Welcome back folks this is lesson 8 of the January 2017 ICT mentorship. This tutorial is going to be specifically dealing with the possession trade management. Okay for bullish market conditions we like to anticipate potential bullish seasonal tendencies and again like I prefaced in every one of the seasonal teachings it's not a be all end all it's not a panacea it's just a rule of thumb a roadmap if you will about what may unfold and Price action, just because it's done it for the last 40 plus years, doesn't mean this year or next year or three years from now when you sit down in front of the charts, doesn't mean that's going to be the outcome you see in price. But we start there because seasonal tendencies are just that. There's a tendency for price to do certain things.
Since we're looking for bullish market conditions, we're going to be focusing on the bullish seasonal tendencies that are most likely to occur in the next three to four months. We went through some of my ideal. seasonal tendencies, which ones I like, and how to go into the marketplace and look for them. What we do after we identify what most likely will unfold for a bullish seasonal tendency is we have to look at intermarket analysis confirmations. Is there something to suggest there really is a bullish technical picture for that seasonal tendency to come to fruition?
If there isn't any technicals to align with that seasonal tendency, the seasonal isn't going to drive price. But technicals in alignment with the seasonal tendency are a very powerful couple. What is the interest rate markets telling you?
Are yields increasing? Because if the yields are increasing, it's going to be good for the currency that you're trading. If we see divergence between the yields, that may suggest there's going to be a shift or a pause in the underlying direction of the marketplace at the current moment. When we look at intermarket analysis, we are blending the two of interest rate yields, and we're also blending the four major asset classes, the stock market, interest rates, commodities, and currencies. All four of them together should be confirming your general outlook on the marketplace.
Now, you may not get clear pictures from all four, but if you're getting three to indicate that your directional bias for your asset you're going to be trading is in fact what they're suggesting as well or confirming, then you probably got a pretty good trade idea lined up. Once this occurs, we go into a higher time frame monthly and weekly chart for PDA. Now PDA is Premium Discount Array or PDA Array.
I'm going to be abbreviating that for the remainder of this mentorship so that way when you receive PDA, it's the Premium Discount Arrays. That means order blocks, all the things that I look for for institutional reference points. We're looking for higher time frame weekly and monthly charts to indicate where institutional overflow on those particular time frames we'll look to seek to trade to.
When we understand there's two higher time frames, then we'll know what the daily chart is going to do. And we're going to be focusing on the daily chart for a quarterly shift or an intermediate price swing. Every three to four months, we're going to be looking for this new price swing to occur. And we're going to be looking at intermarket analysis and interest rate yields to suggest that is, in fact, unfolding. We're not trying to pick the absolute low.
We're not trying to pick the absolute high. We are trying to get in sync with that quarterly shift to get the meat in between. In other words, the biggest portion of the move, that's what we're focusing on.
We use the daily PDAs to frame our bullish setups. In other words, we're looking for order blocks, voids, gaps, rejection blocks. old highs, old lows.
We're looking for those things to frame our buy setup. We're waiting for that to occur based on what we see on the higher timeframes and with intermarket analysis. And hopefully, a seasonal tendency is also suggesting a bullish move as well. When we have these things in alignment, we have a great deal of confluences in our camp. We're looking for a high probability scenario in that case.
Once you get to this stage, what you're going to have to do is you're going to have to determine whether you're going to be a buyer on a stop or a buyer on a limit. It doesn't matter which one you elect to go with, but just understand that if you are going to be trading with limit orders, there's a probability of you missing moves or missing your fills because you're demanding a specific price level. when you go on a buy stop generally you're going to end up getting filled more times using that order but unfortunately that creates a little bit more gap in between where you're entering and where your stop loss is going to be if as long as you're not over leveraging your account which brings us to how much money should you be risking no more than one percent and again keeping the idea that you're taking big positions in terms of the time that you're in there, but not big positions in terms of how much you're allocating to the trades. So you're looking for big moves with a little bit of a year count.
By having that, your risk is going to be reduced, but your maximum payout is going to be massive in terms of how many pips you draw. But still, it's going to be relative in terms of the percentage because it's just the nature of this time frame. Once you determine you're going to be buying on a stop or a limit and you enter the position, You're going to be trailing your stop loss below the lowest low in the last 40 trading days.
