Original subtitles

Okay folks.

Welcome back to the fifth of eight teachings for the month of

November, 2016, ICT membership.

Okay.

We're looking at inside price action.

Institutional market structure.

Okay.

Now what is institutional market structure?

It's the analysis of correlated assets or the relationship to

inversely correlated, right?

The purpose is to determine what the smart money is accumulating or distributing.

Now, currencies are the easiest to analyze with institutional market

structure and we utilize the dollar index.

Every price swing should be studied to determine if market symmetry.

Now, how do we identify institutional market structure in Forex, we compare

every price swing in the dollar index with the foreign currency that we trade

as the us dollar index trades higher, we reasonably expect a lower price

swing in foreign currency pairs.

If the us dollar index or a foreign currency.

Fails to move symmetrically smart money is actively trading as

U S dollar index trades lower.

We reasonably expect a higher price swing in foreign currency pairs.

If the us dollar index or foreign currency fails to move symmetrically

again, smart money is actively trading.

Okay, let's take a closer look.

What this concept actually means, and we're gonna be referring to

the us dollar index SMT divergence.

Now SMT stands for smart money tool or smart money technique.

And we're gonna be looking for a divergence between closely correlated

or inversely correlated assets.

Now, obviously, if we expect the dollar index to trade higher, that's going to

put downward pressure on foreign currency.

If we're expecting the dollar index to trade lower, that's going to

allow foreign currencies to rally in a symmetrical market condition.

When the dollar index makes a lower, low foreign currencies, we

expect that to make a higher high.

When we see this, this confirms current price action and the

underlying trend is likely to continue.

Now, the idea of stalking reversal patterns in this condition is not highly.

In fact, you want to avoid it altogether?

The reason why is, because for instance, let's take a look at the dollar index

example here, but the red line, okay.

We're going to look at the likelihood of that old, low

being violated as we see here.

And if we see that old, low violated, and we see a higher high

in foreign currency that confirms the down move in the dollar index.

And even though it trades back above a short-term.

That short-term high is going to be just a run on by stops.

And then the dollar index most likely will resume going lower.

This is one of the ways that I can basically go into the marketplace and

anticipate with turtle suit before it actually happens in the same

thing, said for foreign currencies.

If we see that higher high, while the dollar index makes that

little low price is confirmed.

Does that mean it's the underlying direction is still intact.

So any movement down to the foreign currency pairs below a swing low or

short-term low they're gathering up the cell stops below the marketplace

and that's where they're going to be accumulating new long positions.

And then the foreign currency pairs will be allowed to trade

higher and make a new, higher high.

Now when the dollar index makes a higher high and the foreign currency.

Makes a lower, low this too confirms current price action.

And the underlying trend is likely to continue again, like we just said about

the other slide, the idea of stalking reversal patterns in this condition is not

high probability and it should be avoided.

And again, once that dollar index makes a higher high in the foreign currency

makes a lower low that run above the short term high and foreign currencies

is many times going to be a run owned by stop them on the marketplace.

And then you'll see another sell-off making a lower, low, and the same is said

for the contrary, for the dollar index.

When the market trades back below that short term low, it's going to

gather up, sell stops to pair new buying with, and it'll most likely

trade higher and make a new high.

Now we're gonna talk about non-symmetrical market conditions.

When the dollar index makes a lower, low in the foreign currency fails to

trade higher than a previous high.

This is us dollar index SMT for USD ex SMT.

This does not confirm current price action.

And the underlying trend is likely not to connect.

However, the idea of stalking reversal patterns in this condition is high

probability and could reasonably be.

That lower low on foreign currencies is indicating that the dollar index

is most likely going down below a previous low to do what wipe out the

cell stops, accumulate new buying, and the rally should ensue and a dollar.

If the dollar is going to rally, that means it's going to be downward

pressure in foreign currencies, and it's already shown itself in the form

of weakness by having a failure swing in the foreign currency, making a lower.

Again, looking at non-symmetrical market conditions.

When a dollar index fails to make a higher high while foreign currencies make a lower

low, the same thing as being said, as we said in the previous slide, it's just

being illustrated in a different context.

This is showing the dollar index is failing to make a higher high.

That means there's underlying weakness and.

A lower low seen in foreign currency pairs.

They're going down below a previous low to accumulate all the cell

stops on foreign currency pairs.

Then they'll rally the market higher.

The dollar index will sell off, which would support foreign

currency, long positions.

And the underlying weaknesses indicated with the us dollar

index making a lower high feels.

