All language subtitles for Lesson 5 - Smart Money Footprints EN

Okay.

Folks is our last discussion for
commodities for the month of June,

2017 content, we will be revisiting
commodities in the month of August

with the top-down analysis templates.

But as a reminder, very important to read
the disclaimer here and to remind you

also, I'm not a commodity trade advisor.

I'm not licensed to get trade advice.

Everything that's being discussed
here, as it relates to commodities

is in capacity of paper trading only.

Okay folks, June, 2017 and 18 mentorship,
ICT, commodity trading, lesson five,

open interest and smart money footprints,
the real secret to using open interest.

Okay.

Folks open interest in
the commodity markets.

All right.

So when I first started as a
commodity trader, everyone that's

familiar with me understands that.

Really I'm baptized by Kent Roberts.

Well, like most of the commodity
traders in north America, back in the

eighties and nineties, he put out a
rather basic commodity trading course.

And while it was not enough to.

Make money with it did allow me
to develop a insatiable desire

about the financial markets.

So by getting involved with Ken Roberts,
um, buying his course, obviously

he sold my name to a mailing list.

And then Larry Williams of all
people on the trading circuit

got a hold of my address.

And then like everyone
else solicited information.

And I purchased it.

So, uh, Larry Williams was the first
in the list of my mentors and his

open interest concepts is basically
widely known and I built on what

he gave as general guidelines.

So everything I'm going to teach you
here is pretty much what I learned from

Larry Williams, with a couple of twists
of my own that I picked up along the way.

Before we begin, we have to outline
and define what open interest is

because I know some of you are going
to ask you what is open interest.

And while that could be answered simply
with a Google search, uh, for completeness

sake, I'm going to include it here.

Uh, the OpenEdge is, is the total
number of outstanding contracts

that are held by market disciplines
at the end of each trading day.

Now where volume measures the pressure
or intensity behind it, price.

Open interest measures the flow
of money into a futures market.

Now for each seller of a futures
contract, it must be a buyer of that.

That's a seller and buyer combined
to create only one contract,

therefore to determine the total
open interest for any given market.

We need to only know the totals
of one side or the other buyers

or sellers, not the sum of both

the commodity markets have a built-in
advantage or additional insight shared

by the way of open interest, the study
of open interest can provide a trader

a very important perspective in.

There are two ways to view open
interest as a trading tool, measuring

the strength of a trend or price
move and tracking the footprints

of the large commercial traders.

When I first take a look at measuring
trends and or price moves with open-ended.

Using open interest in trends and swings.

If prices are in an uptrend
and open interest is rising.

This is a bullish sign.

There are shorts who are
being stopped out, but new

sellers are taking their place.

As the market continues to rise, the longs
get stronger and the shorts get weaker.

If prices are a downtrend and open
interest is rising, this is a bear.

Week longs are being stopped out, but
new buyers are taking their place.

As the market continues to
fall, the shorts get stronger

and the longs get weaker.

Put another way.

As long as the open interest is increasing
in a major trend, it will have the

necessary sponsorship to continue.

If prices are in an uptrend
and open interest is falling.

This is a bear sign, the old longs,
the smart money in this case, our

banking gains as their liquid.

They are replaced by new buyers who do
not have the strength on balance, but the

declining open interest is an indication
that the weak shorts are also exiting.

They will be replaced by new shorts
who are stronger than new, old

shorts that were trading earlier.

But that squeezed out if prices are on
downtrend and open interest is falling.

This is a bullish sign, smart money.

The shorts are covering
and liquidating profitable.

They will be replaced by new shorts,
not as strong as they were, but the

declining open interest indicates
the squeezed belongs are baling.

They will be replaced by new longs who
are not as weakened by the lower prices.

As the old longs were put another way.

When the supply of losers is
exhausted, the downtrend ends

are using open interest in consolidations.

It prices are in a consolidation
and open interest is rising.

This is a bear sign.

The reason is the street money
plays the long side, rising open

interest in a trading range, suggest
commercial, hedgers and professionals

are taking the short side and the
uninformed speculators will fall

victim to the downside break in price.

Now think about what causes open interest.

It's the commercial hedges are the
largest liquidity provider and they.

The commodity for purchased for trading.

If they're willing to sell a lot of
it, that means that they don't believe

that price is going to go higher.

Otherwise they would hold out
and wait for higher prices.

So since the most likely the most
largest pool of counterparty to

commodity traders, if the open interest
is rising, they have an expectation

that prices are not going to increase.

Because on balance they're larger
as a supplier or seller of a

commodity than they are a buyer.

So open interest increasing
provides a measure of their

willingness to be a heavy seller.

So open interest is high.

That means they have a very high
interest again on seeing lower prices.

We can see that graphic here
with the cumulative line.

That's been drawn crudely by myself when
it increases while the market stays in a

range, price will break down generally.

