Welcome back folks. This is ICT with a fifth installment of the eight in the continuing series for the first month of the ICT mentorship for the month of September. The previous tutorial in session four, we looked at equilibrium versus discount. This session, we're going to be looking at equilibrium versus premium. We went through a great deal of content in regards to discount versus equilibrium.
We won't have to spend so much time with this tutorial because everything we're selling here is basically diametrically opposed to what you would expect to see in the equilibrium versus discount teaching. So looking at what we have, when we look for premium markets, markets that are in a premium, now when we talk about commodities later on in this mentorship, the topic of premium will come up again. But when I'm referring to premium as it relates to price action, I'm actually referring to the current range that we're trading in. And the first thing we look for is an impulse price swing, which is we have an impulse price swing here. We have another impulse price swing here.
We have another impulse price swing here. So the first thing we look for in price is an impulse swing. And we see one here.
We see another one here. We see another one here. And these three price swings actually make up one larger price swing, which is an impulse leg or impulse swing by its own right.
So when we define our ranges, okay, the use of the Fibonacci is helpful in this case because we can take the Fib, draw from a high down to a price low. And I'm using this low here because it's the most lowest in contrast to this high and price comes all the way back up to what I have taught in many years The optimal trade entry which is a standard 79% to 60% retracement level on the Fib now I didn't create that but if it was just simply looking at that alone 62% to 70% tracing levels Looking for buys and sells there every way we loaded it would be no no work at all in terms of taking trades. But obviously you probably learned very quickly there's much more to it than just pulling a fib over top of price swings.
We have in this larger price swing, we have a smaller price swing here. And we have the high down to this low and the market starts to retrace. Equilibrium or half of the impulse price swing has to be at least touched and then once it hits that we watch for price to reach up into This area here. Now there's other disciplines out there and other mentors and other teachers Will say that the 50 retracement level is a good level to trade at based on price swings.
I don't agree with that I understand that sometimes it's going to work. But what I want to do is I want to be selling at a market That's at a premium level For a market to be at a premium in this current price range here And that's assuming none of the price action from this high down all the way to the right has not happened yet So you'd be watching price in this initial range and price did not get back up to the midway point or 50% of the range that was created from the high to the low. That's all equilibrium is, is 50% on a fit.
That's how I'm describing it. The concept is, is you have to see a market price move above the halfway point. Once it does that, it starts going into what is referred to as a premium market.
That means it's at a really high price relative to its current trading range. We don't need overbought and oversold indicators to help us classify an overbought or oversold market. We just simply need to know the current price range we're trading in. And if we get above the 50% level, we start getting into what would be deemed as overbought or at a premium level. On this price swing here, it obviously never gets above the 50%.
It never even touches it. So it never gives us an opportunity to get short relative to this time frame or this price swing. So, there would be nothing to do there. The next price leg here.
Okay, the same thing from this high to this low. Nothing in terms of that price swing there. It doesn't get back up to the 50% level.
But look closer. There's another smaller price swing that has formed right in here. Okay, so we could look at that, measure the high to the low, and the market gets right to equilibrium, but does not stay above to go to a premium market. It only goes right to the Fibonacci 50 level. or what we deem as equilibrium.
So price goes to an equilibrium price point and then immediately sells off. This would be a missed opportunity in regards of looking at equilibrium to premium. The reason why we want to focus primarily on the 62 or 70% traceable levels in that range to be selling short is because the market's going to be really pressed higher and would be really, in terms of overbought and oversold, it would be very overbought and it would be expecting a willingness to sell softer and go lower. There's going to be times when the market does not give that scenario to you and you just got to let those particular price swings go without you. The next price swing is this high to this low.
Market trades back up to equilibrium here. Let me move this over so you can see a little bit better. Okay, so market trades back to equilibrium, goes back above it into a... Premium market and it goes right on through what would be deemed as an optimal trade entry.
Okay, or selling at a premium So here's a wonderful thing about this You can look at this and say okay if I'm measuring this high to this low and I'm gonna be selling I'm above equilibrium I want to get short in this area between 62 and 79 percent chasing level. Okay, you look over here Maybe there's something over here institutionally in terms of a bearish order block or something like that you can define. We're going to say that that's not there.
We're going to say that you went short just purely on price action, retracing back into this Fibonacci level here. It comes all the way up and hits you where your stop would be. When you see these conditions where the market trades above equilibrium and goes through the levels of 62% and 79% trade levels, what that does is it gives you a condition that we saw in the equilibrium to discount. If it takes out a previous low when it's in discount, it's probably going to be a turtle soup buy.
In this case, it's going to be a turtle soup sell. It's going to be reaching for stops above the impulse swings high. And you see that here. It goes up, runs out the stops here, and then it goes lower.
