Skip to Content

ICT YT - 2019-02-03 - What Makes Trade Setups Low Odds - Trapped Order Flow.srt

Last modified by Drunk Monkey on 2022-12-22 08:37
1 00:00:36,180 --> 00:00:50,100 ICT: Okay, folks, long time no see, I'll share some things regarding the euro dollar. Last week, we had the non farm payroll. And, you know, typically that
2 00:00:50,340 --> 00:01:02,010 that's a day that I like to refrain from engaging in. But I'm gonna give you some things that added to the uncertainty about that particular day being last
3 00:01:02,010 --> 00:01:13,200 Friday, or February 1, to be specific, I want you to take a look at this section of price action. And obviously, it's an intraday segment of price action. But
4 00:01:13,200 --> 00:01:28,260 nonetheless, it's going to communicate something I believe is helpful to those that have ever entered a trade that failed to move in their in their favor, or
5 00:01:29,310 --> 00:01:40,200 fail to move out of a specific range. This is what is referred to as trapped order flow. So we take a look at it in greater detail, but I want you to take a
6 00:01:40,200 --> 00:01:53,880 look at what's shown here. And try to determine what makes this segment of price action difficult to move higher or lower, at least for the scope of last Friday,
7 00:01:54,480 --> 00:02:06,840 understanding what may lead to dynamic price action, one of the things you want to be able to identify is when the market is less likely to move, you understand
8 00:02:06,840 --> 00:02:19,170 from my concepts that we teach how to determine where the market is being drawn to. So that's to draw on liquidity. If you arrive at that, and you're correct,
9 00:02:19,290 --> 00:02:28,050 you'll find that you have very little resistance in terms of finding profitability in your setup. But when we have things in price action that lead
10 00:02:28,050 --> 00:02:41,970 to adversities or what we refer to as high resistance liquidity runs a low resistance liquidity run is something that would be seen as a very low resistant
11 00:02:42,060 --> 00:02:55,020 high energy price mood that runs an old high or runs an old low, very easy, smooth price action. A high resistance liquidity run would be one that will be
12 00:02:55,020 --> 00:03:06,780 seen with a great deal of adversity. In other words, from a classical technical analysis analogy, a lot of resistance in a bullish condition and a lot of
13 00:03:07,140 --> 00:03:23,310 support in a bearish condition. What frames this trapped order flow in here on Friday is directly related to two price points. This one here. And this one
14 00:03:23,310 --> 00:03:38,610 here. Both of these two reference points here have smaller fractal patterns within those larger patterns that also present additional features that would
15 00:03:38,610 --> 00:03:49,140 act as a trapping mechanism in the sense that it's very difficult it was difficult rather for price to move out of that range on Friday. So I'm gonna add
16 00:03:49,140 --> 00:04:03,960 a little bit detail here and I'll give you some more insights as we as we go. Okay, so we have this price when here is the larger bullish ICT breaker. Now
17 00:04:03,960 --> 00:04:14,850 without being all tied up with the lingo all we're gonna do is refer to this low here we residing below that sell side liquidity could be in the form of sell
18 00:04:14,850 --> 00:04:29,520 stops to go short or sell stops on assumed long positions. price drops down clears these stops out right here. Then price rallies away. Once this high is
19 00:04:29,520 --> 00:04:40,890 taken out. The price trades back down to that last close candle. This is a buying opportunity. Generally if the market conditions is bullish, offered
20 00:04:40,890 --> 00:04:54,300 support and here when a little bit lower into this ICT bullish breaker. Again a low high in between a lower low sell high liquidity ran out here. So inside this
21 00:04:54,300 --> 00:05:08,160 larger breaker there's a smaller breaker same pattern. Just on a smaller scale, once price runs through that, it makes a high comes back, makes the short term
22 00:05:08,160 --> 00:05:20,310 low rallies through this old high, then trades back down below this low that makes this a bearish ICT breaker. So now price trades up into there on Friday
23 00:05:20,310 --> 00:05:35,550 and has difficulty getting through it. We traded back down into this old high. Just like we saw Reese response off of this one here, we saw this rally
24 00:05:37,560 --> 00:05:50,130 off of offer this high, this low to this high down to this low is a bullish breaker as well, because we have liquidity below this low here, price trades
