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01-ICT Mentorship Core Content - Month 1 - Elements Of A Trade Setup

Last modified by Drunk Monkey on 2022-08-24 09:43
1 00:00:35,760 --> 00:00:48,630 ICT: Okay, folks, welcome to the first teaching tutorial. From the ICT monthly mentorship for the month of September 2016. This is the first of eight. Each
2 00:00:48,630 --> 00:00:59,400 month you'll get eight individual teaching tutorials that will complement the general theme for the month. This particular teaching is going to be elements to
3 00:00:59,400 --> 00:01:10,350 a trade setup. And as you probably noticed, this month so far, we've been focusing primarily on showing the consistency that's able to, to be delivered to
4 00:01:10,350 --> 00:01:18,930 you as a developing trader after you submitted the time. And you've done the work with the exercises and the content, materials that we're going to be
5 00:01:18,960 --> 00:01:32,010 presenting to you. When we refer to elements to a trade setup, there's really just two primary concerns. And one is obviously context or framework.
6 00:01:32,880 --> 00:01:43,410 Surrounding the idea was what makes the idea favorable for a trade. It's not just simply, well, my indicator tells me this or my support resistance level
7 00:01:43,410 --> 00:01:54,810 tells me that there has to be something that builds a reason to want to do this trade. In my material, I mean learning force specific principles, and we're
8 00:01:54,810 --> 00:02:05,340 gonna be dealing with them in general terms, and then what we do in those conditions where we specifically pairing up with in terms of the ICT tools, the
9 00:02:05,340 --> 00:02:15,540 first one is gonna be expansion. Okay, we're gonna talk about expansion and what we look for in that condition. We're gonna, we're gonna be talking about
10 00:02:15,540 --> 00:02:31,470 retracements. And what tool or concept we used for retracements, reversal. And lastly, consolidation. Now each one of these four, give a specific framework,
11 00:02:31,530 --> 00:02:40,500 any context to the marketplace that you're going to be trading in, they can only be one of these four conditions, either the market is going to be expanding,
12 00:02:40,680 --> 00:02:52,440 running away, in other words, trending, a retracement or pullback, altogether reversal. And obviously, when the markets doing nothing, it's consolidating, but
13 00:02:52,440 --> 00:03:00,090 really, we all learned in the market maker series, that there's really no such thing as the market doing nothing and consolidation exactly, accumulating
14 00:03:00,090 --> 00:03:15,690 orders. Now, the other characteristic we use for defining elements to a trade setup is using these four criteria for context and framework to specific
15 00:03:16,320 --> 00:03:32,670 reference points in institutional order flow. The first one is order blocks. The second one is fair value gaps, and liquidity voids liquidity pools and stop
16 00:03:32,670 --> 00:03:37,590 runs. And lastly, equilibrium.
17 00:03:45,990 --> 00:03:56,190 Now, understanding these two characteristics together, will give you a greater understanding of market efficiency paradigm, how the smart money interprets
18 00:03:56,190 --> 00:04:07,620 price, and how they influence the general populace or the speculative, uninformed money. It's going to be rather illuminating to tutorial actually,
19 00:04:07,980 --> 00:04:17,010 you're going to be able to look at the marketplace with an expectation of knowing what tool to apply based on what the markets providing you right now. It
20 00:04:17,010 --> 00:04:25,290 only takes a second or two to look at the marketplace determine okay, what characteristic are we trading in so that way you can build a context or
21 00:04:25,290 --> 00:04:33,060 framework on how you're going to approach the marketplace. Sometimes you'll have right away an issue where you can say I'm not going to do anything because the
22 00:04:33,060 --> 00:04:41,340 market is consolidating, I am going to be waiting. The other three conditions are going to be providing you an opportunity to take action relative to the
23 00:04:41,340 --> 00:04:57,300 tools that we coupled with those conditions or context. Now the interbank price delivery algorithm or what I always refer to as the algo or interbank algo is
24 00:04:57,300 --> 00:05:11,070 the actual basically artificial in Intelligence. It's a price engine that when we receive our price for currencies, it's actually 90%. Done by electronic
25 00:05:12,420 --> 00:05:23,670 algorithms. So it's all computer based. Now, it used to be open outcry. And it's, but there's no longer an auction market. It's all AI. And it's based on
26 00:05:24,240 --> 00:05:34,050 principles I've been teaching for about seven years now. You're not going to learn these things, because number one, no one's going to believe that it
27 00:05:34,050 --> 00:05:49,680 exists. There is this movement away from human involvement with market making, it's become much more efficient to be electronically based. And these things are
28 00:05:49,680 --> 00:06:00,600 programmed by human beings, obviously, and those intelligence are limited. So while that is probably unsettling, for some of you that are listening to this
29 00:06:00,600 --> 00:06:07,440 thinking, Well, I thought I had a free market I was trading in, it's actually not and it's highly manipulated, especially in the foreign exchange, which is
30 00:06:07,440 --> 00:06:18,930 what we're primarily dealing with here. Because of the nature of it being so manipulated, manipulated, the the fingerprints, if you will, are easy to see
