Okay folks, welcome back. This is another discussion on commodities. Everything we refer to in this lesson and in this month, 2017 June content, is referred to specifically as a paper trade only.
Okay folks, June 2017, ICT Mentorship, ICT Bond Trading, Lesson 2, Split Session Rules. Okay, T-Bond, Split Session Rules. Now before we get into this, I understand that most of you are in this mentorship to learn how to trade with my concepts, Forex. There's a lot of time of day references for Forex, and commodities have a unique time of day element as well. I'm going to teach you the way I interpret price action for my analysis for the bond market.
There's some similarities, but there's some slight deviations. As I mentioned at the beginning of this mentorship, when we get into the commodity content, there are time of day studies, but there's… a small variance what you normally expect to see in, for instance, the foreign exchange market. There's a small overlap, but then there's a small deviation from what we would normally expect for time of day.
Traditionally, overnight sessions will have an impact, and that's traditionally seen as the London session. New York a.m. session is defined by 8 a.m.
New York time to noon New York time. The New York p.m. session is defined by noon New York time to 3 p.m.
New York time. Now, before I go any further, just understand that while we are generally familiar with the New York session or New York open kill zone, and there's a London close kill zone, and then the daily range we understand can trade all the way as late as 2 p.m. There's a little bit of an overlap, but we're going to actually define it in two sessions. So. What I'm teaching here, the analysis concept should be focused primarily on the New York session hours.
While if you're going to graduate into maybe go through the lessons this week and you fall in love with bond trading and you say, you know, the heck with Forex, the heck with stock trading and the other asset classes, I'm going to be a bond trader. Well, great. That's wonderful. If that's what you become and you find your niche in the marketplace, then great. That means that you've been a success going through the mentorship.
But you can trade overnight or during a London session the ZB or 30-year treasury bond and trade with similar things that we talked about in regards to the London Open. I would counsel you to use the information that is seen by overnight trading during a London session to look for stops, liquidity voids. fair value gaps, those types of things, and focus primarily on trading the New York session. As we mentioned in the previous Lesson 1 Bond Concepts, the largest volume is seen between 8 o'clock and 9 o'clock in the morning, or generally before the equities open.
So between 8 a.m. and 9.30 a.m. New York time, that's the largest influx of purchasing and selling of the Treasury bond futures.
The AM session has a built-in advantage because it generally will see the largest volume of the day. That means it's generally going to form the higher low of the New York session or the blending of or total range of the true day for treasury bonds. The PM session generally will have a continuation or reversal.
And then the other thing is a consolidation. So generally you're going to see a move. More often than not in the a.m.
session, I tried to focus when I was doing commodities only as an asset class, focusing primarily on 820 in the morning to 11 o'clock in the morning. That was like my kill zone, if you want to call it that, when I was trading the E-mini S&P, the S&P futures, big boy, and the currencies and the bond market. That was my work day.
And when I wanted to be. deviant or really push my luck i would trade the pm session And for the PM session for the Treasury bond market, it's seen here as noon to 3 p.m. Trading days can see the complete trading day be one-sided in both the a.m.
and p.m. sessions. So in other words, the opening around 8 a.m., 8.20 a.m. New York time creates the low of the day, and it can trade all the way up to 3 p.m. One-sided, completely bullish through a.m.
and p.m. trend. Those sessions together.
create the full daily range. Trending days can start also with one of the sessions being, for instance, the PM session. For instance, there could be a late afternoon FOMC like we have tomorrow.
The bond market could be consolidated during the AM session and then go into a trending environment in the PM session that carries over in what we call a runner where you can have the move continuously go on into the next trading session or the session after that. Consolidation days can see opposing directions in the a.m. and p.m.
sessions, or it can see one session produce a swing and the other be quiet or consolidate. So when we look at 2 o'clock in the morning to 5 a.m., we understand that is the traditional London session. OK, so if we're looking at price in terms of the bond market. we can refer to what overnight price trading has seen between 2 o'clock in the morning and 5 a.m.
That'll give us where our stops are, overnight stops, overnight liquidity voids, fair value gaps, any measure of PDR rate that we would normally use in the foreign exchange market. We would look for that to be found in this specific reference point in time. While we're not actively trading them on this session, and I don't really want to trade or...
imply that you should be trading the London session with the bond, we refer to it always between these two reference points, 2 o'clock in the morning and 5 a.m. The a.m. session or morning trend is defined by 8 a.m. to noon.
Now sometimes the 8 a.m. to noon session can end early around 11 a.m. Which is the traditional London closed time period.
London European traders will be looking to close up shop. They made their money in the morning and they moved to the sidelines. It doesn't mean the trading days ended or there's no more opportunity.
It just means that we're going to see a reduction in volume. A lot of the European and UK traders are going to close up shop. Like I said, they're going to stop trading for the day.
And then you're left with the North American traders only. But we're also encountering what is referred to as New York lunch. around 11 o'clock to 1 o'clock in the afternoon. So while I'm defining it in general terms, noon ends the AM session.
Just know that it can end earlier around 11 o'clock in the morning. This is your New York session AM trend or New York AM session. The next portion of the daily range for bond trading is the New York PM session.
This is seen by delineating 12 noon. New York time to 3 p.m. New York time.
