Core Principle
"You don't need anything else besides this element as a foundation to what you're trying to trade and you can make all the money you'd ever want."
"It's reaching for old highs, old lows and inefficiencies. That's the fair value."
"Once we know that the market is likely to do these things, that's a characteristic. It's an algorithmic characteristic."
The Only Two Things You're Worried About
- "Old highs, old lows"
- "Inefficiencies"
"You're not trying to predict a direction on the day. You're not trying to be right about 50 handle runs. You're just studying, observing."
Algorithmic Certainty
"This is always absolutely without fail. It's never not going to do it. It's always every single effing day it's going to do this very thing. It's going to do it. It's going to absolutely do it because there is an algorithm."
The Study Time Window
Critical Observation Period
New York Local Time (Eastern Standard Time)
"So between 8:00 and 8:30 in the morning, New York local time or Eastern Standard Time in the US, everything I mentioned in terms of time, if it's the time that matches New York local time, so set a clock, if you have your smartphone, there's a way that you can pull up world time and put one in there for New York and you'll always know what time ICT is saying to look for these things to."
"Between 8 o'clock and 8:30 in the morning, you want to sit down and determine where are the smooth locations in price action on the 15 minute, the five minute, and the one minute."
"8:30 the algorithm will start spooling for liquidity for inefficiencies. One or the other."
Time Zone Importance
"I'm in the east coast of the United States and the algorithm is on New York local time. I don't care what anybody else tells you. Okay, that's what it's on. Period."
The Three Time Frames
"15, five, one minute. Those are your first three time frames to worry about."
"The levels and inefficiencies on the 15 minute time frame, the five minute time frame, and the one minute time frame, if you're brand new, you don't know how to trade ICT, you don't know how to trade price action, you don't have to trade period. Okay? You don't need any other time frame."
What You Don't Need
- "You don't need a daily chart"
- "You don't need an hourly chart"
- "You don't need a 31 minute chart"
- "You don't need a 17-minute chart"
- "You don't need a 15-second chart"
- "You don't need anything below a one minute chart"
Simplicity Statement
"You don't need anything else to do what I'm going to teach you."
Understanding Smoothness
"What we're looking for always, the first thing that you're looking for Caleb is where is the market smooth on the 15, the five and the one minute chart."
"When you have price levels that create highs like this swing high here and this swing high here, they're real close to one another."
"Any time that you're looking at price action, and it doesn't matter what time frame you're looking at, okay? If you're looking at it through the lens of a second chart, sub sub one minute or the weekly chart or a monthly chart or a quarterly chart where it's three months of data compressed in to make candlesticks. It does not matter. This principle is always true. The market will go to areas of smoothness for the purpose of disrupting any orders that would be resting above or below it."
"You observe price action and you're looking for areas that look real smooth and safe where they say peace and safety. Sudden destruction comes upon me."
Relative Equal Highs & Lows
"We have relative equal highs right now. Okay, very simple, smooth price level."
High Probability Relative Equal Highs
"How do you know it's a high probability relative equal high that's likely to get swept or traded through? How do you know that ICT? What differentiates that from any other? Okay, it's this. If you have two swing highs, if the one to the left is slightly higher than the right, you have a very, very high probability that they're going to want to take it above it."
High Probability Relative Equal Lows
"What would be a high probability relative equal low that the market is likely to draw down and go below? It would be a low that has a slightly... in common terms referred as a failure swing."
"What I'm teaching you is how to identify in price action where the algorithm will refer back to and why."
Priming
"Priming is where you continuously create, inspire, or manipulate the expectations of a large number of investors and they think, 'Oh, it's going to go through that high.' But then there's a lot of folks that don't want to see it go there because they went short."
"So when the market goes up here and stops and turns down, what that does is it creates a sympathetic side, the shorts are relaxing. If the shorts are relaxing, what are they saying? They're saying that this is now what? Resistance. So anyone that takes a new short position, where are they going to think that the safest place to put their stop loss is going to be? Right above these highs."
Draw on Liquidity
"Draw on liquidity is just an initial reasonable assumption on our part to determine a directional move that could unfold. It does not mean and it does not define the absolute terminus to a price run or the be all end all target."
"In plainer terms, the market's probably going to keep moving until it gets to this level. It doesn't mean that it can't have retracements lower. It doesn't mean that it can't make a lower low than it's done here. Highly unlikely, but it's still an initial idea."
What is a Draw on Liquidity?
