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28-ICT Mentorship Core Content - Month 4 - Mitigation Blocks

Last modified by Drunk Monkey on 2022-09-09 12:49
1 00:00:27,480 --> 00:00:38,040 ICT: We're going to be looking at a amplification of order block theory, or specifically dealing with the mitigation block. Can when we look at mitigation
2 00:00:38,040 --> 00:00:50,520 blocks, what we're looking for is a condition in the marketplace where the market has given clear indications that it wants to break down or move higher in
3 00:00:50,520 --> 00:01:01,800 a step ladder formation. In other words, like selling rallies or buying declines, drying declines in bullish markets and selling rallies in a bear
4 00:01:01,800 --> 00:01:11,340 market. Kevin, we look at the marketplace and we frame price action in the form of resistance levels and support levels or anticipated bearish institutional
5 00:01:11,340 --> 00:01:20,520 reference points and anticipated Bosch institutional reference point. We have to have a context in the marketplace behind our viewpoints. Are we looking at the
6 00:01:20,520 --> 00:01:27,690 market that has a bullish scenario? Or are we looking for a market that has embarrassed scenario? In this example, we're going to look at a market that has
7 00:01:27,690 --> 00:01:40,950 a bearish example, when we're looking at a market that is moving up into a potential bearish, resistance level, market typically will move up in a move
8 00:01:40,950 --> 00:01:55,380 into a old high, it could be an old low B, it could be a bear shorter block, it could be a breaker that we'll learn more about. It could be a multitude of
9 00:01:55,380 --> 00:02:07,320 things that would lead your opinion into the realm of resistance. Okay, but without going into great detail what that may be, there's multiple opportunities
10 00:02:07,320 --> 00:02:17,370 to frame that idea of being resistance. If a resistance level is expected or you anticipate some selling pressure, and particularly blinds is indicated here,
11 00:02:17,910 --> 00:02:26,460 what we do is we wait for price to indicate a confirmation that there are willing sellers up there. If the market does show repricing and it rallies one
12 00:02:26,460 --> 00:02:38,640 more time up to it. What we're gonna be doing is monitoring does the market have a willingness to want to break down. And eventually, the market will show signs
13 00:02:38,640 --> 00:02:48,210 that it does, in fact, want to break lower. Now if you look at this specific pattern here, this is what is referred to as an M pattern. Why? Because it looks
14 00:02:48,210 --> 00:02:59,160 like a giant M. Okay, well, when you have this pattern here, it's a failure swing with a confirmation break in market structure. That low right here is what
15 00:02:59,160 --> 00:03:10,380 you're going to be utilizing to frame the context of the market structure shift. So when that shift in market structure is seen here, with a break below that
16 00:03:10,410 --> 00:03:19,770 low, that gives us confirmation that the market does in fact have participants on a large scale, willing to drive prices lower. And that's what we need as
17 00:03:19,770 --> 00:03:28,530 small traders, we have to have the willingness to have the smart money, indicate their cards if he will show or show their hand, do they want to send prices
18 00:03:28,530 --> 00:03:40,140 lower or they want to send prices higher. In this case, this is indicating that the market does in fact, have confirmation that it wants to go lower. So what we
19 00:03:40,140 --> 00:03:51,840 do is we look at this range from that short term low up to that short term high. Inside that range. There has been buyers. But the problem is is now those buyers
20 00:03:52,080 --> 00:04:00,360 are underwater. This short term rally in price highlights a specific institutional reference point known as the mitigation block.
