ICT Charter Price Action Model #4 Position Trading

Summary

This video script discusses a price action model for trading, focusing on quarterly shifts and seasonal tendencies in the forex market. It outlines a strategy using the Commitment of Traders (COT) report, SMT divergence, and a hedging program to anticipate market movements. The model is exemplified with the British Pound, highlighting a bearish seasonal tendency in May, and demonstrates how to use COT data, SMT divergence, and liquidity pools for long-term position trading with a potential 5:1 reward-to-risk ratio.

Takeaways

• 📈 The video discusses Price Action Model Number Four, focusing on position trading and the effects of quarterly shifts and seasonal tendencies.
• 📊 The setup for this model combines SMT Divergence with a Commitment of Traders (COT) hedging program, targeting external range liquidity.
• 🔍 The market is analyzed for a specific data range of 20 to 40 or 60 days on the daily chart, looking for old highs and SMT Divergence.
• 📚 The video references content from January 2017 on long-term position trading, highlighting the importance of understanding seasonal tendencies.
• 🌐 The model anticipates a bearish monthly candle, which can be reversed for bullish scenarios, focusing on the monthly range as the primary driver.
• 💹 The British Pound is used as an example, with a focus on the seasonal tendency in the last week of April leading to June lows.
• 📉 The video emphasizes the importance of the COT hedging program, which looks back 6 months to anticipate a bearish scenario based on seasonal tendencies.
• 🔎 The model uses the Futures Contract symbol B6M18 for the British Pound, analyzing the COT line chart to focus on the commercials' net position.
• 🏦 The logic behind the model is based on the bearish seasonal tendency for the pound sterling in the month of May, looking for a COT hedging program to reflect excessive net short holdings by commercial traders.
• 📌 The video demonstrates how to use the last up closed candle's open to place a sell stop order, aiming for a long-term position trade with a potential 5:1 or 8:1 reward-to-risk ratio.

Q & A

What is the focus of the Price Action Model Number Four Position Trading Quarterly Shifts and Seasonal Tendencies?

The focus of the model is to anticipate the effects of a quarterly shift in the majors, overlapping with a seasonal tendency, using a combination of SMT Divergence and a Commitment of Traders hedging program.

What is the significance of the Commitment of Traders (COT) in this model?

The COT is used to analyze the net position of the commercials over the last 6 months, which helps in identifying the market's potential direction based on their net positions.

What is the role of SMT Divergence in this trading model?

SMT Divergence is used to identify potential market reversals. It can be correlated with the USDX or a correlated pair like the Euro, indicating a potential mismatch between the market's price action and the underlying momentum.

How does the model utilize the concept of external range liquidity?

External range liquidity is used to identify key support and resistance levels. The model looks for old highs or lows being taken out, indicating a potential shift in the market's range.

What is the importance of the seasonal tendency in this trading model?

The seasonal tendency is crucial as it provides a context for the expected market behavior during specific times of the year. It helps in anticipating bullish or bearish scenarios based on historical patterns.

How does the model handle bullish scenarios?

In bullish scenarios, the model looks for a data range of 20 to 60 days on the daily chart, targeting a liquidity pool, and expects the commercials to be net bullish or net long in the last 6 months.

What is the strategy for bearish scenarios in this model?

In bearish scenarios, the model anticipates a monthly candle that would be bearish, focusing on the last week of April to the June lows, expecting a net short position by the commercials.

What is the role of the British Pound in this specific example?

The British Pound is used as an example in the script, demonstrating how the model can be applied to anticipate a bearish seasonal tendency in the month of May.

How does the model use the concept of 'turtle soup' in trading?

The term 'turtle soup' is used to describe a scenario where the market is expected to break an old high or low, indicating a potential trend reversal or continuation, which is a key entry point in the model.

What is the significance of the 'monthly range' in the model?

The monthly range is the primary driver in the model, used to anticipate the market's behavior within a month. Traders look for buy or sell opportunities based on the expectation of a bullish or bearish monthly candle.

How does the model incorporate the concept of 'time and price'?

The model blends time and price by considering the duration of the seasonal tendency and the potential market movement within that time frame, helping to determine the optimal entry and exit points.

Outlines

00:00

📈 Price Action Model 4: Quarterly Shifts and Seasonal Tendencies

This paragraph introduces the fourth price action model, focusing on quarterly shifts and seasonal tendencies in trading. The model combines Commitment of Traders (COT) analysis, divergence, and hedging strategies to anticipate market movements. It specifically looks for a 20 to 60-day data range on the daily chart, an old high being taken out with a higher high, and a divergence in the small traders' (SMT) positions. The importance of seasonal tendencies is highlighted, with the expectation of a bearish monthly candle. The model is demonstrated using the British pound, with a focus on a bearish seasonal tendency in late April to early June.

