predictable.
- 📝 **Homework Assignment**: The audience is tasked with analyzing intraday charts to identify stop hunts and market structure shifts, reinforcing the learning through practical application.
- 🔑 **Key to Success**: The ability to identify pools of liquidity and anticipate market movements is presented as a critical skill for successful trading.
Q & A
What is the focus of the lecture?
-The lecture focuses on internal range liquidity and market structure shifts within a 15-minute time frame on the e-mini NASDAQ 100 Futures Contract for March delivery, 2022.
What are sell stops and buy stops?
-Sell stops are orders placed below a certain price level to sell, and buy stops are orders placed above a certain price level to buy. These are used to identify potential market entry points.
Why are 'relative equal highs' preferred over a single high when identifying potential market shifts?
-Relative equal highs are preferred because they provide a more reliable indication of potential market resistance levels, as they represent multiple tests of the same price area.
What is meant by 'Market structure shift' in the context of intraday trading?
-A market structure shift refers to a change in the intraday market trend, which may not necessarily lead to a prolonged multi-day movement but indicates a potential change in the direction of the price movement within the day.
How does the讲师 define 'internal range liquidity'?
-Internal range liquidity refers to short-term highs or lows within a price leg that the market is retracing back into, which includes stops above or below these levels.
What is the significance of the market trading down and hitting a previous low?
-When the market trades down and hits a previous low, it indicates that sell stops have been triggered, potentially leading to a market structure shift.
What is a 'fair value gap' and why is it important?
-A fair value gap is a situation where the high of one candle is significantly higher than the low of the next candle, indicating a potential change in market sentiment and a possible entry point for trades.
How does the讲师 suggest traders should react when the market rallies above a certain level?
-Traders should anticipate a market structure shift and look for potential trading opportunities, rather than forcing a shift in market structure.
What is the role of high-frequency trading algorithms in creating market structure?
-High-frequency trading algorithms contribute to market structure by constantly offering and changing prices, which can lead to the formation of new highs and lows and influence market liquidity.
Why is it beneficial to look at the 3-minute, 2-minute, and 1-minute charts?
-Examining these shorter time frame charts helps traders identify high-frequency trading patterns, potential market structure shifts, and areas of liquidity more precisely.
What homework is assigned at the end of the lecture?
-The homework involves going through e-mini Futures intraday charts to identify stop hunts leading to market structure shifts, and logging these examples with annotations for a study journal.
Outlines
📈 Market Structure Shifts and Liquidity Identification
This paragraph discusses the concept of market structure shifts and liquidity identification on a 15-minute timeframe e-mini NASDAQ 100 Futures Contract. The speaker explains the importance of recognizing old lows and equal highs to identify sell and buy stops, respectively. They emphasize the difference between a market structure shift and a break, noting that a shift does not necessarily indicate a prolonged movement but rather an intraday price movement. The speaker also introduces the idea of fake runs and how they can signal a bearish market structure shift. The paragraph concludes with a discussion on how high-frequency trading algorithms use marked structures on various timeframes and the significance of taking out liquidity from the market.
💹 Fair Value Gaps and Trade Execution
The second paragraph delves into the concept of fair value gaps and how they can signal potential trade opportunities. The speaker explains that a fair value gap occurs when a candle's high is not completely overlapped by the next candle's low. They discuss how to identify the earliest point for trading based on these gaps and the importance of monitoring the market's reaction to short-term highs and lows. The paragraph also covers the idea of taking partial positions in a trade and the rationale behind targeting specific price levels for exits. The speaker emphasizes the importance of understanding market liquidity and how it can influence trade execution, including the impact of high-frequency trading algorithms on market movement.
📉 Order Blocks and State of Delivery
This section explains the concept of order blocks and the state of delivery in the market. The speaker describes an order block as a change in the state of delivery, which can occur when the market moves past a significant opening price, signaling a shift from offering sell-side to buy-side liquidity. They discuss how this change can lead to a market structure shift and the subsequent targeting of buy stops by the market. The paragraph also covers the importance of identifying key support and resistance levels, as well as the significance of 50% levels in market movement. The speaker provides guidance on how to analyze market behavior on different timeframes, such as 3-minute, 2-minute, and 1-minute charts, to identify potential trading opportunities.
🌐 Global Market Sessions and Homework Assignment
The final paragraph focuses on the importance of understanding global market sessions, specifically the London, New York, and Asia sessions, and their impact on market movement. The speaker highlights the relevance of session highs and lows and how they can lead to significant market activity. They also provide a homework assignment for the listener, which involves analyzing e-mini futures intraday charts to identify stop hunts that lead to market structure shifts. The assignment aims to help the listener practice identifying liquidity pools and market structure shifts by annotating charts and studying market behavior during specific timeframes.
