ICT Mentorship Lecture: Equilibrium vs. Discount

Overview

• Fourth installment of ICT mentorship.
• Focus on equilibrium vs. discount in trading.
• Introduces concepts of optimal trade entry and institutional order flow.

Key Concepts

Optimal Trade Entry

• Introduced in 2010 based on swing projections and retracements.
• Uses Fibonacci for illustration but emphasizes market understanding.
• Important for framing trade context.

Institutional Order Flow

• Understanding who moves the market (banks, big money).
• Greed, not supply and demand, drives price movements.
• Focus on price movements rather than indicator-based systems.

Technical Analysis Approach

Price Swings

• Look for impulsive price swings on daily charts.
• Daily charts provide a clearer big picture for new traders.

Fibonacci and Equilibrium

• Use Fibonacci to find equilibrium (midpoint of a range).
• Equilibrium = 50% level on Fibonacci.
• Below 50% is considered a discount.

Planning Trades

• Wait for price retracement to equilibrium for potential buying within a demo account.
• Look for setups primarily on daily charts.
• Understand swing high and swing low formation with candle patterns.

Trading Strategy

Impulsive Price Swings

• Identify impulsive price swings; wait for retracement.
• Measure from low to high; wait for swing high to form.
• Monitor for four candles to establish reversal and reach equilibrium.

Discount Markets

• Below equilibrium (50% Fibonacci) is a discount.
• Enter trades at equilibrium or lower (62% to 79% levels are optimal).
• Discount prices do not last long if market is bullish.

Institutional Order Flow Markers

• Use order blocks and turtle soup (false breakout) as signals.
• Price should react dynamically at discount levels.
• Understand liquidity targeting (e.g., above old highs for buy stops).

Practical Application

• Practice identifying equilibrium and discount levels on charts.
• Use daily charts for a higher time frame context.
• Recognize when markets are in discount and anticipate bullish moves.

Conclusion

• Equilibrium vs. discount is foundational for understanding market behavior.
• Emphasizes patience and planning in trading.
• Future sessions will cover equilibrium vs. premium.

Study Tips

• Analyze past chart data to see these principles in action.
• Focus on understanding rather than memorization.
• Prepare for more complex topics in upcoming mentorship sessions.