Again, this is the New York p.m. session. Now, generally, if you have a runner, that means the market's made a significant high or low in the morning session. You can see follow through equal distant measured moves, that type of scenario. And whatever usually happens in the morning session generally is seen in quicker terms or less time in the p.m.
session. If there's a large degree of the average daily range, if you will, seen in the a.m. session, that means that the p.m.
session will be rather abbreviated. So the way we can use this information is if we know that the lines portion of the day has been fulfilled by the a.m. session and we are going flat before New York lunch, we could avoid trading the p.m.
session altogether. Don't come back for a second portion. Just be happy with what you made and go home in the black. All right, so let's take a look at the examples we had in the first lesson and define the price action by way of split session rules.
Okay, you can see between 2 o'clock and 5 o'clock in the morning, there was a London open trade here. Trades back up into, closes a fair value gap, and sells off going into what we understand classically as the New York open in Forex. But now we have to apply the bond rules, which is 8 a.m.
to 9 a.m. We have our opening range, which we defined in the first lesson, and then we saw a subsequent lower move. which is the equities opening, runs that opening range low, and that's all occurring during the a.m.
session for the morning trend. Price rallies up into the 11 o'clock hour. London and European traders go home. They square positions.
Retracement takes place right down into noon. So the retracement ends at noon, and that begins the p.m. session, which we see here.
This is the afternoon trend or the p.m. session for bonds. Price makes the high of the day ahead of 2 o'clock New York time and goes in consolidation at 3 p.m. So we can see the daily range is defined by 8 a.m. Typically is a bullish day.
We can see the down move, which is a Judas swing. Price rallies away, comes back, finds some support at the opening range at around that 153.27 level or thereabouts. And then rise again, making a high of the day ahead of 2 o'clock in the afternoon, and then the price goes into retracement and consolidation at 3 p.m. Traditional power 3, just defined in terms of the split session rules for bonds.
Okay, we have another example here. And again, these are the same examples I used in Lesson 1, but we're just defining in split session rules for your benefit. Again, we have a price swing in the London Open. Price makes a high, trades down into the 8 to 9 a.m.
session. Notice it's taking out the low that was formed in the London Open. So the a.m. session for the bond market trades down below the London session lows, creates a failure swing.
Moves into a bullish order block at the 153.29 level. Price goes into expansion through the entire morning trend or AM session into noon where it creates a market reversal profile. And the reversal takes place where we have the split session rules seeing the AM session going higher than the PM session going lower.
Both offering opportunities, one for a buy and one for a sell. And then after 3 o'clock, price goes into what we would see classically as a consolidation, as defined by True Day in Forex. Okay, we have another example here.
Price makes that high in the 2 o'clock hour in the London session. Price trades down. And then notice what's happening here early at 7 a.m.
New York open kill zone in the Forex. market price rallies up and clears out the highs the equal highs around 154.19 going into the eight o'clock hour price makes that high sweeps the london high trades down aggressively and blows out the lows that was formed in the london session and the early seven o'clock in the morning low between eight o'clock and nine o'clock in the morning so nine o'clock it creates the low of the day true to form During the AM session, price has a large opening range. So when there's a large opening range, we want to start looking for retracement ideas or fair value ideas.
In other words, bullish order blocks, fair value gaps to be a buyer or seller in. In this case, it was bullish because price traded down, took out the liquidity below the lows at 154.03 and ran the stops on the buy stops in the London highs. So it's worth both sides of the marketplace. But more specifically, it trades down, creates the Judas swing, and it creates a turtle suit, which is a move below the 154.02 level in the opening range, 8 o'clock to 9 o'clock in the morning New York time. That down-closed candle creates a bullish order block at that 154.02 level, and that is what is seen for the move taking place for the PM session or the afternoon trend.
And price starts to rally away there. Now, you're probably saying, well, it doesn't look like there's much of a move there. It doesn't require a whole lot of move for the bond to pay you.
So you have a bullish order block during the AM session or a turtle soup, either or. The turtle soup is a buy below 154.02s, which is the 6 o'clock and 7 o'clock in the morning lows, or price trades back above that 154.03 level. and then comes back down into the bull shoulder block for the pm session You can take that trade or during the AM session price trades down into fills the fair value gap at 154.03 into 154.02 ahead of the 10 o'clock hour. This is all during the equities open and price rallies from 154.02 all the way up into 154.10.
So it's an eight tick move. 8 times $31.25 per contract. That would be your AM session move.
Now, I know some of you are thinking, well, that doesn't seem like a lot. You can find these trades several different times a week. But you're highly selective by what you're looking for and by time. But the better trade was in the PM session.
And you can take portions off once the fair value gap is filled between the highs at $154.10 during the AM session. And the... Last up-close candle during the 8 o'clock hour.
So that fair value gap closes in at 154.13. There's your profit there. You would take profits in that position. So 154.02 to 154.13.
So you would see an 11 tick move for the PM session. And if you left something on as a runner, you could have captured a little bit more move to run out the opening range high at 154.21 later on in the evening during the Asian session. So by having these ideas applied to price action, we define the bond market trading day in a specific criteria as defined here. But we're also including everything we've learned in terms of PDA raise, institutional order flow, and other time of day studies as it overlaps with Forex.
So you can see how there is a blending of how the markets work together. They still respect time. But by applying these.
concepts, and then thinking about how it dovetails nicely with foreign exchange, you'll start to see there's a synergy that takes place between the asset classes and how bonds influence other markets. But you're not going to appreciate that until you start doing a day-by-day basis and study and keeping a journal of the bond market as we're showing here. So what we've covered so far is the opening range concept, the basics of what makes a bond market valuation in terms of its movement.
the time of day that we like to study it, and specific generic terms of what type of moves take place at these times of day. Now, the next lesson is going to be in trading and consolidation days and how we can look for small moves before we get to those trending days where there's a big, large range available. Until then, I wish you good luck and good trading.