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ICT Mentorship - January 2022: Internal Range Liquidity and Market Structure Shift

Jul 12, 2024

ICT Mentorship - January 25, 2022

Internal Range Liquidity and Market Structure Shift

Key Topics Covered:

  • Homework and Study Resource
  • Key Concepts: Market Structure Shift vs. Market Structure Break
  • High Frequency Trading and Market Structure
  • Trade Setup and Execution Analysis

Homework and Study Resource

  • ICT gave homework on the community tab: reviewing a chart for market structure shift and liquidity points.
  • Emphasis on utilizing the 15-minute time frame for analysis.

Market Structure: Shift vs. Break

  • Market Structure Shift (MSS): An intraday shift indicating likely price movement direction without implying prolonged trends.
    • Example: A bearish structure shifting intraday might only lead to short-term downward movement.
  • Market Structure Break (MSB): A longer-term significance than MSS, indicating more extended price movement.
  • Key Point: Focus on MSS for short-term trading opportunities.

High Frequency Trading (HFT) Insights

  • HFT algorithms use market structure on micro timeframes (3-min, 2-min, 1-min charts, sometimes sub-1 minute).
  • Significant Levels: Internal range liquidity at important swing highs/lows.
  • Evidence of HFT: Short-term high broken downwards indicates sell stops below an old low; upward spike above relative equal highs signals a likely MSS.
  • Algorithmic Mechanics: Algorithms offer and deliver prices rather than creating price movements.

True Understanding of Market Structure Shift

  • Identification of intraday buy/sell stop regions important for anticipating MSS.
  • MSS defined by price action following liquidity run (e.g., break above equal highs followed by downward MSS indicates bearish trend).
  • Not all breaks/trades signify a longer price move; it's important to differentiate based on context.

Trading Order Blocks

  • Order Blocks: Down-closed or up-closed candles indicating MSS and significant levels where trades can be executed inside liquidity pools.
  • Example: Sell-side liquidity entered, MSS noted when price breaks a short-term high, signaling potential bullish trade.

Trading Consistency with MSS

  • Use fair value gaps and order blocks for precise entries within defined areas of MSS.
  • Tools: Use backtesting extensively to familiarize with these concepts.
  • Homework: Annotate past price action examples focusing on MSS contexts during defined trading times (8:30 AM – 11 AM, NY local time).
  • Understand all asset classes react similarly to these principles, though personal verification through backtesting is vital.

Practical Example Shared - Live Trading Execution

  • ICT's live trade execution example using the TD Ameritrade and TradingView platforms.
  • Example: Execution revealed practical application of fair value gap entries based on MSS principles.

Lessons for Traders

  • Consistent backtesting and study of price action vital for internalizing MSS and liquidity principles.
  • Patience and perseverance necessary for aligning personal trading strategy with observed market behaviors.
  • Importance of logging and backtesting for personal study journals to observe these phenomena reliably in historic data.

Trading Session Times Reference

  • London Session: 2 AM - 5 AM (NY local time)
  • New York Session: 7 AM - 10 AM (NY local time)
  • Asia Session: 7 PM - 9 PM (NY local time)

Personal Notes: Understand and apply MSS primarily in the context of intraday trading. Avoid distracting chart annotations; simplicity helps retain focus. Use thorough backtesting to align strategies and expectations.

Full transcript