Now, this brings us back to the IPTA data range. Why are we looking for the lowest low in the last 40 trading days? Because if we're looking for a bullish move, the market will most likely not want to go back 40 trading days to find a low.
It's going to be looking for the highs in the last 40 trading days. So that means we are going to have a trailing stop loss order that's… very handsomely behind the current market price and it's going to take a very significant price move to stop you out it avoids getting knocked out of the marketplace prematurely and when you're trading long-term trends or long-term quarterly shifts the worst thing that can happen is get knocked out prematurely and then the market moves take place and you miss out on that move in this time frame you are not looking to trail your stop loss ultra tight you have to have some freedom in the market you can't just let it you know you can't demand really ultra tight stops in long-term trading. You got to allow it to move a little bit gyrate pull back against you sometimes.
And initially when you first get in the trade, you just got to have to weather that. And unfortunately it may not be your cup of tea, but that's again, the nature of the beast. Once the trend starts underway and it starts moving in your favor, if it moves 50% of the range that you expect to see unfold on the monthly and or weekly chart, because that's what you're actually trading off of and you're executing on a daily chart.
Once that range moves to 50% of what you expect to see in terms of profitability, say it's a 500-pip range or a 1,000-pip range, if it moves, if it's a 1,000-pip range we're referring to, if it moves 500 pips in your favor, you need to still consider what the lowest low was in the last 40 days. Your stop loss is going to be below that. But when we get above 50%, 50%, Then we're going to be looking for the lowest low in the last 20 days.
Once we get about three quarters of the way of the entire weekly, monthly range, you want to start trailing your stop loss below the most recent low in the last 20 trading days. And I'll talk about that in examples in a moment. But you're permitting price to seek out the liquidity on the upside and giving it a lot of room to consolidate if it needs to before it goes another leg higher.
If you keep your stop loss below the lowest low in the last 40 trading days, you're going to have a better chance of staying in the move and not being stopped out prematurely. Okay, for bearish market conditions, I could probably just save this slide and just say everything I just said for the bullish, just reverse it. But for completeness sake, we are being paid to do this now.
So I want to give you both sides. The bearish market conditions, again, we're anticipating a potential bearish seasonal tendency. So we're focusing on the bearish tendencies that have the most ideal conditions.
What times of the year are they expected? We already know what they are. We went through those in three teachings. And once we understand what is most likely to occur seasonally, again, we're just looking for it first there. Then we're looking for intermarket analysis, confirmations.
Is there a suggestion across all four major asset classes, currency markets, interest rates, commodities, and the stock market? Are they all in agreement with? the expectation you have for the next three to four months.
And if interest rate yields are confirming that direction as well, interest rates rising or increasing or decreasing, is that salient to your expectation for the bearish move that you're trying to take on for next quarterly shift? If this does align, then we go to the higher time frame monthly and weekly and we start looking for the ranges and we look for the PDA for monthly and weekly objectives institutionally. Where are we looking to go? How far are we looking to go down? Where are the old lows?
Where are... the bullish order blocks, where are the liquidity voids on the downside, where are the fair value gaps below us, where are the mitigation blocks and potential breakers we have to be mindful of. All those ideas we have to start mapping that out because they're either going to be speed bumps or they're going to be rocket fuel for our next price leg in our bearish expectations. So we have to be mindful of them going forward.
We'll have them already in our charts. We won't be surprised by them. And once we have all these ideas, then we can expect that quarterly shift to take place and then therefore have an intermediate term price swing moving over the course of two to three, potentially four months at maximum, where we see a bearish move take place.
Once we have the scenario outlined, okay, and we expect the monthly and or weekly range or swing to take effect, what we're going to be doing is focusing on the daily chart, and we're going to be utilizing the daily PDAs. That means the daily premium. discount or raise or basically we're looking for bearish order blocks we're looking for bearish liquidity voids to fill in we're looking for old highs to sell above we're looking for rejection blocks above an old high handles body and we're looking for bearish breakers to trade into we're looking for mitigation blocks to trade against and sell off of all those ideas we're looking for that on a daily time frame to get in sync with the move we expect to see unfold in the monthly and weekly charts So we're using the daily PDA to frame our bearish setups.
Once we have our setup, what we're looking for is the determination. Are we going to be selling on a stop or are we selling on a limit order? And that's going to be a matter of personal preference.
Again, like I said, with the bullish market conditions, if you're going to be selling on a limit, chances are you may not get your fill. So just take that in consideration. And if you're 100 percent certain you have to have the entry.
