welcome back folks this is ict with a sixth installment of the eight teachings of september 2016 ict mentorship we'll be specifically dealing with fair evaluation in this teaching and fair evaluation comes in the form of two perspectives fair value in regards to equal distance of a high or low or what we would call equilibrium or fair value for the perspective on valuation in regards to market makers and combined both of them to give you the perspective that you have to have when you look at price this is actually a chart that we mapped out in advance talking about a lot of these very specific things here in the week of this tutorials production uh september 24 2016. we called australian dollar higher based on the things that i'm going to cover here i was aiming for 76. 65 as a weekly objective and you can clearly see here the market did in fact hit that what led to these ideas behind me giving these upside objectives from an area down here well first you have to understand there's a lot of overlap from what we just covered in the previous two sessions that being equilibrium to discount and equilibrium to premium obviously if you're a buyer if you want to be buying you want to be looking at a discount market that means trading in a lower third of the current trading range that the market presently are currently created in its most recent impulse lag or impulse price swing the cells are best taken in the most current trading range or impulse price swing upper third portion of that range okay that's a premium market we're selling at a premium when the market returns back to an area of fair value that is a fair value for the market maker to either sell or buy in this case we're going to cover again both concepts in regards to equilibrium and the fair valuation for market maker participation in price action this swing here is making this high here the market broke down and it quickly ran away and this is what we call a liquidity void where the market makes a a sudden movement lower and large ranges very little wicks very quick movement that is avoid 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 here where it started trading more efficiently back and forth on both sides of the candle and ultimately having a retracement this range in here as soon as we see pockets of price action where there's sud movement lower just like we saw a quick sub movement lower here 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 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 this area once price broke this low it left it open basically it's like a gap the same thing occurs here when this up candle is broken here on this candle once it started breaking lower there's a gap between this candle's low in this candle body or wick okay so i defined it by the body i like to use those the range in which it causes this void okay 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 just like we said there was a gap because there was no movement up in this area here between this up candle's low and this up candle is high this area in price action only saw down movement didn't have any up candle movement only down movement all this down here is down candle price action only big ranges so this is a liquidity void the fact that it creates it in big ranges and speed that's what defines it now because price moves so quickly in these areas fair value is established because there's going to be a willingness to want to see price trade back up into these levels and here and close in all this in other words there's going to be up movement later on it won't happen immediately always sometimes it takes a little bit of time sometimes depending upon the time frame you're looking at it may take a great deal of time but when price starts to move higher we know that we'll try to trade into this range here and fill that in at a later time that is where market makers view fair value now equilibrium or fair value in regards to equidistant uh range between high and low of a defined high and low range that being if we have this low here and this high here if we define that with fib okay we have equilibrium right here or 50 percent of that range from this high this high to this low there's equilibrium okay look how the bodies that again will stay above that but we have a lot of work around that equilibrium price point that in it that in itself is significant because it's showing you that the market ran through a short-term high once it ran through it it came back down right back to the middle of the range or fair value which is equilibrium at this moment price could stay in this consolidation for a period of time of any length we don't know how long price is going to stay in a consolidation but 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 the 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 well there's no swing low in here of any significance but there is a swing high up here that it broke through here so when we made this low price ran through it clearing out these highs right on this up candle price come back down into equilibrium do we define the range from here to here as you're looking at price you always want to get a feel for where you're at in regards to the most current trading range also notice that we are in the lower portion of the range defined by this high in this low so we're in a real low area where it would be deemed over sold so we have a range concept blending with the fact that we're moving back in the middle of a smaller consolidated trading range with a market structure break of recent high in here broke that high and it came back to equilibrium so the highest probability in terms of direction is going to be going short or going long well obviously it's going to be going long but the mechanics behind it was that the fact that we broke this swing high we have this void in here okay we had weakness in the dollar which we're not going to talk so much about correlation between dollar based uh analysis but we're only specifically dealing with price action alone here but what led to this bullish move in the ulti dollar this week was the fact that we moved back into a fair value or equilibrium so that way it's fair value for the market makers to build in long positions or build a net long book that means they're building accumulating long positions the down candle right before this move up through a short-term high that is a bullish order block so price comes down into that hits it at the same time it's hitting at equilibrium and it's deemed fair value it's fair value because the market traded back down into an area where it would be bought again and where it should be expected to see buying pressure come in we don't want to buy it up here because we've already broke a swing high what are we doing up there we would be we would be buying at a premium that's not what you want to do so you're going to blend a couple things when you're looking for high probability setups to get fair valuation 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 like we just discussed in the previous tutorial okay market will go to a premium okay the market's buying at a discount okay and it's at equilibrium it's at fair evaluation because we're in the low end of the range from this high to this low and we have all of this open price action right in here so the markets want to we're going to want to come up here and close that in it doesn't have to come all the way back up to this candle's low which is a bearish order block this up can write for the down move all this is needed to give us a directional bias we have a swing high in here where we know what's going to be resting above that buy stops so we know that there is a strong likelihood that because we're in the low end of the total range which is this low to this high so this is the parent price point this high to this low we created a short-term load that was higher we broke through a swing high came back down into equal distance of the high to the low that is equilibrium we are now at fair valuation for what for longs so market makers can build a net long book at this price level now 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 if traders are buying this chasing price are they buying at a fair value no they're buying at a premium remember that we just discussed in regards to equal equilibrium to premium the range from this high to this low we're above 50 level and here we're in that upper portion of the optimal trade entry or 62 to 79 cent tracing level i'll show you what that looks like the low to the high 79 percent adjacent level 70.
