ICT Breakers, How to interpret them

Summary

In this detailed video, the speaker explains the concept of Breakers in trading, focusing on how they use liquidity sweeps, price displacement, and order flow to predict market movements. By analyzing different time frames, the speaker highlights how to identify bearish and bullish Breakers and how they rely on higher time frame key levels for confirmation. Concepts like Turtle Soup, SMTs (Symmetry Divergence), and the use of external and internal liquidity help enhance accuracy in trade setups. The speaker also discusses the importance of understanding market dynamics and confluence factors for making informed trading decisions.

Takeaways

• 😀 A breaker is formed when there is a high, low, and higher high, with a key focus on price sweeping liquidity into higher time frame PD arrays.
• 😀 You should avoid entering trades when liquidity has already been swept before the breaker is tested, as it can lead to false breakouts or poor entries.
• 😀 External range liquidity is important to monitor, as once it is swept, you should expect the price to return to internal range liquidity for potential setups.
• 😀 Breakers can appear on all timeframes, but it's crucial to ensure that other time frames align before taking an entry.
• 😀 A bearish breaker typically forms after a higher high sweeps liquidity, then the price moves below a swing low before retesting the breaker and rejecting downwards.
• 😀 Breakers work best when they align with other liquidity models, like turtle soups and market maker models, as well as with other PD arrays like order blocks and fair value gaps.
• 😀 The power of three—accumulation, manipulation, and distribution—is a useful pattern to identify within price action for anticipating breakouts or reversals.
• 😀 The importance of higher time frame analysis is emphasized, particularly for identifying when to expect more downside, as well as for confirming key levels such as fair value gaps and order blocks.
• 😀 Using midnight price levels and aligning them with higher time frame analysis can offer strong confluence for trade setups, as seen with buy setups below and sell setups above midnight price.
• 😀 Always validate breaker entries with confluence, such as other PD arrays (order blocks, fair value gaps) and time-specific price actions (like the New York open or midnight price).

Q & A

What is a bearish breaker setup, and how is it formed?

A bearish breaker setup is formed when there is a high, low, and higher high. The higher high represents a sweep of buy-side liquidity. After this, the price displaces below the swing low before the higher high, forming the breaker. This setup is anticipated to retrace to the breaker before heading down to sell-side liquidity.

What key components make up a bullish breaker setup?

A bullish breaker setup consists of a low, high, and lower low. The higher high is formed by sweeping liquidity, and then the price moves back down below the low. This forms the bullish breaker. The setup suggests a retest of the breaker before price rises toward buy-side liquidity.

Why is it important to wait for a retest after a displacement in a breaker setup?

Waiting for a retest ensures that the price action is confirmed and provides an opportunity for a better entry. The displacement alone does not guarantee the direction of price movement, so the retest gives more validation to the breaker before executing a trade.

What role does liquidity play in breaker setups?

Liquidity plays a crucial role in breaker setups, as price often moves to sweep external liquidity before retracing to internal liquidity. Identifying liquidity sweeps helps traders understand the flow of the market, and they can then anticipate whether a breaker will form and where price may go next.

How can timeframes affect the reliability of breaker setups?

Timeframes affect the reliability of breaker setups because higher timeframe structures provide context and confirmation. A breaker on a higher timeframe may offer stronger predictive value compared to one on a lower timeframe. It's essential to align setups across timeframes to improve accuracy.

What is the significance of using higher timeframe order flow analysis in breaker trading?

Higher timeframe order flow analysis helps traders understand the broader market context and identify major liquidity zones. This ensures that breaker setups align with the larger market trend, increasing the likelihood of successful trades.

What is a Turtle Soup setup, and how does it relate to breaker formations?

A Turtle Soup setup occurs when price moves in the opposite direction before forming a breaker, typically after liquidity has been swept at a higher timeframe level. It can serve as an early indication that a breaker is about to form, allowing traders to anticipate a reversal before the primary move.

How can market maker models enhance the prediction of breaker setups?

Market maker models provide insights into the market's cycle, helping traders anticipate reversals and liquidity sweeps. By understanding these models, traders can better predict when a breaker will form, particularly when price action follows a specific pattern that aligns with market maker behavior.

What is the importance of 'midnight price' in breaker setups?

Midnight price acts as a key reference point for determining entry levels. Breaker setups formed below midnight price are more likely to lead to buy setups, while those above it are better suited for sell setups. It helps in confirming the direction of price movement during the day.

How does external and internal liquidity affect the formation of a breaker?

External liquidity refers to areas outside the current price range where liquidity has been swept. Internal liquidity is closer to the current price, and once external liquidity is swept, price often moves to internal liquidity. Breaker setups are stronger when they form after liquidity has been swept in this manner, aligning with the market's expected direction.