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ICT Mentorship Core Content - Month 04 - Orderblocks
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ICT Mentorship Core Content - Month 04 - Orderblocks

Reinforcing Order Block Theory: Bullish Order Block

In this section, we will discuss the definition and validation of a bullish order block. We will also cover entry techniques and risk management strategies associated with bullish order blocks.

Definition of a Bullish Order Block

  • A bullish order block is the lowest candle or price bar with a down close that has the most range between open to close and is near a support level.

Validation of a Bullish Order Block

  • The high of the lowest down candle or price bar must be traded through by a later formed candle or price bar to validate a bullish order block.

Entry Techniques Using Bullish Order Blocks

  • When price trades higher away from the bullish order block and then returns to the bullish order block candle or price bar high, this is considered as an opportunity for a bullish entry.

Defining Risk with Bullish Order Blocks

  • The low of the bullish order block is considered as a relatively safe stop loss placement location. Placing stop loss just below 50% of the total range of the order block is also considered as an effective risk management strategy.

Identifying Support Levels

In this section, we will discuss how to identify support levels on higher time frame charts like monthly, weekly, or daily charts.

Identifying Support Levels

  • A support level can be in the form of an old low on long-term or higher time frame chart, or it could be an old high where price has moved above recently and now retraced back into it.
  • Simple support resistance ideas are enough here but identifying these levels on higher time frame charts like monthly, weekly, or daily charts is important.

Validating Bullish Order Blocks

In this section, we will discuss how to validate a bullish order block and enter long positions.

Validating Bullish Order Blocks

  • Once price trades down into the support level identified as a potential bullish order block, we wait for indications that smart money or institutional traders are participating in the move.
  • A down candle with a high that is violated by a new candle and trades through it validates the down candle as a bullish order block.

Entering Long Positions

  • We can enter long positions early if price retrades back down to the bullish order block's high or even in the very candle that broke that down candle's high.
  • If we don't enter on a re-trade at the bullish order block's high, we wait for price to pull back before entering long positions.

Institutional Sponsorship Behind Moves

In this section, we will discuss how institutional sponsorship behind moves is evidenced in price action.

Institutional Sponsorship Behind Moves

  • When there has been displacement in the marketplace due to large flows or institutional traders participating in the move, it is evidenced in price action.
  • We patiently watch price and anticipate prices start to retrade back down into that down candle or bullish order blocks high.

Setting Alerts

  • We can set alerts when prices start retrading back into support levels identified as potential bullish order blocks.
  • Identifying highs of candles using their bodies and setting alerts on them is an effective strategy.

Setting Alerts and Identifying Entry Points

In this section, the speaker discusses how to set alerts and identify entry points in trading.

Setting Alerts

  • Use your platform to set an alert that reminds you with a text or email when a specific market is reached.
  • Some platforms have sophisticated means of contacting you, while others use an audible alarm on your computer.

Identifying Entry Points

  • Identify what you're looking for in terms of entry. Wait for price to get down there while price is trading lower.
  • Formulate an idea of what it is that you're going to do in terms of risk, how much you're going to put on the trade when you buy long, and where you're aiming to get out of a market with a profit.
  • Eventually, price will drive down into that down candle or bullish order blocks high at that moment. If you're in front of your charts, enter the market with a long position at that point.
  • You can also rate the market as it hits that down candle if you don't want to rely on limit orders. Key off demo entries on the down candles body of the candle's high and cut or open (in this instance any down candle). The body begins with the opening and ends with the close.

Internal Range Liquidity

In this section, we learn about internal range liquidity.

Internal Range Liquidity

  • When trading inside a range defined by external range liquidity, look for an expansion up into a known level of external range liquidity.
  • External range liquidity is where we offset some or all our long positions.

Profit Taking and Risk

In this section, we learn about profit-taking and risk.

Profit Taking

  • Identify the buy level and enter the market. Ideally, have in mind where you're looking to take your profits above an old high in the form of buy stops.
  • Sell your position to willing buyers in the form of those individuals that hold buy stops above that old high.

Risk

  • Take your attention back down to that bullish order block because it's going to give you everything you need for your trading plan. Identify the entry at the open of the down candle (buy point or five pips above it).
  • Focus on the midway point of that down candle, which is going to be in the form of a mean threshold. The best order blocks will not see price trade down below the midway point of the entire body of the candle. Your protective cell stop is going to be below the bullish order block's low or below its close.

Conclusion

In this section, we learn about what happens when price shows responsiveness and trades up and through.

Conclusion

  • Eventually, price should show a responsiveness and trade up and through.

Bullish Order Block Trading

In this section, the speaker introduces the concept of bullish order block trading and explains how it can be used to get in sync with institutional order flow.

Liquidity-Based Bias

  • If the monthly, weekly, and daily charts are bearish, there is an opportunity to get in sync with institutional order flow.
  • Look for liquidity on the buy side on intraday charts (4 hours or less).
  • Short for a target under a recent low. Target near-term liquidity on the daily chart.
  • Primarily trade in the direction of the monthly chart.

Anticipating Market Entry

  • Interest rate charts 4 hours or less will be correcting and retracing lower.
  • Look for protective cell stop raids or returns to bullish order blocks or fair value gaps and/or filling up a liquidity void each offering a potential low-risk liquidity run buying for a target above a recent high.
  • Preferably look for something in the weekly chart that would support even higher.

Note that this is not an exhaustive treatment of bullish order block trading. The speaker promises more detailed instruction later in the month.

Identifying Support and Resistance Levels

In this section, the speaker discusses how to identify support and resistance levels on a monthly chart.

