2022 ICT Mentorship Episode 21

Summary

In this mentorship session, the instructor analyzes the Dollar Index and E-mini S&P to illustrate risk-on and risk-off market dynamics, emphasizing intermarket relationships and key trading principles. He explains daily order blocks, relative equal highs/lows, and fair value gaps, while demonstrating how to interpret session openings at midnight, 8:30 AM, and 9:30 AM New York time. The session highlights the Power 3 concept—accumulation, manipulation, and distribution—alongside disciplined trade management, position sizing, and psychological readiness to accept missed opportunities. Through real-world examples, he reinforces the importance of patience, flexibility, and methodical observation for successful intraday trading.

Takeaways

• 📈 The dollar index movement is key to understanding risk-on vs. risk-off markets: dollar up implies risk-off and foreign currencies decline, while dollar down implies risk-on.
• 🛑 Order blocks and fair value gaps are essential tools for identifying high-probability trade entries and market reversal areas.
• 🎯 Relative equal highs and lows provide target levels for price action and help forecast potential market direction.
• 🕒 Key session timings matter: midnight NY opening for London session analysis, 8:30 a.m. NY for short-term intraday analysis, and 9:30 a.m. NY for equity market volatility.
• ⚡ Heavy markets may prevent ideal price rallies above opening prices, requiring flexibility and use of smaller imbalances for entries.
• 💡 Power 3 framework: Accumulation (smart money builds positions), Manipulation (stop runs/false moves), Distribution (exit at strategic levels).
• ⏳ Typical trade duration is short (90 minutes to 2 hours); holding overnight or long-term increases risk and is avoided in current market conditions.
• 🧠 Accept that missing trades is normal; trading is not about capturing every move but applying consistent rules and analysis.
• 💰 Proper stop-loss management is critical: do not adjust prematurely; let market structure and price action guide risk decisions.
• 📊 Market psychology and session context are as important as technical indicators; understanding market sentiment aids in anticipating price movements.
• 📝 Trading requires planning for real-life interruptions; missed opportunities are inevitable and should be accepted without frustration.
• 🎓 Beginners should focus on learning concepts like order blocks, fair value gaps, and session timing before expecting perfect trade execution.

Q & A

What is the significance of the Dollar Index in trading risk-on and risk-off markets?

The Dollar Index indicates market sentiment. A rising dollar signals a risk-off scenario, where money moves into safe-haven assets, leading to declines in foreign currencies, equities, and other risk assets. Conversely, a falling dollar indicates risk-on conditions, benefiting risk assets.

How does the mentor suggest using the Dollar Index when analyzing Forex and other markets?

The mentor uses the Dollar Index to predict currency movements: if the dollar rises, foreign currencies are likely to decline; if the dollar falls, foreign currencies may rally. This relationship helps anticipate pressure on other markets, including indices.

What are 'order blocks' and how are they used in the mentor's trading strategy?

Order blocks are key price zones (low, open, high of a daily block) where institutional activity or liquidity is concentrated. Traders use them to anticipate market turning points or areas where price is less likely to reach, helping in bias formation and trade timing.

What is the 'Power 3' concept, and how does it apply to session-based trading?

Power 3 is a framework combining accumulation, manipulation, and distribution. Accumulation identifies smart money short positions, manipulation anticipates false moves above key levels, and distribution is the unloading of positions at important lows. This framework helps predict short-term market behavior during sessions.

How does the mentor use different New York session opening times in analysis?

The midnight NY opening is used to analyze the London session (2–5 AM NY time). The 8:30 AM NY opening marks the NY session start, useful for detecting rallies above opening price (Judas swings). The 9:30 AM NY opening signals equity market start, often accelerating moves already in progress.

Why does the mentor emphasize that not all setups or moves will materialize?

Market behavior can deviate from ideal patterns due to volatility or overwhelming trends. Traders must accept missed opportunities as part of the learning process, maintain discipline, and adapt their strategy to prevailing market conditions.

What role do fair value gaps and imbalances play in this trading model?

Fair value gaps and imbalances provide micro-entry opportunities when ideal moves (like rallies above opening prices) do not occur. They allow traders to engage with ongoing market trends without waiting for perfect setups.

How long does the mentor typically hold trades, and why does he avoid overnight positions?

Trades are usually held between 90 minutes to two hours. The mentor avoids overnight positions due to increased risk and unpredictability in current market conditions, focusing on session-based trades for better control and safety.

What psychological advice does the mentor give regarding missed trades or unexpected market moves?

Traders should accept that they cannot participate in every move and should avoid emotional reactions like frustration or overtrading. Patience, adaptability, and disciplined risk management are essential to long-term success.

How does the mentor suggest tracking local time for trading purposes?

He advises setting a clock to New York local time (24/7, year-round) to avoid confusion with daylight savings or local variations. Accurate timing is crucial for session-based analysis and applying models like Power 3.

How are seasonal tendencies used in this trading approach?

The mentor integrates historical seasonal patterns, such as May declines, into his daily bias. Combining seasonal trends with order blocks, relative equal lows, and session analysis enhances predictive accuracy.

Why does the mentor emphasize simplicity in trading analysis?

Simplicity helps traders focus on clear biases, intermarket relationships, and actionable setups, reducing confusion. Overcomplicating analysis can lead to missed opportunities and poor decision-making.