ICT Long-Term Top-Down Analysis

Date: August 2017

Overview

• Focus: Teaching long-term top-down analysis using ICT (Inner Circle Trader) methods.
• Objective: Discuss how to analyze monthly charts to derive actionable insights for weekly charts.

Key Concepts

Review and Confluence

• Utilize the information provided over the course of the mentorship to build a flexible, personalized approach to market analysis.
• Aim to align multiple factors (seasonal tendencies, interest rates, etc.) to form a confluence, increasing the likelihood of success.

Monthly Analysis Process

• Frequency: Perform this analysis once a month, ideally at the close of the last trading day of each month.
• Timeline: Start immediately after the market closes for the month; if the month ends mid-week, begin analysis the next day.

Steps for Monthly Analysis

1. Seasonal Tendencies

• Identify the impact of seasonal tendencies for the current and upcoming month.
• Look for historical repeating patterns in market movements based on the calendar.

2. Quarterly Shifts

• Trading Cycle: Markets often see new cycles or shifts every 3-4 months.
• Direction: Anticipate either the continuation or reversal of the trend seen in the last few months.

3. Interest Rate Differentials

• Compare interest rates across different countries using websites like Investing.com.
• Use high interest rates versus low interest rates to form a fundamental bias, especially for forex pairs.

4. Market Profile

• Classification: Determine if the market is in a trend, consolidation, or retracement.
• Impact: This affects what can be expected next, influencing trade decisions.

5. Inter-Market Analysis

• Compare correlated markets to further validate or negate trade ideas.
• Analyze both positively and negatively correlated markets.

6. Current Market Structure

• Classify recent highs and lows to understand the market's control points.
• Identify if the market is under a trending environment or consolidation.

7. Define Premium and Discount Arrays (PD Arrays)

• Use the PD array matrix to identify key levels in the market, such as order blocks, rejection blocks, and liquidity pools.

8. Calibration of Key Price Levels

• Monthly Levels: Round to the nearest 5, 10, or 0 levels to calibrate premium and discount arrays.
• Directional Bias: Form a monthly bias based on analysis to guide weekly chart insights.

Example: Australian Dollar (AUD)

• Seasonal Tendencies: January, March, June typically have a bullish tendency.
• Quarterly Shift: Look for shifts in trend every 3-4 months.
• Interest Rates: Compare Australia's higher interest rate with the US Dollar's rate.
• Market Structure: Identify versus Dollar index (DXY) using SMT divergence.
• Key Levels: Define key levels using order blocks, rejection blocks, and liquidity pools for monthly analysis.

Conclusion

• Efficiency: While the process sounds detailed, it becomes quick with practice.
• Frequency: Conduct this analysis monthly to stay in sync with market trends.
• Next Steps: Next teaching will focus on how to transition from weekly to daily charts for intermediate-term analysis.