Elements Of A Trade Setup

Question 1

What is expansion?

Answer 1

Expansion is when Price moves quickly from a level of Equilibrium.

Question 2

What is the significance of Expansion?

Answer 2

When Price leaves a level quickly, this indicates a willingness on the part of the Market Makers to reveal their intended repricing model.

Question 3

What do we look for in Price in relation to Expansion?

Answer 3

The Orderblock the Market Makers leave at or near the Equilibrium.

Question 4

What is Retracement?

Answer 4

Retracement is when Price moves back inside the recently created Price Range.

Question 5

What is the importance of Retracement?

Answer 5

When price returns inside a recent Price Range this indicates a willingness on the part of the Market Makers to reprice to levels not efficiently traded for Fair Value.

Question 6

What do we look for in Price in relation to Retracement?

Answer 6

The Fair Value gaps and Liquidity voids.

Question 7

What is Reversal?

Answer 7

Reversal is when Price moves the opposite direction that current direction has taken it.

Question 8

What’s the significance of Reversal?

Answer 8

When Price reverses direction it indicates the Market Makers have ran a level of Stop and a significant move should unfold in a new direction.

Question 9

What do we look for in Price in relation to Reversal?

Answer 9

The liquidity pools just above an old Price High and just below an old Price low.

Question 10

What is Consolidation?

Answer 10

Consolidation is when Price moves inside a clear trading range and shows no willingness to move significantly higher or lower.W

Question 11

What is the importance of Consolidation?

Answer 11

When Price consolidates it indicates the Market Makers are allowing orders to build on both sides of the market. Expect a new Expansion near term.

Question 12

What do we look for in Price in relation to Consolidation?

Answer 12

The impulse swing in Price away from the Equilibrium price level that is found exactly in the halfway point of the Consolidation range.

Question 13

What are the 2 primary concerns when we refer to elements of a trade setup?

Answer 13

1. The context or framework surrounding the idea, in other words, what makes the idea favorable to trade. It has to be something that goes beyond indicators or support/resistance levels. There has to be something that builds a reason or narrative to want to do this trade.
2. Reference points in Institutional Order Flow. These are the tools to apply based on what the market’s providing you right now.

Question 14

What are the 4 principals that can be used to build context or a framework for a trade?

Answer 14

1. Expansion
2. Retracement
3. Reversal
4. Consolidation

Question 15

What are the reference points in Institutional Order Flow

Answer 15

1. Order blocks
2. Fair value gaps and Liquidity voids
3. Liquidity pools and stop runs
4. Equilibrium

Question 16

Which ICT tool is used in relation to Expansion?

Answer 16

Order block

Question 17

Which ICT tool is used in relation to Retracement?

Answer 17

Liquidity voids or Fair value gaps

Question 18

Which ICT tool is used in relation to Reversals?

Answer 18

Liquidity pools

Question 19

Which ICT tool is used in relation to Consolidation?

Answer 19

Equilibrium

Question 20

How is price delivered?

Answer 20

All markets start with consolidation. It then moves into expansion when there’s an impulse move, or an impulse price swing. After the impulse wing, it either goes back into consolidation, or it goes into retracement. When retracement happens, it goes back into another level of expansion. At the expansion, it can also go into a reversal pattern. At the reversal, it will another retracement, then back into a consolidation.

Question 21

What delivers price?

Answer 21

The interbank price algorithm

Question 22

What do you need to look at when reading price?

Answer 22

Where price is right now.
Where it’s likely to go, and where it came from?

Question 23

Why do all markets start with consolidation?

Answer 23

Market makers keep price in a tight, or defined, range until there’s enough money on both the upper and lower end of the ranges.
The market then typically moves in the direction that has the most money to absorb.

Question 24

How do we anticipate the direction price will move towards when the market is consolidating?

Answer 24

We wait for the expansion as the expansion will give us insight into what the market is most likely to do.
Then we wait for either a retracement, another consolidation or a reversal.