ICT Gems - IPDA Data Ranges and Open Interest Secrets

Summary

In this insightful video, ICT Gems delves into the significant role Futures Contracts play in Forex trading, particularly when analyzing pairs like the Australian USD. Emphasizing the importance of understanding both Futures and Forex markets, this video uncovers how crucial data ranges, such as the 20, 40, and 60-day look-back periods, are used to predict market shifts. By calculating these ranges, traders can spot trends, identify potential shifts, and make informed decisions based on institutional order flow and open interest activity. This method offers a unique vantage point into how large funds and market makers manipulate markets to seek liquidity and make lucrative moves.

Highlights

• Futures Contracts provide crucial volume insights not present in Forex. 📊
• Monitoring Australian USD pair showcases Futures influence in Forex trading. 🇦🇺💱
• Recognizing quarterly market shifts can guide investment strategy. ⚖️
• Market makers use historical data to anticipate and seize liquidity. 💡
• Smart money uses open interest as a tool to manipulate market trends. 🎯

Key Takeaways

• Understanding Futures Contracts can unlock hidden insights for Forex traders. 🌟
• Examining both Futures and Forex markets solidifies a comprehensive trading approach. 💹
• Key data points like 20, 40, and 60-day look-backs are essential for market analysis. 📈
• Open interest decline often signals a shift in market behavior and sentiment. 📉
• Calculating buy and sell stops based on historical highs and lows can predict market moves. 🔍

Overview

If you're keen on Forex trading, understanding the intricate details of Futures Contracts can be your secret weapon. ICT Gems walks us through the Australian USD pair, emphasizing how Futures can significantly impact the Foreign Exchange Market. By analyzing Futures, one can grasp the underlying trends and data ranges that dictate market behavior, offering a goldmine of insights for traders looking to make informed decisions.

The heart of the video lies in deciphering the magic of data ranges. Using look-backs of 20, 40, and 60 days illuminates hidden patterns and shifts in market structures. These periods help traders remain in sync with market trends by uncovering the invisible hands – the large funds and market makers – steering the market towards liquidity pools.

Moreover, understanding open interest becomes crucial as it's often misunderstood in trading jargon. A significant drop in open interest can hint at a market shift, contrary to the common belief of its association with healthy trends. By comprehending these nuanced mechanics, traders can better predict the directional bias and the extent of price movements, leveraging smart money strategies effectively.

Chapters

• 00:00 - 00:30: Introduction to Futures and Forex Trading The chapter introduces the relationship between Futures and Forex trading, emphasizing the importance of studying Futures contracts to gain insights for Forex trading. By using the Australian USD pair as a case study, it illustrates how understanding Futures contracts is crucial for transitioning into Forex markets. The content is particularly relevant for Futures traders who haven't yet considered the impact of Forex markets.
• 00:30 - 01:00: The Imperative of Understanding Futures for Forex Traders The chapter discusses the importance for Forex traders to understand the underlying Futures Contracts to gain a complete picture of market trends. It emphasizes that traders should look at both the Forex and Futures markets simultaneously. The text suggests that while one might assume the Australian underlying Futures Contract should align with the Foreign Exchange Market, this alignment is generally expected but may not always be the case.
• 01:00 - 01:30: Data Points Differentiation: Forex vs Futures Market This chapter discusses data points differentiation between the Forex and Futures markets. The main point is that the Forex market doesn't provide accurate volume information, unlike the Futures market, which offers volume data from underlying Futures contracts. Additionally, it touches upon identifying IPO data ranges and recent market shifts, with a focus on the Australian dollar within the last three months.
• 01:30 - 02:00: Market Shifts and IPA Data Ranges The chapter titled 'Market Shifts and IPA Data Ranges' discusses a significant market shift that occurred in November 2016. The narrative highlights how this shift, although not allowing us to retrospectively trade or profit by going back in time, provides essential insights for understanding market behaviors. This significant movement is attributed to the influence of large players or smart money, which is evident from the daily charts of that period, specifically impacting the underlying future contract.
• 02:00 - 02:30: Understanding Quarterly Market Shifts Chapter Title: Understanding Quarterly Market Shifts. The chapter discusses the observable shifts in the Australian dollar market over three to six months intervals. It emphasizes the recurring nature of these shifts, which can manifest as selloffs or rallies. The chapter also talks about analyzing these patterns using the IPA data range, with a focus on a 20-day look back and a 40-day forecast range.
