How to Determine Daily Trading Bias and Handle Consolidation | 2022 ICT Mentorship Episode 7

TL;DR

Determine daily trading bias by reading the daily chart for liquidity sweeps, market-structure shifts, fair value gaps, and the current position within a defined range. ICT illustrates the process with the NASDAQ and explains why consolidation around equilibrium may require waiting for more price action after the 9:30 a.m. New York open. Read on for the specific bearish-bias framework, leverage guidance, and approach to imperfect trades.

Transcript

all right folks welcome back this is the seventh episode for the ICT mentorship on YouTube 20122 this lecture is going to be dealing with daily bias and consolidation hurdles all right folks we're looking at the daily chart for the NASDAQ and if you're looking at trading view under the NASDAQ selection so it's the continuous contract that way it ma... Read More

Key Insights

• Daily trading bias is established by analyzing the daily chart for key price levels and market structure shifts.
• The key to successful trading is understanding liquidity runs and recognizing consolidation patterns.
• Market dynamics and intermarket relationships play a crucial role in determining bias and executing trades.
• Using lower time frames helps in identifying precise entry points and managing trades effectively.
• Controlled leverage is essential in managing risk, especially when trading against the established bias.
• Experience and practice are necessary to overcome challenges in reading market bias and executing trades.
• Traders should embrace imperfection and focus on the overall profitability rather than individual trade success.
• The use of intermarket analysis, such as comparing indices, can provide additional insights into market movements.

Questions & Answers

Q: How do you determine daily trading bias?

Start with the daily chart and identify liquidity being taken, a shift in market structure, and the range defined by a significant high and low. When structure shifts lower and price retraces into a fair value gap, ICT anticipates lower prices each day and hunts for intraday short setups.

Q: How does ICT establish a bearish daily bias?

ICT describes a setup in which market structure shifts lower, price trades back into a fair value gap, and lower price objectives remain available. During that move, he approaches each day expecting a sell scenario where he can sell short and potentially buy back at a lower price.

Q: What happens after sell-side liquidity is taken?

After price trades below an old low and removes sell-side liquidity, ICT says it is likely to retrace into the range defined by the selected high and low. In the NASDAQ example, price returned to a premium above equilibrium, moved into a discount, bounced from the old low, and then consolidated around equilibrium.

Q: Why does consolidation around equilibrium make daily bias difficult to read?

Consolidation around equilibrium can prevent a clear directional reading because price is centered within the identified range. ICT says that even he sometimes has no clear read in this condition and must demand more price action and information from the market.

Q: When should a trader wait for more information before choosing a bias?

A trader should wait when the daily chart does not provide a clear directional read, particularly during consolidation around equilibrium. ICT looks for additional information from price action after the 9:30 a.m. New York open before refining the intraday plan.

Q: How should lower-time-frame trades relate to the daily bias?

The daily bias provides the directional expectation used when moving to lower-time-frame charts. With a bearish bias, ICT hunts intraday sell scenarios; a long position would be countertrend and therefore calls for reduced leverage.

Q: How much risk does ICT suggest for traders who are still learning?

ICT says beginners should risk less than 1%, suggesting about one-half percent or one-quarter percent. He recommends a demo account and very low leverage, or deleveraging, so early results do not create fear, toxic thinking, or bad execution habits.

Q: Does a bearish daily bias mean every candle must close down?

No. ICT explicitly says that not every day will produce a down-close candle, and a short trade may lose even while the broader bias remains bearish. Traders should give up the expectation of perfect entries, exits, position sizes, assets, and outcomes.

Summary & Key Takeaways

• Daily trading bias is determined by analyzing the daily chart, focusing on key price levels and market structure shifts. Traders should pay attention to liquidity runs and consolidation patterns to anticipate price movements. Understanding intermarket relationships and using lower time frames for precise entry points are crucial for successful trading.

• Managing risk through controlled leverage is essential, especially when trading against the established bias. Traders should embrace imperfection, focusing on overall profitability rather than individual trade success. Experience and practice are necessary to overcome challenges in reading market bias and executing trades effectively.

• Intermarket analysis, such as comparing indices, provides additional insights into market movements. By understanding market dynamics and using a systematic approach, traders can make informed decisions and improve their trading performance. The video emphasizes the importance of experience, practice, and embracing imperfection in trading.