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ICT Mentorship Core Content - Month 04 - ICT Vacuum Block
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ICT Mentorship Core Content - Month 04 - ICT Vacuum Block

Introduction to Reinforcing Order Block Theory

In this section, the speaker introduces the concept of reinforcing order block theory and focuses on the bullish vacuum block.

Understanding Bullish Vacuum Blocks

  • A bullish vacuum block is a gap in price action caused by a volatility event, such as non-farm payroll or session open in futures.
  • The gap represents a lack of liquidity directly related to the event.
  • It is important to note that traders often assume that the market will continue moving higher after a gap up.

Depiction of Price Action and Volatility Events

This section explains how short-term lows are formed in price action and provides examples of different types of markets.

Short-Term Lows Formation

  • Short-term lows can be formed in various markets, including futures contracts with session opens and closes or stocks like S&P 500.
  • Volatility events, such as economic calendar releases or geopolitical events, can inject large volatility into the market.
  • If the market has been rallying for days or weeks before a swing low, it could indicate an exhaustion gap.

Exhaustion Gaps and Market Direction

This section discusses exhaustion gaps and their significance in different market conditions.

Exhaustion Gaps

  • An exhaustion gap typically represents capitulation or the last bit of momentum in an underlying trend.
  • If there has been a downward correction in an upward market or if there is anticipation of bullish news, a gap up may indicate potential higher prices.

Gap Up and Liquidity Expectations

This section explores the concept of liquidity expectations when observing a gap up in price action.

Liquidity and Gap Up

  • When the market gaps up from a discount level, it indicates an absence of trades in that range.
  • The gap creates a vacuum of liquidity, and there is a high probability that the market will attempt to fill the gap.
  • Traders should pay attention to the space between candles as it represents important price levels.

Identifying and Analyzing the Gap

This section focuses on identifying and analyzing the gap in order to determine potential market direction.

Analyzing the Gap

  • The absence of trades within the gap range defines it as a vacuum block.
  • The high and low of the gap serve as reference points for analysis.
  • Traders need to assess whether the market will continue moving away from the gap or if it will trade back down and close within that range.

Bullish Order Block Considerations

This section discusses considerations when looking for bullish order blocks or down candles that may prevent complete filling of the gap.

Bullish Order Blocks

  • If expecting a bullish market, traders should look for any bullish order block or down candle that could prevent complete filling of the gap.

Timestamps are approximate and may vary slightly.

Understanding Buy Opportunities in Price Gaps

In this section, the speaker discusses potential buy opportunities in price gaps and how to manage risk.

Identifying Buy Opportunities

  • When a price gap occurs, there may be an opportunity to buy if immediate feedback is seen.
  • Consider the risk associated with entering at the gap and use a stop loss below the lowest low for risk management.
  • The range between the opening of the gap and the close of the previous candle before the gap can help define risk.

Time of Day Sensitivity

  • If price trades lower into an order block area but there is a stronger conviction that it will trade back down to the last up candle before the gap, it may be better to wait.
  • Time of day can play a role in determining whether price will close or leave a gap open.
  • If it's early in New York session or London session, there is a higher chance that price will close the gap. Late afternoon gaps are more likely to remain open.

Trading Scenarios

  • If time of day permits more trading opportunities, such as early New York or London sessions, it is highly unlikely for price to leave a gap open.
  • However, if it's later in the morning (around 10 am or 11 am), there is a possibility that only part of the gap will be closed during that specific trading day. This presents a fair value gap for future trading.

Closing Gaps and Liquidity

  • Two reference points are important: opening of gapped up candle and close of previous up candle before the gap.
  • A complete closure of the gap indicates balanced price delivery within that range.
  • Higher prices can be expected if there is still bullish liquidity above the marketplace after closing the gap.

Risk Management and Leverage

  • Buying at this point with a stop loss below the lowest low provides defined risk and potential leverage.
  • It is important for price not to come back down below the level that caused the gap closure, as it would indicate a bearish order block.

Summary

A vacuum block or breakaway gap occurs when there is a complete closure of a gap, indicating efficient price delivery. Not all gaps fill completely, especially if there is a bullish order block within the gap. If the gap remains open, it shows strength and willingness for higher prices. Risk can be managed by using stop losses and defining risk levels based on reference points.

Anticipating Bullish Moves in Price Gaps

In this section, the speaker explains how to anticipate bullish moves in price gaps and the significance of vacuum blocks.

