ICT Mentorship Core Content - Month 04 - Mitigation Blocks

Summary

This video dives deep into the concept of mitigation blocks within the amplification of order block theory, focusing on how traders can identify bearish market trends. It explains the process of recognizing support and resistance levels, highlighting price action patterns like the M-pattern and market structure shifts. The core idea revolves around selling opportunities when price retraces to certain levels, particularly the last down candle before a rally, and how this action mitigates the losses of prior market participants. Traders are guided on identifying key entry points for short-selling and understanding market manipulation tactics by smart money to drive price movements.

Takeaways

• 😀 Mitigation blocks refer to price action setups where the market shows signs of wanting to reverse, typically in the context of a market structure shift.
• 😀 A key to identifying mitigation blocks is recognizing a failure swing, like the 'M pattern,' which signals a shift in market structure and confirms the bearish trend.
• 😀 In a bearish market, when price moves back to a prior support level (a 'short-term low'), traders should watch for potential sell opportunities at the 'last down candle' in that move.
• 😀 A break below a previous low in the market confirms the shift to bearish market structure, highlighting potential sell zones around the last down candle.
• 😀 The 'last down candle' before a short-term rally marks a critical reference point. Once price revisits this point, it presents an opportunity to sell, as prior buyers are now 'underwater.'
• 😀 The concept of a 'mitigation block' is tied to the idea that the smart money wants to liquidate or mitigate losses when price revisits a previously breached support level.
• 😀 When price moves back into a mitigation block, there’s an opportunity to sell, with the goal of targeting lower price swings and ultimately reaching support levels or liquidity voids.
• 😀 Traders should use a stop loss just above the mitigation block to manage risk, protecting the trade from any false breakouts or reversal attempts.
• 😀 Liquidity voids are areas where the market moved quickly, leaving gaps in price action. These voids often serve as potential target zones or support levels.
• 😀 The ultimate goal when trading a mitigation block is to sell short at the optimal point (last down candle) and target lower price moves, possibly reaching the liquidity void or lower support levels.

Q & A

What is a Mitigation Block in trading?

A Mitigation Block is a key price level where institutional buying or selling has previously occurred. This level becomes important when price returns to it, as institutions may look to 'mitigate' their prior positions by liquidating or adjusting them, providing an opportunity for traders to enter the market.

How does the concept of Market Structure Shift relate to Mitigation Blocks?

A Market Structure Shift refers to a change in market direction, such as a break below a previous low in a bearish market. This shift confirms that the market sentiment has changed. After the shift, the focus shifts to Mitigation Blocks, where institutional positions may need to be mitigated, creating a potential selling opportunity.

What is the significance of the 'Last Down Candle' in identifying Mitigation Blocks?

The 'Last Down Candle' is crucial because it marks the final bearish move before the market shifted. When price revisits this candle after breaking lower, it signals a potential area for mitigation, providing traders with a reference point to place trades, particularly for selling in a bearish market.

How can a trader identify the right moment to enter a trade using a Mitigation Block?

A trader should wait for price to return to the level of the last down candle, which forms the Mitigation Block. This level represents a key point where previous buyers may be liquidating their positions. Entering a trade at this point provides an opportunity to sell into the anticipated price move lower.

What does 'Buyer’s Remorse' mean in the context of Mitigation Blocks?

Buyer's remorse occurs when price revisits a previous support level (now resistance) after breaking below it. Those who bought at this level earlier may now be selling at a loss, creating additional downward pressure on the market, which provides an opportunity for traders to enter short positions.

What is the role of Liquidity Voids in the Mitigation Block strategy?

Liquidity Voids are areas where there has been little to no market activity, often creating gaps in price action. These voids are significant because when price moves into or near them, it may indicate a potential continuation or reversal, and traders can use them as a target for profit-taking after a successful trade using a Mitigation Block.

Why is it important for a trader to focus on the last down candle in a Mitigation Block?

Focusing on the last down candle is important because it represents the price level where institutional buying or selling occurred before the market shifted. This is where the market might return to in order to liquidate positions, providing a clear reference point for traders to enter the market.

What does a break below the previous low indicate in the context of the Mitigation Block strategy?

A break below the previous low confirms that the market structure has shifted from bullish to bearish. This breakdown indicates a change in market sentiment, and the trader can then focus on identifying Mitigation Blocks to enter short positions, anticipating lower prices.

How does a trader manage risk when trading Mitigation Blocks?

To manage risk, a trader should place their stop loss just above the high of the last down candle, which forms the Mitigation Block. This ensures that if the market moves against the trade, the loss is minimized. The target for the trade is typically a lower support level or the mean threshold of a liquidity void.

What is the expected price move after entering a trade at a Mitigation Block?

After entering a trade at a Mitigation Block, the expected price move is typically a continuation of the downward trend, targeting a lower support level or the mean threshold of a liquidity void. This move reflects the market's return to mitigate previous institutional positions, pushing price lower.