Discover the Secret of SMC Traders with Daily Bias: A Game Changer in Trading

Daily Bias: A Game Changer in Trading

Welcome to a unique insight into a lesser-known aspect of SMC trading. This blog post is going to unravel the mystery of the Inner Circle Traders (ICT) masterstroke concept known as the daily bias. This concept is not merely a trading tutorial; it is a game changer, empowering SMC traders to consistently outperform others. It's time to leverage this secret ingredient to transform your trading panache.

Uncovering the Daily Bias for Power Trading

Unveiling the secret: the key to the consistent success of some SMC traders is their knowledge of daily bias, which they leverage in their trading. But what exactly is this daily bias, and how do we get it every day? How can it revolutionize your trading strategy? In our discussion, we will follow a step-by-step approach revealing how to get daily bias using the Past, Present, and Future (PPF) framewand, and subsequently, how you can utilize this knowledge to become the informed trader who isn't on the outside looking in, but operates from inside the circle of understanding.

Step 1: From the Past: Deciphering Price Action

Our journey through the PPF framework starts with a look at past price action. We will specifically scout for liquidity, imbalances, gaps, and structure. These elements can be discovered on the chart as follows:

Looking for Liquidity

Liquidity can be identified by searching for equal highs and lows in past price action. Take a look at the highs and note if any of them are equal. If they are, we can consider that an essential trap, effectively a trick used to misguide the retail trader into going short. This trap can be set just a few points above a daily high.

Recognizing Imbalances

With liquidity established, you can then find volume imbalances or gaps in the chart.

For example, let's identify a volume imbalance by highlighting it, say, in orange. Now we move on to spot fair value gaps, which are likely during the expansion phase of the chart.

Identifying Gaps

To identify gaps in the regular trading hours (RTH gaps), you need to shift down to a lower time frame (four hours or less). Gaps are typically caused from the New York opening to its session close, which correlates to the stock exchange hours. Mark these gaps, as they often act as magnets for price, drawing further price action towards them and providing support for subsequent action.

Step 2: Present: The Informed Trader's Framework

For informed trading, the fundamental tool is the Past, Present, and Future (PPF) Framework. As we move into the 'Present' part of this framework, let's summarize what we've already gathered: liquidity pools, imbalances and gaps (potential magnets for price), and the structure of the market. To move forward, we need insight into how price generally moves. Price action, to a great extent, moves in three distinct ways: Expansion (E), Consolidation (C), and Reversal (R)

.

Connecting these three phases in order will show a basic market structure, typically consisting of an expansion phase, a period of consolidation, and then a reversal stage. Following this, there is a shorter period of consolidation, and then expansion resumes again. This sequence provides a snapshot of market structures, from expansion through consolidation to reversal and potentially, a new expansion phase.

Footprints of Future Price Action

With the past price action covered and consolidated in the Present, the next step is a prediction of future price action. We count the identified 'magnets' for price and compare them for both the upside (bullish) and downside (bearish) movements.

For example, if four upside magnets and two downside magnets are identified, it suggests that the potential for upside price movement is higher. Looking at these data points and comparing them can give us much-coveted information: the direction of the Market Bias.

Step 3: Future: Towards Informed Trading

After gathering the Past data and consolidating it in the Present, we can now move towards predicting the future based on that information. Using the past data and considering imbalances, gaps, and structure, you can get a good idea of where the market is likely headed.

If you have a bullish bias, for example, you will be looking at the liquidity above the current price action. These can be marked as your targets (T1, T2, T3, and so on) on the chart.

To close, let's illustrate this with a practical example. Considering all your analyzed data points, you have identified a clear bullish bias for the week. Based on the liquidity, imbalances, and structure, you have your targets set. Your trading strategy for the week would likely revolve around this bias, placing trades that align with this bullish outlook and your targets.

In conclusion, the Past, Present, and Future (PPF) Framework with a focus on Daily Bias is a formidable tool in your trading arsenal. Once mastered, it can transform your trading strategy, allowing you to step into the informed trader's circle of understanding.

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