And the commercials won't
be the indication of that.

Now, when we see this, we want a
couple this with cot hedging programs

or the net traders position as
a whole, we can look at what the

commercials are doing in this case.

We want to see the commercials net
short or increasing their shorts.

Now if prices aren't a consolidation
and open interest is falling.

This is a bullish shine.

The reasons is the commercial's
hedgers who are most likely shorting

are covering the street money.

It will be shorting and expecting
a breakout lower in price.

This is seen graphically with
the cumulative line at the bottom

here that would be open interest
inclining, low price stays in

arrange at eight key support, low.

And the market breaks to the upside.

Ideally, we want to look for long-term
or higher timeframes for levels in price

to anticipate this open interest concept
in times where price is trading at

key support levels on a hard timeframe
basis, open interest will decline

or drop while price is consolidating
at or near a hard timeframe support.

Or as we define it, a discount array as
we outlined institutional reference point.

This will be bullish and
anticipate an upswing in price.

Conversely, we want to look for long-term
or higher timeframe, resistance levels

in price to anticipate this open
interest concept in times where price

is trading at a key resistance level
on a higher timeframe basis, open

interest will re will rise while prices
consolidating at or near the higher

timeframe resistance, or a premium array.

As we outlined institutional
reference points, this will be

bearish and we anticipate a downswing.

Now, when we look at open interest,
there's obviously the way we can see

this as we can see it on bar chart.com.

And let me just say this bar chart.com.

If you do the total open interest and
volume, that will give you the true open

interest reflection for declines and
rallies, and it's a cumulative basis line.

And compare that with price action.

To get a better picture.

You're going to have to avail
yourself a resource or two.

And I like CRB trader and
I like price, charts.com.

And the reason why, if you're going
to be a commodity trader and yes,

I still subscribe to these mediums,
even though I don't actively

trade the commodities market.

I use it for my Forex analysis.

So when I'm looking for quarterly shifts,
or if I'm looking for mega trades, as

we're going to teach next month, The idea
is I look at the seasonal average of open

interest and bows price, charts.com and
CRB trader both plot this for you, what

it is, as you can see the dotted punitive
line here and all the errors here,

you can see where it's pointing to it.

That is the average of a multi-year.

Or I'd like to look at it as a seasonal
average over the last few years,

what open interests usually has done.

And they can, as you can see around
the June, September and December time

period, which is generally the contract.

Exploration and rollover period.

And when I teach, uh, open interest,
invariably, someone's going to say,

well, what's your seeing there is the
contract rollover and exploration.

And while that's generally
built into it, yes, it's not

indicative of the entire answer.

Okay.

So there are going to be times
when open interest reflects a great

deal of buying and a great deal
of shorting by the commercial.

If we are seeing contract expiration
and traders are trading, for

instance, say this is a copper, okay.

It's copper prices are seeing,
um, a bull market just because

the contract expiration is what
we're seeing here suggested.

Uh, I'm not saying these are the
delivery month expirations, but this

is say for instance, they for it is,
or it's the S and P 500 for instance.

Okay.

These months because they're expiring
as they normally would upon delivery.

When that last trading day takes place,
if traders are still bullish or bearish,

they're just not going to stop trading
because that contract expires, they're

going to sell or buy to cover their
position in the nearby contract and

roll right over into the next month out.

So open interest will still be reflected.

It won't, they won't change anything.

Okay.

Because we'll be replacing one for one.

So by looking at open interest like
this, what I like to see is it open

interest declines, or in this case
many times it can rally above if it

goes above the seasonal tendency or the
average of what that dotted line is,

for instance, from the period of June.

All the way through to the second
week of September open inches,

which is the solid dark line.

What I do is I look at the difference
between open interest, actual number

and the seasonal average by getting
a better feel or intensity about what

the commercials are doing as a whole.

By taking the black line and comparing
it to where the dotted line is.

The dotted line again is the
average over the several years.

And the actual is the solid black line.

Okay.

So the solid black line is above
between June and September,

the normal multi-year average.

So that's actually, if it were
an embarrass environment, we were

trading at a resistance level.

I could be expecting some really
nice increases in opening.

At a resistance level while it's above
the average of it's open interest, normal

seasonal, that would be bearish, but
when it drops down below the average

or that dotted line of openings, That's
a multi year average of open interest.

So when the black line drops below
that dotted line, what that's

indicating here is the commercials
are really covering shorts.

They're well below in September, then
their average of open interest movement.

So in this case, if the commodity
that we're trading was at a bullish.

No worries at a longterm
support level at discount array.

And we seen this condition and price
was in a consolidation that would

be extremely bullish, and I would
expect that price to go higher.

Okay.

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

We're looking at the British pound and
I have a monthly chart here and we're

looking back in the 2010 time period.

And I want you to see that we have
a bullish shoulder block outlined

from 2000 and nines trading.