25 00:05:50,130 --> 00:06:01,920 down to it and then runs through the highest up close candle. That's your breaker. Price hits it here. So we're seeing a back and forth tug of war for
26 00:06:01,920 --> 00:06:13,410 order flow back and forth in between those two price points. Now, if we add that to the economic calendar, which obviously last Friday was non farm payroll, if
27 00:06:13,410 --> 00:06:24,030 we look at a five minute chart, here's the price action on non farm payroll Friday price, meandering around until non farm payroll release, the release
28 00:06:24,030 --> 00:06:38,070 comes out it drops down aggressively, then rallies back through, drops back down inside the original consolidation then sells off again, but hits a bullish
29 00:06:38,070 --> 00:06:53,400 breaker. So we have the market wanting to find a direction. But it can't find its way out of a defined range. When you see this coupled with the economic
30 00:06:53,400 --> 00:07:06,210 calendar for things like FOMC related events, a high impact speakers, or non farm payroll, this is what you could reasonably expect to see. If we have the
31 00:07:06,210 --> 00:07:18,060 price action, back to a 15 minute timeframe, you can see the difficulty with price finding a direction in here. It can be very problematic for someone that
32 00:07:18,060 --> 00:07:28,230 wants to follow, for instance, the optimal trade entry long one could be a buyer here. And yes, it made a higher high. But if you don't take partial profits,
33 00:07:28,260 --> 00:07:42,540 you're not going to see a profit market finds its way all the way back down into the original point of the buy. If you're trying to be a seller up here, and
34 00:07:42,540 --> 00:07:52,800 looking to go short thinking that this is going to be the downside catalyst on the initial run. Yes, it makes a lower low than this here. But if you don't take
35 00:07:52,800 --> 00:08:01,680 partials, you get stopped out. So it can be very frustrating back and forth when you're inside of a Seek and Destroy type of event. And that's what this whole
36 00:08:01,680 --> 00:08:13,800 price pattern is here. Every high and low gets taken out subsequently. So you're probably looking at the entry on this particular chart thinking, well, if that's
37 00:08:13,800 --> 00:08:25,080 the case, it was so hard. Why are you showing a short position? Obviously, I was on the assumption that I would see something in here, that would help me frame
38 00:08:25,080 --> 00:08:45,750 an entry. Let's go back down into a five minute chart inside of this run up. Okay, inside this up close candle, we like to look at the midpoint of that. If
39 00:08:45,750 --> 00:08:58,050 we breach it, like we do here, this candle runs a higher high, and then we start to see it break down. We traded down below the midpoint of this up close candle
40 00:08:58,560 --> 00:09:09,630 when it started to drop down. I don't like to see that if we take a higher high. So this to me sets up a scenario where we could be a seller. You can go short on
41 00:09:09,630 --> 00:09:28,770 that. If you look at the time of entry 1634 this candle right here 1635 that's the candle I did it in this little movement back up above the midpoint of this
42 00:09:28,830 --> 00:09:43,590 up close candle I was trying to get in as close as I possibly can to this mean threshold. My expectation is is that we ran stocks above this high and even if
43 00:09:43,590 --> 00:09:53,790 this stays in the Define range that it is here. If I can get below this low here, I can take first profit and move my stop to a lower level. And I don't
44 00:09:53,790 --> 00:10:03,780 care at that point getting stopped out. But if I'm right about this being in it Important high and we've done all the dirty work on the upside, and we grow
45 00:10:03,780 --> 00:10:19,590 lower. If I have a full 100 pips, in terms of a drop, it may not do this until later in the week, if at all, it doesn't have to do it, I could be wrong. But
46 00:10:19,590 --> 00:10:33,780 I'm looking at the premise that we had difficulty on Friday, just like we saw on the British pound, British Pound had that same scenario on Thursday. So you can
47 00:10:33,780 --> 00:10:36,480 destroy higher, low higher, low, higher, low, higher low.
48 00:10:38,040 --> 00:10:46,560 It's very frustrating when you're caught in this type of environment, because you can be buying, it runs up a little bit and then comes back stops you out.
49 00:10:46,560 --> 00:10:53,280 And you think, Okay, well, I'm gonna sell short that now. And then you put a short in, it runs up and takes a short term, how do you put your stop above,
50 00:10:53,520 --> 00:11:01,710 back and forth, it's very, very frustrating. The sooner you find that you're in that situation, the better off you are, and you want to move to the sidelines.