Where is it going to go? Where do you take profits at? Below lows.
It's already established in the marketplace here and here. You can see that's exactly what the market does. You can also use, when you're defining your ranges, All price swings from high down to low, okay, you want to anchor your Fibonacci one. The market goes down from this high all the way down to here, okay, and creates that low.
As soon as we start seeing it bounce up, you need four candles. Remember, it's the same thing we just saw on the equilibrium to discount teaching. Once you see a swing low form, you're watching that fourth candle to show willingness to go higher.
It does, but then you simply wait. Here's the... Equilibrium price point this this 50% level in the fib price goes through that so now you're gonna be watching it You want to watch to see if price gets to 62 the 7% trace on levels it does And it does it while it's running out that high here So two scenarios one you could have used this high down to this low and got a stop out in the initial 62 to 700 trace in levels where we saw earlier, but it ran right through it if you had not anchored your fib to this high to this low, you would never see this optimal trade entry, okay, or return to a premium to go short. Price is above the equilibrium price point and it takes out an old high.
So we're running stops at an old high and we're going back into what would be a premium market. We're above the equilibrium price point of the range high and the range low and we take stops out. That's really, really good in terms of probabilities and the market goes down and sweeps out. a previous low. Remember, when we were looking at the equilibrium to discount, every time we were buying, we were taking profits at above an old high.
Okay, so when you see that, all we're seeing is the reverse of that in the equilibrium versus premium market. So we're always looking to sell at a premium. Premium is defined by, it has to be above the equilibrium price point or 50% level to Fibonacci, anchored on a swing of clear... discernible price action.
In other words, if it looks sloppy, if it doesn't really look like a solid price swing, and obviously, obvious price swings are the ones we look at. We're not looking at anything that looks questionable. If it's a pure price swing, we measure it. This is a high. This is a low, and we went through all the potential stages of all these high to low, high to low, high to low scenarios.
Really nice scenario here. Again, taking profits initially below this low here when it would hit that, and then you'd hold out for a potential run for some of your trade to be taken off below this low here. Now, the market goes into another area of premium relative to equilibrium.
I'm going to go back to this larger price swing here. this low all the way up to this high. The market goes right into the 79% retracement level, hits it perfectly to the pit, then rolls down. Where do you take your profits at? You're going to be looking to take your profits at below this low here, okay, and into the order block down in here, which is what you see right there, okay.
You have another range that you can use, this high. to this low. Now what's really nice about this is if the market's in a consolidation, this type of trading is your go-to. A long protractionary state in the marketplace where it goes up and down, no real movement higher in one direction or lower in one direction. It just stays in a large consolidation.
You want to be trading turtle soups for understanding where premium and discount are. If you have the high here and you pull down to the low here, when the market gets above equilibrium right in here, it goes right into the 70.5 or what would be the optimal trade entry sweet spot or OTE. And the market is a sell off there. Where do you look to take your profits at?
Below an old low or below this low right there. Every time the market makes a swing low, you have to take a look. And it only takes three candles. This is why I do not use the Williams fractal. It requires five candles.
I only need three candles. So we have a candle low here, a lower candle low here, a small, small little candle in here. The market blows through that. That would be your your target right there. You would take first profit.
Then you would come back and end up taking your stop out right there. Now, if you get a stop and say you don't take first profit, let's say devil's advocate for a moment. Say you're greedy, you're impatient, you're developing.
Don't want to do anything to take some profits out or it couldn't happen for you. You didn't do it like that. The market comes back and takes your stop loss out.
If you see that scenario, okay, you're going to be looking for old highs to be breached while we're above the 50% level. So we're in a deep premium. Okay, so markets are overbought right in here.
The market runs through this previous high. So we're in turtle soup scenario. We could be looking for turtle soup sales.
Mark comes up starts to come down one more time runs through you take your stop out again This is going to happen in your trading do not try to avoid it because it's going to happen So the same scenario we have an old high mark goes back above it if it's at a premium And you've defined the range here you take this scenario as a cell on turtle suit basis for each above an old high Sell short are you going to take profits at? below the first low that's here the next low is right here and we have another range created here so while we're watching this form as soon as we see a swing low form this candle here we know they're probably going to want to run back up into this range here now we have a new range the impulse price swing is this high down to this low here's equilibrium price expands to equilibrium once we start seeing that We watch. Does it get to 62?
It does. The body to the candle stopped perfectly right there. You could sell short right there. What's nice is you're going to see the bottom of this candle, this up candle.
That's a bearish overblock, which you'll learn more about. That's a sell by itself. Where do you look to take profits at? Below the old low, right in here. It goes right down below that and does what?
Trades back up higher. If we use the price swing from the high we just anchored to to this low. The same thing occurs here.
