Speaker A
It's important to know where the market's reaching for and then look for these imbalances in price.
Learn how to trade using ICT's fair value gap and liquidity concepts with practical examples and mindset tips.
Ask about this video. Answers come from its transcript only — with the timestamp, so you can check them.
Generated from the transcript and can be wrong — check the timestamp.
Key Takeaways
- Fair value gaps and liquidity pools are critical areas to watch for potential market moves.
- Multiple time frame analysis helps confirm market structure shifts and trade setups.
- Traders should be flexible with their bias and know when to step aside if conditions are unfavorable.
- Understanding market narrative and algorithmic behavior aids in predicting price direction.
- Trusting your own analysis and avoiding external noise is essential for consistent trading.
What the video covers
- The video explains how to identify fair value gaps and imbalances in price to anticipate market moves.
- It emphasizes understanding where the market is likely to go based on liquidity draws rather than entry patterns.
- The presenter uses multiple time frames, primarily 15-minute and 5-minute charts, to analyze market structure shifts.
- The importance of narrative and algorithmic market behavior is highlighted to understand price action.
- The video covers how to adjust or abandon a trading bias based on market signals and when to move to the sidelines.
- Key concepts include watching for fair value gaps, liquidity pools, and shifts in market structure as trade triggers.
- The presenter shares real-time examples of trading decisions and how to manage positions during intraday sessions.
- Special attention is given to trading during the New York lunch hour and afternoon session setups.
- The video distinguishes between scalping models and day trading approaches using ICT principles.
- Mindset advice includes trusting oneself, avoiding panic, and not relying on others' opinions when trading.
Chapters
- 00:00Introduction to Fair Value Gaps and Market Imbalances
- 01:04Hourly Chart Analysis and Market Structure
- 02:02Key Topics and Trading Bias Adjustments
- 03:07Liquidity Pools and Premium Areas
- 04:06Institutional Liquidity and Algorithmic Market Behavior
- 05:09Market Reaction and Avoiding Shorts
- 06:0015-Minute and 5-Minute Chart Analysis
- 07:43Position Management and Trade Exits
- 08:50New York Lunch Hour and Afternoon Session Setup
- 10:03Scalping Model vs Day Trading Approach
Full Transcript — Download SRT & Markdown
Speaker A
And then what makes it a fair value gap is the fact that it's coming down into this area here or inside this area here or this area here or this area here.
Speaker A
So, they're all fair value gaps. It's a fair value to buy it if you're bullish. This idea here.
Speaker A
So, initially on Twitter, if you were following me on that platform, I mentioned how I was going to start the day looking for a potential run to 4070.
Speaker A
Okay, so 4070 was my initial draw on liquidity to see if it would want to reach down into that level. If you look in this area here, that's my fair value gap.
Speaker A
And you can see we traded down into it here. And today one more time, we traded down into it, left these relatively equal lows in place, and then started to move higher.
Speaker A
All right, here's the hourly chart.
Speaker A
You can see how we did not take these relatively equal lows out. I wanted to see it go down there.
Speaker A
That's what I was looking for to see it try to draw down into that. It didn't do it. The main takeaways before I get into it is this.
Speaker A
What did I do and how do I go about abandoning a specific bias? How do I change gears if it is applicable? Sometimes it's not applicable to reverse. And this means move to the sidelines and just say I'm not going to
Speaker A
do anything. And what are the characteristics that would lead to a bias that is changed?
Speaker A
And how do you use that logic going forward? And how to navigate the New York lunch hour.
Speaker A
Okay, so we're going to tackle those topics in this video.
Speaker A
All right, so notice that we had this low here taken with this run.
Speaker A
Then this low was taken with this run. And this low was taken with that run.
Speaker A
So, notice what we are seeing. We're seeing multiple lows get taken and then the market reverses.
Speaker A
While offering really no high probability shorting opportunity. The 4070 level never got tagged. Liquidity left in place.
