ICT Mentorship 2022 ep 3 notes

The Internal range liquidity and

market structure shift.
Previous homework:
To go through this particular chart
and look for reasons that provided the
market structure shift and the buy-side liquidity and sell-side liquidity.

(attention over here.This old low and these relative equal

highs, that
old low below that is sell stops
and relative equal highs above that is buy stops)
(Now you could have used this high here;there's nothing
inherently wrong about that but whenever i see
‘equal highs’ like this,and if it's
higher than an ‘old high’ over here i'm going to use that,
so that way there’s a little bit of insight for you for
your study journal)

● The sell side liquidity you can see that the market trades down hits that runs through it
 ●
then rallies all the way back up clearing equal highs. So the buy stops have been taken
here. so at both of these price points here that's the point at which you'll look for or
anticipate a market structure shifts.
● The concept of market structure shifts and emphasizes the distinction between
intraday shifts and prolonged, multi-day movements. It highlights that an intraday
market structure shift, unlike a break in market structure, may not necessarily lead to
prolonged movement. The example of a bearish market structure being intraday broken
to the downside is used to illustrate this point which we see equal highs taken.
● The paragraph emphasizes distinguishing between market structure breaks and intraday
shifts. While a break suggests a more significant change, an intraday shift may lead to
short-term price movements without altering the overall structure. The use of the term
"market structure break" carries a nuanced context in this conversation, indicating a more
impactful development compared to intraday shifts.

In this context, we’re anticipating a bearish market

structure shift when observing a fake run above a certain
level. The key question is ,”how to recognize that this
upward movement is indicative of a bearish shift in market
structure:
This is the algorithmic perspective of a market structure shift intraday.
● In analyzing this chart without incorporating additional concepts like order blocks,
breakers, or supply and demand, the focus is on understanding market structure shifts.
This occurs daily when high-frequency trading algorithms while using market structure
on short time frames like three minutes, two minutes, and even sub-one-minute
intervals. The significance lies in recognizing a short-term high(STH) being taken out
just before a low forms, and this is deemed significant only if the subsequent downward
movement triggers sell stops.
● Up we see the same thing. How do we know there’s liquidity?; there’s buy stops This
emphasizes the importance of disregarding traditional perspectives on trading based on
historical highs and instead encourages a focus on understanding market logic and
 ●

algorithms. They challenge common beliefs and stress the significance of personal
observation and logic for successful trading.
when this run above these relative equal highs happens
right there. You're anticipating a market structure shift
you're not forcing it ,you're not trying to get ahead of
it. I don't think any of you are going to have the skill
set to do that there are ways to know when to sell short
right above that not even wait for the shift in market
structure.
 ● ICT discusses live executions and teaching the concept of utilizing micros, which cost two
dollars per handle or 50 cents per tick. It uses the example of the Nasdaq E-mini chart,
representing twenty dollars per handle with four ticks in each handle. The idea is to trade
these small increments, but some may doubt the feasibility of trading at this level of small
internal swings.
● The main context of this lesson is to encourage you to explore the charts and try to prove
the speaker wrong. The challenge is to understand the lesson, go into your charts, and
perform backtesting to verify if the information holds true. The speaker emphasizes the
importance of self-conviction through personal exploration and mentions their own
experience on BabyPips in 2010, where they urged others to validate the information
independently.

The approach involves adding minimal annotations to a clean chart and encourages simple
logic for analysis.

here's those sell stops. so this little area here shaded in

that's an area where sell stops would be residing below
that 14 600 level on that 15 minute time frame the market
dove into that liquidity.
And you may not know that this is a buy. You don't need to
you anticipate a shift in market structure when the market
rallies above. When does that happen on this candle right
here above see that little light bulb that's when
you're thinking okay now i have a condition in the
marketplace that i might see an opportunity intraday.
let's see if there's further evidence to that short term
high is taken. here we traded above it. it does not need to
close above that, really important, once that candle closes
and next candle opens you're gonna monitor the next candle
and you want to see as soon as this candle closes; does it
create that fair value gap? if it creates a fair value gap
again that's a candle with a high one single pass up. next
candle has a load it doesn't completely overlap all this
that's a fair value real simple.
This is candle is where you would look to potentially trade
at the earliest because now there's a gap. there the market
trades down into that boom takes off here is insight.

