You're Trading The PO3 WRONG - ICT Concepts

Summary

This video introduces the concept of the 'Power of Three' in trading, focusing on accumulation, manipulation, and distribution phases in both daily and 4-hour charts. The key strategy involves recognizing the open, low, high, and close of candles to identify bullish or bearish trends. By analyzing the 10 a.m. 4-hour candle open, traders can determine optimal entry points, with a focus on liquidity zones and changes in market delivery. The video also emphasizes using order flow and specific price action setups to improve trading accuracy and profitability.

Takeaways

• 😀 The Power of Three is a key concept in trading, consisting of accumulation, manipulation, and distribution.
• 😀 The focus of the video is on how to use the Power of Three with both the 4-hour (4H) and daily timeframes for trading strategies.
• 😀 For a bullish market, traders look for a setup where the market trades lower first (manipulation) before trading higher (distribution).
• 😀 Order flow plays a crucial role in identifying market direction—bullish markets respect down-closed candles, while bearish markets respect up-closed candles.
• 😀 The daily chart strategy involves mapping out the midnight opening price, trading below it for oversold conditions, and waiting for a market reversal to trade higher.
• 😀 The 4-hour (4H) Power of Three uses similar concepts, with 10:00 a.m. being the key time for new candles to open, shaping the market's direction.
• 😀 In a bullish market, traders should look for an 'open-low-high-close' pattern on the 4H chart, while in a bearish market, an 'open-high-low-close' pattern is preferred.
• 😀 External liquidity (buy side above the high, sell side below the low) should be taken into account when determining trade setups.
• 😀 Once the 4H candle opens and trades lower, traders should wait for the market to take out liquidity and reverse to form the high, completing the Power of Three pattern.
• 😀 A change in the state of delivery, such as closing above a down-closed candle, signals the shift from a sell program to a buy program, providing entry opportunities for traders.

Q & A

What is the Power of 3 in trading?

The Power of 3 refers to the three key phases in market movement: accumulation, manipulation, and distribution. Accumulation occurs when the market builds a base, manipulation involves false price movements to trick traders, and distribution is the final phase where the market moves in the expected direction.

How do the 4H hour and daily candles relate to the Power of 3?

The 4H hour and daily candles are used to apply the Power of 3 by identifying key points of price action. On the daily chart, the market opens, trades lower (manipulation), and then trades higher (distribution). Similarly, on the 4H chart, the timing around 10:00 a.m. plays a significant role in setting up trades based on these phases.

What is the significance of the 10:00 a.m. time frame in the 4H chart?

10:00 a.m. is critical because it's the start of a new 4H candle. This is when traders look for the market to either trade lower or higher, depending on whether they are bullish or bearish. It helps define the direction and provides a clear entry setup for trades.

What is order flow, and how does it relate to the Power of 3?

Order flow refers to the direction and strength of market movement. In a bullish market, down-closed candles are respected, signaling that price is likely to rise. In a bearish market, up-closed candles are respected, signaling further decline. Order flow helps confirm the Power of 3 by showing whether the market is in accumulation, manipulation, or distribution.

How can you identify bullish and bearish trends using candlesticks?

To identify a bullish trend, look for down-closed candles that are respected as support. In a bearish trend, focus on up-closed candles that form at price legs, which support a continuation lower. These candlesticks confirm the market’s order flow, helping traders identify the trend.

What is the concept of 'external liquidity' in the context of trading?

External liquidity refers to the buy-side liquidity above the highs and the sell-side liquidity below the lows. In the trading strategy outlined, you wait for one side of the range to be taken out (either buy side or sell side) before targeting the opposite side for potential profits.

What is a 'change in the state of delivery' in trading?

A change in the state of delivery occurs when the market shifts from a bearish to a bullish program or vice versa. This is often confirmed by a strong close above or below key levels, such as down-closed candles, indicating a shift in market sentiment.

How can traders use the Power of 3 to perfect their entries?

Traders can use the Power of 3 by focusing on the manipulation phase, where the market trades lower (for bullish setups) or higher (for bearish setups) and then enters the distribution phase. The key is to wait for confirmation from the market after the manipulation, such as a change in the state of delivery, to enter at optimal points.

Why is the 4H hour Power of 3 setup critical at 10:00 a.m.?

The 4H hour Power of 3 setup at 10:00 a.m. is critical because it marks the start of a new candle. Depending on the market direction, traders use this point to determine the optimal entry by looking for price action that aligns with their bias—either bullish or bearish.

How does the concept of 'mitigation blocks' support trade entries?

Mitigation blocks are areas of price action that support further movement in the expected direction. In this strategy, traders look for price to dip into a mitigation block (such as a green candle) before reversing higher (for bullish setups) or lower (for bearish setups). These blocks provide a favorable entry point with a lower risk.