ICT's 2022 Mentorship Program - Lesson Two Review

Introduction

This tutorial serves as a comprehensive step-by-step guide based on ICT's 2022 Mentorship Program Lesson Two, focusing on the essential trade setup strategies that can be applied in trading. It breaks down the concepts presented in the video into clear and actionable steps, allowing traders to gain insights into the analysis and execution of trades effectively.

Chapter 1: Trade Setup Overview

• The primary focus of the mentorship program is to teach a specific trade setup that revolves around using price charts without any indicators.
• The objective is to identify and execute one trade per week, aiming for a 20% return on investment while avoiding overtrading.
• The main trade setup taught is based on the concept of fair value gaps.

Chapter 2: Top-Down Chart Analysis

Step 1: Weekly Chart for Bias

• Conduct your analysis at the start of the week or the end of the previous week.
• Focus on determining the market's direction based on:
  • Recent price movements (momentum and corrections).
  • Macro-economic factors and seasonality.
• Identify your bias (e.g., bearish if expecting prices to decline).

Step 2: Daily Chart for Liquidity and Imbalances

• Analyze swing highs and lows to locate areas of liquidity:
  • Buy stops are above swing highs.
  • Sell stops are below swing lows.
• Look for imbalances where the price has moved rapidly without prior price discovery (i.e., gaps between candles).

Step 3: Hourly Chart for Price Behavior

• Use the hourly chart to observe how price seeks liquidity:
  • Identify short-term highs and lows.
  • Expect a price move in the opposite direction before a significant move in the anticipated direction.
• Mark significant highs and lows based on your analysis from the weekly and daily charts.

Chapter 3: Identifying Stop Hunts

Step 4: 15-Minute Chart for Detail

• Zoom in on the 15-minute chart to identify specific stop hunts.
• Look for areas where liquidity has been created through repeated touches at highs or lows.
• Recognize the formation of a fair value gap where a stop hunt has occurred.

Chapter 4: Entry, Exit, and Trade Management

Step 5: 1-5 Minute Charts for Execution

• Use one to five-minute charts for precise entry and exit points:
  • Identify the fair value gap created by the previous price movements.
  • Set your entry order within the fair value gap.
• The fair value gap is defined by:
  • The first candle (spike high or low).
  • The second candle (rapid movement).
  • The third candle that completes the setup.

Step 6: Placing Orders

• Choose to enter with either a market order or a limit order within the fair value gap.
• Place your stop loss:
  • At the high of the first candle for short trades.

Step 7: Managing the Trade

• Determine exit points based on:
  • Liquidity zones established in your earlier analysis.
  • Fair value gaps that may act as target points.
• Consider taking partial profits at identified liquidity points while allowing the rest to run if conditions remain favorable.

Conclusion

This tutorial has outlined the key steps from ICT's mentorship program regarding trade setups, emphasizing the importance of top-down analysis and the fair value gap concept. By following these structured steps, traders can improve their analysis and execution skills, leading to more strategic trading decisions. As you gain experience, consider backtesting these methods to refine your approach and adapt to your trading style. Happy trading!