● ICT emphasizes the importance of understanding a specific concept related to market

structure and highlights his invention of "order block theory." They claim to have
introduced it in 2010 on BabyPips after initially teaching it one-on-one in 1996. The
speaker asserts ownership of this theory, stating that they are correcting others to ensure
accurate teaching and prevent harm to learners.
see these down closed candles see that’s all one continuous
order block what's it doing it's inside that pool of
liquidity(sell stops).
On the open on that series of down closed candles right
here that's the price level extending out in time boom!!!
so inside this fair value gap this opening price on the
order block that's your buy plus three pips or whatever for
spread and that's what you would use for a limit order
price starts to run where above the highs where by slots
will be here

let's go into a one-minute chart and see how that looks a little bit different but still has the
same characteristics. here's that same price structure just on a one-minute chart the same
logic still there.
swing high taken after liquidity has been traded into this
short-term high it's violated right when this trades down
in here
● (Put this in your notes) high frequency algorithms are hammering. They're just throwing
orders in buy! buy! buy! buy! buy!..That is not herein an important thing that is causing
the market to go higher, it's just volume that's coming in. The algorithms that deliver
price that offer price they're constantly offering the price in the marketplace. That’s
what's beginning to spool and go higher okay and regardless of where you want to trade
at your limit orders they may not get filled where you're trying to buy with a market order.
● You may think you're getting in at 14 662 but by the time your order is executed and
confirmed you're in 14 664. that's slippage, that's negative slippage. if you were trying to
buy it at 14 662 and it filled you at 14 661 that’s positive slippage.
when price starts to rally all this is a default to the
algorithm constantly offering price at a higher price.
see these two up close candles here that's one consecutive
bearish order block the opening price extended out in time.

why is this a good a bearish order block because it has

that gap and it's taken liquidity and there's a market
structure shift there's your high frequency high power,
High probability bearish order block.

● What is an Order Block? it's just change in the state of deliver. it's a change in the state
of delivery. ICT discusses the concept of an order block, emphasizing its significance in
identifying a change in the state of delivery in the market. They point out specific
features, such as gaps, liquidity absorption, and market structure shifts, that make a
bearish order block high probability. An order block is defined as a point where the
market's state of delivery changes, affecting the algorithm's sensitivity. The opening
price of a candle serves as a reference point, and a violation of this price marks the
shift in delivery state. Then the market seeks for buy-side liquidity and sell-side liquidity.
The market staying below that high. it's building up more
interest,that this is what resistance that is engineering
liquidity.
when this runs above it, what you’re learning that's a pool of liquidity for buyers coming in
at a high price. why is that useful because smart money that bought down, that's where they’ll
sell to high seeking buyers.

See that gap right there. that down closed candle right
there that's your order block boom by it right there.
The one-minute chart Is just a real nice delivery here. as
well filling in that very value you got change in the state
of delivery now it's offering sell side what's that mean
it's going to match up sell stops it's going to keep going
below old lows into an imbalance until we get down to a
discount.

● ICT emphasizes the importance of maintaining a clean chart without distractions when
analyzing price movements. ICT prefers not to clutter their charts with annotations or
levels to remain flexible in interpreting market dynamics. By adding annotations later, ICT
shares his internal thought process for students to understand the reasoning behind their
trading decisions. The approach encourages a more fluid response to market changes and
allows for greater adaptability compared to a rigid perspective. I allow myself to be flexible
whereas if you have all these things you're putting on your chart you're only!… only!seeing
your will be done.

How is this useful? One you’re looking for highs and lows
in London open session(02:00 - 05:00) NY morning time. The
Highs and Lows of that session that’s important because the
market is going to sweep below the lows or above the highs.
The New York session(07:00 - 10:00) NY local morning time,
an intraday high and low forming before the Equities open
at 09:30,the right hours of operation are generally 08:30
to 11:00 but can be extended to New York session. I do not
tend to take trades in the afternoon because that hour is
problematic better to look setups preferably (13:30 to
16:00) New York local time afternoon typically coming in
between 14:00 - 15:00 there’s a setup that usually forms
there. Same things for Asian(19:00 - 21:00). That three
times a day looking for key highs and lows.

