2022 ICT Mentorship [No Rant] ep. 2 - Elements To A Trade Set Up

Summary

Key Points

• —On the daily chart, traders identify swing highs and lows as key liquidity pools (buy stops and sell stops) and imbalances, which are primary drivers of market movement. 1:56
• —The trading strategy begins by establishing a weekly bias, predicting whether the next weekly candle will likely expand higher or lower. 2:12
• —A crucial element of the setup is anticipating a "stop hunt," where the market temporarily moves against the expected direction to trigger stops and provide counterparty liquidity for institutional traders. 5:36
• —After observing a stop hunt on a higher timeframe (e.g., 15-minute), traders should drop to lower timeframes (e.g., 1, 2, or 3-minute) to pinpoint specific entry patterns. 5:52
• —For a bearish setup, the market often first drops to take out sell stops (inducing shorts) and then rallies to attack buy stops above relative equal highs, providing an optimal selling opportunity for smart money. 7:26
• —A "break in market structure" on the lower timeframe, such as a short-term low being broken after the stop hunt, signals a shift in the immediate market direction. 10:08
• —Following the market structure break, traders look for a "fair value gap" or imbalance (an inefficiently delivered price range) and anticipate price to retrace into this area for a high-probability short entry. 11:02
• —Price objectives are determined using the concept of premium (market above 50% of a range) and discount (market below 50%), with the expectation that price will move from a premium entry to a discount target, often targeting sell stops or closing imbalances. 13:09
• —Traders are assigned homework to backtest this strategy on E-mini futures charts, logging examples to develop a deeper understanding and trust in the pattern's recurrence. 16:16
• —This specific setup, characterized by liquidity runs, market structure breaks, and fair value gaps, is presented as a repeatable and precise pattern that occurs consistently across futures contracts. 16:29