Power Of 3 In ICT Market Maker Models • Explained In-depth

Summary

In this video, the presenter teaches how to use ICT concepts to identify high-risk-reward (RR) trades by analyzing the market maker buy or sell model. The focus is on predicting the high of the day by marking key points like the midnight and 8:30 AM opens, manipulating price actions, and applying the 'power of three' concept. The process involves identifying specific market models, detecting bearish market structures, and executing trades based on high RR setups. Real-time examples from the NASDAQ and S&P 500 charts highlight the practical application of these techniques.

Takeaways

• 😀 A Market Maker Buy or Sell model is essential for understanding price movement and liquidity targeting.
• 😀 The 'power of three' concept helps to identify high-probability entry points for higher risk-reward trades.
• 😀 Smart Money manipulates price to trigger retail stop losses, often leading to reversals and shifts in market direction.
• 😀 SMT Divergence (Smart Money Divergence) is an indicator of bearish market conditions when it occurs between assets like NASDAQ and S&P 500.
• 😀 Manipulating above significant levels such as the 12 a.m. and 8:30 a.m. opening prices is a key indicator of a 'deep premium' market condition.
• 😀 The key to finding high RR trades is recognizing when price reaches a premium and then shows signs of reversing.
• 😀 Standard deviation targets can help in setting profit-taking levels based on the distance from swing highs and lows.
• 😀 The concept of 'Institutional Order Flow' shows that up-close candles act as resistance during bearish market conditions, signaling further downward movement.
• 😀 High probability setups are not available every day, and beginners should aim for one solid setup per week to avoid overtrading.
• 😀 Real-time examples and Twitter predictions demonstrate the effectiveness of this strategy in actual market conditions, not just hindsight.
• 😀 The strategy involves observing price manipulation, identifying the 2022 model, and applying it to forecast high of the day and low-risk trades.

Q & A

What is the ICT Power of Three Concept?

The ICT Power of Three Concept involves using three key factors to identify high-reward trades, predict market reversals, and enter trades at the right points in a market maker's buy or sell model. These factors include marking out specific time openings (midnight and 8:30), manipulating above certain levels, and waiting for market structure shifts to confirm trade setups.

How does the Market Maker Buy or Sell Model work?

In the Market Maker Buy or Sell Model, price moves through different phases. On the buy side of the curve, it leaves behind old highs and lows. Retail traders place stop losses beneath these lows. When price reverses and smart money enters, it targets these lows, creating a sell-side liquidity pool. This model helps predict price movements and potential reversal points.

What does 'smart money' refer to in the context of this model?

'Smart money' refers to institutional traders or market makers who have significant capital and insight into market trends. They are believed to move the market in ways that can be predicted through the study of market structure, liquidity, and price manipulation.

What is the significance of SMT Divergence in market analysis?

SMT Divergence (Smart Money Tool Divergence) occurs when different assets, such as the NASDAQ and S&P 500, create divergent price movements. For example, if NASDAQ makes a higher high while S&P 500 does not, this is considered a bearish signal, indicating that the market is likely to reverse or distribute lower.

Why is it important to mark the midnight and 8:30 opening prices?

Marking the midnight and 8:30 opening prices helps in identifying key levels for manipulation and potential reversal points. These levels are important in predicting the high or low of the day, as price often manipulates above or below these levels before initiating a strong move in the opposite direction.

What role does a fair value gap play in identifying trade setups?

A fair value gap occurs when there is a price inefficiency or imbalance. In a market maker sell model, once price manipulates above a specific level (such as midnight or 8:30), creating a fair value gap, it signals that price may return to fill this gap before continuing its movement, offering an entry point for high-reward trades.

What does 'deep premium' mean in this context?

A 'deep premium' refers to a price point significantly above the perceived value or equilibrium of the market. When price manipulates above both the midnight and 8:30 opening prices, it indicates that the market is in a deep premium, which may lead to a reversal as smart money seeks to sell at these higher levels.

How do you calculate potential targets for trades in this model?

Potential targets for trades can be calculated using standard deviation levels, where traders measure the distance from a swing high to a swing low and apply the standard deviation to estimate potential price movements. Traders may also use tools like Fibonacci retracement levels to predict where price may retrace or target sell-side liquidity.

What is a 'market structure shift' and why is it important?

A market structure shift occurs when price breaks key highs or lows, indicating a change in the trend or sentiment. In this model, a market structure shift is a crucial signal for entering a trade, as it often marks the point where price begins a new directional move, such as from a buy-side to a sell-side or vice versa.

Why would you not trade on days with equal highs or consolidation?

Days with equal highs or consolidation are low probability conditions for successful trades because price may just oscillate around these levels without providing clear directional signals. Trading on such days can be risky, as the market may not establish a clear trend, leading to potential losses or missed opportunities.