Speaker A
Okay? Previous day's high, which is here. That high was not traded to. So, we have a high of 4168 and a quarter.
Speaker A
And then we have a fair value gap over here. So, you have two premium areas that may be a draw on liquidity. It takes us up in here and maybe even run above.
Speaker A
These are all the equal highs. All right, on the 15-minute time frame, you can see how we just kept going lower than the previous lows.
Speaker A
And then finally we had a run higher. So, we had a short-term shift in market structure relative to the 15-minute time frame.
Speaker A
Remember that's our bellwether chart. So, it runs higher, creates a fair value gap in here, and trades down into it here. But, what I'm teaching you is where is the market likely to go to?
Speaker A
Okay?
Speaker A
I'm not trying to teach you entry patterns with an importance that getting in at a specific price level is the most important. I'm teaching you how to determine where the market's likely to go to next. Where is that draw on
Speaker A
liquidity? Now, there's a lot of different ways that that is calculated on an institutional level.
Speaker A
Okay? And how it's determined. It's not buying selling pressure.
Speaker A
Okay? [laughter] But, it is algorithmic.
Speaker A
What is narrative? Narrative is the understanding of what price should do, why, and what things will it encounter to prove that the narrative that you are assuming is in place is in fact underway.
Speaker A
I was looking for 4070 today to see if you can get down outside the range of that daily fair value gap.
Speaker A
And we failed to do so, and then the market shifted higher. Now, the whole time I'm looking at the market, it's not giving me any kind of short.
Speaker A
I'm not comfortable taking any kind of short. And all of a sudden the market does this.
Speaker A
Okay, no panic. No, I'm missing a move. No, you know, calling somebody else or reaching out to somebody on a social media platform and ask them, "What do you think's happening?"
Speaker A
I don't worry about anybody else's opinion, and you shouldn't worry about anybody else's opinion, either. You're going to learn how to trust yourself.
Speaker A
So, we had created a fair value gap here on the 15-minute time frame. So, right away, that is your area to watch and see if price supports
Speaker A
a run. If it digs into that and starts to repel higher, and we take out this short-term high, that is enough to set up a stage for the afternoon trend. Now, I'm not looking at and this is where one
Speaker A
of the instances where resistance broken turns support, but it digs a little bit past that.
Speaker A
Okay?
Speaker A
Notice that it goes down into my fair value gap, not stopping dead in its tracks right at the high.
Speaker A
Notice that? So, I'm not looking at support and resistance. I'm looking at the fact that we went through this short-term high, created an imbalance, and then we traded down into that. And then when we get in this area
Speaker A
here, I'm interested in looking at intermarket relationships. I want to study real accumulation and distribution.
Speaker A
Okay, how do I do that? I've already told you. We're going to go into a lower time frame, 5-minute chart. All right, so here's the 5-minute chart.
Speaker A
As you can see, the market did, you know, drop down. It did a real quick sudden move after I tweeted saying that my initial interest was 470 and it started drawing lower.
Speaker A
And then one more time here at 10:00 after 9:00, took out that short-term low there, and then it started rallying higher at 9:30's opening.
Speaker A
And then we dig down into that 15-minute time frame fair value gap. So, it doesn't look like a fair value gap in here. Notice that?
Speaker A
But, I want you to go back to your 15-minute chart. This is where the work is required on your part.
Speaker A
In this price run from here to here on that 15-minute chart, look at your chart and shade that in on the 15-minute time frame. And then drop down into the 5-minute and you'll see how it drops into that shaded area.
Speaker A
So, we're working from a higher time frame 15-minute bellwether chart into a 5-minute chart.
Speaker A
All right. So, anyway, it digs down into that 15-minute time frame fair value gap here and then rallies higher.
Speaker A
Then, it starts to trail off and goes down into this imbalance right here. Now, in that little stinger video, I draw this little area out with a rectangle and I do a small little box up here.
Speaker A
Okay? And what that box is is if it goes down into here and starts to rally, I'm going to take half that position off once it gets into this area here again.
