Time Frame Selection and Defining Setups for Trading Models

Overview

• Lecture Context: 1st of 8 teachings in the third month of ICT mentorship
• Main focus: Time frame selection and defining setups for trading models

Time Frame Selection

Monthly Chart

• Use: Position trading
• Suited For: Traders who cannot engage in lower time frames
• Benefits: Provides direction, removes short-term trading price action shock
• Characteristics: Represents long-term position trading; patience required
• Example: Trade setups form over many months, leading to large pip movements

Weekly Chart

• Use: Swing trading (1-2 trades within 3 months)
• Suited For: Traders who cannot monitor intraday movements
• Benefits: Provides intermediate-term setups, reduces short-term volatility shock
• Characteristics: Patience still needed; useful for framing short-term trades

Daily Chart

• Use: Short-term trading
• Benefits: Combines long-term perspective with short-term details, shows institutional levels
• Characteristics: Convenient for swing and short-term traders, versatile for multiple setups
• Example: Provides analysis points, identifies liquidity and fair value gaps

Intraday Charts (4 hours or less)

• Use: Day trading
• Characteristics: Not discussed in detail in this teaching, more specific to timing of day concepts

Defining Setups for Your Model

• Mentor's role: Guide, not to enforce a specific trading mold
• Goal: Discover the trader in you, find the setups you are comfortable and effective at executing
• Key Takeaway: One good pattern is enough; setup applicability across all time frames

Types of Traders and Models

Trend Trader

• Focus: Trade directionally aligned with monthly and weekly charts
• Hold Duration: Long-term, several months to years

Swing Trader

• Focus: Trade daily intermediate-term price action
• Hold Duration: Requires patience, holds for several weeks to months
• Mentor's Note: Less patience for this; prefers faster returns

Contrarian Trader

• Focus: Trades reversals at market extremes
• Key: Identifying extreme price moves for potential reversals

Short-term Trader/Day Trader

• Focus: Weekly ranges, short-duration trades (1-5 days)
• Characteristics: Handles volatility, requires active monitoring

Practical Examples and Analysis

Monthly Chart Example

• Breakdown of a significant price move in EUR/USD
• Large moves can take several months to years
• Emphasis on knowing large timeframe directional bias

Weekly Chart Example

• Renfinement of monthly chart moves
• Detailed analysis of moves within intermediate-term frameworks

Daily Chart Example

• Short-term action-based analysis
• Using known ranges and fib levels for refined setups
• Identifies optimal entry points like order blocks

Realizing Setups

• Breakers and Order Blocks: How they are identified and utilized in setups
• Stop Run (Turtle Soup): Trading false breakouts and liquidity absorption

Conclusion

• Key Points:
  • Identification of long-term directional bias is crucial
  • Refine higher time frame analysis into actionable setups
  • Define your own trading model based on psychological and practical alignment
• Recommended Starting Point: Use daily charts even if aiming for day trading
• Notes: Only need a few setups (3 mentioned: range trading, order blocks, stop runs)