4HR PO3 | MMXM | Standard Deviations | ICT Concepts

Summary

In this video, the creator dives into the concept of the 'Power of Three' using the 4-hour candle and its correlation with the market maker model in trading. The script covers the anatomy of a candle, breaking down the key phases of market movements: accumulation, manipulation, and distribution. It explains how these phases correlate with price action and how traders can identify market maker models, including smart money reversals and order blocks. Additionally, the video invites viewers to join the trading community, providing valuable insights into smart money trading strategies and mentorship opportunities.

Takeaways

• 😀 The 4-hour (4H) candle's anatomy includes open, high, low, and close values. This pattern works the same across different timeframes and candle types.
• 😀 Bearish candles show the open at the top, followed by the high, low, and close, whereas bullish candles have the open at the bottom and close at the top.
• 😀 The market moves in three phases: accumulation, manipulation, and distribution. These phases apply to both bearish and bullish market movements.
• 😀 The 'Power of Three' concept is crucial for understanding market structure. It helps identify key phases in market movements, which can be applied to candle analysis.
• 😀 Market phases can be observed in the 4-hour candle, where accumulation happens at the open, manipulation occurs around the high, and distribution happens as the price moves lower.
• 😀 The Market Maker model uses accumulation, manipulation, and distribution to explain price action. This model works in various timeframes, not just the 4-hour.
• 😀 Key trading times, such as 10:00 AM (when a new 4-hour candle opens), can be a significant moment for market analysis and pattern recognition.
• 😀 Accumulation does not always mean a small consolidation; it can be a broader price range or even more complex setups involving liquidity generation.
• 😀 Smart Money Reversal (SMR) occurs at points of interest, such as previous highs or lows, significant price levels, or PD arrays. These points are critical for predicting future price action.
• 😀 The Market Maker model involves identifying key liquidity points (buy side or sell side) and using them for trade entry, with particular attention to smart money reversals and value gaps.
• 😀 In volatile markets, price action can follow standard deviation principles, with target zones based on deviation from the initial accumulation zone. This helps identify potential entry and exit points.

Q & A

What is the power of three in the market maker model?

The power of three refers to the three main phases the market goes through: accumulation, manipulation, and distribution. These phases are used to describe the price action and the market maker model, where price moves through these stages to generate liquidity and make key market moves.

What are the components of a candle in the context of a 4-hour chart?

In the context of a 4-hour chart, a candle consists of four main components: the opening price (where the price begins), the high (the highest price reached), the low (the lowest price reached), and the close (the final price at the end of the 4-hour period). These are collectively referred to as OHLC (Open, High, Low, Close).

How does the market move through the phases of accumulation, manipulation, and distribution?

In the market, accumulation occurs when price consolidates and builds liquidity. Manipulation involves moving price to extreme levels (either high or low), often to trap traders. Distribution is when the price moves in a direction that reflects the larger trend or market intentions, following the liquidity created in the previous phases.

What is the significance of the 4-hour candle in the market maker model?

The 4-hour candle is a higher time frame used to analyze the market's behavior. It provides a broader view of the price action, including accumulation, manipulation, and distribution phases. Traders can use this time frame to understand the overall market sentiment and potential entry points.

What is a smart money reversal in trading?

A smart money reversal refers to the point at which institutional or 'smart' money causes a shift in the price direction. This often happens at key levels of interest, such as old highs, lows, or significant order blocks, and marks a shift from the manipulation phase to the distribution phase.

What are points of interest (POIs) in the market, and why are they important?

Points of interest (POIs) are key levels where significant price action has occurred, such as previous session highs, lows, or liquidity zones. These levels are important because they often act as support or resistance and can be areas where price reversals or continuation patterns emerge.

How does liquidity play a role in market maker strategies?

Liquidity is critical in market maker strategies because it allows large institutional traders to enter and exit positions without causing excessive price movement. Market makers generate liquidity through the accumulation and manipulation phases, setting up price levels where they can execute large trades more efficiently.

What is the significance of the 10 a.m. opening in the market maker model?

The 10 a.m. opening corresponds to the start of a new 4-hour candle. This is a critical time for many traders, as it marks the beginning of a new price phase, often setting the tone for the upcoming market movement. The accumulation, manipulation, and distribution phases typically begin around this time.

What is a bearish value gap, and how does it impact price action?

A bearish value gap occurs when there is a price gap that reflects a significant imbalance in the market, usually due to a sharp move. This gap is often filled later, and it represents a point of interest where traders anticipate price to retrace before continuing in the direction of the gap, typically lower in a bearish scenario.

How do standard deviation and price action relate in the context of the market maker model?

Standard deviation can be used to measure how much price deviates from a consolidation area. In the context of the market maker model, it helps identify possible price targets. For example, one standard deviation below a swing high or low may act as a target where price is expected to reach after a manipulation phase, especially in a heavily trending market.