ICT Mentorship Core Content - Month 1 - Equilibrium Vs. Premium
Summary
TLDRThe speaker discusses trading concepts like equilibrium, premium, discount, impulse price swings, Fibonacci retracements, optimal trade entries, turtle soup buys/sells, trading ranges, and identifying swing highs and lows. He explains how to identify premium and discounted markets using fib levels and price action, set up turtle soup buys/sells, sell at premium prices, define ranges to trade inside consolidation, and take profits below swing lows/above swing highs. The goal is providing actionable setups to trade profitably without needing a directional bias.
Takeaways
- π The topics covered are premium vs equilibrium markets, identifying price swings, using Fibonacci retracements.
- π Premium markets are above the 50% equilibrium level of a price range.
- π Optimal entries to go short are between the 62-79% Fibonacci retracement levels when in a premium market.
- π Take profits at below recent swing lows after entering at premium areas.
- π Impulse price swings make up larger price swings. Compare different swing timeframes.
- π Wait for 4 candles to confirm a swing low before considering buy limits below it.
- π€ Consolidation trading favors using turtle soup and premium/equilibrium concepts.
- π‘ The same concepts work on higher timeframe charts like daily and hourly.
- π― Sell high buy low. Selling at premium prices and buying at discounts makes sense.
- βοΈ Focus on trading ranges rather than needing a bias of the overall trend direction.
Q & A
What is meant by a market being at a premium price?
-A market is at a premium price when it is trading above the midpoint or 50% level of the current price range, defined by the most recent swing high and swing low. This indicates the market is at an overbought area.
Why is it advantageous to sell at a premium price?
-Selling at a premium price allows you to sell into market strength and overbought conditions. This means there is an increased chance of the market reversing and moving lower after hitting your entry.
What defines an equilibrium price?
-Equilibrium price refers to the midpoint or 50% retracement level of a price swing, as measured from the swing high down to the swing low. It is the balancing point between bullish and bearish control.
How can you trade profitably inside a consolidation range?
-You can sell at premium levels when price goes above equilibrium and buy at discount levels when price goes below equilibrium. Taking profits near previous swing points.
Why is selling above an old high with stops such a high probability setup?
-Old highs often have buy stops clustered above them from previous longs trying to get break even. Running through these stops adds fuel to drive price lower.
What defines a proper price swing?
-A proper price swing consists of a visually obvious and structurally sound impulse move, typically consisting of a series of 3 pushes creating new highs or lows. The more clean the swing looks, the better.
Where should you anchor your Fibonacci levels?
-The Fibonacci levels should be anchored from the most recent discernible swing high down to the most recent swing low. Using the most recent swings gives the most relevant levels.
Why not use the Williams Fractal indicator?
-The Williams Fractal requires 5 candles to form a swing high or low. Price action trading only needs 3 candles, allowing you to define ranges faster and with less lag.
What is the optimal trade entry sweet spot referred to?
-The optimal trade entry (OTE) sweet spot is the 62-78.6% Fibonacci retracement zone. This aligns price with previous swing points to offer high probability entries.
Where should your initial profit targets be placed?
-Initial profit targets should be placed just below the most recent swing low when selling, or just above the most recent swing high when buying. Then trail stops to exit.
Outlines
π Defining premium versus equilibrium price ranges
Paragraph 1 discusses defining premium and equilibrium price ranges using Fibonacci retracement levels. It explains that premium occurs above the 50% retracement level (equilibrium), representing an overbought market expecting sellers. It provides examples of identifying impulse price swings, anchoring Fibonacci levels, and selling at premium levels between the 62-79% retracement area by running stops above old highs.
π Identifying misses and hits for selling at premium levels
Paragraph 2 continues examining trades based on selling at premium levels. It highlights cases of missed opportunities when price fails to reach optimal levels. It also shows examples of successfully selling at premium levels above equilibrium near the 62-79% Fibonacci retracements, taking profits below recent swing lows.
π Using equilibrium versus premium concepts to trade consolidations
Paragraph 3 demonstrates applying equilibrium vs premium concepts when trading long consolidations. It advocates using turtle soup setups to trade reversals by selling above old highs when the market is at a premium. Several examples are shown of defining ranges and selling above 62-79% retracements into strength during overbought conditions.
