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Okay folks.
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Welcome back to the fifth of
eight teachings for the month of
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November, 2016, ICT membership.
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Okay.
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We're looking at inside price action.
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Institutional market structure.
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Okay.
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Now what is institutional
market structure?
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It's the analysis of correlated
assets or the relationship to
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inversely correlated, right?
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The purpose is to determine what the smart
money is accumulating or distributing.
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Now, currencies are the easiest to
analyze with institutional market
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structure and we utilize the dollar index.
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Every price swing should be studied
to determine if market symmetry.
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Now, how do we identify institutional
market structure in Forex, we compare
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every price swing in the dollar index
with the foreign currency that we trade
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as the us dollar index trades higher,
we reasonably expect a lower price
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swing in foreign currency pairs.
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If the us dollar index
or a foreign currency.
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Fails to move symmetrically smart
money is actively trading as
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U S dollar index trades lower.
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We reasonably expect a higher price
swing in foreign currency pairs.
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If the us dollar index or foreign
currency fails to move symmetrically
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again, smart money is actively trading.
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Okay, let's take a closer look.
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What this concept actually means,
and we're gonna be referring to
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the us dollar index SMT divergence.
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Now SMT stands for smart money
tool or smart money technique.
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And we're gonna be looking for a
divergence between closely correlated
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or inversely correlated assets.
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Now, obviously, if we expect the dollar
index to trade higher, that's going to
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put downward pressure on foreign currency.
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If we're expecting the dollar index
to trade lower, that's going to
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allow foreign currencies to rally
in a symmetrical market condition.
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When the dollar index makes a
lower, low foreign currencies, we
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expect that to make a higher high.
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When we see this, this confirms
current price action and the
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underlying trend is likely to continue.
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Now, the idea of stalking reversal
patterns in this condition is not highly.
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In fact, you want to avoid it altogether?
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The reason why is, because for instance,
let's take a look at the dollar index
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example here, but the red line, okay.
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We're going to look at the
likelihood of that old, low
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being violated as we see here.
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And if we see that old, low
violated, and we see a higher high
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in foreign currency that confirms
the down move in the dollar index.
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And even though it trades
back above a short-term.
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That short-term high is going
to be just a run on by stops.
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And then the dollar index most
likely will resume going lower.
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This is one of the ways that I can
basically go into the marketplace and
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anticipate with turtle suit before
it actually happens in the same
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thing, said for foreign currencies.
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If we see that higher high,
while the dollar index makes that
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little low price is confirmed.
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Does that mean it's the underlying
direction is still intact.
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So any movement down to the foreign
currency pairs below a swing low or
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short-term low they're gathering up
the cell stops below the marketplace
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and that's where they're going to
be accumulating new long positions.
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And then the foreign currency
pairs will be allowed to trade
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higher and make a new, higher high.
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Now when the dollar index makes a
higher high and the foreign currency.
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Makes a lower, low this too
confirms current price action.
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And the underlying trend is likely to
continue again, like we just said about
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the other slide, the idea of stalking
reversal patterns in this condition is not
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high probability and it should be avoided.
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And again, once that dollar index makes
a higher high in the foreign currency
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makes a lower low that run above the
short term high and foreign currencies
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is many times going to be a run owned
by stop them on the marketplace.
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And then you'll see another sell-off
making a lower, low, and the same is said
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for the contrary, for the dollar index.
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When the market trades back below
that short term low, it's going to
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gather up, sell stops to pair new
buying with, and it'll most likely
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trade higher and make a new high.
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Now we're gonna talk about
non-symmetrical market conditions.
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When the dollar index makes a lower,
low in the foreign currency fails to
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trade higher than a previous high.
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This is us dollar index
SMT for USD ex SMT.
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This does not confirm
current price action.
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And the underlying trend
is likely not to connect.
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However, the idea of stalking reversal
patterns in this condition is high
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probability and could reasonably be.
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That lower low on foreign currencies
is indicating that the dollar index
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is most likely going down below a
previous low to do what wipe out the
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cell stops, accumulate new buying, and
the rally should ensue and a dollar.
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If the dollar is going to rally,
that means it's going to be downward
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pressure in foreign currencies, and
it's already shown itself in the form
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of weakness by having a failure swing
in the foreign currency, making a lower.
