ICT 2024 Mentorship \ Lecture #16 August 24, 2024

Summary

This video provides an in-depth tutorial on chart annotation and price action journaling, designed to teach Caleb—and viewers following along—how to systematically analyze market movements. It covers identifying order blocks, volume imbalances, fair value gaps, and balanced versus inefficient price ranges, while emphasizing daily repetition for skill development. Viewers learn to track intraday price behavior relative to higher time frame levels, use event horizons to anticipate algorithmic price attraction, and account for manual interventions like Fed speeches. By combining screenshots, annotations, and journaling, this process builds a structured approach to understanding market dynamics and developing long-term trading intuition.

Takeaways

• 😀 Consistently annotate and log your charts daily to build a deep understanding of price action over time.
• 😀 Focus on key levels such as order blocks, volume imbalances, high/low of the day, and mean thresholds to anticipate market behavior.
• 😀 Use mediums like PowerPoint or notation software to capture screenshots and observations for each trading session.
• 😀 Observe balanced price ranges and inefficient price moves to identify potential propulsion or repulsion areas.
• 😀 Track the first presented fair value gap (minimum 9:31–10:00 a.m.) and project its influence throughout the trading day.
• 😀 Identify new day and new week opening gaps and use quadrants to locate the Event Horizon, which often acts as a price magnet.
• 😀 Pay attention to relative equal highs and lows to anticipate support, resistance, and potential market reactions.
• 😀 Distinguish between algorithmic price action and manual intervention, especially during high-impact news events like Fed speeches.
• 😀 Over time, refine your journaling to focus only on the most significant and educationally useful observations.
• 😀 Daily routine, disciplined annotation, and careful observation will develop intuition for anticipating price moves and deciding when to trade or sit still.

Q & A

What is the primary purpose of annotating charts as described in the video?

The primary purpose of annotating charts is to capture and log individual segments of price action for each session, helping traders track market behavior, understand price patterns, and build a baseline for anticipating future movements.

Why does the instructor emphasize using your own charts rather than his charts?

Using your own charts forces you to actively engage with the market data, make observations, and annotate yourself, which accelerates learning and prevents passive observation. Relying solely on his charts limits the development of analytical skills.

What is a 'volume imbalance' or 'volume IM balance' according to the video?

A volume imbalance occurs when two consecutive candles do not overlap or touch each other's bodies. It indicates a lack of equilibrium between buy and sell pressure, signaling potential inefficiencies or imbalances in price action.

What is the significance of a 'first presentation fair value gap'?

The first presentation fair value gap, which forms between 9:31 and 10:00 a.m., represents the initial inefficiency in the market. Annotating it allows traders to track how price interacts with it later in the day, providing clues for potential trade entries or exits.

How should one use new day and new week opening gaps in chart analysis?

New day and new week opening gaps help identify premium and discount zones. Traders use these gaps to anticipate where price may gravitate, as these areas often act as 'event horizons' where algorithms or smart money may influence price movements.

What is an 'Event Horizon' as introduced in the transcript?

An Event Horizon is the midpoint between closely aligned new day or new week opening gaps. It acts like a magnet for price, drawing it toward this midpoint and serving as a high-probability area for potential reversals or reactions.

Why is it important to track relative equal highs and lows?

Relative equal highs and lows define support and resistance zones within price ranges. They help identify potential areas where price may reverse or stall, which is crucial for understanding the balance and imbalance of market forces.

What role does manual intervention play in price action during high-impact events?

Manual intervention, such as actions taken during speeches by the Fed Chair, can temporarily override algorithmic price behavior. Traders are advised to avoid chasing trades during these events, as initial moves may be misleading or manipulated.

How does annotating balanced and inefficient price ranges aid in trading?

Balanced price ranges show areas of equilibrium where price moves back and forth efficiently, while inefficient ranges highlight aggressive movements (displacement). Annotating these helps traders anticipate where price might face resistance or continue momentum.

What is the recommended routine for chart annotation and journaling?

Traders should annotate charts daily, capturing high and low points, gaps, fair value gaps, order blocks, and key inefficiencies. Over time, this consistent practice builds a detailed price action journal, improving pattern recognition and trade decision-making skills.

Why must the first fair value gap be formed no earlier than 9:31 a.m.?

The 9:31 a.m. threshold ensures that the fair value gap aligns with regular trading hours and not the 9:30 electronic tick. This distinction prevents false signals and confirms that the gap represents a true initial inefficiency in the market.

What is the significance of pyramiding in the context of the transcript?

Pyramiding refers to adding to a trade incrementally as price moves favorably within a validated zone, such as a bearish order block or fair value gap. It allows traders to maximize gains while managing risk based on confirmed market structure.