Understanding Inducements in Trading

Key Concepts

Types of Inducements

1. Minor Inducements

   • Found on M1 (1 minute) and M5 (5 minute) timeframes.
   • Lower probability, typically continuation trades.
   • Often involve Asia Midline.

2. Medium Inducements

   • Found on M5 (5 minute) and M15 (15 minute) timeframes.
   • Include Asia High and Asia Low.
   • Higher probability compared to minor inducements.

3. Major Inducements

   • Found on H1 (1 hour) timeframe.
   • High probability trades, strong zones of supply and demand.
   • Generally involve breaks of structural points.

Identifying Inducements

• Look for structural breaks on relevant timeframes.
• Major Inducements: Check higher timeframes like H1.
• Medium Inducements: Check mid-range timeframes like M15.
• Minor Inducements: Most often on lower timeframes like M1.

Strategy and Execution

• Expectational Order Flow: When a structure breaks on H1 or H4, expect a pullback.
• Retail traders often fall into traps (e.g., trend line setups, breakout strategies).
• Smart Money will wait for inducements before entering trades.
• Moving away from the trap is a key strategy once inducement is confirmed.

Mitigations and Market Behavior

• If an inducement happens, look for mitigations to move away from the trap.
• Strong focus on using higher timeframes (like H1) for more valid supply and demand zones.
• High probability setups involve waiting for multiple traps to be set off before entering.

Indicators

LED Indicator

• LED helps to confirm entries by showing when prices and moving averages are diverging or converging.
• Wait for a candle close to confirm entry when using LED.

EDM Indicator

• Equilibrium, Divergence, Manipulation (EDM)
• Works better on higher timeframes as an addition to LED.
• Signals stronger confirmation for entries when seen on H1 or M5.

Practical Application

• Understand the concept of order flow and how it correlates with inducements.
• Inducements create zones where smart money waits for retail traders to get trapped before making their move.
• Major and medium inducements can be used to establish trade entries with higher probabilities.

Tips for Traders

• Focus on identifying major and medium inducements for higher probability setups.
• Use multiple timeframes to identify different types of inducements and validate supply and demand zones.
• Combine LED and EDM indicators for stronger confirmation of trade entries.
• Pay attention to market hours and economic cycles to understand when manipulations are likely to occur.