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ICT Mentorship Core Content - Month 04 - Mitigation Blocks
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ICT Mentorship Core Content - Month 04 - Mitigation Blocks

Amplification of Order Block Theory - Mitigation Block

In this section, we will focus on the mitigation block within the amplification of order block theory. We will explore how to identify market conditions that indicate a potential breakdown or upward movement in a step ladder formation.

Understanding Mitigation Blocks

  • Mitigation blocks refer to market conditions where there are clear indications of a potential breakdown or upward movement in a step ladder formation.
  • In bearish markets, it involves selling rallies or buying declines, while in bullish markets, it involves buying declines and selling rallies.
  • When analyzing price action and framing resistance and support levels, it is important to consider the overall context of the market scenario (bullish or bearish).

Identifying Bearish Market Scenario

  • To illustrate a bearish example, we look for a market that is moving up towards a potential bearish resistance level.
  • The market may reach an old high or low, encounter a bear short-term block, or break through certain reference points indicating resistance.

Confirmation of Resistance Level

  • Once we anticipate selling pressure at a particular level, we wait for price confirmation that there are willing sellers present.
  • The market may retest the resistance level multiple times before showing signs of wanting to break lower.

M Pattern and Market Structure Shift

  • An M pattern refers to a failure swing with confirmation break in market structure.
  • A break below the previous low confirms a shift in market structure and indicates participants driving prices lower.
  • As small traders, it is crucial to observe smart money entities' actions as they indicate their intentions through price movements.

Focus on Last Down Candle

  • After the market structure shift lower, attention shifts to the last down candle near the short-term low.
  • This candle represents where buying took place before the short-term rally.
  • Breaking below this low signifies a short-term support level giving way with a bearish context.

Three Reference Points

  • When price action returns to the reference point of the short-term low, there are three key reference points: A, B, and C.
  • Long positions taken from A to B can be liquidated or mitigated during the price move from B to C.
  • This can result in new lower price swings for retesting or a significant move into a support level below the market price.

Selling Opportunity

  • The identified market structure shift and return to the short-term low present an opportunity to sell in any particular market or asset class.
  • Breaking lower does not mean missing an opportunity; it signifies a new unfolding opportunity.
  • If there is a belief that prices will continue moving lower, there may be unrealized lower support levels for sell-side liquidity.

Market Structure Shift and Mitigation Block

In this section, we further explore the concept of market structure shift and how it relates to mitigation blocks.

Importance of Market Structure Shift

  • Market structure shift refers to a net shift in market dynamics, indicating participants driving prices in a specific direction.
  • It provides confirmation that smart money entities are actively involved in either driving prices lower or higher.

Focus on Short-Term Low

  • After breaking below the short-term low, attention shifts to the last down candle near that low.
  • This candle represents where buying took place before the subsequent rally.
  • Breaking below this low indicates a short-term support level being breached with bearish sentiment behind it.

Liquidating Long Positions

  • When price retraces back into the range between the short-term low and high, long positions taken from A to B have an opportunity to mitigate losses incurred during the move from B to C.
  • This can result in new lower price swings for retesting or a significant move into a support level below the market price.

Selling Opportunity

  • The market breaking lower presents an opportunity to sell in any particular market or asset class.
  • It does not mean missing an opportunity; rather, it signifies a new unfolding opportunity.
  • If there is a belief that prices will continue moving lower, there may be unrealized lower support levels for sell-side liquidity.

Unrealized Lower Support Levels

In this section, we discuss the concept of unrealized lower support levels and their significance in identifying selling opportunities.

Significance of Unrealized Lower Support Levels

  • Unrealized lower support levels refer to price levels where sell-side liquidity has not been tapped into yet.
  • These levels provide potential selling opportunities for traders who believe prices will continue moving lower in the long term.

Identifying Selling Opportunities

  • When the market breaks lower and returns to the short-term low, attention should be given to three reference points: A, B, and C.
  • Long positions taken from A to B can be liquidated or mitigated during the move from B to C.
  • This can result in new lower price swings for retesting or a significant move into a support level below the market price.

Selling into Mitigation Block

  • The identified market structure shift and return to the short-term low present an opportunity to sell in any particular market or asset class.
  • Breaking below previous lows indicates confirmation of bearish sentiment and willingness of smart money entities to drive prices lower.

These notes provide an overview of amplification of order block theory with a focus on mitigation blocks. They explain how to identify bearish scenarios, confirm resistance levels, analyze M patterns and market structure shifts, as well as recognize selling opportunities based on unrealized lower support levels.

New Section

In this section, the speaker discusses a market structure shift and explains the focus of traders at a specific level.

Focus on Specific Level

  • Traders are focusing on a specific level, which is the last down candle inside a low.
  • The objective is to anticipate price reaching back up into that low and become sellers when price rises above it.
  • The focus is on trading into the last down candle before a short-term rally.

New Section

This section explores the concept of support levels and how they influence trading decisions.

Anticipating Support Levels

  • Traders anticipate price moving down from a certain point, aiming to run liquidity out below a short-term low.
  • The target is to reach a higher time frame support level or an anticipated bullish institutional reference point.
  • As price hits these levels, traders would close their trades and wait for new developments.

New Section

Here, the speaker explains how support broken turns resistance in the marketplace and highlights buyer's remorse.

Support Broken Turns Resistance

  • When price moves back to an old low, it becomes resistance as buyers who previously bought at that level feel remorseful for their decision.
  • Smart money understands these short-term fluctuations and can manipulate price higher or lower through large orders.
  • Manipulation allows smart money to liquidate their positions without incurring losses.

New Section

This section discusses how premium price highs are bought by less informed traders but sold by smart money.

Premium Price Highs

  • Less informed traders tend to buy premium price highs while smart money sells them.
  • Traders need to determine which group they belong to in order to make informed trading decisions.

New Section

The speaker highlights a liquidity void and its equilibrium, emphasizing the importance of reference points.

Liquidity Void and Equilibrium

  • A liquidity void is identified, and its equilibrium is determined by the midpoint.
  • Breaking a high indicates an expectation of continuation on the upside.

New Section

This section focuses on mitigation blocks and selling opportunities based on price movements.

Mitigation Blocks and Selling Opportunities

  • Mitigation blocks are created when price breaks below previous lows.
  • Traders can sell short when price trades back up to these lows or specific reference points.
  • The objective is to aim for moves back below previous lows or into the mean threshold of the liquidity void.

New Section

Here, the speaker provides an example using a 30-minute chart to illustrate mitigation blocks and selling opportunities.

Example Using 30-Minute Chart

  • The mean threshold and liquidity void are highlighted on the chart.
  • Selling opportunities arise when price hits these levels or breaks below them.
  • Mitigation blocks help traders identify potential areas for profit-taking or reversing positions.

New Section

The speaker discusses the characteristics of a mitigation block and predicts price movements based on these characteristics.

Trades Up Again

  • The body of the candle is not violated, which is a hallmark characteristic of a mitigation block.
  • Price trades up into the mitigation block.
  • Expectation: Prices will go below the low of the mitigation block.
  • Ultimately, prices will reach down into the mean threshold of the liquidity void.

No specific timestamp was provided for this section.

Playlists: 2016 ICT Private Mentorship Core Content Month 04
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