Mindmap
Keywords
💡Market Structure Shift
💡Liquidity
💡Stop Hunts
💡Fair Value Gap
💡Swing High/Low
💡E-mini NASDAQ 100 Futures Contract
💡Intraday
💡Algorithmic Trading
💡Support and Resistance
💡London Session/ New York Session
Highlights
Introduction to the concept of liquidity and market structure shifts in e-mini NASDAQ 100 Futures Contract trading.
Explanation of sell stops and buy stops in relation to old lows and equal highs.
Importance of using higher equal highs for better market insight.
Market structure shifts versus breaks and their impact on intraday movements.
The significance of anticipating market structure shifts without forcing them.
Identification of areas where market structure shifts are likely to occur.
The concept of fake runs and how they indicate a bearish market structure shift.
Importance of remembering specific price levels during market analysis.
Use of two-minute charts to identify relative equal highs and market structure.
Role of high-frequency trading algorithms in creating market structure on short-term charts.
Explanation of how trading algorithms influence market movement without causing price increases.
The significance of a short-term high being taken out and its impact on market liquidity.
Concept of fair value gaps and their role in market trading strategies.
How to identify potential trading opportunities using fair value gaps.
The process of taking partials in a position and the rationale behind it.
Importance of understanding market structure shifts for short-term trading.
How to use one-minute charts to identify market structure shifts and trading opportunities.
The concept of internal range liquidity and its application in trading.
Homework assignment to practice identifying stop hunts and market structure shifts in historical data.
Guidelines for identifying key times of the day for potential market structure shifts.
Final thoughts on the importance of understanding market structure for trading success.
Transcripts
all right folks welcome back this is the
internal range liquidity and Market
structure shifts lecture again 15-minute
time frame on the e- mini NASDAQ 100
Futures Contract for March delivery
2022 and take your attention over here
okay this old
low and these relative equal highs see
that old low below that is sell
stops and relative equal highs above
that is buy stops now you could have
used this High here there's nothing
inherently wrong about that but whenever
I see equal highs like this might and if
it's higher than an old high over here
I'm going to use that so that way
there's a little bit of insight for you
for your study
journal the sell side liquidity you can
see that the market trades down hits
that runs through
it then rallies all the way back up
clearing equal highs so the buy stops
have been taken here okay so at both of
these price points here and here that's
the I guess the point at which you'll
look for or anticipate a market
structure Shift You Don't Force It okay
I see a lot of people try to teach my
Concepts that'll talk about Market
structure breaks or shifts and we'll use
that term interchangeably but for
intraday I want you to think about
intraday Market structure shifts because
it's not necessarily A break-in Market
structure that leads to prolonged
multi-day movement okay what do I mean
by that if you see a market structure
that's bearish and it's broken to the
downside intraday that may just lead to
an intraday price leg that may
eventually see that high be taken out in
the same day so that's why I'm using the
term Market structure shift not Market
structure
break for our conversation here on this
mentorship just know that when I'm going
to lean on that term Market structure
break it means a little bit more in
context versus an intraday shift in
Market structure just means there's
likely a downside draw or an upside draw
intraday by seeing the term shift okay
so there's a little bit of semantics
there all right so we have both of these
areas here and here where there would be
a likelihood of a market structure shift
up here we look for a fake run above
here so that fake run above how do we
know it's going to be a market structure
shift that's bearish now keep this price
level in mind so it's essentially 14,600
and 14,820 which're is eyeballing it
okay now dropping all the way down into
a two-minute chart this is that same
particular day here's those relative
equal highs and this run down here if
you recall 146 and around that 14860 or
so if you look at this Market structure
without having the levels on your chart
it's easy to get lost when we had this
low form right before this low was
formed there's a swing high right
there now in the first mentorship video
I gave you I mentioned that high
frequency trading algorithms will use
marked structure on a 3 minute 2 minute
1 minute chart many times sub 1 minute
that would be like 45 second 30 second
15c intervals if you look at this
short-term High here right before this
low formed when this high is taken out
right there on that candle that's
significant only if this run down here
has traded into cell stops okay below an
old low of some kind it could be a
double bottom it could be a single low
but it's got to be Trading under some
retail idea that would be viewed as
support up here the same thing when this
run above these relative equal highs
happens right there you're anticipating
a market structure shift let me go back
to this for a second we had this high on
this candle then we had the candle right
after that here the highest one and then
the lower high of this candle here so
that's a swing High very simple little
pattern but it means a lot when it's in
the proper context when this high is
broken with this particular candle right
there that is significant only on the
basis that we have taken liquidity out
of the marketplace that's it so when it
broke this short-term high this is more
meaningful and then the market will
start to seek buy stops okay or buy side