21 00:04:07,530 --> 00:04:19,500 Once price posts, a market structure shift lower your attention as the trader moves to this specific low in price. Great there. Inside that low. What we're
22 00:04:19,500 --> 00:04:30,090 going to be focusing on is the last down candle. Because the last down candles where the buying took place right before that little short term rally up. Since
23 00:04:30,090 --> 00:04:41,490 price broke below that low at a subsequent later time, which is really no there's no rule as to how long it takes before that low is violated. We just
24 00:04:41,490 --> 00:04:51,810 note it and when it's broken, it's seen as a short term support level that's given way with a bearish context behind it. So when we see that we're seeing the
25 00:04:51,810 --> 00:05:00,450 evidence is that there are smart money entities behind the marketplace, driving price lower. Now, at first glance it looks like well this is a missed
26 00:05:00,450 --> 00:05:14,100 opportunity. But now what we do is we focus on this low because that last down candle will give us a bearish level to sell into. When price dries back up into
27 00:05:14,100 --> 00:05:24,240 that old short term low we just referenced, there's going to be three reference points that you need to be aware of. The market structure shift is seen here,
28 00:05:24,240 --> 00:05:41,040 we're retracing back into it. Right there, what three points are used at this moment, you have point A, point B. and point C. When price action returns to the
29 00:05:41,040 --> 00:05:54,600 point of a reference, the long positions taken from A to B price swing will have an opportunity to liquidate or mitigate their losses that were occurred during
30 00:05:54,600 --> 00:06:05,910 the price move from B to C. And this can result in new lower price swings to see for retesting, or a significantly lower price move into a support level that's
31 00:06:05,940 --> 00:06:07,020 under the market price.
32 00:06:13,350 --> 00:06:26,700 In short, this is an opportunity to sell whatever particular market or asset class this is. As the market breaks lower, let's say you look at the chart, this
33 00:06:26,700 --> 00:06:39,570 is what you see here. It does not mean that you've missed an opportunity, it just means that now you have a new opportunity that's unfolding. Do the Long's
34 00:06:39,570 --> 00:06:48,240 in here, in that short term low that short term high? Do they need to be mitigated? We don't know for certain. But if you do have a belief that price is
35 00:06:48,240 --> 00:06:58,320 going to be moving lower longer term, that there's an unrealized lower support level for sell side liquidity that has not been tapped into yet. We could be
36 00:06:58,320 --> 00:07:17,070 viewing this short term rally in here as an opportunity for a new selling opportunity. We have another market structure shift. So where's our focus? Given
37 00:07:17,070 --> 00:07:26,190 what was explained in the previous example? Where's our focus right now to Trader? Why are we looking at a specific level? And what are we anticipating
38 00:07:31,740 --> 00:07:40,500 that low right there, inside that low the last down candle, that's what we're gonna be looking for price to reach back up into if it does that we can be a
39 00:07:40,500 --> 00:07:53,010 seller at that moment. As price dries back above it into that low, we're watching price trade into that last down candle right before it had that short
40 00:07:53,010 --> 00:08:08,670 term rally before we're at that moment here, we're looking to go short. As price hits that last down candle in the previous short term low. Where's your focus at
41 00:08:08,670 --> 00:08:17,520 this moment, we're anticipating price to move down from this point here, which is giving us a short opportunity to run liquidity out below this short term low
42 00:08:17,520 --> 00:08:31,590 here and potentially as low as our higher timeframe support level. As price hits our longer term support level or anticipated bullish institutional reference
43 00:08:31,590 --> 00:08:39,840 point which could be an old high, it could be an old low it could be a bullish order block many many opportunities to frame that idea. But whatever that is,
44 00:08:39,840 --> 00:08:52,200 that forms your idea for support. This is the objective that you'll be reaching for. As price hits that level, and we will be collapsing our trade and moving to
45 00:08:52,200 --> 00:09:05,670 the sidelines waiting for new developments. When we had this in the marketplace, what we're seeing is the classic support broken turns resistance everytime price
46 00:09:05,670 --> 00:09:15,300 moves back to an old low actually happening is is referred to as buyer's remorse. The buyers at the previous short term loan that saw a short term pop in
47 00:09:15,300 --> 00:09:23,670 their favorite and eventually saw the market break below that low they bought that when price gets back to that level. They're remorseful for buying it so