π Recapping examples and examining applicability across timeframes
Paragraph 4 concludes by recapping examples and noting the applicability of the concepts across timeframes. It emphasizes selling at premium prices into strength, despite the nerves it may cause new traders. An hourly chart example is shown to demonstrate universality across intraday and daily timeframes.
π Final example of selling at premium on hourly chart
Paragraph 5 provides one last example on an hourly chart of selling at the 79% premium level based on a defined price swing. It notes initial profit targets below a swing low, followed by an extension below the next low for an additional 70+ pips.
Mindmap
Keywords
π‘premium
π‘equilibrium
π‘impulse swing
π‘fibonacci retracement
π‘turtle soup
π‘high/low
π‘order blocks
π‘retracement
π‘candlesticks
π‘stop loss/profit take
Highlights
We define price ranges using swing highs and lows, then look for trades when price moves into premium levels above equilibrium
Selling at premium prices is like selling your car when prices are high - it makes the most sense for maximizing profit
Turtle soup sells short on breakouts above old highs are good probability trades in premium markets
Concepts apply on any timeframe; daily, hourly etc. You don't need to break out of a range to make money trading
Taking profits below recent swing lows is key after entering at premium levels
4 pip spread on exits gives you room to close below a swing low profit target
You don't need a directional bias to trade well. Ranges exist in all market conditions
Wait for 4 candles to show willingness to move higher before trading a bounce off a swing low
Selling into strength at scary looking highs is optimal - it means we are at premium levels
The 50% fib level marks equilibrium. Above that is premium where we sell high probable shorts
62-79% fib retrace is optimal for entering short sales in premium conditions
Ignore unclear swing high/lows. Focus only on obvious, visually solid swings
Daily charts can give 100+ pips for swing trades using these concepts
Stops above old highs confirm our premium selling zone shorts
Let price swings go if they don't reach premium levels - wait for the next one
Transcripts
welcome back folks this is ict with a
fifth installment of the eight in the
continuing series for the first month of
the ict mentorship for the month of
september
uh the previous tutorial in session four
we looked at equilibrium versus discount
in this session we're looking at
equilibrium versus premium
we went through a great deal of content
in regards to
discount versus equilibrium so
we won't have to spend so much time with
this tutorial because everything we're
selling here is basically diametrically
opposed to what you would expect to see
in the equilibrium versus
discount
teaching
so looking at what we have
when we look for
premium markets markets that are in a
premium now when we talk about
commodities later on in this mentorship
uh the the topic of premium will come up
again
but when i'm referring to premium as it
relates to price action uh i'm actually
referring to the current range that
we're uh trading in
and
the first thing we look for is an
impulse price swing which is we have an
impulse price point here we have another
impulse price one here we have another
impulse price swing here
so the first thing we look for in price
is an impulse swing
and we see one here
we see another one here we see another
one here
and
these three
price swings actually make up one larger
price swing
which is an impulse leg or impulse swing
by itself by its own right
so
when we define our ranges
okay the use of the fibonacci is
helpful in this case because we can take
the fib draw from a high
down to a price low
and i'm using this low here because it's
the most
lowest
in contrast to this high
and price comes all the way back up
to what i have taught in many years
the optimal trade entry which is a
standard 79 to 60 retracement level on
the fib now i didn't create that
but
if it was just simply looking at
that alone 62 percent to 700 levels uh
looking for buys and sells there
everywhere we loaded it would be no no
work at all in terms of uh taking trades
but obviously you probably learned very
quickly there's much more to it than
just pulling a fib over top of price
swings
we have
in
this larger price swing we have a
smaller price swing here okay
and we have the high down to this low
and the market starts to retrace
equilibrium or half of the impulse price
swing
has to be at least touched and then once
it hits that we watch for price to reach
up into
this area here then there's other
disciplines out there and other mentors
other teachers will say that the 50
retracement level is a good level to
trade at based on price swings i don't
agree with that um i understand that
sometimes it's going to work but what i
want to do is i want to be selling at a
market that's at a premium level
for a market to be at a premium in this
current price range here and it's
assuming none of the price action from
this high
down all the way to the right has not
happened yet so you'd be watching price
in this initial range
and price did not get back up to the
midway point or 50 percent of the uh
the range that was created from the high