5 62 tracing level so the mark goes right up into 79 retracement so we're in premium here we're we're below equilibrium here so we're at a discount down here relative to the range down here we're at discount okay in terms of looking at the low to high this is where the premiums built in if we reverse it and look at the range in opposite terms defining it from low to high we're below the 79 tracement 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 level here so in terms of really being suppressed in terms of the total range high to low we are a deep discount in the middle of a current small little trading range from this high to this low so we're at equal distance price measurement of high middle low and into total end or lower one-third of the range of the parent price swing that we see here right in here okay even if you didn't see this high to low as the parent price wing this price swing high to low still gives you the same context just in a slow a smaller scale so you have high to low we're in a lower one-third here and we're in deep discount here's equal distance for equilibrium we're below it so we're a discount so fair evaluation for the market makers to build a book long would be so many overlapping factors there they could be building long positions or accumulating long positions here looking for what liquidity above the marketplace that means where above these highs that initially sold off of then you have the buy stops about here so the market runs through that takes those stops runs through this short-term high here and then what does it do it goes into consolidation now if it's a turtle soup and it wants to go lower after blowing out buy stops it should go lower quickly it doesn't do that it's staying in a sideways consolidation in fact during this week i actually gave live sessions explaining how this market was going pointing to higher prices it went back into consolidation which means it's going back into what it's building equilibrium okay so equilibrium is building again in that small little range so you define the high and the low right there and look how much price taxes spend around the middle point at equilibrium price point okay so it's hanging around fair value okay one spike move lower doesn't see price go lower any aim it's any significant doesn't break the range and it expands to the upside once it expands the upside it starts filling in all of this again this is another area of fair value the market's fair for those long positions for the market maker that have already accumulated longs on it's this is a good area in this shaded area i'm going to extend this out in time over here all of this is a good place for them to sell the lungs that they started accumulating down here look how much time they whip back and forth in that range all these wicks okay they're selling they're selling they're selling all the positions they've accumulated here accumulated here and down here on the initial run down into the support once this range is closed in the next area of concern is above this short term high so our void filled in right here it's filled in so this is no longer of area of interest no no more now we still look for higher prices why would we still look for higher prices because they went long here okay so if they're gonna look to sell their position where would they look to sell their positions at discount prices are premium premium but 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 to move it's already been moving higher it's fair value to the market maker to liquidate their positions at this small little pocket between this lows this up candle is low and this up candle is high so we can now create a new specific area of fair value for the market maker to liquidate their long positions in here right in here to draw that out in time that's what you see here price coming right into the bottom of that candle hits it perfectly to the pit bodies of the candle are still deep inside the shaded area for fair evaluation what makes it fair is because they bought it at a deep discount and they're liquidating at a premium it's fair for them to accumulate here and it's fair for them to liquidate see market makers have to deal in terms of valuation for their longs and their shorts and they have to do that same evaluation for their exits on both sides of the marketplace so when we see inefficiency in price like we see here with these candles just only going down no up movement only going down here not moving in until later on all of this area they're scaling out their positions that they accumulate down here here and here when price moves in defined trading ranges there's going to be equilibrium equilibrium is in itself fair value that means the market makers are holding it in a consolidation when that consolidation gives way the strongest move out of that consolidation on alarm on a hard time frame chart will give you a great deal of prognostication for directional bias so what i mean by that is if we look at price and we take a look at it like this we can look at price like from this high down to this low to have a range defined there okay the markets in this range here consolidates it goes right back to equilibrium hangs around equilibrium dips down below the equilibrium so even if we're monitoring this range from this high to this low we're below the equilibrium price point so are we at a premium right here or are we at a discount we're at a discount traders on a retail level they're going to see this as a selling point they're going to want to get short because they're going to see this high to this low coming up to 62 percent retracement level like remember i said in the last two sessions it's not enough let's look simply looking at fibonacci you can get tripped up in fibonacci if you don't understand what price is actually telling you so getting short here is not what you want to do even though you've seen price movement going lower it's only coming down to an area of fair value for the market makers to accumulate longs in an area of discount so you're having an overlap of three things you're looking at total range from this high to this low or this high to this low we're in the lower portion or one third 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 especially if you combine that with areas of institutional overflow so if you're looking to buy what would you be looking for an area to run out below the stops in other words cell stops below an old low we don't see so much of that happening here it doesn't need to do that it's only returning down to this down candle which is a bullish order block a down candle before the market moves higher that's where market support really relies um we're not really resides in okay up candles before the market drops down that up candle is exactly where resistance is an institutional basis so that's where selling occurs so when we see price action like this we can define things in terms of fair value in relationship to how market makers going to perceive price the way they value price in terms of the current range that it's trading in the same way the algo delivers price where are we at in proximity to the current total range we have a nice impulsive price swing high to low here we are in the lower portion of that range here we have built-ins buy stops above this high above this high here above this high here and we have value uh evaluation gap okay a fair value gap market's going to want to come back up there because they spent very little time in this area it was all down movement all down movement no no buying was actually occurring in here no buying was occurring in here it was all on the sell side one way flows so the market ran up into just to close in where only selling took place and no real buyers so now when price comes back up to that level and they shoot it up there like that that's going to make a run on stops above the swing high and we're going to close in the range between this up candle and this up candle here which is a fair value gap so when we're looking at price action it's a couple things you need to keep in consideration the total range you're trading in the equilibrium price point relative to the most recent trading range high and low and we defined several of them here we did this high to this low with this high and this low and this high in this low so we have multiple things lining up with the fact that for fair value sake the market has a deep discount here and it's most likely going to trade higher and we have reference points that we can look for where the market maker should aim but ultimately this is the fair value gap that they wanted to get back up into and the reason why the basis was of me calling 76. 65 for the week was i want to get just below where i ultimately think it's going to go and the level at which if we look at the high uh the low comes in at 76.
