ICT Charter Price Action Model 6.3 - Supplementary Lesson

Summary

In this lesson, the focus is on applying the Market Maker Buy Model to long-term position trading, specifically in the gold market. The speaker explores how price action moves from accumulation to distribution and how the model’s fractal nature can be used across different time frames. By analyzing the relationship between gold and the U.S. dollar, the lesson highlights key concepts like buy-side liquidity, smart money reversals, and institutional order blocks. The speaker emphasizes the importance of understanding these models to capture significant market moves in the context of position trading.

Takeaways

• 😀 The Market Maker Buy Model is crucial for understanding price action, particularly in long-term position trading.
• 😀 Scalping, day trading, and swing trading are shorter-term strategies, while position trading focuses on larger, long-term price movements.
• 😀 The model divides price action into accumulation (consolidation) and distribution (expansion), where liquidity is gathered and absorbed by market makers.
• 😀 Liquidity pools, such as buy-side liquidity above highs and sell-side liquidity below lows, are key areas for market makers to target.
• 😀 The fractal nature of market maker models means the same principles apply across all timeframes, from weekly charts to intraday charts.
• 😀 When trading gold, understanding its inverse correlation with the US Dollar Index is crucial for identifying potential price movements.
• 😀 Accumulation phases are marked by price consolidating in tight ranges, while distribution occurs when the price tests and breaks these levels.
• 😀 Fair value gaps and bullish order blocks are important concepts used to find optimal entry points for new trades.
• 😀 Longer-term trades require patience as market cycles between contraction (accumulation) and expansion (distribution), taking weeks or even months to play out.
• 😀 The gold market analysis demonstrates how smart money operates through order flow, identifying key moments when price rebalances or moves to test liquidity pools.

Q & A

What is the primary focus of Model #6 in this video?

Model #6 focuses on the Market Maker Buy model and its application to position trading, particularly in the gold market. The lesson emphasizes the importance of understanding market accumulation and distribution on higher time frames, such as weekly charts, while also touching on the relationship between gold and the Dollar Index.

How are the concepts in the Market Maker Buy model applied across different timeframes?

The Market Maker Buy model is fractal, meaning the same principles of accumulation and distribution apply regardless of the time frame. Whether on a one-hour chart or a weekly chart, the patterns of price action remain consistent, allowing traders to apply the same strategies across multiple time frames.

What role does the Dollar Index play in the gold market according to the video?

The Dollar Index (DXY) and gold are typically inversely correlated. As the Dollar Index moves within its range, gold can rally, especially if gold's buy-side liquidity is targeted. However, if the Dollar Index breaks key levels to the upside, it may be bearish for gold, causing its price to retreat.

What is meant by 'buy-side liquidity' in the context of this video?

Buy-side liquidity refers to the market's tendency to seek out price levels where there are buy stops or accumulated buy orders, typically above key resistance levels. In this video, the speaker highlights how gold’s price targets these areas of liquidity as part of the Market Maker Buy model.

What is a bullish order block, and how is it used in the Market Maker Buy model?

A bullish order block is a price level where price has previously accumulated and then moved higher. In the context of the Market Maker Buy model, these order blocks are important areas for traders to enter long positions when price revisits these levels, as it suggests institutional buying activity.

What is the significance of the fair value gap mentioned in the video?

A fair value gap occurs when price moves rapidly through a range, leaving a gap between the high and low of certain candles. Traders use these gaps to identify areas where price may return to rebalance before continuing its move. The gap represents an imbalance in price action, which is corrected when price revisits it.

Why does the speaker suggest focusing on the October gold contract for trading?

The speaker recommends focusing on the October contract for gold because it generally has the highest open interest and liquidity compared to nearby contracts like the August contract. October contracts tend to offer better trading opportunities due to higher participation and volume.

What is the relationship between accumulation and distribution in the Market Maker Buy model?

In the Market Maker Buy model, accumulation refers to the phase where smart money builds positions at lower prices, often after a distribution phase where price consolidates or moves sideways. Once accumulation is complete, the market expands higher to capture liquidity above the buy-side levels, thus rebalancing the market.

What does the speaker mean by 'not forcing trades' and waiting for confirmation?

The speaker emphasizes the importance of patience in trading, advising that traders should not force trades when the market is unclear. Instead, they should wait for confirmation that price action aligns with their strategy, such as identifying accumulation or distribution phases before entering positions.

How does the speaker suggest that traders approach the gold market in the context of long-term trading?

For long-term traders, the speaker suggests accumulating long positions during periods of reaccumulation or when the market is trading at a discount relative to previous price action. The focus should be on identifying price levels where accumulation occurs, and then holding positions as the market expands upwards toward buy-side liquidity.