to low that's all equilibrium is is
fifty percent on the fit let's have to
tell them describing it but the concept
is is you have to see a
market price
a move above the halfway point once it
does that start it starts going into
what is referred to as a premium market
that means it's at a really high price
relative to its current trading range
we don't need overbought never sold
indicators to help us
classify an overvoter we're sold market
we just simply need to know the current
price range we're trading in and if we
get above the 50 level okay we start
getting into what would be deemed as
overbought or at a premium level
on this pricing here it obviously never
gets above the 50 and everything touches
it so it never gives us an opportunity
to get short
relative to this time frame or this
price swing
so there would be nothing to do there
the next price leg
here
okay the same thing from this high to
this low not nothing in terms of that
price swing there it doesn't get back up
to the 50 uh level but look closer
there's another smaller price swing that
has formed right in here
okay so we could look at that
measure the high
to the low and the market gets right to
a pre uh i'm sorry equilibrium but does
not stay above to go to a premium market
it only goes right to the fibonacci 50
level or what we deem as equilibrium so
price goes to an equilibrium price point
and then immediately sells off this
would be a missed opportunity in regards
to looking at
equilibrium to premium the reason why we
want to focus primarily on the 62 or 79
trace levels in that range to be selling
short
is because the market's going to be
really pressed higher and would be
really
in terms of overbought never sold it
would be very overbought and it would be
expecting a willingness to to sell
softer and go lower there's going to be
times when the market does not give that
scenario to you and you just got to let
those
particular price links go without you
the next price swing
is this high to this low market trades
back up to equilibrium here
and move this over so you can see a
little bit better
okay so market trades back to
equilibrium goes back above it into a
premium market
and it goes right on through
what would be deemed as an optimal trade
entry okay or selling at a premium so
here's a wonderful thing about this
you can look at this and say okay if i'm
measuring this high to this low
and i'm going to be selling i'm above
equilibrium i want to get short
in this area between 62 and 79 chasing
level okay
you look over here
maybe there's something over here
institutionally um in terms of a bearish
order block or something like that you
can define we're going to say that
that's not there we're going to say that
we went short just purely on price
action retracing back into the fibonacci
level here it comes all the way up and
hits you where your stop would be
when you see these conditions where the
market trades above equilibrium and goes
through the levels of 62 and 79 certain
trace levels what that does is it gives
you a condition that we saw
in the equilibrium to discount if it
takes out a previous low when it's in
discount it's probably going to be a
turtle suit by
in this case it's going to be a turtle
soup cell it's going to be reaching for
stops above
the impulse
swings high
and you see that here it goes up runs
out the stops here and then goes lower
where is it going to go where do you
take profits at below lows it's already
established in the marketplace here and
here you see that's exactly what the
market does
you can also use
when you're defining your ranges
all price swings from high down to low
okay you you want to anchor your your
fibonacci on
the market goes down from this high all
the way down to here okay and creates
that low
as soon as we start seeing it bounce up
you need four candles remember it's the
same thing we just saw on the
equilibrium to discount
teaching once you see a a swing low form
you're watching that fourth candle to
show willingness to go higher it does
but then you simply wait here's the
equilibrium price point this this fifty
percent level in the fifth
price goes through that so now you're
gonna be watching it you're gonna want
to see if price gets to sixty two the
seven tracing levels it does
and it does it while it's running out
that high here so two scenarios one you
could have used this high down to this
low and got a stop out
in the initial
uh 62 to 700 tracement levels where we
saw earlier but it ran right through it
if you had not anchored your fib to this
high to this low
you would never see this
optimal trade entry okay or return to a
premium to go short
is above the equilibrium price point and
it takes out an old high
so we're running stops at an old high
and we're going back into what would be
a premium market we're above the
equilibrium price point of the range
high
and the range low and we take stops out
that's really really good in terms of
probabilities and the market goes down
and sweeps out a previous low remember
when we were looking at the equilibrium
discount every time we were buying we
were taking profits at above an old high
okay so when you see that all we're
seeing is the reverse of that in the
equilibrium versus premium market so
we're always looking to sell at a