Those markets.

The idea of stalking reversal patterns in this condition is high probability

and could reasonably be considered.

Yeah.

Okay.

So let's take a look at a case study here.

What does this look like in price?

Okay.

We're looking at a daily chart of the British pound USD, or as we call it the.

And notice the highs in here.

Okay.

We have a higher high formed in pound dollar.

This is around the end of April going into mid June of 2016 in the same timeframe.

We see the dollar index making a low in April time period going into mid

June, but notice the difference between.

Going back to the pound dollar.

We have a higher high forming in the middle part of June, 2016 by itself.

At the time when it was rallying up, I'm sure it probably looked very

positive and bullish to everyone.

But if that's the case, if there is a symmetrical market condition that should

be seen with what, in terms of the dollar, it should be seen with the lower.

Do we see a lower, low form in the dollar index?

No, that's it.

USD X SMT bullish divergence.

That means what we're seeing underlying strength in the dollar index.

And even though this looks bullish on the bears pound, it's really just taking

the buy stops above the 47 60 level.

Once those stops are ran out, the market does in fact tank.

The underlying strength in the dollar index allows us to look at that 93,

80 to 94 big figure this down candle in here that may become a future Bush

or block that we could trade at once this boy is closed in, we know that

there's underlying strength in the dollar index, because there was an

unwillingness to see that lower, low form.

As we saw the higher high for me.

So again, you can see that, that higher high piercing and old high that's going to

be a run on stops above that 47 60 level.

Now it trades almost up into 50 65, which is several hundred

pips, but it's a daily chart.

So we're going to be cognizant of that.

But nonetheless, we're looking for institutional market structure.

So this looks like by all indications, when the market was ready, N

retail traders and less informed traders would see that as a bullish

breakout, but it's not seeing with the dollar index having a lower low.

So we see the same thing we had mentioned earlier, just graphically described here,

the higher, low formed on the dollar index that should have created a lower

low as the cable made a higher high.

And it didn't.

And what does that actually giving us?

It's giving us a great insight.

What is being accumulated.

The dollar index is being accumulated alongside.

Otherwise it would have been permitted to go lower.

If we see that and we can see a foreign currency pair shooting higher.

Okay, basically, um, acting on its own accord, if you will.

Okay.

That's not by accident.

It's absolutely.

I mean, it'd be Alation.

So if we understand where the manipulation is taking place in the marketplace, then

we can go in and capitalize on that.

So now we can focus primarily on being bullish.

Why because the dollar was unwilling to make a lower, low.

And the only reason why that can happen is if it's being bought

aggressively, otherwise they would wait for lower prices.

So since they're unwilling to wait for lower prices in the middle of June of

2016, we have to focus primarily on being a buyer $1, and it means put, sell

signals or bears stance on all foreign currencies looking to be a seller.

This is the reason why all through the second part of 2016, I've been in dollar.

Okay, let's take a look at another example and we're going to be

using the daily chart again.

Cause I'm going to build the idea that you don't have to be a day trader,

but having these ideas will help us have a longterm to intermediate term

perspective when the marketplace.

So now we're going to turn our attention to the latter portion of August,

2016 to the first week of septic.

And you can see that the cable meet a higher high

Okay.

So all in all indications here looked very bullish.

Okay.

So price was running through an old high here at the same time.

This low on the dollar index here did not see another lower, low.

So as the cable was pressing higher rallying, this dollar index

should have seen a lower low.

It did not do that.

What that indicates is again, dollar base strength.

In other words, the dollar index is being accumulated on the long side.

The cable is being distributed.

Now it's being distributed above an old high here, but look to the left

again above this old high here as well.

So now we can go and frame another level for turtle soup or

a false break above an OHI to run.

What, what type of stops reside above an old high by stops?

Why would they want to take the market up to a buyer?

Because they want that buy stock to execute at the

market, to buy at the market.

They're going to sell their long positions.

They accumulated here and they accumulated here.

They can sell those longs at a higher price to willing buyers up here.

This is being distributed.

It's being distributed at an old high while the accumulation is seen in strength

because the dollar can't go lower.

Now think if the dollar doesn't go lower it's because it can't

go lower because of price.

It's being kept while the premium is being built into the pounds.

So retail chases, this run like this and false breakout while smart money

looks at failure swings in the lows.

When you see what would otherwise look like strength and breakouts on the

upside and foreign currencies, always double-check them with the dollar index.

If you don't see that, then you know that.