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Again, looking at non-symmetrical
market conditions.
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When a dollar index fails to make a higher
high while foreign currencies make a lower
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low, the same thing as being said, as
we said in the previous slide, it's just
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being illustrated in a different context.
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This is showing the dollar index
is failing to make a higher high.
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That means there's
underlying weakness and.
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A lower low seen in
foreign currency pairs.
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They're going down below a previous
low to accumulate all the cell
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stops on foreign currency pairs.
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Then they'll rally the market higher.
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The dollar index will sell off,
which would support foreign
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currency, long positions.
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And the underlying weaknesses
indicated with the us dollar
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index making a lower high feels.
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Those markets.
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The idea of stalking reversal patterns
in this condition is high probability
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and could reasonably be considered.
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Yeah.
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Okay.
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So let's take a look at a case study here.
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What does this look like in price?
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Okay.
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We're looking at a daily chart of the
British pound USD, or as we call it the.
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And notice the highs in here.
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Okay.
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We have a higher high
formed in pound dollar.
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This is around the end of April going into
mid June of 2016 in the same timeframe.
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We see the dollar index making a low
in April time period going into mid
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June, but notice the difference between.
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Going back to the pound dollar.
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We have a higher high forming in the
middle part of June, 2016 by itself.
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At the time when it was rallying
up, I'm sure it probably looked very
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positive and bullish to everyone.
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But if that's the case, if there is a
symmetrical market condition that should
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be seen with what, in terms of the
dollar, it should be seen with the lower.
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Do we see a lower, low
form in the dollar index?
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No, that's it.
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USD X SMT bullish divergence.
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That means what we're seeing underlying
strength in the dollar index.
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00:09:00,330 --> 00:09:05,190
And even though this looks bullish on
the bears pound, it's really just taking
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the buy stops above the 47 60 level.
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Once those stops are ran out,
the market does in fact tank.
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00:09:13,440 --> 00:09:19,319
The underlying strength in the dollar
index allows us to look at that 93,
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00:09:19,319 --> 00:09:27,780
80 to 94 big figure this down candle
in here that may become a future Bush
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or block that we could trade at once
this boy is closed in, we know that
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there's underlying strength in the
dollar index, because there was an
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unwillingness to see that lower, low form.
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As we saw the higher high for me.
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So again, you can see that, that higher
high piercing and old high that's going to
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be a run on stops above that 47 60 level.
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Now it trades almost up into
50 65, which is several hundred
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pips, but it's a daily chart.
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So we're going to be cognizant of that.
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But nonetheless, we're looking for
institutional market structure.
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So this looks like by all indications,
when the market was ready, N
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retail traders and less informed
traders would see that as a bullish
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breakout, but it's not seeing with
the dollar index having a lower low.
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So we see the same thing we had mentioned
earlier, just graphically described here,
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the higher, low formed on the dollar
index that should have created a lower
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low as the cable made a higher high.
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And it didn't.
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And what does that actually giving us?
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It's giving us a great insight.
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What is being accumulated.
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The dollar index is being
accumulated alongside.
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Otherwise it would have
been permitted to go lower.
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If we see that and we can see a
foreign currency pair shooting higher.
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Okay, basically, um, acting on
its own accord, if you will.
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Okay.
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That's not by accident.
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It's absolutely.
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I mean, it'd be Alation.
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So if we understand where the manipulation
is taking place in the marketplace, then
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we can go in and capitalize on that.
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So now we can focus
primarily on being bullish.
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Why because the dollar was
unwilling to make a lower, low.
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And the only reason why that can
happen is if it's being bought
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aggressively, otherwise they
would wait for lower prices.
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So since they're unwilling to wait for
lower prices in the middle of June of
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2016, we have to focus primarily on
being a buyer $1, and it means put, sell
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signals or bears stance on all foreign
currencies looking to be a seller.
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This is the reason why all through the
second part of 2016, I've been in dollar.
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Okay, let's take a look at another
example and we're going to be
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using the daily chart again.
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Cause I'm going to build the idea that
you don't have to be a day trader,
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but having these ideas will help us
have a longterm to intermediate term
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perspective when the marketplace.
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So now we're going to turn our attention
to the latter portion of August,
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2016 to the first week of septic.
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And you can see that the
cable meet a higher high
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Okay.
