BTC: Reading the Tape on the Daily

Scenarios I'm considering:
1) Price makes a run upward to the short-term target above (note that these moves can take weeks or months).
2) Price continues lower into deeper levels of liquidity seeking more sell orders (the logic for this is explained down below).
3) Price crashes below anything I've mapped out here. My Longs get liquidated and I cry myself to sleep with all the Moon Boys and Moon Girls out there. (JK I only trade spot, so I can't get liquidated).

Scenarios I'm not considering:
1) Price skyrockets to the moon and annihilates the ATHs over the next few days, weeks or months.
2) BTC goes to zero and proves all the no-coiners right.

Things to watch:
DXY (US Dollar Index): If it continues higher, we can anticipate some more pain in crypto and riskier equities.
FOMC Meetings on September 21-22: We need to know the narrative of interest rates.

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If this is your first time reading one of my posts, I recommend reading through this section at least once. Otherwise, you can skip this section of concepts and terms.
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Key Concepts and Terms:

ICT: The Inner Circle Trader (Michael J. Huddleston). He is considered a controversial trader due to some of the chest beating alpha male behavior and trolling antics he was known for in his younger days. Additionally, many traders feel insulted when their retail trading indicators and axioms (i.e., their ideologies of how the market works and how they view market structure etc.) are criticized and questioned by ICT. There is a religious element to trading schools and communities. Traders from any school, and people in general, get rather defensive when you poke them in their fundamental axioms. You can make an argument that ICT himself, ICT students and SMC traders are as guilty of this as the traders they often poke fun at. However, when it comes to reading Price Action and Market Structure, I respect ICT as one of the few mentors out there who applies a market making model to trading and who teaches traders to think outside of retail logic. By this, I mean how we interpret things such as order flow, liquidity, and algorithmic price delivery on the charts. From the retail side, we do not have access to the same level of data feeds and analytics to filter out DOM noise (order spoofing, HFTs, etc.) that “professional” traders supposedly do have access to, so I would argue that we really need to try theorizing what price action fractals might look like on the charts from our retail trading avenues with the data that we do have – most notably the ability to tape read. Note that I am not talking about reading the DOM, which is one definition of tape reading. Instead, I am talking about reading price action on the charts from candlesticks (or bars) in order to analyze Time and Price. This is not the same as trading patterns such as flags and pennants or individual candlestick patterns (dojis, hammers, etc.). We are trying to interpret the context and the series of candlesticks (i.e., pure price action OHLC and time) as a reflection of price seeking liquidity and how large orders are booked into the markets.

Market Makers: There are three ways you are likely to hear this term used. The first use is for large banks and financial institutions who provide liquidity and who capture the bid-ask spread at a granular level for profits. The second use is for the technical definition of liquidity on the order books. You have likely heard of maker fees vs. taker fees. Makers add liquidity to the markets and takers remove liquidity from the markets by hitting the bid or lifting the offer. Under the second definition, we retail traders can also be “market makers.” The third use of the term is for those entities who we posit as the real string pullers behind the scenes. In Forex, we know for a fact that the central banks directly control the ultimate direction of everything. Outside of Forex, the central banks still impact everything in other markets, but we might assume the direct string pullers to be commercial banks, funds, whales or some other entity. In some ways, this definition does overlap with the first one if we consider the narrative of who controls the balance (areas of fair value) and imbalance (fair value gaps) in any given market. The main difference between the first and third definition is the degree of macro level cynicism and price manipulation that we ascribe to the latter definition of “market makers.” Many traders – myself included – believe that these market makers (the string pullers) leave certain clues in price action based on the algorithms they use and we try to hunt for setups based on signatures of time and price in a given market.

Smart Money: This a rather ambiguous term that is used often by certain trading communities. It can refer to large funds (whales), market makers(string pullers), or “in-the-know” traders who supposedly know how to read the footprints of what the market makers are doing. I tend to use the term to refer to the latter group, but you would have to interpret what someone means on a case-by-case basis from context.

Smart Money Concepts (SMC): According to ICT, he has taught hundreds of thousands of students over the last three decades through his online mentorship. Apparently, some of the former ICT students did not uphold their NDA and ICT’s teachings have allegedly been leaked over the years and rebranded as SMC. These SMC traders argue that they are teaching Wyckoff. ICT has made multiple videos to highlight how Wyckoff and ICT teachings are different. Having studied about the real Richard D. Wyckoff from books and StockCharts.com, I tend to agree with ICT on this issue, but you would really have to do your own research and come to your own conclusion. I get the impression that many of the newer SMC traders genuinely believe they are using Wyckoff when they first start studying smart money trading systems, so I am guessing only a percentage of traders intentionally try to steal ideas and concepts. That said, be wary of any “traders” who try to sell you any trading “education,” systems, indicators, and setups – regardless of whether it is smart money or some other trading framework. While you cannot expect anyone to reveal 100% of their cards or to hold your hand for free, people who genuinely care about you should be willing to provide at least some information at no cost.

Imbalance: I am using this term to refer to broader areas where price has been delivered too much in one direction. ICT’s Fair Value Gap is more precise, so I leave it to you to go study on your own from ICT since most of his content is available for free now.

Liquidity: I am using this term on the charts to refer specifically to counterparty liquidity. ICT splits this into two categories: Buyside and Sellside Liquidity. Above old highs, we anticipate a large number of potential Buy Orders because that is where Short positions get stopped out (a stop loss for a Short is a Buy Order), Breakout Long Traders ape in at these levels, and overleveraged Short Positions can potentially get liquidated. Thus, ICT refers to these areas of value as Buyside Liquidity. This does not mean traders should be looking to Buy here. The idea is to think counterparty and realize that it is a potential opportunity to pair those Buy Orders with Sell Orders which would be Profit Taking from Longs or Short entries. Below old lows, we anticipate a larger number of potential Sell Orders because that is where Long positions get stopped out, Breakout Short Traders ape in at these levels, and overleveraged Long positions can potentially get liquidated, especially in markets such as crypto. Thus, ICT refers to this as Sellside Liquidity because of the counterparty potential for pairing those Sell Orders with Buy Orders – which of course amounts to new Long entries and Profit Taking from Shorts. After one area of liquidity has been “taken out,” then we anticipate price to potentially reverse and go after the nearest liquidity in the opposite direction. However, recent lows can continuously get attacked and recent highs can continuously get attacked, so it does not mean we are expecting immediate price reversals or continuations. You would need to use a top-down approach from the HTFs to the LTFs and look for market structure shifts or breaks. While I personally anticipate price to behave a certain way after reaching these areas of value, I would never try to call the exact bottom or top of any short-term, intermediate-term or long-term move. Price can run much deeper into liquidity than I anticipate. As I am still in the process of improving as a trader myself, there are likely more experienced traders than me out there who have a better sense of depth expectations while trading from the same framework and way of viewing the markets. Regardless, I believe strongly in the idea of taking partials and taking risk off the table after we reach each area of liquidity, as price can always go higher towards intermediate-term liquidity after claiming short-term liquidity to the upside and price can always go lower towards intermediate-term liquidity after claiming short-term liquidity to the downside.