00:00:00

00:00:50

in this video you are going to learn all

the ICT Concepts in a logical order once

and for all so you can stop jumping

between videos on YouTube and most

importantly you are going to learn the

truth behind the concept this video

provides everything you need to know

about the ICT method we are also going

to talk about several wrong ideas that

ICT Traders were led to

believe by watching this course you can

save a lot of time and money by learning

all of this as quickly as possible

possible and also by avoiding many traps

in the ICT Method Keep in mind that this

video is a description of the method not

prescription there's a lot to talk about

so without further Ado let's begin by

listing the ICT Concepts understanding

them and discovering what they actually

are let's begin with the concept of

00:00:55

Swing points this is a very simple idea

a swing High occurs when there is a

00:01:09

lower high to the left and a lower high

to the right of a candlestick in the

same way a swing low occurs when there

is a higher low to the left and a higher

low to the right of a

Candlestick this is just another way of

00:01:14

describing highs and lows in the chart

notice that all important highs and lows

are swing points but not all swing

00:01:21

points are important highs and lows for

example in this chart we can see an

00:01:54

important low right here notice how it

is a swing low there's a higher low to

the left and a higher low to the right

of the candle that forms the low

to the right of the chart we can find an

example of a swing high that doesn't

become an important high if you

investigate this chart you'll find many

examples of Swing points most of which

end up being

unimportant another detail here is that

other Traders have arrived at the same

concept so this is not exclusive to the

ICT method two of them come to mind

00:02:01

immediately lendry pivots and Bill

Williams fractals indicator the lry

pivot is the same idea of Swing points

00:02:16

and it is attributed to a well-known

Trader in the technical analysis

Community called Dave

Landry Landry described the same idea

but he used it as a setup to trade gaps

Bill Williams fractals indicator was

00:02:45

developed in the 90s and is also another

way of objectively defining highs and

lows the fractal indicator basically

shows the highest high or the lowest low

among five candles the only difference

is that LR pivots and the idea of Swing

points consider three candles while

Williams fractals consider five

candles in theory you can use any odd

number of candles to determine highs and

lows like this in this chart you can see

00:03:11

the Williams fractals indicator showing

you important highs and lows notice that

Williams fractals filter some of the

unimportant highs and lows by

considering a higher number of periods

in summary the idea of Swing points is

is not exclusive to the ICT method other

Traders have come up with the same idea

before let's now move on to another

concept that spawns from the idea of

Swing points which is the idea of buy

00:03:20

side and sell-side liquidity in the ICT

method the reason ICT Traders care about

the concept of Swing points is that

Traders usually Place their stop-loss

00:03:45

orders right above highs or right below

lows this is a common practice in

trading traders who go short after a

swing High high will place their

stop-loss order above the swing high

recalling that the stop-loss order of a

short trade is a buy stop order many

Traders also attempt to place buy stop

orders to get in the market right above

high traders who go long after a swing

00:04:02

low will place their stop-loss order

below the swing low recalling that the

stop-loss order of a long trade is a

sell stop order many Traders also

attempt to place sell stop orders to get

in the market right below a low

according to the ICT method the smart

00:04:36

money will maneuver the buy stop orders

above swing highs and the sell stop

orders below swing lows they call orders

above swing highs buy side liquidity and

orders below swing lows sell-side

liquidity the idea that price

continuously takes the so-called buy

side and sell-side liquidity is obvious

there is no other possibility it's not

exactly because price is attracted to

these areas it's because it's the only

way price can move there are a few

clarifications to make here the first

one is the idea of liquidity I see many

00:04:55

ICT Traders throwing the term liquidity

around without actually knowing what it

means liquidity is not a price level

simply put liquidity is the ease with

which a market can be traded without

causing significant changes in price

liquidity is linked to Market depth

00:05:00

which is the number of orders in each

price level the greater the market depth

00:05:12

the greater the liquidity liquidity is

indeed higher right above highs and

right below lows since those are natural

places for stop orders to exist but

Market depth varies significantly in

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other areas of the chart too it's very

important that you understand that

Concepts like liquidity and Market depth

00:05:47

were not invented by ICT these ideas

began to be studied more deeply in

Market micr Structure Theory which is a

field that emerged in the 70s and 80s

although the concept of liquidity is

much older than that if you think

learning ICT concept is difficult try

reading a serious book about Market micr

structure and you'll change your mind

very quickly we'll talk more about this

later another point of confusion here is

the terms buy side and sell side in

00:05:50

finance the terms buy side refers to the

00:06:14

institutions that trade on behalf of

others we're talking about institutions

like hedge funds proprietary trading

firms Pension funds

Sovereign wealth funds and so on the

term saleside however refers to the

institutions that facilitate trading

these are firms like brokerages research

firms and Market making firms by the way

market making is made by prominent

00:06:15
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institutions such as Citadel group

virtual Financial Chain Street Capital

and the list goes on notice that there

isn't just one market maker notice also

that there is competition among market

makers well talk about this later in

Greater detail

too this piece of information alone is

enough for you to understand that the

claim that there is one algorithm behind

price is false we'll take a deep dive

into algorithms later going back to the

idea of buy side and sell-side liquidity

in the ICT method after understanding

these other ideas we can see how the

terms buy side and sell-side liquidity

are used incorrectly by ICT Traders

these concepts are caricatures of the

real thing

which is a lot more complicated than

what ICT Traders believe but again as we

go through the course this is going to

become

clearer let's move on to another ICT

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concept called equal highs and

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lows equal highs and lows are highs or

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lows that sit in the same price level or

at least very close to one another for

example in this chart I marked a bunch

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of lows that happened around the same

level creating a cluster of lows this is

exactly the same idea of support and

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resistance lines which is perhaps the

most well-known idea in technical

analysis this idea of support and

resistance can be traced back to Charles

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da in the late 1800s and early

1900s gain more popularity throughout

the 20th century with the work of

Richard shabaker Robert Edwards and John

mcke it is self-evident that the idea of

equal highs and lows is the same as

support and resistance there is no need

to change the name of one of the most

famous ideas in technical analysis at

this only adds

confusion the next concept we'll talk

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about is called discount and

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premium to understand these we need to

00:08:32

measure the range of a price movement

which is the distance between two Market

extremes we then divide this range in

two halves the upper half is called

premium and the lower half is called

discount the idea here is that long

trades should be open in discounts and

short trades should be open in premium

once again there is absolutely nothing

new about this the idea that a Trader

00:08:59

should get in a long position near a low

and in a short position near a high in

order to have a logical place to put a

stop loss was already being talked about

in the beginning of the 20th century and

not because it's revolutionary it's

because it's the obvious thing to

do the only alternative is to get in the

middle of nowhere in the chart far from

a logical Market

structure the whole point of technical

00:09:20

analysis is to improve the Precision and

timing of entries and exits so again

there is nothing new about

this another problem with this one is

similar to what we observe with the buy

side and sell-side liquidity

concept the misuse of terms that are

found in other areas of Finance for

example a stock is set to be traded at a

00:09:35

discount when it's below fair value and

in premium when it's above fair value

and that involves many other factors

beyond observ in the position of price

in relation to the previous price

movement another example is in forward

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discount or premium in Forex markets in

FX markets the forward exchange rate may

differ from the spot rate due to

interest rate differentials between two

countries judging whether price is in

00:10:03

discount or premium is a lot more

complicated than seeing where it is in

relation to the previous price movement

judging that by looking at the price

chart only is merely a technical

analysis perspective

let's now move on to another ICT concept

called
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Ot Ot stands for optimal trade entry

this is a specific set of retracement

ratios that aim to capture a good long

Trad entry in discount or a good short

trade entry in premium using the ICT

jargon in this illustration you can see

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the OT for a long

trade in this other illustration you can

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see the OT for a short

trade the problem with this is that the

range of ratios Falls almost exactly in

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the same place outlined by two of the

most common Fibonacci ratios the

0.618 and the

0.786 if you think this is a new concept

or a revolutionary one you don't have

basic knowledge of technical analysis in

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this chart we can see a standard

Fibonacci retracement tool the black

lines represent the Fibonacci levels

used since the

1930s in the second image you can see

that I Mark the ratios proposed by the

ict's OT Concept in red it becomes

immediately obvious what the problem is

when you see price reacting to an OT

it's not because ICT said it would it's

partly because Fibonacci ratios have

been part of the technical analysis

culture for almost 100 years so there is

a self-fulfilling prophecy effect

associated with these levels the ratio

in the middle that doesn't fall almost

exactly in any Fibonacci ratio is simply

the midpoint between the two ratios that

do Fibonacci ratios were popularized in

00:11:57

trading by Ralph Nelson Elliott the

creator of the Elliot wave theory during

the

1930s Elliot observed that prices tend

to move in waves or patterns and that

these movements often inine with

Fibonacci

ratios in other words the idea that

price retraces and reacts to specific

Fibonacci ratios is almost 100 years old

if you want to learn more about Elliot

00:12:07

wave in Fibonacci trading I have one

free course for each in my channel I

will leave the links in the

description let's now talk about Market

structure under the ICT method the way

00:12:13

ICT Traders Define an uptrend is by

observing higher highs and higher lows

00:12:20

and the way they Define a downtrend is

by observing lower highs and lower lows

that is indeed the best way to identify

00:12:56

a trend but this definition doesn't come

from ICT this idea originated in the Dow

theory in the late 19 century and early

20th century Charles D also talked about

the way to identify a change in the

trend when a swing low is broken in an

uptrend there's a change in Trend when a

swing high is broken in a downtrend

there is a change in Trend th and other

Market technicians that came later also

talked about different ways that can

happen let's observe the main three

possibilities in the case of an uptrend

transitioning to a
00:13:21

downtrend the first case is what Crow

out and others call a failure swing

price is making higher highs and higher

lows and then it fails to produce a

higher high after this failure price

breaks an established low creating a

lower low the lower high just before the

lower low is logically called failure

swing because it fails to advance the

trend the second case is what da called

00:13:47

a non-failure swing that happens when a

higher high is immediately followed by a

lower low in the case of an uptrend it's

called non-f failure swing simply

because it's the opposite idea of the

failure swing this is exactly what ICT

Traders call Market structure shift but

once again this idea was described by

Charles D Richard wof and others in

great detail so it's more than 100 years

old the third possibility is the

00:14:19

formation of a double top which is when

a flat high is formed before the lower

low it's something in between the

failure swing and the non-failure swing

in a

way a double top is part of the classic

chart patterns that ICT Traders believe

to be used only by unaware retail

traders in terms of relevance failure

swings non-f failure swings and double

tops or bottoms are equal this is the

foundational Market structure laid out

by Charles D if you want to learn more

about the Dow Theory I have a free

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course here in the channel

too we move on now to what ICT Traders

call Advanced Market structure according

00:14:30

to the ICT me method Advanced Market

00:14:39

structure involves the ideas of

short-term highs and lows intermediate

term highs and lows and long-term highs

and lows short-term highs and lows are

00:14:45

basically the same idea of Swing highs

and lows we saw before an intermediate

term higher low is the same idea of the

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short-term higher low but on a larger