51 00:11:01,740 --> 00:11:16,500 Or if you do see a run on the extended range. Like up here, I was entering, not above the old high because I just didn't see it at a time. But ideally, you want
52 00:11:16,500 --> 00:11:27,720 to be a seller above old highs and fire below old lows, if you see the scenario, or the out of the marketplace, because the closer you get to the middle with an
53 00:11:27,720 --> 00:11:36,960 entry, which is generally going to be with your like an optimal trade entry, it's going to be painful, it's gonna be painful, you're going to be stopped out,
54 00:11:36,990 --> 00:11:44,460 it's not going to move in your direction. And it's going to be frayed for frustrating. So to me, my thought process was that we cleared this high with
55 00:11:44,460 --> 00:11:53,970 this run. And I wanted to get in as close as I could to the midpoint of the up close candle. Because even if I do get stopped out faster, it moves down a
56 00:11:53,970 --> 00:12:01,980 little bit, the likelihood of it come back to that midpoint is unlikely to occur because we've cleared a high. So in other words, they've done some work up here,
57 00:12:01,980 --> 00:12:15,600 we cleared some stops. And now the market should seek, again, should is not a definitive statement. It's not a an absolute definition of what to expect, okay,
58 00:12:15,600 --> 00:12:25,650 it's not going to be perfect. And you're not going to know that I don't always know that I have very high probability and statistical edges that helped me get
59 00:12:25,650 --> 00:12:32,040 to these assumptions. But that's what's really, really all they are at the beginning their assumptions. And until you see me go on Twitter and prove it
60 00:12:32,040 --> 00:12:41,790 after the fact. Then and only then was I right? But I'm not right yet. Even though that the trade has paper profit. I'm not right about the trade, because
61 00:12:41,790 --> 00:12:52,440 it's still open. I didn't collapse anything that didn't take any portion of it as a profit. So I want to see it trade below this low. Why because we've been in
62 00:12:52,440 --> 00:13:02,310 this trap overflow. And once we got to a higher high, I want to be at that high or very close to it. And because it's the means threshold, that's the reason why
63 00:13:02,310 --> 00:13:13,200 I was entering at that price point. Now I'm not trying to be nailing the absolute high, I want to be as close as I can to that high. It can happen after
64 00:13:13,200 --> 00:13:25,770 me. Nor it doesn't have to, doesn't have to be expected before I get in, because the understanding is that we've already tried to run higher than this high with
65 00:13:25,770 --> 00:13:35,700 this high, we ran higher than this high with this high remained higher than this high with this one. So I'm up here. So if I get stopped out, that gives me a lot
66 00:13:35,700 --> 00:13:44,910 of insight as to what I believe may happen with the euro dollar. Because if we come back up and knock this position out, then I think ultimately euro dollar is
67 00:13:44,910 --> 00:13:53,670 going to go higher. Now, if it continuously goes lower, I know what I'm looking to do, I would like to take a portion off below this low. If it runs through
68 00:13:53,670 --> 00:14:05,640 that, I would like to take a portion off below that. move my stop to a point of reasonable open this paper profit and then hopefully see if I can get 100 PIP
69 00:14:05,640 --> 00:14:14,790 move out of it. And that's it. If I'm right in my assumptions about what has transpired in here,
70 00:14:16,320 --> 00:14:25,590 I'm feeling this as they had high, anyone short, they were knocked down. Anyone that sold short here, they were knocked out as well. And it broke down
71 00:14:25,620 --> 00:14:34,710 aggressively. And then anyone that was selling short up here was not, again not allowed to be a participant in this move that's coming. So therefore, they not
72 00:14:34,710 --> 00:14:45,540 visit individuals out. So I want to hold on to this position. It admittedly, if I were to tell you how I feel internally at the time of the entry, and also
73 00:14:45,570 --> 00:14:58,440 currently right now talking to you. I don't feel comfortable about the trade. Now in my past history. Every time I've had a trade that felt uncomfortable the
74 00:14:58,440 --> 00:15:08,160 whole if I didn't like the way it felt, while I was in it, they generally are the ones that pan out because they're the ones that either exit too early. And I
75 00:15:08,160 --> 00:15:15,870 take too much off at my first and second third profit scaling. And I wish back in hindsight that I wish I would have held on to it longer with a larger
76 00:15:15,870 --> 00:15:26,160 portion. Because of the feelings I have about that idea. We are still in a range, it has yet to break below this low. So we're still inside of a dealing
77 00:15:26,160 --> 00:15:35,370 range. What's the range now to this high in this low, we're on the low end of it. Now, we could have just very easily traded below this low here, and it
78 00:15:35,370 --> 00:15:44,130 starts to tear off and goes higher and stops me out. And that's trading. That's the way it works. Sometimes you just you're just wrong. I have a rule based idea
