Grading Price Swings [ICT Concepts]

Summary

The video explains how to identify and utilize key trading ranges using Fibonacci levels on monthly charts. By defining the high at a bearish order block and the low at recurring monthly lows, traders can grade price swings and anticipate potential setups. The presenter demonstrates how market movements oscillate within this range, highlighting equilibrium points, expansions, and sell-offs. By understanding these levels in advance, traders can predict where new trading opportunities are likely to form, allowing them to strategically enter or exit positions as the market moves toward the range’s terminus.

Takeaways

• 📈 The trading range is defined by a known high and low on the monthly chart.
• 📉 The high is determined by a bearish order block, while the low corresponds to repeated monthly lows.
• 🧮 Fibonacci levels can be applied across these high and low points to grade the price swing.
• 📊 The horizontal lines created by the Fibonacci levels represent potential areas for new market setups.
• ⏱ Knowing the range in advance allows traders to anticipate possible trading scenarios before they occur.
• 🎯 Trading setups tend to form in close proximity to these key levels.
• 📌 The first quarter of the range from high to low (25%) is often a point where setups can emerge.
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• ⚖️ The market often moves lower to reach equilibrium, then reverses and expands again, creating repeated patterns.
• 🔄 The market cycles through selling off, returning to equilibrium, filling voids, and continuing to sell before reaching the final move.
• 🏁 The price ultimately closes at the terminus of the defined range, completing the move.

Q & A

What defines the range mentioned in the transcript?

The range is defined by a known high and a known low, specifically using the bearish order block for the high and the equal lows on the monthly chart for the low.

How is the Fibonacci tool used in this context?

The Fibonacci tool is applied across the high and low reference points to grade the price swing and identify key levels where the market may form new setups.

What do the horizontal lines represent?

The horizontal lines mark areas within the price swing where new market setups are likely to occur.

Why is it important to know the range before the market trades it?

Knowing the range in advance allows traders to anticipate trading scenarios and potential setups when the price reaches specific levels.

What is the significance of the 25% level in the range?

The 25% level represents the first quarter of the price swing from high to low, and it is a point where a trading setup can typically be observed.

What does the transcript mean by the market going into 'equilibrium'?

Equilibrium refers to the price returning to a balanced state after a move, often filling voids or retracing before continuing its trend.

How does the market behave after moving lower according to the transcript?

The market trades lower, returns to equilibrium, expands again, returns to the range, sells off, fills voids, sells off again, and finally closes at the terminus of the move.

What is the 'terminus of the move'?

The terminus of the move is the final point of the price swing, where the market completes its cycle from high to low and all setups within the range have typically played out.

Why are setups expected to form near the graded Fibonacci levels?

Because these levels are derived from key swing points, they represent areas of potential support and resistance where the market often reacts, creating trading opportunities.

How does this approach help in trading decisions?

By pre-identifying the range and key levels, traders can anticipate market behavior, position themselves strategically, and manage risk more effectively.

What role do monthly chart levels play in this analysis?

Monthly chart levels provide reliable high and low reference points that are significant in defining the overall range and guiding where Fibonacci levels and setups are likely to occur.