ICT Core Content Month 1 Notes

ICT Mentorship Core Content Month 1 Notes

The ICT Core Content Month 1 Notes is a comprehensive resource for traders who are new to Smart Money Concepts (SMC). The notes cover the fundamental concepts of SMC, including order blocks, fair value gaps, liquidity pools, and equilibrium. They also discuss the different contexts or frameworks in which these concepts can be used, such as expansion, retracement, reversal, and consolidation.

4 Elements of Trading Setups

1.Expansion:

Price goes rapidly away from the equilibrium level. Whenever a price breaks through a level, it indicates that market participants are willing to divulge their independent repricing model. Market participants exit the order block near the equilibrium le

2.Retracement:

When the price re-enters a recent price range, it suggests that market makers are open to adjusting prices to levels that have not been efficiently traded for fair value. What we focus on in terms of price are the Fair Value Gap (FVG) and liquidity voids.

3.Reversal

A reversal occurs when the price changes direction, moving opposite to its current trend.

Price moves against the IPDA direction, indicating Smart Money’s liquidity run and potential large moves. Observe Liquidity Pools near old highs/lows.

4.Consolidation:

Consolidation is when price is moving inside a clear trading range.

When prices are consolidated it shows the market maker placing orders on both sides of the market. This is mainly due to manipulate the un informed money

Reference Points in Institutional Order Flow:

  • Order Blocks: Significant levels where price reacts, often providing trading opportunities.
  • Fair Value Gaps & Liquidity Voids: Price gaps suggesting objectives for profits or new setups.
  • Liquidity Pools: Areas of low resistance leading to liquidity, common around old highs/lows.
  • Equilibrium: Balanced market state, crucial for understanding market sentiment.

Understanding Market Efficiency Paradigm:

The Role of “Smart Money”: Smart money influences price and uninformed traders.

ICT Mentorship Core Content Month 1 Notes

The Interbank Price Delivery Algorithm (IPDA): AI-based efficient pricing mechanism with manipulation potential.

True Day Daily Range and “Dead Time”: IPDA defines daily range; certain periods are “dead time.”

How Market Makers Condition The Market

Context of Framework Surrounding the idea

  1. Expansion=Judas Swing
  2. Retracement=New York Session
  3. Reversal=London Swing
  4. Consolidation=Asian Range.

Interbank Price Delivery Algorithm Price show daily these phenomenon due to the IPDA  (Inter Bank Price Delivery Algorithm)

General Daily Price Movement Structure:

  • Equilibrium
  • Manipulation
  • Expansion
  • Reversal
  • Retracement
  • Consolidation

Everything starts with a consolidation Next stage is always an expansion, impulse price swing up or down Once were in the expansion phase it can retrace to an order Block it left behind or it can reverse and once it reverses we move back into another expansion and then it goes back into a consolidation

Certainly! Here’s a comprehensive table that covers all the possible and not possible transitions based on the given rules:

Stage TransitionPossibleNot Possible
Consolidation → ExpansionPossible
Expansion → RetracementPossible
Expansion → ReversalPossible
Retracement → ExpansionRetracement → Reversal
Retracement → Reversal
Reversal → ExpansionReversal → Retracement
Reversal → Retracement
Retracement to where it expanded from → Expansion → Another Leg Up/DownPossible
Retracement to where it expanded from → Expansion → ReversalPossible
Stage TransitionPossibleNot Possible
———————————————–—————————————–————————————
Consolidation → ExpansionPossible
Expansion → RetracementPossible
Expansion → ReversalPossible
Retracement → ExpansionRetracement → Reversal
Retracement → Reversal
Reversal → ExpansionReversal → Retracement
Reversal → Retracement
Retracement to where it expanded from → Expansion → Another Leg Up/DownPossible
Retracement to where it expanded from → Expansion → ReversalPossible

This comprehensive table highlights the possible and not possible transitions between different stages, as per the provided rules.

Possible Phase Transitions:

  • Consolidation → Expansion: The initial phase often begins with consolidation, where price movement remains within a narrow range. This can transition into an expansion phase, characterized by increased activity and movement as traders react to new information.
  • Expansion → Retracement or Reversal: Within the expansion phase, the market can either experience a retracement, where prices pull back temporarily before continuing in the same direction, or a reversal, where the trend changes direction entirely.
  • Retracement → Expansion or Reversal: A retracement, which involves a temporary pullback in prices, can be followed by either an expansion phase or a reversal, depending on how traders react to the retracement.
  • Reversal → Expansion or Retracement: Following a reversal, where the trend direction changes, the market can enter either an expansion phase or a retracement, as traders adapt to the new direction.
  • Expansion → Retracement → Another Leg Up/Down: After an expansion phase, a retracement may occur, followed by another price movement in the same direction, often resulting in another leg up or down in the overall trend.
  • Expansion → Reversal: In the expansion phase, a trend reversal can occur, leading to a shift in price direction.

