ICT Mentorship Core Content - Month 04 - ICT Propulsion Block

Summary

This video explains the concept of 'propulsion blocks' in trading, focusing on their role in price movements. A propulsion block is a candle that trades back into a previous order block, acting as a key price support for higher movements. The video illustrates both bullish and bearish propulsion candles, detailing their behavior in real market conditions. It emphasizes how these candles offer rapid price responsiveness, providing traders with quick feedback and minimal drawdown. The session also highlights the importance of avoiding mean threshold violations to ensure the effectiveness of these entries in short-term trading strategies.

Takeaways

• 😀 A propulsion block is a candle that trades into a previous order block and serves as price support for higher price movement.
• 😀 Propulsion blocks are characterized by their inability to breach the mean threshold (middle of the candle's body) of the candle they trade into.
• 😀 In bullish scenarios, a down candle trades into a previous down candle, showing willingness for higher price movement.
• 😀 Propulsion blocks provide an opportunity for quick and strong price reactions, offering tight stop-loss placements for traders.
• 😀 In bearish scenarios, price trades into a previous bearish order block, and a propulsion candle confirms a downward movement.
• 😀 The key to a successful propulsion candle trade is immediate price responsiveness upon trading into the candle.
• 😀 If the mean threshold is broken, the trade is likely invalid, indicating that the market may move in the opposite direction.
• 😀 Propulsion blocks should show clear price movement away from the candle, either bullish or bearish, as soon as they are touched.
• 😀 Tight stop losses can be used when trading based on propulsion candles, offering limited drawdown and rapid market feedback.
• 😀 The concept of propulsion candles applies across different timeframes, with the same price action principles holding for both shorter and longer charts.

Q & A

What is a propulsion block in the context of order block theory?

A propulsion block is a candle or bar that has traded down into a previous bearish order block and then takes on the role of supporting higher price movement. It indicates a strong potential for price to move higher after being tested.

How is a propulsion candle created?

A propulsion candle is formed when a down candle trades into a previous down candle, which is part of an already established bullish order block. The subsequent price movement reacts powerfully when the market responds to this setup.

What does the 'mean threshold' refer to in propulsion block theory?

The mean threshold refers to the middle of the range of a candle's body. In the case of a propulsion candle, it should not violate this level, as a break below it indicates that the price is losing its bullish momentum.

What happens when price trades back into a propulsion candle without breaking the mean threshold?

When price trades back into a propulsion candle and does not break the mean threshold, it typically signals a strong bullish reaction. The market is expected to show immediate upward movement, confirming the strength of the propulsion block.

Can you explain the concept of a 'bullish propulsion candle' with an example?

A bullish propulsion candle occurs when price trades down into a previous bearish order block and then swiftly moves higher. For example, if a down candle trades into an earlier down candle and the price reacts by moving up immediately, that candle is considered a bullish propulsion candle.

What does it mean when a bearish propulsion candle shows a price movement?

A bearish propulsion candle is formed when price trades up into a previous bearish order block and then moves lower after breaking the mean threshold. This reaction typically signals a strong bearish trend and a potential short entry point.

Why is the mean threshold important in determining the effectiveness of a propulsion candle?

The mean threshold is crucial because if price breaks below or above it (depending on whether the propulsion candle is bullish or bearish), it can invalidate the propulsion candle’s potential. A breach of the mean threshold signals that the initial momentum might be weakening.

How does price behavior around a propulsion candle help in short-term trading decisions?

Price behavior around a propulsion candle provides immediate feedback to short-term traders. A quick price response, either higher or lower, without significant drawdown, indicates that the trade is likely on the right side of the market. If price violates the mean threshold, traders may exit or reassess their positions.

What is the role of a higher bullish or bearish order block in the formation of a propulsion block?

A higher bullish or bearish order block serves as the underlying support or resistance for the propulsion candle. The initial price move into the order block provides the basis for the propulsion block, and once price reacts to it, the order block defines the strength of the move.

What are some key characteristics of a bullish propulsion candle?

A bullish propulsion candle typically shows price trading into a previous down candle within a bullish order block. Price should not break below the mean threshold, and upon hitting the candle's low, price should quickly react and move higher.