"Maximizing Trading Profits with ICT, Technical and Fundamental Analysis"

  Introduction:

Technical analysis is a tool for traders who want to predict market movements by analyzing historical price and volume data. By incorporating key concepts from the Inner Circle Trader (ICT), traders can develop a more comprehensive understanding of technical analysis and use this knowledge to inform their trading strategies. However, to take trading success to the next level, combining technical and fundamental analysis is important. In this article, we will summarise the most important ICT concepts for technical analysis and how combining technical and fundamental analysis can lead to more high-probability trades.

What is Technical Analysis?

We have discussed this in previous articles but, at its core, technical analysis is the process of analyzing historical prices and identifying patterns and trends by looking at only prices. By studying this data, traders can gain insights into market movements and use this information to make profitable trades. And no, technical analysis is not just looking at colorful charts and pretending you're a wizard - although it can certainly feel like that at times! that is why we don't use just any technical method you can think of, we specifically look at ICT trading concepts for both the long term and short term. Those who love day trading are in the right place. The good thing about using ICT models is that when it comes to day trading, we can even forget about the Fundamentals and sorely look at the price if we are well aware of what you are looking for. If you are not, worry not because you are just at the right place, will update you with what is it you need to have an edge with ICT concepts.

Key ICT Concepts in Technical Analysis:

1. Market Structure: Market structure refers to the way that price moves and behaves in the market. ICT emphasizes the importance of understanding the underlying market structure, including identifying key liquidity levels and market swings. It's like understanding the rules of a game - if you don't know the rules, how can you play to win?

2. Order Flow: Order flow analysis is the study of market liquidity and the flow of orders into the market. ICT stresses the importance of understanding order flow to identify potential buying and selling opportunities, and knowing where liquidity is, as it acts as a magnet to price. Think of it like being a detective, piecing together clues to solve the mystery of the market.

3. Price Action: Price action analysis is the study of how price moves and behaves in the market. ICT emphasizes the importance of identifying key price levels, as well as understanding the role of market psychology in driving price movements. It's like reading the emotions of the market, except the market can't cry into a pint of ice cream after a bad breakup, you must listen to what the market is telling you and not otherwise

4. Order blocks: A bullish order block is the Lowest Candle or Price Bar with a Down Close has the most range between Open to Close and is near a “Support” level and a bearish order block is The highest Candle or Price Bar with a up Close that has the most range between Open to Close and is near a “Resistance” level.

5. Fair Value Gaps: When Prices leave a specific level and only has a small section of price action that is seen as one directional, this is known as a Fair Value Gap. It is very similar to what is traditionally known as a “Common Gap” in technical analysis. They can present

6. Liquidity: it is the open interest of buyers and sellers in the marketplace

Of course, these are not all, these are the main ones you will mostly hear about. In coming articles, we will explain all of these in great detail, we will use real-time chart examples, clearly identifying each of them, stay tuned, this was just an introduction to the greatness

Combining Technical and Fundamental Analysis:

Technical analysis is a valuable tool for predicting market movements, but it's important to also consider the fundamental factors that drive the market, even as day traders, it's not mandatory, but it just takes you ahead of other traders and gives you an edge. Fundamental analysis looks at macroeconomic indicators, such as interest rates, inflation, earnings reports, and political events, to portray the overall health of an economy which will in turn affect the value of a currency. By combining technical and fundamental analysis, traders can gain a more comprehensive understanding of the market and make more informed trading decisions. It's like having a map and a compass - the map shows you the big picture, while the compass helps you navigate the terrain. There is a myth that Fundamental analysis is hard and complicated, I used to live by that myth until I really wanted to know how institutions and banks do it, and how they are ahead of us almost all the time, I wanted to be ahead too, that was my motivation.

Why Combine Fundamental and technical analysis?

In most cases, people a told you only need one between technical analysis and fundamental analysis to make life easier for you. That might be true, you have to know the meaning and purpose of each method of analysis individually. It all comes back to the reason why we trade currencies in the first place, we are trying to take advantage of the price movements to generate profits from that. What people forget is the reason why these price movements occur, people don't seem to care nowadays, forgetting how crucial it is and how it could be of advantage if they knew. Currency prices move due to the differences in currency values at a particular point in time and that value is what causes prices to fluctuate the way you see it on a price chart. Now Fundamental analysis helps you identify that value, if you know that value, you expect prices to move and that's now what technical analysis offers. When you are in a trade, and it is moving in your favor, the reason why you are not patient enough to let it ride and you want to lock in all your profits too early is that you are not confident if your trade will continue to go in that direction. Why do you think that is? It's because the reason for that trade idea was not solid enough, you want to let fate decide on your trade and not facts. Imagine if you knew that the US dollar is currently stronger than the Canadian dollar based on research, would it be hard to look for a valid support level in a price chart as compared to if you had just guessed the validity of the level. That's how trading gets to make sense. Technical Analysis and Fundamental Analysis work best together and suck when used independently. it doesn't mean you can choose one of them and not be profitable, it just means you have less of a trading edge as compared to when you use them together. Think of it like this, If you had a choice between your eye, your hand, or both, what would you choose. of course, if you are a normal human being you choose both, why? because both of them are crucial for your body to fully function. That is the same thing with technical and fundamental analysis, think of trading as your body, for your trading to be fully functional, you need both aspects of trading because they serve different purposes but together they enhance the functionality of your body. Now it all comes to personal preferences, we all have the gift of free will, and we can choose whatever we want. You can either choose your hand or your eye or both. You can also choose between technical analysis or fundamental analysis or both. It's up to you! We have separate allocations of both Technical Analysis and Fundamental Analysis here on this site.

Key Take Aways

We saw that technical analysis is studying prices to find trade setups. We saw that Fundamental analysis is when we look at currency values and take advantage of the differences or divergences in value to capitalize on price moves. We saw a list of some of the common ICT terms and their explanation and we saw that by using these key concepts from the Inner Circle Trader (ICT) and combining them with fundamental analysis, traders enhance their trading capabilities. Whether you're a beginner or an experienced trader, it is crucial to master these concepts, and incorporating them into your trading strategy can help you to predict market movements and achieve greater trading success. Trading can be serious business, but who says we can't have fun along the way? Just don't let the market see you smiling too much, we don't want to give away all our secrets!

Author:

Tinahse Kwande