Hey folks, welcome back to Lesson 8, the final of April 2017's content for ICT Day Trading Model. This lesson is going to be teaching integrating day trades with higher time frame trade entries. Okay folks, we're going to be revisiting Power 3, and we're going to be talking specifically with day trade entries and higher time frame setups. Now we can use day trading entries to position ourselves in our longer term higher time frame trades. And it's a method that employs very little time and analysis.
We do not need to use the London Kill Zone if you're not able to trade it. Some of you aren't able to get up, aren't able to stay awake, can't do it because of business, family, work. I get it.
Trust me, I've been there. We don't need to have the London Kill Zone to be a day trader. You don't need the Lend and Kill Zone to be entering with your higher time frame setups as a day trader either. There's a way of using day trading concepts to facilitate an entry on a longer term higher time frame set.
There are two essential times of the day IPTA refers to reset. The daily candle can point the ideal entries for all styles of trade. And when we look at the daily candle, obviously I've taught this in the past, power three refers to the open, the rally or decline, and then close.
Obviously for an up to close day or bullish day, we would see the open near the low of the day, a small little wick below the opening price, an expansion move or range expansion, up, then a close that typically closes just a little bit off the high of the day. For a down close or a bearish day, We see the open near the high of the day with a very small little wick above the opening price. Then expansion move lower with the close coming off the low with a small little wick making the low of the day in respect to the close. That's power three. It's the open, rally, up close, or open, decline, down close.
The open is near one extreme of the daily range and the close is near one end of the daily range. So they're going to be opposite extremes. Now, obviously, it goes without saying. Typically, we've mentioned this many times before in the free stuff, but there is a vacuum of concern when we look at price action like this as a retail trader. We're not even aware these phenomenons have any significance.
So when we look at price on a daily chart, just think for a moment. Say, for instance, that you are not. able to have any difficulty getting up in London. Just imagine for a moment, if you did, how could you enter as a day trader or how could you day trade? And you have to avoid the London session.
That was one of the things I had to come up with to fill in the void where there was a short period in time where I could not do anything in London. I had to help take care of the kids. My wife was just...
unable to do anything. She was nursing and healing up from having a child. I wanted to trade, but I couldn't do it because I had to take care of three kids and one of them being a newborn. So I had to really figure out a way to overcome that. And this was my answer or my solution to it.
Now, obviously, this isn't the last and be all end all, but for me, it worked. Okay. The open or openings. Now there's two session openings that I monitor daily.
It's the ZeroGMT. This is your standard platform on 4xLTD demo that you see me teaching with in my tutorials. You can use that time for calibration wherever you are globally.
And then obviously everyone knows about the midnight New York time, that opening price as it relates to New York time, whatever that time is on your platform. That opening price on an hourly chart, that's what we're looking for. Well, this teaching, okay, we're going to go a little bit beyond that. And there are very refined entry points that can be had in the London Open.
Obviously, that goes without saying. But here's the rub with it. You don't need it.
If you understand the daily range and you understand what IPTA is going to do, or most likely to do, let's say it that way. and you understand where you're at in the PD array matrix, where are we moving from? Are we moving from a discount up into a premium? Or are we moving from a premium down into a discount?
Knowing that gives us directional bias. It gives us an understanding of what we should be looking for being a buyer or seller. And it's not required to position day trading concepts on higher time frame setups.
By using the London Open, you're not limited to that. There's other ways of doing it. So I want you to think for a second. Imagine being able to trade the daily range for a single day or hold for a much longer duration of trade, harvesting a larger number of pips.
How could you do that? Well, we're going to be looking at IPTA true day open, and this is reset. The daily candle at zero GMT, that's our beginning reference point for IPTA.
That's true day opening. But then there's true day, as I refer to it when I'm trading London using the midnight candle in New York. That's my opening price there. Because I'm able to be awake and I'm able to trade London and I'm wanting to be there because I want to be able to capture that really small, tiny little move of protraction up on down days or down moves right before the up close. I want to be able to capture that little movement or at least get in there and fade that move so that way I can have a very tight.
Ultra small stop in relationship to what I may be doing on a higher time frame setup But when we look at the power three what we're really doing is this work We're looking at the opening price and we're waiting for the opposite to occur in the daily range when we're bullish We're gonna be buying near the low of the day or near the opening the main question is how much? Lower from the opening will it go if it's going to be enough close And if it's going to be a down close, how much higher than the opening will it go before it makes a lower close? I get this question so many times, and I'm just going to tell you this.
It's been staring at you all this time. It's been in your charts every day, and you don't pay any attention to it. I have also led everybody away from this because it's just one of those things I wasn't willing to share.
But because you're in the mentorship, you get to learn it. This little hyphenated little dash that appears on all the daily candles, or not candles, but open, high, low, closed bar, if you set that for your platform. That little opening hashtag tick to the left of your daily candles or bars, that opening is all you need to know. That occurs very, very early in the evening in New York time. So I'm on the East Coast.
I'm basically the same time as in... New York. Residing in Maryland, I have East Coast time. Wherever that is in terms of zero GMT using the Forex LTD platform, the demo, you need to calibrate your local time and know what that time is where you live. All you need to know is that opening price.