Equal Highs as Resistance Level

  • The speaker points out equal highs on the chart as a resistance level.
  • Price hits the support level after coming down from the equal highs.
  • The speaker classifies this level as a support level.

Order Block Validation

  • An up candle violates the down candle right before hitting the support level, validating an order block.
  • This creates an opportunity to buy if price comes back down into this candles opening where it starts to body the candle that price level is 94.58.

Another Potential Support Level

  • A down candle off of another potential support level could be a potential bullish order block.
  • Traders go down there to pick up more opportunities to get long at a cheaper price.

Weekly Chart Analysis

In this section, the speaker drops down into a weekly chart and analyzes how it gives us a weekly bias as well.

Objective for Going Long

  • Price trades down into that level and rallies away.
  • Looking for an objective to go long on this level in here right in here so how many times did price move away from this down candle is by identified again we're going back out to a monthly chart.

Identifying Monthly Order Blocks

In this section, the speaker discusses how to identify monthly order blocks and wait for evidence to support the idea that large traders want to send price higher.

Monthly Order Block Identification

  • Identify the monthly order block on a chart.
  • Wait for price to trade down into it and see if it wants to rally away.
  • Refine the order block level as needed based on price movements.

Trading Opportunities

  • Anticipate trading opportunities when price trades back down into an internal range liquidity.
  • Look for responsiveness on the upside after liquidity is absorbed.
  • Be a buyer at identified levels with expectations of seeing a run.

Avoiding Bearish Order Blocks

In this section, the speaker explains why bearish order blocks should be avoided and how they can interfere with institutional order flow.

Long-Term Trend Direction

  • Avoid bearish order blocks when long-term trend direction suggests going higher overall.
  • Don't look for sales in bullish markets; instead, look to buy dips and sell rallies to take profit.

Institutional Order Flow

  • Standing in the way of institutional order flow can lead to missed opportunities.
  • Sell longs when buy stops are above highs where willing buyers exist.

Keying Off Daily Time Frames

In this section, the speaker discusses using daily time frames and refining levels using four-hour time frames.

Daily Time Frame Levels

  • Use daily time frames as key levels for trading opportunities.
  • Refine these levels using four-hour time frames as needed based on price movements.

Bullish Order Block Validation

  • Validate bullish order blocks by looking for evidence of willingness from large traders to move price higher.
  • Look for a move of two to three heights or the range of the order block as a rally away to anticipate retracements and buying opportunities.

Understanding Bullish Order Blocks

In this section, the speaker explains how to identify bullish order blocks and refine levels based on higher time frames.

Identifying Bullish Order Blocks

  • A bullish order block is identified when a candle's open is higher than the previous candle.
  • The level can be refined by looking at a higher order block or a higher time frame.
  • Look for a rally of two to three times the order block's body height.

Refining Levels Based on Time Frames

  • Use the opening price of candles to refine levels.
  • Add pips to levels to cover dealing spread.
  • Every time there is a new down candle, it becomes the new potential bullish order block.
  • Refine entries and levels from higher time frames to lower ones.

Taking Profits and Adding Positions

In this section, the speaker explains how to take profits and add positions based on external range liquidity.

Taking Profits

  • Take partial profits after price makes a run through an old weekly high.
  • Look for weekly highs as profit targets.

Adding Positions

  • When price comes back down, add back positions taken off earlier.
  • Enter external range liquidity at high points above weekly highs where buy stops are placed.

Trading Based on Daily Time Frames

In this section, the speaker explains how trading can be refined further using daily time frames.

Refining Levels Based on Daily Time Frames

  • Levels become more refined when viewed from daily time frames.
  • Blend down candles together to get one full bullish order block.

Mean Threshold of Down Candle

In this section, the speaker explains how to identify mean threshold of down candles.

Identifying Mean Threshold of Down Candles

  • Look for the mean threshold of a down candle.
  • This is the middle point of the down candle.
  • External range liquidity is expected above weekly highs.

Dynamic Trading Based on Time Frames

In this section, the speaker explains how to use monthly, weekly and daily time frames to get a directional bias.

Using Monthly, Weekly and Daily Time Frames

  • Use monthly time frames to get a directional bias.
  • Refine levels based on weekly time frames.
  • Wait for confirmation that there is displacement by smart money.
  • Use daily time frames to refine entries and levels further.

Long Bullish Order Blocks and Bearish Order Blocks

In this section, the speaker discusses the importance of focusing on long bullish order blocks when the monthly, weekly, and daily charts show clear indications of market accumulation. The speaker also explains how bearish order blocks can be used to take profits at certain times of the day.

Focusing on Long Bullish Order Blocks

  • It is important to focus on long bullish order blocks when there are clear indications of market accumulation in the monthly, weekly, and daily charts.
  • This strategy helps capture external range liquidity and draw allocations from large institutional traders that trade managed funds and larger position holders.

Using Bearish Order Blocks to Take Profits

  • Bearish order blocks can be used to take profits at certain times of the day when profit taking should take place.
  • However, if time of day is not a factor, bearish order blocks should not be considered as they may pause and consolidate instead of driving price through an old high.
  • When using bearish order blocks to take profits, it is important to wait for Asia, Frankfurt, and London to retrace a little bit before driving through for a new higher high.

Conclusion

In this section, the speaker concludes by wishing good luck and good trading.

  • The goal of this teaching was to help traders focus their attention on long bullish order blocks when there are clear indications of market accumulation in the monthly, weekly, and daily charts.
  • By doing so, traders can capture external range liquidity and draw allocations from large institutional traders that trade managed funds and larger position holders.
  • Good luck and good trading!
Playlists: 2016 ICT Private Mentorship Core Content Month 04
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