Secrets to High Reward Trading Setups

Introduction

• Sixth teaching of month two of ICT mentorship
• Focus on high reward trading setups
• Trading Plan Development series: foundational knowledge for new traders
• Importance of a mentor or framework for new traders

Common Questions from Traders

• Where to begin, what to focus on, what to study?
• Trading plan development series still valuable but more specific here
• Focus on forex trading

Key Concepts in Trading

• Not about trade signals, stop-loss, or trade management
• Focus on foundational thinking and process
• Importance of understanding the decision-making process
• Examples: bullish/bearish stances, selecting currency pairs

Trading Process

• Importance of having a structured, binary decision-making process
• Avoid emotional, psychological, impulsive trading

Patience and Trade Environment

• Patience is key
• Understanding trade environments: conducive or not for trading
• Trade parameters: what makes a trade a buy or sell?
• Clear, specific, and binary trading plans

Developing a Trading Model

• Need for organization and structure
• Defining executable criteria and understanding market conditions
• Experience and logging trades for future reference

High Reward Trade Setups

• Knowing what to look for
• Efficiency in trading comes from process-oriented thinking
• Avoiding reactionary or impulsive actions

Importance of Process-Oriented Thinking

• Developing a mindset that looks at the bigger picture
• Avoiding the rush to trade and focusing on scenarios that make sense

Big Picture Perspective

1. Macro Market Analysis
   • Inflationary vs. deflationary markets
   • Impact on currency and equities
2. Interest Rate Analysis
   • Higher vs. lower interest rates
   • Unexpected changes and trends
   • Interest rate differentials
3. Intermarket Analysis
   • Relationship between commodities and the US dollar index
   • CRB Index
4. Seasonal Influences
   • Bullish and bearish seasonal tendencies

Intermediate Perspective

1. Top-down Analysis
   • Monthly, weekly, and daily chart analysis
2. Commitment of Traders (CoT) Data
   • Commercial traders and smart money
   • Historical extreme levels
3. Market Sentiment
   • Extreme bullishness or bearishness
   • Various sources of sentiment analysis

Short-Term Perspective

1. Correlation Analysis
   • US dollar index SMT analysis
   • Correlated pair SMT analysis
2. Time and Price Theory
   • Quarterly, monthly, weekly, and daily effects
   • Time of day considerations
3. Interbank Price Delivery Algorithm (IPTA)
   • Institutional overflow and liquidity
   • Market efficiency paradigm

Process for High Reward Trade Setups

• Aligning big picture, intermediate, and short-term perspectives
• Framework for high reward trading setups

Conclusion

• Importance of process-oriented thinking
• Developing a structured, binary trading model
• Consistency and clarity in trading decisions
• Building a unique trading model based on these principles