ICT Mentorship: Bond Trading - Consolidation Days

Key Disclaimers

• The speaker is not a licensed CTA and offers no trading advice.
• Discussions pertain to commodities and futures as paper trades only.

Introduction

• Focus on the thought process of bond analysis and its application to forex trading.
• Understanding consolidation days in bond markets and their implications.

Overnight Price Action

• Can either show trending environments or be range-bound.
• London trading does not always predict New York trading.
• New York session may have dead space, especially when lacking noteworthy news reports.

Economic Calendars and News Impact

• High-impact U.S. reports later in the week can promote consolidation days.
• Example: FOMC day at 2 p.m. can lead to high volatility.
• A lack of high-impact news may lead to a consolidation day.

Formation of Consolidation Days

• Occurs after a premium or discount array is met on a higher timeframe.
• Price may pause or consolidate, potentially leading to retracement or reversal.
• Understanding these pauses aids in trading decisions across forex, commodities, and bonds.

Market Behavior

• Markets alternate between consolidation and expansion.
• High timeframe conditions influence market pauses or consolidations.
• Consolidation is common after price reaches a premium/discount array or equilibrium.

External Factors Influencing Consolidation

• U.S. bank holidays often lead to market consolidation.
• Bond auction days can also result in consolidation, especially prior to the auction.

Trading Strategy on Consolidation Days

• Scalping for 5-10 ticks is viable during AM sessions.
• Avoid trading PM sessions on consolidation days unless no stop run occurred in the AM.
• Focus on trading before noon and avoid the PM session when interest rate news is expected.

Consolidation and Trading Mindset

• Small Ranges Precede Large Ranges: Consolidation days indicate potential upcoming large moves.
• Use consolidation days for market analysis and planning, not extensive trading.
• Emphasize rule-based ideas and professional trading mindset to avoid emotional trading pitfalls.

Psychological Aspects of Trading

• Rule-based trading reduces fear and greed.
• Professional mindset helps harness trade psychology.
• Focus on process and execution over impulsive trading.

Conclusion

• Consolidation periods set up future market expansions.
• Apply insights from bond market consolidation to expectations in forex and other asset classes.
• Look forward to trending movements following long consolidation phases, enhancing future trading opportunities.