ICT Mentorship Core Content - Month 1 - Elements Of A Trade Setup

Summary

The video teaches traders how to utilize specific market conditions and ICT tools to identify high-probability trade setups. It outlines four key market contexts: expansion, retracement, reversal, and consolidation. Each context is coupled with a corresponding ICT concept - order blocks, liquidity gaps/voids, liquidity pulls, or equilibrium. By correctly identifying the current market condition and applying the paired ICT tool, traders can anticipate market maker intentions and pinpoint impending moves with greater accuracy. Consistent practice identifying trade setup elements across various pairs and timeframes builds skills for consistent profitability.

Takeaways

• 😀 The four key market conditions are: expansion, retracement, reversal, and consolidation
• 🔎 Specific ICT tools correspond to each market condition
• 📈 Expansion indicates a willingness for market makers to reveal their intended re-pricing model
• 📉 Retracement indicates a willingness for market makers to re-price to levels not efficiently traded
• ↩️ Reversal indicates market makers have run stops and a significant move in the new direction should unfold
• ⏸️ Consolidation indicates market makers are allowing orders to build on both sides of the market
• 🎯 Learning one consistent setup based on a specific market condition and ICT tool can lead to consistency
• 🧠 Understanding market conditions and ICT tools leads to anticipatory skills for market movements
• 📊 Studying past price action through the lens of these frameworks builds skill in setup discovery
• 😊 Consistency comes from repeating daily analysis using this conceptual framework

Q & A

What are the four market conditions that price action falls under?

The four market conditions are: expansion, retracement, reversal, and consolidation.

What ICT tool couples directly with the market condition of expansion?

The ICT tool that couples directly with expansion is order blocks.

What ICT tool do we look for when the market is in a retracement condition?

When the market is in a retracement condition, we look for liquidity gaps and liquidity voids.

What indicates the market makers have run in a level of stops when the market reverses direction?

When the price reverses direction, it indicates the market makers have run in a level of stops and a significant move should unfold in the new direction.

What ICT tool corresponds to consolidation market conditions?

The ICT tool associated with consolidation is equilibrium.

What are the two primary concerns when referring to elements of a trade setup?

The two primary concerns are: (1) context/framework surrounding the idea and (2) using the framework conditions to identify specific reference points in institutional order flow.

What are the specific reference points looked at in institutional order flow?

The reference points are: order blocks, fair value gaps, liquidity voids/pools, stop runs, and equilibrium.

Why is it important to understand the four market conditions?

Understanding the four conditions gives traders a framework to analyze the market, determine which condition it is in, and decide which ICT tool to apply based on the condition.

What is indicated when price consolidates?

When price consolidates, it indicates the market makers are allowing orders to build on both sides of the market and expect a new expansion near term.

What clue signals the direction the market will likely move after consolidation?

The impulse move or swing in price away from the equilibrium level signals the likely direction the market will move after consolidation.

Outlines

00:00

📽️ Introducing the Trading Concepts for This Month

The speaker introduces that this is the first of eight monthly video tutorials that will teach trading concepts and tools to complement this month's theme on elements of a trade setup. He explains there are four key principles - expansion, retracement, reversal, and consolidation. He will couple these with ICT tools like order blocks, fair value gaps, liquidity pools, equilibrium etc. to understand market efficiency and how informed traders operate.

05:01

🤖 The Interbank Price Delivery Algorithm

The speaker explains that 90% of price delivery is now done electronically by AI algorithms, moving away from human market makers. He acknowledges some may find this unsettling but says the algorithms have limitations that leave clues or fingerprints to study. By understanding the conditions and operations, one can anticipate and exploit inefficiencies.

10:02

🚀 Understanding Expansions and Order Blocks

The speaker defines an expansion as when price moves quickly from equilibrium, indicating market makers are revealing their intended repricing model. This couples with the tool of order blocks - reference points near equilibrium where price may return to after an expansion. An example chart is shown illustrating the concepts.

15:03

↩ Understanding Retracements, Voids and Gaps

The speaker defines a retracement as when price returns inside a recent range, indicating market makers are repricing areas not traded fairly. This couples with the ICT tools of liquidity gaps and voids. An example chart is shown illustrating a liquidity void and how to trade the expected fill.