scale alluding to the fact that price is

fractal which we'll talk about later so

an intermediate term High happens when

there's a lower short-term High High to

the right and to the left of it an

intermediate term low happens when there

is a higher short-term low to the right

and to the left of

it there's also what IC Traders call a

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rebalanced intermediate term high or low

which is a high or low that forms from a

fair value Gap don't worry if you don't

understand what a fair value Gap is

we're going to talk about it in a

moment a long-term high or low is the

00:15:39

extreme that is formed off of a higher

time frame level level as you can see

this leads to the idea of multi-time

frame analysis and logically the idea

that price is

fractal the idea that price is fractal

00:16:08

is not new once again Charles Dal

already had an intuition about this D

described price in terms of primary

Trends secondary swings and daily

fluctuations in the same way that

ripples happen within waves and waves

happen within Tides Ralph Nelson Elliot

expanded the idea of price fractal with

the L8 wave theory assuming that the 53

wave pattern happens within itself

across multiple

scales interestingly these theories were

00:16:20

developed a few decades before the

concept of fractals was formalized in

mathematics by Mandel br medob br has

one of the greatest Finance books ever

written in my opinion called the

00:16:30

misbehavior of markets a fractal view of

financial turbulence I highly recommend

you read it another important point

Point here is that ICT Traders don't

00:17:02

realize the contradiction in accepting

prices fractal while believing that

price is delivered by an

algorithm the reason price is fractal is

precisely because markets are a

decentralized mechanism where diverse

Market participants with different time

Horizons coexist interact and intersect

in the same playing field so to speak if

markets were delivered by an algorithm

they would not be fractal the idea that

price is fractal leads traders to think

that multi-time frame analysis is a

solution but multitime frame analysis is

00:17:28

a blasting in the curse so to speak

there is no way to clearly establish the

limits of how much information you

should consider in the analysis when you

use multiple time frames and increasing

the amount of information you need to

consider is also a big problem if you

take a look at the name of my channel

you can see that I'm an advocate for the

fractal Market hypothesis and I have

actually studied the science behind it

and I have a couple of courses that deal

00:17:38

with fractal price action Chaos Theory

fractal geometry and nonlinear

Dynamics in summary if you believe price

is fractal while believing is delivered

00:18:09

by an algorithm you have cognitive

dissonance which is when you believe to

contradictory idea simultaneously

without realizing it this leads to

rationalization which is why you end up

needing to trust one person to guide

everything you do I'm sure not all ICT

Traders believe that price is delivered

by an algorithm and I don't know if ICT

claims this in this way but many ICT

Traders do believe that so we need to

address the problem the way to reconcile

these ideas is by realizing that the

00:18:25

market is composed of diverse Market

participants and also diverse types of

algorithms with different purposes as

we'll see later but this debunks this

idea that price is controlled by an

algorithm worse yet an algorithm that

was coded by ICT like some Traders

believe let's move on to what ICT

00:18:34

Traders call a market structure

shift the market structure shift is very

simple to observe a bearish market

00:18:48

structure shift happens when the market

produces a higher high and then a lower

low the idea is that when price breaks a

previous low like that it will retrace

back to give a short trade

opportunity a bullish Market structure

00:19:17

shift happens when the market produces a

lower low and then a higher high the

idea is that when price breaks a

previous high like that it will retrace

back to give a long trade

opportunity this pattern is indeed a

reliable pattern in the markets but it

did not come from ICT as we already saw

the same pattern has received different

names throughout almost a 100 Years of

evolution in Western technical

analysis the first one to talk about

this was Charles da with the idea of

00:19:24

non-failure Swing it's the same pattern

a little later in the 20th century

Richard wof described the same pattern

00:19:41

but using a different logic in

adaptations of the wov method this

pattern is often referred to as jump

across the creek in the case of a

bullish pattern and fall through the ice

in the case of a bearish pattern I have

a free wof trading course in my channel

00:19:47

if you want to get into it this pattern

can also be described under the light of

Elliot like we can see here and rather

00:19:56

annoyingly to ICT Traders some classic

chart patterns also imply the same thing

for example falling and Rising wedges

00:20:18

also imply ICT Traders called a market

structure shift and these patterns were

outlined long before algorithms in

electronic markets existed the trade

entry is identified using a simple trend

line not a fair value Gap OT or order

block if you want to learn the other

classic chart patterns I also have a

00:20:21

free course here in the Channel Jesse

Livermore one of the most famous traders

00:20:40

in Wall Street from 1910 to 1930 had the

same Trend change rules

once in a downtrend the first

penetration of stop losses would signal

the beginning of an uptrend and the

second penetration would confirm the new

uptrend in the second half of the 20th

00:21:02

century a famous engineer and Market

analyst called Arthur marrow pioneered

the study of chart patterns and he

outlined 16 patterns of Market structure

which are called M and W patterns what

ICT Traders Now call a market structure

shift was already outlined in the 16 M&W

patterns the point is that this pattern

00:21:33

is very old and it has received many

different names throughout its history

which mainly occurred during the 20th

century in a time before algorithms and

electronic markets

existed notice that the renaming of

technical analysis Concepts is also not

a new thing it has happened many times

young Traders learning how to trade on

social media are not aware of the great

names of technical analysis for the most

part so when someone tells them these

ideas are new they believe it once again

you can call this pattern whatever you

want what matters is the logic behind it

00:21:41

which was described way before ICT was

born we move on now to what ICT Traders

00:21:48

called a liquidity

grab according to the ICT method a

liquidity grab occurs when price pierces

00:22:10

a previous structure but fails to break

above or below it this is called

liquidity grab because just above a

previous High there are buy stop orders

and just below lows there are sell stop

orders the idea that price will poke a

previous high or low just to go to the

opposite side right after is a very old

idea too its most common name is bull

00:22:27

trap or bear trap bull trap comes from

the idea that buyers think price will go

up after the breakout of a high only to

find out that price will go down be trap

comes from the idea the sellers think

price will go down only to find out that

price will go up this is just another

00:22:35

version of the idea that began with

Richard wov in the early 20th

century another term you hear a lot in

the ICT method is

00:22:39

displacement displacement is a large

00:22:47

move made of one or multiple candles and

that breaks Market structure meaning a

previous high or low so for example here

00:23:05

we can see a large bullish candle

breaking the previous high with some

violence in the ICT method this is

called

displacement in the same way on the

right we can see a large bearish candle

breaking below a previous low with some

violence this is displacement according

to the ICT method this is just a

00:23:15

different name for an increase in

volatility leading to a breakout which

is

self-explanatory we move on now to what

ICT Traders call low and high resistance

00:23:31

liquidity these are Concepts that once

again capitalize on very old ideas of

technical analysis this time from

Charles D which described these patterns

in the late 19th century what ICT

Traders call low resistance liquidity is

00:23:42

what Dow called failure swing in other

words a higher high higher low lower

high lower low in the case of an

uptrend high resistance liquidity is the

00:24:16

idea of non-failure swing in the Dow

Theory which is a higher high followed

by a lower low in the case of an uptrend

transitioning to a

downtrend using the ICT

jargon High Resistance liquidity is the

same of the market structure shift the

point is that this pattern has been

described more than a 100 Years Ago by

Charles D and it has been used

extensively with other names throughout

the 20th century as well these terms

involving liquidity aim to give the

impression that price action follows

liquidity which is incorrect price

00:24:31

doesn't follow liquidity price follows

perceived value liquidity is simply the

ease with which a market can be traded

without causing significant changes in

price

the next concept is what ICT calls power

00:24:36

of three or AMD which basically stands

for accumulation manipulation and

00:26:06

distribution so there are a couple of

problems with this concept the first

problem is obvious to anyone who has

studied the wov method this is exactly

what Richard wov described almost 100

years ago wov proposed that

well-informed buyers would deceptively

induce sellers to the downside just so

that these well informed buyers could

get in and then price would create an

upper movement leaving sellers

frustrated wov called this manipulation

before the uptrend a

spring some people call this a bear trap

because it misleads

sellers in the same way wov proposed

that price would deceptively induce

buyers to the upside just so that more

powerful sellers could get in and then

price would create a downward movement

leaving the buyers

frustrated wov called this manipulation

before the downtrend an up thrust after

distribution some people call this a

bull trap because it misleads

buyers the second problem with the way

ICT described the century old idea is

that according to wof and Charles DAL to

a distribution is a sideways Market not

a trending market so accumulation is the

sideways Market that happens before an

uptrend and a distribution is the

sideways Market that happens before a

downtrend the terms accumul and

distribution are used incorrectly by ICT

Traders let's now talk about what ICT

Traders call turtle soup turtle soup is

00:26:13

yet another concept built on the idea of

manipulation of Market structure the

00:26:20

basic idea is to buy below old lows and

sell above old highs the term turtle

soup was coined by the Traders Larry

00:26:32

Conners and Linda rashki and it was a

strategy published in the book Street

Smart's high probability short-term

Trading

strategies it is a play on the famous

Turtle trading system that was developed

00:26:39

by Richard Dennis and William eart in

the 1980s Turtle Traders were basically

Trend Traders Turtle soap is a

00:26:49

contrarian trading approach that

capitalizes on a scenario where Trend

Traders are misled once again this idea

00:27:44

did not come from ICT it's a very old

idea in technical analysis the Connor

and rasy turtle soup itself can be seen

as the same idea a derived from wov

decades before because capitalizing on

false breakouts was first accomplished

and described by Richard wov in the

early 20th century and later the same

idea received different names the ideas

of spring and up thrust after

distribution in the wov method are

conceptually the same as the turtle soup

even though there might be slight

variations the core concept is the same

you may be starting to notice a pattern

in the ICT concept so far most of them

are based on the Bull and Bear Trap

patterns and the original idea from wov

recall once again that the wov method

was developed in a time when electronic

markets and trading algorithms did not

exist let's now move on to order

00:27:58

blocks along with fair value gaps the

order block is one of the most famous

Concepts in the ICT

method an order block is again a very

simple idea camouflaged as a

sophisticated one it's the old open of

00:28:32

the large candle that sweeps liquidity

and then leads to the break of an old

structure right after for example a

bullish order block is the open of the

large candle that sweeps sside liquidity

and then leads to a break of structure

right after this is a very inefficient

way of saying the open of a large candle

that breaks a low and then leads to the

breakout of a high forming an expanding

pivot non-f failure swing or whatever

you want to call this the theory is that

price will return concerned the order

Block Level in reverse a bearish order

00:29:29

block is the open of the large candle

that sweeps buy side liquidity and then

leads to a break of structure right

after this is again a very inefficient

way of saying the open of a large candle

that breaks a high and then leads to the

breakout of a low forming an expanding

pivot I think it's already clear that

the ICT method talks about fundamental

concepts in technical analysis such as

highs and lows in breakouts but with the

different

language for example highs and lows are

called buy side and sell-side

liquidity false breakouts and breakouts

are called sweep or break of structure

and so

on however we do see price reacting to

the so-called order blocks sometimes and

when new Traders see that happening they

