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Video Transcript:
All right, good morning. This is David from Trader Dale, and I’m going to show you a trade that we took on Monday, October 19th. That’s one of my favorite trade setups. It’s basically what you may know as Accumulation, Manipulation, and Distribution (AMD). ICT may call it the Power of Three, or whatever they call it. We’re looking for a specific pattern.
First of all, these are the pre-market levels from Monday. The market opens somewhere near here. What I do in the morning is mark all my pre-market levels. Here, I have the London high, which is already marked by a tool. On this day, I also had relative equal highs up here, which I think are great draws on liquidity. So, I had two really good buy-side liquidity targets.
We had this accumulation before the market opened. When you have accumulation, you don’t know which way the market is going to go. We could move up first, manipulate that side, discover the price, and then hit the sell-side levels. Alternatively, we could move lower, hit the sell-side levels, fail to take out any levels here, attract sellers below, and then move in the direction the market wants to go to discover other price areas.
There are three things we need to see. First of all, we need to see accumulation. Sometimes, accumulation can’t be identified until after price discovery and manipulation. However, this is the accumulation that was happening before the market opened, and we can place a Fixed Range Volume Profile over that accumulation.
The reason we do this is that we want a midpoint. The price action above and below this midpoint will help determine whether the price is going to reject the level or invert and distribute in the opposite direction.
So, we have accumulation followed by a move lower. For this to be a valid Accumulation, Manipulation, and Distribution setup, we need to see a move in one direction away from the accumulation, a sweep of a level of internal liquidity, and then strong momentum in the other direction.
We also need a point where the move turns into distribution. One of the confirmations that price is transitioning into distribution, rather than simply rejecting the level, returning to the POC, and moving lower again, is an inverse Fair Value Gap.
If we look at the inverse Fair Value Gap on this leg, this was the last line of support or resistance. We also have the POC right here, at the top of that inverse Fair Value Gap. Once price inverses this Fair Value Gap to the upside and takes back the POC, this is the signal to go long and start targeting our levels.
We also had a really nice retracement, which doesn’t always happen, back to the POC before another leg higher. This move targeted the main source of liquidity, which was right up here at these relative equal highs.
However, AMD is the focus here. If you can find these AMD patterns at key levels and key times of the day, they can be very powerful. They come in all shapes and sizes. They can appear on daily charts or 4-hour charts. They can be big-picture AMD setups, or they can appear on a 1-minute chart or even a 30-second chart. For intraday traders, they can help show where price is likely to move at a specific time during the day.
These are very powerful setups, and they’re easy to understand. All you need to do is recognize accumulation and manipulation, and then trade the distribution move. It’s pretty simple.
There are two things that help us understand when we’re in the distribution phase: an inverse Fair Value Gap and a break of the POC for confirmation. If the POC is here and price moves lower, we’ll need to see price move back above that POC for confirmation that we’re moving into distribution. Obviously, the opposite applies to a short trade.
All right, I hope this helps. Backtest these setups because they happen a lot. This is one of my favorite setups because it shows accumulation, a failed attempt at price discovery in one direction, and then distribution in the other direction. It makes complete sense, and especially when you understand where price is going and which levels to target, these setups become even easier to trade.
These are the different types of things we do at Trader Dale. If you want more information, contact us. I’d be more than happy to get on the phone with you.
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All right, everybody. Have a good day.
