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ICT Mentorship Core Content - Month 05 - Defining Institutional Swing Points
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ICT Mentorship Core Content - Month 05 - Defining Institutional Swing Points

Lesson 1.5: Defining Institutional Swing Points

In this lesson, the instructor introduces the concept of institutional swing points and discusses their significance in trading.

Institutional Swing Points

  • Institutional swing points refer to specific patterns in price action that are important for institutional traders.
  • A swing high is formed when there is a high with lower highs on both sides, indicating a potential reversal point.
  • Conversely, a swing low is formed when there is a low with higher lows on both sides.
  • Understanding institutional swing points conceptually is crucial for identifying trading opportunities.

Two Forms of Swing Points

The instructor explains that there are only two forms of swing points in institutional trading: stop runs and failure swings.

Stop Runs and Failure Swings

  • Stop runs occur when the market makes a higher high but fails to sustain it, resulting in a breakdown and rejection at the highs.
  • This pattern can be surprising and frustrating for traders who bought at the higher high, as it quickly reverses.
  • On the other hand, failure swings happen when the market makes a lower low but fails to continue downward, leading to an aggressive upside move.
  • These two forms of swing points provide opportunities for traders to enter or exit positions based on their characteristics.

Importance of Breaker Swing Points

The instructor emphasizes the significance of breaker swing points and why they are essential to understand.

Breaker Swing Points

  • Breaker swing points are considered the most powerful and dynamic price patterns that traders need to learn conceptually.
  • They occur when the market creates a short-term low between a higher high and the previous high (for selling scenarios).
  • Breaking down below this short-term low indicates trapped sellers and often leads to an aggressive move away from the level.
  • Breaker swing points can be associated with various factors such as bearish order blocks, fair value gaps, or liquidity voids.

Characteristics of Breaker Swing Points

The instructor explains the characteristics and behavior of breaker swing points in more detail.

Characteristics of Breaker Swing Points

  • Breaker swing points often occur after a rally to an area of old resistance.
  • This resistance can be interpreted as a bearish order block, a previous low, or a high that falls short initially before trading lower.
  • The market may make one more pass higher, driving out short-term highs and spooking traders who are already short.
  • Ultimately, price tends to reach the expected level (resistance) that traders anticipated initially.

Anticipating Price Levels

The instructor discusses how to anticipate price levels based on institutional reference points.

Anticipating Price Levels

  • When price hovers just below a key institutional reference point (e.g., bearish order block), there is an expectation for price to trade towards it precisely or slightly beyond it.
  • By identifying these levels on charts (represented by blue lines), traders can anticipate selling opportunities or areas of resistance.
  • Understanding the concept of order blocks and observing their behavior helps in recognizing breaker swing points.

Bearish Order Blocks and Breaker Swing Points

The instructor explains the relationship between bearish order blocks and breaker swing points.

Bearish Order Blocks and Breaker Swing Points

  • Many times, the bearish order block is just above the short-term low created before the higher high in breaker swing points.
  • Price may come close to filling in a fair value gap or closing a liquidity void but fall short initially before making a second leg up.
  • Breaker swing points occur when the market breaks down below the short-term low, trapping initial sellers and targeting buy stops.
  • Studying intraday charts can provide numerous examples of how these patterns materialize daily in various currency pairs.

The transcript is already in English.

New Section

In this section, the speaker discusses the importance of identifying key levels or institutional reference points on price charts to anticipate trading opportunities. They explain how certain patterns, such as the breaker pattern, can be used to identify entry and exit points in the market.

Identifying Key Levels and Institutional Reference Points

  • The speaker emphasizes the need to have key levels or institutional reference points already marked on your chart to capitalize on trading opportunities.
  • Certain scenarios like stop runs, fair value gaps, or liquidity voids can align well with patterns like the breaker pattern.
  • It is important to study real examples on charts to understand these concepts better.

Breaker Pattern for Short-Term Highs and Lows

  • The breaker pattern can offer excellent entry points for both bearish and bullish trades.
  • Traders should trust institutional reference points taught in September tutorials and free resources.
  • Experience helps in determining if a reversal will occur after selling above a previous high or buying below a previous low.

Trading Strategies with Breaker Patterns

  • Once a breaker pattern is identified, traders can use it as a trigger for their trades.
  • For example, if a bearish swing point breaks down, it becomes a trigger for selling. If price returns to that level, it confirms the trade opportunity.
  • The presence of a stop run adds confidence to the trade setup.

