2022 ICT Mentorship Episode 36

Summary

In this video, the host discusses trading strategies for the E-mini S&P futures contract in June 2022. He explains market conditions such as oversold scenarios, premium and discount zones, and market structure shifts. The focus is on technical analysis using hourly, five-minute, and one-minute charts to identify potential entries and exits. The host highlights specific trades, their rationale, and how market liquidity plays a crucial role. He emphasizes discipline, following rules, and being consistent in trading, while also acknowledging the unpredictability of the market after non-farm payroll data is released.

Takeaways

• 😀 The June 2022 e-mini S&P futures contract is about to expire in a few weeks, and the market will roll over to the September 2022 contract.
• 😀 The market is currently in an oversold condition, as it has dropped into a discount and below equilibrium on the hourly chart.
• 😀 The speaker highlights that there is no need for an indicator to determine market conditions, as the market structure can be analyzed visually.
• 😀 The market had a run-up into a premium level, after which it slid down to take out sell-side liquidity (relative equal lows).
• 😀 A shift in market structure occurred when the market moved from a discount to a premium, indicating that it was likely to go higher.
• 😀 A short-term trade was made by the speaker, where partial positions were taken as the market moved in the expected direction.
• 😀 The speaker traded at a discount by waiting for the market to retrace before going long, with a manageable stop loss below the swing low.
• 😀 After clearing sell-side liquidity, the market structure shifted again, signaling the potential for further upward movement.
• 😀 The speaker made use of various chart intervals (1-minute, 5-minute, and hourly) to spot entry points and analyze the market.
• 😀 The speaker emphasizes the importance of rules and discipline in trading, noting that they prefer to finish their trades by Wednesday of each week and avoid chasing trades later in the week.

Q & A

What is the significance of the June 2022 e-mini S&P futures contract mentioned in the script?

The June 2022 e-mini S&P futures contract is about to expire in a couple of weeks, and the trader is preparing for the rollover into the September 2022 contract. The script provides insight into the current market conditions and trading strategies for this contract as it approaches expiration.

What does the term 'equilibrium' refer to in the context of the hourly chart analysis?

In this context, 'equilibrium' refers to a balanced price level, typically where the market is neither in a premium (overbought) nor a discount (oversold) condition. The trader uses this as a reference to gauge whether the market is overpriced or underpriced relative to the range between a swing low and swing high.

How does the trader determine whether the market is in a 'discount' or 'premium'?

The trader uses a Fibonacci retracement tool to find the equilibrium and identifies whether the price is above or below this level. If the market is below equilibrium, it's considered a 'discount' (potential buy zone), and if it's above equilibrium, it's considered a 'premium' (potential sell zone).

What is a 'fair value gap' and how is it used in the analysis?

A 'fair value gap' is a price imbalance that the trader uses as a potential zone for entering trades. It’s identified when there’s a rapid price movement, leaving a gap in the market where price tends to return to fill the imbalance. The trader waits for price to return to these gaps for potential trade opportunities.

Why does the trader emphasize the importance of 'shift in market structure'?

A shift in market structure occurs when the market changes direction, often after taking out key highs or lows. This shift signals that the previous trend may be reversing, and the trader uses this information to identify potential entry points for new trades or changes in the market sentiment.

What role does liquidity play in the trader's strategy, especially regarding 'sell-side liquidity'?

Liquidity is critical for price movement. Sell-side liquidity refers to the sell orders that exist below certain price levels. The trader looks for moments when the market will take out these orders by dropping below certain price levels, then buying into these areas once the liquidity has been cleared. This helps ensure that the market is primed for a potential rally.

What does the trader mean by 'no model entry' in the context of the short-term price drop?

A 'no model entry' means that the price drop does not conform to the usual patterns or indicators that the trader typically uses to enter a trade. Instead of following a clear setup, the drop is perceived as a rush to clear liquidity, and the trader waits for a more reliable setup before taking action.

How does the trader handle the risk associated with their trades, especially when they mention 'a little bit of heat'?

The trader manages risk by setting stop losses just below key swing lows, so even when the price moves against them (experiencing 'heat'), the risk remains manageable. The 'little bit of heat' refers to a small price movement against the position that was not significant enough to trigger a stop loss.

Why does the trader avoid trading on Thursday and Friday, and what strategy do they follow instead?

The trader prefers to have all their trades completed by Wednesday to avoid the uncertainty of market movement later in the week, especially with upcoming events like non-farm payroll. They emphasize discipline and consistency, following a rules-based approach where they avoid trading when there is no clear market direction.

What is the significance of the trader's approach to 'partial exits' in the trade execution?

The trader uses partial exits to lock in profits incrementally. By taking partial profits at different points, they can secure gains while still keeping some positions open in case the market continues in their favor. This approach provides flexibility and reduces the risk of giving back too much profit if the market reverses.