Skip to Content

10-ICT Mentorship Core Content - Month 2 - Framing Low Risk Trade Setups

Last modified by Drunk Monkey on 2022-09-02 12:03
1 00:00:25,950 --> 00:00:37,890 ICT: Folks, welcome back. This is Module Two of month two of the ICT mentorship, we're gonna be specifically teaching on how to frame low risk trade setups. Now
2 00:00:37,890 --> 00:00:47,340 before we actually consider doing this, we have to consider what makes a setup worth taking. And ideally, selecting trade setups on higher timeframe charts is
3 00:00:47,340 --> 00:00:57,750 ideal. That's the primary function of a high odds probability trade, you have to look at a higher timeframe chart to give you the directional bias to give you
4 00:00:57,750 --> 00:01:09,000 the institutional order flow, the support or resistance ideas that would be framing the buy or sell idea that you're looking to do. And the reason why we do
5 00:01:09,000 --> 00:01:19,560 that is because large institutions and banks analyze markets on daily, weekly and monthly, monthly basis. Now, when we do these things, we're locating price
6 00:01:19,560 --> 00:01:27,390 levels that align with institutional order flow. This is key because if you don't have the understanding of institutional order flow on a monthly, weekly
7 00:01:27,420 --> 00:01:38,190 and daily timeframe, it's going to limit your exposure to high probability setups. Higher timeframe, setups form slow and provide ample time to plan
8 00:01:38,190 --> 00:01:49,410 accordingly. Folks that can't day trade, folks that can't be inside of the short term intervals, in terms of charts, they have businesses, they have jobs, they
9 00:01:49,410 --> 00:01:58,530 have life, barriers that keep them from being able to be an intraday trader. You don't necessarily need to be a day trader, you can be using these higher
10 00:01:58,530 --> 00:02:09,630 timeframe charts, and they'll be able to frame out really low risk, high end probability setups, it doesn't require being intraday. What can we do to lower
11 00:02:09,630 --> 00:02:24,690 the risk in a trade, the higher timeframe has more influence on price. So we focus there the conditions that lend to a trade setup on a higher time frame can
12 00:02:24,690 --> 00:02:34,830 be refined to a lower timeframe. Transposing the higher timeframe levels to lower timeframe charts is important because that way, we can start to reduce the
13 00:02:34,830 --> 00:02:44,460 overall exposure in terms of pips, for our stops. And then finally, refining higher timeframe levels to lower timeframe charts, allows for smaller stop loss
14 00:02:44,460 --> 00:02:47,400 placement, and by default, lower risk.
15 00:02:53,010 --> 00:03:01,320 Okay, sticking to our model, we used the Aussie dollar daily chart the last time, we're going to look at this same setup, and we're gonna look at it in
16 00:03:01,320 --> 00:03:03,720 terms of refining with lower risk.
17 00:03:10,410 --> 00:03:17,760 Now, I want you to look at this chart carefully, because this is exactly the same chart you saw in the previous teaching. Now, I'm going to amplify on this,
18 00:03:17,760 --> 00:03:25,350 but it's important you understand the way the framework is here, you're gonna see it's exactly the same thing just brought down to a lower timeframe chart.
19 00:03:25,650 --> 00:03:35,790 And we're actually going to do it in two scales lower. I want you to look at the fact that we have the higher timeframe 75 to 7512 level relative to the daily
20 00:03:35,790 --> 00:03:44,040 chart, that's what this line is here, delineating the daily bullish order block. Notice we have an old low here and price goes through that down into that higher
21 00:03:44,040 --> 00:03:52,080 timeframe level, it's really important to see that because not only is it just because we're going below lows, not enough to expect a reversal. Okay, we're not
22 00:03:52,080 --> 00:03:59,670 looking for that just because that's the case. We're looking for a higher timeframe premise, why should we expect there to be buying down below an old low
23 00:03:59,820 --> 00:04:11,220 because this daily chart level 7512 is an old bullish order block, because banks have bought here before. So if we trade into that level again, okay, look at the
24 00:04:11,220 --> 00:04:24,300 framework here we have a hourly chart, with a low being violated down into a key support level relative to a daily timeframe. We've noted obviously, the buy
25 00:04:24,300 --> 00:04:32,730 stops above here just like we did in the first teaching. And obviously the second area of buy stops. So we have upper level objectives framed on this
26 00:04:32,730 --> 00:04:43,680 trade. It's not a scalp. It's not a day trade. It's something that's going to give us a little bit more magnitude, okay for objectives for for hauling in
27 00:04:43,680 --> 00:04:53,790 pips. Now, obviously, we framed the first teaching in this month's delivery of content. We looked at this down candle as the bullish order block, and we were
28 00:04:53,790 --> 00:05:02,460 looking at 7542 as a long entry. And obviously by doing that, we framed it what a 20 pip stop. up, this is where our stop loss would be, which would be below
29 00:05:02,460 --> 00:05:11,910 the mean threshold of this down candle, which is a bullish order block. So what if you want to get a smaller stop in relative terms to 20 pips? And here's the
30 00:05:12,090 --> 00:05:19,800 more important thing. What if you want to be buying lower and offering yourself a lot less in terms of risk exposure?