liquidity that would rest above here
here and here so here's those sell stops
so this little area here shaded in
that's a area where sell stops would be
residing below that 14600 level okay on
that 15 minute time frame so the market
dove into that liquidity and you may or
may not know that is a buy you don't
need to anticipate a shift in Market
structure when the market rallies above
when does that happen on this candle
right here see that little light bulb
that's when you're thinking okay now I
have a condition in the marketplace that
I might see an opportunity intraday
let's see if there's further evidence to
that short-term high is taken here we
traded above it it does not need to
close above that okay really important
once that candle closes and this candle
opens you're going to monitor this
candle and you want to see as soon as
this candle closes does it create that
fair value
Gap If it creates a fair value Gap again
that's a candle with a high one single
pass up next candle has a low that
doesn't completely overlap all this
that's fair value Gap real simple okay
this candle is where you would look to
potentially trade at the earliest
because now there's a gap there the
market trades down into that boom takes
off see these down closed candles see
that that's all one continuous order
block
what's it
doing it's inside that pool of liquidity
sell stops where's the open on that
series of down Clos candles right here
that's the price level extending out in
Time Boom so inside this fair value Gap
this opening price on the order block
that's your buy plus three Pips or
whatever for spread and that's what you
would use for a limit order well price
starts to run where above the highs
where buy stops will be here Above This
High here and above this High here so
the buy stops above here that was taken
this swing low forms once this candle
closes so this candle we're watching
does it go below that short-term low it
does so now we have a shift in Market
structure that is now bearish only
because we've taken buy stops fair value
Gap forms the market rallies up into
that you go short there what are you
looking for below here sell stops below
here sell stops below here sell stops
and in this Fair Val
here so if you are in a position that
has multiple contracts you can take
partials below here I really wouldn't do
it there but below here here and some
you saying why wouldn't you take them
below their ICT well if you're trying to
get short here that's not really that
much movement so if you're going to take
something off your trade below that low
why not just try to reach for that one
and you could get it there right here
okay and then below that low is nice as
well this is below the 50 level of this
high and that low okay okay so 50% level
that's what we targeting now this
candle's low was the high end or first
objective inside this Gap so that's your
target you're going to look for that so
you're looking for low hanging fruit the
easiest Target to get to you're not
trying to be perfect and you grow into
eventually holding to see if it will
fill in that Gap okay this Fair B Gap
was going down to this candle's High
that's something that you strive for
over time if you understand what I just
showed you here that's a very simple
process of looking for number one
liquidity gauging what happens without
having to know for certain because you
don't know you're not going to know
until the market shows its hand this is
it showing its
hand now let's go into a one minute
chart and see how that looks a little
bit different but still has the same
characteristics here's that same price
structure just on a one minute chart the
same logic still there right swing High
taken after liquidity has been traded
into this short-term High gets violated
right when this trade down in here
what's actually occurring okay put this
in your notes high frequency algorithms
are hammering they're just throwing
orders in buy buy buy buy buy that is
not okay here's an important thing that
is not causing the market to go higher
it's just volume that's coming in the
algorithms that deliver price that offer
price that are constantly offering price
in the
marketplace that's what's beginning to
spool and go higher okay and regardless
of where you want to trade at your limit
orders they may not get filled where
you're trying to buy with a market order
you may think you're getting in at
14662 but by the time your order is
executed and confirmed you're in
14664 that's slippage okay that's
negative slippage if you were trying to
buy it at
14662 and it filled you at 14661 that's
positive slipage that's better than what
you were expecting
so when price starts to Rally all this
is is a default to the algorithm
constantly offering price at a higher
price so we're looking at the swing low
right here Market breaks down trades
break back up into this back up in this
fair value Gap here and sells off and
there's another fair value Gap right
there trades up into that as well this
is a one minute chart so it's giving you
multiple points of execution that you
could trade on and then Dives see these
two candles here that's one consecutive
bearish order
block the opening price extending out in
time why is this a good bear shoulder
block because it has that
Gap and it's taking
liquidity and there's a market structure
shift there's your high frequency high
power high probability bearish order
block what it is it's a change in the
state of delivery the Market's being
offered higher higher higher higher in
these two up closed candles how did this
series of up closed candles begin with
this candle's opening right there that
opening once this candle trades below it
that changes the state of delivery so
you go back to that point of reference
right there and that's why it's
sensitive the algorithm remembers that
right there okay that's all I'm going to
give you on the Free mentorship level
but that is your answer okay that is
what an order block is it is a change in