validate whatever it is that ICT uses to

justify the new language for old

ideas to understand this we must

comprehend a few important Concepts in

trading the first idea is that price

doesn't reverse because of one thing

00:29:33

price reversals are always the result of

00:29:57

several factors combined and we cannot

track them all through a price chart no

matter how much you understand the

market you cannot have access to all the

variables that influence price when you

Traders see price reacting to an order

block or a fair value Gap or whatever it

is they immediately validate the idea

while not being aware of the other

potential causes behind the movement in

this chart we have a good example of of

00:31:30

bullish order block under the ICT

terminology we see a relatively large

candle sweeping sell side liquidity and

then a break of structure right after

when price comes back to the order block

it starts a violent movement to the

upside when ICT Traders look at this

they immediately validate the order

block concept simply because that's the

information they have they cannot

understand the other reasons because

they simply don't know them or they have

purposefully decided to ignore them

in reality though there are multiple

reasons why price reversed there some of

these reasons can be known through

technical analysis and some of these

reasons cannot be known at

all recall that according to Game Theory

trading is a game of incomplete

information let's explore some of the

reasons we can know if we erase the ICT

terminology from the chart and plot a

volume profile in that last downward

price movement we'll see that the VP or

volume point of control follows exactly

where the order block is we eras the

volume profile and plot a Fibonacci

retracement in the Upper price movement

we'll see that price reacts to the

78.6% level or simply the last low that

got broken in fact that U did a better

result than the order block another very

interesting example that ICT Traders

like to ignore or are simply not aware

of are the elements of order flow we can

find in the footprint chart for examp

example if we access the footprint chart

00:31:55

of the low where the so-called order

block occurred we'll see that there is a

very interesting order flow activity in

there the most obvious of elements is

the massive bid stacked imbalance we can

find in the candle that ICT Traders

incorrectly called order block a little

bit later we can find a big ask stacked

inbalance as well and these two stacked

imbalances intersect with one another if

we extend these levels to the right

00:33:36

we'll find that price reverses at their

inter section as you can see here by the

way ICT Traders talk about order flow

while just looking at Price which is

incorrect order flow refers to the flow

of orders behind price action and it is

accessed through tools like footprint

charts Market profile volume profile

cumulative Delta and so on price action

is just price action order flow relates

to the volume activity behind price

formation however the real tools of

order flow are not mentioned by ICT

Traders and their origin is explicit to

anyone with basic knowledge over their

flow

trading they begin with Peter style Meer

in the 1980s things like the footprint

chart and the volume profile are logical

extensions of style Meyer's Market

profile method once again ICT traders

who believe ICT is the only reliable

source of information are simply

uneducated about technical analysis they

think price reverses because of order

blocks or fair value gaps while in

reality there's a lot more going on by

the way we can find lots of instances

where order blocks and fair value gaps

don't work just like any other trading

technique which is perfectly normal we

can spend a lot of time here and find

multiple reasons why price reversed

there using several ideas from technical

analysis but my point is that price

doesn't reverse just because of one

thing it reverses because multiple

things intersect some of these reasons

can come from technical analysis and

some can come from completely unknown

sources this is partly why technical

analysis is an imperfect game it's

impossible to differentiate between

00:33:50

coincidence and causality in the charts

we can only speculate about it this is

why there is no trading technique

capable of producing only positive

results we move on now to another

concept called change in state of

00:33:57

delivery according to ICT a change in

state of delivery is simply when price

00:34:43

goes from bearish to bullish or bullish

to bearish just like what happens with

Market structure shift you may ask

what's the difference between The

Changing State of delivery and the

market structure shift then the answer

is that market structure shifts relate

to the high or low that gets broken and

changing state of delivery relates to an

order Block in other words the market

structure shift is the break of

structure while The Changing State of

delivery is the break of the order block

the expression Changing State of

delivery gives the Imp impression that

there is an algorithm delivering price

action which is one of the claims that

ICT Traders make without actually

knowing what they're talking about we'll

talk about this idea in Greater detail

later in the video similarly to the

order block there is a concept called

00:34:47

breaker block the breaker block is a

simple pattern in a bullish breaker

00:35:01

block we observe a low a high a lower

low and then a higher high the breaker

block dwells in the bullish candle or

series of bullish candles within the low

and the high in the bearish breaker

block we observe a high a low a higher

00:35:42

high and a lower low the breaker block

dwells in the bearish candle or series

of bearish candles within the high and

low according to the ICT method price

action will retrace back to the breaker

Block in reverse the reason you can see

price reacting to the so-called breaker

blocks sometimes is that they usually

sit in a small

consolidation if we recall Peter style

Meers auction Market Theory area of

consolidation are areas of price

acceptance and these areas tend to

attract price action notice also the

presence of expanding pivots or

non-failure

swings the ICT method also proposes the

mitigation block the mitigation block is

00:35:46

similar to the breaker block the

00:35:59

difference lies in the market structure

around it in the same way the breaker

block implies a non-failure swing the

mitigation block implies a failure swing

we Rec calling that these ideas were

00:36:06

outlined more than 100 Years Ago by Dao

and

wov the last kind of block if you will

is the propostion block which is a

00:36:12

slightly more complex idea the

propostion block is basically an order

00:37:15

block off of another order Block in the

case of a bullish propostion block first

way identify the order block which is

the open of the bearish candle that

breaks an important level the

confirmation of the order block comes

when price returns and closes above the

open open that bearish candle which

would technically be a change in state

of delivery after that price retraces to

the order Block Level forming another

bearish candle if price then closes

above this bearish candle we have a

propostion block at the open if price

comes back to the propostion block area

a long trade can be framed in my opinion

this jargon is unnecessarily confusing

it's much simpler to observe that a

small area of consolidation recalling

Statum Myers idea that consolidations

are areas of fair value the price might

get attracted to and then repelled from

you can see the propostion block as the

first small consolidation after a

non-failure swing following the

terminology proposed by Charles D let's

now clarify the idea of

00:37:21

liquidity according to the ICT method

liquidity is the price levels where

00:37:47

Trader stops are sitting this is why we

saw those other Concepts called buy side

and sell-side liquid liquidity so

basically any high or low in the chart

can be considered liquidity in the IC

method this is incorrect liquidity is

not a price level liquidity is the ease

with which a market can be traded

without causing significant changes in

price liquidity is directly linked to

the idea of Market depth which is the

00:37:53

number of orders in a price level

imagine a range of prices above the

current price with progressively deeper

00:38:20

levels as price goes up in the price

levels immediately above the current

price where the market depth is shallow

it doesn't require a lot of aggression

from buyers to make price rise so

there's less

liquidity as buyers move higher in

Market depth increases buyer aggression

must increase in order to produce the

same movement in price meaning that

liquidity is greater it is true that

liquidity is higher right above highs

00:38:40

and R below lows but not exclusively

Market depth and therefore liquidity

varies across all price levels and that

cannot be assessed through price action

Reading Alone we need real order flow

tools like the footprint chart Market

profile and volume profile ICT Traders

have the incorrect notion that price

00:38:48

follows liquidity in reality price

follows the perception of value price is

the objective measurement of a market

00:39:24

it's a number value is the subjective

measurement of a market it's a

perception of whether price is low or

high the discrepancy between price and

value is what drives price not liquidity

different Market participants will have

different perceptions of price this is

why at any given moment what one market

participant perceives to be a good long

opportunity can be perceived as a good

short Opportunity by another Market

participant especially when we are

talking about Market participants in

different time Horizons let's move on

now to fair value gaps the fair value

00:39:38

Gap is perhaps apps the most famous and

most used ICT Concept in combination

with order blocks these are the ones

that draw the most attention the fair

value Gap is a very simple idea just

00:40:06

like all the other ICT Concepts a

bullish fair value Gap is basically a

three candle pattern where there is a

gap between the upper shadow of the

first candle and the lower shadow of the

third candle in a bearish fair value Gap

the Gap exists between the lower shadow

of the first candle and the upper shadow

of the third candle

the ICT method proposes that price often

returns to this Gap area and reverses

there are two keys to understand where

00:40:10

the idea of fair value gaps come from

Peter style Meers auction market theory

00:40:16

and the idea that price is fractal the

auction market theory was developed by a

00:40:32

cbot Trader called Peter styom Myers in

the

1980s he's also credited with the

development of the market profile

approach which is essential for the

understanding of real order flow

analysis if you want to understand a

little bit more about order flow

analysis I have a free course here in

00:40:38

the channel as well stle Meers action

market theory proposes that the

00:41:27

financial markets work as an auction

constantly seeking to find fair value

out of this Theory two basic ideas

emerge when price is going sideways it

is in a state of balance acceptance or

fair value the market ranges because

buyers and sellers relatively agree

about the fair value of the market in

that moment when price trends it is in a

state of imbalance rejection or unfair

value it is also said that price is in

price Discovery when it Trends that's

because buyers and sellers disagree

about the fair value of the market and

price is now trying to find a new area

where Market players agree generally

speaking we tend to observe areas of

fair and unfair value with broad price

movements and this is where the concept

00:41:48

of fractals enters the scene a fractal

is a pattern that repeats inside itself

and it is self-evident that price action

behaves like that in any time frame you

choose you can see the mechanics of

higher and lower time frames without

necessarily switching between time

frames the Practical implication of this

is that just like we can see highs and

00:42:06

lows in Broad price movements we can see

highs and lows in the Candlestick level

for example on the left we can see areas

of consolidation and areas of training

movements in a broader scale but the

same concept can be seen embedded in

candlesticks like so the fair value Gap

is nothing more than the empty space

00:42:18

between two consolidations in the

Candlestick level which represents the

empty space between two consolidations

between broad price movements in a lower

time frame for example in this chart we

00:42:36

have a bearish fair value Gap if we look

at the Shadows of the candlesticks

involved we'll see how they form small

consolidations highlighted in yellow

in this time frame the consolidations

are small but if we switch to a lower

time frame we will see them as broad

price movement if we move to the

00:42:48

two-minute time frame we can see that

indeed there is a training movement

between two

consolidations that's what a fair value

Gap is notice that the term fair value

Gap means the space between two fair

00:43:13

value areas the point is that this

identification of fair and unfair value

areas in price is an idea found in the

auction market theory and in the market

profile approach developed by Peter

Styer in the80s it has nothing to do

with the algorithm that ICT Traders keep

talking about there are a few problems

with this fair value Gap idea though

fair value gaps just like any other

00:43:43

technique fail often the reason is

because diverse Market participants from

multiple time frames coexist interact

and intersect in the final analysis it's

impossible to differentiate between

coincidence and causality in the price

