Super Easy ICT Trading Strategy 5m

Summary

This video outlines a simple trading strategy focusing on the first available trade post 7:00 a.m. UTC, emphasizing risk management. It details the importance of identifying fair value gaps coinciding with support or resistance levels for entry points, aiming for a 2:1 risk-reward ratio, and adjusting stops to break-even upon reaching a 1:1 risk. The presenter advises against trading post 5:00 p.m. UTC due to reduced liquidity and shares examples to illustrate the strategy's application, while cautioning about the influence of news on price movements.

Takeaways

• 📈 Trading involves risk and most traders lose money, so it's crucial to have good risk management in place.
• ⏰ The strategy focuses on taking the first available trade after 7:00 a.m. UTC plus one time and avoiding subsequent opportunities to maintain higher odds of success.
• 📊 To identify potential trades, plot the previous daily high and low on the chart, either manually or using an indicator.
• 🔍 Look for a 'fair value gap' which occurs when there is no overlap between the top of one candle and the bottom of the next, indicating a potential area for price action.
• 🚫 Avoid taking trades that occur too late in the day, specifically after 5:00 UTC plus one, as volume dries up and the chance of hitting the profit target decreases.
• 🔄 The strategy involves taking trades when the price breaks through the previous daily high or low and then comes back within the fair value gap.
• 🎯 Prefer fair value gaps that coincide with additional support or resistance levels, such as the previous daily high or low, for stronger trade setups.
• 💰 Use a 2:1 risk-to-reward ratio for trades, and if the trade reaches a 1:1 risk level, move the stop to break even to secure profits.
• 📉 In cases where the price breaks through a level but doesn't provide a fair value gap, or if the gap is too small or weak, it's safer to avoid the trade.
• 📝 It's important to monitor trades closely and adjust stop-loss orders to break even when the trade is at risk of losing the initial investment.
• 🛑 The presenter emphasizes the importance of sticking to the rules, as no trading strategy has a 100% win rate, and encourages viewers to do their own research and potentially adapt the strategy to their preferences.

Q & A

What is the main topic of the video script?

The main topic of the video script is a simple trading strategy that can be implemented by viewers, with a focus on risk management and specific rules for identifying trades.

Why does the speaker emphasize the importance of risk management in trading?

The speaker emphasizes risk management because trading is inherently risky, and most traders lose money. Good risk management is crucial to minimize losses and protect the trader's capital.

What is the first rule of the trading strategy discussed in the script?

The first rule is to only take the first available trade after 7:00 a.m. UTC plus one time, and not to take subsequent opportunities as the odds of success decrease with each passing opportunity.

How does the speaker define a 'fair value gap' in the context of trading?

A 'fair value gap' is defined as a gap created between two candles when the top of one candle and the bottom of the next do not overlap, indicating a potential area for price to bounce or reverse.

What is the significance of the previous daily high and low in the trading strategy?

The previous daily high and low are significant because they serve as reference points for identifying potential trade entries and exits. They also provide additional support or resistance levels that can validate trade setups.

What is the recommended risk-to-reward ratio for this trading strategy?

The recommended risk-to-reward ratio for this trading strategy is 2:1, meaning for every unit of risk, the trader aims to gain two units of profit.

What should a trader do if the trade reaches a 1:1 risk-to-reward ratio?

If the trade reaches a 1:1 risk-to-reward ratio, the trader should move their stop-loss order to break-even, ensuring that they will not lose money on the trade if the market moves against them.

Why is it not advisable to take trades after 5:00 UTC plus one time according to the script?

It is not advisable to take trades after 5:00 UTC plus one time because the volume in the market tends to dry up later in the day, reducing the likelihood of the price reaching the profit target.

What is the importance of the 'retest' in the context of the trading strategy?

A 'retest' is important because it provides a second opportunity to enter a trade after the price has broken through a significant level (like the previous daily high or low) and then returns to test that level again, potentially offering a safer entry point.

