ICT BIBLE
LINKS: start
Fib levels
Swing points
Market structure
Ranges – Premium – Discount
Low resistance run
Multi timeframe analysis
Liquidity
Manipulation
Phantoms
Liquidity void
Fair value gap
Order block
Price delivery arrays
Breaker block
Mitigation block
Institutions sponsorship
Market framework
OTE – Optimal entry
BOS –CHOCH
Types of liquidity
Phases of market
Market maker model
UNDERSTANDING OPTIONS
TRADE PLAN
Congratulations on choosing the most difficult business in the world.
Where people think that they can earn money with help of a computer/ mobile and pressing a few keys. Let’s do some
reality check and these things will not sound good but it will help in the end ultimately.
Trading is a profitable business but it also comes with lot of risk.
You have to understand that you can make a lot of money but it’s much easier to lose money that to earn it.
It’s now easy to earn to earn money and become a profitable trade and most can’t do it.
Most difficult thing is to learn discipline and implement it on daily basis.
Let’s take an example – There is a jungle and there is only 1 pond of water in jungle. Now every animal has to come to that
pond to drink water.
Now when sheep’s/ goats/ deer will come to drink water what will lions/ tiger/ fox do? They will eat them.
We are the sheep and goat and institutions are the wild animals.
This is also applies to all retail traders who keep their stop losses at same place and are ultimately taken out at same place.
Now only way to survive in the jungle is to change sides. Shift from sheep to wild animal.
How to do this. You already have the skill set explained in the course section where to look for trades but we will discuss
this in detail further.
Although 100 percent return is possible in trading we will start with 50% return annually. Now how you can achieve this?
Now what do you need to do every month?
See the table and see what happens when we target only % monthly.
We gain % monthly which is almost 50% annually.
Now if you use compounding told by you tubers and everyone in financial world (which means using previous month profit
in investing next month then you gain much more).
That return goes to 660%, but we won’t be using compounding. So we only need 4 monthly. Now this may look achievable
but 97% traders can’t achieve this. Now let’s take an example of 100 trades with Rs. 1 each and see what happens when
our accuracy changes.
100 trades taken - 1 rupee - 75 win 25 lose. So net will be 75-25 = 50 rupees.
100 taken with 25% accuracy : 25 win 75 lose. So net is 25-75 = -50 rupees.
Rupee 1 is your risk in trade and you are earning rupee 1 only. Now try to understand that what is to be done to make all
breakeven.
If you see 75% accuracy then we just need to win .33 times we lose and if you take 25 accuracy then we need to win 3
times we lose which means in 25% accuracy if we lose 75 rupees then we need to win 3 times our risk in those 25 winning
trades.
25*3 = 75 and 75*1=75 lost will be 0.
Net RR required
Now let's make things achievable. We are targeting 4% per month and there are 4 weeks in a month so we have to target
1% per week. When you remove Saturday and Sunday from month we have only 20-22 trading days in a month. So we have
to achieve 1% gain in 5 days per week.
If you have 1, 00,000 the 4% per month is 4,000 and weekly is 1,000. You need to earn only 1,000 per week.
If you have 10k then you need to earn 1 of 10k which is 100 per week.
So 1% per week. Now how to achieve this?
I want you to look for only 1 trade per week with only 1 risk per trade. You can only lose 1% of the capital in 1 trade.
What to do with 1 trade? How to take it? Which setup? Why 1 trade only?
We will take only 1 trade with 1% risk with target 1:1 in mind and we have to take a trade only after confirmation? We
need to see the confirmation on charts and entry after that check the results.
2.
Not everyone can win all trades. It’s a fact that you can never win all trades you take. So you need to do something
else
3.
1. Those who are not earning and are in -ve you need to go on daily charts in nifty 500 stocks and find those who
are near daily order blocks.
2. Those who are earning regularly can take index trades / any order block on any timeframe as per requirement and find
trades now when the price enters the order block no need to take direct entry. we will wait for confirmation that
institutions are participating in the move and how are we going to know that..? We need to go on lower time frames and
find out break of structures and then after confirmation we will take trades.
IMPORTANT – TERMS!
PDH - Previous day high
PDL - Previous Day Low
PWH - Previous Week High
PWL - Previous Week Low
BMS - Break in Market Structure
CBDR - Central Bank Dealer Range
CE - Consequent Encroachment (50% of FAIR VALUE GAP)
SH - Stop Hunt
SMS - Shift in Market Structure
MS - Market Structure
RTO - Return to Order Block/Origin
OB - Order Block
OTE - Optimal trade Entry
IPDA - Interbank Price Delivery Algorithm
FAIR VALUE GAP - Fair Value Gap
SMT - Smart Money Tool
LP - Liquidity Pool
PA - Price Action
IOF - Institutional Order Flow
BISI - Buy Side Imbalance Sell side Inefficient
SIBI - Sell Side Imbalance Buy Side Inefficient
COT - Commitment of Traders
NFP - Non Farm Payroll
HTF - Higher Time Frame
LTF - Lower Time Frame
AMD - Accumulation, Manipulation & Distribution
PO3 - Power Of 3
RN - Round Numbers
OSOK - One Shot One Kill
LVG - Liquidity Void Gap
EQH - Equal High
EQL - Equal Low
TS - TURTLE SOUP
WDYS - What Do Yu See
CME - Chicago Mercantile Exchange (Bond Market Open) BSL - Buy side Liquidity
SSL - Sell side Liquidity
OB - Order Block +OB - Bullish Order block -OB - Bearish Order block
PB - Propulsion Block
VB - Vacuum Block
MB - Mitigation Block
BRK - Breaker +BRK - Bullish Breaker -BRK - Bearish Breaker
LV - Liquidity Void
RTB - Return to Breaker
RR - Risk to reward
MS - Market Structure
IOF - Institutional Order Flow
DH - Daily High
DL - Daily Low
MH - Monthly High
ML - Monthly Low
MTH - Mean Threshold
LO - London Open
NYO - New York Open
LOKZ - London Kill Zone
NYKZ - New York Kill Zone
AMD - Accumulation, Manipulation, Distribution
TSBM - Turtle Soup Buy Model
TSSM - Turtle Soup Sell Model
SH - Stop Hunt
SL - Stop Loss
SP - Stops Purged
TP - Take Profit
HTF - High Timeframe
LTF - Low Timeframe
1D - Daily Timeframe
1W - Weekly timeframe
1M – Monthly
LIST OF CONCEPTSstart
SWING HIGH AND LOW - start
Swing high is a 3 candle pattern which has highest middle candle and has lower highs on both sides. Please note that color
of candles 1 and 3 does not matter – they can be bullish or bearish
WHAT IS SWING HIGH HIDING?
Swing low is a 3 candle pattern which has highest middle candle and has lower highs on both sides. Please note that color
of candle 1 and 3 does not matter – they can be bullish or bearish.
SWING LOW
Swing low is a 3 candle pattern which has lowest middle and has higher lows on both sides. Please note that color of
candle 1 and 3 does not matter – they can be bullish or bearish.
WHAT IS SWING LOW HIDING?
SWING LOW
Swing low is a 3 candle pattern which has lowest middle candle and has higher lows on both sides. Please note that color
of candle 1 and 3 does not matter – they can be bullish or bearish.
SWING POINTS start
What is daily doing?
.It is coming from premium to OTE discount on daily in a down trend only major high is safe. It can grab liquidity from
intermediate highs and fall back this is what it did.
Structure broken to downside. All these are intermediate and minor swings.
Now understand this trap?
Understand the trap? The intermediate high is created by IPDA so that people put stop losses above it. Always keep to
shifting structure.
If you are expecting start of downtrend we need at least hourly or 3hr BOS.
The main thing to understand is which major structure is, what is intermediate and what minor swing points are. If you go
to 1 higher time frame then it will be clear what is major swing and what is intermediate and what is minor?
Example of short term trend or minor trend
Example of intermediate trend or intermediate swing point
Example of major trend or major swings
Actually we are doing swing trading at every time frame. If there is BOS upwards and you are waiting for long entry at OTE
then you are waiting for buying at new higher low and target will be higher high.
This is swing trading right. This is what we have to do at every time frame. Isn’t it?
If you do it on 5m or 15m then it’s intraday, if you do it on hourly or 3hr then its short term. If done on daily or weekly it’s
swing trading. ICT concept applies on every time frame, that’s why it is important to understand the range you are trading
inside.
5m – 15min – intraday
1hr/3hr – short term
Daily/weekly – swing trading
Fib levels start
Types of trades start
Both trades will be confirming when there is BOS on 1 time frame lower than this time frame.
Swing point intermediate and trade types. Now see one thing if we taking trade 1 –
Will it stop till all lowest possible unmitigated bullish OB are mitigated? Will it stop at any support?
