EXPOSED - ICT’s Favorite Trading Strategy (Hear it From ICT Himself)

Summary

In this video, Jesse (Casper SM), a multi-six-figure funded trader, shares ICT's favorite trading strategy, focusing on market maker models (buy and sell). The strategy is broken down into three key steps: identifying market maker models, waiting for liquidity manipulation, and entering with a technique called displacement failure. By analyzing key levels, observing market consolidation, and watching for liquidity pools to be manipulated, traders can enter high-probability trades. The strategy emphasizes understanding market structure shifts, with an additional focus on time-based liquidity for higher probability outcomes. This method provides explosive potential for successful trades when executed properly.

Takeaways

• 😀 ICT's favorite trading strategy is the second stage distribution of a Market Maker Sell model or second stage reaccumulation of a Market Maker Buy model.
• 😀 The process of trading ICT's model involves three steps: identifying the Market Maker model, waiting for manipulation of the reaccumulation or redistribution phase, and using displacement failure for entries.
• 😀 To spot a Market Maker model, observe the behavior of the market around a key level (imbalance, old high, or low). A consolidation with equal highs or lows signals a potential Market Maker model.
• 😀 A smart money reversal (SMR) signals a change in market direction and is a key element for identifying when liquidity is transitioning from sell-side to buy-side or vice versa.
• 😀 ICT focuses on trading the last leg of the Market Maker model, which is the reaccumulation or redistribution phase, where the market prepares for a sharp price movement.
• 😀 The entry strategy for ICT’s model is based on displacement failure, where the market fails to displace after a liquidity pool has been reached, indicating a strong reversal.
• 😀 Time-based liquidity pools (like session highs or lows) are more powerful and increase the probability of successful trades, offering higher confidence in market movements.
• 😀 The goal is to sell above highs when the market is bearish or buy above lows when the market is bullish, focusing on liquidity pools for key entry points.
• 😀 A consolidation phase after a market structure shift is important to wait for before entering a trade. This avoids premature entries and ensures a higher probability of success.
• 😀 Risk-to-reward ratios for trades should be at least 2:1, with the highest probability trades being those based on time-based liquidity, which can be applied to any timeframe or asset.

Q & A

What is ICT's favorite trading strategy?

ICT's favorite trading strategy focuses on trading market maker models, particularly the second stage distribution of a market maker sell model or second stage reaccumulation of a market maker buy model. This strategy aims to exploit liquidity manipulation by identifying market reversals at key levels.

How does one identify a market maker model?

To identify a market maker model, you must look for consolidations where clean highs or lows have been formed. These areas represent potential liquidity zones that the market will target for manipulation. The behavior of the market as it approaches these key levels indicates whether the model is a buy or sell model.

What is the importance of key levels in ICT’s strategy?

Key levels such as imbalances, old highs, or lows are crucial because they represent areas of liquidity. The market's behavior at these levels helps traders identify whether a market maker buy or sell model is in play, and they serve as the basis for trade entries.

What does 'displacement failure' refer to in ICT's strategy?

'Displacement failure' refers to a market's inability to continue past a specific level of liquidity, despite an initial push. This failure to displace indicates a reversal in market sentiment and presents an entry point for traders.

What are the steps involved in ICT's trading strategy?

ICT's trading strategy consists of three steps: 1) Identifying the market maker model, 2) Waiting for manipulation or reaccumulation/redistribution of liquidity, and 3) Entering based on displacement failure, which signals a shift in market direction.

What is meant by 'market structure shift' in the context of the strategy?

A market structure shift occurs when the market transitions from seeking sell-side liquidity (in a bearish market) to buy-side liquidity (in a bullish market). This shift is often marked by a quick reversal or a change in the market's price action after manipulating liquidity.

Why is the displacement failure entry considered effective?

The displacement failure entry is effective because it allows traders to enter the market when the price fails to move past a key liquidity level. This failure often precedes an explosive price move in the opposite direction, offering high-probability trading opportunities.

How does ICT’s strategy relate to time-based liquidity?

Time-based liquidity refers to liquidity levels that are tied to specific timeframes, such as the high of a particular session or week. These time-based levels are seen as more powerful, increasing the probability of price reacting to them, and therefore making the strategy more effective when time-based liquidity is factored in.

What role does 'liquidity pool' play in ICT's strategy?

A liquidity pool is a collection of stop-loss orders and unfilled trades around key price levels. ICT’s strategy focuses on identifying these pools, as they represent areas where the market is likely to move towards and manipulate before reversing in the intended direction.

Can this strategy be applied to any timeframe or asset?

Yes, ICT’s strategy can be applied to any timeframe and asset. However, higher probabilities of success are achieved when trading with time-based liquidity and higher timeframes, as these present more significant liquidity pools and stronger market reactions.