2022 ICT Mentorship Episode 37

Summary

In this mentorship video, the focus is on price action analysis of the e-mini S&P market, with insights on how to read liquidity and fair value gaps. The mentor emphasizes the importance of patience and discipline, advising against trading on volatile days like Non-Farm Payroll Fridays. Key trading principles, such as avoiding risk on choppy days, studying price action, and maintaining a structured trading mindset, are discussed. The mentor shares real-time chart analysis and urges students to journal their observations for long-term growth, stressing that consistency and experience are key to success in trading.

Takeaways

• 😀 Trading during high-volatility events, such as Non-Farm Payroll (NFP) days, can be risky for inexperienced traders. It's important to avoid these days until you gain enough experience with price action.
• 😀 The market can behave erratically during events like NFP, and without the necessary skills, it can feel like 'random' movements to an untrained eye. It is crucial to understand price action before engaging in trades during these events.
• 😀 Bias is derived from identifying key price levels, such as fair value gaps and short-term highs. The market's tendency to reach these levels forms the basis for trading decisions.
• 😀 Consistent, small, and logical trades based on market structure are more effective than attempting to trade on volatile days or trying to speculate with live money without sufficient experience.
• 😀 After the New York session on Wednesday, it is recommended to stop trading for the rest of the week. This strategy helps maintain discipline and prevent emotional decisions in choppy, unpredictable markets.
• 😀 Developing patience and discipline is essential for traders. Avoiding impulsive trades and focusing on analyzing price action leads to better long-term results.
• 😀 The use of journaling is crucial for tracking and understanding market patterns. When analyzing past trades, document observations and reflections to build a stronger sense of market behavior over time.
• 😀 Market structure shifts and liquidity gaps provide important trading opportunities. Pay attention to the price action around key levels, as these often signal potential market direction.
• 😀 Being mindful of the time frames and market conditions is important. Smaller time frames, such as the 1-minute or 5-minute charts, can create noise, which may lead to incorrect conclusions without understanding the broader context of the market.
• 😀 It's important to remain responsible and avoid trading when market conditions are uncertain or difficult to navigate. Experience and observation over time are key to developing better trading strategies.

Q & A

What is the primary trading strategy being discussed in the video?

The video focuses on price action trading, specifically using concepts like fair value gaps, liquidity runs, and market structure shifts to guide trading decisions. The approach emphasizes understanding price behavior through different time frames, from daily to lower intervals like 5-minute charts.

Why does the mentor advise against trading during Non-Farm Payroll (NFP) days?

The mentor advises against trading on NFP days because the price action on those days can be volatile, erratic, and unpredictable, especially for inexperienced traders. The lack of precision can lead to losses, and it's better to focus on learning and practicing during more stable periods.

What is the significance of the fair value gap in this trading strategy?

The fair value gap is used as a key reference point in the strategy. It represents areas of imbalance where price may return to fill the gap before continuing in the direction of the trend. The mentor emphasizes the importance of understanding these gaps, particularly on higher time frames like the daily chart, and looking for price action that suggests the gap will be filled.

What does 'ICT Power 3' refer to in the video?

'ICT Power 3' refers to a market structure pattern that involves three stages: accumulation, manipulation, and distribution. These stages are critical for understanding price action and market behavior, particularly in low time frames like the 5-minute chart. The mentor explains this concept using a market example where the price forms a low, consolidates, and then rallies.

What is meant by the term 'liquidity run' in the context of the video?

A liquidity run refers to the market's movement toward areas where liquidity is likely to be found, such as prior highs or lows. The mentor discusses how price can run toward these levels, known as liquidity zones, either to fill gaps or to stop out traders before continuing in the primary trend direction.

What does the mentor mean by 'stop run' and why is it important?

'Stop run' refers to the market deliberately moving to take out stop orders around key levels, like short-term lows or highs. This is significant because it often triggers a reversal or a continuation, and understanding this concept helps traders anticipate when the market is likely to make a sharp move in one direction after clearing these levels.

Why does the mentor recommend stopping trading by the New York session on Wednesday?

The mentor recommends stopping trading by the New York session on Wednesday to avoid the challenges and unpredictability that often arise during the latter part of the week, especially during high-impact news events like Non-Farm Payroll. By halting trading earlier, traders can focus on studying price action and avoid making impulsive or poorly timed trades.

What is the key takeaway from the mentor's experience with trading on difficult days?

The key takeaway is the importance of avoiding trading during periods with high uncertainty or low precision, such as on volatile news days. The mentor encourages a disciplined approach, where traders should focus on their edge and only trade when the market conditions align with their proven strategy.

How does the mentor suggest traders use their charts for journaling?

The mentor suggests marking up charts and taking notes about potential setups, even if the trader didn't take the trade. This process involves reflecting on the market structure, the timing of price movements, and any expectations that were met or missed. Journaling helps reinforce learning by allowing traders to see what they could have observed or learned in real-time.

What role does 'self-talk' play in the mentor's advice to students?

Self-talk, according to the mentor, is an essential tool in reinforcing positive habits and experiences in trading. By journaling in a positive and factual manner, traders can trick their subconscious into believing they’ve already experienced the outcome they are aiming for, which helps build confidence and solidifies learning.