ICT Mentorship 2023 - Market Maker Models

Summary

This video delves into advanced price action trading techniques, focusing on smart money concepts, order blocks, and timing. The speaker emphasizes the importance of experience in recognizing market patterns, such as fair value gaps and liquidity points. They discuss key trading principles, including identifying low-risk short entries, understanding market distribution stages, and timing trades around high-volume sessions like London and New York opens. The speaker also shares personal insights and experiences from over 30 years in trading, while addressing the challenges of navigating market reversals and staying disciplined in volatile conditions.

Takeaways

• 😀 Recognizing smart money reversals requires experience and an understanding of market behavior over time, not just technical setups.
• 😀 In extremely bullish markets, trying to pick tops can be dangerous due to potential intervention and unpredictable price movement.
• 😀 It’s important to understand price action dynamics and liquidity to anticipate where the market is heading, especially in lower-risk short setups.
• 😀 Traders should focus on low-risk entries using fair value gaps, breaker levels, and order blocks to identify high-probability trades.
• 😀 Time plays a crucial role in trading; understanding when high-volume market sessions like New York and London open can enhance trading strategy.
• 😀 The relationship between time and price is key—trading during specific market hours (like the New York kill zone) increases the likelihood of success.
• 😀 Traders must understand the narrative behind price action rather than relying solely on hypothetical lines, such as trend lines, which can be misleading.
• 😀 Market reversals often occur at specific points where buy-side or sell-side liquidity is targeted, and understanding this helps traders align with the market’s flow.
• 😀 It’s vital to be patient and allow the market to develop, using tools like fair value gaps and breakers to time entries rather than rushing into trades.
• 😀 Successful traders learn over time, developing the ability to manage trades confidently, using stop losses effectively and understanding market structure at a granular level.

Q & A

What is the key concept emphasized in the video regarding market behavior?

The key concept emphasized is understanding price action and market structure to anticipate reversals, particularly focusing on how smart money behaves in the market. The speaker discusses how experience helps in recognizing these patterns and timing trades effectively.

What is the danger of trying to pick tops in a bullish market?

The danger of picking tops in a bullish market is that there could be unexpected interventions that push prices even higher. This makes it difficult to predict reversals accurately, especially without the necessary experience.

What does 'smart money reversal' mean and how is it used in trading?

A 'smart money reversal' refers to the point where the market is expected to reverse after a buildup, often signaled by a price pattern or a shift in market structure. Traders use this concept to anticipate price movements, entering trades once they have confirmation from price action.

How does the speaker suggest identifying low-risk shorting opportunities?

The speaker suggests identifying low-risk shorting opportunities by observing price movements in relation to fair value gaps, order blocks, and market structure. Key moments are when the market rallies into a bearish order block or breaker level and begins to reverse.

What role does experience play in identifying trading opportunities?

Experience is crucial in identifying trading opportunities, as it helps traders recognize when and where to enter or exit positions. The speaker mentions that with 30 years of experience, recognizing smart money reversals becomes easier, but for less experienced traders, it may take years of practice.

What is the importance of time in trading, according to the video?

Time plays a critical role in trading because certain periods of the day, such as the London and New York opens, are associated with higher volatility and increased market participation. These times are referred to as 'kill zones' and are ideal for entering trades when volume is highest.

How do breakers and order blocks contribute to trading strategies?

Breakers and order blocks are used to identify key levels where the price is likely to reverse. A breaker is a level where price action suggests a reversal after a breakout, while order blocks indicate areas where price has previously shown strong support or resistance.

Why does the speaker mention the 'sell side' and 'buy side' of the curve?

The 'sell side' and 'buy side' of the curve refer to the different phases of market movement, with the sell side aiming to target sell-side liquidity (stops below price levels) and the buy side targeting buy-side liquidity. This helps traders understand the likely direction of price movement and plan entries accordingly.

What are the potential psychological challenges faced by new traders?

New traders may face psychological challenges such as fear, confusion, and difficulty in making decisions, especially when price action doesn't align with their expectations. This can result in hesitation, missed opportunities, or panic exits from trades.

What advice does the speaker give about trading strategy and market conditions?

The speaker advises aligning trading strategies with market conditions and timeframes. Traders should focus on times with high liquidity, such as the New York or London open, and be aware of market structure and liquidity areas, using tools like fair value gaps and order blocks to inform their trades.