How does the speaker suggest handling trades that result in a loss?

The speaker suggests sticking to the rules of risk management, such as moving the stop-loss to break-even at a 1:1 risk-to-reward ratio if the trade moves against the trader, and accepting that not all trades will be winners.

What does the speaker mean by 'cherry picking' trades?

Cherry picking refers to the practice of selectively choosing only the most favorable or successful trades to showcase, often ignoring or not discussing the less successful ones. The speaker clarifies that they did not cherry pick the trades in the script.

Outlines

00:00

📈 Introduction to a Simple Trading Strategy

The speaker introduces a basic trading strategy that can be implemented with a strong emphasis on the inherent risks of trading and the importance of risk management. The strategy involves taking the first available trade opportunity after 7:00 a.m. UTC, with the rule of not taking subsequent opportunities to avoid diminishing chances of success. The speaker also explains the method of marking the previous day's high and low on the chart, either manually or using an indicator, and how to identify valid trade setups based on price action relative to these levels.

05:03

📉 Trade Execution and Risk Management

This paragraph delves into the specifics of executing the trade, including identifying fair value gaps and additional support or resistance levels that coincide with the gap. The speaker advises on the placement of stop-loss orders and the strategy's risk-reward ratio of 2:1. It also discusses the importance of not taking trades too late in the trading day and the potential for retesting fair value gaps, with examples provided to illustrate different scenarios and outcomes.

10:03

🚫 Avoiding Late and News-Driven Trades

The speaker warns against taking trades that occur late in the trading session, particularly after 5:00 UTC, as these have a lower chance of reaching the profit target due to reduced trading volume. Additionally, the paragraph addresses the unpredictability of trades influenced by news events, which can lead to erratic price movements that are not suitable for the described strategy. The speaker emphasizes the importance of adhering to the strategy's rules and avoiding trades that do not meet the specified criteria.

15:08

🔄 Trade Adjustments and Break-Even Opportunities

In this section, the speaker discusses the strategy's approach to adjusting trades once the risk reaches a 1:1 ratio, suggesting moving the stop-loss to break-even to secure profits. The paragraph includes examples of trades that did not go as planned and how to manage them effectively. It also highlights the importance of protecting the trading account and the strategy's potential for both wins and losses, emphasizing the need for careful trade selection and management.

20:08

🛑 Final Strategy Review and Future Demonstrations

The speaker concludes by summarizing the key points of the trading strategy, reiterating the rules and conditions for executing trades. They also address potential concerns about cherry-picking trades and assure viewers that the examples provided are representative of the strategy's performance. The speaker expresses intentions to demonstrate the strategy through live trades or pre-recorded examples in future videos, encouraging viewers to like, comment, and subscribe for updates.

Keywords

💡Trading Strategy

A trading strategy refers to a specific approach or plan for buying and selling financial instruments, such as stocks, currencies, or commodities. In the context of the video, the trading strategy discussed is a simple method that involves taking trades after 7:00 a.m. UTC plus one time, focusing on the first available opportunity. The strategy emphasizes risk management and the importance of taking the first trade opportunity to avoid diminishing odds of success.

💡Risk Management

Risk management in trading involves the identification, evaluation, and prioritization of risks followed by coordinated efforts to minimize, monitor, and control the probability or impact of unfortunate events. In the video, the speaker stresses the importance of good risk management as the primary rule in trading, suggesting that it is crucial for protecting one's investment and ensuring sustainable trading practices.

💡UTC Time

UTC stands for Coordinated Universal Time, which is the primary time standard used globally. In the video, the speaker specifies that trades should be taken after 7:00 a.m. UTC plus one time, indicating a time zone consideration for the strategy's execution. This timing is important to standardize the trading approach across different geographical locations.

💡Daily High and Low

The daily high and low are the highest and lowest prices a financial instrument reaches in a single trading day. In the video, the speaker instructs viewers to plot the previous day's high and low on their trading charts, which serves as a reference point for identifying potential trade opportunities and setting entry and exit points for trades.