We have this high all the way down to this price low. Price comes all the way up into the 79% trace level above equilibrium. We start watching it. Now we're in an area where the price is going into equilibrium. I'm sorry, from equilibrium up into premium.
Okay, premium is above equilibrium in a range that's been defined from high to low. And look what's happening. We're running out an area of stops above an old high. Again, very, very good probabilities for getting short. Take that as a turtle soup inside of a premium-based market.
and you can look to take profits on a swing low. Here's your swing low here. The market trades down through that.
You'd have to take profits below here. Market trades down into small little consolidation here. And I'm not going to define anything else that's in this chart because I can do all kinds of other things to, it would look like sure coding, but you'll learn other things to look at and it has to do with this candle over here.
So we'll refer to this candle later on in, uh, recapitalized bullish order blocks and bearish order blocks. But The market creates another range this high down to this low here. So this high down to this low market goes above equilibrium here Where's it going to go to?
We want to watch it go to at least 62 percent retracement level It does that goes right up to the 70.5 OTE Optimal trade entry and then sells off where you take profits at below swing low right here's a swing low take profits right there Yeah, they're not astronomical trades. Okay, they're not enormous trades, but to get short in here at 98 big figure and covering below the low on this candle here at 96.94 that's over 100 pips. Nothing wrong with that.
This is a daily chart we're trading off of. Again, this is helping these folks that cannot be doing day trades. Okay, you don't need a great deal of movement on a daily chart to make a decent amount of pips.
We're going to go back to this high and use that same old low here. OK, from this high down to this low, if you went short here based on a stop run above here and we're at a premium, we're above the equilibrium. We've defined our range. We're looking to sell into strength.
It's scary when you first start looking at it as a new trader, but that's exactly what you want to be doing as a professional trader. You want to be selling at premium prices. Think about it.
You could sell something if you own it. Say you own a car. and you want to sell your car, do you want to sell it at a discount? That doesn't make any sense.
You want to sell it at a premium. So professional traders sell their long positions or they sell new short positions at premium prices. There ain't no better place in the world to sell short or sell longs above an old high because there's going to be willing buyers right there in the form of buy stops.
So when we see this area here, we get short from this area here going short. And if you just took profits once this low formed, That low comes in at 97.39. 97.39. And the open is 97.99. So we're going to say we went short somewhere around the 98 big figure.
The low comes in at 97.39. So that means your stop, I'm sorry, your limit order to take profits would be below 97.39. So you'd get the low here. Say you're aiming for 10 pips below that low, below this low right here. You'd be looking for 97. 29 roughly 97 30 that's 70 pips using a setup that's on a daily chart you're not intraday trading you're not looking at 5 minute 15 minute charts you're not you're not being forced to do what ict does most of his teachings through intraday trading but the same concepts appear in these higher time frame charts so don't discount it that i'm teaching you in a 15 minute basis because all the concepts are universal and i know it's hard for you to understand that as a new trader Because it just seems like I can't be watching that chart, so therefore I can't trade.
That's not true. That's not true at all. So by having these ideas of looking at price over the course of a premium market, if we go down to a say we go down to an hourly chart. And what's nice is you don't have to trade with a bias. Most people are always asking me, hey, look, can Can you give me a way of trading with a daily bias?
Give me the trend direction, Michael. I need to know that. Well, you don't really need to know that.
You don't need to know it. And the reason why you don't need to know it is because you need to know how to trade inside of a range because those ranges are always there. Whether you're in a trending market, whether you're in a consolidation or whether you're in a reversal market, those profiles will always give you ranges to trade in and you don't need to break out of the range to make money.
We have a swing high here. Why am I using that swing high, Michael? Not this one here, not this one here, because this is the most recent one prior to this down move. I could use this one here, but I'm going to use this one because it has more price action around it.
Just high down to the lowest low. Okay. Market trades up to equilibrium in here.
Okay. Does it get to premium? No, it doesn't get up there yet.
It comes down off of this a little bit and then trades right up into 79% traceable level right in here. Closes in a range, which we'll talk about in the next teaching. Over here.
The market sale it sells off and where you're gonna be looking to take profits at you have a small little swing low here You have a certain real good swing low here So if you're getting short up here and on an hourly basis, say we got short at 97.70, nice round number. To get out that level here is 42 pips. To get out below this low here is 60 pips.
So if you go 10 pips below that, that will give you a nice 70 pips. It will give you a nice 70 pips. Look at the reaction. Going 10 pips below here, this range low from that high up here where we would have been selling at based on the concepts. Again, it's all hypothetical in hindsight here, but the conceptual idea is the same going forward.
Range is 60 pips. 10 pips below will be 70. You got at least 4 pips below that for spread to take you out, and it absolutely does that. It doesn't go very much low at all.