05:00

📊 COT Analysis and Seasonal Trading Strategy

The second paragraph delves into the specifics of the Commitment of Traders (COT) analysis, which is central to the trading strategy. It emphasizes the importance of focusing on the commercial traders' net position over the last six months and the anticipation of a bearish scenario based on seasonal tendencies. The paragraph explains the process of identifying the right time to trade by looking at the net short position of commercial traders and the use of the COT hedging program. It also discusses the symmetry of the market when using COT analysis and the logic behind the model, which is to find an excessive net short holding by commercial traders in anticipation of a quarterly shift in the majors.

10:01

📉 Seasonal Tendency and Entry Strategy for GBPUSD

The final paragraph discusses the application of the model to the British pound, highlighting the seasonal tendency for the currency to be bearish in May. It outlines the entry strategy for a short position, which includes looking for an SMT divergence against the dollar index and trading the open of the last up-closed candle on a stop. The paragraph also explains the use of the price action model to identify key levels for potential profit and stop-loss placement. It concludes by emphasizing the potential for significant profit without the need for day trading, as demonstrated by the model's application to the seasonal tendency and COT analysis.

Keywords

💡Price Action

Price Action is a trading methodology that relies on the study of price movements to make trading decisions, rather than relying on technical indicators or fundamental analysis. In the video, Price Action is used as a core concept for developing trading models, such as the model number four which focuses on quarterly shifts and seasonal tendencies.

💡ICT Mentorship

ICT Mentorship refers to a mentorship program related to trading, possibly run by the speaker or an organization they are associated with. It is mentioned as part of the context in which the trading model is being discussed, indicating that the model is part of a broader educational or training offering.

💡Quarterly Shifts

Quarterly Shifts in the context of the video refer to significant changes in market trends or patterns that occur on a quarterly basis. The trading model discussed anticipates these shifts to make informed trading decisions, particularly in relation to the major currency pairs.

💡Seasonal Tendencies

Seasonal Tendencies are patterns in financial markets that repeat at certain times of the year. In the script, the concept is used to identify periods that are historically bullish or bearish for certain assets, such as the British pound, to inform trading strategies.

💡SMT Divergence

SMT Divergence stands for 'Small Traders' Divergence' and is a technical analysis tool used to spot potential trend reversals or continuations by comparing the performance of small traders to the market itself. In the video, it is used in conjunction with other indicators to identify trading opportunities.

💡Commitment of Traders (COT)

The Commitment of Traders is a report that shows the open interest, volume, and positions of traders in the futures and options markets. In the script, the COT report is used to analyze the net positions of commercials over the last six months to anticipate market movements.

💡External Range Liquidity

External Range Liquidity refers to the price levels outside of the recent trading range where liquidity is concentrated, often leading to significant price movements. The video discusses using this concept to identify potential entry and exit points for trades.

💡Monthly Candle

A Monthly Candle in trading refers to the price movement represented on a monthly time frame chart, typically showing the open, high, low, and close prices for each month. The video script discusses anticipating a bearish monthly candle as part of the trading model.

💡British Pound

The British Pound, often symbolized as GBP, is the currency of the United Kingdom. In the video, the speaker uses the British Pound as an example to illustrate the application of the trading model, particularly focusing on its seasonal tendencies and how to trade it based on the model's criteria.

💡Stop Order

A Stop Order in trading is an order to buy or sell a security once it reaches a certain price, known as the stop price. In the script, a sell stop order is discussed as a method to enter a trade when the market moves in a bearish direction as anticipated by the trading model.

💡PD Array

PD Array, or Pivot Points Array, is a set of technical analysis tools used to identify potential support and resistance levels in the market. The script mentions using the PD Array Matrix to determine potential profit targets and stop-loss levels for trades.

Highlights

Introduction to the Price Action Model Number Four, focusing on quarterly shifts and seasonal tendencies in trading.

The model combines SMT Divergence with a Commitment of Traders (COT) hedging program for trading strategies.

External range liquidity is identified as a key pattern for this trading model.

The importance of looking for a dip or rise in data range of 20 to 60 days on the daily chart for setup identification.

The Commitment of Traders net position over the last 6 months is crucial for anticipating market movements.

The concept of old highs and lows being ran out with SMT Divergence as a signal for trading entries.

Seasonal tendencies play a significant role in anticipating monthly candle outcomes for bullish or bearish scenarios.

The model's application to a bearish seasonal tendency using the British Pound as an example.

The use of the B6M18 futures contract symbol for identifying trading opportunities on barchart.com.