79 00:15:44,130 --> 00:15:55,890 that I'd like to be able to take something off below this low here. Now I could take off something right now. And essentially, I would have 20 pips or so. But I
80 00:15:55,890 --> 00:16:07,800 only have two and a half standard watts on in terms of leverage, one over 100 and some $1,000 demo account. So I don't have a lot to be concerned about you if
81 00:16:07,800 --> 00:16:18,930 it stopped me out. And I don't have a lot to make as an illustration for this idea. But admittedly because of the technicals that are here. And because we
82 00:16:18,930 --> 00:16:29,580 just moved out of just the high end of the range that the final Friday's non farm payroll price action, until we break out below this low, then I'd feel
83 00:16:29,580 --> 00:16:36,840 better about the likelihood that reaching below here. But right now it's still hammering around, they could come all the way back up to the top, near the top
84 00:16:36,840 --> 00:16:49,110 of this range. And everything I have an open profit for this setup would be eroded. So what was the point of this video, the point of the video is to see if
85 00:16:49,110 --> 00:17:01,920 he starts seeing opposing conditions that would present both sides. Okay, this is obviously a nice ideal scenario to be a buyer at when classical support
86 00:17:01,920 --> 00:17:12,360 resistance would work. If you just use this Oh, hi, yet classical support resistance would be favorable here. In this area here, when we have a high a low
87 00:17:12,390 --> 00:17:22,470 higher high once the lower point or low and between those two highs is broken on the downside, draw that level as your resistance generally, it'll act as
88 00:17:22,470 --> 00:17:35,940 resistance and your classical support as our levels will work. But if we have a range that's defined with this massive repricing as what this is here, all of
89 00:17:35,940 --> 00:17:46,680 this by side delivery, extremely overweighted. On the buy side, the market does in fact rebounds right at this point here and it spends a lot of time
90 00:17:46,680 --> 00:18:00,360 accumulating right off of this breaker. It runs up to its obvious level of order flow that would create a barrier or wall. Now they tried several times to drive
91 00:18:00,360 --> 00:18:09,060 it up in there one more time here higher high, and it just couldn't find traction going up. But even though it didn't find traction going up, this
92 00:18:09,390 --> 00:18:18,900 retracement really wasn't all that energetic either. So what I'm doing is I'm using a very, very small position to get attached
93 00:18:19,079 --> 00:18:29,249 to this particular pair. Because I have a position and it allows me to think about what I would be feeling if I had skin in the race. In other words, if I
94 00:18:29,249 --> 00:18:37,439 had money, and at that risk, which I don't own this because it's a demo trade, everything I teach with is a demo. Now you can have an issue with that and say,
95 00:18:37,439 --> 00:18:44,789 well, you have any business teaching, because you're not trading with real money. I'm not here to defend that I could care less. Okay, I'm teaching
96 00:18:44,789 --> 00:18:54,839 conceptually. And if you're a new trader, that's my target audience, because you need to have some kind of foundation and you don't build a foundation with live
97 00:18:54,839 --> 00:19:03,689 funds, because the only thing it's going to do is teach you bad habits, and poor thinking and worry about the money. And I'm teaching the concept of reading
98 00:19:03,689 --> 00:19:13,649 price action, if you can respect that. Going forward and just understand it the conceptual ideas that I teach, repeat over and over and over again. That does
99 00:19:13,649 --> 00:19:25,589 not translate into money. Now, it could, if you do it with a Live account, and it pans out in your favor. But it also can and it absolutely will turn around on
100 00:19:25,589 --> 00:19:35,129 you. And you'll do it wrong and you'll suffer a loss. If you try to trade with live money. Nothing that I do in my teachings provides a 100% strike rate, it
101 00:19:35,129 --> 00:19:51,269 doesn't happen. I take losses I lose sometimes I get it wrong sometimes. I just read it wrong. And I'm not stating that this is going to make you money. I'm
102 00:19:51,269 --> 00:20:02,609 stating that this is going to help you avoid times when the market is far less likely to pan out in your favor. And then Again, it's whenever we see opposing
103 00:20:03,179 --> 00:20:12,149 ideas, and you're inside of a trapped range ready to hit the market can't find its way out. If you go back and look at periods where there's extended
104 00:20:12,149 --> 00:20:24,839 consolidation in a market or specific asset class, chances are you're going to find this scenario. Cake this, there's a there's a good side and a bad side to
105 00:20:24,839 --> 00:20:35,459 this. Okay, the bad side is it's very difficult to find moves with a great deal of magnitude that go higher or lower, we have to find our way out of that that
106 00:20:35,459 --> 00:20:48,509 range first. The good news about this is that there's going to be a large displacement that will occur once we exit this range, once there has been a
107 00:20:48,509 --> 00:20:57,629 buildup of positions, and we don't know for certain if it's the institutional buying or the institutional selling that has the heavier weight. I don't know