💡Fair Value Gap

A fair value gap is a price gap that occurs when the top of one trading candle does not overlap with the bottom of the next, indicating a break in price continuity. The video describes how to identify a fair value gap and emphasizes that trades should be taken when the price returns to this gap, as it represents a level where the price may reverse due to the lack of overlapping price action.

💡Support and Resistance Levels

Support and resistance levels are price points on a chart that tend to have a higher concentration of buying or selling pressure, respectively. In the video, the speaker mentions using the previous daily high or low as additional support or resistance levels, which can provide an extra reason for the price to bounce and validate the trade setup.

💡Risk-Reward Ratio

The risk-reward ratio is a comparison of the potential risk of a trade to the potential reward. In the video, the speaker suggests aiming for a 2:1 risk-reward ratio, meaning for every unit of risk, the potential reward should be two units. This ratio helps traders manage their expectations and potential gains or losses from trades.

💡Break-Even Stop

A break-even stop is an order type that moves the stop loss of a trade to the entry price once the trade has reached a certain profit level, ensuring that the trade will not result in a loss. In the video, the speaker advises moving the stop to break-even once the trade reaches a 1:1 risk-reward ratio, which locks in the initial investment and allows the trade to continue profiting without risk.

💡Swing Low and High

Swing low and high refer to the lowest and highest points in a price trend, respectively, that are not exceeded by subsequent price movements. In the video, the speaker uses the recent swing low as a reference for placing the stop loss, which is a method to protect profits and limit losses in case the market reverses direction.

💡Price Break

A price break occurs when the price of a financial instrument moves past a significant level, such as a support or resistance level. In the video, the speaker explains that trades should be taken when the price breaks through the previous daily high or low after 7:00 a.m. UTC plus one time, signaling a potential trend continuation.

💡Retest

A retest in trading is when the price of a financial instrument returns to a previously broken support or resistance level to confirm its validity as a new support or resistance. In the video, the speaker mentions that trades can be taken when the price breaks a level, retests it, and then moves back into the fair value gap, which can be a sign of a strong trend continuation.

Highlights

Trading is risky and most traders lose money, emphasizing the importance of good risk management.

The strategy involves taking the first available trade after 7:00 a.m. UTC plus one time, avoiding subsequent opportunities for better odds.

Using indicators to plot previous daily high and low on the chart for easier trade identification.

The importance of waiting for the price to break the previous daily high or low after 7:00 a.m. to validate a trade.

The concept of a 'fair value Gap' as a key element in identifying potential trade opportunities.

Fair value Gaps must coincide with another level, such as previous daily high or low, for added support or resistance.

Taking trades at the closest part of the fair value Gap to ensure timely entry.

Setting a stop under the recent swing low and aiming for a 2 to 1 risk-reward ratio.

Moving the stop to break-even once the trade reaches a risk of one to one to secure profits.

Avoiding trades that occur too late in the day, specifically after 5:00 UTC plus one time, due to reduced volume and chances of hitting the profit target.

Retesting trades where price breaks and pops back up into the fair value Gap, although riskier.

The necessity to wait for the price to be below the previous daily low at 7:00 a.m. for a valid trade setup.

Ignoring news-driven spikes as they can lead to unpredictable price movements and are not suitable for this strategy.

The strategy's performance with four winners and two losers, demonstrating a 2:1 risk-reward ratio.

The importance of sticking to the rules and not cherry-picking trades for consistency in strategy application.

The potential for live trades or pre-recorded trade demonstrations to showcase the strategy's practical application.

Encouraging viewers to like, comment, and subscribe for updates on live trade demonstrations.