Selling on a stop is almost a guarantee you're going to get that fill because you're going to be selling on weakness. And once that price is triggered, you'll be short. Again, but that opens a little bit more risk from where you enter and where your stop loss needs to be.
Which brings us to once you're in the move, you're going to be using a trailing stop loss above the highest high in the last 40 trading days. And what that's going to keep you from having happen is a premature stop out. You don't want to get knocked out of the market before.
You actually see the move transpire. You don't want to have any opportunity for the market to have a move against you and see it take off once it knocks you out. It's very frustrating to see that happen. And if you wait a long time for these long-term setups to get set up, just to get knocked out prematurely, you've exercised so much patience to get to that stage. Then to once get in it and then it knocks you out, the worst thing that can happen is you get fearful.
or never get another opportunity to get back in, and it takes off and runs away from you. Then you have to wait for another higher-level objective to get in to and then you obviously lose some of the potential profit. But nonetheless, you can still get in the positions, but it's nothing worse than that. And having all the analysis done, the homework, the patience factor, get in and the market knocks you out prematurely because you're trying to have too much of a tight stop loss.
You don't need to do that on higher timeframe trading. In fact, it's better if you keep a wider stop. And you try not to rush to move it up to break even because break even on long term trading is just the worst thing that possibly ever consider.
You don't want to do that. So we're going to be trailing your stop loss above the highest high in the last 40 trading days. And by doing so, what you're doing is actually giving the market room to breathe and move around.
When you identify the range at which you're trying to see unfold on a monthly and or weekly chart, when the price moves 50% of that range in your favor. In other words, it's moved half the distance you thought it was going to. Even at that moment, you're still going to be using the highest high in the last 40 trading days.
Your stop is going to be above that because you're not trying to get knocked out. Once it moves to about three quarters of the range that you anticipate seeing, then what you're going to be doing is you're going to be looking for the highest high in the last 20 trading days because you're getting really close to that ultimate objective, and it may not really get there. So you want to lock in as much profit as possible. If you use the highest high in the last 40 trading days and you've seen three quarters of the move, you may see a deep retracement that may end up becoming the actual reversal that you didn't expect to see. Think like optimal trade entry.
It could go 79% of the total move you expect to see, but then fail and go the other direction. And you would just be knocked out with a great deal of more larger loss by using that trailing 40-day stop loss above the highest high in the last 40 trading days. By reducing it to only 20 trading days, we're using IPTA procedures for data ranges, but we're measuring the ranges.
Okay, and grading the scale of how far that move has already happened. When we start getting mature in our move, we want to start locking in more aggressively that position, but we're only going to drop down to a 20-day look back. Once we get to three-quarters of the move that we expect to see, then we have to start dropping back in terms of how far we go back in terms of using a stop-loss basis.
We're not going to use 40 trading days the entire duration of the trade, but we get three-quarters of the move. under our belt, obviously we're going to be looking to lock in some of that profit and keeping it from moving a great deal against us. So by using a 20-day, look back every single day while we're in the trade, once three quarters of the move's been seen, what you're doing is you're ultimately bringing that stop loss closer to the market price, but not so close that it knocks you out.
If it does knock you out and goes below a 20-day low, chances are you probably made a really handsome profit or you probably saved yourself a complete reversal. and watch it erode more profits if you would have stepped, just kept at that 40 trading day high. So let's take a look at a couple examples real quick, and then we'll button this January teaching up. Okay, we're looking at the Japanese Janus of the weekly chart, and we have the high up here, and we have these equal lows we talked about during the live teachings of the mentorship, and then below these equal lows, we have these two candles, which makes the bullish order block. And what we're going to do is we're going to add a Fibonacci just to grade the scale of this entire range.
So we have this high all the way down to this low. I'm sorry, this high rather of this candle. And that gives us our range low and this is our range high.
Okay, and here's equilibrium right in here. Okay, so we're looking at this move here after market structure has been broken. We have this swing low here.
It's violated here. And then we have a rally. So we're going to be looking at this high in here. I want a daily. I'm looking for an ultimate move down to this level here.
So we're going to go to a daily chart now, dropping down into it. And we're going to be looking at the sell side first. Okay, here's that move.
We'll refer to this in a minute when we get to the buy side objectives. But here we have this high here. Price has the break in market structure here.