20:04

🔄 Understanding Reversals and Liquidity Pools

The speaker defines a reversal as when price reverses direction opposite to the current move, indicating stops have been run and a bigger move may unfold. This couples with liquidity pools above old highs and below old lows. An example chart plots likely stop levels and reversal points.

⏸ Understanding Consolidation and Equilibrium

The speaker defines consolidation as when price trades in a range with no directional bias, indicating orders are building before new expansion. This couples with equilibrium - the midpoint of the range. An example shows how price expansions occur from equilibrium levels.

Keywords

💡order block

An order block is a clustering of pending buy or sell orders that represents supply and demand zones. As price moves quickly away from equilibrium, it leaves behind an order block which becomes a reference point to trade from when price returns. For example, when price breaks out of consolidation, the candle before the breakout is considered a potential order block to buy/sell from.

💡liquidity

Liquidity refers to the availability of buy/sell orders at different price levels. When price moves quickly, it skips over certain price levels, leaving liquidity voids and gaps. These become target areas when price retraces as pending orders get triggered. For example, after a sharp sell-off, old resistance levels often have buy stops which provide liquidity when retested.

💡consolidation

A consolidation occurs when price oscillates in a tight range as buyers and sellers reach equilibrium. It represents a balancing of supply/demand as orders accumulate on both sides. The direction of the next expansion is determined by which side builds up the most volume. Traders wait for the breakout and pullback into order blocks.

💡expansion

An expansion is a directional price swing that breaks out of consolidation or equilibrium. It indicates the market makers' intention to reprice the market and leaves an order block as a clue. Traders use expansions to determine overall bias and identify potential buy/sell zones for retracements.

💡retracement

A retracement occurs when price pulls back into a prior price range after an expansion. It indicates willingness to fill untraded liquidity. Traders aim to buy/sell at liquidity voids/gaps made during previous moves. For example, old support can become liquidity when retested.

💡reversal

A reversal is when price changes direction against the current trend. It signals that market makers have run protective stops and a bigger move should unfold. Traders aim to join reversals at 'liquidity pools', old areas which likely have stops to run. For example, above a recent high or below a recent low.

💡equilibrium

Equilibrium refers to the midpoint or 'fair value' area in a consolidation range. It represents a balance point between buying and selling pressure. Expansions away from equilibrium set up order blocks to trade from when price returns to equilibrium.

💡stop run

A stop run occurs when price moves quickly to take out clustered stop-loss orders before reversing. It leaves a liquidity pool - an area likely to have stops which can be targeted again. Stop runs are mainly used to fuel bigger moves by triggering more orders.

💡context

Context refers to identifying the type of condition or pattern the market is exhibiting in order to apply the appropriate trading tools or tactics. For example, expansions set up order blocks, consolidations target equilibrium, retracements fill liquidity.

💡anticipatory skills

Anticipatory skills refer to a trader's ability to predict high-probability outcomes based on contextual clues in market maker behavior. Through pattern recognition, traders aim to anticipate direction and likely areas of order flow convergence.

Highlights

There are 4 market conditions: expansion, retracement, reversal, and consolidation.

Expansion couples with order blocks, retracements couple with liquidity gaps/voids.

Reversals couple with liquidity pools, consolidation couples with equilibrium.

Expansion indicates market makers' willingness to reveal intended repricing model.

Retracements indicate willingness to reprice to levels not efficiently traded.

Reversals indicate market makers have run stops and a significant move should unfold.

Consolidation indicates orders are building on both sides, expect a new expansion.

Wait for impulse move away from equilibrium during consolidation.

Focus on just one setup that fits your style rather than mastering all.

You only need one setup with the right context and ICT tool to be consistent.

Look through old charts to find examples of each market condition and element.

The interbank algorithm is an AI price engine that delivers 90% of FX pricing.

Market making has moved away from humans to efficient electronic algorithms.

Fingerprints of manipulation are visible once the algo's operations are understood.

Go through the free prerequisite tutorials to build necessary knowledge base.