The false breakout on the upside, on the foreign currency market, it's all

sucker play and it's retail candy land.

Everyone's going to be looking to be going long on those false

breakouts in foreign currencies.

While the smart money is focused in on the dollar, having an unwillingness

to go lower like it does here.

So there's low.

And I basically frame the exact dates.

That's why this box is up here.

So it's not like a kills or anything like that.

I'm just giving you a specific date range to look at sample size of price.

Action.

As you look at this, I want you to see just how strong it is in

terms of giving us a longterm to intermediate term perspective on

what direction the market is going.

And again, this is a daily chart.

So if they're going to keep price at a higher price low here and not blow

out the previous low, or this low over here, we see the unwillingness to

hold these prices, British pound USD.

They quickly drop it.

Because it's been distributed, they'd left the retail, holding

the bag when accumulated long positions start moving higher.

Every time there's a retracement, we expect to see another

experience in the upside.

So when we look at price like this, we can see it graphically using the

price chart, but also use a tall as an overlay for the empty four platform.

And I'm going to share that to you now.

Okay.

Here we are over at the ICT monthly mentor.

Forum and we're in the November content thread or category as the form calls it.

Okay.

And I gave you several empty four indicators today at

the time of this recording.

And what I'm going to do is I'm going to tell you what we're

going to be doing is showing you how to install this on empty for.

Yeah, it used to be where you can just download it an empty four indicator and

just drop it in the indicator, um, folder.

Uh, they have since changed that with empty four and made

a little bit more difficult.

So it's not that difficult, but a little bit tricky.

So what we're gonna do is we're going to click on the link, the

empty four line chart overlay by clicking on that, it's giving you

a down, download prompt over here.

You're going to click on that.

You're going to click on open while you have empty.

And what that'll do is open up your editor

since I already downloaded it.

Okay.

I'm just going to say yes.

I want to overwrite it.

Okay.

Once it's overwritten.

So what I do is I get in here.

I could see that as Unicode overlay

say, yes, I want us to replace it.

Then you can close this.

And you'll go back to your empty, empty four platform after you restart it.

So I'm going to read reboot mine, and once it restarts, I'll

show you what we would do next.

Okay.

Here we are back rebooted.

And you would just go up and into insert, go down to indicators and

go to custom and scroll down to overlay chart line, click on it.

Where it sees, where it says all these double Xs, double click on that.

And what you're gonna be doing is changing that to whatever pair or

the dollar index you want to use.

Okay.

And I'll show you what I mean by that.

Let's go back and highlight a specific chart first.

So we're highlighting the British pound USD chart by

clicking anywhere on the chart.

Go up to insert indicators, custom overlay chart line, rather double click.

And we're gonna be overlaying the U S dollar index.

So capital letters.

Okay.

And we're going to leave everything as it is here.

You can see.

We see price making that higher high at the same time, the dollar

index was failing to make that lower, low, you can get these grid

lines that come off by doing this.

Okay.

Okay.

I have a white background, so I will just change it to that and

then close and suddenly it's gone.

It makes it real clean and be able to see it very crisp.

No, you can do all of your notations for your log when you're done doing your

trades or as you're doing your analysis.

So while we're seeing higher highs here, dollar index is making

that higher, low, so it should have been in a lower low there.

It has not shown that as confirmation.

So we see that as a turtle soup or a false breakout above and Omaha.

And an old high here, so we can look to for that to be distributed.

We do not see that as strength.

Okay.

And then obviously the market trades softer.

So when we look at identifying institutional market structure,

what we're basically doing is we're weighing the underlying strength

of the buying and the selling at respective highs and lows in the

dollar index versus foreign currencies.

Now, if you pick one particular currency, And you identify areas like this and

accessing on a daily chart, it gives you a long-term perspective where you

can be focused primarily on being short.

That means if you are a short-term trader, you could be looking to sell

short at every 60 minute or four hour bear shorter block, or you could be a day

trader selling it above the opening price above the midnight candle in New York.

And you just capture all those types of moves going on.

So it gives you an ideal, uh, context to work within and gives you a framework.

It doesn't give you ambiguity.

It gives you a very specific frame of mindset going in knowing that if it's

the daily chart and you were seeing underlying strength in the dollar, and

we seeing potential distribution in British pound U S date, most likely

we're going to see lower prices on cable.

So that way we can be a buyer on dollar based currencies or a seller

on foreign currencies that it's paired up with the dollar index.

So hopefully you found this.

I didn't until the next time.

I wish you good luck and good trading.