And then we have a bullet shoulder
block from early part of 2010.

So we have the bullet shorter
block noted here, and we have

another bullish order block here.

We're gonna look at the second
condition here because we had an

institutional order flow suggesting
higher prices because price had

respected a mid 2010 bullish order block.

Response off of a 2009 bullish shoulder
block and then price rally through the

higher order block that the second one's
being denoted here and price trades

down to it and finds some support there.

So we're going to go into that
price level and get a better look.

And we're going to go into a
weekly chart and we can see at that

same period in September, 2010.

The commercials were net long, and we're
gonna be looking specifically at that

little nodule and price or that low.

You can also see it's trading back
down into an old bullish breaker

seen in the first quarter of 2010.

Okay.

We're going to take ourselves over to
an old chart on CRB trader, and I'm

going to highlight that 1 53 level.

That's the higher
timeframe support level or.

And rezoned in writing here
during our period of consolidation

and price open interest, takes
a dive and look what it does.

It goes down below the dotted line or
the average or seasonal tendency for open

interest that is extremely bullish price.

As a result rallies with the open
interest dropping at a support

level while prices and consolidation
with the net trigger decision.

So in the commercials are bullish.

That's a wonderful condition to
be in expecting higher prices.

Footprints smart money is
clearly being shown here.

They can't hide what they're doing.

Covering shorts and price moves in
the British pound, over 800 points.

So in a short span of time, less than
two months, price sees a rally of

800 points or in the Forex market.

That would be 800.

Okay, Brian, look at another
example here, Euro, we're

looking at the weekly chart here.

The commercials are foolish.

Exceed them above the zero line right here
and look at the extreme bullish reading

we had prior to it just left to that.

When the price made its low in the early
part of 2010, then we have price rallying.

Off of that low and having a retracement
off of 1 33 gallon into a support level

of 1 26, a 1 26 is a bullish or a block.

The last two down weekly candles.

You see, that is finding also that same
time in Polish net triggers position.

Right.

Okay.

We see those last two
down close candles here.

I'm highlighting the high.

Series of two down weekly candles or
as our bullish older block and price

trading back down to that bullish
order block as a discount array,

again was commercials net long.

So we're going to build into
a daily chart back in 2010.

You see how I have the range outlined,
a small little consolidation there,

and we see the 1 26 higher timeframe.

Support level.

Now at the same time we see
open interest, take a dive.

And again, what happens?

It drops down below the seasonal
average of open interest.

Again, we don't just simply
look at that black solid line.

That's not enough if open interest is
going to decline, as you can see in time.

See.

The average, nor the data
BlackLine, it does drop down in

September, but look how much it
drops down in actual open interest.

That's totally different.

That's a different storyline.

Altogether.

Price moves in an amazing 1500 pips or
points for this specific commodity open

urges drops at a support level while
prices and consolidation naturally is

bullish, amazing price response there.

And look how fast price moves.

It does not spend a lot of time
daily DeLeon around it, completely

volts from the 1 26, 1 27 level all
the way up into the one 40 twos.

So again, in less than two months, 1500
points or in the Forex market, Debby over

1500 pips available as a price swing.

So now when we talk about these
things, Obviously, we're not just

giving you examples of where it
works once in a while, because it

works on a hard timeframe basis.

So these open interest
ideas are not day trades.

They're really selected for swing
trading position trading, or to get your

trading in sync with that larger move.

Say, for instance, we looked
at this scenario and it was

the first week of October.

We can see.

That price move has a lot more
significance behind it because

it's a large macro play.

So there's going to be a dominant support
structure behind it for higher prices.

So we can go back and look into that
weekly chart and see where price

may reach for, for a premium array.

And while that's still has not been
fulfilled, we can be looking for day

trades where the openness near the load.

And then rally up or look for one
shot, one, kill four expansions on

the weekly range for a higher Friday
close from the week's opening.

So the way I use open interest again
is not to simply as it is open, it's

just declining or is it rallying?

I have to have it coupled with a hard
timeframe level, because understanding

what the hedges are doing, the
commercials they have a more closely.

Tide relationship to what prices
actually doing based on what it

should be doing fundamentally.

And they also look at the higher
timeframe charts to the value price

levels, historically for valuation.

And the, the idea of looking for support
resistance on those hard timeframe

charts by using our PDA Raymond.

And coupling it with cot hedging
programs and the net trader position.

And now with open interest declining
at supports or discount rates or open

just increasing while at resistance
levels or premium arrays, we can

anticipate much more stronger,
moves, much more predictable moves.

And while it doesn't answer everything
and it doesn't give you a signal every

day or every week, we can be looking
for these moves a couple of times.

Where it gives us a lot of
framework to have all the timeframes

we can trade at our disposal.

So hopefully you found this trading
lesson insightful, and until

next time I wish you good luck.

And.