the state of delivery much in the same
way all of this movement down here all
these down closed candles the opening on
that candle starts the series of
delivery on the downside when that
opening price gets violated here it
changes its state of delivery now it was
offering sell side when it goes above
that opening now it's offering buy side
what will it be doing after that it'll
be looking for buy stops buy stops buy
stops because it's offering buy side
liquidity same thing here buy side is
being offered until that opening price
is violated right there then the change
of state of delivery occurs now the
Market's going to be doing what offering
sells side liquidity what's that mean
it's going to start going lower and
attacking the sell stops all the sells
side liquidity it's offering it to the
marketplace that's what's happening
that's what the algorithm is doing but
the market goes down to that 50% level
because it's going down to what but I
teach you what did I say in the first
video it's going down from a premium
Market relative to this low in this High
50% is here that's equilibrium so it's
going to go down to a discount and
that's that Gap right here it doesn't
look like a gap so much here but if you
go back up one more time that's that
single opening right there on a
two-minute chart and then on a one
minute chart it's two candles that make
that up but you're going to have to do
is go through a progression of going
from the 3 minute 2 minute and one
minute chart and you'll get your Market
structure and your areas of where it
wants to look for an imbalance or old
low old high and it just makes it easy
and here's the lipstick on it on the one
minute
chart swing high is broken Market
structure is now
bullish rallies taking buy stops taking
buy stops taking by stops this right
here these highs right here is just
staying below that low it's building up
more interest that this is what
resistance that is engineering liquidity
that way when this runs above it those
individuals that know what you're
learning today they know that that's a
pull of liquidity for buyers coming in
at a high price why is that useful
because smart money they bought down
here or here or here or here or here
that's where they sell to high seeking
buyers real nice delivery here as well
filling that fair value Gap change in
the state of delivery now it's offering
sell side what's that mean it's going to
match up sell stops it's going to keep
going below old
lows into an imbalance until we get down
to a discount so with that I want you to
think about how this is useful number
one you're looking at London highs and
lows a session for London open okay for
instance like 2:00 in the morning to
5:00 in the morning New York time every
every time I tell you just always set it
with New York local time 2 o'clock to 5
o'clock in the morning that's your
London session what's the highest in
lows of that session okay that's
important because the Market's going to
probably sweep above those highs or
sweep below those lows and create
situations like this okay and the New
York session is 7:00 in the morning to
10:00 in the morning New York local time
okay what's the session high and low for
that and do the same thing for Asia okay
7:00 p.m. to 9:00 p.m. and that's it
those are the three times of the day
that I'm looking for specific key highs
and key lows and any intraday high and
low forming right before the equities
open at 9:30 pretty easy right the hours
of operation again are generally between
8:30 in the morning to 11:00 but it can
be extended all way to New York lunch
noon I do not tend to take trades after
noon local time New York uh that hour is
usually very problematic and it's just
it's better not to even look for any
kind of setups wait until 1:00
preferably really 1:30 to 4:00 then you
got the afternoon Trend typically you'll
see between 2:00 and 3:00 there's a
setup that usually forms in the
afternoon Trend or setup in the period
of the time of the day that will also
offer opportunities but that's outside
the scope of what I'm going to be
teaching in this mentorship all right so
we talked about internal range liquidity
and internal range liquidity is looking
for short-term lows or short-term highs
inside a price leg that we're retracing
back into okay that's all it means
internal range liquidity is a short-term
higher low with stops above below it or
an imbalance in that same range of price
action and I taught you Market structure
shifts showed you exactly all that's
necessary that is all that you require
and the skill set of identifying pools
of liquidity that is going to be
something you learn rather quickly just
by going through old data and looking at
the times of the day I gave you in this
lecture all right your homework is
you're going to go through your em mini
Futures intraday charts and you're going
be looking for stop hunts that lead to
Market structure shifts intraday you're
going to log your examples with your own
annotations for your study Journal so
what I showed with the break in the
market going higher and lower above old
highs or lower below and old low that's
running for stops that's a stop hunt
then you're looking for that signature
for the market structure shift on the
three two and or one minute charts okay
if you look for that between 8:30 in the
morning to noon New York local time in
the eem mini markets or if you're
watching the micro markets the same
logic exists okay but you're going to
start going back from today and go back
as far as the data will allow you and
you annotate your 15-minute time frame
for your buy side liqu pool and your
cide liquidity pools and then going down
into the 3 minute 2 minute one minute
chart so for every individual day that
you're logging and you're back testing
back testing is just Dressing Your Chart
out like I'm showing you here and then
studying it not just do it until account
done really go into to see how price
moved and how it
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