• 02:30 - 03:00: Market Structure and Signal Identification The chapter titled 'Market Structure and Signal Identification' delves into understanding and predicting market movements. It suggests using a combination of historical ('look back') and predictive ('cast forward') ranges to assess market trends. A key concept discussed is the 'market structure shift,' exemplified by a specific occurrence in November, marking a transition to a sell profile. The chapter emphasizes the importance of identifying conditions that lead to directional change or consolidation in the market. It highlights that while some indicators are clear, there is an element of ambiguity, referred to as the 'vague gray,' in predicting significant counter-directions.
• 03:00 - 03:30: Range Analysis: 20, 40, and 60 Days The chapter discusses range analysis over 20, 40, and 60 day periods, focusing on the situations when a market does not show a clear retracement or correction in the opposite direction. It uses an example of market behavior from November to February and explains how a market could have been consolidating during this time rather than moving counter-trend. The analysis highlights a high point made in November, noting that a low was subsequently broken, presenting a different market behavior than if it had simply corrected in the opposite direction.
• 03:30 - 04:00: Open Interest and Liquidity Voids The chapter discusses a shift in market structure, indicated by a break to the lower side. This shift occurs when an area of equal highs is taken out, piercing the buy stop liquidity pool. The effect is visible when the market structure shift is analyzed, particularly by looking back at historical data, such as a previous event in November, and highlighting changes on the chart. The focus is on understanding and identifying these key changes in market dynamics.
• 04:00 - 04:30: Significance of Old Highs and Lows This chapter explores the concept of identifying significant market points and shifts, specifically focusing on the importance of old highs and lows within market structures. It emphasizes understanding where significant changes begin, particularly in relation to the Interbank Price Delivery Algorithm (IPA). The chapter discusses the method of delineating the most apparent market structure shifts, especially those occurring within a recent three-month span. It advises readers to project 20 days forward from the start of the month when such shifts occur to anticipate market movements effectively. The emphasis is on syncing with recent IPA activities to align with prevailing market dynamics.
• 04:30 - 05:00: Interest Rates and Long-term Market Trends The chapter discusses the importance of identifying significant shifts in market structure to understand long-term market trends and interest rates. It cautions against making hasty anticipations based on recent market activity and emphasizes the need to look back over a period of months for obvious bullish or bearish movements. The suggestion is to partition daily charts into quarters, using months like March, June, September, and December as reference points to better analyze the data and discern these trends.
• 05:00 - 05:30: Central Bank as Liquidity Provider The chapter titled 'Central Bank as Liquidity Provider' focuses on how liquidity shifts are detected in the financial markets. It explains the use of algorithms that traders can mimic to identify liquidity changes in a given range. This includes looking back at past data, specifically covering 60 days, to determine where sell and buy stops have historically occurred. This method aids traders in anticipating market movements based on past liquidity patterns.
• 05:30 - 06:00: Role of Open Interest in Market Trends The chapter discusses the role of open interest in market trends, focusing on fair value gaps, liquidity voids, and equilibrium price points. It explores how prices need to adjust to close gaps and maintain balance by reverting to previous ranges. The concept of optimal trade entries is explained in the context of returning to equilibrium after potential overextensions in market movements.
• 06:00 - 06:30: Conclusion and Key Takeaways The chapter titled 'Conclusion and Key Takeaways' discusses the expected market movements and timeline insights based on a shift in market structure observed during a specific November period. It highlights the implications of this quarterly shift on daily charts, which may inform market actions over the next three to six months. However, it emphasizes a focus on a three-month time horizon, advising against looking beyond that period based on past experiences.