31 00:06:18,930 --> 00:06:31,950 once you understand the operations and conditions to the market maker, interbank price delivery algorithm functions. So when the market does what it's doing, it
32 00:06:31,950 --> 00:06:41,130 gives you indications it gives you fingerprints, or clues as to what you should be expecting next. And that's where your anticipatory skills are going to be
33 00:06:41,130 --> 00:06:47,850 coming in. You're not going to know these things right away the first time watching this video, it may go over your head. But for some of you that have
34 00:06:47,850 --> 00:06:56,370 already went through the prerequisites, I believe, that are in my free tutorial section on my website. If you haven't gone through the sniper series, resisting
35 00:06:56,370 --> 00:07:06,120 trading concepts and the market maker series yet, you're going to need those. Okay? So don't be discouraged if you hear some terms in here that go over your
36 00:07:06,120 --> 00:07:13,680 head because they're all taught in those three tutorial series for free. It's a lot of material over there saying, dig into not only the stuff you're getting in
37 00:07:14,070 --> 00:07:23,670 this curriculum with the mentorship, but fill in the space when I'm not giving you content with the free tutorials, those three tutorials and again, I say what
38 00:07:23,670 --> 00:07:39,600 they are, they are market makers series precision trading concepts and a sniper series. Okay, the interbank algo. Okay, obviously,
39 00:07:40,770 --> 00:07:48,060 there's gonna be times when the market goes sideways in or it's in a consolidation or when I referred to as a holding pattern. Now when this happens,
40 00:07:48,120 --> 00:07:58,350 the market will be looking to do an expansion. Okay, so all markets start from a consolidation and move into an expansion that means there's an impulse move or
41 00:07:58,350 --> 00:08:09,600 an impulse price swing after the impulse swing, okay, either goes back to a consolidation again, or it goes to a retracement. When the retracement happens,
42 00:08:09,630 --> 00:08:22,230 it goes back down into another level of expansion, or after the expansion, it can go to a reversal pattern. After the reversal pattern, you'll see another
43 00:08:22,530 --> 00:08:33,870 retracement then back to potentially consolidation. These four conditions they interchange throughout the ups and downs and ebbs and flow the marketplace.
44 00:08:34,650 --> 00:08:42,090 You're only going to get one of these four conditions. Now you're probably saying okay, well, that's a lot, I need to know one of these things to make a
45 00:08:42,090 --> 00:08:53,880 trade. No, you just need to know where it's at right now, where it's likely to go and where it came from. And over the course of the month of September, you're
46 00:08:53,880 --> 00:09:01,350 going to get a lot of understanding about how to know where the markets going to go next. And that's going to fill in a lot of the gaps that you've had with
47 00:09:01,860 --> 00:09:12,630 teaching directional bias ICT. The main thing is, is the consolidation begins with everything, all the moves that take place in the marketplace, start from a
48 00:09:12,630 --> 00:09:22,920 measure of consolidation, because that's where the markets are building orders. So the market maker keeps the market in a tight range or a defined range until
49 00:09:22,920 --> 00:09:32,940 there's enough money on both sides of the upper and lower end of the range that's being defined by the consolidation. whichever one has the highest amount
50 00:09:32,940 --> 00:09:42,150 of money to be absorbed. That's the direction it's going to move in. We don't always know what that is, but we wait for the expansion when the expansion
51 00:09:42,150 --> 00:09:51,360 occurs. That's when we get the clue as to what the market is most likely going to be doing. And then we wait for either retracement or another consolidation or
52 00:09:51,360 --> 00:10:00,930 reversal. But we always wait for the first expansion that gives us all the insight that we need to make a decision. Now sometimes it may experience so far,
53 00:10:00,930 --> 00:10:08,700 but we can't do anything with it. We have to wait for the retracement or the next consolidation. There's nothing wrong with that it's all normal, you're not
54 00:10:08,700 --> 00:10:18,990 going to catch every move. The main thing is understanding these four individual characteristics to a trade setup, because price is delivered by one of these
55 00:10:18,990 --> 00:10:34,170 four conditions. It can't be any other way. Now, what is expansion? Now expansion is when price moves quickly from level equilibrium. Now expansion
56 00:10:34,710 --> 00:10:45,840 coupled directly with the tall of an order block. Now, what is the what's the importance of knowing expansion? Well, when price leaves a level quickly, this
57 00:10:45,840 --> 00:10:53,580 indicates a willingness on the part of the market makers to reveal their intended repricing model. Now, what does that mean? Well, if we're in a
58 00:10:53,580 --> 00:11:04,470 consolidation, okay, or point of equilibrium, if price were to move up quickly, that would give us an indication of looking for a bullish Orbach. We don't want
59 00:11:04,470 --> 00:11:13,350 to chase price, we're going to wait for price to come back down into the order block. where's that going to occur? Well, what do we look for in price, the
60 00:11:13,350 --> 00:11:21,540 order block that that market makers leave near or at the equilibrium price point. So I know what you're thinking, Okay, Michael is already going over my
61 00:11:21,540 --> 00:11:24,630 head. Give me some examples. No problem. I'm gonna show you that right now.