Understanding Vacuum Blocks

  • A vacuum block refers to a breakaway gap where liquidity is created due to the closure of a previous gap.
  • Not all gaps fill completely, especially if there is a bullish order block within the gap.
  • A fair value gap may occur if price only comes down to a bullish order block before rallying higher.

Trading Strategies

  • If expecting higher prices and there is a gapped up scenario, buying at that point with defined risk can be considered.
  • The low of the up candle formed at the gap should be cleanly broken through for bullish confirmation.
  • Once price has closed in and filled the vacuum block range, it is permitted to trade bullishly higher.

Liquidity and Price Movement

  • Closing in that range indicates balanced liquidity delivery and allows for further upside movement.
  • Taking out the high after closing in on the vacuum block suggests continued upward momentum.

Summary

A vacuum block represents efficient price delivery after closing a previous gap. Anticipating bullish moves involves understanding whether gaps will completely fill or leave fair value gaps. Buying opportunities can arise when price breaks through key levels and confirms bullishness. Once the vacuum block is filled, price can trade higher with liquidity support.

Factors Influencing Gap Filling

In this section, the speaker discusses factors that influence whether gaps will fill completely or remain open.

Bullish Order Blocks and Fair Value Gaps

  • If there is a bullish order block within a gap, price may only come down to that level before rallying higher.
  • This creates a fair value gap, which can be used as a reference point for future trading opportunities.
  • If the fair value gap remains open, it indicates strength and willingness for higher prices.

Time of Day and News Events

  • Late New York openings or gaps after 10 am to 11 am may result in partial gap closures during the trading day.
  • News events at 8:30 am often cause significant gaps in the market.
  • Understanding time of day sensitivity helps determine whether gaps will close completely or remain open.

Closing Gaps and Liquidity Balance

  • Closing a gap involves balancing out the liquidity within that range.
  • Once a gap is closed, there is no reason for price to come back down below the last point of reference before the gap.
  • Price can then trade bullishly higher with potential for further upside movement.

Summary

The presence of bullish order blocks within gaps can influence whether they fill completely or leave fair value gaps. Time of day plays a role in determining gap closure likelihood. Closing gaps balances liquidity and allows for bullish price movement. Understanding these factors helps anticipate market behavior and identify trading opportunities.

New Section

In this section, the speaker discusses the importance of monitoring price movements and making decisions based on candlestick patterns.

Analyzing Price Movements

  • It is important to observe if the price goes below the first stop candles close.
  • If this happens, it may indicate a suspect situation and taking some profits would be advisable.
  • However, if the price starts to correct and go lower, it is recommended to exit the trade completely as there is no reason for it to continue.

Timestamps are not available for this section.

Playlists: 2016 ICT Private Mentorship Core Content Month 04
Video description

2016 Premium ICT Mentorship Core Content Video Lectures Audio and visuals are exactly as they were distributed in December 2016. CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN Trading performance displayed herein is hypothetical. Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance trading results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results. U.S. Government Required Disclaimer – Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with money you can’t afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results. Trade at your own risk. The information provided here is of the nature of a general comment only and neither purports nor intends to be, specific trading advice. It has been prepared without regard to any particular person’s investment objectives, financial situation and particular needs. Information should not be considered as an offer or enticement to buy, sell or trade. You should seek appropriate advice from your broker, or licensed investment advisor, before taking any action. Past performance does not guarantee future results. Simulated performance results contain inherent limitations. Unlike actual performance records the results may under or over compensate for such factors such as lack of liquidity. No representation is being made that any account will or is likely to achieve profits or losses to those shown. The risk of loss in trading can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. If you purchase or sell Equities, Futures, Currencies or Options you may sustain a total loss of the initial margin funds and any additional funds that you deposit with your broker to establish or maintain your position. If the market moves against your position, you may be called upon by your broker to deposit a substantial amount of additional margin funds, on short notice in order to maintain your position. If you do not provide the required funds within the prescribed time, your position may be liquidated at a loss, and you may be liable for any resulting deficit in your account. Under certain market conditions, you may find it difficult or impossible to liquidate a position. This can occur, for example, when the market makes a “limit move.” The placement of contingent orders by you, such as a “stop-loss” or “stop-limit” order, will not necessarily limit your losses to the intended amounts, since market conditions may make it impossible to execute such orders.