ICT Gems - IPDA Data Ranges and Open Interest Secrets Transcription

• 00:00 - 00:30 by looking at the Futures Contract if we're going to be trading Forex okay it's really important that you know that you can get a lot of insight just by studying the underlying Futures uh price so since if we're going to be looking at the Australian USD pair as our case study we're going to be looking at how influential the study of just the Futures Contract alone how that's Paramount and understanding how that moves right into and Segways beautifully into trading in the Foreign Exchange Market if you're a futurist Trader you've never considered what the foreign exchange markets doing or if you're a
• 00:30 - 01:00 Forex Trader and you've never considered what the underlying Futures Contract is doing vice versa it's imperative that you understand what they're both doing to get a complete picture you want to be looking at both now obviously right away one's going to assume well it should be obvious it it should be the same thing because the Australian is leading the pair Al versus the dollar so therefore the Australian underlying Futures Contract should be in fact the same thing we see in the Foreign Exchange Market and by far and large it that's
• 01:00 - 01:30 true but there's certain data points that you cannot get by looking at the Foreign Exchange Market there's simply no way of getting that because foreign exchange doesn't give you volume it doesn't give you accurate volume like you can get volume from the underlying Futures Contract how would we go about looking at where the ipto data ranges are and if we're looking at Australian dollar the most recent Market shift okay in the last three months occurred back
• 01:30 - 02:00 in November we can clearly see that there was a major Market shift in November 2016 now what that does it gives us a great deal of insight we can't take a time capsule travel back in time okay and be back in November and go short there but we can use the information that our daily charts are telling us there that means there was a great deal of displacement by the large players or smart money when we see that in November what we're seeing here is the underlying future contract of the
• 02:00 - 02:30 Australian dollar has a market shift right there that's a quarterly Market shift over the last three to six months that's the most obvious one you can clearly see it that's what you're looking for every three months there's going to be something like this occurring it could be a selloff creating a high or it could be a a low where it starts to Rally the IPA data range okay you have a 20-day look back and cast forward range you have a 40-day look
• 02:30 - 03:00 back and cast forward range and then you have a 60-day look back and cast forward range what I'm suggesting to you is if you are looking at price and you see a for instance you have a market structure shift here and the ctly shift occurs in November that means that now the market is in a sell profile from that point until it gets to a level of significant counter Direction what would cause it to change direction or consolidate that's the other thing that's the vague gray
• 03:00 - 03:30 area in the analysis sometimes you won't see a clear retracement or correction opposite direction for instance it's been going down November uh it could have very easily been consolidating here going into January okay into February it doesn't need to be a counter Trend move like we're seeing unfold here since the last week of December it can be a consolidation so back in November we see that there's a high made what's really going on that low here is broken so we
• 03:30 - 04:00 have a shift in Market structure it breaks lower we know that we can see it because it's taken out in an area of equal highs and we pierced above that taking out the buy stock liquidity pole and that's seen here that was the uh that was the basis and the framework around what caused the market structure shift that quarterly effect comes in uh to operation at that moment where our eyes go immediately back to November because you can clearly see it when you see that and you delineate that on your chart what you're doing is is you're now
• 04:00 - 04:30 identifying the beginning of November so you have to have a basis point where where is it where did it all begin because if you don't get yourself in sync with what IPA most recently did and IPA is the interbank price delivery algorithm that's for your notes again you're going to delineate where the most obvious one in the last three months has been then you're going to cast out 20 days go forward from the beginning of the the month that that market structure shift or quarterly shift takes place you're going to count out 20 days now it
• 04:30 - 05:00 may not even be 20 days you may look at the chart and say hey this is an obvious one right here something's really going on if you do that you're really doing too much anticipation you got to go back to the most obvious one and it may require you going back three months but find the most recent one where the market structure has shifted and there was a move that took place that was obvious bullish or bearish and it's really easy if you just divide your your daily chart into uh quarters like put one put a line on March put a line on uh June and sep September December and just
• 05:00 - 05:30 keep doing that your eye will go right to where these uh corly shifts are happening they're not going to always occur on those months there's a little bit of gray area which is the reason why we have a look back and a cast forward the ifpa data range okay what it's really doing is it's highlighting you as the trader you're going to try to mimic what this algorithm's doing it's looking for the liquidity in the range of 60 days in the past where is the sell stops in the last 60 days where are the buy stops in the last 60 days where are the