This is called low resistance run. There will be negligible resistance for price to come lower.
In trade 1 when we are bearish it can grab liquidity from above intermediate highs. Like this one –
We need to find original range. Look at this bank nifty trade.
Bank nifty is so bullish because it broke previous range.
How can I take trade 1?
What is needed to short bank nifty? This range!
Is there any signal from institutions that they want to go lower?
What should we expect to see that institutions want to take price lower? Simple BOS to downside on same time frame.
If it had made higher high then we would have taken that as required level for break for trade 2 we will wait bounce at OTE
then take long position.
We have breaker, we have fair value gap (fair value gap), we have to find different things from where it can bounce if there
is fair value gap(fair value gap) on 75m.
It will bounce from various areas to build liquidity but ultimately it will come to lowest possible unmitigated OB.
This was previous range so ICT says you can expect 50% entry on previous consolidation. 50% of previous range coinciding
with breaker. Like this we have to find things.
MARKET STRUCTURE start
Just understand this that in a bullish trend, point C is not a lower high till higher high is created. We don’t assume things
while drawing market structure one thing that none noticed is that how do we know first point A is low or high? Is the
chart starting from there?
Always see that where the chart is starting from to gain understanding of exact structure.
See this chart it’s making higher high and higher lows
If chart has started from here then this is correct.
Now see this
The point is always looking at left side of chart from where the structure actually is.
Check ALOK INDUSTRIES weekly chart please send latest BOS and structure on weekly. I want range high and low and BOS.
Now go to ALOK BUILDCON weekly
Now we will understand BOS and LIQUIDITY HUNT.
All the structure after point D is actually inside C and D.
See this
We are concerned about recent only.
Now see this
Do you think this is break of structure?
Yes, it has broken structure. Why do we consider this is broken because the body of candle has broken then structure
properly?
What about this?
This is not break of structure as body closed below the BOS line.
Now what about this?
This is also BOS but this is a weak BOS, so we need another candle for confirmation where body breaks the structure
properly otherwise we will consider this as liquidity hunt.
See the wick above the candle. It is very big and shows that we have grabbed SL of people who have shorted at C and have
kept stop losses above that and breakout traders also have been fooled. If many candles repeat like this, we will consider
this as liquidity hunt.
Now what about this?
This is a bearish candle; we need a green candle body to break structure.
What about this?
This is not a good sign because the next candle is closing below the green candle which shows immediate selling and when
you check it at a higher time frame both candle will form a wick. Sudden change is not a good sign. We can take immediate
short position as turtle soup as we are at crucial level and liquidity hunt can happen at this level. What price is doing at
these levels is very important. We can’t go long in this case. You have to find an area of discount to go long.
See the structure below which is not broken.
Now see this low
The low is actually the wick, now focus on these candles.
Do you see the candles going lower than previous low?
This is liquidity hunt from previous low. Now focus on bodies of low candle and the body of these 2 candles.
In ICT only bodies matter to institutions. It is higher low if you are checking that we are focusing on liquidity hunt, now
focus on this candle.
See how liquidity is grabbed
See how price is moving back from high to OTE and back to high
See this how liquidity is grabbed.
You can say institutions are more focused on bodies but the wicks also form structure. But for break of structure (BOS) the
body is required. Whenever there will be a swing point liquidity will be grabbed above or below and then trend will
change.
At least till OB above got the BOS and liquidity hunts. See below how highs and lows are formed and liquidity hunt works.
Blue is high or low and red is liquidity grabbed. Always remember that swing high and low is 3 candle formations.
See this axis bank chart
TIMEFRAMES start
Now think which time frame is this now?
Correct answer is whichever time frame you see this on. If you see this on 5 min take trade on 5min, if you see this on daily
take trade on daily, if you see this on weekly take trade on weekly. Don’t restrict yourself to a single time frame. The
preferred time frame is on you. How fast you can anticipate the chart and price. See the reversal confirmation and lower
time frame BOS required is different on each time frame.
If you see a trade on daily then waits for at least hourly reversal BOS or 3hr BOS, if you are trading 5min then go for 3min
reversal or 1min BOS, if you are trading stocks then at least 15min confirmation is good.
So it depends on how big order block is and how much confirmation is required to trade it.
BOS confirmation is always better as it shows the institutional sponsorship of the move.
If this chart is 75m chart and the price is going from D to F then should we miss short trade on 5m/ 15m?
We know that price will come down to order block. If it is un-mitigated it won’t reverse if you read market structure
correctly.
The moment you get BOS on 5m or 15m it is confirmed that it will go lower and we can short it.
So here it depends on you that which trade you want to take. You are bearish on daily and bullish on weekly. So you are
right in both cases. It depends on how fast you can see things on chart that’s why it’s important to see on each time frame
where you are inside the range.
From D to F you are bearish but then order block will turn the price and then again you will be bullish.
so how will you take bullish trade after the order block?
The BOS is upward direction after OB bounce is signal that price will now go in opposite direction.
So here recent BOS is downward.
See the bodies
It is BOS + liquidity hunt. See what is happening.
Remember a higher low is only valid when higher high is made.
Till D closes above B then only C is confirmed, otherwise we can see it as signal that market structure is changing.
This point is not higher low as higher high is not formed. There is a shift in market structure as higher high not formed and
higher high turned to a low. The market structure should be clear HH HL HH HL. So it’s clear that trend is changing. So BOS
will be taken from the point which we are not considering as higher low.
See this now:
What will it do after grabbing internal liquidity?
After internal liquidity it will grab external liquidity. But where is external liquidity?
There is external liquidity above high and below low. So which will it go for?
It depends on previous structure break. If it is bullish BOS then it will go after high and if recent BOS was bearish then it will
attack lows.
.
That’s why A and B points are also important. By this we know where institutions want to go. Most important this is market
structure. Just see structure on each time frame and you can trade the ranges within. In an uptrend the market will go for
internal to external again and again.
But when a protected low is broken or the reverse side liquidity is grabbed we know that trend is changing.
RANGES / PREMIUM / DISCOUNT start
Let’s say that we have a script in an uptrend
What’s the current range we are concerned about?
We are only concerned about recent BOS and recent high and low.
So mark this as follows
The high and low will be lowest low within the candle from where structure started.
Now understand most important thing, in this range some people think that the script is available at a cheaper and some
think that script is available at higher price that means is costly. Some might sell some might buy. But we are only
concerned with what institutions think about the price.
So we divide the new range into half and upper half is called as premium and lower half is called as discount.
Note that you can use Fibonacci tool to find thing. We keep extending the range till minor BOS is done.
If mitigation blocks happen in same time frames then we will short.
The inner structure is inside the range.
Now at premium institutions only look for shorts as the price is high in the range and at discount they only look for longs as
the price is low/ cheap in the range.
Now in an uptrend we need to understand this that we are trying to buy at a new higher low and our target will be high of
the range.
We will look for longs in uptrend as we expect the price to go up further. So what we are trying to do is catch a whole new
swing. Now let’s use Fibonacci tool to find an area where you can buy or expect the price to reverse from. Apply Fibonacci
from past to future (low - high in uptrend)
Now the levels between fib 0.618 and 0.79 is to look for reversal, which means that higher low will be formed at that point.
Why is this level and why not 0.236 or 0.50 because at that price the stock is at premium price not at discount. So
institutions will bring the price lower to an area of discount into discount area so that they can look for buys. The level
0.705 on Fibonacci tool is called as OTE – optimal trade entry.
Now when you understand about the order blocks and mitigation then you will come to know that the price will actually
come to lowest possible unmitigated order block and then reverse. So till the time you learn that or till you can’t find an
unmitigated order block then look for buys or shorts between 0.618 and 0.79 fib levels.
For downtrend or shorts
Now how do we find targets?
IN UPTREND TARGETS
1. First target is high – because trend can change after grabbing liquidity from above high.
2. Second target is -0.272 fib level
3. Third target is -0.618 level
4. Last is complete similar swing which -1 fib level.
IN DOWNTREND TARGETS
1. First target is low – because trend can change after grabbing liquidity from above low
2. Second target is -0.272 fib level
3. Third target is -0.618 fib level
4. Last is complete similar swing which -1 fib level.
So fib level should look like this.
See nifty daily –
Simple BOS and OTELook ABFRL
See here why the taken as first target – the price can reverse from here
Now why to miss this short –
How can we take this short trade? What is the confirmation?
After minor BOS we can take trades. These are two things which can happen now. How will trend change? The trend will
change by two things.
1. Breaker block
2. Mitigation block
Both the cases will have BOS downward. See the structure you need a lower low.
Practically breaker stop loss is 0. It reverses from the same level and this is the big difference between breaker and
mitigation.
Breaker is almost line but mitigation block is an order block.