Speaker A
Okay? I don't need to go above this short-term high. So, that's what that little red rectangle represents when you see me doing that stinger little vignette video in my Twitter feed.
Speaker A
I'm drawing your attention here. So, when we go from this level here, if it starts to rally up once it gets back up in that area again, I'm going to take half the position off.
Speaker A
And then see if it can run above that high. And I want to talk a little bit about New York lunch.
Speaker A
Okay? I gave you rules of engagement when you're trading the afternoon session. And primarily what I gave you for the model was a morning session idea. But, because other people are asking me and inquiring, "Hey, can you teach us a
Speaker A
little bit about the PM session or the afternoon setup?" This is the opening price at midnight.
Speaker A
That's what that level is. Now, I teach if we're bullish, we want to be buying at or close to the opening price.
Speaker A
Okay? Now, here's one of those advanced ICT things.
Speaker A
Okay? [laughter] If you know that the market is likely to go down to go up, then you can wait for price to give you this type of setup right here, where it
Speaker A
goes down, shift in market structure, come back down into a 15-minute time frame fair value gap.
Speaker A
This is intraday or day trading. It is not the model I gave you where it is a scalp. Essentially, that's what that is.
Speaker A
The model I've provided for you for this YouTube channel is a scalping model. That's exactly what it is. But, if you're going to day trade daily range, you're going to be using the 15-minute 5-minute chart.
Speaker A
And there it is. Now, you can use that model that I gave you for entries and scalping, you can use that as your entry criteria, but with the logic and narrative that you're going to be trading the
Speaker A
my attention in the in the video here to go back what I mentioned moments ago, that that's an old imbalance that may stall here. It may fail here.
Speaker A
It may just consolidate and then run for previous day's high, you know, Wednesday. But anyway, it's taking out that short-term low on a retracement. But if it was consolidating into lunch, I would look for the swing lows during the lunch
Speaker A
hour and then wait for the drop down, sweep them like it's doing here, and then rally. But because this is a retracement going into lunch, I want to see it retrace back down into a discount. How's that done? From that low
Speaker A
to high. So, the algorithm reprices to a discount once it gets to here, then it does what?
Speaker A
Creates that short-term low, rallies a little bit, leaves smooth highs in here. So, what is that? They think that is resistance. So, anyone that's short, they trail their stop loss here, and it drops one more time right below
Speaker A
that short-term low. What's below that short-term low? I have already told you here. Sell stops. And you're probably going to say, "Well, why don't you just trade the model, Michael? Why don't you just teach us how to use the model?" I am.
Speaker A
When the model speaks, I'm going to show you. But, I'm also teaching you how you still learn to read price when the model isn't giving you a setup. Because every single market isn't going to give you that model's entry, setup, and
Speaker A
framework every single day, every single session. And because I'm the author of these concepts, I don't have a limitation to just that one. So, is it beneficial for you to have me say nothing when the model says nothing?
Speaker A
Or is it beneficial for me to teach you how to read price action, how to get in sync, and learn how to change gears when the market shows you it's time to change gears?
Speaker A
Can they use time frames outside of the 1 through 5-minute chart? But, use the same logic. Yes.
Speaker A
Yes. That's all I'm trying to do. I'm trying to teach you a mindset that on the lowest time frame, it gives you a lot of experience, a lot of setups, a lot of things to practice. But, don't limit yourself to that because there's
Speaker A
so many other ways to trade using what I'm teaching you, and you can scale to whatever time frame, whatever whatever chart you want to use it on.
Speaker A
So, let's talk a little bit about narrative. When the market shifted here bullishly, and it came back down into that 15-minute time frame fair value gap, and then rallied, this right here told me that they want to set this up for a
Speaker A
bullish run in the afternoon. Why? Go back to that daily chart. Remember we were inside this shaded area here? That's the fair value gap that I did not shade when we were looking at the daily chart naked at the beginning
Speaker A
of the video. If you shade that on your own chart, you'll see when you drop down to the lower time frame, 5-minute chart, yours will look like this.
