Understanding Order Flow and Consolidations

Oct 13, 2024

ICT Amplified Day Trading and Scalping: Lesson 4 - Trading and Consolidations

Key Concepts

  • Order Flow Subordination

    • Focus on daily and 4-hour charts to determine order flow direction.
    • Align trades with both daily and 4-hour order flow for higher probability.

  • Consolidations

    • Occur in lower time frames (e.g., hourly, 15-minutes).
    • Represent a buildup of new positions or orders.
    • Smart money uses consolidation breakouts to fade retail traders.

Retail vs. Smart Money

  • Retail Traders

    • Look for cause and effect.
    • Chase price, breakouts from consolidations.
    • Use classical support and resistance (old highs/lows).

  • Smart Money

    • Engineers or fades breakouts of a consolidation.
    • Buys under old lows, sells above old highs.
    • Focuses on liquidity above/below market prices.

Trading Consolidations

  • Order Flow and Directional Bias

    • Daily/4-hour dictates consolidation breakout direction.
    • Above consolidation in bearish flow: shorting opportunity.
    • Below consolidation in bullish flow: buying opportunity.

  • Equilibrium and Expansion

    • Price tends to revert to equilibrium during consolidation.
    • Retail views highs/lows as support/resistance; smart money sees liquidity opportunities.

  • Execution Strategy

    • Identify equilibrium in consolidations.
    • Fade breakouts that contradict order flow.
    • Use daily/4-hour order flow to dictate trades.

Practical Examples

  • Bearish Scenario

    • Short-term high broken in bearish flow indicates a sell.
    • Aim for liquidity below old lows (retail support).

  • Bullish Scenario

    • Short-term low broken in bullish flow indicates a buy.
    • Target liquidity above old highs (retail resistance).

Conclusion

  • Focus on higher timeframe order flow for day trading.
  • Use consolidations to identify liquidity, not just support/resistance.
  • Align trades with institutional order flow to mimic smart money strategies.

Remember, always pay attention to the daily and 4-hour charts to guide your trading decisions within consolidation phases. Good luck and good trading!