On more thing if you look at Wyckoff accumulation and distribution then
AT DISCOUNT LEVEL – Accumulation will happen
AT PREMIUM LEVEL – Distribution will happen
But better to stick with market structure, see how this distribution happened at premium level
Most important you don’t need to see RSI or MACD to understand that stock is oversold or overbought, no divergence
needed. Now you know breakout traders always buy at high (premium) and sell at lows (discount), but we do opposite.
Sometimes liquidity above or below intermediate highs and lows can be taken out before going in same direction. You can
take trades based on the OTE with SL below the low and target as high. You will get 1: 1:5 trades with this. All concepts
have more than 70 percent success ratio.
OTE – OPTIMAL ENTRY start
OTE - Optimal trade entry is an optimal location for institutions to exit the previous opposite trades and add more trades in
same direction. Although it’s not a magic number or any Fibonacci magic, it’s just simple calculation that institutions will
average their trades at the prices which make the average of total quantity in their favor. Example : If they buy some
quantity on Rupees 100 per share and they want to come back again to add more quantity, it’s quite obvious that they will
come as lower as possible so that average of total quantity gets as lower as possible. So they will bring the price down as
lower as possible. We can spot the exact level by finding the lowest possible unmitigated Order block. It doesn’t matter
that its between .618 or .79 fib, while buying they will come back to lowest possible unmitigated order block and while
selling they will come back to highest possible unmitigated Order block
General OTE entries for general people who can’t find unmitigated order blocks.
The concept is to find buys below .618 levels as it will be at a discount price and overall average will be low or to sell above
0.618 levels at premium price so that overall average price is high.
CONCLUSION: The fib levels are just for reference to take entry if you don’t find a suitable order block. But when you learn
in detail about unmitigated order blocks, fair value gaps, liquidity pools and stop runs further in course then you won’t
need these fib levels. Just try to find farthest possible unmitigated order blocks in a range from High to Low and enter the
price will come to that.
Note: Important thing to note is that when trading 24 hours market like forex and crypto you should use original body to
body method for entries into order block but for NSE and Commodities use wick to wick method for using Order blocks.
LOW RESISTANCE RUN start
Low resistance means when the price moves in an uptrend on a particular time frame then nothing bearish will stop it or
reverse it, and when the price is moving in a downtrend then nothing bullish will stop it or reverse it, till something on daily
time frame hits it.
In short IPDA - INTER BANK PRICE DELIVERY ALGORITHM is most active on daily timeframe and the price will move from
daily support to daily resistance or vice-versa. Keep in mind these support and resistance is not retail support and
resistance. These levels will be discussed later in IPDA advance concept but we have to clear some basics before we go
further deep in topic. Just understand this that if a script on daily timeframe is moving from a bullish order block only
bearish order block will stop it or daily premium array will stop it nothing on any time frame lower can stop it. You may get
small bounce but again it will move up.
How far will it move? Till the level, it wants to achieve let’s say a script has given BOS on daily time frame.
You can expect the script to go up to daily range high without any problem till a daily premium level is reached this move
from low to daily high will be a low resistance run.
1. No supply zone can stop this
2. No resistance will stop it or reverse it.
Study this below chart from left to right.
Understand how everything is happening on daily chart
1. Daily BOS
2. Daily order block
3. Daily liquidity hunt on top
4. Then BOS on daily
5. Last move is drop from daily order block
Now the thing to understand here is that when if something is happening on daily time frame nothing on lower time frame
can stop it or reverse it and thus it has low resistance. So if price is coming down on daily it will come till a daily level freely,
and it is going up on daily nothing can stop it from going up. Not only order block, all premium and discount arrays will stop
it.
See this aarti industiries chart:
See Balkrishna chart
Bandhan bank
We are not talking about market structure here, see Bandhan bank it’s making lower lows but also following daily levels.
Just see the fall
See Dabur
See UPL why it has started moving up now.
Do you think any of these resistance or supply ones can stop it
It will reach its daily target
___________________________________________________________________________________________
MULTI TIME FRAME ANALYSIS start
Let’s discuss how things work on different time frames and what we can expect on each.
The cart will look someone like this on 5min
Do currently this has given BOS upside and now we are waiting for it to come to OB at OTE.
Now we are discussing this down move from high to OTE.
Now understand this thing that we are bullish on 75mm or hourly but we are bearish on 5m and 15m. As soon as we get a
break of structure BOS on 5m or 15m then we can short right???
Now what will be our target??
You have to short on any opportunity you get either it will come to 5m bearish OB or it will grab liquidity from above the
highs.
Look for shorts again and again till 75 OB comes.
Now let’s see this example, price is in downtrend and given recent BOS downside? Can we short at 15m OTE?
We have reached 75m OB at OTE and we are expecting price to go bullish now. Trend will change from here.
Best it is to see one time frame lower or 2 time frames lower max, preferred is 1 time frame lower…. MONTHLY, WEEKLY,
DAILY, 3HR, 1HR/75M, 1M, 5M, 3M, 1MIN, 30SEC, 15SEC. at the 75m OB we are expecting reversal so we wait till we have
15m BOS or 5m BOS to the upside
Now do one thing:
Open a chart on daily then see what is price doing and till where do you think it will go, then open 75m or hourly then see
what is it doing and where it can go to. Write anchored note on chart at the corner of the screen like 75m-bullish, 15minbearish and continuing all price.
__________________________________________________________________________________________
LIQUIDITY start
Liquidity is open orders in form of their new orders to be taken or stop losses of people already in trade. Let’s understand
types of liquidity one by one.
First type is resistance and support
What do you do at support and resistance?
You buy at support and sell at resistance
What else? What do breakout traders do?
At resistance breakout traders wait for longs and at support they look for shorts
Can we day we have new orders pending above and below support resistance and also stop losses of existing traders.
So can we have liquidity pool above resistance and below support in form of stop losses and new orders?
How it is grabbed will be discussed in next section.
Now what happens when resistance is broken?
We have to understand where the liquidity is and when it is grabbed we have to enter.
Now what happens at support?
At support previous traders who shorted they will also hit stop-losses.
Jo breakout trader long kiya uska bhi ho gaya
This is called as resistance manipulation.
What we have to do?
Wait for LTF BOS and short.
See this
Support Manipulation
Equal high example
Just get this in mind that whenever there is liquidity grabbed from support and resistance we can trade that.
Now how equal low hunt happened?
See how liquidity is grabbed below body?
Now let’s understand LIQUIDITY ABOVE AND BELOW SWNG POINTS.
Now what happens when a new swing is formed?
And why did price go up forming lower low? Some people might have bought also
This might happen on smaller time frames that are trying to go long and scalp, but as the price will move lower buyers will
be taken out.
Now let’s say the price has fallen and forms an order block.
If you look at one higher time frame this might look like this.
How IPDA will move price is it will take out all sellers and again fall from order block.
So we can say that where ever there are swing points there are stop losses of retail and institutions.
Whatever pattern you see is liquidity above and below. Which will be taken out eventually both sides? Which one will be
taken out first and which one will be taken out next? Do we know?
The one is favor of institutions will be taken out first that why structure is important. The main structure will decide where
the price will go but there is a pattern. Wait not some pattern but the liquidity is taken out in a pattern (regular way) –
which is internal external internal and then external.
Let’s understand INTERNAL EXTERNAL LIQUIDITY.
Let’s say the price is going up
Who is taking price up?
Institutions are taking the price up with help of IPDA.
What is below low?
What below every intermediate swing low within the uptrend?
Small institutions that follow retail have stops and big players have open positions.
Now the price is turning and coming down? Who can do that?
So when people see price coming down what do they do. Some will exit longs; some will open new shorts on lower time
frame too and keep SL above HIGH right?
So now we have liquidity above high, below low, above every intermediate high and below every intermediate low.
Correct?
One thing is wrong in that line let’s see who can catch it?
See the bigger image.
There is something wrong in this.
Initial sellers have already hit there SL’s and have been taken out.
Here sellers are taken out again and again.
So there is no liquidity there or let’s see safe may be some big players are still there bearing losses. So we can say this is
true.
Now WTF is internal liquidity and external liquidity?
Now IPDA will go after internal liquidity
Why only upside?
External is above highs and below lows….both
Time frame does not matter. Only thing that matters is which time frame you are looking at. Both sides liquidity remaining
which is external liquidity.
Now what tells you where the price will go?
The thing which will decide is previous BOS, previous BOS bullish then it will go up. Previous BOS bearish then it will go
down.
It will take out external liquidity but it will keep in mind previous BOS.
So now how trend is about to change??
This may be in a phase where trend is about to change or accumulation or distribution phase. Now what the hell is
protected low and protected high?
Simple – in a uptrend the liquidity below low is protected right as it is targeting highs again and again. In a downtrend
liquidity above high is protected high as it is targeting lows again and again.