Not Possible Phase Transitions:

  • Consolidation → Reversal: A direct transition from consolidation to reversal is not likely, as consolidation represents a phase of price stabilization, whereas reversal involves a significant change in trend direction.
  • Consolidation → Retracement: Similarly, a direct transition from consolidation to retracement is unlikely, as consolidation involves a range-bound price movement, while retracement implies a temporary pullback in an existing trend.
  • Consolidation → Expansion → Consolidation: After an expansion phase, transitioning directly back into another consolidation is not a common occurrence. The expansion phase typically leads to further price movement or potential retracement/reversal.
  • Retracement → Reversal: Transitioning directly from a retracement to a reversal without an intermediate expansion phase is improbable, as retracement represents a temporary pause within a trend, whereas reversal involves a fundamental shift in trend direction.

These rules help describe the logical sequence of market phases and provide insights into the dynamics of price movements.

Understanding the Daily Price Movement of Financial Markets

  1. Asia Consolidation: The day often starts with a period of price consolidation during the Asian trading session. This phase reflects a cautious approach as the market digests overnight developments.
  2. Expansion and London Reversal: As the day progresses, the market typically transitions into an expansion phase. This is followed by a potential reversal in trends during the London trading session, which often establishes the high or low of the day.
  3. New York Consolidation: The New York trading session may witness a smaller consolidation phase, characterized by narrower price ranges as traders assess the evolving sentiment.
  4. Retracement and Further Expansion: Around 800-830 GMT, a retracement might occur, leading to a brief pullback. This is often followed by another phase of expansion as price movements regain momentum.
  5. Late Reversal and Final Consolidation: The day could conclude with a reversal in trends and a subsequent consolidation phase as traders wind down their activities.

PhaseDescription
Asia ConsolidationCautious price movement during the Asian session, evaluating overnight news.
Expansion and London ReversalIncreased activity, potential reversal in London session, establishing high/low of the day.
New York ConsolidationNarrower price ranges in New York session as traders assess sentiment.
Retracement and Further ExpansionPullback followed by renewed price momentum around 800-830 GMT.
Late Reversal and Final ConsolidationLate-day reversal in trends, concluding with consolidation as trading winds down.

This pattern reflects the interplay of global trading sessions and trader behavior throughout the day.

When you have HTF bias understood it becomes easy to know what price will do

The weekly price movement in financial markets follows a recurring sequence:

  1. Sunday Open Consolidation: The week often begins with price consolidation on the Sunday open, reflecting a cautious approach as traders assess the weekend developments.
  2. Monday Expansion: As the trading week gains momentum, Monday is typically marked by an expansion phase. This reflects increased activity and movement as traders react to new information.
  3. Tuesday Reversal: The following day, Tuesday, often witnesses a reversal in price trends. This can be attributed to traders reassessing their positions after the initial expansion phase.
  4. Wednesday Expansion: Midweek, the market tends to experience another expansion phase. This reflects a renewed bout of activity and movement in response to evolving market dynamics.
  5. Thursday Consolidation: On Thursday, there’s often a consolidation phase. Price ranges may narrow as traders assess the overall sentiment and prepare for the end of the trading week.
  6. Midweek Friday Reverse or Retrace: As the week approaches its close, Friday may see a reversal or retracement in trends. Traders might adjust their positions before the weekend, leading to a shift in price direction.

In summary, the weekly price movement follows a pattern of consolidation, expansion, reversal, expansion again, consolidation, and a potential reverse or retracement, all of which are influenced by trader behavior and market dynamics.

DayPhaseDescription
SundayOpen ConsolidationCautious approach as the week starts with price consolidation.
MondayExpansionIncreased activity and movement in response to new information.
TuesdayReversalTrend reversal as traders reassess positions.
WednesdayExpansionRenewed activity and movement midweek.
ThursdayConsolidationNarrower price ranges as traders prepare for the week’s end.
Friday (Midweek)Reverse or RetracePotential reversal or retracement before the weekend.

This weekly cycle reflects the rhythm of market sentiment and participant actions throughout the trading week.

6. Practical Trading Strategies for New Traders:

  • Utilize Old Highs and Lows for Buy/Sell Stops.
  • Identify Liquidity Pools for efficient trade entry.
  • Recognize Three-Candle Patterns for swing highs/lows.

7. Other Key Concepts:

  • Fair Value Gap :Price returns to levels it moved from; suitable for profit-taking.
  • Low Resistance Liquidity Run: Price encounters little resistance on its way to areas of liquidity.
  • Market Protraction (Judas Swing): Sudden move opposite to daily range direction; indicates micro expansion.

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