- "New week opening gap, that's a draw liquidity" (0:25)
- "Old highs, old lows"
- "Inefficiencies" — "where the market needs to offer fair value to the marketplace"
What the Algorithm Does
"It does this to spur on emotional interest or tangible orders that are actually sitting out there. Real orders that are sitting above and below or inside of inefficiencies where the market needs to offer fair value to the marketplace."
The Market Will Reach These Levels
"It does not matter how many buyers are buying the market to go up there and how many short sellers... Look at those orders. There's no imbalances there. There's just as many short orders below the market as there is above. But yet, the market will still march and march and march and march and go to the beat of the drum that I tell you it does. It reaches to these levels because it's coded to do this."
Order Block & Displacement
"Displacement is where the market runs against a pre session preday pre trend or price swing direction. In other words, it's a counter move to what's already been in play."
"So the market has dropped here and then we move aggressively above the short-term high."
"That down closed candle is a order block. We have displacement. It took liquidity and the market has been one directional. Now what makes that order block specifically is that it has happened post 8:30."
Fair Value Gap Types
"A fair value gap that has a down close is a civvy. A fair value gap that has an up close is a bissy — buy side efficiency."
Journaling & Study Method
"You're studying price at specific times of the day. If you're not writing this part down, you're blowing it already."
"What you're doing is you're measuring because you have zero baseline experience. You have no continuity in what is you're reaching for looking for in price action. And you study how long it took and you record that many minutes."
What to Record in Your Journal
- How many candles it took to move to the target
- How many minutes the move took
- "What it felt for you physically"
- "Were you anxious?"
- "Did you second guess that it was going to run there?"
- "Did you feel excited the entire time?"
- "Were you impatient that you thought it should have moved there sooner and faster?"
- "Did certain candle formations cause you to doubt it?"
"Don't be discouraged if you can't watch this stuff real time and see it or outline it in advance. It's okay for you to come home from work and look at your charts after the fact and go back and look at this and study it."
Don't Stay in Hindsight Too Long
"You have obviously the benefit of hindsight initially, but you don't want to stay in that very long."
Psychology & Mindset
The Stress Response
"You're paranoid that that winning trade that you just found out just fell into your lap. Oh my goodness, this I'm winning. This is something new. I need to secure this. But then you're thinking, 'Oh, wait a minute. I'm supposed to be holding for the daily range.' And now you're wrestling. And that becomes a real hard wrestling match, doesn't it? Makes you feel nauseous."
"Any other time you're like, 'Oh,' THIS TIME 'GET AWAY FROM ME. CAN'T you see I'm trying to worry about this 10 pip handles move? The weight of the world is on my shoulders right now and you're coming at me with this.'"
"The reason why you feel that is because you don't know what you're doing. You haven't done this part long enough where you're completely desensitized to, okay, I'm doing this exercise to get comfortable with anticipating price moves."
Manual Intervention
"Intervention is think like FOMC, think like CPI, think like non-farm payroll where if you're wrong, if you're offside right when it hits the market, you're dead. That's what manual intervention looks like."
Chasing During Intervention
"There are many times untradeable. It's unreasonable for you to assume that you can trade that once it starts because you're literally chasing the wind and you're never going to catch it. You're just going to frustrate yourself and get placed very poorly and you're going to be in a trade that's going to be highly anxious and stressful. And that's not trading, that's gambling."
The Market is the Jungle
"As soon as you push the button, you're asking the shark to take a leg off. You're asking that lion to take your face off. You're inviting it."
"As soon as you enter these markets, you've entered the jungle. You've entered the deep waters. And honey, everybody's hungry. And if you offer it up on a silver platter, they're going to take it and eat it."
"Are you liquidity? Because if you're liquidity, you're lunch. I go in and I'm looking for lunch. I'm looking for the liquidity."
Trading Rules
"You can't blow the account if you trade with one micro and you only take one trade a day. You can't, there, it's physically impossible for you to go out there on day one and blow the account."
"That's what your subconscious is fearful of. I don't want to blow the account. I don't want to have a big losing trade. I don't want to go into big draw down. Okay, that's easy. Don't over leverage your account and don't take more than one trade a day."
"Pyramiding should not be part of your repertoire yet. That's something that you need to be doing maybe a year after trading with one contract."
Process and Logic
"If you want to be able to do it correctly, you have to do things with a process. There has to be a logic behind it. There has to be some measure of rule based thinking and then you have to adhere to that. If you don't want to adhere to rules, I promise you, you're going to lose."
The Blame Game
"You're going to fail. And you're going to blame me. You're going to blame everybody else. You're going to blame the prop firm. You're going to blame the brokerage firm. You're going to blame everything but you."
Study Flashcards
Click each card to reveal the answer (direct quotes from the transcript).