ICT & SMC Advanced Module

Lesson 11: Additional Trading Tools - Fib, OTE, Premium/Discount, Divergence

Additional tools we need for trading. But we can get good confirmations from this.

📌 Special Feature of This Lesson

Additional tools we need for trading. But we can get good confirmations from this. So let's dive in and see what this is like.

📋 4 Topics in This Lesson

1) Fibonacci
2) Optimal Trade Entry (OTE)
3) Premium and Discount
4) Divergence

1) Fibonacci Retracement

The market runs in some direction and then gives a pullback. So when we take an exact entry from this pullback, we can use this tool.

Before using the Fib tool, we need to set up the values properly:

1.5

0.650

0.618

0.5

0.236

-0.27

-0.618

-0.790

Up Trend (Buy Side)

If the market is in an Up trend, or going on the buy side, we need to draw the fib tool from Higher Low to Higher High. Then when the market gives a pullback, we can see exactly where the market can turn from. Remember this is technically only. We can use it as support for our analysis.

Down Trend (Sell Side)

If the market is in a Down trend, or going on the sell side, we need to draw the fib tool from Lower High to Lower Low. Then when the market gives a pullback, we can see exactly where the market can turn from.

Golden Pocket: The 0.618 and 0.650 zone is what we call the golden pocket. After the market comes there, we can take entries. There's about 90% probability that the market will reverse from there. But here I tell you again - this is technically only. It can fail due to some fundamental reasons. So don't forget to look at the fundamental side well before taking entries.

2) Premium and Discount Zones

Here the 0.5 to 1 zone we call the Discount zone. And the zone between 0.5 and 0 we call the Premium zone.

⚠️ We NEVER take entries in the Premium zone.
If you see entries in this Premium zone, don't go for them. It's a bit risky.
✅ Wait patiently and when the market comes to the Discount zone you can take your entry.

3) Divergence (RSI Indicator)

Here we use the RSI Indicator. In full words, Relative Strength Index. You can apply this to any market.

Definition: When the indicator moves opposite to the direction the market is moving, a divergence forms there.
Bullish Divergence: After a bullish divergence, we can see the market buying.
Bearish Divergence: After a bearish divergence, we can see the market selling.
RSI Levels: Here the RSI indicator has levels - 30 and 70 levels.
Overbought: When the indicator buys above 70, we say the market is overbought.
Oversold: Similarly, when the indicator sells below 30, we say the market is oversold.
Valid Divergence: If a divergence forms when the indicator is overbought or oversold, the probability of it being valid is higher.

Bullish Divergence

Bearish Divergence

🎯 Practical Application

You can color the background of the Fibonacci tool. Or you can leave it without color. Also, put the values on the right side. That will be much easier for you. That's just my personal opinion.

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