2022 ICT Mentorship Model Episode 3 (Notes)

Internal Range Liquidity & Market Structure Shifts

MARKET STRUCTURE BREAKS


A market structure break is a significant event that occurs when the established pattern of price movements in a market is disrupted, leading to a prolonged movement in a multi-day trend. When a market structure break occurs, it indicates a potential shift in the overall market sentiment and can lead to sustained price movement in a particular direction.

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MARKET STRUCTURE SHIFT

A market structure shift refers to a noticeable change in the pattern or behavior of price movements within a single trading day. It often leads to an intra-day draw, which means that price is drawn towards specific levels or areas of interest.

During a market structure shift, intra-day liquidity pools or intra-day fair value gaps play a crucial role. Intra-day liquidity pools represent areas in the market where there is a concentration of orders, such as buy or sell orders. These pools act as support or resistance levels and can attract price towards them during a market structure shift.

Similarly, intra-day fair value gaps refer to the price gaps that occur between the previous day’s closing price and the next day’s opening price. These gaps occur due to overnight news, economic releases, or other market-moving events. Intra-day fair value gaps can influence price behavior and draw price towards the fair value level during a market structure shift.

Traders closely monitor intra-day liquidity pools and fair value gaps as they provide insights into potential levels of support or resistance and areas where price may gravitate during market structure shifts. By understanding and effectively utilizing these intra-day dynamics, traders can make more informed trading decisions and potentially capitalize on short-term price movements.

AREAS OF INTEREST

When analyzing price for market structure shifts, there are specific elements to focus on:

For a Bullish Market Structure (MS) Shift:

  • Look for an old low or clean low that could act as a support level. This indicates a potential shift towards a more bullish sentiment.

For a Bearish Market Structure (MS) Shift:

  • Look for an old high or clean high that could act as a resistance level. This suggests a potential shift towards a more bearish sentiment.

Important Time Frame and Session for Liquidity

Highs and lows of the Asian Session (8:00 PM to 12:00 AM): This period is relevant for identifying liquidity pools and potential support/resistance levels established during the Asian trading session.

Highs and lows of the London Session (2:00 AM to 5:00 AM): This timeframe is important for determining liquidity pools and key levels of support/resistance created during the London trading session.

Highs and lows of the NY Session (7:00 AM to 10:00 AM): This session is significant for identifying liquidity pools and crucial levels of support/resistance that emerge during the New York trading session.

Intra-day highs and lows before Equity Opening at 9:30 AM: Pay attention to the price levels established before the official equity market opening. These intra-day highs and lows can provide insights into potential liquidity areas and support/resistance levels.

By analyzing price and liquidity in these specific contexts, traders can gain a better understanding of market dynamics and make more informed trading decisions.

Points of interest where Market Structure Shifts can occur are typically identified :

  • Areas of Support and Resistance: Market Structure Shifts often occur when price breaks through key levels of support or resistance e.g session high or low
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It is important to note that Market Structure Shifts should not be forced or anticipated without valid signals. Traders should wait for price action to validate their analysis before considering a Market Structure Shift.

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High-frequency trading algorithms often utilize Market Structure information on shorter timeframes, such as 5, 4, 3, 2, or 1-minute charts. These algorithms seek to capitalize on short-term price movements and may contribute to increased volatility during potential Market Structure Shifts.

Significant Market Structure Shifts often coincide with price taking out liquidity in the market. This means that when price surpasses key support or resistance levels, it can lead to a notable change in market dynamics, attracting more participation from traders and algorithms.

By monitoring these points of interest and paying attention to price behavior and liquidity dynamics, traders can identify potential Market Structure Shifts and adjust their trading strategies accordingly.

ICT Episode 3 Summary

  1. We find POI on Session high or low. We Anticipate Drawn of Liquidity either on buy side or sell side.
  2. After drawn on liquidity wait for market structure shift
  3. After MSS take enters on the base of FVG or imbalance align with our daily bias.

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