charts we can know some of the reasons

price reverses but not all of them this

is why trading is

speculation this is also why the best

that can be done with technical analysis

is the integration of techniques for

example in this chart we can see many

00:43:56

fair value gaps doing a very poor job

this doesn't mean this technique doesn't

have value it means it also fails like

any other it's common for beginner

traders to attribute price events to one

00:44:04

single variable while being unaware of

the other variables involved for example

in this image we can see a wide fair

value Gap and the Traders looking at it

00:44:32

will attribute the brief price reversal

to it however minimal examination allow

us to see that this is not the only

variable involved in the reversal right

before the fair value Gap we can see a

minor high that also contributed in the

footprint chart we can see a stacked

imbalance that pinpoints the reversal

much more accurately than the PR value

gap which is too wide in this other

chart we can see a linear regression

00:45:03

Channel also pointing to the reversal

you get the idea there are many reasons

why price reversed in there some of

which have to do with technical analysis

some of which have not fundamental

factors news and Etc will of course

impact price too like it was stated

before fair value gaps are born of the

intersection between auction market

theory and the idea that markets are

fractal and you see many ICT Traders

accepting price is fractal however this

goes in direct collision with the idea

00:45:46

that there is one algorithm behind price

action the fractal nature of price is a

result from multiple Market participants

human and algorithmic coexisting

interacting and intersecting in multiple

time Horizons but in the same playing

field so to speak in other words the

acceptance that price is fractal means

it's impossible for the market to be

controlled by one algorithm only

price can be fractal while being

impacted by multiple types of algorithms

but that destroys this illusion of top-

down control that I Traders believe fair

value gaps are often too wide to provide

meaningful reversal zones or levels this

problem can be solved by looking at real

order flow tools like the footprint

00:46:25

chart which have nothing to do with

ICT ICT Traders talk about reading order

Flow by looking at candles only which is

misleading order flow relates to to the

order placement matching and execution

behind candles so to speak and it can

only be accessed by tools like the

footprint chart order book depth of

Market Market profile volume profile

cumulative volume Delta and so on none

of which have anything to do with ICT

all these tools are logical extensions

of the work done by Peter styom Meer

with the auction market theory and the

market profile

approach for example here we see price

00:46:51

reacting to a wide fair value Gap G

which is not useful at all because it's

too wide if we access the footprint

chart which is a real order flow tool we

will see that the largest stacked

imbalance in that wide range candle

provides a much more accurate zone of

reversal in comparison to the wide fair

value Gap this is of course the very tip

of the iceberg of orderflow analysis you

can learn the basics in my free course

here on
00:46:55

YouTube moving on to the next idea we

have what is called smt Divergence which

00:47:03

stands for smart money trading

Divergence this concept is related to

the idea that when correlated markets

00:47:40

Exhibit price Divergence an opportunity

might be in place correlated markets

will often move in synchrony so when

Market a is producing higher highs and

higher lows for example Market B will

also produce higher highs and higher

lows the same is true for downtrends of

course Divergence happens when this

relationship momentarily ceases to exist

for example in two positively correlated

markets if Market a produces a higher

high while Market B produces a lower

high there is Divergence between the two

which in this case means a bearish

reversal in this chart we can see a very

00:48:11

clear example of this on top we have the

1hour S&P 500 futures and on the bottom

we have the 1hour NASDAQ futures these

two markets are positively correlated

the black line shows a moment where the

S&P produced a lower high while the

NASDAQ is producing a higher high both

markets were going up so the Divergence

ended up signaling a bearish reversal as

far as smt Divergence is concerned there

are a couple of

problems one this idea doesn't come from

00:48:29

ICT and two ICT Traders assume that

markets are correlated because there is

an algorithm behind price movement let's

examine these two problems more closely

the idea of Divergence between markets

is part of something called inter market

analysis which was popularized by John

00:48:55

Murphy in the

1980s John Murphy is a former technical

analyst for CNBC and has over 40 years

of market experience in 1992 he was

given the first award for outstanding

contribution to Global technical

analysis by the International Federation

of technical analysts and was the

recipient of the 2002 Market technicians

association annual

award Murphy's most famous book is

00:49:06

called intermarket analys is profiting

from Global Market relationships a fair

assessment of intermarket analysis

requires a separate moment the second

problem is that ICT Traders assume that

00:49:13

markets are correlated because there is

an algorithm behind price movement this

is wrong there are several reasons why

00:49:19

markets are correlated several markets

share main drivers like interest rates

00:49:42

inflation and GDP Global Market

sentiment makes Traders and investors

move collectively between

markets global trade links economies and

markets together markets are not

isolated Islands geopolitical events

will impact multiple markets

simultaneously there are several

examples of how markets are correlated

00:51:33

let's observe a few Australia is a major

exporter of iron ore and other

Commodities the azi often moves in

tendem with global commodity prices

especially iron ore as export revenues

directly impact the economy and currency

Norway is a significant oil exporter and

its currency the Norwegian Crone often

strengthens with Rising oil prices and

weakens with falling prices the yen is

often inversely correlated with global

equities during risk off periods

investors flock to the Yen as a safe

haven currency and it tends to

appreciate the Swiss frank often

correlates with gold prices as both are

considered safe haven assets during

periods of economic uncertainty the US

dollar typically moves inversely to gold

prices when the dollar becomes stronger

gold becomes more expensive for foreign

buyers reducing demand and vice versa

Brazil is a leading Global exporter of

soybeans the Brazilian real often shows

correlation with soybean prices due to

the importance of agricultural exports

to the Brazilian economy as one of the

world's largest energy exporters the

Russian Rubble frequently correlates

with global oil and natural gas

prices New Zealand's economy relies

heavily on Dairy exports the New Zealand

dollar often tracks Global dairy

prices South Africa is a leading

producer of gold and platinum so the

South African rent often correlates with

the prices of these

Metals the Euro sometimes correlates

with German Bond Utes as Germany's

economy is a dominant driver of the Euro

Zone's overall economic

Outlook markets also impact one another

on a cascading effect for example a

00:52:40

sharp sell off in the S&P 500 occurs due

to negative news such as weak economic

data or a geopolitical event this

triggers risk of sentiment among

investors as equities decline investors

seek safer assets like US Treasury bonds

this increases demand for bonds driving

their prices up and Ys now bond prices

and udes move inversely falling udes on

us treasuries reduced the attractiveness

of the US dollar as an interest earning

currency this weakens the US dollar

which influences Forex markets and

potentially boosts the value of safe

heaven currencies like the Japanese Yen

or Swiss frank a weaker dollar can drive

up the prices of dollar denominated

Commodities like gold and oil adding

further feedback loops to other markets

the initial sell off in the S&P 500 can

spread to other Equity indices like the

NASDAQ as investor sentiment moves

across the board leading to Global

Market declines economies and therefore

financial markets are deeply

00:52:59

interconnected and interdependent which

makes it impossible for Price action to

be delivered by one algorithm retail

Traders have the problem of being

alienated to price charts only which

causes them to fail to realize the true

complexity of financial markets

let's now talk about the concept of kill

00:53:02

zones kill zones are specific time

00:53:17

periods within the trading day that have

higher volatility and that makes it

easier to catch certain kinds of Trades

I will not bore you with whatever

arbitrary periods ICT Traders believed

are the best the bottom line about this

is that the hours of the day with the

00:53:27

highest volatility are the hours where

trading sessions

overlap in the Forex markets for example

we have the four main trading sessions

Sydney Tokyo London and New York the

00:54:01

training hours when these sessions

overlap have the highest volatility

simply because there are more Traders

from different regions actively trading

in these same markets there are two

major overlaps Sydney Tokyo overlap and

the London New York overlap the latter

being the most powerful one this happens

simply because there are more Traders

engaged in the market when sessions

overlap here's an illustration of the

Forex sessions in their overlap in

GMT let's now talk about another theory

00:54:07

involved in the ICT method called

quarterly Theory quarterly Theory

suggests that time must be divided into

00:54:15

quarters in order to enhance the

Precision and remove ambiguity from ICT

concept one year is divided into

00:54:44

quarters with three months each each

month is divided into four weeks each

week is divided into four days plus

Friday which has its own function this

is already weird Let's ignore it each

day is divided into quarters 6 hours

each each quarter is divided into

quarters 90 minutes each the idea is

that each quarter dictates what the next

one will do the start of the second

quarter in each cycle represents what is

00:55:29

called a true open which serves as a

Time filter for what is called Judah

swing which we'll talk about in a moment

the Frameworks for the quarterly Theory

follow the AMD or power R3 structure

which is a bit misleading in its

nomenclature in this illustration you

can see an example of how the quarterly

Theory might help in trading sessions

the open of the second quarter marks the

true open which can be used to frame a

trade after a judo swing which is once

again the old manipulation maneuver

outlined by

wov this is just one example of how this

might play out I'm not going to explore

this further because life is too short

if we want to get serious about Cycles

it's certainly possible the idea that

00:55:42

the financial markets can be narrowed

down to quarterly Cycles is incomplete

in reality there are different kinds of

Cycles from various time Horizons

impacting the financial markets there

are major business cycles that impact

00:55:58

the market in the long term such as the

kraf wave the juggler cycle the kitchen

cycle the Shan Peter cycle different

markets are affected by different types

of cycles and markets are interconnected

for example commodity markets are

00:56:11

affected by agricultural Cycles Equity

markets are affected by earning cycles

and Forex markets are affected by

interest rate Cycles in technical

analysis the major reference in terms of

00:56:28

cycle analysis is JM Hurst which is

considered to be the father of psycho

analysis which emerged in the 60s and70s

the sem of work can be found in the book

called The Profit magic of stock

transaction timing

HST psycho analysis follows several

00:57:00

principles such as harmonicity

synchronicity nominal variation and

commonality I will eventually post a

psycho analysis course here in the

channel we once again see this idea that

the financial markets are a

decentralized amalgamation of thousands

of variables coexisting interacting and

intersecting which is precisely the

opposite of the algorithmic market

hypothesis proposed by the ICT method in

terms of the quarterly Theory it's

obvious that the cycle analysis of

financial markets is more complicated

00:57:07

than simply dividing things by

four let's now talk about what are

called daily profile

00:57:23

formations ICT talks about the daily

profile formations such as London

reversal New York continuation Seek and

Destroy New York manipulation and so on

in order to understand how ICT talks

about this you need to understand

00:57:42

Candlestick quantization meaning how to

compile a series of candles into one

single candle there's a useful indicator

in trading view for this called HTF

power of

three let's observe a brief summary of

the profiles outlined in the ICT

method London reversal the London

00:57:53

reversal simply means that the market

will reverse at the beginning of the

London session in New York session will

continue in this

direction New York reversal in the New

00:58:03

York reversal the market will reverse

Direction outline in the London session

as soon as New York

opens New York

00:58:17

manipulation the New York manipulation

is when London consolidates and then the

beginning of the New York session

manipulates and reverses once again

recalling that this pattern was outlined

by

wov SE and destroy a Seck and Destroy

00:58:34

profile is basically a sideways Market

where multiple manipulations occur on