Transcripts

okay folks

welcome to the first

teaching tutorial

from the ict monthly mentorship for

month of september

2016.

this is the first of eight each month

you'll get eight individual teaching

tutorials that will complement the

general theme for the month

this particular teaching is going to be

elements to a trade setup

and as you probably noticed uh this

month so far we've been focusing

primarily on showing the consistency

that's able

to be delivered to you as a developing

trader after you've submitted the time

and you've done the work with the

exercises and the content

uh materials that we're going to be

presenting to you

when we refer to elements to a trade

setup there's really just two primary

uh concerns

and

one is obviously

context or framework

surrounding the idea in other words what

makes the idea

favorable for a trade it's not just

simply well my indicator tells me this

or my support resistance level tells me

that there has to be something that

builds a reason to want to do this trade

in my material i'm learning four

specific principles and we're going to

be dealing with them in

general terms and then what we do in

those conditions what are we

specifically

pairing up with in terms of the ict

tools

the first one is going to be expansion

okay we're going to talk about expansion

and what we look for in that condition

we're going to be talking about

retracements

and what toll or concept we used for

retracements

reversal

and lastly consolidation now each one of

these four

give a specific framework and a context

to the marketplace that you're going to

be trading in they can only be one of

these four conditions either the

market's going to be expanding running

away in other words trending

a retracement

or pullback

uh altogether reversal

and obviously when the market's doing

nothing it's consolidating but really we

all learned in the market maker uh

series that there's really no such thing

as the market doing nothing in

consolidation exactly accumulating

orders

now the other

characteristic we use for

defining elements to a trade setup is

using these four criteria

for context and framework to specific

reference points in institutional order

flow

the first one is order blocks

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the second one is fair value gaps and