62 00:11:26,190 --> 00:11:36,930 That you see here, there's a consolidation in blue shaded area, very clear to find consolidation. It's got a clear discernible high and low and equilibrium
63 00:11:36,930 --> 00:11:45,600 price point is directly in the middle of the high in the low end of that range. You can simply take the Fibonacci told you have in all your platforms, lay the
64 00:11:45,600 --> 00:11:53,400 fit from the high and the low in the general consolidation, find that midpoint. And you can check yourself also by looking at how many times the market touches
65 00:11:54,510 --> 00:12:03,870 up up against it from below and from above it going down into elements, how many times it's touching and hanging around that level. Eventually, the market will
66 00:12:03,870 --> 00:12:12,780 move outside of the consolidation, you can see that impulse move in that tan shaded box, it moves away from the equilibrium price point. And then all we have
67 00:12:12,780 --> 00:12:21,150 to do is go back to the down candle. Right before that up, move that down candle or Black Candle, I'm drawing a small little segment I hope that's the bullish
68 00:12:21,150 --> 00:12:29,280 order block. When the price comes back down into that and hits it, that's where we would be buying in and obviously you can see it hits that level and expands
69 00:12:29,280 --> 00:12:39,000 to the upside over 100 pips just by using that simple principle. It repeats itself all the time. It's in price action all the time. And if you study just to
70 00:12:39,000 --> 00:12:47,400 the left of the consolidation, we have shaded in blue, there's actually consolidation in the sell side where the market broke down and came right back
71 00:12:47,400 --> 00:12:56,880 to the equilibrium price point again and then sold off. I'll leave that for your study now but we're gonna move on to the next characteristic of a trade setup.
72 00:13:01,350 --> 00:13:11,550 The next one is a retracement. Now what is the retracement? retracement is when price moves back inside the recently created price range. Now years ago I think
73 00:13:11,550 --> 00:13:22,890 was in 2012. I did a webinar called trading inside the range. And a lot of folks that were following me on one of the forms that is pretty popular on the
74 00:13:22,890 --> 00:13:33,840 internet. They went head over heels when they learned this the simple principle of understanding how you can trade it with inside of a range. And it doesn't
75 00:13:33,840 --> 00:13:43,200 even have to break out doesn't have to trend. You can define the range by a high and a low and trade inside that range. And that was the beginning basis point of
76 00:13:43,200 --> 00:13:51,360 how I brought a lot of people from that form into the understanding of an order block. The order block was introduced in the sniper series tutorial on my
77 00:13:51,360 --> 00:13:59,070 website. But prior to that I just gave indications and clues about what an order block was without actually really referring to or spelling it out for everyone.
78 00:14:00,660 --> 00:14:08,340 What's the importance of the retracement or when price returns inside a recent price range. This indicates a willingness on the part of the market makers to
79 00:14:08,340 --> 00:14:19,410 reprice to levels not efficiently traded for fair value. When we're thinking retracement, the go to is for ICT tools, we're looking for liquidity gaps and
80 00:14:19,410 --> 00:14:31,980 liquidity voids. When we look for price when we see run UPS real quick and run downs in price and always real quick rallies up or real quick rally down in
81 00:14:31,980 --> 00:14:45,660 price. Many times that range that's created. We'll want to come back in and close that in and I'll give you an example what that looks like now. This is an
82 00:14:45,660 --> 00:14:57,180 example of a retracement as you see here the orange shaded area we had a real quick sudden movement away from a price level and that quick sudden movement
83 00:14:57,180 --> 00:15:06,570 creates what we call as a liquidity void In other words, as the market drops aggressively like that, there's going to be pockets where the price wasn't
84 00:15:06,570 --> 00:15:18,420 actually delivered on every opera, available price level at that, in that range, it moved too quickly it skipped or it created gaps. Well, what we'll do is this,
85 00:15:18,420 --> 00:15:26,790 we'll wait as a trader, we won't chase price, we'll wait and see, okay, well, there's going to be either an indication to get long, and try to fill in that
86 00:15:26,790 --> 00:15:34,980 range. Or we can wait for it to come all the way back up to it and fill into liquidity void, once it hits it, then it will probably resume going lower. And
87 00:15:34,980 --> 00:15:49,620 that's what we're looking for in terms of liquidity void. So we've covered three conditions. The next one is the reversal. The reversal is when price moves the
88 00:15:49,620 --> 00:16:01,260 opposite direction. Current direction has taken. So if we are looking for reversals, we're directly coupling that with an ICT tool of liquidity polls.