• 05:30 - 06:00 fair value gaps where's the price gaps that price has not been efficiently delivered in the last 60 days where are the um the liquidity voids where price has only been delivered on the upside where it has to come back down to efficiently deliver price and balance it out by going back down and closing in that range optimal trade entries that's where that comes from where are the equilibrium price points does it have to return back to equ equilibrium did we get too far ahead of ourselves did we extend too far do we have to come back
• 06:00 - 06:30 and retrace minor retracement before we see the next leg lower by looking at the market structure shift that takes place in this November time period we are in Ence saying that this is a quarterly shift therefore because it's a daily chart this is going to give us insight about what the market should do on a thre Monon timeline as much as six months but I like to just remind you that I'm only really looking for about 3 months Horizon time Horizon that far out I don't like to look Beyond on that there's been many times I can show you
• 06:30 - 07:00 in journals where I had it right but I real just because I had it right doesn't mean I was executing on every trade but many times I'm really accurate in about four to six weeks time Horizon and it's about the half life of a three-month cycle but these ideas are the same so how can an algorithm or a comp we'll just say it like this how can a computer program know where everyone's stop is it has to have a range of data now just because we have the the numbers of price
• 07:00 - 07:30 the value of price okay they have to have a look back period the look back period is 20 days 40 days and 60 days and what you're doing is and this is the what's I want you to do go back through your charts and don't just look at the Australian dollar look at every currency pair look at every commodity look at individual stocks look at indices and and you'll see quickly by studying this it will become quickly clear that there's no Randomness to it there's a specific pattern that this thing does
• 07:30 - 08:00 all the time if you look back 60 days in the past what was the highest high in the last 60 days there's going to be buy stops above that high what's the lowest low in the last 60 days there's going to be sell stops below that low in the last 40 days what was the last highest high and what was the last lowest low looking back in the range to the left from that November red line that we're delting on November where are the stops below and above those highs inside of the range of 20 days 40 days and 60 days what happens
• 08:00 - 08:30 if there's a low that's really really obvious that's just outside the range of 60 days that's the farthest extreme that's when the open float will move aggressively and go outside that normal parameter of 60 days and you'll see that big run the market will jump and Skip right down into that old low that's just outside that 60-day range how do you know when it's going to be an explosive move Michael when you have that scenario
• 08:30 - 09:00 if the last 60 days if they've already ran out the the the stops below and low in the last 60 days or above an old high in the last 60 days and there is a larger higher high or lower low where the stocks will be resting above or below respectively then then you know there's going to be a big run on price and they're going to run for that liquidity because that's the only other thing that's left the large funds have their orders above and below these old highs and lows if there isn't anything
• 09:00 - 09:30 that hasn't been traded to in the last 60 days if everything's been wiped out above and below the market FL in other words the open float all the buy stops above old highs and all the sell stops below old lows in the last 608 during your look back in other words everything to the left of that November vertical line at Red Line if everything's been cleaned out above and below the highs and lows there's no more buy stops there's no more sell stops it has to create a new expansion so you have to identify what the next High and low
• 09:30 - 10:00 outside that range of 60 days looking back where that is and that's going to tell you where they're going to draw price on this daily time frame it's more it's more confirmed when you start applying it to the weekly chart and the monthly chart because you'll start seeing things align where that old low that's just outside of the last 60 days looking back there's an old low that may not be on this chart here I don't know I'm just giving you a hypothetical uh example if there's an old load that's just outside the realm of September in this example here say maybe there's August there's a significant lower low
• 10:00 - 10:30 the Market's going to reach for that there may be a high that's just outside the September boundary in August they may have uh turned around here and they make a run for that that's what you would be noting and you're going to look for price to be drawn to one of those two price points and you look for evidences that that institutional order flow is going that direction then you know where it's going it gives you directional bias because of the higher time frame nature of this daily chart and weekly and monthly so what we have here this is the the look forward okay
• 10:30 - 11:00 or cast forward of November this is 20 days out from the 1 of November so we have 20 days here inside of that 20-day range there's going to be a significant setup that you can use for your trading it's moving up into the old low that was formed in October it goes into consolidation well here we have a condition where the market didn't create any significant shift but it starts to move in consolidation then you count forward okay okay from here that's the
• 11:00 - 11:30 20th so you can go from the beginning of November to the 20th yes there was a price swing but using the information next stage would be 40 days out from that price point of November beginning we have here that is your 40-day Lookout or cast forward and you're looking for again a potential major shift quarterly it can happen at that point now it didn't give you the lowest low because if you go back to the left two two daily candles or bars the last down right here this down candle that was the actual low