The passage discusses the significance of specific time sessions for trading, such as the
London, New York, and Asia sessions. It emphasizes the importance of identifying the highs and
lows during these sessions, as market movements may exceed or fall below these levels. The
New York session is highlighted as being from 7 a.m. to 10 a.m. local time, and the Asia session
from 7 p.m. to 9 p.m. local time. The passage also mentions the formation of intraday highs and
lows before the equity market opens at 9:30 a.m. Overall, it explains the focus on specific key
highs and lows during these time frames for trading purposes.
Summary:
Internal range liquidity is looking for short term lows or short-term highs inside a price leg that
we're retracing back into.

liquidity is a short term high/low with stops above or below it or an imbalance in that same
range of price action.

market structure shifts showed you exactly all that's necessary that is all that you require and
the skill set of identifying pools of liquidity that is going to be something you learn rather
quickly just by going through old data and looking at the times of the day.

Homework

The homework assignment to analyze e-mini futures intraday charts for stop hunts that lead to
market structure shifts. Examples with annotations should be logged, focusing on identifying
stop hunts and market structure shifts between 8:30 am and noon local time.
You go back into your charts and you annotate your 15-minute time frame for your buy-side
liquidity pool and your sell-side liquidity pools
and then going down into the three-minute two-minute moment chart.

For every individual day that you're logging

and you're back-testing is just dressing your chart up like i'm showing you here and then
studying it,not just do it say okay i'm done really going to see how price moved and how it
delivered how many pips did it move how long did it move going higher or lower. how much
drawdown did it put on your position if you would have taken one all of those things you want to
annotate that in your chart ; so that way when you go back through your study journal you'll have
many examples that look at
and because you're looking at it and you're seeing it over and over again repetitively,when you
have a period of time where nothing feels like it's working and you feel confused you want to go
back through your study journal and look at these examples because it will encourage you
through periods of time where you just feel like it isn't clicking okay it's why it's important to
have a study journal because you're going to see this stuff is happening every single day.
 ● You’re teaching your brain, i use this analogy a lot, it's like hunting; to know where you're
gonna find a deer if that's what you're going to go out and hunt you need to know how to
track one okay or sit up in this tree stand and wait for it to walk by but usually they go out
and they walk around in the woods and look for tracks would you know what a deer track
looks like before i was shown one i didn't know what it was okay but because i'm showing
you what it looks like that's all this lesson was predominantly focusing on is the actual view
of what it looks like the details what you don't need is anything above and beyond what
i've shown you the only thing you need is what i've shown you here it's simple it's straight
to the point and i'm only talking to that way you understand that this is all that is required.
● if you don't have that mindset this isn't going to be for you because it's going to require
work it's going to take effort and organization and personal responsibility if you don't have
those characteristics you need to develop them if you don't develop them and patients.

Side note: So whenever there's two fair value gaps(for your notes)in case you missed this
the idea is i'm going to let it trade down to that lower one. i'll sacrifice that better entry
and if it trades down there and trades into it and then comes right back up into that first
higher fair value gap i'll enter when it's in there and expect that the lower one won't be re-
traded to.

it's a personal endeavor when you're

speculating if you don't have any faith in it then
obviously you would never put live money
in it.

ICT took a live trade:

so this is the part of trading where it feels scary if you've never traded with live funds and you
just feel like you got to watch that number of how much money you're making and losing that's
the worst thin to do. what i'm watching is the chart; does the chart continuously keep giving me
feedback visually? that it's accumulating and not going lower now it can go one more time back
into that lower fair value gap that's permissible to me i'm willing to endure that i just don't want
to see it overlap that entire thing and go lower because then i'd have to close the trade and
preferably save my stop.

now when you put a trade on you kind of like

give the complete control of everything to the marketplace and you want to just allow the market
t do what it's going to do and not try to
overthink every fluctuation every little minor movement in the price action.