ICT Mentorship: Internal Range Liquidity and Market Structure Shift Lecture (January 25, 2o22)

Introduction

• Date: Tuesday, January 25, 2022
• Platform: YouTube - ICT Mentorship
• Topics: Internal Range Liquidity, Market Structure Shift

Homework and Preliminary Tasks

• Check the community tab for homework assignments.
• Analyze the provided chart for market structure shifts and buy-side/sell-side liquidity.

Key Concepts

Internal Range Liquidity

• Definitions:
  • Sell-Side Liquidity: Market trades down through previous lows, triggering sell stops.
  • Buy-Side Liquidity: Market rallies through previous highs, triggering buy stops.

Market Structure Shift (MSS)

• Intraday MSS:
  • Occurs when the market moves down triggering sell stops or moves up triggering buy stops.
  • Not necessarily a prolonged movement but indicates a potential price leg for the day.
  • Market structure shifts when higher highs/lower lows are revisited intraday.
• Market Structure Break (MSB):
  • Indicates a more significant multi-day movement.
  • Differentiates from MSS in context and implications.

Detailed Chart Analysis

Example Chart Analysis

1. Timeframe: 15-minute chart of e-mini Nasdaq 100 futures contract (March delivery, 2022).
2. Key Levels:
   • Old Low: Indicator of sell-side liquidity (sell stops beneath this level).
   • Relative Equal Highs: Indicator of buy-side liquidity (buy stops above this level).
3. Market Structure Visualization:
   • Market moved down, hitting sell-side liquidity (old low) and rallied up, hitting buy stops (equal highs), showing MSS.
   • Importance of distinguishing short-term highs/lows for MSS.

In-depth Analysis with a 2-Minute Chart

• Transition from a 15-minute to a 2-minute chart for finer analysis.
• Key Observations:
  • Identifying swing highs and lows before major market movements (sell-off or rally).
  • High Frequency Trading (HFT) algorithms and their impact on market structure.
  • Importance of focusing on market evidence rather than preconceived notions.

Practical Application and Advanced Insights

1. Fair Value Gaps:
   • When a market structure shift happens, gaps form (fair value gaps) indicating entry points.
2. Order Blocks:
   • Down-closed candles before a rally or run down indicating accumulation or distribution.
3. Trade Execution Examples:
   • Scalping multiple positions based on the observed market structure and order blocks.
4. Homework and Study Goals:
   • Backtesting e-mini futures charts for MSS evidence.
   • Annotation of study journals with detailed observations for future references.

Pro Tips for Analysis:

• Strip prior analysis concepts when learning these techniques (e.g., no order block, Elliott wave, etc.).
• Focus purely on price action logic and algorithmic market structure.
• Observe patterns daily to gain the experience and verify the accuracies described.

Final Insights and Encouragements

• Emphasized importance of backtesting and annotation for reinforcing concepts.
• Recognizing fundamental differences between various interpretations of market theories.
• Encouragement to keep a detailed study journal for continuous learning and reference.

Trading Session Example:

• Live demonstration of trade setups on a 2-minute and 1-minute chart.
• Emphasis on identifying and waiting for confirmation of MSS.
• Practical illustration of trading using real account data, focusing on fair value gaps and order blocks.

Conclusion

• Clear differentiation between MSS and MSB for different market contexts.
• Stress on clean chart analysis for better decision-making.
• Ultimate goal to distinguish genuine liquidity points and structure shifts for trading success.