ICT Charter Price Action Model #4 Position Trading

Summary

This video script discusses a price action model for trading, focusing on quarterly shifts and seasonal tendencies in the forex market. It outlines a strategy using the Commitment of Traders (COT) report, SMT divergence, and a hedging program to anticipate market movements. The model is exemplified with the British Pound, highlighting a bearish seasonal tendency in May, and demonstrates how to use COT data, SMT divergence, and liquidity pools for long-term position trading with a potential 5:1 reward-to-risk ratio.

Takeaways

• 📈 The video discusses Price Action Model Number Four, focusing on position trading and the effects of quarterly shifts and seasonal tendencies.
• 📊 The setup for this model combines SMT Divergence with a Commitment of Traders (COT) hedging program, targeting external range liquidity.
• 🔍 The market is analyzed for a specific data range of 20 to 40 or 60 days on the daily chart, looking for old highs and SMT Divergence.
• 📚 The video references content from January 2017 on long-term position trading, highlighting the importance of understanding seasonal tendencies.
• 🌐 The model anticipates a bearish monthly candle, which can be reversed for bullish scenarios, focusing on the monthly range as the primary driver.
• 💹 The British Pound is used as an example, with a focus on the seasonal tendency in the last week of April leading to June lows.
• 📉 The video emphasizes the importance of the COT hedging program, which looks back 6 months to anticipate a bearish scenario based on seasonal tendencies.
• 🔎 The model uses the Futures Contract symbol B6M18 for the British Pound, analyzing the COT line chart to focus on the commercials' net position.
• 🏦 The logic behind the model is based on the bearish seasonal tendency for the pound sterling in the month of May, looking for a COT hedging program to reflect excessive net short holdings by commercial traders.
• 📌 The video demonstrates how to use the last up closed candle's open to place a sell stop order, aiming for a long-term position trade with a potential 5:1 or 8:1 reward-to-risk ratio.

Q & A

What is the focus of the Price Action Model Number Four Position Trading Quarterly Shifts and Seasonal Tendencies?

The focus of the model is to anticipate the effects of a quarterly shift in the majors, overlapping with a seasonal tendency, using a combination of SMT Divergence and a Commitment of Traders hedging program.

What is the significance of the Commitment of Traders (COT) in this model?

The COT is used to analyze the net position of the commercials over the last 6 months, which helps in identifying the market's potential direction based on their net positions.

What is the role of SMT Divergence in this trading model?

SMT Divergence is used to identify potential market reversals. It can be correlated with the USDX or a correlated pair like the Euro, indicating a potential mismatch between the market's price action and the underlying momentum.

How does the model utilize the concept of external range liquidity?

External range liquidity is used to identify key support and resistance levels. The model looks for old highs or lows being taken out, indicating a potential shift in the market's range.

What is the importance of the seasonal tendency in this trading model?

The seasonal tendency is crucial as it provides a context for the expected market behavior during specific times of the year. It helps in anticipating bullish or bearish scenarios based on historical patterns.

How does the model handle bullish scenarios?

In bullish scenarios, the model looks for a data range of 20 to 60 days on the daily chart, targeting a liquidity pool, and expects the commercials to be net bullish or net long in the last 6 months.

What is the strategy for bearish scenarios in this model?

In bearish scenarios, the model anticipates a monthly candle that would be bearish, focusing on the last week of April to the June lows, expecting a net short position by the commercials.

What is the role of the British Pound in this specific example?

The British Pound is used as an example in the script, demonstrating how the model can be applied to anticipate a bearish seasonal tendency in the month of May.

How does the model use the concept of 'turtle soup' in trading?

The term 'turtle soup' is used to describe a scenario where the market is expected to break an old high or low, indicating a potential trend reversal or continuation, which is a key entry point in the model.

What is the significance of the 'monthly range' in the model?

The monthly range is the primary driver in the model, used to anticipate the market's behavior within a month. Traders look for buy or sell opportunities based on the expectation of a bullish or bearish monthly candle.

How does the model incorporate the concept of 'time and price'?

The model blends time and price by considering the duration of the seasonal tendency and the potential market movement within that time frame, helping to determine the optimal entry and exit points.