both sides without any clear trend

Direction this idea of profiling the

trading day is not new the market

profile approach developed by Peter

stomer in the 1980s outlined several

00:58:48

daily formations based on the

distribution of time at Price this

notion has been developed later by James

Dalton stle Meers Market profile method

outlines six main daily profiles based

00:59:32

on the distribution of time at Price

meaning how much time price spends

across different price levels the non-

trend day the normal day the normal

variation day the trend day the double

distribution day in the neutral

day the careful study of these market

profiles goes outside the scope of this

video I just want to show you that the

study of daily profiles began with Peter

stle you can see the distribution of

time at price in trading view by

choosing the chart type called time

price opportunity also referred to as

TPO this is the chart type used if you

want to follow the market profile

approach we move on now to the concept

called daily
00:59:50

bias the daily bias is one of the most

famous ICT Concepts and it's also a very

simple idea to determine the bias for

the next day the trader must observe the

position of the close of the current

candle in relation to the previous

candle range let's observe the

01:00:10

possibilities of the bullish daily bias

if price closes above the previous day's

range we have a bullish bias for the

next day if price pierces the previous

day's low without closing below it we

also have a bullish bias for the next

day that aims to reach at least the

current day's high price closes below

01:00:25

the previous day's range we have a

bearish bias for the next day price

preces the previous day's range high

without closing above it we also have a

bearish bias for the next day that aims

to reach at least the current day's low

price doesn't react to the previous days

01:00:56

extremes there is a neutral

bias if you really want to go deeper

into the knowledge of what the bias is

for the next day or week you need to use

something like intraday seasonal. comom

which is based on an Insight Larry

Williams had in the '90s

intraday seals.com shows the cumulative

sum of intra-week average variances and

that helps to determine bias based

trading

strategies two famous Traders claim to

use this website to trade

01:00:57

Larry Williams like already mentioned

01:01:10

and Andrea anger a Trader who won the

World Trading Championship four times

with systematic training strategies so

obviously this is worth looking

into the next concept is called internal

01:01:21

and external liquidity the concepts of

internal and external liquidity sound

complicated but they are not internal

liquidity is just a fair value Gap

01:01:33

external liquidity is an old high or low

or buy side sell-side liquidity levels

under the ICT jargon which are just

different name for highs and lows

According to some ICT Traders price

01:02:13

action only does two things it

oscillates from internal to external

liquidity so if price reacts to a fair

value Gap it goes to a buy side

sell-side liquidity level or old high or

low and then it moves to a fair value

Gap again in an endless cycle this

assumes that there is no diversity of

maret players and time Horizons it's

self-evident that things are much more

complicated than that in reality price

action and Order flow are the result of

diverse Market players of different time

Horizons coexisting interacting and

intersecting so the road laid out by the

real Market is a much bumpier road so to

speak for example in this image we see

01:02:34

price going from sell-side liquidity to

buy side liquidity without reacting at

the fair value Gap in between which

renders this concept as

Incorrect and once again liquidity is

not price level is the ease with which a

market can be traded without causing

significant changes in price liquidity

varies across price levels in a way that

01:02:42

is not perfectly correlated with the

geometry of candlesticks so to

speak let's now talk about the Box setup

01:02:47

this is once again a setup based on the

old wof manipulation idea the concept

01:03:07

here is that price will manipulate an

extreme and then go back to the level

that got manipulated to give an entry

opportunity

the manipulation maneuver in the wov

method is called Spring on the downside

and up thrust after Distribution on the

upside let's now move on to another

01:03:12

famous idea called the Silver Bullet in

the ICT method the Silver Bullet refers

01:03:22

to a specific time of the trading day

where a manipulation maneuver will occur

followed by a movement on the other

direction using EST the manipulation is

01:03:50

set up using the high and low of the N

a.m hourly candle then on a lower time

frame like the 5 minute or 1 minute the

trader will look for the manipulation

during the Silver Bullet window which is

from 10: a.m. to 11:00 a.m. the trader

can frame the trade using the other

Concepts such as order blocks fair value

gaps and so on and use the other side of

the range as a

Target needless to say at this point

this is once again the old wof

01:04:03

manipulation pattern the only difference

is that you will be looking for it in

specific time of day which is not really

helpful because this pattern happens all

the time we move on now to the concept

01:04:10

of the Balan price range the Balan price

range or BPR for shorts is basically the

intersection between two opposing fair

01:04:24

value gaps when the market is going fast

in One Direction and reverses sharply

let's observe an example where this idea

works and then investigated a little

further on the 1H hour S&P we can see

price transitioning from an aggressive

01:06:11

movement down to an aggressive movement

up this is called a vbottom by the way

which is a classic chart pattern that

ICT Traders believe to be used only by

retail

Traders on the way down we can see a

bearish fair value Gap and on the way up

a bullish one and we can also see how

they intersect later we do see price

returning to the intersection or what

ICT Traders call the balance price range

and then going to the upside we already

talked about fair value gaps and the

truth behind them fair value gaps refer

to orderflow Concepts without actually

using the order flow tools which can be

a bit

misleading if we move on to a real order

flow tool like the footprint which is

not used by ICT Traders we'll see the

actual reason why price reversed there

or at least one of the main reasons

notice that in the candle that forms the

low of the V bottom we can find two

stacked

imbalances price reverses as soon as it

encounters the first stacked imbalance

in the as column and it does so with a

much greater Precision in comparison to

the fair value gaps forming the Balan

price range this is one of the reasons

you cannot really read order flow

through price action alone like ICT

Traders think you need order tools to

assess what's happening behind price

action and all of these tools have a

well-known origin which is the auction

market theory and the market profile

approach both of which were developed by

Peter styom in the

1980s reading order flow with actual

order flow tools also increases the

number and precision of opportunities

you see in the market ict's balance

price range is easier to see but this

ease has a high opportunity

cost let's now talk about what ICT

01:06:22

Traders referred to as

inducement you probably guessed it at

this point this is yet another variation

of the wov manipulation pattern the

definition of inducement is a move that

01:06:33

induces buyers or sellers into the

market but only as a form to increase

liquidity for the opposite and more

powerful market player exactly the same

idea outlined by
01:07:13

wov for example in an uptrend we see

price forming a resistance and then

sellers assume price will break to the

downside but price ends up forming a be

trap and continues up in the same way in

a downtrend we see price forming a

support and then buyers assume price

will break to the upside but price ends

up forming a bull trap and continues

down you can see this idea of inducement

as a bull or bear trap that happens in

the middle of the trend rather than the

beginning or end it's simply easier to

assume that a w of bull bear trap

pattern can occur at any point in the

trend we move on now to another concept

01:07:22

that confuses the real definitions of

order flow which is the volume

imbalance the ICT method refers to a

volume imbalance as a gap between candle

01:07:46

bodies while there is an overlap between

shadows in technical analysis this is

just another form of Gap the real volume

imbalance can only be accessed using

order flow tools like the footprint

chart for

example these imbalances are not visible

using candles only and they can happen

anywhere within the candle

range for example here we have a

01:08:23

footprint chart which ICT Traders do not

mention this shows the bid and ask

imbalances that occurred within

candlesticks among other things

here we have what is called a bid

stacked inbalance which is later

respected as resistance notice that it

happens in a non-obvious area of the

Candlestick the point here is that

volume imbalances are not visible

through candle bodies and shadows

only once again if you're interested in

learning more about the footprint chart

and real order flow analysis I have a

free course here in the

channel the next concept we'll talk

01:08:35

about is called candle range Theory

recently ICT Traders have been talking

about this idea as if it is new and once

again it sounds complicated but it's

simple in the bearish version the

01:08:49

pattern begins with a bullish candle

that forms the

range the next candle pierces the high

of the range but closes below it the

third candle succeeds to close below the

range this is the micro version of the

01:09:15

same pattern we keep seeing in the rest

of the ICT method that was originally

outlined by Richard wov

in other words the candle range Theory

pattern is a fractal version of a bull

trap followed by a fall through the ice

if we're going to use wov

jargon once again we see the acceptance

that price is fractal which goes in

contradiction with the idea of

algorithmic price delivery some ICT

Traders
01:09:20

believe let's now move on to a more

difficult and necessary topic related to

Market micr structure a lot of the

01:09:44

confusion revolving the ICT training

phenomenon occurs because of a lack of

understanding about the role of market

makers in training algorithms it's

important that you know that learning

this is not an easy task this knowledge

can be found in the study of Market micr

structure which is a difficult and

comprehensive subject some ICT Traders

say and I quote ICT coded the algorithm

01:09:58

that delivers price

action I don't know if ICT actually said

those words but I do see a lot of ICT

Traders saying this so it's worth

clarifying it there's nothing like

01:10:23

access to deeper knowledge to understand

the problem with this a lot of people

have an intuition that this is wrong but

being able to explain why is a different

story there are several things wrong

with the statement to understand this we

need to be aware of the different types

of algorithms that exist in the

financial markets their function and how

they coexist and interact let's

differentiate them imagine a market like

01:10:44

the S&P futures for example Le now

imagine all the people who buy and sell

in this market at the same time there

are multiple types of Market players

with different intentions different

strategies different levels of capital

in different Geographic locations and

with different time Horizons in view but

all of these Market participants coexist

01:11:12

and interact in the same playing field

so to speak the result is an enormous

number of buy and sell orders arriving

in real time at the exchange it's

obvious that all this information must

be organized in some way so you can

comfortably see live price action unfold

in your computer screen at home and it's

also obvious that this organization task

is too complicated for humans to

accomplish we need algorithms the

algorithm that does that is called

01:11:27

matching engine algorithm it encompasses

all the buy and sell orders in real time

consolidates it and displays it as

realtime price quotes matching engine

algorithms exist at the level of the

exchange an exchange like the CME for

01:11:37

example codes its matching engine

algorithm internally with the oversight

of the

cftc there are several kinds of matching

01:11:39

engine algorithms in different exchanges

01:11:55

we'll use different types of algorithms

depending on the

situation in the slide you can see the

different types of matching engine

algorithms for you to see a price chart

which shows the historical prices

usually in form of open high low and

closed data according according to the

01:12:48

time frame of your choice another

algorithm is needed this other algorithm

is called Data aggregation algorithm and

it exists at the level of financial

platforms and charting software notice

that these two types of algorithms don't

react to past price information only

realtime order flow these two things

form the backbone of what retail Traders

see on a price chart these are the the

algorithms that allow you to see price

action on your screen to sum this up

when you look at real time price setion

the real-time changes in price are being

compiled by the matching engine

algorithm at the exchange and this data

is being compiled by a data aggregation

algorithm over time meaning that it is

being transformed into candles or Bars

by the charting platform you use these

are the algorithms involved in the

organization and display of price

action however there are other types of

