ICT Mentorship Module 2, Month 2 Lecture

Topic: Framing Low-Risk Trade Setups

Key Concepts:

• Importance of Higher Time Frames:

  • High odds probability trades rely on higher time frame charts (daily, weekly, monthly).
  • Institutions analyze markets on these time frames to determine order flow, support, and resistance.
  • Higher time frames provide directional bias and align with institutional order flow.
  • Suitable for those unable to day trade due to time constraints.

• Reducing Risk:

  • Higher time frame insights can be refined to lower time frames for smaller stop loss placement and lower risk.
  • Transposing levels from higher to lower time frames reduces pip exposure for stops.
  • Identifying key levels where institutions have placed trades before (order blocks).

Practical Application:

• Aussie Dollar Daily Chart Example:

  • Setup: Utilize a daily chart to identify important levels, such as the 7512 bullish order block.
  • Observations: Price movement below old lows into these levels indicates potential support.

• Refinement to Lower Time Frames:

  • Hourly Chart: Identify buy stops and set objectives beyond simple scalps for larger pip gains.
  • 15-Minute Chart:
    • Lower entry point at 7520 with a stop loss at 7507, reducing risk to 17 pips.
    • Close proximity to the significant 7512 level.
  • 5-Minute Chart:
    • Further refinement with an entry at 7515 and stop loss at 7507, reducing risk to less than 10 pips.
    • Achieve a 3R reward-to-risk ratio with an 8-pip stop loss.

Conclusion:

• Risk Management and Reward:
  • By refining trades on smaller time frames, achieve a high reward-to-risk ratio (e.g., $3 reward for every $1 risked).
  • Understanding price action and why it responds at certain levels is crucial for using tight stop losses effectively.
• Strategic Summary:
  • Use larger time frames for directional bias and refine them on smaller time frames to minimize risk.
  • Proper understanding of price action allows for efficient trading with minimal risk exposure.