89 00:16:01,740 --> 00:16:09,870 Now, what's the importance of it? When the price reverses direction and in case the market makers have ranted level stops? And a significant move should unfold
90 00:16:09,900 --> 00:16:23,160 in the new direction? What do we look on price, the liquidity pools just above an old high and just below an old low. Okay, and we're looking
91 00:16:23,160 --> 00:16:34,200 at examples of reversals here. Every X indicates where stops would be in the market goes just above those levels and in rejects and goes the other way, or
92 00:16:34,200 --> 00:16:42,000 goes just below those levels where there's an X and rejects and goes the other way. Look how many times there's so many opportunities just on this one chart.
93 00:16:42,390 --> 00:16:53,220 And it's on a pair I don't really like to trade to US versus the Swissy. This pair is real choppy, it tends to have a lot of this type of price action. So it
94 00:16:53,220 --> 00:17:04,230 has a characteristic that is very favorable. If you're into a type of trading like this. Turtle soups and false breaks are really really good in this Swissy.
95 00:17:09,270 --> 00:17:19,800 Lastly, we have consolidation. And whenever we're referring to consolidation, we're directly relating that to an ICT tool of equilibrium. What is
96 00:17:19,800 --> 00:17:28,140 consolidation consolidation is when price moves inside a clear trading range and shows no willingness to move significantly higher or lower. And what's the
97 00:17:28,140 --> 00:17:37,860 importance? When price consolidates? It indicates the market makers are allowing orders to build on both sides of the market expect a new expansion near term.
98 00:17:38,430 --> 00:17:47,310 Now what do we look for on price, we're waiting for the impulse move or impulse Swain price away from equilibrium price level that is found exactly in the
99 00:17:47,310 --> 00:17:57,180 halfway point of the consolidation range. And I'll show you an example what that looks like. Here we see here where we've identified a range defined specifically
100 00:17:57,180 --> 00:18:05,880 by the bodies of the candles, not the wicks. Now you can see price moves out in an expansive manner and then comes right back down to equilibrium price point,
101 00:18:06,120 --> 00:18:16,770 and then expands to the outside. By having an understanding of these specific characteristics and elements of trading, a setup, you'll give yourself framework
102 00:18:16,770 --> 00:18:28,170 to first learn how to practice and study price action, and eventually work towards understanding consistent setup discovery. And by utilizing the time with
103 00:18:28,170 --> 00:18:39,780 me on a daily basis, we'll be able to frame these characteristics and pull out specific elements to a trade setup. by repetition, and by using the daily time
104 00:18:39,780 --> 00:18:50,850 with me, when we can outline the elements of a trade setup, we'll be able to do all these things in a manner where you later retain it, make it yours, you'll be
105 00:18:50,850 --> 00:18:57,510 able to discover really what type of trade you're going to be because one of these characteristics is going to be your bread and butter condition. Some of
106 00:18:57,510 --> 00:19:08,940 you will trust the equilibrium, some of you will trust the order block, some of you will look for the void, or the liquidity gaps to trade into. Some of you
107 00:19:08,940 --> 00:19:17,040 will have one or two of these characteristics. And you'll trade within those parameters though, they'll frame your trades. Some of you will eventually grow
108 00:19:17,040 --> 00:19:23,250 into understanding all of them and be universal. But don't think that you have to have all of them well known and under your belt before you actually
109 00:19:23,250 --> 00:19:33,840 consistent because you can just find one element. As we described here, if we just find one for you, just for you. One, you can start being consistently
110 00:19:33,840 --> 00:19:43,740 profitable in your trading. It only takes one setup, either what context or framework you're going to trade in. Couple that with an ICT tool, and then wait
111 00:19:43,740 --> 00:19:52,380 for those conditions. You're not going to get to trade every single day. But you can get a couple of them every single week. If you look at four major pairs with
112 00:19:52,380 --> 00:19:59,730 one condition or criteria, you'll find a trade every single day. But that's not what you're trying to do right now. You're going to grow into that over time.
113 00:19:59,880 --> 00:20:06,810 You But for now, just go through your charts and try to look at all the examples that's already happened in the left side of your chart and outline them
114 00:20:06,810 --> 00:20:14,970 individually based on the characteristics and elements that we've identified here in this teaching. Until next time, I wish good luck and good trading