premium premium is defined by has to be
above the equilibrium price point or 50
50 level of the fibonacci anchored on a
swing of
clear
discernible price action in other words
if it looks sloppy if you if it doesn't
really look like a solid price swing and
obviously obvious price swings are the
ones we look at we're not looking at
anything it looks questionable if it's a
pure price swing we measure it and
this is a high
this is a low and we went through all
potential stages of all these high to
low high to low high low scenarios
really nice scenario here again taking
profits initially below this low here
when it would hit that and then you'd
hold out for a potential run for some of
your trade to be taken off below this
low here
now the market goes into another uh area
of
premium relative to equilibrium
we go back to this larger price swing
here
this low all up to this high the market
goes right into the 79
79 retracement level hits it perfectly
to the pit
and then rolls down where do you take
your profits at
you're gonna be looking to take profits
at below this low here
okay and into
the order block down in here which is
what you see right there
okay
you have another range
that you can use
this high
to this low
okay
now what's up what's really nice about
this is if the market's in a
consolidation this type of trading
is your go-to okay a long protractionary
state in the marketplace where it goes
up and down no no real movement higher
in one direction or lower in one
direction it just stays in a large
consolidation you want to be trading
turtle soups or understanding where
premium and discount are
if you have the high here and you pull
it down to the low here when the market
gets above equilibrium right in here it
goes right into the 17.5 or what would
be the optimal trade entry sweet spot
okay or ote
and the market is a sell-off there where
where do you look to take your profits
at
below and old low
or
below this low right there
every time the market makes a swing low
you have to take a look and it only
takes three candles this is why i do not
use the
williams uh fractal it requires five
candles i only need three candles so we
have a candle low here a lower candle
low here a small smaller little candle
in here
the market
blows through that that would be your uh
your target right there you would take
first profit then you would come back
and end up taking your stop out right
there now
if you get a stop
and say you don't take first profit the
slave doubles advocate for a moment say
you're greedy you're impatient you're
developing you just
don't want to do anything to take some
profits out
or it couldn't happen for you you didn't
do it like that the mark comes back and
takes your stop loss out
if you see that scenario
okay you're gonna be looking for old
highs to be breached
while we're above the fifty percent uh
level so we're in pre we're at a deep
premium okay so markets are overbought
right in here the market runs through
this previous high so we're in turtle
soup scenario
we could be looking for turtle soup
cells
mark comes up starts to come down
one more time runs through you takes
your stop out again this is going to
happen in your trading
do not try to avoid it because it's
going to happen
same scenario
we have an old high mark goes back above
it if it's at a premium
and you've defined the range here
you take this scenario as a cell on
turtle suit basis
for each above an old high sell short
we're going to take profits at below the
first low that's here the next low is
right here
then we have another range created here
so while we're watching this form soon
as we see a swing low form this candle
here we know they're probably going to
want to run back up into this range here
now we have a new range
the impulse price swing
is this high
down to this low
here's equilibrium price expands to
equilibrium once we start seeing that we
watch does it get to 62 it does the
bodies of the candle stop perfectly
right there you could sell short right
there what's nice is you're going to see
the bottom of this candle is up candle
that's a bearish overblock which you'll
learn more about
that's a cell by itself where you look
to take profits at below the old low
right in here
it goes right down below that and does
what
trades back up higher
if we use the price swing
from that high we just anchored two to
this low
the same thing occurs here we have this
high all the way down to this price low
price comes all up into the 79 trace
level above equilibrium we start
watching it now we're in an area where
the price is going into equilibrium i'm
sorry from equilibrium up into premium
okay premium is above equilibrium in a
range that's been defined from high to
low
and look what's happening we're running
out an area of stops above it or high
again very very good
uh probabilities for getting short
take that as a turtle suit inside of a
premium based market
and you could look to take profits on a
swing low
here's your swing low here the market
trades down through that you'd have to
take profits below here
market trades down in two
small little consolidation here and i'm
not going to define anything else that's
in this chart because i could do all
kinds of other things to it would look