• 11:30 - 12:00 we had a small little range in here and then we came down and hit this level here at 7150 that's the 40 days out from the beginning of November framed on the quarterly shift that took place here so we're anticipating a potential change in in the direction okay 20 40 or 60 days out but that's the range it's not always going to do like what you're seeing here where it's almost calling the very day it moves and makes the the change you're allowing your study to say okay the price is going to move about 20 days and
• 12:00 - 12:30 then we could see something if it doesn't happen in 20 days okay well in the next 20 days up to 40 days from where the market structure last shifted here quarterly then we're going to anticipate in the realm of the next 20 days it may happen so you have to be looking for signs that it's going to happen if you don't do these things you're going to marry the idea that the Market's going to keep on going lower and never turn around it doesn't it doesn't do that markets don't trade in straight lines so if we see here on this day here this is for days out from the beginning of November very significant
• 12:30 - 13:00 price move occurred from that price 7150 one of the things I learned when I was an indicator-based Trader I liked stochastic I liked uh Larry Williams accumulation distribution uh I liked his William percent art and the reason why I liked his William percent R is because it has an uncanny ability to be one day before when I looked at the percent R what that did it gave me many times the day before the real oversold condition would happen for instance if the oversold condition existed in Williams
• 13:00 - 13:30 percent R today that means tomorrow it's probably still likely to go down just a little bit more but that's going to be the buy day that's the very low low well that same phenomenon sometimes occurs with these ranges 20 days out you may get the if it doesn't turn it may happen on the 21st day or it may occur on the 19th day when it when it does occur but that's not what you're relying on so it's important that while that may have magic in your chart sometimes you may see it happen it might do the very thing turning on the 20th day or the 40th Day
• 13:30 - 14:00 or the 60th day I'm not telling you that the market turns every 20 days every 40 days and every 60 days but it can and will sometimes do that what we're looking for is these quarterly shifts that take place once we identify one there's our beginning Point okay but you have to roll back to the beginning of that month it occurs in it occurred in the second week of uh of the month of November so we're now we're calibrated now we can start going forward until we see a equal or counterparty uh to that
• 14:00 - 14:30 move going lower it has to be a significant you know retracement or correction or reversal it's indicating that here the last week of December why is it doing that because we've taken out December's High you see that we're trading at a level where if this was continuously bearish it shouldn't be where it's at right now today okay but my point in drawing your attention to the 40-day is it was not the 40th uh I'm sorry it wasn't the fact that it made the low low and turned on that day but
• 14:30 - 15:00 look at the low in proximity to the lowest low that was formed here inside this see this day here was inside the range of 40 days back to this point price point here so from this level of looking at the first day of November casting forward 40 days this whole turning point right here could have happened any time in the last 40 days because inside that 40 days just like when we look back for 40 days and look for the low for sell stops and we look for the high for the buy stops in this range here what is this that's a low
• 15:00 - 15:30 below that low is going to be what sell stops yes we moved about 150 Pips or so below that but we came to a level of 7150 that's not random 7150 is a significant level it's a midf fig level and it's happening at a time when inside of 40 days the if the data range is going to be looking to do something it has it has to do something every three months price is going to be pushed around it's going to be drawn to a level
• 15:30 - 16:00 or it's going to repel from a level it's seeking large fund liquidity now longer term where we're talking about monthly and yearly moves they are all driven by real fundamental things like interest rates but every quarter there's going to be a EB and flow that takes place a rally and a decline when this occurs that's all short-term in nature when you look at long-term trends that go for 5 years or 10 years 3 months is nothing
• 16:00 - 16:30 that's like a five minute chart on the scheme of a weekly chart it doesn't mean anything there's no significance to it at all long-term macro fundamentals okay are not impacted by three-month Cycles they're not they can be used to get in sync with long-term macro fundamentals but the only fundamentals you're going to get from me is interest rates if we know at this point here casting 40 days forward we can have a vertical line right here on our or on our chart you got to count this day as day one 1 2
• 16:30 - 17:00 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 okay so 20 is basically the the last day before you get to December so the second to the last day in November is 20 days back what was the highest high formed in that range it's going to be mid ju uh mid December where it made those equal highs so there's going to be what what's resting above that buy stops so what is is the IPA algorithm going to
• 17:00 - 17:30 do it's going to seek that liquidity it's going to go up there and take that which high should I look for Michael that one looking back from this point here because we know it from this point here casting forward 40 days okay Going Back 40 days well that's going to be in the range that's delineated here with this line that we' already shown this is the low is there any significance about that low well I'll C you to go into your 4H Hour 1 hour and 15 minute time frame and put up 7,300 on your Al do and see what you see there's nothing random