How is uptrend changed or how can we say now trend has changed?
This is in uptrend where protected low is taken out. That’s why we consider
BOS and not liquidity hunt. If it grabs liquidity where will it go next?
It will go same direction where the trend was moving and continue uptrend.
See this intermediate swings are taken out keeping in mind major trend.
Internal external internal and external. It will be followed always. Its same thing what we call higher high and higher low
but this is ICT so everything has explanation.
The thing is we trade on small time frame and things can change suddenly on smaller time frame because of higher time
frame. That’s why always higher time frame is always better. In sideways also it will grab internal and external both but will
not break structure.
We have to decide ourselves which time frame is suited as per our personality but every timeframe will have its drawback
as liquidity grabs will keep happening. So it is always better to exit before actual high as price can reverse from there.
HOW IS LIQUIDITY FORMED WITHIN A TREND AND HOW IS IT GRABBED?
And now a start forming higher highs and higher lows for the retail traders not for us.do what retail starts to do is they start
to buy and take long positions. But what will happen is that price will go up to an order block and fall again.
So this uptrend was created just to create liquidity just to grab it eventually.
Ways of liquidity market can create??
So main thing is to keep the structure in mind and avoid all the liquidity.
What to avoid in range?
That’s why many times you will see the price reverses just before the order block so that people take positions or keep stop
losses below that and then price comes back to order block and takes out swing liquidity. IPDA creates liquidity to trap
people. We have to keep main structure in mind and take trade accordingly.
MANIPULATION - start
Think like retailer?
Draw trend line like retailers
After manipulation scripts must BOS on other side. Manipulation can happen in any time frame. If market manipulates in
5min then waits for 5min BOS and if 15min then waits for 15min BOS.
Now see how price manipulation in done in Adani port.
Already trend line manipulation done. This is not 100% accuracy.
Asianpaint already manipulation done.
Think like retailer and trade smart.
Now look at DJI manipulation trend line:
Here it didn’t work.
PHANTOMSstart
PHANTOMS - trend line, support, resistance, chart and candle patterns, RSI, MACD, double top, double bottom. These all
are ghost of stock market. Don’t follow them. They are taught to all retail traders to trap everyone. Trend line forces people
to take buy and sell positions which are ultimately taken out.
Same with support and resistance:
Double top and bottom
Head and shoulders:
All you know where retail takes entries but we as ICT traders know that they will get trapped. All divergence and
overbought and oversold conditions trap retailers.
LIQUIDITY VOID! start
After a sharp run in Price, the large candles that form are the least efficiently trades in the range. Sudden runs in Price will
leave porous Price Action that tends to fill in at a later time. This is described as a void of market liquidity or Liquidity Void
Whenever institutions enter - either its long or short they consume every opposite order very quickly and not many sellers
and buyers are present at every price so price moves too quickly in one direction without actual trading happening at the
price this is also technical language.
Let’s focus here
Let’s say institutions entered here
So if institutions want 10,000 quantities they can’t find sellers at certain price. At exact 925.40 not many sellers are there.
So what NSE does is they match orders with next seller which is obviously higher. So price moves very fast even when the
actual sellers are very less. Most of the trading happened at the lowest black candle when people are fooled that price is
going down so they sell and institutions buy. Most buying by institutions and selling by retail happened in these candles.
We only come to know by the big candle that institutions have stepped in. Now the price has moved very fast in that big
candle.
Because retail buyers can’t move price like this. Now let’s see where next proper buying did and selling happened see
these wicks. Wicks are proof that selling happened sees these wicks.
Where is the first down candle?
So we can say that from 925.4 to 1055.4 there was not enough trading that happened.
Why didn’t trading happen – because of sudden buying by institutions and so many sellers were not present in market so
there was no liquidity in market thus its called liquidity void.
See some examples-
Why is this important to understand?
This liquidity void created is unfair for retail traders as everyone is not able to buy or sell at every price due to institutions
so the price will come back and fill all this easily. This is not always true. Some liquidity voids remain open always but when
it gives signal that price is going towards it then we can say it will be filled.
See this liquidity void is created and if we see bearish signal that its coming down we can say it will be filled completely.
how to find it. Just see big candles together. See how many can you see in this.
FAIR VALUE GAP start
When Price leave a specific level and only has a small section of price action that is seen as one directional, this is known as
a Fair Value Gap. It is very similar to what is traditionally known as a “Common Gap” in technical analysis. They can present
objectives for profits or new setups, depending on the current market environment.
Now what is this. It is same thing as liquidity void but it has only one difference.
Now note one thing. One time frames liquidity void can be FAIR VALUE GAP – fair value gap on higher time frame.
See this AARTI daily liquidity void –
1day liquidity void become fair value gap on 2nd.
So fair value gap is the first body leaving the institutional buying / selling area.
Understanding the point of fair value gap?
It is the first area from where the displacement of price starts. Institutions entered positions suddenly so price moved fast
right. So there is a gap in fair value. Which means not everyone could buy and sell all prices. Beginning from FAIR VALUE
GAP, between these 2 prices there was no proper trading right.
So they will come back to fill this gap that’s why my target for call was this today. There is a level exactly at 50% of the FAIR
VALUE GAP – fair value gap which is called FAIR VALUE GAP CE – fair value gap consequent encroachment which is used by
institutions.
FAIR VALUE GAP CE is 50% of the fair value gap – used by institutions to create liquidity to trap retail like today.
Let’s see how fair value gap ce is used to create double tops or equal highs or resistance levels just before there selling
level. This happens most of the time. There is no 100% way that can tell FAIR VALUE GAP CE will work or not.
But if it matches with higher time frame things then it will work for sure. Like this almost same levels is mitigation block.
ORDERBLOCK start
Last down move before the big up move
Or
Last up move before the big down move
Let’s see what is actually happening. Order block is an area where the institutions accumulate orders – either longs or
shorts.
Bullish order block they accumulate longs
Bearish order block they accumulate shorts.
So let’s try to understand how can they accumulate so many long positions?
Don’t consider it as a demand or supply zone. It’s an order block not supply and demand.
You have to see a nice one way move. Let’s take this area for easy understanding.
Do there are both shorts and longs both in the same area but longs or obviously more as the price is going up. Now why
are we interested in this area? Yes, we know that this area is a discount area for them and they have previously bought in
this area and can again buy from this place. There is one more reason though?
So we can expect this to happen. Exiting unwanted short position is called mitigation.
Now let’s understand some important points.
FIRST WHEN IS OB VALIDATED
When can we say a down move becomes a bullish order block?
Simple rule – till body of green candle closes above the high of black candle.
Which candle’s body is breaking the high of down candle.
The order block is validated by candle number 3 as its body broke its high. Now we can mark the order block.
The number of candles does not matter. We have to see when the high is broken.
But lesser the number of candles higher the strength.
After validation is done. Now we will see mitigation. Now important this to note is that if there are multiple down candles
or some down candles and up candle then we have to understand how it’s done.
See which black candle is bigger?
First candle is bigger so the shorts placed are forming its high to its low.
Now see this area
Where did the shorts start from?
Did they start from candle marked with arrow?
All the candles are black so they started shorts from there.
Now focus on this down move and OB.
Order block is always wick to wick no matters which you tuber says its only wick to wick or only body.
Now find what is wrong in the above chart?
Its part of bigger order blocks and bigger down move.
The actual order block is this.
The OB is bigger OB only. But we can refine it in different ways.
Now see this area.
Where is bullish order block?
Ob is this big candle
Now how mitigation happens lets understand that. It will work or not that is different bro. we understand you to mark it.
Time frame has nothing to do with this. It can happen in any time frame.
WHERE DO WE FIND THERE ORDERBLOCKS?
Best location is OTE, above resistance, below support, just above and below trend lines, above equal highs, below equal
lows.
All these are too made so that retail gives there entries to institutions.
Where ever you see retail entering there will be trap just nearby.
WHAT IS MITIGATION OF ORDER BLOCK?
So what is mitigation? We have already discussed that exiting the positions to trap retail is mitigation, which might look like
retest. Let’s say there is a newly validated OB.
And price moves away from it.
So the institutions have short and longs like this and the shorts are in losses, so they will come back at this level to exit
them.
Exiting shorts and taking new longs is mitigation.
This is mitigated in the next candle but see the depth of wick, how deep it goes inside the ob.
Now see the shorts taken by institutions.
Between 6769 and 6047 many shorts will be taken, so average can be (6769 + 6047)/2 = 6408.
So when the next candle mitigates the ob. can we say they exited at 6408 or they exited at 6769?
They have exited at 6769.
Now positions lower that this price can still be open. So we can say that it can come again to mitigate, but this happens at
higher time frames or when the OB is big. On lower time frame as positions size can be that huge so we can avoid such
order blocks but hourly and above we can use this mitigated OB again.