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So all in all indications
here looked very bullish.
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Okay.
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So price was running through an
old high here at the same time.
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This low on the dollar index here
did not see another lower, low.
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So as the cable was pressing
higher rallying, this dollar index
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should have seen a lower low.
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00:12:48,839 --> 00:12:49,890
It did not do that.
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What that indicates is
again, dollar base strength.
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In other words, the dollar index is
being accumulated on the long side.
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The cable is being distributed.
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00:13:02,970 --> 00:13:06,480
Now it's being distributed above an
old high here, but look to the left
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00:13:06,480 --> 00:13:09,420
again above this old high here as well.
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00:13:09,930 --> 00:13:17,610
So now we can go and frame
another level for turtle soup or
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00:13:17,610 --> 00:13:20,250
a false break above an OHI to run.
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00:13:20,250 --> 00:13:26,190
What, what type of stops reside
above an old high by stops?
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00:13:26,280 --> 00:13:27,930
Why would they want to take
the market up to a buyer?
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00:13:29,115 --> 00:13:31,305
Because they want that buy
stock to execute at the
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market, to buy at the market.
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They're going to sell
their long positions.
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00:13:35,444 --> 00:13:37,814
They accumulated here and
they accumulated here.
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00:13:38,235 --> 00:13:41,355
They can sell those longs at a higher
price to willing buyers up here.
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00:13:42,255 --> 00:13:43,425
This is being distributed.
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00:13:43,454 --> 00:13:50,085
It's being distributed at an old high
while the accumulation is seen in strength
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00:13:50,115 --> 00:13:51,975
because the dollar can't go lower.
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00:13:52,275 --> 00:13:56,715
Now think if the dollar doesn't
go lower it's because it can't
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00:13:56,715 --> 00:13:57,765
go lower because of price.
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00:13:58,515 --> 00:14:03,825
It's being kept while the premium
is being built into the pounds.
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00:14:04,935 --> 00:14:09,645
So retail chases, this run like this
and false breakout while smart money
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00:14:09,645 --> 00:14:11,564
looks at failure swings in the lows.
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00:14:11,564 --> 00:14:15,915
When you see what would otherwise look
like strength and breakouts on the
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00:14:15,915 --> 00:14:20,355
upside and foreign currencies, always
double-check them with the dollar index.
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00:14:20,355 --> 00:14:22,185
If you don't see that, then you know that.
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00:14:22,720 --> 00:14:26,020
The false breakout on the upside, on
the foreign currency market, it's all
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00:14:26,020 --> 00:14:28,120
sucker play and it's retail candy land.
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00:14:28,150 --> 00:14:30,880
Everyone's going to be looking
to be going long on those false
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00:14:30,880 --> 00:14:32,740
breakouts in foreign currencies.
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00:14:33,130 --> 00:14:36,610
While the smart money is focused in
on the dollar, having an unwillingness
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00:14:36,610 --> 00:14:37,930
to go lower like it does here.
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00:14:38,920 --> 00:14:39,670
So there's low.
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00:14:40,120 --> 00:14:41,620
And I basically frame the exact dates.
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00:14:41,650 --> 00:14:42,820
That's why this box is up here.
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00:14:42,820 --> 00:14:44,260
So it's not like a kills
or anything like that.
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00:14:44,260 --> 00:14:48,670
I'm just giving you a specific date
range to look at sample size of price.
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00:14:48,670 --> 00:14:49,030
Action.
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00:14:50,385 --> 00:14:54,704
As you look at this, I want you
to see just how strong it is in
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00:14:54,704 --> 00:14:59,145
terms of giving us a longterm to
intermediate term perspective on
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00:14:59,145 --> 00:15:01,064
what direction the market is going.
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00:15:01,665 --> 00:15:02,895
And again, this is a daily chart.
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00:15:03,165 --> 00:15:07,905
So if they're going to keep price at
a higher price low here and not blow
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00:15:07,905 --> 00:15:13,155
out the previous low, or this low
over here, we see the unwillingness to
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00:15:13,395 --> 00:15:15,795
hold these prices, British pound USD.
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00:15:15,974 --> 00:15:17,324
They quickly drop it.
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00:15:18,240 --> 00:15:20,910
Because it's been distributed,
they'd left the retail, holding
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00:15:20,910 --> 00:15:26,100
the bag when accumulated long
positions start moving higher.