48 00:09:23,670 --> 00:09:34,770 they bail. But on an institutional level, the smart money understands these short term fluctuations and they can drive price on a short term basis, higher
49 00:09:34,770 --> 00:09:44,160 or lower through manipulation. So if they're going to manipulate price on the short term, by having large orders come in and push and bully market pricing
50 00:09:44,160 --> 00:09:51,600 around, they're going to want to liquidate their positions because just like anyone else, they don't want to incur losses, so this gives them the opportunity
51 00:09:51,840 --> 00:10:05,280 to mitigate those losses. premium price highs are bought by less informed traders and sold by smart money, which are you going to be grouped in? Okay,
52 00:10:05,280 --> 00:10:19,500 folks, we're gonna look at a quick example. And draw your attention to a liquidity void in here. And there's equilibrium and that liquidity void bodies
53 00:10:19,500 --> 00:10:32,610 or body end, or is the open and close. And we're going to highlight that reference point here, the halfway point of this equilibrium ideas, we broke this
54 00:10:32,610 --> 00:10:57,630 high back here, we're expecting continuation on the upside. market trades higher but it shows a breakdown in here. Okay, in here, this failure swing right there,
55 00:10:58,140 --> 00:11:17,940 we're gonna be looking at this Whoa. So I'll draw horizontal lines in on the respective lows. And this will be a new mitigation block when we drop down into
56 00:11:17,970 --> 00:11:29,970 the lower timeframes, or sell off their cells off, breaks this low here to the last down candle on this move here is
57 00:11:35,580 --> 00:11:47,970 there, so once price trades back up, that's a sell right in here, it shoots it just overshoots it by a little bit. But nonetheless, it breaks lower. Right,
58 00:11:47,970 --> 00:12:03,300 here's an hour our attention is on this low. Every rally that sees lower prices needs to be mitigated right here so if we trade back up to that low, that's a
59 00:12:03,300 --> 00:12:18,300 sell right there. So we're gonna be aiming for a move back below this low. Ultimately down into our equilibrium of our liquidity void right here. So it
60 00:12:18,300 --> 00:12:34,320 comes in at 111 48 148. Here's a short term low, hits it trades lower, trades back up into the last down candle hits it overshoots a little bit but it's
61 00:12:34,320 --> 00:12:46,350 inside the body of the candle, which is what a negation Buck represents. Price trades down below. Last downcast candle here and we have another lower low here
62 00:12:46,350 --> 00:13:01,020 so we can adjust that one to that low there. Right there, price hits, that objective is going to be break below this low sells off goes through it. And
63 00:13:01,020 --> 00:13:14,220 often it goes down into our mean threshold of the liquidity void. So a couple different things shown in here. As an overlap study on mitigation, let's take a
64 00:13:14,220 --> 00:13:19,170 look at a 30 minute chart on the same price action.
65 00:13:27,059 --> 00:13:35,939 Here's a mean threshold and liquidity void. Last down candle right for the move, price hits it sell it right there. This is a mitigation block everything that
66 00:13:35,939 --> 00:13:46,019 was used to drive price higher. Once it's traded below here, it's underwater to everyone and want to mitigate those losses at that candle sell short. This last
67 00:13:46,019 --> 00:13:56,669 down candle here is violated here. If price trades back up to it. Here. We can be a seller, the body's whole entire candle is used not just the bottom, but we
68 00:13:56,669 --> 00:14:06,809 can be a seller down here. It's gonna be a short seller at 112 62. And our stop has to be somewhere above that down candle in here. Okay, so that high on this
69 00:14:06,809 --> 00:14:18,629 candle comes in at 129. So it needs to be above that and foremost stop. So we could be seeing some little bit of drawdown in here about 20 pips or so. But
70 00:14:18,629 --> 00:14:31,229 never getting much above this down candle price trades lower violates a very convincing break down here. Last down candle the low trades up and again notice
71 00:14:31,229 --> 00:14:40,289 the body of the candle is not violated. This is Hallmark characteristics of the other mitigation block price trades up into it. We're expecting prices below
72 00:14:40,439 --> 00:14:51,359 this low now and then ultimately reaches down into our mean threshold of liquidity void. Then ultimately I'll give you the year what took place. Price
73 00:14:51,359 --> 00:14:58,679 eventually started to move back up. So hopefully this has helped you with mitigation blocks. We will still talk more about it again in the PDF file for
74 00:14:58,679 --> 00:15:04,799 your December 2016 in ICT mentorship study notes until next time I wish you good luck and good trading