Now let’s say this is the situation, till where will they bring price? How much lower?
These positions are also in losses
They will first close lowest possible positions they have taken and then take price higher.
This is how trend is formed.
PD ARRAYS! start
IPDA – Inter Price Delivery Algorithm
It is responsible for movement of price. It will not move from price to price but liquidity to liquidity on all time frames. We
have already seen that price moves in certain pattern from external liquidity to internal liquidity and internal to external
liquidity.
The best time frame to see where the price is moving is Daily as it can provide vital information of what price is doing or
what the direction is. First thing is to mark current structure and range on daily chart and market premium and discount
like this.
We can clearly see after making high the price is coming down to grab internal liquidity.
So we can say price is coming from premium to discount right?
Now the thing to understand is the price is coming from an area of premium then only things in discount can stop it or
reverse it and if price is coming from discount only things in premium can stop it or reverse it.
What things?
Premium things or premium arrays
A7. Old high
A6. Rejection block
A5. Bearish order block
A4. Fair value gap
A3. Liquidity void
A2. Bearish breaker
A1. Mitigation block
Discount things or discount arrays
A7. Mitigation block
A6. Bullish breaker
A5. Liquidity void
A4. Fair value gap
A3. Bullish order block
A2. Rejection block
A1. Old low
Now what is this thing? What does this mean?
Now see this if the price is coming from premium then these arrays can stop the price or reverse it.
Most powerful out of all arrays is BREAKER.
This is the order in which you will find the discount arrays only thing is if there is breaker then mitigation block will not be
there and if there is mitigation clock then breaker will not be there.
When the price enters discount area the order in which the price will face or encounter the discount arrays is
1. Mitigation block
2. Bullish breaker
3. Liquidity void
4. Fair value gap
5. Bullish order block
6. Rejection block
7. Old low
Always order will be this.
When the price reverses and makes a range low it will form either breaker or mitigation block, only 1 can be formed. Both
can’t be formed as it will break structure upward in only 1 way.
So either you will have mitigation block or breaker block, both can’t be there together.
See the same way premium arrays will stop or reverse the price.
Now let’s see how things will work individually. The price can reverse directly from breaker if it has mitigated/ exited
positions at a lower OB.
This can be applied to any time frame. We just need a higher time frame OB or at least same time frame OB from where
price has bounced and formed a breaker.
So how can price reverse?
1. The price can reverse directly from breaker if it has mitigated / exited positions at a lower OB.
2. It can fill some liquidity void and reverse to create liquidity just before actual OB.
3. The price can reverse from FAIR VALUE GAP 50% (FAIR VALUE GAP CE) to create more liquidity.
4. It can come to OTE OB or return to actual unmitigated OB.
5. There can be a reversal from rejection block formed at low.
6. If there is nothing then it can grab liquidity below the low and give a turtle soup.
These are the possibilities
Not so neat but you will get the point.
BREAKER BLOCK start
What is a Bullish Breaker Block - It is a bullish range or Up Close Candle in the most recent Swing High prior to an Old Low
being violated. The Sellers that sold this Low and later see this same Swing High violated – will look to mitigate the loss.
When Price returns back to the Swing High – this is a Bullish Trade Setup worth considering
The logic behind the bullish breaker is to trap on wrong side and mitigate the sell orders (taken to trap them) at such a
price that sellers can’t even at break-even. The most important thing in bullish breaker is bounce from bullish order block
below or an institutional support level.
Now let’s understand the bullish breaker in detail. Let’s imagine the price is coming into an institutional support level or a
bullish order block.
After bouncing from the institutional support level they let the price shift its market structure (break of structure to the
upside).
Now keep the lower high in previous downtrend in focus and that high point is very sensitive to price now. We can expect
an up-move from previous lower low, as the sellers in the last move from lower high to lower low into the institutional
support will be a trap and institutions will mitigate from above and never return to that level. So we have to look for buys
in that area and wait for up-move in our favor
.
The target will be next institutional resistance where we can exit our longs
MITIGATION BLOCK start
There is a small difference in breaker and mitigation which is previous swing point liquidity hunt. Liquidity - hunt is done in
breaker but not in mitigation block.
Let’s understand mitigation block first. Imagine a situation where the price has hit an institutional resistance area or higher
time frame order block and bouncing from there and is forming lower high and lower low either inside a bigger range or by
breaking it.
Keep in mind this is not breaking the protected low or range low. It is not necessary. We can trade in range also.
See both are mitigation blocks.
Now the short term rally from higher low to lower high is called as the mitigation block where the buys are taken by
institutions to build liquidity for further use.
Now when the price moves lower we need to shift our focus here
Now see this image carefully and try to understand that the institutional buying from point A to B will be in loss at position
C after falling from B or C, so the institutional will bring price between A and B where they will exit there buy positions and
continue with sells.
Now is this clear
Where these are buys exited or mitigated
They have exited above on resistance level.
Getting the point, people buying on highs and institutions selling little by little.
Now the price comes down due to selling.
But will the institutions sell at lower point? What should they do so that people start buying more so that they can sell?
Now institutions will start buying again so that people think its bullish flag breakout
Flag phantom at resistance level, people start buying seeing the breakout and who is selling again institutions.
Now buyers are trapped and some institutions might also have open buys in this range.
There are some institutional buys unmitigated here.
Now is there any reason for institutions to take price above their lows buying?
People are trapped above so will institutions give them chance to exit?
So we can expect selling again from this area.
Now can we take this trade?
Now what about stop loss?
ICT suggest you to keep SL above the swing high
First thing to understand is consecutive same color candles are 1 order block.
This will be our SL.
If they are all same color then we have 2 possible entries.
1 at low and other at unmitigated OB.
Now where do we take entry actually? Have you seen me averaging?
What do we do at lower OB?
When price reaches it what do we do?
What do we look for?
We look for institutional sponsorship – LTF BOS / reversal. If we get it at lower OB then we enter at lower otherwise if we
get on higher OB then we enter at higher.
Remember day before bank nifty trade. I waited for LTF BOS till highest point
Not entered on fair value gap or breaker
It went higher as breaker was large. This was LTF BOS / institutional sponsorship / reversal in bank nifty.
Now see the buy from low that day
Getting both entries?
Till the time we get confirmation of institutional sponsorship, we don’t take trade.
Actual breaker is these 2 candles
SUMMARY OF MITIGATION BLOCK AND BREAKER
INSTITUTIONAL SPONSORSHIP start
We will discuss the how to trade the following
1. Order blocks / OTE
2. Breaker
3. Mitigation Block
4. FAIR VALUE GAP CE
5. Liquidity Hunts - Trend lines, Supports and Resistances, Highs and Lows, Previous Day High and Low, Previous Week High
and Low
6. Rejection Blocks
7. Propulsion Blocks.
Before trading these setups we need to understand a concept which is called as institutional sponsorship.
At an order block or an institutional support or resistance are the institutions willing to take the price in our direction? If a
bullish order block are the institutions willing to take price higher? We can say are they sponsoring the up move from
bullish ob. How do we know that price will reverse from OB or why it will reverse?
Simple – when price enters the OB, if it reverses then there must be institutions involved right? Retail can’t change it?
See this price is entering an OB, we will not enter directly
Before entering we have to check if the institutions want to take price higher or not right. Their involvement is confirmed
when they will give BOS at LTF. Taking their own external liquidity.
Best thing to do is to take on same time frame as per ICT but you can go one time frame lower or 2 time frames lower
(risky).
Institutional sponsorship time frames
Daily – BOS in Daily, Hourly, 15m
Hourly – BOS in Hourly, 15m, 5m
15m – BOS in 15m, 5m
5m – BOS in 5m, 3m or 1m
When we get LTF BOS we can look for trade in our direction from desired locations at LTF keeping target on higher time
frame.
See this….
The target should be nearest liquidity area which is either a SWING HIGH, OR HIGH of the previous swing or some equal
highs, or else finally the next swing high.
MARKET FRAMEWORKstart
ELEMENTS TO A TRADE SETUP
FRAME OR PHASE OF MARKET
1. Expansion
2. Retracement
3. Reversal
4. Consolidation
REFERENCE POINTS IN INSTITUTIONAL ORDER FLOW
1. Order blocks
2. Fair value gaps & liquidity voids
3. Equilibrium
The IPDA works in 4 phases of the market by which we can anticipate current state and expect the future move. These
phases can be seen on each time frame. Keep in mind every market or script start with CONSOLIDATION.
It is the first phase in the market. Everything starts with consolidation. Now definition of consolidation is little different
from what we have learnt as retail traders.
ICT – CONSOLIDATION is where institutions are accumulating orders. They can be accumulation long positions or short
positions.
What should we do during Consolidation?