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00:15:26,370 --> 00:15:29,670
Every time there's a retracement,
we expect to see another
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00:15:29,670 --> 00:15:30,660
experience in the upside.
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So when we look at price like this,
we can see it graphically using the
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price chart, but also use a tall as an
overlay for the empty four platform.
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And I'm going to share that to you now.
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Okay.
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Here we are over at
the ICT monthly mentor.
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Forum and we're in the November content
thread or category as the form calls it.
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Okay.
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And I gave you several empty
four indicators today at
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the time of this recording.
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And what I'm going to do is I'm
going to tell you what we're
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going to be doing is showing you
how to install this on empty for.
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Yeah, it used to be where you can just
download it an empty four indicator and
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just drop it in the indicator, um, folder.
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Uh, they have since changed
that with empty four and made
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a little bit more difficult.
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So it's not that difficult,
but a little bit tricky.
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So what we're gonna do is we're
going to click on the link, the
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empty four line chart overlay by
clicking on that, it's giving you
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a down, download prompt over here.
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You're going to click on that.
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You're going to click on
open while you have empty.
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And what that'll do is open up your editor
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since I already downloaded it.
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Okay.
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I'm just going to say yes.
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I want to overwrite it.
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Okay.
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Once it's overwritten.
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So what I do is I get in here.
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I could see that as Unicode overlay
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say, yes, I want us to replace it.
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Then you can close this.
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And you'll go back to your empty, empty
four platform after you restart it.
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So I'm going to read reboot
mine, and once it restarts, I'll
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show you what we would do next.
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Okay.
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Here we are back rebooted.
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And you would just go up and into
insert, go down to indicators and
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go to custom and scroll down to
overlay chart line, click on it.
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Where it sees, where it says all
these double Xs, double click on that.
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And what you're gonna be doing is
changing that to whatever pair or
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the dollar index you want to use.
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Okay.
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And I'll show you what I mean by that.
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Let's go back and highlight
a specific chart first.
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So we're highlighting the
British pound USD chart by
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clicking anywhere on the chart.
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Go up to insert indicators, custom
overlay chart line, rather double click.
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And we're gonna be overlaying
the U S dollar index.
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So capital letters.
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Okay.
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And we're going to leave
everything as it is here.
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You can see.
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We see price making that higher
high at the same time, the dollar
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index was failing to make that
lower, low, you can get these grid
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lines that come off by doing this.
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Okay.
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Okay.
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I have a white background, so I
will just change it to that and
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then close and suddenly it's gone.
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It makes it real clean and
be able to see it very crisp.
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No, you can do all of your notations
for your log when you're done doing your
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00:19:00,180 --> 00:19:01,950
trades or as you're doing your analysis.
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So while we're seeing higher
highs here, dollar index is making
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that higher, low, so it should
have been in a lower low there.
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It has not shown that as confirmation.
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So we see that as a turtle soup or
a false breakout above and Omaha.
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And an old high here, so we can
look to for that to be distributed.
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We do not see that as strength.
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Okay.
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And then obviously the
market trades softer.
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So when we look at identifying
institutional market structure,
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what we're basically doing is we're
weighing the underlying strength
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of the buying and the selling at
respective highs and lows in the
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dollar index versus foreign currencies.
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Now, if you pick one particular currency,
And you identify areas like this and
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accessing on a daily chart, it gives
you a long-term perspective where you
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can be focused primarily on being short.
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That means if you are a short-term
trader, you could be looking to sell
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short at every 60 minute or four hour
bear shorter block, or you could be a day
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trader selling it above the opening price
above the midnight candle in New York.
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And you just capture all
those types of moves going on.
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So it gives you an ideal, uh, context to
work within and gives you a framework.
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It doesn't give you ambiguity.
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00:20:24,315 --> 00:20:28,965
It gives you a very specific frame of
mindset going in knowing that if it's
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the daily chart and you were seeing
underlying strength in the dollar, and
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we seeing potential distribution in
British pound U S date, most likely
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we're going to see lower prices on cable.
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So that way we can be a buyer on
dollar based currencies or a seller
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on foreign currencies that it's
paired up with the dollar index.
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So hopefully you found this.
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I didn't until the next time.
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I wish you good luck and good trading.
28070
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