Understanding Market Behavior with Breaker Patterns

  • Breaker patterns indicate an expectation of market direction based on order flow dynamics.
  • Traders should look for evidence such as stop runs or moves breaking lower near resistance levels before entering trades.
  • Price action moving favorably supports traders' confidence in their positions.

Applying Breaker Patterns for Selling and Buying

  • For selling opportunities, traders want to see a short-term high broken followed by price returning back up to that level. This indicates an advantage for short sellers.
  • For buying opportunities, traders want to see a short-term low formed at or just above a key support level. This can be a bullish order block or an unfilled liquidity void.

New Section

In this section, the speaker further explains the breaker pattern and its advantages for short selling. They discuss the importance of understanding institutional order flow and support levels when identifying trading opportunities.

Advantages of Breaker Patterns for Short Selling

  • The breaker pattern offers a built-in advantage for short sellers.
  • Although it may seem fearful to sell above an old high, having experience in analyzing institutional order flow and support levels provides confidence in executing such trades.

Identifying Entry Points with Breaker Patterns

  • Traders should look for a short-term high being broken followed by price returning back up to that level as an entry point for selling.
  • The presence of a stop run adds further confirmation to the trade setup.

Market Behavior and Breaker Patterns

  • Breaker patterns clear out buy-side liquidity, allowing traders to engineer new shorts.
  • Once price returns back up to the previous resistance level, there is less likelihood of it trading back up due to already knocking out initial bearish traders.

Applying Breaker Patterns with Confidence

  • Traders can sell at the breaking point with confidence if they are unable to enter earlier during the aggressive breakdown phase.
  • Setting stop loss above the high provides protection against potential reversals.

Understanding Support Levels and Order Flow

  • Institutional reference points and support levels play a crucial role in determining market behavior.
  • Traders should analyze evidence like stop runs or moves breaking lower near resistance levels before entering trades.

New Section

In this section, the speaker discusses how breaker patterns can be used for buying opportunities. They explain how identifying key support levels and understanding market behavior can help traders make informed decisions.

Breaker Patterns for Buying Opportunities

  • Breaker patterns can also be used to identify buying opportunities.
  • Traders should look for a short-term low formed at or just above a key support level as an entry point for buying.

Support Levels and Order Flow

  • Key support levels, such as bullish order blocks or unfilled liquidity voids, are important reference points for identifying buying opportunities.
  • Understanding institutional order flow and market dynamics helps in making informed trading decisions.

Entry Points and Confirmation

  • Traders want to see price returning back up to the previous support level after a short-term low is formed as confirmation of the trade opportunity.
  • This indicates that buy-side liquidity has been cleared out, allowing traders to enter new long positions with confidence.

Time Frame Considerations

  • The time between an old low and the formation of a new low can vary significantly.
  • Traders should focus on recent lows that have seen a slight retracement before another drop, followed by hitting the bullish institutional reference point.

New Section

In this section, the speaker concludes their discussion on breaker patterns. They emphasize the importance of practice and experience in effectively utilizing these patterns for trading decisions.

Practice and Experience

  • Selling above an old high or buying below an old low may seem challenging for inexperienced traders.
  • It is crucial to practice analyzing institutional order flow and support levels on different time frames to gain confidence in executing trades based on breaker patterns.

Institutional Order Flow Analysis

  • Analyzing evidence like stop runs or moves breaking lower near resistance levels provides insights into market behavior.
  • Price action moving favorably supports traders' confidence in their positions.

Confidence in Trading Decisions

  • Breaker patterns offer advantages for both short selling and buying opportunities when understood correctly.
  • Having confidence in executing trades based on breaker patterns comes with experience and understanding of institutional order flow.

Summary

  • Breaker patterns can be used to identify entry and exit points in the market.
  • Traders should have key levels or institutional reference points marked on their charts to capitalize on trading opportunities.
  • Breaker patterns offer advantages for short selling and buying, but confidence in executing trades comes with practice and experience.

Accumulating Sell Stops

In this section, the speaker discusses the importance of accumulating sell stops and buying at a deep discount. They emphasize the need for an immediate response away from a certain level and caution against trading below that level for too long. The speaker also mentions that as position traders, they may have to wait a long time for confirmation on daily time frames.

Importance of Immediate Response

  • It is crucial to see an immediate response away from a certain level.
  • Trading below that level for an extended period is not desirable.

Waiting for Confirmation

  • As position traders, it may take a while to receive confirmation on daily time frames.
  • The market often creates a wick after trading down to make a low before moving away from it.
  • Candlestick traders focus on candlestick patterns, while institutional traders trade bold face candles before they become wicks or hammers.