Nothing -Simply nothing, we need to wait for consolidation to be over.
After the consolidation is over there will be only one possible phase which is EXPANSION. But it can happen on either side,
It may be upward or downward. Basically expansion is the impulse move in any direction.
Although we can get a hint where the market can expand is by looking at higher time frame order flow. If that is not clear
we have to wait for expansion to happen.
Just keep in mind we can’t do anything during consolidation and after consolidation only expansion will come.
This concept is applicable to all timeframes not only only consolidation aur expansion ke beech main nahi hoga.
Now let’s see what comes after expansion / impulse swing. Wither it can go back to consolidation again or it can go to
retracement or it can go to reversal phase. These are interchangeable. Anything can happen after expansion and reversal
and retracement. It can go to any phase. These 4 conditions interchange throughout ups and downs of the market. But you
will get only 1 condition out of 4 conditions in the market at a time.
Now how to trade using this. You just want to know which phase the market is in, where the price is coming from and
where it will probably go.
In consolidation market maker keeps the market in a tight range or defined range so that there is enough money / liquidity
created on both sides of th market. Now where the market will go, obviously depends on whichever side higher amount of
liquidity is present. Sometimes it will expand so fast that we can’t do anything but wait for retracement or next
consolidation which is not wrong. You are not going to catch every move in the market.
Now let’s learn about all phases in detail and what can be done to trade them.
EXPANSION
Expansion is when price moves quickly away from level of equilibrium of consolidation/
Importance – When price leaves a level quickly this indicated a willingness on the part of market makers to reveal their
intended reprising model. Which means market maker wants to reprise the script.
What to look for in price?
Order block that market maker leaves at or near the equilibrium of consolidation. Expansion is coupled closely to order
block. We are not going to chase the price, but we will wait for price to come back to this order block.
Now the question arises why near OB is always followed?
It is because it want to expand price further. So whenever we see price leaving the consolidation we can trade using order
block near or at equilibrium of consolidation. Now if you are trading forex or 24 hours market then don’t include wicks to
mark consolidation.
RETRACEMENT
Retracement is when price moves back inside the recently created price range.
Importance - When price return inside a recent price range that indicates a willingness on the part of market maker to reap
rise to levels not efficiently traded for fair value.
Which means when we have fair value gap or liquidity void we can expect price to enter retracement and fill in these
inefficiencies. So we can either wait for the price to fill in these and trade in the direction of previous expansion or we can
take internal trade after confirmation.
Reversal
Reversal is when price moves in the opposite direction that current direction has taken it. Means the sudden impulse move
in opposite direction of the expansion.
Important - When the price reverses direction it indicates that market makers have run a level of stops and a significant
move should unfold in the new direction.
What to look for?
The liquidity pools just above old highs and below old lows. This means when there is a stop run above highs and below
lows then we can look for turtle soup setups.
CONSOLIDATION:
Consolidation is when price moves inside a clear range and shows no willingness to move significantly higher or lower.
Important – when price consolidates it indicates that the market maker or allowing orders to build on both sides of the
market. Expect the new expansion in the near term.
What to look for?
Impulse swing in the price away from the equilibrium price level that is found exactly in the halfway point or the
equilibrium of the consolidation range. Which means we have to wait for price to leave consolidation and wait for price to
come back again to the nearby order block and trade for new expansion.
Now we somewhat know what to expect when price is doing something and how to trade in according to the phase price is
actually in. just keep in mind only expansion can come after consolidation and every other phase all other 3 can come
back.
MARKET STRUCUREstart
This structure inside isn’t giving any bos. Not upside not downside so bos upward will be done only when lower high is
taken out(price goes above the lower high) or the price goes below lower low for downside BOS.
For trade purpose we can take trade inside this range without BOS looking at short term trend. We can trade the range
from lower low to an OTE between the lower high and lower low.
So how do we do it
We look for new upwards trend inside the previous range but we need to be careful and only expect the upwards
movement to nearest liquidity area or PD arrays.
Here the major trend is bearish and you will get fast movement in bearish trades only but you can take bullish trade as the
price is expected to go upto that area.
Now look at this scenario
Now the price has made low and its grabs liquidity from below the previous low, we consider this as start of reversal.
This is basic reversal which is explained all over ICT.
Now there are 2 approaches – aggressive and conservative.
In some videos you will hear ICT calling that liquidity grab a lower low but when he teaches the break of structure he is
very specific that body break the structure and then we call it lower low.
BOS-CHOCH start
Now this is the trend. Time frame doesn’t matters here, when price breaks the previous high its called break of structure.
Now what trade we will take further? Bullish or bearish?
Ofcourse bullish. So now we will look for bullish trade from discount arrays.
But lets ay that this time frame is 15min time frame and it will take 3-4 hrs to come down to our level. Then we will get
bored. Now we can be aggressive and take a bearish trade from high to discount array.
But we need confirmation. Lets focus here
If this is 15m structure then there must be 5min structure inside it.
Now this si bos required for structure to be bearish on 5min.
Now if the structure breaks this will be 5min break of structure (BOS).
But for 15min structure what will it be?
It will be a minor bos or choch for 15min. even if you consider the major 5min trend which will be 1min structure only then
it will be choch in major 5min structure as well.
5min bos = mbos 15min = choch on major 5min
Now price is coming down
And it breaks this low.
What is it?
BOS on minor 15m structure = CHOCH on major 1min structure = Mbos on major 15 structure. Also its major bos for major
5min structure. So it all upto you – which time frame you are actually interested in. taking trade.
Your bos can be minor bos for someone else. The major tra=end in 5min can be minor structure of 15min or intermediate
structure of 15min time frame.for trading inside a range you need choch na bro that how you know its coming down.
See this is major vs intermediate trend in 5min nifty yesterday.
Minor vs intermediate structure nifty 5min
I don’t prefer to use change of character. Use mbos with time frame written at end. The things is when in an uptrend price
can grab liq below lows and then move up again so we have to wait for proper mbos. Now every time price reverses then it
can form 2 things only.either it will form breaker or mitigation block.
Types of liquidity
PHASES OF MARKET
1.
2.
3.
4.
CONSOLIDATION
EXPANSION
RETRACEMENT
REVERSAL
Quest – reversals are also strong moves coming from order block?
Note necessary, reversal is basically opposite expansion after is over.
Quest – how will we measure the expansion is over?
Expansion can be calculated in 2 ways. Either its objective is complete. Which means the move it should do like higher
timeframe order block, filling fair value gap, going above highs etc. or else we can use fib extension on precious swing.
MARKET SELL MODEL
Let’s say we are in a downtrend or we have an objective to be met higher before the price falls again
So the price has to go up to this level to trap people and to fulfill some objective may be its grabbing liquidity or mitigation
of an order block or fair value gap
Any objective, now what the price will do is it will accumulate longs
It has to go up keep in mind. Now it will again accumulate more longs and fulfill the objective
Then it will go in manipulation as its objective has been met
Once the manipulation is complete it goes into distribution.
Targets are level below initial accumulation
Now see what happened in in bnf on all time high
It can be marking an ATH – ALL TIME HIGH to trap people. There are many objectives to be met by market makers.
Manipulation is forming higher high to trap buyers and then falling down.
This is distribution or accumulation of shorts
You can say both. Actually there is no distribution in ICT or market maker trading. They are either accumulating longs or
shorts. They offload at liquidity areas. So when they were bringing price from below where will buyers come in?
Ans – when they see break of resistance
Call it open float.
Float is where there are new orders as well as old stop losses. Breakout people buying and sellers having stop losses. So
ultimately lots of buyers for institutions to sell.
THIS IS MARKET SELL MODEL.THE OPPOSITE WILL BE A MARKET BUY MODEL.
___________________________________________________________________________________________________
UNDERSTANDING OPTIONS
TYPE
OTM
ATM
ITM
STRIKE PRICE
17600
17500
17450
PRICE
101
149
183
DELTA PRICE
0.4
0.52
0.57
Remember price is on 17520.
Points to be noted
If nifty moves 100 points then option will move 100 * delta
Which means if nifty moves 100 points then
Strike price
17600
17500
17450
Points moved
100
100
100
Delta value
0.4
0.52
0.57
Product
40
52
57
In points
40 points
52 points
57 points
Now how to calculate Stop loss in options-
Now here our entry is 17520 and stop loss is 17487 on the chart.
Which is 17520-17587 = 33 points
Now we have 33 points stop loss.
So now the question arises that how much movement will come in each option
moves 33 points?
The answer is
Stop loss points * delta = Stop loss points
If nifty moves 33 points then
17600 calls will moves 33*0.40 = 13.2 points – OTM CALL
17500 calls will move 33*0.52 = 17.16 points – ATM CALL
17450 calls will move 33*0.57 = 18.81 points – ITM CALL
So by above calculation you can consider that ITM and ATM calls are best to take.