Focusing on the commercial traders' net position for a 6-month look back to anticipate bearish scenarios.

The logic behind using the COT hedging program to reflect excessive net short holdings by commercial traders.

The identification of a bearish seasonal tendency in the month of May for the British Pound Sterling.

The strategy of shorting the open of the last up-closed candle on a stop as a trading entry method.

Using a 130 pip stop as a risk management strategy in long-term position trading.

Targeting old lows as potential profit-taking levels based on the PD array matrix.

The significance of blending time and price to identify the end of a major move in the market.

The demonstration of the model's practical application in live trading scenarios with real-time examples.

The opportunity for further study and application of the model through the forum for additional learning.

Transcripts

[Music]

okay folks welcome back this is price

action model number four position

trading and this is the ICT mentorship

quarterly shifts and seasonal

[Music]

Tendencies okay IC price action model

number four position trading quarterly

shifts and seasonal

Tendencies now for our stage for this

model is going to be a quarterly shift

or anticipating the effects of a

quarterly shift in the majors

overlapping with a seasonal

tendency our setup is going to be a

combination of smt

Divergence and a Comm trator hedging

program and our pattern is going to be

external range

liquidity okay the conceptual idea again

this is what I see internally how I

internalized the setup the market move

the whole process for this

model is we obviously look for a nip to

data range of 20 to 40 or 60 days on the

daily chart the commitment of Traders

net position on the commercials are

going to show a net position over the

last 6 months look back and on the daily

chart we are looking for an old high to

be ran out with a higher high

and at the same time smt Divergence

forming now this could be a corelated

smt or could be a USDX smt

Divergence and we're coupling that with

now the importance of the seasonal

tendency now everything for this model

obviously you can find in the January

2017

content on long-term position

trading and we're going to be

anticipating a

monthly candle that would be

bearish everything is reversed obviously

for bullish scenarios I'm throwing this

in there so you can apply it to a

seasonal tendency that's

bullish again everything here with the

seasonal tendency if the data range of

20 40 or 60 on the daily chart targeting

a liquidity

pool in this case we're going to be

looking for an old low being taken out

it's a lower low being in price coot

hedging peram

the commercials are net bullish or net

long in the last 6 months we're getting

that total range anticipating a bullish

monthly range expansion and an S&T

Divergence either at USDX or correlated

pair okay and again we're focusing on

the monthly range as our

primary driver if you will uh we're

going to be looking for buy stock

liquidity

pull equal highs on The Daily when we're

bullish and we're coupling this idea or

model with a bullish seasonal tendency

with bullish net long positions by the

commercials but on this example we're

focusing on a bearish seasonal tendency

so we're going be looking at the monthly

range seen with the expectation of equal

lows on The Daily or a sell stop

liquidity pool being our objective or PD

right okay for this model we're going to

be using the British pound obviously

this is the seasonal tendency you guys

saw this in the January 2017 content

long-term position

trading now I want you look at this

chart okay and there is a highly highly

bullish scenario or seasonal tendency to

occur in the beginning of March mid

March and running up in into the May

highs I'm not electing to use that we'll

come back to that type of seasonal

tendency when we go back into position

trading for another position trading

model for this one uh position trading

can be several weeks long to several

months so I want to give you the shorter

side of it and we're going to focus on

the seasonal tendency in the the last

week or so of April going down into the

June lows you you see that

here okay so primarily the month of May

is bearish but the seasonal tenden kick

in a little bit early as you can see in

the seasonal tendency graph

[Music]

here all right so we're looking at the

British pound this is the Futures

Contract and the symbol is B6 M18 you

can find that on barchart.com I uploaded

the cot commitment

Traders now this is an interactive chart

so you can use that on their feature and

I want you to take a look at the

standard coot line chart here the red

line that's going to be the commercials

that's what we're focusing on primarily

the other two which is small specs and

you know public Traders we're not

interested in those so again our focus

is going to be on now that black line

that was red okay

and what I'm doing here is my hedging

program as taught in the mentorship and

we're looking back 6 months okay

so using the criteria that may is

bearish we go back as late as November

to the previous year so by having that

we'll have an expectation of seeing a

bearish scenario the last week or so of

April was which is reasonable based on

the seasonal tendency because we know

the seasonal Tendencies are not locked

to the actual calendar day it's a shift

of seasonal impact so again I like to

look about mid April to the second week

of June that's the duration I like to

have

but you can be a stickler and say I'm

going to only trade like the last week

of April with this seasonal tendency

anticipating lower prices that's fine

but the entire month of May you want to

be expecting lower prices for British

pound you see that the month of April

going into may we have a heavy net short

position by the commercials by my coot

hedging program application again this

is taught in the

mentorship so the seasonal High the last

6 months and the seasonal low in the

last 6 months is delineated

here and notice how perfectly

symmetrical the market becomes when you

use coot like

[Music]

