ICT Mentorship: Market Maker Traps and False Breakouts

Lecture Overview

• Final teaching for the second month of the ICT mentorship (October).
• Focus on market maker traps and false breakouts.
• The lecture discusses strategies primarily in bearish and bullish market conditions.

Key Points

False Breakouts in Bearish Markets

• Occurs above price consolidations in bearish markets.
• Market moves into a trading range where breakout traders place buy stops above old highs and sell stops below old lows.
• Market makers will often push prices above these ranges to neutralize buy stops.

False Breakouts in Bullish Markets

• Occurs below price consolidations in bullish markets.
• Market makers push prices below ranges to neutralize sell stops.
• Traders bracket trading ranges without knowing true market direction.

Market Maker Strategy

• Market Maker's Playbook:
  • In bearish markets: Run buy stops above market range.
  • In bullish markets: Run sell stops below market range.
• Order Placement:
  • Buy stops above the market range and sell stops below.
  • Market makers use buy stops to pair long selling and sell stops to pair long orders.

Market Efficiency Paradigm

• Market seeks liquidity primarily at untapped areas.
• Consolidations reveal liquidity resting points.
• False breakouts indicate market makers' intention of absorbing liquidity.

Understanding Liquidity

• Buy Stops: Rest above old highs.
• Sell Stops: Rest below old lows.
• Liquidity is provided by market makers to facilitate trades.

Practical Application

• Recognize patterns of false breakouts as opportunities for smart trading.
• Expectation of market behavior during consolidations can guide trade decisions.

Advanced Insights

• Recognize market maker's motives by observing price behavior around consolidation ranges.
• Predict market direction by identifying whether buy or sell stops are the focus of market action.

Conclusion

• Application of market maker models provides insight into market dynamics.
• Future sessions will build on these concepts, filling in gaps left in prior teachings.

Preparation for Upcoming Sessions

• Get ready for more detailed price actions and advanced concepts.
• Future teachings will bridge gaps from previous free mentorship content.

Closing

• Encouragement for continued learning and successful trading.

Remember to review these notes to familiarize yourself with the strategies discussed, their application in different market conditions, and the insights into the market maker's approach to trading.