Transcription
Okay folks, welcome back. This is lesson three of the April 2017 ICT mentorship content. This month, we're teaching the ICT day trading model, and this teaching is specifically teaching the Central Bank dealers range.
Okay, for the Central Bank dealers range, I'm going to assume you've already went through my YouTube tutorial dealing with the essential Bank dealers range. But if you haven't gone through it, this one's going to pretty much teach you everything you should have gleaned from that lesson anyway. But we're going to assume for a moment that you have an understanding of standard deviations. Now, first, we have to have a range or a number or a level in terms of a central focal point, and then it has to deviate above it or below it to give us our deviation. Well, the essential Bank dealers range is a specific time of the day we're going to teach in this lesson. But for now, I want you to think about ranges in terms of a predefined higher low.
This box here represents the Central Bank dealer's range, and I'll get into the specifics and show you what it looks like in the chart. But for now, we have to know conceptually if there's a range that we have deemed a specific important range in price. Once we determine that that range height from high to low, based on two different types of parameters which we'll go over, that measurement of price range in terms of pips can be reproduced or replicated, if you will, in the form of a standard deviation. One standard deviation above and below would be the same range added to the high. The Central Bank dealer's range, and one standard deviation is the same range that makes the Central Bank dealer's range. A total range in terms of pips, and we subtract that range from the Central Bank dealer's range low, and that would give us one standard deviation above it and one standard deviation below it. That range would be added to the high of the first standard deviation and subtracted from the low of the first standard deviation below, giving us the second standard deviation. And this would go on, replicating that Central Bank dealer's range with standard deviations one, two, three, and four. Typically, most sell days will create the high of the day from the Central Bank dealers range up to three standard deviations. Most buy days will create the low of the day from the Central Bank dealers range down to the third standard deviation. Ideally, sell days create the high of a day no more than two standard deviations above the Central Bank dealers range. Many times, just one standard deviation. Ideal buy days will create the low of the day no less than two standard deviations below the Central Bank dealer's range, and ideally, many times you'll see it just go one standard deviation below the Central Bank dealer's range, creating the low of the day. Four standard deviations above for a high today is going to be on the heels of a very high impact news event for the session in London. Same thing is said on buy days. If it trades down to four standard deviations, usually it's going to be very high impactful news, or price can come down or go up to the fourth standard deviation to create a New York session market reversal profile.
Dealing specifics with the Central Bank dealers range, the time period that frames the Central Bank dealers range is 2 PM to 8 PM New York time. The ideal range is less than 40 pips. Preferably, the range should be no more than 20 to 30 pips in total range, high to low. So, what are we saying here? Between 2 PM and 8 PM New York time, regardless of where you live globally, you need to find where your price charts indicate what would be seen as the candle that starts the 2 PM and 8 PM times in New York time. So, for completeness sake and the sake of avoiding all confusion, like everything else I always teach, find out what New York time is where you're at geographically, and then find out what that looks like in your platform for your charts, and delineate that with a vertical line with 2 PM New York and 8 PM New York. Between those two time windows, the highest high and the lowest low ideally should be less than 40 pips, preferably 20 to 30 pips. Total range is larger than 30 pips can tend to be unfruitful for projections.
The range in pips by calibration from high to low, or using the wicks, or alternatively, we can use the range in the highest body and the lowest body as well. Whatever the highest closing or open price is, and we have the lowest close or open is in between 8 PM and 2 PM New York time. Now, obviously, we need to know directional bias for this to be any of any assistance to us. So, it has to be used in conjunction for our projections to work. The Central Bank dealer's range strength is aiding in the low of the day or high of the day selection. That's the most important thing as a day trader. We can focus on if we can look for the highest probable high or low of the day to form. Or in terms of when markets are bullish, we're looking for the low of the day to form predominantly in the London session. So, where is that low most likely going to occur? And is it going to be on a day that's highly favorable for that event to unfold? Remember, I said many times over the last seven years teaching Forex online that I don't trade every single day. And even in this mentorship, you've seen that it's not productive to try to trade every single trading day. But there are times we're going to learn that there are highest probabilities for a condition to be met for that higher low to form in London. When we have these conditions, we can go in with reasonable expectation that we have a good chance, more than most days, that the high or low will form in London, and we can get a ballpark idea where that lower high should form using the Central Bank dealers range. So, the Central Bank dealers range main focus is to help you find the high or low of the day in respective bullish repair stays. In other words, if we're bullish on the market as a whole, or if we're looking for one shot, one kill for the week, that's predominantly expected to go up for the for a Friday close higher than where it opened up on Sunday, for instance. If we're looking for one shot, one kill in a bullish week, we're going to be looking primarily for the low of the day in London, each day, Tuesday, Wednesday, and Thursday, preferably those days, but it could occur on Monday as well. But we're looking for the low of the day to form in London in that criteria. But just because we're looking for the low to form and be a bullish close every single day doesn't mean this is the highest probability setup. And we can use the Central Bank dealers range to help frame that context as we'll teach in this lesson here. But we're using wicks in this example here. So, every one of these blue boxes represents the Central Bank dealers range for that respective day. Now, this chart represents the Central Bank dealer's range with using the bodies. Now, I will have to admit to you, I like to use the bodies predominantly because the wicks are always going to show erroneous price because of your dealing spread through your broker. Everyone's going to have a disparity between their high and their low on every candle. It's never going to agree. So, what I use is the bulk of the trading, which is the body. That, in my opinion, and there's no real ten-see of y'all end-all answer for this, but my uh studies over the last two decades is if we focus primarily on the bodies of the candles, we're going to get more closer to what smart money is doing in relative terms than if we use just the wicks. Now, we can get a lot of feedback in terms of what retail is doing if we study wicks. But if we study the bodies of the candles and we frame our ranges with that, we'll get more clear pictures about what the institutional accumulation distribution ranges are going to be when we use the Central Bank dealers range. So, as you can see here, each one of these ranges has its respective ranges in terms of pips. The first is 13 pips, the next is 58 pips, the next is 19, and the last in this example is 16 pips in range. So, using the bodies, we're going to focus primarily on that. Now, before I go into greater detail, I want you to think about just because I like using the bodies and I think it's got the most advantage, we still have to look at the ranges with the wicks included.