like sugar coating but
you'll learn other things to look at and
it has to do with this can over here
so we'll refer to this candle later on
and uh
recapitalize bullish shoulder blocks and
bear shorter blocks but
the market creates another range
this high down to this low here
so this high down to this low market
goes above equilibrium here where is it
going to go to we want to watch it go to
at least 62 percent tracing level it
does that goes right after the 70.5 ote
optimal trade entry and then sells off
where you take profits at below swing
low right here's the swing low take
profits right there now they're not
astronomical trades okay they're not
enormous trades but
to get short in here at 98 big figure
and covering below the low on this
candle here at 96.94 that's over 100
pips
nothing wrong with that this is a daily
chart we're trading off of
again this is helping these folks that
cannot be doing
day trades okay you don't need a great
deal of movement
on a daily chart to make a decent amount
of pips we're going to go back to this
high
and use that same old low here okay
from this high down to this low if you
went short here based on stop run above
here and we're at a premium we're above
the equilibrium we've defined our range
we're looking to sell into strength it's
scary when you first start looking at it
as a new trader
but that's exactly what you want to be
doing as a professional trader you want
to be selling at premium prices
think about it you could sell something
if you own it say you own a car and you
want to sell your car do you want to
sell it at a discount that doesn't make
any sense you want to sell at a premium
so professional traders sell their long
positions or they sell new short
positions at premium prices
ain't no better place in the world to
sell short or sell longs above an old
high because there's going to be willing
buyers right there in the form of buy
stops
so when we see this area here we get
short
from this area here going short and if
you just took profits once this low
formed
that low comes in at
39 97 39 and the open is
97.99 so we're going to say we went
short somewhere around about 98 big
figure the low comes in at 97.39 so that
means your stop i'm sorry your limit
order take profits would be below 97.39
so you get the low here say you're
aiming for 10 pips below that low
below this low right here
you'd be looking for
97.29 roughly 97 30.
that's 70 pips using a setup that's on a
daily chart you're not interested
trading you're not looking at five
minutes 15 minute charts you know you're
not you're not being forced to do what
ict does most of his teachings through
intraday uh trading but the same
concepts appear in these higher time
frame charts so don't discount it that
i'm teaching you in a 15-minute basis
because all the concepts are universal
and i know it's hard for you to
understand that as a new trader because
it just seems like i can't be watching
that chart so therefore i can't trade
that's not true that's not true at all
so
by having these ideas
of looking at price over the course of a
premium market if we go down to a
say we go down to an hourly chart
okay and what's nice is you don't have
to trade with a bias
most people are always asking me hey
looking can you give me a a a way of
trading with a a daily bias give me the
trend direction michael i need to know
that well you don't really need to know
that you don't need to know it
and the reason why you don't need to
know it is because you need to know how
to trade inside of a range
because those ranges are always there
whether you're in a trending market
whether you're in consolidation or
whether in a reversal market
those profiles will always give you
ranges to trade in and you don't need to
break out of the range to make money
we have a swing high here
why am i using that swing high michael
not this one here not this one here
because this is the most recent one
prior to this down move i could use this
one here but i'm going to use this
because it has more price action around
it
this high
down to the lowest low okay market
trades up to the equilibrium in here
okay does it get to premium no it
doesn't get up there yet it comes down
off of this a little bit then trades
right up into 79 tradesmen level right
in here
closes in a range which we'll talk about
in the next teaching
over here
the market sale that sells off
and where you're going to be looking to
take profits at you have a small little
swing low here you have a certain real
good swing low here
so if you're getting short up here
and on an hourly basis
say we got short at 97.70
nice round number
to get out that level here's 42 pips to
get out below this low here 60 pips so
if you go 10 pips below that
that'll give you
oh
nice 70 pips
and give you a nice 70 pips and there
look at the reaction
going 10 pips below here yeah this range
low
from that high up here where we would
have been selling at based on the
concepts again it's all hypothetical in
hindsight here but the conceptual idea
is the same going forward
range is 60 pips 10 pips below will be
70. you got at least four pips below
that for uh for spread to take you out
and absolutely does that and it doesn't
go very much a little at all
Browse More Related Video
5.0 / 5 (0 votes)