Now this is the situation
So calculate this when price hits an order block.
Now which strike price to take? It’s upon the risk of the trader.
For example if you have 1, 00,000 (1 lakh) capitals and your risk is 1% per trade
which is Rs. 1,000.
Now the lot size in nifty is 50 so now 1000/50 = 20 point. Now you can choose any
strike which is going to move less than 20 points
Now if you see above in option chain table strike price of 17400 then its delta is .62
which will move 33*0.62 = 20.46 which is more risky.
Now there is a reverse calculation also which is easy.
Now your risk was -1000 rupees. Divide it by lot size which will be 20 points because
1000/50 = 20 points
Now multiply this with your stop loss which is
20*33 points (stop loss) = 66 points
Now go to option chain and see which strike has delta less than 0.66.
FINDING MAJOR TRENDS
____________________________________________________________________
Understanding options
What are options?
Options are like token amount given to book a property that you want to buy. For
example you go to buy a flat or property which is 1cr and you decide to buy it and
you give 5 lacs to the owner that you will buy it after 3 months. Now when you go
back 3 months it doesn’t matter that price of property is 1.5cr or 80 lacs. You have
to buy it in 1cr right.
Now understand how option is a little different.
The buyers of the property gives that token amount to seller of the seller of the
property and say I will buy this property if its rate increases till 3months otherwise
you keep the token amount. Which means if the value of property increase than
buyer will in profit. But the amount needs to be more than 5 lacs. Imagine the price
of property increase to 1.2 cr, the buyer will be very happy to buy it in 1cr as he has
already given token amount but if value of property decrease to 7 lacs buyer will say
you keep the token amount 5 lacs.
I will explain how loss can be more than this. Now there is a rule for exercising
options – the buyer has no onligation to buy property, but the seller of property has
a compulsion of selling the property if buyer wants it.
The guys who is giving token has no compulsion but the one who is taking the token
has compulsion.
Now let’s take 1 more example..
Imagine I went to see a flat for 1cr and gave 5 lacs as token to seller.
Now suddenly there is a news that some celebrity is buying a flat in same building.
What will happen?
Price will increase of the flat.
But now there is no empty flat and no one is selling any flat. No imagine that I don’t
have 1cr for some reason and I fail to buy it but asif comes to me that you have
given 5 lacs token for that flat so sell me that token for 6 lacs. I am happy that I get
1lacs profit – as I have paid 5 lacs but asif is giving me lacs. Asif is happy that he is
getting the flat for 1cr + 6 lacs. Instead of 1.2cr now lets say the same flat I booked.
Now there is some bad news and price decrease. What are my options?
I can either take 5 lacs loss max or I can sell that token to asif for 3lacs.
Same happens for nifty options – when we buy call that nifty will go up. We are
giving token to someone who is ready to sell nifty to us.
Example nifty is currently at 18000 and we give token to someone that after 1 week
we will buy nifty from you and you keep this 70 rs as token. Now if the price of nifty
increases more people will come to us to buy our token and price of our 70rs TOKEN
WILL INCREASE 90/100/110. But if price of nifty decreases people will say give your
token for 50rs/40/30.
Now what options buyers don’t know or consider is that what effects the price of
option. The option price has 2 things – one intrinsic value and one time value. Now
what the hell is this?
INTRINSIC VALUE – is the difference between the current stock price and the strike
price like current value of INFY is 1772 and we choose a strike that is 1700 then the
intrinsic value is 1772-1700 = 72 rs. But if you see feb expiry INFY 1700 CE its price is
85. Now what is this difference of 85-72 = 13rs
This is time value. Now imagine the price of INFY on feb end remains 1772. What
will be price of option at that time?
It will be 72 because time is over. Now the market price is 1772 but we got property
for 1700+85 rs = 1785. Now we are in loss of 13 rs which was time value. Time is
over now we have to take decision to buy it for 1700 or not and token amount
remains 72 rather than 85 because now no one will pay us more than 1772.
Maine 1 feb ko booking ki infy ki 1700 ka rate. Booking amount 85 ek mahine ki deal
28th feb ko deal over ho gayi.
Rate on 28th feb 1772 but maine kitne main liya? 1700 + 85 = 1785
Ab maine tumko bolu ki 1785 main lo to tum mujhse loge kii 1772 wale se.
Obviously 1772.
To mujhe loss bus 13rs ka 1785 – 1772 = 13rs. 85 paid on 1st feb. price of option on
28th feb will be 72 which is nothing but difference in strike and current price.
Drop isiliye hoga kyonki poore feb main chance tha price badne ka, to uska premium
pay kiya 13rs see current price of INFY 1700 ce is 85. But it includes 72 as intrinsic
value and 13 rs as time value if deal closes today then it will be on 1772 only. Time
value will have 0 value.
So actually to be in profit what should be the price at expiry?
It should be more than 1700 + 85 (premium paid) = 1785 or more.
Now what happens is people take 1900 ce for say 50rs and INFY expires at 1800.
What will happen?
Will you buy it at 1900 if price is 1800? Or you will be happy losing 50rs.thats why
OTM options go 0 and in the money options expire at the is equal to current price –
strike price. Getting the point till here?
Now what is sellers perspective?
Seller took token amount of 85 to sell at 17000 on 28th feb now the current price is
1772. So he is still in profit of 13rs.
Now imagine next example when I booked INFY at 1700 for rs 85 suddenly there is a
new that Rakesh jhunjhunwala bought some shares in INFY. What will happen?
Price will rise suddenly it may rise 40 rs in 1 day and option price may go up to 120
in a day. So I have 2 options – sell the option at 120 or wait for expiry.
But if I wait for expiry there can be 2 cases the price can again come down reducing
the option price to below 85 also or it may go above 1820 and giving more profit.
The thing to note is that even if news came that JHUNJHUNWALA has bought shares
I can still go in loss in future. See I bought token on 1st news came on 10th. We still
have 18 days to 28th and anything can happen in those days.
The sudden hike in price was due to volatility increase. Now imagine if you buy the
token from me on 10th for 120rs and the price of INFY didn’t go up more than 1772
then what will happen? Slowly the price of option will come down day by day.
Options theta
Theta – the term theta refers to the rate of decline in the value of an option due to
the passage of time. It can also be referred to as the time decay of an option. This
means an option loses value as time moves closer to its expiry, as long as everything
is held constant. Theta generally expressed as a negative number and can be
thought of as the amount by which an option’s value declines every day. Here goes
the definition. In simple words - the price of option decrease with time.
Why does this happen?
You are giving token amount for a flat expecting that the future price will be higher
and you will get the flat for less, so what happens is that when the expiry is far then
we have more chances that the price of flat will increase. But when we have only 1
day left the chances of price increasing will be very less. Like you think price of nifty
will go to 17600 and price of call option 17600 is 101 and we have 4 days for that.
The current price is 17520. So the chances are more that the price of nifty can reach
17600.
But as we are going near to expiry (Thursday) the chances of nifty going to 17600
will be less as it may not move that much in small amount of time so the price of
option will reduce. But the decay is not linear or does not happen at same pace. It
actually less when far from expiry and becomes fast when to expiry.
That’s why price of options reduce fast on Thursday. Now point to note here is that if
the price of asset is not changing then price of option will reduce due to theta decay.
The option buyer is losing money but the option seller is earning it. Now let’s say
you thought that price of nifty will go to 19700 on Friday but it closed below the
19700 on Thursday.
And some option seller has sold call 19700 and put 19200. Who will be in profit on
expiry?
The seller will be in profit because he has sold the option and due to theta decay
price of option is reduced now and even it expired in between so he gained theta in
both options.
But you lost whole theta amount which was present in option price on Friday.
Now let’s talk about when buyer gets some profit. Let’s say we are on this day.
Now who is in profit and who is in loss?
Option buyers are in profit and option sellers are in loss.
The option buyer bought call option on Friday when the price on nifty was at 19435
but its now at 19740, so he was out of the money on Friday but now he is in the
money. So he gained intrinsic value also. He covered almost (19740-19435) = 305
points in nifty. 305 multiplied by delta of call option 19700 will be his gain right?
Say his delta was 0.50 so price of option will increase by 305*0.50 = 15250. But this
will not happen. Even if we are gaining due to delta we are losing on theta. The
theta decay from Friday to this day will be lost.
Theta is enemy of option buyers. So actual profit will be gain in delta – theta decay.
Now let’s look at option seller who sold both call and put. He has earned theta
decay in both call and put.
But what about delta?
But first let’s see how much intrinsic value seller gained or lost. He gained intrinsic
value in put but lost same intrinsic value in call.
So he earned nothing and lost nothing in intrinsic value but delta of call option and
delta of put option is different. So the amount he is gaining in call sold is different
one thing to remember here is that option price can go to 0 only on expiry as it still
has some chance.