31 00:05:26,220 --> 00:05:35,040 Well, that's gonna require us going down into a 15 minute timeframe. Everything here, look very closely, this is very close to what you saw on an hourly chart,
32 00:05:35,400 --> 00:05:46,260 we have an old low price trades down below that oh low right into that key level 7512 Level. Now this up here is the buy order that would be needed on an hourly
33 00:05:46,260 --> 00:05:55,140 chart way up here. But what if we focus our attention down in this area here? What can we do with this information? Well, obviously the same things there, we
34 00:05:55,140 --> 00:06:03,240 have sell stocks below an old low whereby orders can be paired up on the smart money side. And you see the market trades down into that level 7512. So we do
35 00:06:03,240 --> 00:06:11,760 have a turtle soup long setup. But we don't require the price to come all the way up here before we start buying. So how can we do this and reduce risk? Well,
36 00:06:11,760 --> 00:06:20,670 we can take the bullish order block here, the down candle right off of that level. And why is this a bullish order block is it's valuable. And it's worth
37 00:06:20,670 --> 00:06:29,520 taking, because this candle trades through it right here. And now we can focus on the midpoint of that candle up to a tie in that area, we can be a buyer. So
38 00:06:29,520 --> 00:06:40,620 we can be a buyer down here at 7520. Okay, and have a stop loss down here at 7507. It should not go down to 7507. If it's going to go higher, it should go up
39 00:06:40,620 --> 00:06:51,360 higher from where it's at now. By doing so, now we have a 17 pip stop loss and look how much lower we are in relative terms to what we saw on the setup on the
40 00:06:51,360 --> 00:07:04,980 hourly chart way closer to this key level of 7512. And we're using a 15 minute timeframe to do it. So looking at it in terms of even further reducing the risk,
41 00:07:05,550 --> 00:07:12,810 we can take this small little area in here and refine that same sample size of data. Okay, and we're gonna take a closer look into it.
42 00:07:18,420 --> 00:07:29,340 Okay, so we're zoomed in. Now, we want a five minute chart, all we're doing is looking at that same 7512 level. Okay, and we're refining the entry from 7520.
43 00:07:29,430 --> 00:07:41,040 What can we do differently here? Well, let's take a look at what's going on inside this yellow area. Okay, we have price with another down candle as it hits
44 00:07:41,100 --> 00:07:51,180 that bullish order block 7512 on the daily chart, this down candle gets violated right here. So now we can start looking at this down candle from its open or
45 00:07:51,180 --> 00:07:59,280 high down to the midpoint and we can be a buyer there. Or we can just simply say okay, well that's basically the 7512 level, we'll just add the spread to it in
46 00:07:59,280 --> 00:08:14,790 terms of buying. That puts us in around 7515 our stop loss can still be down here at 7507. That's less than 10 pips less than 10 pips on a buy. Now you can
47 00:08:14,790 --> 00:08:27,090 refine this where your risk is eight pips here and then first profit of eight pips above here, second, and third. So we have a multiple of three our before we
48 00:08:27,090 --> 00:08:36,600 even take out, the buy stops above this old high on a five minute chart. Now notice this is not even to buy stocks that was framed on an hourly chart, all
49 00:08:36,600 --> 00:08:45,270 we're doing is using price action on the timeframe we've executed on and looking at where price is going to be reaching for so we have a multiple of three, our
50 00:08:45,540 --> 00:08:56,820 or in other words, we've made three for every $1 we rift. So the price has already moved 24 pips up from our entry in here on our stock is only eight pips
51 00:08:56,820 --> 00:09:13,110 below where you would enter it at this old low here. Notice also, by refining our risk like this, we're actually getting multiple of three, our reward for $1
52 00:09:13,110 --> 00:09:25,500 risk. As we hit the entry that would be assumed on an hourly chart at that night at 7542 level, we're hitting that level here with lower risk and we're getting a
53 00:09:25,500 --> 00:09:38,790 three to one reward ratio. Think about that. The risk reward is $1 for $3 to be made, or in terms of reward the risk, we're looking at $3 made for every $1
54 00:09:38,790 --> 00:09:46,740 risk. So it's amazing how you can take this and refine it down to smaller timeframes. You don't have to have big super wide stops, but it does require you
55 00:09:46,740 --> 00:09:53,070 to understand what you're doing and why you're doing it. You just can't get anywhere with these ultra short stop loss orders if you don't understand price
56 00:09:53,070 --> 00:09:55,080 action and why it should be responding on these levels.