Speaker A
So, it dips down into that lower end of that fair value gap, and then rallies, trades back down into the 15-minute time frame fair value gap, which is what that is here, then it rallies. Now, right away in my
Speaker A
mind, this tells me that the algorithm is priming itself for an afternoon run to potentially previous day's high, which is this level up here, okay?
Speaker A
If I'm thinking that this move here to here and then retracing down is setting up an afternoon run to potentially this level here by the close of the day, I want to be like smart money and do what?
Speaker A
Buy sell stops. That is buying sell-side liquidity. My order as it's underneath here, I fill right here.
Speaker A
I'm buying it on this candle right there. And then you probably don't believe me. I'm going to show you the candlesticks in a minute. But I drop down into it. I go long there.
Speaker A
And then I wait for it to rally up. So it starts to rally up. It consolidates a little bit in here and then starts to almost come out above this high and it creates a little small little consolidation and then pumps it
Speaker A
through the old high and the 4140 level. Creates a short-term high, rallies once more. I'll draw a line on here cuz I want to see if price can be supported by that down close candle. That's a order block. It trades through it. And once it
Speaker A
did that, I nixed the trade. This is an optimal trade entry once more. Pushing it higher, but still did not hit the previous day's high. Now, think about this, folks.
Speaker A
Think. At the beginning of day, I tweeted public knowledge I want to see initially if it wants to make a run down to 4070.
Speaker A
Okay? And as soon as I tweeted it, it was like off to the races it goes.
Speaker A
Right in here. Boom. And then boom. And then drifted down to it here and made a low of 4076 even.
Speaker A
Didn't break out below the fair value gap that's formed on the daily chart. That's again that shaded area here.
Speaker A
And I'd have this tweet here so you can see that's the time at 10:35. That's when I said note yesterday's high. So that is there on this candle.
Speaker A
And you 10:35, I'm tweeting note previous day's high. So, I'm drawing your attention up here.
Speaker A
So, if a retracement comes back down into what I shared in that video beforehand, before it even came down here, I'm showing you this.
Speaker A
And the I gave you this level up here as previous day's high in chart format in the video showing you that this is where my my mindset is. I'm thinking think up here. This is where it's going to draw
Speaker A
to likely. And it's going to retrace down to this level here. So, right away this should tell you that for the folks that are paying attention, ICT says that it's probably going to go up in the afternoon.
Speaker A
And it's probably going to gravitate towards this level up here, which is the previous day's high. And he's showing this level here where he's taught optimal trade entry, fair value gap. When it goes down to here, it's in what? A discount. So,
Speaker A
we're moving from a discount to buy side liquidity. Now, think about what I've shown here.
Speaker A
I was wrong on this level. And I was wrong on the 4070 level. But, I was able to trade and take the lion's portion of the move in the middle.
Speaker A
That's all you need. You don't need to be in here doing the absolute highest high and the lowest low. You don't need to do that.
Speaker A
Okay? The folks that are asking me, "Can you teach me to do that?" You don't need to. Look at this.
Speaker A
Wouldn't this keep you from going hungry? [laughter] I mean, I think it would. I mean, this is good eating here. I mean, this is a nice move. It makes sense. And I don't need this level to get profitable.
Speaker A
Old high? Yes. Yes. And yes. Adding the little compare tab, it's a little plus symbol up here if you go into your TradingView, click on it, it'll give you the drop-down menu for what instrument or market you want to compare it to.
Speaker A
And you use NQM2022. This is going to change to NQU 2022. 2022. And this symbol for S&P will eventually, in a few days, change to uh ESU42022.
Speaker A
And it will be basically tracking the September delivery contract of both indices. Right now, we're in the month of June and it's about to roll over. So, what we do is is we monitor uh chart I'm sorry, barchart.com and
Speaker A
whenever the open interest is larger in the September contract than that of the June contract, that's when I roll over.