• 17:30 - 18:00 about that stuff folks that low is 40 days inside the 40-day range okay that is a significant turning point it's not the very lowest low but you can see that the low forms two days before that and then we have a market structure shift and the market starts to go opposite to what has been put in place in November you can now also from that price point there by having a vertical line on the arrowed uh daily range you can now start counting forward forward 20 days 40 days
• 18:00 - 18:30 60 days until you see an obvious shift quarterly there's a major structure shift okay it could be bullish or bearish whatever one it happens it doesn't make a you're not trying to forecast that all you're doing is anticipating another significant move in price on a daily chart and it happens every three months but the point is the ifp the data ranges give you a means of looking back 20 40 and 60 days from specific spefic days and specific price
• 18:30 - 19:00 points because then you'll know what stops they're going to be reaching for above an old high and Below an old low it's not just well I'm looking for the most recent obvious high and low no no no no it's not like that at all you got to look back in a range of 20 40 60 and then if all those levels have been cleared out then you got to look outside that range then you know you're getting ready to see a big move and if it has these characteristics then you know you're going to see a larger move higher or lower based on what those uh highs and lows would be outside the
• 19:00 - 19:30 most recent 60-day look back all right so this is the Australian dollar here's that 750 level okay and why is that significant here we have a old low back in February of 2016 we have a last down candle but that last down candle has a range in it okay let me show you again this is what it looks like that Wick right in here right here look at that price movement up right before the LA well it's the last week of February the Big Green candle right there we know
• 19:30 - 20:00 that prior to that we saw the down close and that explosive range higher that high is going to be significant it's going to be sensitive okay but all the way down into the opening of that Weekly range also notice that this last down candle here right before this big move up in the last week of May of 2016 that last red candle that was the bull shoulder block as well so we have a big range to work within then going into the the latter portions of 2016 the last
• 20:00 - 20:30 down candle in December that would be a bullish order block as well looking at the the high and the open on that candle would give you significant price points to go forward as well but look what happens when price hits this 7150 level it's been down here before and they repelled aggressively away from that fundamentally must be something to it I don't know what it is but on a weekly chart we're going to be using old highs and old lows and if those old highs and old lows had significant buying and selling pressures that's evidenced and
• 20:30 - 21:00 you can see it here we have to be mindful of that and you can see that they have in fact traded down there we tapped it two times on a weekly basis and then moved out once we moved out away from that level you see that they're going to be looking to do what they're going to be trading above these candles bodies and the Wicks are next and we could potentially trade up into this last up candle in the last week of October of 2016 that's where the bearish order block is so we have a range that potentially could take us up into
• 21:00 - 21:30 7570 to 7580 still for Australian dollar let's go back into the daily on Australian dollar and I want you to take a look at this chart for a moment stare at this for a second tell me what you see okay this is again this is the March contract for the Australian Futures Market it's going to basically do the same thing our Australian dollar pair does in Forex but what you're seeing here cannot be seen in trading Forex the fact that interest is the most misunderstood data point in trading is a
• 21:30 - 22:00 wonderful opportunity for you as a Trader how do we know when the banks smart money are actually going in and buying if we know that there's a likelihood that 7150 on all Z dollar is potentially bullish what evidence is there that there is in fact smart money buying it well inside that blue shaded area in here every 3 months this occurs write this down your notepad where you're at a support level a major higher
• 22:00 - 22:30 time frame support level if you see an expectation that price should be bullish we have been trading lower and we hit the level like we're seeing here at 7150 as we just let me go back one more time to show you the weekly chart there's that 7150 level down here we've been there before in May okay so look at that level here you can see that 7150 has been hit perfectly has Nails it okay and then it runs away at as price hit it this purple line in here I want
• 22:30 - 23:00 you to look at what was going on as price was dropping down okay all through this Market structure shift in November what's happening here yes price is repricing going lower it's allowing Bank level traders to be short and capitalize on that move but also open interest is also declining why why is that happening why is open interest declining when this movees dropping down what what significance is that if the market is in consolidation all through here all between 77 and 7450 for August September
• 23:00 - 23:30 and October price was in a big trading range it's in consolidation then in November it creates a false breakout above 77 big figure and rejects And Trades lower open interest is taught that as long as a trend is going up or down and you see open interest increasing as the trend goes that's a healthy Trend that works for bull markets doesn't work for down markets that's a misnomer that's Miss information Larry Williams says when
• 23:30 - 24:00 open interest drops while you're in consolidation we're in consolidation all through August September and October price drops down in here we have a big drop in open interest open interest is the total open Longs and shorts that are in the marketplace right now if the central bank is the storehouse for price it's their currency it's their commodity if you are trying to buy currency it has to be made available to you and it's going to come from a bank if if this would have been gold okay uh the