01:13:02

algorithms that can and will alter price

action rather than just display it

meaning the algorithms in involved in

trading let's begin with the simpler

ones and then invol with the more

complex simple trading

01:13:43

algorithms there are basically two types

of simple trading algorithms that even

retail Traders can Implement Trend

following and Min reversion these are

perhaps the simplest types of trading

algorithms they are designed to automate

some sort of systematic trading strategy

based on technical indicators or Price

action patterns Trend following

algorithms try to capture broader Trends

and mean reversion algorithms aim to

profit from the expectation that price

always returns to a historical average

in other words these algorithms are

speculative they try to anticipate price

direction using simplistic

rules Arbitrage
01:13:53

algorithms simple algorithms like Trend

following and mean reversion capitalize

on the directionality of price Arbitrage

algorithms aim to exploit some sort of

01:14:30

relation reltionship between markets

there are several kinds of Arbitrage

algorithms given the vast and complex

Market landscape we have now aay a few

of the most common ones are statistical

Arbitrage triangular Arbitrage spatial

Arbitrage options Arbitrage and index

Arbitrage even though the goal is to

profit Arbitrage algorithms do this from

a completely different perspective

compared to simple Trend following and

mean reversion

algorithms speculation is is about

Market Direction Arbitrage is about

Market

relationship machine learning and

01:14:59

artificial intelligence

algorithms these are used in trading to

analyze large data sets in the attempt

to identify subtle Market

inefficiencies machine learning and AI

models are more sophisticated in the

sense that they can find nonlinear

relationships in data they can

self-improve and they can adapt more

efficiently in comparison to algorithms

that simply automate system atic trading

strategies for

example execution
01:15:02

algorithms these algorithms are designed

01:15:35

to optimize the process of buying and

selling in financial markets

institutions use execution algorithms to

minimize the market impact of large

orders for example if an order is too

large it can disrupt the order flow or

Draw the attention to specific price

levels the most common execution

algorithms are based on VAP twap or

implementation shortfall

once again each type of algorithm is its

own Rabbit Hole in this video we are

just getting to know the very tip of the

iceberg event driven

01:16:02

algorithms event-driven algorithms are

designed to react to specific events or

occurrences in the market such as news

releases earnings announcements

macroeconomic data geopolitical

developments or corporate actions these

algorithms process real-time information

to capitalize on price movements

triggered by such events in a much

quicker way than the human beings

can sentiment analysis

01:16:38

algorithms sentiment analysis algorithms

often use natural language processing as

the core technique natural language

processing is a branch of artificial

intelligence that enables machines to

understand human language in training

NLP is used to process unstructured data

such as news articles and social media

posts to extract action insights that

inform trading trading decisions meaning

to extract the overall Market sentiment

these algorithms provide a speed

Advantage because they can scan news

much quicker than

humans liquidity seeking

01:17:05

algorithms liquidity seeking algorithms

are designed to execute trades by

finding and interacting with areas of

high liquidity while minimizing Market

impact and execution costs it's a type

of execution

algorithm these algorithms are specially

useful for large orders or in markets

where liquidity is fragmented across

multiple venues or order types the

liquidity seeking algorithms fragment

orders to avoid exposure spread the

01:17:26

execution across multiple venues they

can use a combination of dark in lit po

to optimize execution and also Advanced

order types such as Iceberg orders when

IC Traders hear the expression liquidity

seeking algorithm a light bulb

immediately lights up in their heads the

activity of these algorithms is much

01:17:49

more complicated than what you were

alled to believe and they cannot be

tracked through simple price charts even

with order flow tools such as order book

in the depth of Market the liquidity

seeking algorithms can easily obfuscate

the real intention of Market players I

talked a little bit more about that in

my orderflow course here on

YouTube Market making

01:18:12

algorithms Market making algorithms

provide liquidity while profiting from

the the bid ask

spread they have an important role in

the stability of financial markets due

to the fact that buyers and sellers are

always preempting one another and that

can cause problems of execution

volatility and liquidity depending on

the market

condition let's clarify how market

01:18:23

makers operate recalling that in Market

micr structure the expression Market

maker has a different connotation than

in technical analysis you can think of

market makers as a mediator between

01:18:30

buyers and sellers the intentions of

buyers and sellers are determined by

supply and demand however buyers and

01:18:43

sellers also preempt one another and

that can create issues of liquidity

volatility and execution to understand

why let's imagine a very simple

01:19:48

exercise imagine the process where

buyers and sellers preempt one another

by adjusting Supply a man according to

the opposite players

intentions the buyer says how much is it

and the seller responds

150 buyer says okay I'll take it seller

responds it's 160 the buyer then says

what you just said

150 the seller responds that was before

I knew you wanted it the buyer says you

cannot do that and the seller responds

it's my stuff the buyer says but I need

a 100 of those the seller reacts 100

it's 170 a piece the buyer says this is

insane and the seller finally reacts is

the law of supply and demand buddy you

want it or not the reaction of Market

participants to the intention of other

Market participants creates problems of

liquidity volatility and

execution this preemption problem means

that there is always a spread between

the highest price that buyers are

01:20:24

willing to buy and the lowest price that

sellers are willing to sell and this

situation gets worse depending on the

market

scenario market makers help reduce the

spread by quoting bid and ask prices

that are narrower than the spread

especially in situations where the

spread might get too wide it's important

to know that market makers only reduce

the spread so they can make a profit

with the remaining difference they don't

eliminate the spread the market Maker's

profit is a compensation for their

liquidity provision role retail Traders

think that there is only one market

01:20:49

maker but that that's not true there are

multiple market makers and they compete

with one another this further decreases

the bid ask spread and provides an even

more efficient and liquid Market

environment for example imagine that a

second Market maker quotes bid it and

ask prices that are narrower than the

First Market maker the narrower spread

will win the order flow so to speak in

summary market makers will compete with

01:21:34

one another the greater the competition

the narrower the spread the greater the

liquidity and the more stable the market

is in unusual scenarios in a market

scenario where Supply and amate get too

imbalanced for whatever reason the bid

ask spread will get too wide without the

presence of market makers because of the

fact that buyers and sellers are always

preempting one another like we saw

before without the liquidity provision

of market makers the volatility of price

movements would be too high and that

would cause unnecessarily violent price

movements

in other words market makers have a very

important role of making markets more

liquid and therefore more

stable however there is another side to

01:21:38

the story the unique role of market

makers to transform the market into a

01:22:01

more liquid stable and fair environment

also allows them to nudge or absorb

price movements in very specific cases

so the very mechanism that creates a

more stable Market also allows for the

subtle influence of price Discovery

Market makers can indeed nudge price

into one direction or absorb price

movements depending on the order flow

01:22:13

the issue here is that small movements

like these in very specific situations

can lead to larger events later this is

another representation of the butterfly

effect in the market a small nudge in

price or a small absortion of prices can

01:22:23

lead to a larger behavioral feedback

loop created by other Market

participants later in summary market

makers can indeed nudge or absorb price

01:23:02

in very specific cases just like any

other Market participant with enough

power can it's important to remember

that broader Market movements are never

a result from one market participant in

isolation it's always the amalgamation

of several diverse Market players

coexisting interacting and

intersecting however it's very easy to

fall for the temptation to believe that

market movements are created by one

single entity simply because that's an

easier answer and it provides a sense of

control to the person who believes it in

reality things are much more complicated

than that there are a few additional

details that are important for you to

01:23:26

know with respect to market makers the

first is that the expression Market

maker means liquidity provider in Market

micr structure but in technical analysis

the term is synonymous to Market

manipulator whale large Trader and so on

this notion that market makers can

manipulate price is not incorrect but

it's nuanced the second thing is that

market makers compete with one another

01:23:43

and they also have risks meaning that

they can lose money for example one of

the greatest risks for a market maker is

the adverse selection risk which is when

the market maker trades against Market

participants with informational

Advantage the third thing is that the

01:24:16

idea of electronic markets being

subjected to Broad manipulation is a

paradox electronic markets are much more

decentralized than the markets in the

open outcry and that makes it difficult

for one single Market participant to

assume control manipulation was a lot

easier in the open outcry so even though

electronic markets allow for the

existence of algorithms it also enhances

competition and decentralization which

makes the rigging of the system harder

rather than easier a fourth thing is

that in electronic markets it's not so

01:24:43

easy to draw the line between different

Market

participants in the open outcry market

makers had a very well- defined role in

electronic markets all kinds of Market

participants can end up being liquidity

providers as well and it's very

difficult if not impossible to know

which one is assuming that role

especially if we're looking only at

Price

charts we also need to talk about

another important type of algorithm

01:24:48

which are the high frequency trading

algorithms they exploit marketing

01:24:59

efficiencies and opportunities through

Lightning Fast order placement and

execution these are the real ghosts in

the machine so to speak notice there

isn't just one highfrequency trading

01:25:05

algorithm there are multiple and they

compete with one another many of the

highfrequency trading firms also engage

01:25:22

in Market making some well-known high

frequency trading firms are Citadel

Securities Chain Street Capital XTX

markets and

drw highfrequency trading algorithms can

place and execute trades in a matter of

01:26:05

micros seconds and even nanc in some

cases a microsc is a millionth of a

second and a nond is a billionth of a

second you may wonder how that's

possible when you see price action

fluctuating in real time in your price

chart there is a minimum time period

between ticks which is often in the

millisecond resolution for retail

Traders highfrequency trading firms have

direct Market access and they can see

the market with much greater resolution

usually in the microsc level Ultra fast

high frequency trading firms have access

to exchange level time stamping and that

allows them to see order flow with nanc

Precision the point here is that there's

01:26:38

a whole lot of Market activity that

happens in between the ticks you see in

your price chart that's where the high

frequency trading algorithms Thrive it's

as if there was a whole other Market in

between ticks the retail Trader simply

cannot see by looking at a price chart

you cannot see what high frequency

trading algorithms are doing simply

because your charting platform doesn't

have the resolution for it you can at

best see the Bro implications of these

algorithms in extreme cases like the

2010 flash
01:27:42

crash it's nice to know the mechanics of

highfrequency trading algorithms but

there is absolutely nothing you can do

about it as a retail

Trader high frequency trading algorithms

have been criticized for their role in

Flash crashes and their potential to

create an unfair playing field for

smaller Traders for example during the

2010 flash crash where the Dow Jones

Industrial Average dropped almost 1,000

points in a matter of minutes it was

concluded after investigation that

highfrequency trading algorithms created

a liquidity vacuum that exacerbated

volatility and that is what ultimately

led to the rapid crash in this case

highfrequency trading algorithms acted

as some sort of anti-market maker

removing liquidity from the market

instead of providing it there's an

increasingly large effort of Market

surveillance and regulation to mitigate