liquidity voids

liquidity pools and stop runs

and lastly

equilibrium now understanding those two

characteristics together

will give you a greater understanding of

market efficiency paradigm

how the smart money interprets price and

how they influence the general populace

or the speculative on informed money

it's going to be a rather

illuminating

tutorial actually

you're going to be able to look at the

marketplace with an expectation of

knowing what tool to apply based on what

the market's providing you right now

it only takes a second or two to look at

the marketplace determine okay

what characteristic are we trading in so

that way you can build a context or

framework on how you're going to

approach the marketplace

sometimes you'll have right away an

issue where you can say i'm not going to

do anything because the market's

consolidating i am going to be waiting

the other three conditions are going to

be providing you an opportunity to take

action

relative to the tools that we couple

with those conditions or context

now the interbank price delivery

algorithm or what i always refer to as

the algo or interbank algo

is the actual

basically artificial intelligence uh

it's a price engine that um

when we receive our price

for our currencies

it's actually 90 done by electronic um

algorithms so it's all computer based

now it used to be open outcry in the

pits

uh but there's no longer an auction

market it's all ai

and it's based on the principles i've

been teaching for

about seven years now

you're not going to learn these things

because number one no one's going to

believe that it exists

there

is this movement away from

human involvement

with market making it's become much more

efficient to be electronically based

and these things

are programmed by human beings obviously

and those intelligence are limited so

while that is probably unsettling for

some of you that are listening to this

thinking well i thought i had a free

market i was trading in

it's actually not it's highly

manipulated especially in the foreign

exchange which is what we're primarily

dealing with here

because of the nature of

it being so manipulated manipulated the

the fingerprints if you will are easy to

see once you understand

the operations and the conditions that

the market maker

interbank price delivery algorithm

functions

so when the market does what it's doing

it gives you indications it gives you

fingerprints or clues as to what you

should be expecting next

and that's where your anticipatory

skills are going to be coming in

you're not going to know these things

right away the first time watching this

video it may go over your head

but for some of you that have already

went through the prerequisites i believe

that are in my free tutorial section on

my website if you haven't gone through

the sniper series this isn't trading

concepts and the market maker series yet

you're going to need those okay so

don't be discouraged if you hear some

terms in here that go over your head

because they're all taught in those

three tutorial series for free

that's a lot of material over there so

you

dig into not only the stuff you're

getting in

this

curriculum with the mentorship but fill

in the space when i'm not giving you

content with the free tutorials those

three tutorials and i'm going to say

what they are

they are

market maker series precision trading

concepts and the sniper series

okay the interface i'll go

okay obviously

there's going to be times when the

market goes sideways and orton

consolidation or what i refer to as a

holding pattern

now when this happens the market will be

looking to do an expansion

okay so all markets start from a

consolidation

and move into an expansion that means

there's an impulse move or an impulse

price swing

after that impulse swing okay either

goes back to a consolidation again

or it goes to a retracement

when the retracement happens it goes

back down into

another level of expansion or

after the expansion it can go to a

reversal pattern

after the reversal pattern

it'll see another

retracement

then back to potentially consolidation

these four conditions they interchange

throughout the ups and downs and ebbs

and flow of the marketplace

you're only going to get one of these

four conditions now you're probably

saying okay well that's a lot i need to

know

one of these things to make a trade

no you just need to know where it's at

right now where it's likely to go

and where it came from

and over the course of the month of

september you're going to get a lot of

understanding about how to know where

the market's going to go next and that's

going to fill in a lot of the gaps that

you've had with

teaching directional bias ict

the main thing is the consolidation

begins

with everything all the moves that take

place in the marketplace start from a

measure of consolidation because that's

where the markets are

building orders so the market maker

keeps the market in a tight range or a

defined range until there's enough money

on both sides of the

upper and lower end of the range that's

being defined by the consolidation

whichever one has the highest amount of

money to be absorbed that's the

direction it's going to move in we don't

always know what that is but we wait for

the expansion when the expansion occurs

that's when we get the clue as to what

the market is most likely going to be

doing and then we wait for either

retracement or another consolidation or

reversal but we always wait for the

first expansion that gives us all the

insight that we need to make a decision

now sometimes it may expand so far that

we can't do anything with it we have to

wait for the retracement or the next

consolidation there's nothing wrong with

that it's all normal you're not going to

catch every move the main thing is

understanding these four individual

characteristics to a trade setup because

price is delivered by one of these four

conditions it can't be any other way

now what is expansion

now expansion is when price moves

quickly from a level equilibrium

now expansion

couples directly with the tool of

an order block

now what is the or what's the importance

of knowing expansion well when price

leaves a level quickly this indicates a

willingness on the part of the market

makers to reveal their intended

repricing model now what does that mean

well if we're in a consolidation

okay or a point of equilibrium

if price were to move up quickly that

would give us an indication of looking

for a bullish order block we don't want

to chase price we're going to wait for

price to come back down into the order

block

where is that going to occur well what

do we look for in price the order block

that that market makers leave near or at

the equilibrium price point

so i know what you're thinking okay

michael this is already going over my

head give me some examples no problem

i'm going to show you that right now

as you see here there's a consolidation

in a blue shaded area very clear defined

consolidation it's got a clear

discernible high and low

and the equilibrium price point is

directly in the middle of the high and

the low end of that range you can simply

take the fibonacci tool you have in all

your platforms

lay the fib from the high and the low

and the general consolidation find that

midpoint and you can check yourself also

by looking at how many times the market

touches

up against it

from below and from

above it going down into an element how

many times it's touching and hanging

around that level

eventually the market will move outside

the consolidation you can see that