And we have a rally up. It goes into this last up candle, which is a PDA on a weekly basis. And it's also a PDA for the daily.
And it's a bearish order block for us here. Trades right up into the body of this candle, which is the open. comes in at 121.69.
The high on this candle comes in at 21.72. So only three pips higher than this opening price. At that candle here, we have the up candle.
So we're going to be doing what? We're going to be deciding if we're going to sell short on a limit. We're going to be selling short either on a limit above this close, or we're going to be selling on a stop. down here.
Which one are you going to do? But what we're doing is once we get in, we have to use the high in the last 40 trading days. I have here a range that's already been created with 40 right here. So there's 40 trading days from this day here, which is the trade day here because you have the up candle. This is the day you would trade.
Look back 40 days, your stop loss has to be above here. So your range of risk is framed out for you by doing this. And let's say you're going to sell on a limit. So you have a stop loss of 250 pips.
You got to be above that. Say 260 pips. That's your stop.
Okay. Some of you are probably cringing with that. 260 pips.
Good grief. It's long-term trading, folks. I mean, you really got to change your way of thinking about it because. It's not going to be the same as it was when we were discussing complete intraday action. And then you can do things like this.
You can go here is one, two, three. 4. 5, 6, 7, 8, and we won't get 9. It just falls short of that. Okay, so we have basically 8R.
this trade that's falling short even at the objective so we can have that one off here and here's 8R right there okay so selling short up here we have 8 times 260 pips think about that that's a massive move okay it's huge move okay And as you trade this, what you're doing is you're continuously, every single time you look at the trading day you're in, you're going to be looking back. And again, I have another range over here with 40 trading days range or approximation, let's say like that. Every trading day, you're going to keep looking back. What was the highest high in the last 40 trading days?
Okay, each trading day, you're looking at the right end of this here. Okay, every single trading day, you're looking at the highest high and you're keeping your stop loss above that high. Whatever that high is, okay, like right in here, looking back in the last 40 trading days, your stop is above this high.
At this point here, we had that real deep trading retracement. Your stop has got to be above these highs. Okay, this is where we actually hit the objective.
So anything past that doesn't mean anything But at this moment here your stop has to be above this high here So it keeps you from getting locked knocked out prematurely and again eight times 260 pips. That's this huge huge move So we're gonna focus now on the buy side and we saw that weekly bullish order block down here And we expected it to trade back up to the weekly bearish order block. In here, here's the buy.
Looking back, 40 trading days, your buy position has a protective sell stop below these lows in here. Okay. If you bought in here before the election and we had that big wild whipsaw, even with this wild whipsaw, if you would have bought this day here on a limit below the close here on a limit on this candle. If you bought here on this candle on a limit on this day here.
Yeah, you would have saw profits, and then on the election day, you would have rode through all this. Probably would have been scary for you. But even then, 40 trading days back, your stop has to be below here. So you're not knocked out. Long term, you're in there.
And again, the same thing. You're looking for the lowest low when you buy it in the last 40 trading days. Like, for instance, if you bought here, your stop has to be below this low.
Let's see which one's lower this one. The low is 109.19 and then you have this candle here. Yeah 109.19 so it's got to be below this low here. And then you have another buying opportunity on this day here. Again your stop still stays below here.
On this day again your stop still stays below here. On this day here the lowest low in the last 40 trading days is here. still but we have to change gears now once we get half the range I'm going to add a fib to this we have our low up to our high here and once price trades through this here we start looking back 20 trading days and we start trailing our stop loss below the lowest low in the last 20 trading days So we get 20 from here Stop loss has to be below here on this buying day here the last 20 trading days your stop loss So below here this day here the last 20 trading days.
It's still below here This day here, the last 20 trading days, stop loss has to be below here. And on this trading day, your stop loss has to be below this trading day, slow. And after that, it just hits the objective, the weekly bearish order block.
So again, above halfway point, you want to start trailing your stop loss tighter below the low of the last 20 trading days. But prior to equilibrium or halfway move, you want to be 40 trading days back using if the data ranges because it's not likely it's going to. seek that liquidity, it's going to be seeking the liquidity above the 40-day highs and above the 20-day highs. And it's going to be looking for the 60-day high.
Now you can see how that if the daily range comes into play using these higher timeframes. So until we talk again, I wish you good luck and good trading.