this okay so what's the logic behind

this model the seasonal tendency for the

pound sterling is bearish in the month

of May so we're going to be looking for

a cot hedging program to reflect an

excessive net short holding by the

commercial Traders trading on the

anticipation of a quarterly shift in the

majors so when gbpusd or cable runs an

old high going into last week or last

week of April going into

May and it's inside a 20 40 or 60-day if

the daily range looking back for an old

high and there's this smt Divergence

between either the dollar Index or a

correlated pair like the dollar versus

the Euro okay in this case it's the euro

dollar or Fiber as we call it we're

going to be looking to short the open of

the last up closed candle on a stop now

again you can find all this in the

January content of 2017 position

Trading

[Music]

okay and now obviously as I mentioned

earlier the month the range of May the

calendar month is typically bearish okay

so when it's bearish we are likely to

see a strong impulse move lower inside

that monthly range or candle there are

four weeks or ranges typically and we're

going to be seeking the range inside

that monthly range before the candle

completes on a new monthly range

beginning that is to say that we want

one or more of the four weeks that

construct a monthly range to

[Music]

profit okay as you can see here we have

an old high using the at the data ranges

we can find that old high here in the

January 2018 period going into uh a

rally up into that old high if it's

broken all it has to do is trade through

it by one pip if it does that while the

criteria which is that orange shaded

area that's the midpoint of April that's

I like to Define it and I'm anticipating

some weakness to come into it seasonally

so I want to see a turtle soup type

scenario or a run on external range

liquidity but I want to be able to trade

this from a long-term position and also

teach it to you all so you don't have to

use intraday trading

Concepts using the last up closed

candles open we can sell on a stop so

all you have to do is look at the

previous day and see what the open is

and if we run that previous old high

just look for the last up closed candle

you all know what that is in terms of a

bearish order Block in this case we're

actually going to use the open to sell

on a stop so in our demo account we'll

place a sell stop at that opening price

so if Price ever trades down to that

level it's going to be moving in our

direction we don't need to get up and

look at kill zones we don't need to

worry about what the Market's doing on a

minute-by-minute

basis

eventually the market does make a higher

high than that old January high and it

does so by forming an SMD Divergence

against the dollar Index so the dollar

was unable to make a lower low as you

would expect it to do when the cable

makes a higher high says S&T Divergence

or USDX S&T

Divergence and it's occurring at that

seasonal

tendency so now we have the 14248 short

entry that would be our price to get

filled on a stop price trades through

that you would be filled short your stop

goes to the high and this this case

would be a 130 pip stop now know some of

you are probably thinking whoa that's

way too much we're trading a long-term

position trade okay so we're going to be

using the same liquidity based Concepts

looking at Old lows as our discount PD

array so using the PD aray Matrix using

the daily chart expecting the monthly to

be the expansion range we're going to be

looking for these two levels here and

now think about it this is exactly what

I showed live each week calling these

levels and all I did was use this model

here so price trades down again 130 Pips

is our stop or risk and taret

targeting our first run to that old low

there is 5 to

one using a daily

chart so you can see with five to one

reward the risk it's still possible and

you don't need to be day trading to get

it and notice the nice deep decline all

through the seasonal tendency that's

shaded

here and ultimately trading down to 8

to1 reward the risk and and what we do

is we look for the discount AR raise in

this case as I indicated for the last

several months that we would be

expecting these lows to be taken out

that's where Lota was resting but until

we get to the seasonal tendency

overlapping with coot and S&T Divergence

driving that we can see a heavy

distribution cycle coming in or self

program and we look for the discount

raise to Overlay with the season seon

tendency so in other words if there was

more time in the seasonal tendency which

I think we're kind of like getting close

to the very end of it now um we could

anticipate it to keep going lower so

you're blending time and price so words

if we would have taken a lot longer in

in terms of time and should it down to

13712 and say it would be the first week

of June at the time then I would think

that would probably be the end of the

major move okay but because we have more

time in Seal tendency as indicated by

that shaded area at the bottom of the

chart that's

orange time and price met Terminus which

is the sell stops and the length of the

seasonal tendency going into June so

hopefully you found this insightful

again we'll have examples um you can go

back and study the charts I'm going to

give you an opportunity to do so in the

forum for this particular model and also

for the previous models and the

remaining models that would uh be taught

in the 12 models I'm going to give you

for the Post mentorship content until

I'll talk to you next time I wish you

good luck and good

Trading