Transcripts

okay welcome back to the channel today

we're going to go over a simple trading

strategy that you can Implement today if

you choose to now I just want to start

by saying that trading is risky most

Traders lose money and if you choose to

do this trading strategy that's on you

the number one thing you should always

have in trading is good risk management

okay now we've gone over that let's go

over the

rules okay so the rules are simple we

are only looking to take the first

available trade after 7:00 a.m. UTC plus

one time so if you miss the first

opportunity that's it you're done okay

on that pair anyway don't take the

second opportunity or the third or the

fourth because um every time that

happens your odds of it being a winner

get lower and lower and lower I mean

that's that's what I found in my testing

okay so you do your own testing that's

up to you but for me personally it's the

first trade or no trade okay so let's

hop back over to the

Chart we want

to plot the previous daily

High and the previous daily

low now if you don't want to do that

manually you can just add an indicator

to your chart like so and so this line

represents the previous day daily high

this line represents the previous daily

low there's a candle there once you've

got those in place you're then ready to

start looking for your trade of the day

so we'll just do a load of examples uh

we'll just go

back beginning of June um start

here

so

basically the start of the day is there

7: a.m.

so we want price to break through the

previous daily low or high as you can

see here this red line is the previous

daily low price has broken through

it now as long as it's done it um if

it's done it in the Asian session or

this this area here it doesn't matter if

it's come down gone back up you can

ignore everything that's happened in

that

session as long as that 7: a.m. or after

7: a.m. it has broken through and it has

come back above or back below whichever

way you're trading then it's valid okay

so just because it broke below before

7:00 a.m. that doesn't matter 7 a.m.