• 24:00 - 24:30 commodity is gold there there's a a provider or a liquid provider of gold okay you have to buy up this position or assume a position in Gold well for Australian dollar if you're buying that currency it has to come from somewhere it comes from the bank so if they are the liquidity provider for the price of Australian dollar the Central Bank of Australia if that bank is providing you the basis of the valuation on Australian dollars they are essentially doing what
• 24:30 - 25:00 they're the counterparty to all the large funds not always not 100% because you have all kinds of smaller entities and institutions that could take the other side of other positions but for for the most part view open interest as every trade that the central bank is providing counterparty to basically what a small brokerage firm would do with their own clients they are the liquidity provider well the central bank is the liquidity provider for Australian dollar so if we see open interest increasing what does that mean that means the
• 25:00 - 25:30 central bank is it's taking on risk it's providing liquidity for buyers of Australian dollar if open interest has a 15% or more drop or change lower like it does here this is this is a very significant drop while price is sideways this is bullish because what this is doing is every every time open interest increases it's indicating that they have now provided liquidity for a buyer if they're not trying to provide liquidity for a buyer and they're trying to reduce
• 25:30 - 26:00 their holding or exposure that means that they're not doing what to offer liquidity to a buyer they have to be a seller open interest reflects the selling side of a provider of liquidity if this open interest declines aggressively like this that's indicating they do not want to hold the heavy short position they would be having by being a provider for those that want to buy Australian dollar you see it rally then but look carefully the extended trading
• 26:00 - 26:30 range is months long what's going on that whole time from this point here they start building in positions they're selling this thing as it's creating higher highs it's coming back it's they're selling more of it here and they're selling more of it here every peak in the open interest from the low it creates here every peak in it is a high they sold more here they sold more here right at this high they sold the most right there they're selling into that rally you don't get that from L Williams book you do get him saying open
• 26:30 - 27:00 interest increases we're in bearish markets and if we're in the consolidation it tells you if we see open interest increasing in a consolidation that means that the open interest is reflecting heavy net selling on the Central Bank level that's how I'm viewing it for currency trading but what he taught in his book was the commercial Traders the large commercial uh users or producers of a commodity they're actually building in heavy short positions what I learned was by looking at open interest and matching up the high to the peaks in open interest you can actually see where they did their
• 27:00 - 27:30 sell programs that's a sell they're selling it here and in the very highest peak they sold it there now think about it if they sold it there and then we do have a market structure shift here are they going to hold on to their short positions if they're naturally a hedger open interest is going to by natural Order of Things reduce as it's going lower because what are they doing they're covering those short positions they built in here that's what's happening all through this process of going lower open interest is declining you don't get to taught in textbooks
• 27:30 - 28:00 it's showing you that they are in fact in a sell program and they're profit taking as it's going lower lower lower lower lower open interest going to decline then we hit a level like this major support are they going to want to hold on to a heavy net short position by offering liquidity to the buyers no way how do they upset that they do rapid price declines that knocks the desire for buyers to want to move away and get out of their way because they don't want to be a provider and bu but for providing the sell side to buyers they don't want that risk and that's why they
• 28:00 - 28:30 do these massive sell-offs in price you see these big moves that jump down to specific levels and it just keep going lower and lower lower they do that to take away and control sentiment on the on the near term they know buyers are going to come in so they have to reset and drop down quick boom they reset they take all their uh interest on being a sell side liquidity provider and drop it down to its lowest point why are they doing that because now their exposure is not here their exposure starts down here
• 28:30 - 29:00 and they go back to that same cycle now everybody's starting to Buy Buy Buy Buy Buy and they will provide that liquidity because they've already profited down here from back here back here and back here all in the last week of September the midpoint of October and the second week of November where they sold and built in their Bears positions The Telltale sign is inside that support level at 7150 dovetailing this with if the data ranges and cly shifts we know that this is most likely going to occur
• 29:00 - 29:30 but the mechanics behind it all is that 7150 is support price on the weekly charts bounced there before we're in the low end of the the range for the weekly um well the lowest point which has been in a long period of time going back go back to your weekly chart that I showed here in your notes and you'll see that that's the lowest it's been in recent time in the weekly chart so therefore it would be reasonable expect to see some bounce at 7150 but I'm drawing your attention into that little area in December it's a massive decline in open