the potential negative effects of high

frequency trading like I said high

frequency trading algorithms are the

real ghosts in the machine ICT is just a

trading method for retail traders that
01:28:01

uses a different language to describe

very old technical analysis Concepts

that were first described in a time when

electronic markets and algorithms did

not exist it couldn't be more different

than high frequency

trading just so you have a taste of how

complicated Market micr structure really

01:28:05

is I have made a summary of the main

models I hope this Sparks your curiosity

01:28:22

to pursue the subject you can also wait

for me to release a market micr

structure course within the next 300

years this is very strong evidence for

the complexity of the financial markets

like I said in one of my first courses

the bonini Paradox exemplifies this situ

01:28:35

situation the model of a complex system

like the financial markets becomes less

understandable as it becomes more

complete there is a paradox in the way

ICT Traders think they often accept the

01:28:39

fact that price is fractal while

01:28:53

claiming that price is delivered by an

algorithm so let's differentiate between

the algorithmic price delivery

hypothesis and the fractal Market

hypothesis algorithmic price delivery

01:29:19

hypothesis

believing the market is controlled by a

single centralized algorithm implies a

deterministic top down approach

perspective suggests the price movements

are pre-ordained orchestrated by a

singular entity or mechanism leaving

little room for emergent Behavior

Randomness and the complex interaction

of diverse Market participants in

different time

Horizons the fractal Market

01:29:44

hypothesis accepting that price is

fractal acknowledges that market

Behavior is self similar across

different time frames characterized by

patterns that emerge organically from

the interaction of countless Market

participants this view aligns with chaos

theory and the idea that price formation

arises from decentralized complex

systems where no single entity can

assume full control decentralization is

01:30:39

an inherent feature of any Market the

reality is that certain Market players

can nudge or absorb price movement in

very specific moments meaning in the

micros scale they cannot manipulate

price on a macro scale this initial and

small nudge or absortion can trigger a

larger self-reinforcing or

self-correcting cycle that goes outside

the control of any single Market

participant this is the butterfly effect

in Chaos Theory where small changes lead

to large

changes the fact that we can describe

market dynamics in terms of chaos theory

is evidence for the fractal Market

hypothesis I don't know if ICT claims

the price is completely delivered by a

centralized algorithm but I've seen many

ICT Traders say precisely that so it

requires

clarification the only way to reconcile

these two main ideas and eliminate the

Paradox is to realize that there isn't

01:31:15

just one algorithm impacting price there

are multiple types of algorithms with

different roles in the same way that

there are multiple types of human Market

participants coexisting interacting and

intersecting the realization that there

isn't just one algorithm behind price

debunks this notion that the ICT method

is the endgame of

trading price action is not like social

media where there is one algorithm

controlling what you see it's much more

complicated than that hopefully you are

able to see a little bit about how that

works in this

course it's time now to make some

01:31:31

general considerations about things ICT

Traders believe and say on social media

so we can combat the enormous level of

misinformation that exists around this

topic you'll often see ICT students say

that ICT Rambles too much trying to

01:31:58

explain simple things in the most

difficult way possible isn't good for

anyone explaining difficult things in

the easiest way possible is the real

challenge but of course there's a limit

to how much you can simplify complex

things there's nothing difficult about

ICT Concepts in fact you'll see a lot of

ICT students teaching these techniques

in a much better way than ICT

himself the ICT method is an

oversimplification of the real thing

01:32:01

which means a lot of important details

01:32:26

are lost as you were able to see in this

course many of the ICT Concepts revolve

around the same old bull bear tra

pattern you must realize that the

financial markets are a much vaster

landscape of ideas opportunities and

pitfalls that's the case even when we

look at Price charts but there's also a

whole world of things to learn outside

the price chart

ICT Traders see themselves differently

01:32:59

than retail Traders which is very funny

they believe they use institutional

trading Concepts they do not realize

that the so-called institutional trading

Concepts they use are the same old

technical analysis ideas with a

different

name many of these ideas are more than

100 years old like we

saw institutional Traders can use

technical analysis as a timing tool in

some cases but they combine a whole set

of other approaches

and some institutional Traders don't use

price charts at all I made a video about

01:33:08

that a while ago to demonstrate one

example in the case of Bank traders who

use Delta hedging I'll leave the link in

the video

description so what is the Smart money

01:33:26

after all we can Define the smart money

as the set of traders who have an

informational Advantage as this is what

ultimately leads to an edge in the

financial

markets however informational Advantage

is a hierarchy all of this becomes

Crystal Clear once you understand the

01:33:49

commitment of Traders report the

commitment of Traders report is a weekly

publication by the cftc that shows the

open interest in the US futures and

options

markets this is a tool that provides

transparency into what different kinds

of Market participants are doing and

it's key to understand the real meaning

of the expression smart money there are

three categories to watch in the

01:34:42

commitment of Traders report

non-reportable positions these are the

market participants that aim to profit

from Price fluctuations but with

positions below the cftc reporting a

threshold this is where the retail

Traders and common investors fall

into non-commercial Traders these are

large Market participants that aim to

profit from Price fluctuations big hedge

funds for example fall under this

classification commercial Traders these

are usually large multinational

companies that produce consume or deal

with commodities and they use the

financial markets to hatch their

operations not to profit from Price

movements notice that there is a

hierarchy of informational Advantage

here the non-commercial Traders have an

advantage over the non-reportable

Traders so in the eyes of retail Traders

01:35:00

the non-commercial Traders like hedge

funds are the smart money simply because

they are smarter not because they are

the

smartest however in the eyes of

non-commercial Traders like hedge funds

the commercial Traders are the smart

money the reason is because the

commercial Traders like multinational

01:36:06

companies for example deal with primary

information meaning that they have

direct access to the forces of supply

and demand of the market they

operate non-commercial Traders only have

access to secondary information in other

words they don't have direct access to

the forces of supply and demand they can

only analyze it indirectly through

aggregated data such as price volume and

other forms of market analysis

non-reportable Traders also deal with

secondary information but in a less

sophisticated way in comparison to the

non-commercial in summary the

institutions like hedge funds are

smarter money than the retail Traders

because they have Superior forms of

market

analysis the commercial traders meaning

large companies are the smartest money

because they have direct insight into

supply and demand

Dynamics however the commercial Traders

don't don't use the financial markets to

speculate they use it as a form of

hedging their
operations commercial Traders are

generally more powerful than

non-commercial too it's worth knowing

the Futures and options were primarily

01:36:18

designed as a risk management mechanism

not speculative ones the good news is

that this commitment of Traders report

can be accessed by anyone Larry Williams

01:36:29

a legendary Trader known for winning the

robins cup with the highest return in

history is very good at tracking what

the smart money is doing in fact he has

a very good book about it called trade

01:37:04

stocks and commodities with the

Insiders Larry Williams says in the book

and I quote I have been following the

smart money crowd since

1970 however since the commitment of

Traders report is a weekly publication

it will show what the smart money is

doing in the long term in the short term

this becomes a more complicated problem

there are modes of market analysis used

by non-commercial Traders that can

indeed be used by retail Traders not all

of them of course one type of market

analysis that can be used by retail and

institutional traders in the short term

is order flow
01:37:28

analysis however you cannot learn order

flow from

ICT ICT Traders don't know the

difference between price action and real

order flow perhaps one of the reasons

the real tools of order flow analysis

are not mentioned in the ICT method is

because their Origins are clear I've

talked about other types of Strat

strategies that both institutional and

Retail Traders can use in the realm of

hedging and Arbitrage if you want to

01:37:54

learn more about that check out my books

on volatility trading gamma scalping

Vega scalping and statistical Arbitrage

these strategies form the fundamental

basis for many institutions and they

don't require the use of price charts at

all they are also based on robust ideas

that earned a Nobel Prize like the black

schs model and the co-integration model

before social media the distinction

between smart money and dumb money was

01:38:21

clearer the smart money was the set of

Traders with an informational advantage

and the dumb money was the set of

Traders with lack of

information social media Amplified a

third category which I like to call the

confused

money these are the traders who have the

illusion of knowledge so not only they

don't know what they're doing but they

are also arrogant about

it the ICT method is not mentioned in

01:38:52

the most respectable technical analysis

certification programs of the world if

you study the literature proposed by the

most respectable technical analysis

certification programs of the world like

the CMT STA and

ataa you will not see ICT in there at

all and the reason is because the

serious technical analysis Community

doesn't accept this claim that ICT is

the engineer and inventor of smart money

Concepts in other words ict's popularity

nowadays is basically an isolated

01:39:43

internet phenomenon and young retail

Traders don't understand that because

they are not used to thinking outside

social media I concepts are not really a

problem because they represent very old

ideas in technical analysis most of

which predate ICT himself the problem is

the narrative being used to promote the

concept and the way ICT Traders validate

the

concept new retail Traders learning how

to trade on social media don't

understand the intricacies of trading

performance so when they see the concept

working in certain cases they end up

validating whatever ICT and other ICT

Traders say such Traders are not even

aware of basic technical analysis let

alone the several cognitive biases

involved in looking at Price charts and

measuring

performance many of the patterns ICT

01:39:51

Traders use were detected in a time when

financial markets were not electronic

yet Charles D and Richard wof did not

01:40:59

have the ease of looking at price charts

on a computer

screen they got data from ticker tapes

telegraphs and exchange records and then

they plotted prices manually needless to

say at the time there were no algorithms

acting in the financial markets because

markets were not electronic yet the

transition to electronic markets was a

gradual process from the 1970s until the

2000s many decades after Charles Dal and

Richard wov identify the same patterns

that ICT Traders use nowadays

days many if not most ICT Traders are

late Millennials or gen Z so they cannot

wrap their heads around a world without

computers social media and algorithms

running everything so how come da and

wuff observe the same patterns that ICT

Traders observe today but in a time when

trading algorithms did not exist the

answer is simple the patterns ICT

Traders use are not a result from

algorithms running the market they

reflect an aspect of the market that has

always been present which is human

nature stop looking for the hack or the

01:41:38

Holy Grail new Traders looking for the

Holy Grail of trading is not a new

phenomenon the Holy Grail of trading

does not exist and even if it did it

would not exist for very long the reason

is because financial markets are Dynamic

systems and they react to predictions

that means when a market inefficiency

eventually gets discovered by a lot of

Traders it tends to disappear and other

unknown inefficiencies will emerge in

other words even if there was a holy

gril of trading people would eventually

find out about it and the opportunity

would

vanish many ICT Traders have a cult

01:42:10

following mentality what ICT says is

their only source of information real

education is not about the authority of

the teacher it's about the empowerment

of the student whenever someone says ICT

coded the algorithm that delivers price

PR section and you have no idea of what

that actually means you either trust