Okay, let's take a closer look at each example here. For this first one, we have replicated that Central Bank dealers range, the little blue shaded area, and we duplicate that range and projected up one standard deviation. That was, that's what the one SD stands for, so one standard deviation and second standard deviation, which is just basically Central Bank dealers range total pip range, or in that case, 13 pips. We added 13 pips more and then added 13 pips more for a total standard deviation of two. Notice how it takes your rate to the high of the day formed in London that particular session, immediately after the Central Bank dealers range closes. So, in other words, at 8 PM, starting the Asian range, project that range that we created for Central Bank dealers range two standard deviations up. That gives us the projected London high. Now, it does not mean it's going to call it to the pip. It might go a little bit above it, it might fall a little short of it, but it gives us a range to look for. The next one in our example here, the range is 58 pips. Now, this is too large. Our rules state that we want to have 40 pips or less, ideally 20 to 30 pips. So, this particular trading day, we have to allow the market to do whatever it wants to do. If we're going to scalp, that's another thing, but for day trading, we can't use this criteria because it's too large of a Central Bank dealer's range. And this is not what I taught in the free teaching on my YouTube channel, but when you're using Central Bank dealers range projections, highs and lows, the criteria is 20 to 30 is ideal in terms of pips. It has to be less than 40 generally, but ideal ranges are 20 to 30 pips high. And the reason why is if the average daily range of the candle for the daily chart that you're trading is typically around 100 pips, now they're not always 100 pips, but I like to use as a ballpark figure, general rule of thumb. If we have 100 pips, one third of that is around 33 pips. So that's why I give about 20 to 30 pips ideal scenario. It won't, you want to be less than 40 pips for that reason. So, for power three, concept to unfold, if we're bullish, we're looking for the opening price and then the market to trade down 20 to 30 pips, ideally no more than 33 pips. If it trades beyond that, we don't want to see it trade more than 40 pips. It doesn't mean it can't, but ideal scenarios, the the drop down from the opening price on accumulation days where the low of the day is formed and we have a higher close, bullish, we're looking for that 20 to 30 pip drop down, and we can use the Central Bank dealers range to confirm that with other things that we'll teach in the next lesson.
The next example here, we have one standard deviation projected below it, and you can see we just about hit that, but it was definitely inside the first standard deviation, creating the low of the day, and price trades up aggressively. Next example, we have one standard deviation projected below and a second standard deviation projected below. So, now we have two standard deviations below the Central Bank dealers range for this particular day, and it takes us right down to the low of the day. It was only off by one pip, went below one pip, and then we saw the low of the day formed in London. Looking at this, obviously, you know, it looks like cherry-picking hindsight and all that business, but I want you to take into consideration when we look at price, we have to have a bias. What do we think price is going to do? Is price going to go higher or lower over the next two or three days? What's the price most likely going to do over the course of this present week or next week? Is it going to go higher? Is it going to go lower? Where are we at seasonally? Are we looking for bullish prices or lower prices? Where are we at quarterly? Are we in a quarterly shift that is underway that's still unfolding with bullish prices, with premium PD arrays that haven't been met yet? If that's the case, then we could be looking for scenarios to look for buys. So, we're looking at discount PD arrays, we're looking at reasons to suggest buying in a discount range. So, our PD array matrix is going to help us look for reasons to build ideas that are bullish. If we look for those ideas with the Central Bank dealers range in conjunction with those, it'll help us narrow down with time of day, London, and open. It'll help us frame ideal entry points. So, if we look at the daily chart and we see price trading up at a premium PD array and markets are bearish, we're looking for lower prices for a one shot, one kill scenario, looking for a lower close week. We could be looking for one, two, or three standard deviations moved higher when the Central Bank dealer's range is around 20 to 30 pips ideally. And if we get that projection up into London, we have a great deal of advantage on our side that we're probably going to get the high of the day in the London session. Now, you add that also with your expectation of seasonal tendencies. All of those things start coming together and draw a closer picture to what institutional order flow is and how ICT moves price. In the next lesson, we're going to go into greater detail about how we can pick the high and the low of the day with this information and with the Asian range.