ICT Mentorship Core Content - Month 1 - Fair Valuation

Summary

The video discusses concepts of fair value and fair evaluation from a market maker perspective to understand price action. It covers key ideas like equilibrium as fair value in a trading range, liquidity gaps creating future fair value areas, distributions versus accumulations, conceptualizing discount versus premium areas, and viewing moves from a market efficiency paradigm. The goal is shifting perspective to anticipate institutional order flow, identifying manipulations and areas of value, rather than reacting based on retail assumptions.

Takeaways

• 😀 Fair value is about equilibrium between highs and lows, not what retail traders think is fair
• 😯 Liquidity voids show where price moved quickly with little trading
• 🔎 Current price swing ranges indicate where we are relative to highs/lows
• 📈 Buy at discount/lows, sell at premium/highs for best trade entries
• ⬇️ Down candles before up moves are bullish order blocks signaling support
• ⬆️ Up candles before down moves are bearish order blocks showing resistance
• 😊 Consolidation near equilibrium suggests pending price expansion
• 💡 Breaking recent swing highs signals upside bias; swing lows signal downside bias
• 📉 Deep discounts below equilibrium indicate good areas for buyers/longs to accumulate
• 🔻 Scaling out positions should occur at premium prices/highs to exit fairly

Q & A

What are the two perspectives on fair evaluation discussed in the transcript?

The two perspectives on fair evaluation discussed are: 1) Fair value in regards to equal distance of a high or low, also called equilibrium. 2) Fair value from the perspective of market makers and valuation.

What is a liquidity void and how can you identify it?

A liquidity void is when the market makes a sudden large movement lower or higher with very little wicks or time spent at each price level. It indicates the price was in a hurry to get to another level where it starts trading more efficiently back and forth.

What is the difference between equilibrium and fair value?

Equilibrium refers to the equal distance price point between a defined high and low range. Fair value refers to the perspective of market makers on efficient price levels to accumulate or distribute positions.

Where should buy stops be placed to take advantage of a move upwards?

Buy stops should be placed above recent swing highs, as that is where resting buy orders will be that can push price higher when triggered.

What indicates the strongest move out of a consolidation period?

The hardest move out of consolidation on higher timeframe charts indicates the likely directional bias for the next price swing.

Where is an optimal area for market makers to sell or exit long positions?

An optimal area for market makers to sell or exit long positions is at a premium, after having accumulated positions at a discount.

What is the difference between how market makers and retail traders view price levels?

Market makers view price levels in terms of efficient areas to accumulate or distribute positions. Retail traders tend to chase moves and buy at emotionally-driven premium levels.

How can you anticipate where price is likely heading next?

By understanding key levels like equilibrium, voids, gaps, etc. and identifying where market makers are likely accumulating or distributing, you can anticipate the next probable swing.

Why should you define price action in terms of current trading ranges?

Defining current trading ranges allows you to identify key levels like equity, premium areas, discounted areas, and determine the market maker perspective and bias.

What is the basis for calling projected price targets?

Projected price targets should be based on identifying key fair value levels and gaps where market makers will look to accumulate or distribute positions.