ICT's 2022 Mentorship Program - Lesson Six Review

Summary

In this video, Paul reviews ICT's 2022 mentorship program, focusing on fair value gaps and market structure shifts. He explains the principles behind ICT's trading approach, emphasizing trading against retail sentiment and aligning with institutional strategies. Paul illustrates how to identify bullish and bearish fair value gaps using the three-candle formation and discusses optimal entry points. He also covers market structure shifts, detailing how to spot and capitalize on them for trading opportunities. The video concludes with insights on managing exits, advocating for taking partial profits over rolling stops, and using the range of the day to determine exit points.

Takeaways

• 📊 The video provides an in-depth review of ICT's 2022 mentorship program, focusing on fair value gaps and market structure shifts.
• 📈 ICT's trading philosophy is based on internalizing price delivery and understanding the behavior of retail and institutional traders.
• 🔍 The video explains that retail traders often follow patterns or indicators, while institutional traders focus on time and price.
• 📉 The concept of 'fair value gap' is introduced as a three-candle formation that signals potential market movements.
• 💹 The 'bullish fair value gap' is identified by a strong upward movement after a dip into sell-side liquidity, typically near previous lows.
• 📌 The 'bearish fair value gap' is identified by a strong downward movement after a rise into buy-side liquidity, typically near previous highs.
• 📋 Market structure shifts are highlighted as significant price movements that break previous highs or lows, indicating a change in market direction.
• 📍 The video uses a NASDAQ example from February 3, 2022, to illustrate how to identify and trade fair value gaps and market structure shifts.
• 🚫 ICT advises against rolling stops and instead recommends taking partial profits and using the range of the day to manage exits.
• 📝 The video concludes with the presenter's intention to test and incorporate the new insights from ICT's mentorship into their trading strategy.

Q & A

What is the main focus of Paul's review in the video?

The main focus of Paul's review is to provide a detailed explanation of the concepts of fair value gaps and market structure shifts as taught in ICT's 2022 mentorship program, lesson six.

What is ICT's approach to trading the markets?

ICT's approach to trading is based on the principles of entering long positions where retail is selling and short positions where retail is buying, without relying on patterns for patterns' sake or indicator readings.

What is meant by 'retail traders' in the context of the video?

In the video, 'retail traders' refers to individual traders who are not part of large institutions and are often considered less informed or educated in trading practices, typically leading to a higher rate of losses.

How does the smart money view retail traders according to the video?

Smart money or institutional traders view retail traders as a source of liquidity, taking advantage of their speculative and uninformed trades to enter and exit positions.

What is a fair value gap according to the video?

A fair value gap is a three-candle formation where the gap is found across the body of the second candle, between the high of the first candle and the low of the third candle.

What is the optimal entry point for a bullish fair value gap as explained in the video?

The optimal entry point for a bullish fair value gap is after a run into sell side liquidity at the previous lows, where retail traders have their sell stops.

What is a market structure shift and how is it identified?

A market structure shift is identified by a price falling below a previous low (bearish) or rallying above a previous high (bullish), followed by a quick and noticeable displacement in the opposite direction.

What is the significance of the displacement candle in the context of a fair value gap?

The displacement candle is significant as it indicates a powerful move that breaks market structure and is used to define the fair value gap, with the gap being formed between the high and low of this candle.

What is the recommended strategy for managing exits in trading as per the video?

The recommended strategy for managing exits is to take partial profits and not roll stops, using the range of the day and looking for fair value gaps near the 50% Fibonacci level to take profits, and closing the remainder at the external range liquidity.

Why is the time of day important when engaging with price according to ICT's methodology?

The time of day is important because it is a key factor for institutional traders, who are looking to anticipate price seeking opposing liquidity at specific times, which can influence trading decisions and strategies.