108 00:20:57,629 --> 00:21:08,639 that. But I know that once we leave this range, we'll have a pretty high odds that we're going to have a sustained price move of several 100 pips both know it
109 00:21:08,639 --> 00:21:19,409 could be, you know, move up several 100 pips or several 100 PIP move lower, I don't know at this point. But I'm placing weight on the fact that I want to be
110 00:21:19,409 --> 00:21:26,819 on the high end of the range here, with the likelihood of it clearing up these relatively equal lows. And that's what this liquidity pool is, if we run through
111 00:21:26,819 --> 00:21:37,739 this and serve some kind of energy, I would like to see it below, here. But if I'm wrong, and it trades all the way up, stops this out and trades above this
112 00:21:37,739 --> 00:21:46,439 liquidity pool, relative equal highs, then I think that this high is going to be taken out, and we'll probably trade, you know, a little bit longer move on the
113 00:21:46,439 --> 00:21:58,229 upside. If you look at also, euro dollar, you know, we've been in a really sloppy consolidation. For months since the fall of last year, the Euro dollar
114 00:21:58,229 --> 00:22:12,059 has basically been sleeping inside of a range of a couple 100 pips. And this movement here, it's highly suspect to just remaining in the range. So to help me
115 00:22:12,059 --> 00:22:23,639 get a better feel of what prices in initially showing right now, for this week, I wanted to carry something from over on non farm payroll, I wanted to see how
116 00:22:23,639 --> 00:22:33,029 we opened up we didn't really open up to much different from where we closed on Friday. So again, I'm watching to see if we reject this low, and then we try to
117 00:22:33,029 --> 00:22:45,569 run higher up, it would look really weird in terms of price action, but it can do it. And it would only be beneficial to me. If we run these highs, because I
118 00:22:45,569 --> 00:22:53,669 think then this high would be taken out. And we were just going to continuously press higher on the higher time frame dealing range being broken. But for now,
119 00:22:53,699 --> 00:23:02,819 as long as we remain below these highs, that obviously would indicate to me that we're probably gonna make a run declare up these equal lows. Now it could come
120 00:23:02,819 --> 00:23:12,359 down clearly sequel lows, rebounds this void. And that would be something that we monitor monitoring and seeing if they make or attempt to run back up. We
121 00:23:12,359 --> 00:23:15,839 would like to see it obviously find resistance in here and not try to trade back above
122 00:23:15,839 --> 00:23:24,809 here and move lower. But you know, we're not in control price, we'll just have to see what happens. But I just want to give you guys an opportunity to see what
123 00:23:25,019 --> 00:23:35,249 it looks like when I have problems. Technically, when it's challenging for me, because I put a tweet out on Twitter last week and on Friday and mentioned that
124 00:23:35,789 --> 00:23:46,889 euro dollar is between two opposing ideas from my content. This is a bearish breaker. Okay, this is a bearish breaker as well. And that's why I have it
125 00:23:46,979 --> 00:23:55,889 directly between both of them. Originally, it was this one. But this one is a breaker as well. And I got a question asked, you know, what is? Why is this a
126 00:23:55,889 --> 00:24:06,569 breaker because what stops would have ran out first. It's this short term high right here. So the high, low higher high liquidity was ran out here. And then we
127 00:24:06,569 --> 00:24:18,179 broke down through it. So that makes this a breaker. So you can see there's all kinds of layered, opposing ideas. So if I'm trading, I want to find a very low
128 00:24:18,179 --> 00:24:29,819 resistance liquidity run. That means everything is so heavily weighted in my direction, or my idea in that trade setup, that it's going to take a real move
129 00:24:29,819 --> 00:24:40,619 of significance for me to be wrong, and see it fail. The more adversities and things you have standing in your way with your trade idea. We shouldn't be
130 00:24:40,619 --> 00:24:48,599 surprised when we have a trade that stops us out or it fails to move out. And this wears us down emotionally and psychologically. We just can't stand anymore.
131 00:24:48,599 --> 00:24:59,669 We just closed the trade. If you look at the overall market environment, it will look many times similar or similar in many ways. Like I'm describing here, the
132 00:24:59,669 --> 00:25:07,559 market In consolidation, so if you look at when markets are trading and trading ranges, now you understand we can go back and look at price, you'll see that
133 00:25:07,559 --> 00:25:18,359 it's being held between two breakers. And one of those breakers gonna have to give way and then the market will have a much easier way to trade from high
134 00:25:18,359 --> 00:25:28,199 resistance liquidity runs, which is where we're at right now. It makes it very hard for markets to find sustainable moves, then transitioning from that to low
135 00:25:28,199 --> 00:25:34,979 resistance liquidity runs, or very efficient, symmetrical price movement. So hopefully you found this insightful and I'll talk to you next time wish good
136 00:25:34,979 --> 00:25:35,999 luck and good trading.