How to trade Market Maker Models - A Deep Dive (ICT Concepts)

Summary

In this video, the creator dives deep into the Market Maker model, explaining its structure and how to engage with it for optimal trading entries. The tutorial outlines both sell and buy models, highlighting the importance of time frame alignment and understanding distribution phases. With detailed examples, the video guides viewers through the concept of smart money reversals, low-risk entries, and predicting price movement based on market structure. The creator emphasizes practical strategies, like using previous selling as new buying zones, and concludes with tips for navigating fast-paced distributions and minimizing risk in trading.

Takeaways

• 😀 The Market Maker Model is used to predict market movements by understanding market maker behavior, including accumulation, distribution, and reversal phases.
• 😀 There are two primary Market Maker Models: the sell model and the buy model, each with distinct patterns of price action and liquidity manipulation.
• 😀 The concept of time frame alignment is crucial, where patterns observed on larger time frames (e.g., daily) translate into smaller time frame models (e.g., 15-minute).
• 😀 The three key distribution phases in a Market Maker Model are: the low-risk sell, first distribution, and second distribution, with the second being the most profitable and quick.
• 😀 Market Maker Models can be anticipated by spotting short-term highs in bearish order flow or short-term lows in bullish order flow, helping to predict future price action.
• 😀 A 'Smart Money Reversal' occurs at a PD (Price Delivery) array or above buy stops, where institutional investors take positions against retail traders.
• 😀 To identify a valid entry, it’s important to recognize when the price tags short-term highs and lows, which signals the potential start of a market move.
• 😀 Mitigation is a critical concept where previously sold areas are used for future buying, allowing for strategic entries as price moves to these zones.
• 😀 Lower time frames (e.g., 1-minute to 15-minute) can be used to visualize smaller Market Maker Models that align with larger patterns seen on higher time frames (e.g., daily or 4-hour).
• 😀 The second distribution phase in the sell model is the fastest and offers the best entries and exits, with price quickly running to the original consolidation or liquidity points.

Q & A

What is a market maker model?

A market maker model is a framework used to understand how large market participants, referred to as 'smart money,' move prices through various phases, including consolidation, accumulation, distribution, and reversals. These models can help traders predict when significant price moves are likely to happen.

What are the two types of market maker models?

The two types of market maker models are the sell model and the buy model. The sell model typically involves price moves that clear out buy stops and target liquidity below the original consolidation, while the buy model targets sell stops and clears out liquidity above the original consolidation.

What is meant by 'time frame alignment' in the context of market maker models?

Time frame alignment refers to the idea that a market maker model on a smaller time frame (e.g., hourly, 15-minute) aligns with a pattern on a larger time frame (e.g., daily, weekly). The patterns formed on the higher time frames give context to market maker models on smaller time frames, which are the actual setups traders can engage with.

How does the distribution phase work in a market maker model?

The distribution phase in a market maker model involves three stages: the low-risk sell, the first distribution, and the second distribution. The low-risk sell happens after a smart money reversal, the first distribution shows a move away from consolidation, and the second distribution is the fastest, where the price moves quickly to the original consolidation area to clear out liquidity.

What is the significance of 'smart money reversal' in the market maker model?

A smart money reversal occurs when price moves against the prevailing trend, typically at key liquidity zones like buy stops or PD arrays (price delivery arrays). This reversal marks the point where 'smart money' enters the market, setting up the move for the next phase, either up or down, depending on the model.

How can you predict when a market maker sell model will occur?

You can predict a market maker sell model when the price trades into a PD array and shows bearish order flow. Additionally, when short-term highs are tagged in a bearish market, this often signals that a sell model could form, providing a setup for traders to act on.

What is the role of 'liquidity' in market maker models?

Liquidity plays a crucial role in market maker models, as market makers aim to clear out buy and sell stops to create more favorable conditions for their moves. This often happens when price runs past short-term highs (for a sell model) or lows (for a buy model), triggering stop losses and creating liquidity for the next move.

What is a 'fair value gap' and how does it relate to market maker models?

A fair value gap is an area on a price chart where there is a lack of price action or where there was a rapid movement without sufficient trading in that zone. These gaps are important in market maker models because they often act as areas where price will return to for a mitigation or reversal, creating opportunities for traders.

Why is the second distribution phase considered the best entry in a market maker model?

The second distribution phase is considered the best entry because it typically sees the fastest price movement, as the market clears out significant liquidity and runs quickly to the original consolidation. This phase offers high-probability trades, especially when short-term highs have been tagged in a sell model.

What is the concept of 'mitigation' in market maker buy models?

Mitigation in market maker buy models involves using previously established selling zones as new buying areas. For example, after a sell-off in a particular area, the market may return to this zone to buy, allowing smart money to enter the market more effectively. This helps establish a precise buy point for traders.