Speaker A
So, that's how I do it. Um it's a little different from everybody else, I'm sure, but that's what it is I'm doing when I'm rolling over into the next month.
Speaker A
Because these months or these contracts, they expire. Okay, so June won't be traded anymore in a in a couple days and September will. And we'll trade September until a week or so into September and then we'll roll over to
Speaker A
the December contract because September will expire. If we know that this area down here is a discount and we know this is an imbalance, fair value gap it trades down into a pool of liquidity below that low is sell stops and I want
Speaker A
to buy sell stops. Like I've mentioned here, I'm buying the sell stops inside the fair value gap during a classic buy day, which is open at midnight, trade down, create the low of the day, rally, and then creates an
Speaker A
optimal trade entry or fair value gap or you're going to buy the short-term low during SMT divergence.
Speaker A
Okay, so there's real accumulation here between the Nasdaq and S&P. So, this tells me that the Nasdaq is failing to go lower, so it's under accumulation and this is just a stop hunt below that short-term low. Check this out. A lot of you know how to use
Speaker A
optimal trade entry. You'll use the low here to the high, pull your fib up, 62 to 79% retracement level. If it goes down to that, then you'll buy it. Okay, that's one pattern.
Speaker A
But now watch what else there is. This is turtle soup. You have a low, lower low, buy the low that's being violated with optimal trade entry. See that?
Speaker A
Or you can just do this. Low high. Find the fair value gap below 50% level, which is a discount. Soon as it trades to the top level of it, hit it there.
Speaker A
Buy it there, stop below the lower low. Or level here. There's your There's your pattern.
Speaker A
See that? Or you can do this. You can wait for it to trade down into this like that and then find the swing high prior to it trading into the fair value gap and put a buy stop there as your entry.
Speaker A
And whatever the lowest low is after it hits that, that's where your stop loss would be just right below that. And you can be buying strength. That's not in my opinion the preferred entry strategy, but I just gave you a bunch of them.
Speaker A
But it's using what? Bias that has been corrected in calibrated based on what the market has done here at key times. Okay, so at at 9:30 the market does what? It brings us that volatility we look for.
Speaker A
So it shifts higher after we have another SMT divergence here. But we have that shift higher.
Speaker A
It's showing us real accumulation in the S&P. It rallies. I don't want to chase that.
Speaker A
I wait for it to come back down into a 15-minute time frame fair value gap, which it does.
Speaker A
Now, am I still buying it there? I could. I absolutely could do that, but I'm not willing to because I want to know that what I thought initially, which was 4070, it could still wipe out that low. It's
Speaker A
early on in the day. So I want to I want to wait for the market to really communicate to me that the algorithm is pricing in a narrative that the afternoon session is bullish.
Speaker A
I'm comfortable knowing what I'm looking for. What is that? Dealing range low, dealing range high, fib crossed it, 50% below that. Here's a fair value gap, trade down into it. I want to buy sell stops.
Speaker A
That's just me. I want to do it because it really fortifies the setup. It allows me to get in where the smart money will be buying.
Speaker A
That little movement here, I'm buying that very candle. I didn't buy the next candle. I didn't buy the candle before that.
Speaker A
I bought below that price. 41 10 and a half. I bought it at 41 10 and a quarter.
Speaker A
The things I'm teaching you, I'm pushing a button. It's a really real instance of happening, not something I took a trade and you never see that happening.
Speaker A
Okay? I'm showing you example after example after example of the things I'm teaching you and I'm using the logic. I'm not creating some falsehood. I'm not scamming you. I'm not frauding you. I'm not doing anything except for teaching
Speaker A
you what works, what makes these markets book. And you do it every single week.
Speaker A
The same kind of stuff all the time.
Topics:ICT tradingfair value gapliquiditymarket structureintraday tradingscalpingday tradingalgorithmic tradingtrading mindsetNew York lunch hour
