Overview
This lecture introduces the four key elements of a trade setup and shows how to pair each with specific ICT (Inner Circle Trader) tools to build consistent trading strategies.
Elements of a Trade Setup
- There are four main market conditions: expansion, retracement, reversal, and consolidation.
- Every trade setup is based on identifying the current market condition and applying the appropriate tool.
- Expansion occurs when price moves quickly from equilibrium, indicating trending conditions.
- Retracement is when price returns inside a recent range, often filling gaps or voids.
- Reversal is when price changes direction, often after stop runs at liquidity pools.
- Consolidation is when price moves within a range, building orders without a clear trend.
ICT Tools and Market Context
- Expansion is paired with order blocks, areas where price left quickly.
- Retracements are paired with fair value gaps and liquidity voids, which are price areas with inefficient trading.
- Reversals are paired with liquidity pools and stop runs, showing where stops are triggered above highs or below lows.
- Consolidation is paired with equilibrium, specifically the midpoint of the range where orders accumulate.
Market Patterns and Execution
- All market moves start from consolidation and then expand, retrace, or reverse.
- Wait for the first expansion out of consolidation to identify the likely market direction.
- Use the Fibonacci tool to find equilibrium (midpoint) in any consolidation.
- When price revisits an order block after expansion, consider entering in the direction of the move.
- Liquidity voids are likely to be filled by price revisiting those areas.
Consistent Trade Setup Strategy
- Focus on mastering one setup or market condition first for consistent profitability.
- Not every day will provide a trade; patience and context recognition are essential.
- Study past charts to identify and outline examples of the four key market conditions.
Key Terms & Definitions
- Order Block — A price zone where smart money initiated a move, often used as entry points after retracements.
- Fair Value Gap/Liquidity Void — An area on the chart where price moved rapidly, leaving inefficiently traded regions.
- Liquidity Pool — A cluster of stop-loss orders typically found above highs or below lows.
- Equilibrium — The midpoint of a price range, often used as a reference in consolidations.
- Expansion — A strong price move away from a range, indicating a new trend.
- Retracement — Price returning into a recent range to fill gaps or test previous levels.
- Reversal — A change in market direction, often after a stop run.
- Consolidation — A period of sideways movement where price builds orders in a defined range.
Action Items / Next Steps
- Study the Market Maker Series, Precision Trading Concepts, and Sniper Series tutorials for foundational knowledge.
- Review historical charts to identify examples of expansion, retracement, reversal, and consolidation.
- Use the Fibonacci tool to practice finding equilibrium in consolidations.
- Practice recognizing order blocks, liquidity gaps, and pools on different currency pairs.