That's it. What we're going to do with that information is frame it in such a way where we can use it. Knowing when we want to be buying or selling.
When it's up close, we're trying to capture that big lines portion move up. And when it's a down close, we're trying to capture that big range going lower for a day trade. But this is the same concept. We'll use this in the same vein by trading with higher time frame setups.
The key is you have to know where you're at on the higher time frame PD array matrix. Obviously, if we're looking for an up close. We need to be seeing the daily moving away from a discount array. It has to have already respected a discount array.
So that way, the next trading day, we should see no movement at all, if very little, below the opening price at zero GMT. If we are looking at a bear scenario on the daily chart, we have to have recently traded. At a premium array, and price has to have shown a respect of that.
In other words, it's repelled or failed to go higher. The next trading day at zero GMT, we're going to be using that opening price to facilitate trade. So let's assume for a moment we have watched our daily chart trade down into a discount PD array, and we're expecting bullish prices now. Institutional order flow has been bullish.
come down into a level that would be expected to be bullish on a daily time frame. We've hit a bullish order block and price has shown a willingness to rally away from that. The very next day at zero GMT, we're going to look at that opening price. Now, I've trained and conditioned all of you to look for that opening price and then expect that down move.
That's your classic London setup. But what if you can't be up during that time? The London protraction, you may not be able to be able to see it. You can't be there to watch it. You can't participate, if you will.
Well, is that entirely true? Not necessarily. Just because you're not awake doesn't mean you can't take advantage of it. What we look for is, yes, the opening price, but we have already arrived at what? If we were awake at London, we would expect… that move down anyway, that's what we're looking for, that Judas swing, that protractionary state in the market where price goes lower to seek liquidity to make a move higher with an up close.
All we need to know is are we more likely to go higher or more likely to go lower? So if we set our daily bias based on the daily PD arrays and if the data ranges and the quarterly shift is still bullish. Everything that's significantly pointing higher, if we're in a seasonal tendency for bullish prices, if it's a Monday, Tuesday, or Wednesday, it's a loaded deal. The main thing is we have to see price having already respected a daily discount PDR.
You have to see it do that, and then the very next trading day, you're looking at the zero GMT opening price. So that means in local time in America, that's pretty easy. Regardless of where you're at in the North American continent, real, real easy to get that price.
Where you're at in the world where it makes it difficult for you, I can't answer for that. So you'll have to work in the London session. But for those individuals that want to trade Asia but have the effects of London open, this is how you do it. We don't know how much of a pro-selectionary state there's going to be. Not always, but we can have a reasonable expectation.
So why zero GMT? Well, you already have central bank dealers range closing right now. At zero GMT, you know what the central bank dealers range is most likely going to provide you in terms of standard deviations. But what if you don't want to use central bank dealers range? Why you would think that?
I don't know. But that's to say you don't even want to consider it. I think it's advantage that knowing it so you can expect how much of a protractionary phase and price.
Go higher or lower, in this case, going lower below the opening price for a bullish up close during London. But what we're going to be doing is focusing primarily on being a buyer at zero GMT. Wait a minute. I'm just going to buy it at zero GMT? Yeah, you're just going to buy it at zero GMT.
You're going to use a five-day average daily range as your stop. Whoa, Michael, wait a minute. What you're saying is. This could potentially be a 90 pip stop. What if it's a 100 pip stop?
Then that's what it is. Remember, we're not day trading with minute risk trying to capture 20R. Okay, and we're not trying to do that here.
This topic and teaching is how to integrate day trading and concepts to get into your higher time frame trade entries. Since you're looking for higher time frame setups, A 90 to 100 pip stop is relatively insignificant because you're looking for moves that are going to be paying several hundred pips. Or you should be. That's what you should be looking for, those types of moves. So if you want to frame those ideas and use day trading concepts, you would be buying at zero GMT using a five day average daily range as your stop loss.
You would take whatever that average daily range is, subtract it from the opening price at zero GMT. There's your stop loss and you just let it rip. You just trade it accordingly based on your higher time frames until it trades to a premium PD array.
Now, what if you want to use this concept as a day trade? You just want to do it as a single one day event. You think it's going to be a big range.
Everything's pointing to a larger up day close. And it's been small ranges recently. And we respected a discount PD array on the daily chart.
Its institutional overflow has been bullish anyway. Its quarterly effect is underway and still bullish. Everything is expected to go higher.
It's a Monday or Tuesday or Wednesday. What can we do with that in regards to intraday? Well, you're going to take the same thing and reverse it for sales.
We don't know how much of a protractionary state we will have without being awake. So we don't need to know exactly how much that is. We can have central bank dealers range hint at that.
But again... We don't know how much of that London protractionary phase in price is going to move up above that zero GMT. The key is we have already seen price move away from a premium PDRA on a daily chart. It has to have to happen the day before the trade day.
So the previous session, we want to see price having respected a premium PDRA and it's not wanting to rally or obviously hit it and started to sell off. So we're near the high end of the range. It's at a premium.
