Simplified ICT Market Structure GUIDE (Step by Step)

Summary

This video emphasizes the importance of understanding market structure in trading. It explains how recognizing external and internal market structures helps traders follow trends effectively rather than trying to predict market highs and lows. The concept of fractals in market movements is introduced, showing how patterns on higher time frames are reflected in lower ones. By waiting for market structure shifts and aligning with higher time frame trends, traders can make more profitable decisions. The video also stresses the need for patience and the importance of executing trades when the market confirms the direction, rather than chasing short-term fluctuations.

Takeaways

• 😀 Understanding market structure is crucial for traders to identify where the market is going and avoid common mistakes.
• 😀 Following the overall trend and market structure, rather than trying to catch highs and lows, is the best way to become profitable.
• 😀 Market structure is fractal, meaning it exists on different time frames, from higher time frames (daily) to lower time frames (hourly or 5 minutes).
• 😀 External structure (on higher time frames) and internal structure (on lower time frames) must align for high probability trades.
• 😀 The highest probability trades come when the internal and external market structures shift together, signaling confirmation to enter a trade.
• 😀 Waiting for confirmation on lower time frames during a pullback in an uptrend can lead to profitable long positions.
• 😀 The daily time frame is the most important for determining the overall trend, and all trades should align with the daily market structure.
• 😀 Traders should wait for a market shift before executing a trade, rather than trying to predict the high or low, which often leads to losses.
• 😀 The market can still make big moves after what appears to be a missed trend, especially if the market structure shifts and aligns with the daily bias.
• 😀 Understanding market structure allows traders to ride trends rather than chase them, improving their ability to capture larger, more reliable moves.
• 😀 Don't focus on calling the high or low; instead, wait for the market to confirm the trend, and then execute your trades based on the alignment of the market structure.

Q & A

What is the most important concept for traders to understand, according to the script?

The most important concept for traders to understand is market structure. Without identifying market structure, traders cannot predict the market's direction effectively.

Why do traders often make big mistakes when it comes to market structure?

Traders often make mistakes because they try to catch the highs and lows of the market rather than understanding and following the trend and market structure, which leads to more consistent profits.

How does understanding market structure change a trader's approach to trading?

By understanding market structure, traders can shift from trying to predict the highs and lows to following the trend, leading to more profitable trades, as they focus on executing trades when the market shows a clear direction.

What is the difference between external structure and internal structure in market analysis?

External structure refers to the overall market trend (e.g., a bullish or bearish trend on the daily chart), while internal structure refers to smaller trends within that overall trend, visible on lower timeframes, like the 1-hour or 5-minute charts.

How do internal and external structures align for higher probability trades?

Higher probability trades occur when the internal structure (e.g., on the 1-hour or 4-hour chart) aligns with the external structure (e.g., on the daily chart). This alignment indicates a stronger and more reliable market movement.

Why should traders avoid trying to catch the highs and lows of the market?

Trying to catch the highs and lows often leads to losses due to the market's unpredictable nature. Instead, traders should focus on trading in line with the overall market structure and wait for confirmations of trend shifts.

What role does the daily timeframe play in determining market direction?

The daily timeframe is crucial because it represents the overall trend. Traders should always trade in the direction of the daily trend to avoid being unprofitable. Short-term trades on lower timeframes should align with the daily trend.

What is an example of a market structure shift on lower timeframes?

An example of a market structure shift on lower timeframes is when the market shows bearish structure on the 1-hour chart while the daily chart remains bullish, and then a reversal on the 1-hour chart signals a move to the upside.

What does the 'Rocket Fuel' analogy mean in trading?

'Rocket Fuel' refers to the power and speed that comes when both the daily and the 4-hour charts align in the same direction, leading to a more explosive and profitable market move.

What should traders focus on instead of calling the high or low of the market?

Traders should focus on waiting for market structure shifts and trading with the trend, rather than trying to predict exact highs or lows. The easiest money is often made when following the bulk of the trend, rather than trying to catch reversal points.