ICT Mentorship: Equilibrium vs. Discount (Lecture 4 of 8)

Introduction

• The fourth session of the ICT mentorship.
• Topic: Equilibrium vs. Discount.
• Basic concepts for newer traders; deeper insights for advanced understanding.

Key Concepts

Optimal Trade Entry

• Introduced in 2010: Swing projections, retracements, and identifying optimal trade entries.
• Uses Fibonacci for illustration but emphasizes the importance of understanding price movement.

Fibonacci

• Fibonacci is not magical but helps frame market context.
• Used to illustrate equilibrium and optimal trade entries.

Framework for New Traders

• Focus on identifying where markets are likely to create buy conditions.
• Use daily charts initially to measure and study price swings.
• Importance of demo accounts for practicing.

Institutional Order Flow

• Understanding the role of banks in price movement.
• Banks move prices based on their interests in making money.
• Price movement is not purely supply and demand but also influenced by greed.

Price Action

• Focus on price itself, not indicators.
• Open, high, low, and close provide all necessary information.
• Example of identifying major price swings and using Fibonacci to find equilibrium.

Equilibrium

• Defined as the midpoint of a price move.
• Important for understanding institutional order flow and determining market conditions (fair value, discount, or premium).
• Use Fibonacci to identify equilibrium (50% level).

Practical Application

Identifying Impulsive Price Swings

• Look for strong price movements (impulsive swings) and wait for retracement to equilibrium.
• Use Fibonacci to measure from low to high and identify equilibrium.
• Example: Daily chart showing price swings and retracements to equilibrium.

Trading Strategy

• Buy conditions are framed around price reaching equilibrium or below (discount market).
• Wait for at least four candles to confirm a swing high or low.
• Look for retracement to equilibrium and then hunt for buy opportunities on lower time frames.
• Emphasize patience and planning.

Entry Signals

• Not covered in detail in this session, but context provided for understanding when to buy.
• Price should react dynamically at equilibrium or discount levels if the market is bullish.

Examples and Analysis

• Multiple examples of price swings, use of Fibonacci to identify equilibrium, and observing price reactions.
• Highlighted importance of understanding context and waiting for the right conditions.
• Practical examples of how to apply these concepts on daily and hourly charts.

Key Takeaways

• Equilibrium is the midpoint of a price move; discount is below equilibrium.
• Use Fibonacci to measure price swings and identify equilibrium and discount levels.
• Focus on impulsive price swings and retracements to determine buy conditions.
• Patience is crucial; wait for the right setup and plan your trades.
• Practical application involves using daily charts for higher time frame context and then moving to lower time frames for entry signals.

Conclusion

• The session introduced the concept of equilibrium vs. discount and its importance in understanding institutional order flow.
• Emphasized the need to study past price actions to anticipate future moves.
• Upcoming sessions will cover equilibrium vs. premium and expand on these concepts.