where is it right now it is below the

previous daily low and that's fine

that's valid for this setup now what

we're looking for is it to come back

above and close

above the previous daily low so it's

broken down it can Wick down as well

that's fine but as long as it closes

back above which it has done here then

we are looking for a fair value Gap okay

what's a fair value Gap that's

when I'll just show you it so this

candle this candle and this candle have

created a gap okay because the top of

this candle and the bottom of this

candle are not overlapping which means

that it has

created this this gap which is called a

fair value Gap okay an example of

somewhere that's not a fair value Gap

would be here this one this one and this

one there's no Gap because the Wicks are

overlapping each bar is

overlapping over here there's a fair

value Gap over here there's a fair value

Gap so we draw that in

okay now what we're looking for is price

to come back into the fair value Gap so

we don't just want to take any fair

value Gap we want to take a fair value

Gap that also has another it coincides

with another level so there's two um

reasons for price to bounce here so

first you got this fair value Gap second

you have this level here okay okay this

level

here will act as support okay so there's

two reasons for price to bounce here now

we will take the trade at

the um closest part of the fair value

Gap so the trade doesn't go without us

so that'll be here we then want to move

our stop

under the recent swing low and we're

going for 2 to one risk reward

okay so there we go simple that's it

there's that that's all there is to this

strategy simple anyone can do it it's up

to you if you do it the risk is on you

like I said everyone should do their own

research but that's it that's as simple

as it as it gets now there is a couple

of other rules if for example price um

once it reaches a risk of one to one one

you can then move your stop to break

even okay so now you are safe in this

trade okay you can't lose um so here

here it hit one risk of one to one it

didn't come back down and stop us out it

carried on going to the profit

Target and we got our full

profit okay so we'll just go over some

more trades um let's go on to the next

day

so nothing happened there you see it

didn't break above it didn't break below

so there's no trades on on that

day and also you don't want to take any

trades that are that are too late in the

day so really

5:00 UTC plus one time is too late in

the day not that there's a trade there

but if there was a trade there that's

just too late okay volume is drying up

you know price

just there's less chance of it hitting

your profit Target so we the earlier the

earlier in the day the better but just

avoid taking any after five UTC plus one

time so okay so what you can do is you

can take a

trade if it's above and comes down and

Pops back out for a retest you can take

a trade there it's riskier but you can

do it so for example um in this one fair

value Gap is

here you can see L price came up it came

back down there was no fair value gap

for it coming back down but it's popped

back up it provided a fair value gap

which also has the previous daily high

as a support level now okay so you can

you've got two things there now it would

have triggered you in here you could

have also gone with this fair value Gap

if you were afraid that price was going

to go about you but it's better to do

the safer option so if there's two

levels on this fair value Gap but

there's not two levels on this one just

go with the one with two so we put our

stop below and then we go for our risk

of 2 to one and that's it done right we

move

on okay so on this day um price has

broken above and it's come back

below before 7 a.m. Okay so

this is void this it would have to be 7

a.m. and still be above it for it to to

count okay so although it's come down

right and there's a fair value Gap there

and this is after 7 a.m. and you could

get in there it's more risky doing it

like that okay this one would have

worked out but it's more risky okay so

the real move is here it's broken back

up and it's come back down now there's a

fair value Gap here with um resistance

here and the top of this would be

resistance to so this would be a really

good one there's also a fair value Gap

here which you could

use like that and you could there could

be an argument here to say that um

because this here

was uh

resistance for price okay price was

wicking away from this so you could say

oh okay it's going to use that as

resistance again you could say that

personally I'd say that's a little a

little weak but you could use it and

that one and that one would have worked

anyway so but I would have said okay

this fair value Gap is stronger I would

have gone for this one let's move

on okay

right let's see if there's one

here price has broken up it's come back

down there's no fair value Gap there's

no fair value

Gap there's a small fair value Gap

here okay where is it uh

here okay you've got this area uh the

previous daily high as

resistance now you can put it above the

recent swing high or you can play it

safer and go uh one further than that I

would put it here because that's that's

a

decent size recent swing high if it has

come up here then you're probably

wrong okay so then you want to bring it

down 2 to

one now obviously the trade has um come

against us I would say

from here so you've risked one to one

now remember what I

said you then put the trade to break

even at this point if the if it gets to

risk of one to one you want to bring it

to break even okay now in this instance

had you have used this swing

High

you just missed out on bringing your

stop to break even however if you were

monitoring this and price had come this

close to it just put your stop to break

even you don't need to wait to the PIP

okay if it's really close just put your

stop to break even

okay you always want to protect the

account like I I always I always say

that in my videos protect the account

okay um okay this one it's come up it's

come down it hasn't come back below so

we'll just leave

that uh

okay uh 7

a.m.

okay price has come

down where's the

time 7

a.m. now it has provided a fair value

Gap and it's at a great area

however it wasn't

below the previous daily low at 7 a.m.