impulse move in that tan shaded box

it moves away from the equilibrium price

point and then all we have to do is go

back to the down candle

right before that up move

that down candle or black candle i'm

drawing a small little segment although

that's the bullish order block

when the price comes back down into that

and hits it that's where we would be

buying and then obviously you can see it

hits that level and expands to the

upside over 100 pips just by using that

simple principle it repeats itself all

the time it's in price action all the

time if you study just to the left of

the consolidation we have shaded in blue

there's actually a consolidation

in the cell side where the market broke

down and came right back to the

equilibrium price point again and then

sold off

i'll leave that for your study now but

we're going to move over to the next

characteristic of a

trade setup

the next one is a retracement

now what is the retracement

retracement is when price moves back

inside the recently created price range

now years ago i think it was in 2012

i did a a webinar called trading inside

the range and a lot of folks that were

following me on uh one of the forums

that is pretty popular on the internet

they

went

head over heels when they learned this

the simple principle of understanding

how you can trade with inside of a range

and it doesn't have to break out doesn't

have to trend you can define the range

by

a high and a low and trade inside that

range and that was the beginning basis

point of how i brought a lot of people

from that forum into the understanding

of an order block the order block was

introduced in the sniper series tutorial

on my website but

prior to that i just gave indications

and clues about what an overblock was

without actually really referring to or

spelling it out for everyone

what's the importance of the retracement

well when price returns inside a recent

price range this indicates a willingness

on the part of the market makers to

reprice to levels not efficiently traded

for fair value

when we're thinking retracement

the go is for ict tools we're looking

for liquidity gaps

and liquidity voids

when we look for price

when we see

run-ups real quick and run downs in

price in other words real quick rallies

up or real quick rallies down in price

many times that range that's created

will want to come back in and close that

in and i'll give you an example what

that looks like now

this is a example of a retracement

as you can see here the

orange shaded area we had a real quick

sudden movement away from a price level

and that quick sudden movement creates

what we call as a liquidity void in

other words it as the market drops

aggressively like that

there's going to be pockets where the

price wasn't actually delivered on every

um

available price level at that in that

range it moved too quickly it skipped or

created gaps

well what we'll do is we'll wait as a

trader we won't chase price we'll wait

and say okay well there's going to be

either an indication of getting long

and try to fill in that range or we can

wait for it to come all the way back up

to it and fill in the liquidity void

once it hits it then it'll probably

resume going lower

and that's what we're looking for in

terms of a liquidity void so we've

covered three conditions the next one

is

the reversal

the reversal is when price moves the

opposite direction

the current direction has taken in

so if we are looking for reversals we're

directly coupling that with an ict tool

of liquidity pulls

now what's the importance of it

when the price reverses direction it

indicates the market makers have ran in

level of stops and a significant move

should unfold in the new direction

what do we look for in price the

liquidity pools just above an old high

and just below an old low

okay and we're looking at examples of

reversals here

every

x indicates where stops would be and the

market goes just above those levels and

rejects and goes the other way or goes

just below those levels where there's an

x and rejects and goes the other way

look how many times there's so many

opportunities just on this one chart and

it's on a pair i don't really like to

trade

the us versus the swissy

this pair is real choppy it tends to

have a lot of this type of price action

so it has a characteristic that is very

favorable if you're into type of trading

like this

turtle soups and false

breaks are really really good um

in this swissy

and lastly we have

consolidation

and whenever we're referring to

consolidation we're directly relating

that to an ict total of equilibrium

what is consolidation consolidation is

when price moves inside a clear trading

range and shows no willingness to move

significantly higher or lower

now what's the importance when price

consolidates it indicates the market

makers are allowing orders to build on

both sides of the market expect a new

expansion near term now what do we look

for in price

we're waiting for the impulse move or

impulse swinging price away from the

equilibrium price level that is found

exactly in the halfway point of the

consolidation range

i'll show you an example what that looks

like

here we see here we've identified a

range defined specifically by the bodies

of the candles not the wicks as you can

see price moves out in an expansive

manner and then comes right back down to

the equilibrium price point and then

expands to the outside

by having an understanding of these

specific characteristics and elements of

trading a setup you'll give yourself

framework to first learn how to practice

and study price action and eventually

work towards understanding consistent

setup

discovery and

by utilizing the time with me on a daily

basis we'll be able to frame these

characteristics and pull out specific

elements to a trade setup

by repetition and by using

the daily time with me where we can

outline the elements of a trade setup

we'll be able to do all these things

in a manner where you'll either retain

it

make it yours you'll be able to discover

really what type of trade you're going

to be because one of these

characteristics is going to be your

bread and butter condition

some of you

will trust the equilibrium some of you

will

trust the order block some of you will

look for the void

or the liquidity gaps to trade into some

of you will have one or two of these

characteristics and you'll trade within

those parameters they'll frame your

trades some of you will eventually grow

into understanding all of them and be

universal but don't think that you have

to have all of them well known and under

your belt before you're actually

consistent because you can just find one

element

as we described here if we just find one

for you

just for you one

you can start being consistently

profitable in your trading it only takes

one setup you know what context or

framework you're going to trade in

couple that with an ict tool

and then wait for those conditions

you're not going to get a trade every

single day but you can get a couple of

them every single week

if you look at four major pairs with one

condition or criteria you'll find a

trade every single day

but that's not what you're trying to do

right now you're going to grow into that

over time but for now

just go through your charts and try to

look at all the examples that's already

happened in the left side of your chart

and outline them individually based on

the characteristics and elements that

we've identified here in this teaching

until next time i wish good luck and

good trading

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