ICT's Favorite Trade Setup - Explained In-depth

Summary

In this video, the presenter discusses their favorite trading strategy, focusing on the second stage reaccumulation and redistribution within the market maker buy and sell models. They explain how these strategies involve quick liquidity runs and target low resistance areas. The presenter shares practical insights on trading, emphasizing the importance of waiting for price action to form specific patterns, such as breaker's or order blocks, to optimize entries. The strategy is designed to align with the market trend, offering an easy-to-follow model for traders aiming for consistent profits.

Takeaways

• 😀 ICT's favorite trading model is the second stage reaccumulation in the market maker buy model, which involves low-resistance liquidity runs.
• 😀 The second stage reaccumulation is a quick, sudden price movement, often occurring each week and offering high-profit potential.
• 😀 A market maker model begins with original consolidation, followed by distribution, a smart money reversal, and a low-risk buy before reaccumulation.
• 😀 Traders can enter trades by waiting for price to return to a fair value gap, followed by a change in state delivery or a breaker to confirm entry.
• 😀 In a reaccumulation, an order block always forms before the breaker, and having both adds confluence to the trade setup.
• 😀 Entry points are marked after a breaker forms in the fair value gap, with a stop placed at the previous low and a target set at the original consolidation.
• 😀 There are two potential targets: the high of the move and the original consolidation price, which can be used for partial exits or full exits.
• 😀 ICT’s strategy focuses on liquidity purging, waiting for a fair value gap, and then taking action based on state delivery changes.
• 😀 In a lower timeframe chart, the setup can be identified by recognizing price movements from one liquidity level to another, forming a breaker for confirmation.
• 😀 Traders should focus on identifying a clear level of liquidity, purging liquidity in the 5–15 minute range, and watching for order blocks and breakers to confirm entry.

Q & A

What is the second stage reaccumulation in a market maker buy model?

The second stage reaccumulation in a market maker buy model is when price moves from a period of consolidation through a distribution leg, followed by a reversal and reaccumulation on the buy side. This is where low resistance liquidity runs occur, making it a fast-moving price action setup that's ideal for trading.

Why does the speaker consider the second stage reaccumulation their 'drug of choice' for trading?

The speaker considers the second stage reaccumulation their 'drug of choice' because it offers quick, low-resistance liquidity runs, which lead to fast price movements. The setup occurs regularly every week, making it a reliable model for trading.

What are fair value gaps (FVG) and how do traders use them in this strategy?

Fair value gaps (FVG) are areas on a price chart where there is a discrepancy between buy and sell orders, creating a gap. Traders use FVGs as entry points, waiting for price to return to these gaps before entering trades. The speaker suggests looking for changes in market structure, like a breaker or order block, to confirm the entry.

What is the importance of a 'breaker' in this trading model?

A breaker in this trading model indicates a change in market structure or a shift in delivery. When price creates a breaker after a fair value gap, it confirms that the market is moving in the anticipated direction, providing a stronger signal for entering a trade.

How does the speaker differentiate between a higher time frame and lower time frame approach to fair value gaps?

On a higher time frame, fair value gaps represent significant price zones that could indicate a reversal or continuation. On lower time frames, such as the 1-minute or 5-minute charts, the speaker looks for smaller, more precise price actions, like order blocks and breakers, to confirm the trade entry.

What is the role of liquidity purging in this trading strategy?

Liquidity purging is when price runs through areas where there is an accumulation of buy or sell orders, often creating a price spike. The speaker uses liquidity purging as an indicator that price is ready to move toward a target, with the expectation that it will return to a key level after the liquidity is taken out.

How does the speaker approach stop-loss placement in this strategy?

The speaker places stop-loss orders just below the previous low after entering a trade. This minimizes risk while waiting for price to move toward the original consolidation or target levels.

What is the concept of the 'original consolidation' in market maker models?

The 'original consolidation' refers to the price zone where the market initially formed a consolidation before a distribution leg or reversal. This area becomes a key target for traders, as it represents a significant liquidity level that price tends to return to after certain market movements.

Why does the speaker suggest partial exits at specific price points?

The speaker recommends partial exits at key levels, such as the previous high, because it provides a chance to lock in profits without fully exiting the trade. This strategy helps manage risk while giving the trade room to continue toward its final target.

How does the speaker confirm a trade entry after liquidity has been purged?

After liquidity is purged, the speaker looks for the formation of an order block or a breaker. These indicate a shift in market structure and confirm the trade entry. The entry is typically made when price returns to the fair value gap or order block, and the trader targets the original consolidation or other significant levels.