This ICT Model Prints Money — 70% Win Rate Explained!

Summary

In this trading strategy video, the presenter explains how to identify and capitalize on order blocks while avoiding common pitfalls like time distortion and trading against the trend. They share personal experiences, discussing both successful and unsuccessful trades, and emphasize the importance of waiting for the right setups, following market trends, and managing risk effectively. The key takeaway is to focus on executing trades with discipline and not chasing or guessing, while aiming for a 2R reward-to-risk ratio. Viewers are encouraged to learn from mistakes and refine their trading approach through backtesting.

Takeaways

• 😀 Focus on trading with the market's trend and avoid counter-trend trades to increase the likelihood of success.
• 😀 Order blocks are critical for identifying potential entry points, and you should wait for confirmation through sequences of up-close candles.
• 😀 Time distortion is a common pitfall; it's important not to confuse it with a legitimate reversal setup.
• 😀 Never trade against the trend, especially if the market shows a strong bullish or bearish direction. Minor retracements often signal continuation rather than reversal.
• 😀 Backtesting is vital to refining trading strategies. Learning from past mistakes, particularly related to time distortion, is essential for improvement.
• 😀 In cases of time distortion, avoid entering trades, as these setups are typically part of a reaccumulation or redistribution phase that is unlikely to be profitable.
• 😀 Stop-loss placement should be strategic, often using swing highs or lows, to protect against unfavorable market moves.
• 😀 A 2R risk-to-reward ratio is a reasonable goal for each trade, aiming for twice the amount you are willing to risk.
• 😀 Partial profits can be taken at key liquidity levels, but the primary target should be a risk-to-reward ratio of 2R.
• 😀 Always wait for an order block to form at significant price levels before entering a trade to ensure the setup aligns with the broader market structure.

Q & A

What is an order block in trading?

An order block is a specific price area on the chart where a sequence of candles forms, indicating an opportunity for a trader to enter a position. This is usually identified at the open of the next candle following a sequence of up-close or down-close candles, suggesting potential continuation or reversal in price.

What does the trader mean by 'time distortion'?

Time distortion refers to a phase in the market where consolidation or redistribution occurs, often after key times like 1 PM. During this phase, trades based on reversal setups can fail, as the market is not in a clear trending phase and is instead moving sideways or re-accumulating.

Why should traders avoid trading during a 'time distortion' phase?

Traders should avoid trading during a time distortion phase because the market is in a consolidation or re-accumulation phase, making it less predictable. Even if a reversal setup appears, it’s more likely to fail due to the lack of clear trend direction.

What is the importance of not trading against the trend?

Not trading against the trend is crucial because doing so increases the likelihood of failure. For example, during a strong bullish trend, attempting to short the market, even if an order block setup appears, is highly unlikely to succeed.

How does the trader decide where to place a stop loss?

The trader places the stop loss at a level where the market structure would break if the trade is invalid. This could be above a swing high or low, depending on the direction of the trade, ensuring that the risk is controlled and minimized.

What does a 2:1 risk-to-reward ratio mean in trading?

A 2:1 risk-to-reward ratio means that the trader aims to make twice the amount they are willing to risk on each trade. For example, if the stop loss is 10 pips away, the trader aims for a 20-pip profit, ensuring the potential reward justifies the risk.

What is an example of a setup that would be considered a 'loss' in this trading strategy?

A loss in this strategy could occur if the trader enters a trade during a time distortion phase or against the prevailing trend. For instance, if a perfect short setup forms in a strong bullish trend, it would likely result in a loss, as the market would continue its bullish momentum.

What is the significance of the 'sequence of up-close candles'?

A sequence of up-close candles is an indicator of bullish momentum and can signal a potential entry point for a trade. These candles show that buying pressure is increasing, suggesting that the market is likely to continue in the same direction.

What is the 'market maker model' referenced in the script?

The market maker model refers to a trading approach that involves understanding the behavior of market makers, who manipulate prices to create liquidity. The trader follows patterns where the market moves in phases, such as accumulation, distribution, and reaccumulation, to anticipate price movements.

How does backtesting help in developing a trading strategy?

Backtesting allows the trader to simulate trades using historical data to evaluate the effectiveness of a trading strategy. By doing so, the trader can identify patterns, test different setups, and refine their approach before applying it in real market conditions.