Why Daily Bias is Holding You Back | ICT Concepts

Summary

This video delves into creating and confidently trading with a daily bias, focusing on critical aspects such as market structure, liquidity, news events, and macroeconomic factors. The speaker emphasizes the importance of planning ahead, staying disciplined, and maintaining confidence even when the market goes against your bias. Key topics include recognizing market cycles, understanding draw on liquidity, and interpreting price action during news events. The speaker uses real-world examples, like Dollar-CAD during Canadian CPI data release, to demonstrate how to apply these principles for successful trading.

Takeaways

• 😀 Confidence in your bias is key to successful trading, even when price action moves against you. Stick to your analysis and don't be swayed by external factors.
• 📅 Factor in macroeconomic news events like NFP, FOMC, or CPI, as they can heavily influence market movements. Be aware of consolidation periods ahead of major news.
• ⏰ Understand the weekly trading cycle and recognize which days offer the most volatility. Mid-week, especially on days with medium-impact news, can provide the cleanest trades.
• 💡 Identify liquidity pools, such as equal highs or lows, where price is likely to gravitate towards in order to fill pending orders.
• 🛠️ Focus on market structure analysis (higher highs, lower lows, etc.) to understand trends. Look for rapid reversals after liquidity is taken out to identify strength in a trend.
• 🔍 Stay aware of market displacement, such as large bullish or bearish moves, which indicate institutional order flow supporting a certain bias.
• 🌍 Pay attention to macroeconomic narratives that influence market sentiment. Events like geopolitical conflicts or economic crises can significantly affect market movement.
• 🔄 Always evaluate your trade's invalidation level. If the market moves against you beyond a certain point, be ready to adjust or exit the trade.
• 💬 Developing experience with market cycles is critical. You can’t backtest real market sentiment during events like the housing crisis or COVID—these experiences must be lived.
• 📈 The best trading opportunities often arise when the market moves against your bias, as it gives you the best entry price and risk-to-reward ratio. Patience and discipline are crucial.
• 🎯 A daily bias is based on various factors like liquidity, market structure, news, and time of week. It's important to maintain flexibility, adjust when needed, and always stick to your analysis.

Q & A

What is the significance of determining the draw on liquidity in trading?

The draw on liquidity refers to areas in the market where liquidity is most likely to be resting, such as above equal highs or lows. These levels act as targets for price action, and the market tends to gravitate toward these areas to facilitate trades. Understanding these levels is crucial in determining where price might move next and aligning your trades accordingly.

How does market structure impact a trader's daily bias?

Market structure helps traders identify whether the market is in a bullish or bearish trend by observing patterns like higher highs, higher lows, or lower highs, and lower lows. A clear understanding of market structure allows traders to anticipate potential price movements and align their bias with the prevailing trend.

Why is it important to consider news events when forming a daily bias?

News events, such as FOMC meetings or economic reports like CPI, can significantly influence market sentiment and price movements. Traders must factor in these events, as they often cause sharp volatility or consolidation in the market. Understanding how news might affect the market helps traders plan their entries and exits effectively.

What role do macroeconomic narratives play in creating a trading bias?

Macroeconomic narratives, such as geopolitical events or economic crises, can have a long-lasting impact on market movements. For example, events like the Russia-Ukraine war can lead to sustained trends in the market. Traders must stay informed about these factors and incorporate them into their daily bias, as they often influence longer-term price direction.

What is the role of timing in creating and executing a daily bias?

Timing is crucial because different days of the week exhibit varying levels of volatility and price action. For example, the middle of the week is often the most productive for trading, as early-week uncertainty from news events might have settled. Traders should be mindful of weekly profiles to anticipate when volatility might increase or decrease.

How can a trader maintain confidence in their daily bias despite market fluctuations?

Confidence comes from having a well-thought-out plan and sticking to it, even if the market moves against the initial bias. Traders should trust their analysis and avoid being swayed by external opinions. It's essential to have a clear invalidation point to know when to abandon the trade if the market does not align with expectations.

Why is it important to avoid making decisions solely based on short-term price action?

Relying only on short-term price action can lead to impulsive decisions that may not align with the overall market trend. It's crucial to integrate a broader market perspective and consider factors like market structure, liquidity zones, and macroeconomic events to make informed decisions that align with the bigger picture.

What is an invalidation point in trading, and why is it important?

An invalidation point is a level where a trader's initial analysis or bias no longer holds true, signaling that it's time to exit the trade. It’s important because it helps traders avoid holding onto losing positions and ensures they remain flexible in adjusting their strategy when market conditions change.

How does understanding institutional order flow contribute to a trader's success?

Institutional order flow, indicated by factors such as market displacement and the respect for order blocks, provides insight into the underlying forces driving market movements. Traders who can gauge this flow are better equipped to align their bias with the actions of large market participants, improving their chances of success.

Why is it critical for traders to have a plan and stick to it in volatile markets?

Having a clear plan and sticking to it ensures that traders stay disciplined and avoid being influenced by emotions or market noise. A well-thought-out strategy reduces the risk of making reactive decisions and helps traders stay focused on their analysis, even during periods of heightened volatility.