Definition
"fair valuation comes in the form of two perspectives fair value in regards to equal distance of a higher low or what we would call equilibrium or fair value for the perspective on valuation in regards to market makers"
"I'm going to combine both of them to give you the perspective that you have to have when you look at Price"
Two Perspectives of Fair Value
"fair value in regards to equal distance of a higher low or what we would call equilibrium"
"equilibrium or 50% of that range from this high this High to this low there's equilibrium"
"fair value for the perspective on valuation in regards to market makers"
"fair value is established because there's going to be a willingness to want to see price trade back up into these levels in here and close in all this"
Fair Value Gap
Definition
"between those two up candles there's what's referred to as a fair value Gap okay a fair value Gap the reason why this is important is because there was no up candle or up movement between the break of that low and the high of this candle here it was all just straight down movement so nothing filled in in this area once price broke this low it left it open basically it's like a gap"
How to Define a Fair Value Gap
"this up candle at the bottom of that that's where we start watching and measuring fair value and the down candle here very next candle is up candle so we start looking at the range between this up candle and this up candle between those two up candles there's what's referred to as a fair value Gap"
"I Define it by the body I like to use those the range in which it causes this void"
Why Fair Value Gap Forms
"this area in price action only saw down movement didn't have any up candle movement only down movement"
Liquidity Void
Definition
"this is what we call a liquidity void where the market makes a sudden movement lower and it's large ranges very little Wicks very quick movement that is a void that means the price spent very little time trading at these price levels and it was in a hurry to get down to this area"
Characteristics
"pockets of price action where there's sudden movement lower"
"this down here is down candle price action only big range so this is a liquidity void the fact that it creates it in big ranges and speed that's what defines it"
Market Behavior
"when price is below that this is going to be fair value okay the Market's going to want to come back to that because there was very little trading in there"
"when price starts to move High we know that we'll try to trade into this range here and fill that in at a later time"
Equilibrium
Definition
"equilibrium or fair value in regards to equal distant uh range between high and low of a defined high and low range"
How to Identify
"if we have this low here and this High here if we Define that with F okay we have equilibrium right here or 50% of that range from this high this High to this low there's equilibrium"
Equilibrium as Directional Reference
"at equilibrium you need to refer to where the most recent price swing took place in other words if we're at equilibrium here or at fair value thek Market can go either way at this price level the easiest way to determine where its most probable direction is is where did Market structure break most recently did it break a swing high or did it break a swing low most recently"
Optimal Trade Entry
Definition
"we're in that upper portion of the optimal trade entry or 62 to 79% rement level"
OTE for Longs (from High to Low)
"the low to the high 79% retracement level 70.5 62% retracement level so the market goes right up into 79% retracement so we're in premium here"
Deep Discount Below OTE
"we're below the 79% retracement level so we're really at a deep discount really really deep discount because we're below equilibrium relative to the Range High and the low we're even below the 79% retracement level"
Market Maker Fair Value
Market Maker Perspective Shift
"how you perceive the marketplace is not how how retail is going to see price they're going to see this as the Market's going to probably keep going up because it's been going up well this is an area of distribution you want to be thinking accumulation down here reaccumulation distribution"
Fair Value for Accumulation (Buying)
"we're now at Fair valuation for what for Longs the market makers can build a net long book at this price level"
"fair value in discount is fair value for buys for Market maker buying"
Fair Value for Distribution (Selling)
"if they're going to do that they're going to look for fair value above the marketplace where they can do what sell their positions at a fair value for them up here"
"fair value in premium is fair value for Market maker selling either establishing new shorts or exiting or scaling out long positions"
Retail vs Market Maker Fair Value
"if Traders are buying this chasing price are they buying at a fair value no they're buying at a premium"
"the premium price that speculators would trade at by buying and chasing price it's a premium to price Chasers people that feed off the desire of being in a price move that's already been moving higher it's fair value to the market maker to liquidate their positions"
Market Maker Valuation Requirements
"see market makers have to deal in terms of valuation for their Longs and their shorts and they have to do that same valuation for their exits on both sides of the marketplace"
Practical Rules & Framework
How to Determine Direction at Equilibrium
"at equilibrium you need to refer to where the most recent price swing took place in other words if we're at equilibrium here or at fair value thek Market can go either way at this price level the easiest way to determine where its most probable direction is is where did Market structure break most recently did it break a swing high or did it break a swing low most recently"
Where to Look for High Probability Setups
"when you're looking for high probability setups to get Fair valuation you're going to be looking at the current range from high to low in this area right here we're in the lower end of that range so we have a lot more upside to build in a premium"
What Overlaps Create Fair Valuation for Market Makers
"you're having an overlap of three things you're looking that total range from this high to this low or this High to this low we're in the lower portion or onethird of of the range so we're in high probability for a discount Market to be in in effect you're also below the equal uh price point or equilibrium between the low to this high so it's consolidating near that but it now it went below it again so we are in an area where the market makers can buy"
Market Movement Framework
"markets move from buy stops and sell stops and sell stops to buy stops and it moves from fair value to Discount to Discount to premium to premium to fair value it moves back and forth between these three reference points"
Consolidation and Expansion
"when there's expansion you know prior to that expansion there's been what it's consolidation"
"when markets are in consolidation you'll be able to forecast The Next Movement out of the consolidation we don't break we don't play the Breakout game we anticipate the breakout"
Why Markets Move Higher
"that's the only reason why markets go up that's the only reason why pric is allowed to be delivered at higher prices because the market makers the banks have have books own own their books that are net long and it's in their interest that Z price higher it doesn't matter how many of us buy the price is going to be set by the bank"
Market Efficiency Paradigm
"you have to view things from the smart money's perspective not what retail should be doing or what retail is doing if you do that you're going to you're going to miss the actual Clarity that comes through looking at Price action"
Do Not Look at Marketplace in Retail Mindset
"do not look at the marketplace in this retail mindset that we're all trained to do we we have the same well we drink from it's the same regurgitated stuff but it's wrong"
Liquidity Seeking Behavior
"the Market's going to seek that liquidity and run against the less informed crowd's opinion"
Study & Review
Click each card to reveal the answer (direct quotes from ICT)