ICT Charter Price Action Model 7 - Supplementary Lesson

Summary

In this detailed lesson, the trader discusses the concept of **tape reading** and its importance in understanding market movements, especially on lower time frames like the 1-minute chart. Emphasizing the **Market Maker Buy/Sell Models**, the trader explains how price action within defined ranges can predict future moves. The focus is on **liquidity** and **order flow** and how these concepts help traders navigate through **price distortions**. The lesson also contrasts the **interbank** level of trading with institutional trading, stressing the value of mastering **timing and price relationships** to make informed, profitable trades.

Takeaways

• 😀 Price action and tape reading are crucial skills for understanding market movements, especially in lower timeframes like the 1-minute chart.
• 😀 Lower timeframe charts are often misunderstood as 'noise', but they actually reveal key insights into market flow when properly interpreted.
• 😀 Tape reading helps traders understand the ebb and flow of price and liquidity, which can be used to make more informed trading decisions.
• 😀 Time and price, not just specific timeframes, are the key factors influencing market price movements and order flow.
• 😀 Distortion in charts happens due to time manipulation in lower timeframes, but it’s possible to identify key market shifts if you understand the ranges and distribution cycles.
• 😀 The Market Maker Buy and Sell models are used to track price action through phases of accumulation, reaccumulation, and liquidity distribution.
• 😀 Monitoring price ranges, rather than individual candlesticks, helps identify when to enter or exit a trade based on previous areas of accumulation or distribution.
• 😀 Successful traders should understand the concept of liquidity pools and how they affect price action in real-time, not just on high-level institutional charts.
• 😀 The speaker shares personal experience from the 90s when trading with limited technology to highlight the importance of understanding market dynamics rather than relying on fancy charts.
• 😀 The complexity of tape reading and understanding order flow requires intense focus, patience, and continuous learning to master these concepts effectively.

Q & A

What is tape reading in trading?

Tape reading is the practice of analyzing real-time price movements and order flow to understand market behavior. Traders observe the price action, often through ticker tapes or other real-time data, to predict future market movements and make informed trading decisions.

Why does the speaker argue that one-minute charts are not noise?

The speaker argues that what many traders call 'noise' on one-minute charts is actually distorted price action caused by time manipulation. By focusing on key price ranges and accumulation zones, traders can filter out the distortion and understand the real market movements.

What are the key components of the 'market maker sell model'?

The market maker sell model involves identifying areas where institutional traders sell their positions to create liquidity for the market. These areas are often found in price ranges where accumulation or distribution of positions has occurred, and traders can look for low-risk sell opportunities when these levels are tested.

How does the speaker suggest traders can predict market movements?

The speaker suggests that traders can predict market movements by monitoring the price action within predefined ranges. By identifying key accumulation zones and observing how price reacts at these levels, traders can anticipate whether the market will go up or down.

What role does time play in the price action model discussed in the video?

Time distorts the price action on lower timeframes like the one-minute chart. The speaker emphasizes that the chart's timeframe itself is not as important as understanding the relationship between time and price. Recognizing the **dealing ranges** and price movement within these ranges is key, regardless of the timeframe.

What is the significance of the term 'range' in this context?

In the context of this lesson, 'range' refers to the price levels within which the market fluctuates. The speaker highlights the importance of understanding **dealing ranges**, where price accumulates or distributes, as they provide key insights into the direction of the market and potential points of entry or exit.

How do institutional traders differ from retail traders in terms of price action analysis?

Institutional traders often work with broader timeframes, focusing on daily or weekly charts and large-scale market moves. They typically don't have the visibility into lower timeframes that retail traders do, which can make them miss smaller, more precise price action signals found in **micro-dealing ranges**.

What is the main reason retail traders struggle with intraday charts?

Retail traders struggle with intraday charts because they often focus too much on chart patterns and indicators, missing the underlying **institutional order flow** and **dealing ranges**. The speaker argues that to succeed on intraday charts, traders must understand the true market mechanics and not just rely on superficial patterns.

What did the speaker mean by 'distortion' in the price action model?

Distortion refers to the way timeframes, especially short ones like one-minute charts, can create a confusing or misleading appearance of market movements. This is not due to noise, but because the way time is segmented can obscure the true underlying price action, especially when the market is holding within a range.

How does the speaker use the concept of liquidity in their trading strategy?

The speaker emphasizes that liquidity plays a crucial role in understanding where the market is likely to move. By identifying **liquidity pools** (areas where institutional traders are likely to buy or sell), traders can enter positions with a higher probability of success. These liquidity zones help predict when the market will break out or reverse.