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

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.