this claim or you don't real education

is about understanding how these ideas

surrounding this claim actually work

instead of trusting people

blindly new retail Traders suffer from

massive cases of the Dunning Krueger

01:42:38

effect which is when people with low

level of knowledge end up overestimating

their ability these Traders learn the

word liquidity and they immediately feel

like Geniuses without even understanding

what liquidity means in a lot of cases

certainty is something that usually goes

along with the illusion of knowledge as

more knowledge is gained more doubts and

more questions begin to appear there are

two great quotes about this nche said

01:42:43

the convictions are more dangerous FS of

Truth than lies volter said that doubt

01:42:52

is an uncomfortable condition but

certainty is a ridiculous one many ICT

Traders think they are special for some

01:43:08

reason their lack of knowledge about

basic technical analysis and basic

principles of Finance allows them to

treat old ideas as if they were new and

to validate these ideas in the wrong way

creating a vicious

cycle if it's valid to use chart

01:43:31

patterns like failure swings and

non-failure swings there is no reason

not to use all the other well-documented

chart patterns which ICT Traders believe

to be retail

stuff for example if we look at a famous

chart pattern called Falling wedge or

right Rising wedge will'll notice that

it hides what ICT Traders call a market

structure shift as we saw

previously social media is all about

01:44:25

attention what appears to you is what is

more likely to capture your your

attention not necessarily what is good

for you in fact those two things often

go in opposite directions good

information is usually boring and

complicated don't confuse Fame with

competence just because you see a

YouTube channel with a lot of hype it

doesn't mean it has something valuable

to offer

the right way of learning something is

going after the knowledge obtained by

the Giants of the field and that

knowledge is usually in scientific books

and articles since the very beginning of

this channel I have tried to bring the

deeper knowledge of financial markets to

the place where it needs it the most

which is social media I don't claim to

be the inventor of anything and I try to

substantiate what I say using a

multidisciplinary approach I believe

that to be the best approach to learning

how to trade young Traders learn in ICT

don't realize that the most important

01:45:06

algorithm involved in the ICT phenomenon

is the YouTube

algorithm ICT Traders like to talk about

the algorithm behind price movement but

in reality the algorithm behind the ICT

phenomenon is the YouTube algorithm that

allows misinformation to capture the

minds of novice Traders young people

grew up in the context of social media

so they are used to things being

controlled by an algorithm they

extrapolate this idea to other areas of

life which is a dangerous thing thing to

do they think there is an algorithm

behind price Motion in the same way

there is an algorithm behind their

Instagram

feed lots of Traders think that learning

ICT nowadays is a good thing because ICT

01:45:43

has released his mentorships for free in

his YouTube

channel people who are unaware of the

basic principles of economics usually

think in terms of financial cost only

but there is another kind of cost which

is as important if not more important

than financial cost and that is

opportunity cost opportunity cost is the

value of the best alternative for gone

when you act ICT takes 12 months to

explain something that can be explained

in 12 minutes imagine everything you

forego when you spend all that time

learning in the least efficient way

possible so just because something is

free doesn't mean it's good another

01:46:19

problem is that something can be free

and also incorrect many ICT Traders have

created YouTube channels and they teach

these Concepts in a much more efficient

way compared to ICT learning for free is

not good if it has a high opportunity

cost if you think paying for education

is expensive it's because you haven't

realized the price of ignorance yet if

you start thinking in terms of

opportunity cost you will start making

much better decisions the idea behind

education is to decrease your learning

curve not to increase

it learn from the grades of technical

01:46:21

analysis Isaac Newton once said in and I

01:46:33

quote if I have seen further It Is by

standing on the shoulders of

giants that's the best way to approach

the learning process of anything many

smart people already have spent the time

01:46:35

learning developing and applying several

01:46:45

different kinds of ideas about how to

trade it's only wise to learn from their

mistakes and

successes retail Traders are the bottom

01:46:59

of the food chain in the financial

markets they are the market participants

who need to educate themselves the most

because of that and yet the reality is

that retail Traders are the most

uneducated Market participants of all

learn stuff outside technical analysis

01:47:34

retail Traders cannot wrap their heads

around the fact that there is a whole

world of things to learn outside a price

chart perhaps I'm one of the very few

trading Channels with a relatively large

reach that draws attention to this while

appealing to the retail Traders what

retail Traders are familiar with are

forms of speculation but there are lots

of interesting strategies in the realm

of Arbitrage and hedging as well for

example not to mention an enormous

wealth of knowledge in other feuds that

intersect Finance the ICT method has a

mechanical appeal that is deeply

01:48:27

attractive to Young retail

Traders new Traders desperately want

something simple and mechanical to

extract profits from the market on a

consistent basis unfortunately trading

is a lot more complicated than that once

you start learning the ICT method the

terminology being used gives you the

impression that the market is a

deterministic centralized machine and

that ICT is the person who created it

needless to say at this point reality is

the precise opposite of that the market

is an amalgamation of tens of thousands

of variables most of which we cannot

know especially if we are simply looking

at a price chart decentralization is an

inherent feature of any market trading

is a probabilistic game not a

deterministic one it's a decentralized

game not a centralized one 99.9% of

01:49:21

retail Traders have no idea how to

measure trading performance so they use

intuitions outside of trading to gauge

their success this leads them to talk

about performance in terms of how much

money they have made in the short term

this is wildly deceptive trading

performance is a lot trickier than

retail Traders think evidence of that is

that there is a whole area of Finance

dedicated to study it called performance

appraisal or performance

evaluation whenever you talk about

trading performance you must keep in

mind foundational Concepts such as

benchmarking risk adjusted performance

metrics and opportunity cost otherwise

you'll simply mislead yourself and no

it's not just about making money in the

long term because there are ways of

doing that in a manner that doesn't

justify the opportunity cost but that's

a subject for another time new Traders

make the mistake of trying to find proof

01:50:47

in trading

which is what common sense tells them to

do the problem with this is that Common

Sense only works in things that are

simple trading is a unique and complex

domain using common sense and intuition

will make you arrive at the wrong

conclusions which will ultimately make

you lose money and time unnecessarily

Traders are always looking for proof

about techniques Concepts and strategies

but it's impossible to prove something

will continue to work in the

markets the reality is that the

probabilities associated with trading

techniques change over time because of

that it is a consensus in finance to

focus on practices that have the

greatest chance of using good results

instead of focusing on the outcome

itself as annoying as the

sounds that's especially true when we

recall that the outcome of your trades

is a function of internal variables some

of which you can control like knowledge

some of which you cannot control like

Risk tolerance and external variables

all of which you can not control

Amalgamated in what Traders refer to as

chance the knowledge about the practices

that have the best chance of producing

good results dwells in finance and they

are often not intuitive nor immediately

obvious in other words you should seek

to learn Universal and atemporal

information about how the markets

work ICT claims to be the mentor of your

01:51:08

Mentor because many people have stolen

his mentorship materials to sell around

the internet which makes him ironically

upset if ICT is the mentor of your

Mentor then Charles Dell Richard wov and

Peter styom are the mentors of the

mentor of your Mentor you have a lot to

gain if you study the materials of these

older

gentlemen the bottom line if using the

01:51:38

ICT method helps you in some way by all

means do it just make sure you give

credit to all the other people who

contributed immensely to the ideas

involved now that you understand the

origins of these Concepts

however if you limit yourself to ICT

you'll miss a lot of useful knowledge

about many other types of opportunities

that exist in trading and a lot of

knowledge about risk management

behavioral finance and Market micr

structure let's now look at some of the

ICT Traders claims you see around social

01:51:42

media I got funded using ICT great you

01:52:16

got funded using technical analysis you

just didn't know that was the case

beyond that getting funded is only the

result from very short-term performance

which is highly misleading evidence that

getting funded is almost meaningless is

the fact that most people who get funded

lose the account right after recall that

in performance appraisal in finance a

minimum of 36 months of performance are

necessary just to begin the assessment

of performance with a sufficient degree

of statistical

reliability I got payouts using ICT

01:52:26

congratulations once again you got

payouts using old ideas in technical

analysis without realizing

it ICT said this is the only thing you

01:53:13

need to quit your job do not ever quit

your job to depend just on retail

trading that's a very stupid idea retail

Traders can only depend on trading

performance for a living and that's not

stable enough to provide a recurrent

form of income for short-term

responsibilities recall that making a

living something that most gen Z people

have no idea how it works is about

paying bills recurrently not buying a

yach or traveling to Dubai not even

institutional Traders depend just on

performance to make a living they are

rewarded based on a dual fee structure

because of the instability of trading

performance so if even institutional

Traders don't depend just on trading

performance maybe it's safe to say that

a retail Trader will not

either this ICT model has x% win rates

01:54:03

new Traders don't understand that the

win rate of a strategy is variable over

time so you cannot say that a strategy

has a particular win rate we can only

say that a strategy had a particular win

rate in the past and the annoying thing

about trading is that this is not an

indication that this win rate will

continue like this in the

future the probabilities associated with

the trading patterns and strategies

change over time because markets are a

second order chaotic system meaning a

system that reacts to

predictions that means that

inefficiencies emerge and disappear

unpredictably they are not a static

feature of the market this is also the

reason why trading systems are not a s

and forget solution they have unknown

expiration

dates when is the algorithm going to

01:54:38

change row some ICT Traders assume that

the supposed algorithm that runs the

market works like the social media

algorithms that change from time to time

this is what happens when late

Millennials and gen Z try to understand

something they always assume there is an

algorithm behind everything because as

the world they grew up in they don't

realize there that there is no

centralized algorithm running the

financial markets like there is an

algorithm behind Instagram for example

the social media algorithms are

responsible to make them think that way

though learn order flow bro I've seen a

01:55:22

lot of ICT Traders talking about order

flow while looking at candles only which

is highly misleading order flow is the

study of real time and historical buy

and sell orders and the traditional

tools associated with order flow are

depth of Market or Dom times in sales or

tape footprint chart Market profile

volume profile volume Delta cumulative

volume Delta Heat Maps view up and the

list goes on all these tools provide

insights that cannot be seen using

candles only and all these tools spawn

directly or indirectly from style Myers

auction Market Theory from the

80s that's it for this course I could go

on here but I believe I have made my

01:55:49

point and I have given you the material

that will allow you to reduce your

learning curve

substantially if you like the way I

teach please check out my premium

courses and ebooks in the video

description there are also a lot of free

courses in my channel if you have any

questions you can contact me at support

ATF fractal flowpro

docomo flowpro

docomo made it this far please help

01:56:03

support the channel by clicking the like

button subscribing to the channel

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giving your feedback in the comment

section and sharing the video thank you

very much for watching and I hope to see

you in the next videos take care