Standard Deviation Projections - ICT Concepts

Summary

In this video, the concept of standard deviation projections is explored, specifically using Fibonacci retracement tools to identify key targets, areas for retracement, and potential reversal points. The video demonstrates how to anchor the Fibonacci tool and utilize projections like -2 to -2.5 and -4 standard deviations. It also covers the pairing of these projections with PD arrays and liquidity zones for a more refined strategy. Through several chart examples, the video illustrates how to project manipulation legs and find confluence with price action for better entry and exit points in trading.

Takeaways

• 😀 Standard deviation projections are used to identify potential price targets, retracements, and reversals in trading.
• 😀 Fibonacci retracement tool is set with values of 1, 0, -1, -2, -2.5, and -4 to mark important price levels.
• 😀 The manipulation leg, a price move that sweeps liquidity before a trend change, is used to anchor the Fibonacci tool.
• 😀 Projections based on the Fibonacci retracement tool help identify areas of interest like -2 to -2.5 and -4 standard deviations.
• 😀 When price moves through the -2 to -2.5 standard deviations, traders expect either retracements or reversals.
• 😀 Once price reaches the -4 standard deviation, it marks the maximum expansion, and traders look for a return to equilibrium.
• 😀 Pairing Fibonacci projections with PD arrays (e.g., fair value gaps, equal highs, order blocks) increases the accuracy of target identification.
• 😀 By projecting multiple manipulation legs, traders can find matching confluences to enhance trading setups.
• 😀 The strategy works across multiple timeframes, allowing traders to refine their targets and entry points.
• 😀 Practical examples show how these projections can be used to spot and act on key price levels like fair value gaps or liquidity sweeps.

Q & A

What is the purpose of using standard deviation projections in trading?

Standard deviation projections are used to find target areas, retracements, or reversals. They help identify where price action might change direction, acting as confluence points when combined with other strategies.

How do Fibonacci retracement tools play a role in standard deviation projections?

The Fibonacci retracement tool is used to project standard deviation levels. By anchoring the tool on a manipulation leg (a swing that swept liquidity before a change in market structure), you can project areas to watch for retracement or reversal.

What are the Fibonacci settings mentioned in the script, and why are they important?

The Fibonacci settings used are 1, 0, -1, -2, -2.5, and -4. These specific levels are important because they correspond to different standard deviation levels, helping to identify key price points for retracement or reversal.

What does the 'manipulation leg' refer to in the script?

The manipulation leg refers to the price movement that swept liquidity before a market structure shift. This is the key leg used to anchor the Fibonacci retracement tool for projection.

How do you identify the manipulation leg in a price chart?

The manipulation leg is identified by finding the swing that made a new high or low before the next major price movement. It often occurs when liquidity is swept and is followed by a structural change in the market.

What happens when price reaches the -2 to -2.5 standard deviation levels?

When price reaches the -2 to -2.5 standard deviation levels, it may indicate either a retracement or a reversal. If the price displaces and closes through this area, the focus shifts to the max expansion level, which is the -4 standard deviation.

What is the role of PD arrays in conjunction with standard deviation projections?

PD arrays, such as equal highs, order blocks, and fair value gaps, are used to complement standard deviation projections. They provide additional confluence, helping to confirm the relevance of certain price levels for targeting or reversal.

How can standard deviation projections be used across different timeframes?

Standard deviation projections can be used across various timeframes by first identifying a manipulation leg on a higher timeframe (e.g., daily chart) and then projecting it down to lower timeframes (e.g., hourly or 15-minute charts) for more precise entry and target levels.

What is the significance of the -4 standard deviation level in the context of this strategy?

The -4 standard deviation level is considered the max expansion. Once price moves beyond the -2 to -2.5 standard deviation range, the -4 level becomes a target, signaling potential continuation or a final reversal point.

What does the 'fair value gap' refer to, and how does it relate to standard deviation projections?

A fair value gap is a price region where there was a lack of market participation, often left during rapid price movements. It is important in this strategy because it can align with standard deviation levels, creating key areas for retracement or reversal, adding further confluence to the trade setup.