It's already shown a willingness to respect some measure of a premium. PDA raise some bear shoulder block or it's rejected an old high turtle suit the very next trading day. Well zero GMT On the forks LTDs demo platform.
You're going to be looking to sell short right at zero GMT or you can sell it Zero GMT plus 20 pips and again using the five-day average daily range as your stop What are we accomplishing here? Well, we can anticipate, obviously, a little bit of movement or protractionary phase in the marketplace where the Judas swing occurs right before that down close. Adding 20 pips to the zero GMT, opening price, that would be your sell limit order.
And then adding the average five-day range, ADR, to your limit entry. So let's give an example. We'll say it was You were getting it in at 1.5000 and the average daily range is at 50. You would get in at 1.0500 and your stop would be at 1.0550. Now, that's a relatively small stop, but that would be an example.
So what you're doing is you're protecting yourself and building in enough. of a filter or a barrier, if you will, that the likelihood of price rallying from the open at zero GMT 70 pips before going down with a down close, highly unlikely, especially if we've seen a previous day or yesterday it trading from a premium PDA rate from a daily chart. So long and short is we already know there's going to be very little upside above the opening price because we are in a bearish cycle.
So if that's the case, we can just look at the opening price. Add 20 pips to it. There's your limit order.
Your stop is the five-day average daily range added to that entry. And then you use your higher time frame objectives for your profit. And you just go to sleep.
Just let it go. Now, there's going to be some times you might have a 20-pip limit, and it doesn't go up 20 pips. And it just runs away.
How can you accomplish the same thing and not be afraid of missing the move? Well… if you take your total position, okay, and you divide it in half, what was your total lot size that you were going to trade and or percentage risk that you were going to trade at plus 20 pips above zero GMT's opening? Take half of that risk and just simply add it at the zero GMT.
There's your first portion, put it in there right away at zero GMT. And then you can do a second portion at 20 pips above the opening price. It may not fill you there, but at least you have something in. So that way, with a five-day average daily range as your stop, there you go.
You're positioned. Now go ahead and you could just sell at zero GMT opening and use the last five days average daily range as your protective stop. You can take the sell at zero GMT.
Or add 10 to 20 pips above the opening price for your sell. So that way you're going to anticipate some measure of protractionary phase in price in London. When price rallies up, it might rally up 30 points.
It might rally up 40. It might even rally 50. But you already have several pips above the zero GMT opening price to get you in as a limit to sell. Then by having a five day average daily range above your entry, you're building in as much as 60 to 70 pips. And again, that's highly unlikely if you're trading on the heels of the previous day, having respect of a daily premium PDR.
You can on buy days simply buy at zero GMT or buy it with 10 to 20 pips below the opening price at zero GMT. There's your limit order to buy. So that way you're going to catch some Judah swing if it occurs. If it goes down a few pips and fills you and say it goes down 30 more, the likelihood of the five-day average daily range being subtracted from the opening price of zero GMT and your 10 or 20 pips below that opening price as your entry.
Again, the likelihood is 70 pips, 60, 70 pips going down from the opening price just to have it up close. It doesn't usually happen if price is already expected a daily discount PDR rate. Now. You have homework. I want you to find three examples, and yes, you have to do this.
Go through your charts and find in recent weeks where you'll have three examples of this concept in price action. Using only the opening price at zero GMT when you're bullish, where price rallied up, or using it as the opening price and then a limit order above or below relative to what you think in terms of the close. If it's going to be bullish. or you expected to see bullish prices based on the analysis that you would see around that time.
Obviously, you have the benefit of hindsight, but this is how you learn it. You look for it in price, and you show yourself many examples. I can give you 20 of them in this, but it's not as good as if you go through the price action yourself.
I'm forcing you to go through the cycle of looking for PDA raise, the higher time frame, looking at institutional order flow, and framing that on clear cut. discount or premium arrays. When price is wanting to go higher, you'll see it obviously in hindsight, but I want you to focus on the zero GMT opening price and how much that goes down relative to the five-day average daily range. The five-day average daily range, if you don't have my ICT indicator, just about everybody has that, but if you don't have it, you can use the simple The indicator that's on most platforms, the ATR, average true range.
Do it on a five-day, and that will give you your number for each day. It's going to get real close to what the ICT, average daily range indicator is. The only thing that makes that one good is it gives you a line.
When it hits it, it turns blue. It gives the impression that you're a lot more fancier than you really are. You don't need it.
But it's just a way of building our stop loss. We'll know what our stop is based on whatever the average daily range in the last five days. Doesn't mean you won't get stopped out sometimes. It doesn't mean that the market won't stop you out and still go where you thought that still can happen.
But this was what my solution was to not being a wake door in London, but still looking for the setups based on what I understood in price. So I look forward to seeing your example shared on the forum. It'll be shared, hopefully, by the majority of you, if not all of you.
But three examples, do it in one post, what pair it was. where it was, how much of a movement down or up from your opening price relative to being a buyer or seller. And I want you in these three examples, I want to see one that worked as a buy, one worked as a sell, and then one where it did not work.
And I don't care if it failed as a buy or a sell, but find one of each. Share that in your post on the forum in the April content thread. And until next time, I wish you good luck and good trading.