Confidence in Buying Below Old Lows

  • Retail traders tend to justify their actions with confirmation, whereas institutional traders have confidence in buying below old lows.
  • A favorable entry point can be obtained by waiting for a market structure shift.

Bearish Breaker Swing Point

In this section, the speaker introduces the concept of bearish breaker swing points. They explain that once sell stops have been cleared out at this level, there is no expectation or reason to believe that the market needs to come back down into this level again. However, if there is a bullish order block nearby, it could provide another opportunity for buying.

Clearing Out Sell Stops

  • Once sell stops have been cleared out at a bearish breaker swing point, there is no need for the market to return to that level.
  • The market quickly rejects and moves away from this level.

Buying Opportunity

  • If the market does give an opportunity to come back down to the breaking point, it can be a buying opportunity.
  • However, there may also be a bullish order block nearby that could provide another entry point.

Turtle Soup Pattern

In this section, the speaker discusses the turtle soup pattern as their preferred pattern in market structure. They explain that this pattern involves a false break above an old high, followed by rejection and quick movement away from it. The speaker emphasizes that entering at the lowest possible point for buys and selling at the highest possible point for sales requires conviction but offers high probability entries.

Turtle Soup Pattern

  • The turtle soup pattern is based on a false break above an old high.
  • It involves quick rejection and movement away from the high.
  • Entering at the lowest possible point for buys and selling at the highest possible point for sales provides high probability entries.

Failure Swing

In this section, the speaker introduces the concept of failure swings as another form of institutional swing points. They explain that failure swings occur when there is a resistance level that is broken but not surpassed on subsequent attempts. The speaker highlights that while breaker setups may not always occur, there are still trading opportunities to consider.

Failure Swing

  • Failure swings occur when a resistance level is broken but not surpassed on subsequent attempts.
  • Breaker setups may not always occur, leading to missed opportunities.
  • There are still trading opportunities to consider even if breaker setups do not happen.

Due to limitations in available timestamps, some sections may have been omitted or combined with others.

New Section

In this section, the speaker discusses a trading pattern and how to identify potential buy and sell setups based on retracements and short-term highs or lows.

Identifying Buy and Sell Setups

  • The speaker explains that if a buy setup retraces off the anticipated support level and then fails to continue downwards, making one more pass up, it can be an opportunity for a buy setup. Similarly, if a sell setup takes out a short-term low or high, it presents another opportunity.
  • The market has already shown a willingness to trap traders above certain levels of liquidity. Sellers are stuck below these levels while buyers are stuck above them. This creates an opportunity for institutional traders to reprice the market in their favor.
  • Institutional traders aim to manipulate the market by trapping funds on the wrong side of trades. They may reprice aggressively after taking out certain levels, causing trapped traders to incur losses.
  • Traders who follow long-term position strategies tend to sell on breakouts below 20-period lows and buy above 20-period highs. Observing this phenomenon can provide insights into potential bullish or bearish order blocks.
  • It is important to wait for confirmation before making any trading decisions. Retracements may occur within a gray area where it is uncertain whether they will stop or continue in a particular direction.

New Section

In this section, the speaker emphasizes the importance of waiting for specific swing points to be violated before entering trades.

Waiting for Swing Points

  • When there is uncertainty about optimal entry points, it is advisable to wait for swing points to be broken before taking action. If expecting a sell setup, wait for the swing point above to be violated. If expecting a buy setup, wait for the swing point below to be broken.
  • Placing stop-loss orders is crucial for protecting positions. For sell setups, a stop loss can be placed just above the short-term high, while for buy setups, it can be placed just below the short-term low. These levels have already been traded with manipulation and are unlikely to be revisited.
  • If an ideal entry point is missed or not confirmed, one can wait for price to trade back up to a certain level (for shorts) or down to another level (for longs). These levels should have already experienced manipulation and provide opportunities for entering trades with confidence.

New Section

In this section, the speaker discusses how institutions aim to trap funds by driving prices in certain directions and taking advantage of pending orders.

Institutional Trading Strategies

  • Institutions enter the market with the intention of trapping or knocking off funds. They drive prices in specific directions to trigger pending orders and then take advantage of them by aggressively repricing and going in the opposite direction.
  • Funds may have pending buy stops above certain levels, anticipating a long-term trend-following buy program. Institutions exploit this by driving prices up and triggering these buy stops before selling aggressively.
  • Traders need to carefully analyze price movements and anticipate potential scenarios but acknowledge that they may misread or miss opportunities. Waiting for confirmation at specific levels is key before entering trades.

