ICT Charter Price Action Model 7 - Trade Plan & Algorithmic Theory

Summary

This video script outlines a comprehensive strategy for sell-side trading using the market maker model. It covers key aspects such as price action analysis, identifying liquidity runs, and leveraging economic events for market predictions. Emphasizing risk management, the script explains how to calculate position size, manage trades, and handle volatile market conditions, particularly in bearish scenarios. The content also highlights the importance of understanding market structure and external factors, like geopolitical events, that influence price movements, especially in commodity and energy markets. Ultimately, the video aims to teach traders how to make informed, strategic decisions in uncertain market conditions.

Takeaways

• 😀 **Economic Calendar Awareness:** Stay informed about upcoming medium and high-impact economic events, as these can trigger volatility and influence the market’s behavior throughout the week.
• 😀 **Range Identification:** Study the last 20, 40, or 60 trading days to identify the highest high and lowest low in order to determine the current ‘dealing range’ of the market.
• 😀 **Liquidity Runs:** Understand that market price often targets low-resistance liquidity areas, especially during economic events. Liquidity runs may push the price in specific directions, either for bullish or bearish setups.
• 😀 **Discount Price Delivery (PDR):** Focus on price arrays below the current market where price is likely to drop, especially during the process of forming a market maker sell or buy model.
• 😀 **Volatility Injection Timing:** Use volatility injections around economic events or market manipulation (like buy stop raids) as opportunities for entering the market, particularly during key trading times like London or New York Open.
• 😀 **Bearish and Bullish Market Management:** Understand the different behaviors in the market based on whether you are in a bearish or bullish market structure, with specific tactics for both buy and sell-side market maker models.
• 😀 **Risk Management Strategy:** Calculate position size based on account equity, risk percentage, and stop loss in pips. Adjust your position size to stay within your acceptable risk levels for each trade.
• 😀 **Multiple Exit Points:** Use multiple orders to take profits at different stages (e.g., 20, 40, 60 pips) and always manage your stop-loss as the trade moves in your favor. Re-enter if necessary after a stop-out.
• 😀 **Post-Win Risk Adjustment:** After a series of successful trades, reduce your risk percentage by 50% to safeguard against future losses. Increase risk only after recovering a portion of prior losses.
• 😀 **Economic & Geopolitical Context:** Stay mindful of macroeconomic conditions, like inflation, energy price movements, and geopolitical tensions. These factors can dramatically impact the speed and direction of market moves, especially in commodities like oil and natural gas.

Q & A

What is the main focus of the price action model number 7?

The main focus of price action model number 7 is the sell-side of the market maker model. It specifically targets sell-side liquidity runs, old lows, and discount PD arrays to anticipate price movements, with an emphasis on market conditions that may lead to significant price declines.

How many stages are there in the universal trade plan for the market maker model?

There are five stages in the universal trade plan: Preparation, Opportunity Discovery, Trade Planning, Trade Execution, and Trade Management.

What does 'discount PD array' refer to in the context of this trading model?

A discount PD array refers to a price level or zone below the current market price where traders expect the price to drop to, based on historical price action, liquidity, and market conditions. This is an area that supports the trader’s bias to sell and target lower liquidity zones.

What is the role of economic calendar events in this model?

Economic calendar events play a critical role in triggering volatility injections. Traders use these events to anticipate price movement and plan trades based on the expected market reactions to high-impact events.

How does the volatility injection affect the market?

Volatility injections, driven by economic calendar events, can cause sudden price movements, which traders exploit to enter trades at more favorable prices. This usually happens around key economic announcements or data releases, triggering market reactions.

What is the difference between a market maker buy model and a market maker sell model?

In a market maker buy model, traders focus on liquidity runs that move the price to a discount PD array before buying. In contrast, a market maker sell model focuses on selling short when the price moves into a premium area, anticipating a decline to a lower price target.

What is the significance of 'Stage 1 and Stage 2 redistribution periods' in this model?

Stage 1 and Stage 2 redistribution periods refer to phases in the market where price consolidates or retraces before making a more significant move. These stages provide opportunities for traders to enter short trades, with Stage 1 representing the first retracement and Stage 2 indicating a stronger move towards the discount PD array.

How does the trade management process work in this model?

Trade management in this model involves placing multiple orders at specific price levels to secure profits progressively. Traders will take partial profits at predefined points (e.g., 20, 40, 60 pips) and reduce risk as the trade moves into profit, adjusting stop-loss levels as the position gains.

What role does position sizing play in this trading strategy?

Position sizing is crucial in managing risk. The strategy uses a formula based on account equity, risk percentage, and stop-loss distance to calculate the optimal position size. The goal is to limit risk to a small percentage of the account on each trade, preventing large losses in case of a negative outcome.

How does the market's behavior during a bearish phase differ from that of a bullish phase in the context of the model?

In a bearish phase, markets typically experience more aggressive, volatile price moves, especially when liquidity is driven lower. In a bullish phase, price moves tend to be more controlled, with price typically retracing to a discount PD array before moving higher. The sell-side liquidity runs tend to be faster and more violent compared to buy-side liquidity runs.