which means that we have to wait for it

to break again okay so now it's broken

through and you could say all right okay

this is

um this is the move this wouldn't be the

move okay this is

130 that that kind of move is likely

news and if if it's news then it's going

to price won't um

price will do whatever it wants at that

point okay if news has pushed it up like

this a spike it's just going to spike up

Spike down Spike up Spike down this it's

not going to play out as it usually does

so we leave it okay we move on to the

next

day

okay now it's come up and like I say you

can play these ones where price breaks

up retests comes back up goes into to

the fair value Gap and comes down I

wouldn't particularly play these ones

because if price has moved this high up

okay it's exhausted Itself by the time

it gets up

here if you're looking for this to go

higher the odds are against you okay you

don't really want to play those ones

where um if price is already out of here

in the morning and it's coming down then

yeah sure you can take the trade but if

price has moved up through the day right

and it's just reached it it's not wise

to to do another um to take the trade

higher okay because it'll be exhausted

so I wouldn't do that okay but if you

wanted to do it then this

trade you have

your fair value Gap here it has a good

line there it also has this down here

so you could put the trade there go

underneath the swing here and then go

for your two: one or in this case it

would be one to one and then break even

that candle might have even got you out

I'm not sure but yeah that that's what

would have happened there so we move on

we

move okay here's another

example price has come down it's broken

through it's come up it's come back

down now it's given us fair value Gap

the other thing as well is um the fair

value Gap needs to be um above so this

is the previous daily low so it needs to

be above if it's previous daily High it

needs to be below so here's our fair

value

Gap okay it's it has this here was

resistance so you could say that this

now is support which it looks like it

was support we want to put our trade in

here again you could go for the recent

swing low or you could go right out here

if you want to play it safe it just

makes get to the profit Target a little

bit harder if you want two to

one uh where is it there it is okay so

you'd get it

there we move move

okay price has come out it's come back

in

now if you can see this there is a fair

value Gap here it's very small but it's

there you see that

there and it's a good one because it's

got the previous daily high as

resistance so you'd want to put your

trade in

it' be triggered

here recent swing

high risk of two to

one okay and we move

on okay here again what times that

230 okay so this is what I mean by it's

already out and way above the previous

daily high and now it's coming back this

is where you could play that going back

up um where is it 910 however it's come

back through it's created a fair value

Gap

here

so let's say we would have taken

this that's a really big stop as well

this

one would be no good okay that would be

your first

loser and like I say we're risking two

to one so that's that just stays at uh a

1% risk if you like if you're ring 1% to

gain 2%

okay so that's a single loss now I move

on okay so price has broken

above it's come back no fair value Gap

it's gone above it's come back now it's

got its fair value

Gap okay but price does not come back to

this level until

here and we would have gotten whipped

out and that's pretty much all there is

to it so that would have

been one loss

two 2

one two

two that's a break

even that's another Break

Even

32

42 okay so four winners two losers at a

2: one risk reward

so if you were risk if you were risking

100 to make 200 then you'd have made 800

and lost 200 you'd be up

600 and that's pretty much all there is

to it if we go back over to the rules so

we're looking at taking the first trade

after 7 a.m. UTC plus one time if it's

missed then don't take the second

opportunity or the third or the fourth

because your odds are lower and lower as

the day goes on the fair value Gap must

be below the previous daily high or

above the previous daily

low um so if a fair value Gap forms but

it's above the previous daily High don't

take it and if it's below the previous

daily low don't take it you want to use

those

lines as extra support and resistance

for your trade okay now it's like I said

it's better to take a fair value Gap

that coincides with one additional level

which could be the previous daily high

or low so just gives that

extra um resistance or support to make

price bounce the way you want it and we

we risk 2: one and if it reaches 1 to

one we move our stop to break

even

okay and that's pretty much it

so and I know what you're thinking oh

did he cherry pick these trades no I

didn't no I didn't at all in fact I'll

I'll I'll just scroll in the chart now

we'll just pick an

area uh

actually this probably isn't a good area

because

news yeah news is spiked and spiked down

so that's yeah I wouldn't play news like

this um cuz like I say what time's that

2:30 oh that's the open and that's

probably news and that could be news as

well actually so you know you is there a

fair value

cap uh I don't even think it's there's

not a fair value Gap there anyway but if

there was I wouldn't play that

so

um okay what time is that seven where's

okay so it's gone seven so price comes

below breaks

through no fair value Gap now there's a

fair value Gap

okay put our order in 2:

one and that's all there is to it okay

we've got our fair value Gap we've got

our previous daily low as extra

resistance now in this case it did come

through and then Wick off the bottom but

that's why you stick your stop below the

recent swing low okay

and that's uh that's all there is to it

you know stick to your rules like I said

there's no trading strategy out there

that's got 100% win rate it's up to you

if you want to run with this um tweak it

yourself put your own spin on it um if

you like this strategy please give the

video a like comment below and subscribe

too because next week I hope hopefully I

need to get the YouTube features uh

because for some reason I haven't got

the advanced features yet but hopefully

if I get them I will be putting out live

trades of me doing this strategy and so

you can uh Watch How I get on with those

um if I can't do the lives then what

I'll do is I'll pre-record my trades and

post those so you can see how they've

all played out okay so smash that like

button and as always I will see you in

the next one