• 29:30 - 30:00 interest right there that purple line when it tanked went low real quick like that that's the Central Bank getting rid of any of their remaining short position so now they're they're done they' completed their sell program first week of November mid part of December so now the they're ready they're prepared for buyers to come in they have reset their s there's no exposure on the upside okay against them by holding heavy heavy shorts so now they can start offering that liquidity from a low end because
• 30:00 - 30:30 they made their book all right so this is what we've seen price do here's that 40-day cast forward day that's the very day and this is that down candle or down open high low close candle that small little one and then here's the the last one or the 40-day look forward from the 1 of November price goes higher from there creates a down candle price moves above that candle here this becomes a bullish order block so if price was to ever come back down we could be a buyer there I said we like to see some
• 30:30 - 31:00 bullishness on this candle here because we're on the left side of the curve this is all the sell side now if they're going to be bullish you're going to go look over here at every down candle there should be some bullishness in here we saw some of that they have a down candle here if we had a retracement I would like to see it price come back down here I would be a buyer that was a potential scenario that could have unfolded if it didn't and we blew out the high of this candle this down candle is going to be the new bullish order block so it's high comes in at 7350 price comes down hits it here yesterday
• 31:00 - 31:30 finds some sensitivity there and expands up and closes in the range so the things you're learning is completely diametrically opposed to those things that you learn in retail world and it's like that because we have to capitalize on those ideas because those things permeate large fund trading where are the buy stops where the sell stops it's the same way human nature is going to repeat itself over time price will agree on a level that's arrived at what IPA is seeking last 60 days where's the high and the low last 40 days where's the high and
• 31:30 - 32:00 the low last 20 days where's the high and the low that's where your liquidity pools are okay last 20 days where is the gaps where are the gaps in the last 40 days where is the gaps in the last 60 days that's where all your fair value levels are think about it what's where's the consolidations in the last 20 days the last 40 days and the last 60 days that's where your equilibrium price points are going to be when the market isn't going to move it's going to gravitate and hang at those levels when you see me say I'm not doing anything today the Market's going to be uh sideways and you're all like well how do
• 32:00 - 32:30 you know that this how to use the data ranges how tells you what you should be doing should you be expecting range expansion on the upside should you be expecting range expansion on the downside that is directional bias that's are you bullish today or are you bearish today if you are not in a Range where it's going to expand and you're hanging around equilibrium in the last 20 days the last 40 days and the last 60 days in other words what that look like if you go back 60 days and you see where price has made a small little trading range
• 32:30 - 33:00 divide that range in half that's equilibrium if your price right now today if it's this hanging around and dollar Index is not trying to move it's probably going to be a z day that means it's going to go up a little bit down a little bit and hang around the middle of the range until it gets some kind of manipulation what's going to cause that high impact news it's all time and price time is date on the higher time frame it's not time of day it's date C calendar days in their calendar days that the markets trade so if we know
• 33:00 - 33:30 that a range of 20 40 and 60 days that the algorithm will look back then you know what high and low need to be focusing on if Market structure is bearish what does that tell you where's the low in the last 20 days where's the low in the last 40 days where's the low in the last 60 days that's where it's going to be reaching for it's looking for that sells side liquidity below those lows what happens if it has two lower lows that haven't been traded to and it trades down below the one in the last 20 days it takes that low out and there's a lower low 60 days in that
• 33:30 - 34:00 range 60 days back there's a low and you know that it's possibly going to go down there but say it doesn't go down there and it Rejects and it breaks Market structure bullishly what does that tell you you have a quarterly shift now it's bullish start finding the highs in the last 20 days the last 40 days and last 60 days and you'll know what ifp is doing it's going to draw a price up to them what you learned today was the real mechanics of what open interest does it gives you the X-ray view of what the real smart money activity is are they really buying because if they're really buying they're going to dump open
• 34:00 - 34:30 interest and it's going to drop 15% or more and it's going to happen at a key support level if it's going to sell off and start going lower and if that was a real turtle soup sell then that means prior to that turtle soup sell there should have been a massive increase over time with that open interest going up because open interest High open interest indicates them offering the sell side they're only going to take part of that if they know eventually they're going to be able to sell that position off with price being going lower that's the only time open interest is going to go up and they can do this on long-term trends but
• 34:30 - 35:00 it will shift every quarter they have to fund themselves for allowing the holding of that risk every three months it's there and that's how they pay themselves for holding on that risk offering the liquidity for the sell side of it providing the means for buyers to buy currency they will do quarterly shifts and you'll see evidence of that in open interest