New Section

In this section, the speaker emphasizes the importance of waiting for rejection signals and using swing points to enter trades.

Rejection Signals and Using Swing Points

  • When the market rejects a certain level, it may not be immediately apparent as a rejection signal. Traders may anticipate one more pass lower before finding an ideal buy entry point. If this does not occur, they can wait for price to trade back up to a specific level for short setups.
  • Stop-loss orders should be placed just above the swing point for short setups and just below the swing point for long setups. These levels have already been traded with manipulation, making them less likely to be revisited.

The transcript provided is in English, so the notes are also written in English.

New Section

The speaker discusses the importance of understanding price dynamics and how institutional traders manipulate the market to trap orders. They explain the concept of swing points and emphasize the significance of breaker setups and failure swings in trading.

Understanding Price Dynamics

  • Institutional traders manipulate prices based on order flow.
  • Dynamic price responses indicate that a sizable number of orders have been trapped.
  • Traders do not want to let go of their positions, especially if they are short.
  • Aggressively repricing higher would collapse their short position, so they reprice quickly to force others to buy back at a higher price.
  • Smart money sells when price moves lower, collapsing their long positions.

Institutional Swing Point Theories

  • Breaker setups are ideal trade entry patterns as they offer deep discounts for buying and premium prices for selling.
  • It may be uncomfortable or scary at first, but practicing in a demo account helps gain confidence in executing breaker setups.
  • Demo accounts allow traders to step in front of the market, sell at new highs, and observe price responsiveness.
  • Immediate feedback from correct entries builds confidence and encourages further trading.

Breaker Setups vs Failure Swings

  • Breaker setups occur when stops are run, offering optimal trade opportunities.
  • Failure swings also indicate manipulation but require a slightly different approach than breaker setups.
  • While breaker setups are ideal, missing them still provides opportunities for entry using failure swings.

Simplifying Trading Approaches

  • There are only two ways the market turns around: through breaker setups or failure swings.
  • Sellers can sell at highs or on retracements back to broken market structures.
  • Buyers can buy at lows or on retracements back to broken market structures.

Focus on Order Flow and Market Structure

  • Understand where orders are relative to old institutional order flow reference points (support/resistance).
  • Analyze how the market behaves at these levels and whether it passes through or rejects them.
  • Breaker setups may lead to dynamic rallies, while failure swings offer opportunities for reversals.

New Section

The speaker emphasizes the importance of focusing on breaker setups and failure swings in trading. They encourage traders to practice in demo accounts to understand the characteristics of these swing point theories before using live money.

Importance of Breaker Setups and Failure Swings

  • Breaker setups and failure swings are the two main ways the market turns around.
  • Both indicate manipulation but require slightly different approaches.
  • Breaker setups offer optimal trade entries, while failure swings provide alternative entry opportunities.

Trading with Demo Accounts

  • Practicing in a demo account allows traders to learn the characteristics of breaker setups and failure swings.
  • Rushing into live trading without understanding these swing point theories can lead to frustration and poor decision-making.
  • Demo accounts provide a safe environment to gain experience, build confidence, and avoid unnecessary risks.

Limitations of Trading Patterns

  • Avoid getting caught up in numerous trading patterns like head and shoulders or bear/bull flags.
  • Focus on understanding order flow relative to institutional reference points (support/resistance) on high time frames.
  • Analyze how price behaves at these levels, whether it breaks through or falls short.

New Section

The speaker reiterates that there are only two conditions in the marketplace: selling at highs or retracements back to broken market structures for sellers, and buying at lows or retracements back to broken market structures for buyers. They emphasize the simplicity of trading based on order flow and market structure.

Simplifying Trading Approaches

  • Sellers can sell at highs or on retracements back to broken market structures.
  • Buyers can buy at lows or on retracements back to broken market structures.
  • Avoid getting overwhelmed by numerous trading patterns or candlestick formations.
  • Focus on understanding order flow and market behavior at key support/resistance levels.

Limited Market Conditions

  • The market only turns around through breaker setups or failure swings, indicating manipulation.
  • Breaker setups offer optimal trade entries, while failure swings provide alternative entry opportunities.
  • There are no other patterns or conditions to consider; it is a matter of understanding order flow and market structure.

Importance of Demo Accounts

  • Practicing in a demo account helps traders understand the characteristics of breaker setups and failure swings.
  • Rushing into live trading without this knowledge can lead to frustration and poor decision-making.
  • Demo accounts provide a safe environment to learn, gain experience, and build confidence before using real money.
Playlists: 2017 ICT Private Mentorship Core Content Month 05
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