So the put sold will not go to 0 and his profit in put will be limited. But his loss in call
will be very high as price of option can go to any amount so he will be facing loss in
sold call.
So ultimately his profit or loss will be = theta gain in call + theta gain in put + gain
due to delta in put – loss due to delta in call. So if day is near to expiry then theta
gains will be higher but if its far from expiry theta gains will be less.
Understanding options
What are options?
Options are like token amount given to book a property that you want to buy. For
example you go to buy a flat or property which is 1cr and you decide to buy it and
you give 5 lacs to the owner that you will buy it after 3 months. Now when you go
back 3 months it doesn’t matter that price of property is 1.5cr or 80 lacs. You have
to buy it in 1cr right.
Now understand how option is a little different.
The buyers of the property gives that token amount to seller of the seller of the
property and say I will buy this property if its rate increases till 3months otherwise
you keep the token amount. Which means if the value of property increase than
buyer will in profit. But the amount needs to be more than 5 lacs. Imagine the price
of property increase to 1.2 cr, the buyer will be very happy to buy it in 1cr as he has
already given token amount but if value of property decrease to 7 lacs buyer will say
you keep the token amount 5 lacs.
I will explain how loss can be more than this. Now there is a rule for exercising
options – the buyer has no onligation to buy property, but the seller of property has
a compulsion of selling the property if buyer wants it.
The guys who is giving token has no compulsion but the one who is taking the token
has compulsion.
Now lets take 1 more example..
Imagine I went to see a flat for 1cr and gave 5 lacs as token to seller.
Now suddenly there is a news that some celebrity is buying a flat in same building.
What will happen?
Price will increase of the flat.
But now there is no empty flat and no one is selling any flat. No imagine that I don’t
have 1cr for some reason and I fail to buy it but asif comes to me that you have
given 5 lacs token for that flat so sell me that token for 6 lacs. I am happy that I get
1lacs profit – as I have paid 5 lacs but asif is giving me lacs. Asif is happy that he is
getting the flat for 1cr + 6 lacs. Instead of 1.2cr now lets say the same flat I booked.
Now there is some bad news and price decrease. What are my options?
I can either take 5 lacs loss max or I can sell that token to asif for 3lacs.
Same happens for nifty options – when we buy call that nifty will go up. We are
giving token to someone who is ready to sell nifty to us.
Example nifty is currently at 18000 and we give token to someone that after 1 week
we will buy nifty from you and you keep this 70 rs as token. Now if the price of nifty
increases more people will come to us to buy our token and price of our 70rs TOKEN
WILL INCREASE 90/100/110. But if price of nifty decreases people will say give your
token for 50rs/40/30.
Now what options buyers don’t know or consider is that what effects the price of
option. The option price has 2 things – one intrinsic value and one time value. Now
what the hell is this?
INTRINSIC VALUE – is the difference between the current stock price and the strike
price like current value of INFY is 1772 and we choose a strike that is 1700 then the
intrinsic value is 1772-1700 = 72 rs. But if you see feb expiry INFY 1700 CE its price is
85. Now what is this difference of 85-72 = 13rs
This is time value. Now imagine the price of INFY on feb end remains 1772. What
will be price of option at that time?
It will be 72 because time is over. Now the market price is 1772 but we got property
for 1700+85 rs = 1785. Now we are in loss of 13 rs which was time value. Time is
over now we have to take decision to buy it for 1700 or not and token amount
remains 72 rather than 85 because now no one will pay us more than 1772.
Maine 1 feb ko booking ki infy ki 1700 ka rate. Booking amount 85 ek mahine ki deal
28th feb ko deal over ho gayi.
Rate on 28th feb 1772 but maine kitne main liya? 1700 + 85 = 1785
Ab maine tumko bolu ki 1785 main lo to tum mujhse loge kii 1772 wale se.
Obviously 1772.
To mujhe loss bus 13rs ka 1785 – 1772 = 13rs. 85 paid on 1st feb. price of option on
28th feb will be 72 which is nothing but difference in strike and current price.
Drop isiliye hoga kyonki poore feb main chance tha price badne ka, to uska premium
pay kiya 13rs see current price of INFY 1700 ce is 85. But it includes 72 as intrinsic
value and 13 rs as time value if deal closes today then it will be on 1772 only. Time
value will have 0 value.
So actually to be in profit what should be the price at expiry?
It should be more than 1700 + 85 (premium paid) = 1785 or more.
Now what happens is people take 1900 ce for say 50rs and INFY expires at 1800.
What will happen?
Will you buy it at 1900 if price is 1800? Or you will be happy losing 50rs.thats why
OTM options go 0 and in the money options expire at the is equal to current price –
strike price. Getting the point till here?
Now what is sellers perspective?
Seller took token amount of 85 to sell at 17000 on 28th feb now the current price is
1772. So he is still in profit of 13rs.
Now imagine next example when I booked INFY at 1700 for rs 85 suddenly there is a
new that Rakesh jhunjhunwala bought some shares in INFY. What will happen?
Price will rise suddenly it may rise 40 rs in 1 day and option price may go up to 120
in a day. So I have 2 options – sell the option at 120 or wait for expiry.
But if I wait for expiry there can be 2 cases the price can again come down reducing
the option price to below 85 also or it may go above 1820 and giving more profit.
The thing to note is that even if news came that jhunjhunwala has bought shares I
can still go in loss in future. See I bought token on 1st news came on 10th. We still
have 18 days to 28th and anything can happen in those days.
The sudden hike in price was due to volatility increase. Now imagine if you buy the
token from me on 10th for 120rs and the price of INFY didn’t go up more than 1772
then what will happen? Slowly the price of option will come down day by day.
Options theta
Theta – the term theta refers to the rate of decline in the value of an option due to
the passage of time. It can also be referred to as the time decay of an option. This
means an option loses value as time moves closer to its expiry, as long as everything
is held constant. Theta generally expressed as a negative number and can be
thought of as the amount by which an option’s value declines every day. Here goes
the definition. In simple words - the price of option decrease with time.
Why does this happen?
You are giving token amount for a flat expecting that the future price will be higher
and you will get the flat for less, so what happens is that when the expiry is far then
we have more chances that the price of flat will increase. But when we have only 1
day left the chances of price increasing will be very less. Like you think price of nifty
will go to 17600 and price of call option 17600 is 101 and we have 4 days for that.
The current price is 17520. So the chances are more that the price of nifty can reach
17600.
But as we are going near to expiry (Thursday) the chances of nifty going to 17600
will be less as it may not move that much in small amount of time so the price of
option will reduce. But the decay is not linear or does not happen at same pace. It
actually less when far from expiry and becomes fast when to expiry.
That’s why price of options reduce fast on Thursday. Now point to note here is that if
the price of asset is not changing then price of option will reduce due to theta decay.
The option buyer is losing money but the option seller is earning it. Now let’s say
you thought that price of nifty will go to 19700 on Friday but it closed below the
19700 on Thursday.
And some option seller has sold call 19700 and put 19200. Who will be in profit on
expiry?
The seller will be in profit because he has sold the option and due to theta decay
price of option is reduced now and even it expired in between so he gained theta in
both options.
But you lost whole theta amount which was present in option price on Friday.
Now let’s talk about when buyer gets some profit. Let’s say we are on this day.
Now who is in profit and who is in loss?
Option buyers are in profit and option sellers are in loss.
The option buyer bought call option on Friday when the price on nifty was at 19435
but its now at 19740, so he was out of the money on Friday but now he is in the
money. So he gained intrinsic value also. He covered almost (19740-19435) = 305
points in nifty. 305 multiplied by delta of call option 19700 will be his gain right?
Say his delta was 0.50 so price of option will increase by 305*0.50 = 15250. But this
will not happen. Even if we are gaining due to delta we are losing on theta. The
theta decay from Friday to this day will be lost.
Theta is enemy of option buyers. So actual profit will be gain in delta – theta decay.
Now let’s look at option seller who sold both call and put. He has earned theta
decay in both call and put.
But what about delta?
But first let’s see how much intrinsic value seller gained or lost. He gained intrinsic
value in put but lost same intrinsic value in call.
So he earned nothing and lost nothing in intrinsic value but delta of call option and
delta of put option is different. So the amount he is gaining in call sold is different
one thing to remember here is that option price can go to 0 only on expiry as it still
has some chance.
So the put sold will not go to 0 and his profit in put will be limited. But his loss in call
will be very high as price of option can go to any amount so he will be facing loss in
sold call.
So ultimately his profit or loss will be = theta gain in call + theta gain in put + gain
due to delta in put – loss due to delta in call. So if day is near to expiry then theta
gains will be higher but if its far from expiry theta gains will be less.