High Probability Market Reversal

ICT teaches how to identify a high probability reversal point when bullish longer term

Time Frame Setup

"on the 15-minute time frame this is going to give me all of the Salient points of liquidity that I believe is going to be pertinent to the session that I'm going to trade or about to trade and it also will have the built-in advantage of showing me the daily levels that I'd be interested in"

"I can determine those points of liquidity on the 15-minute time frame and I can also see all of the pertinent imbalances"

Daily Structure

"we start the day at midnight New York local time that's the beginning of the new day"

"what does the London session do between 2:00 and 5:00 in the morning what's the market do it drops"

Judith Swing

Definition

"a Judith swing is a fake price Run for the express purposes of taking Traders out of potentially profitable Traders position being long in this case or to put them into the opposite direction because there's always going to be Traders out there that trade a breakout"

Judith Swing - Fake Price Run Midnight 2:00 AM 3:30 AM Later Prior Low Breaks Below Low (Takes stops) Low of Day (3:30) Displacement Short-term High (Premium Price) Bullish Context "bullish on the daily chart weekly chart and monthly chart we're expecting higher prices"

High Probability Reversal Indicators

Bias Requirement

"the idea of focusing on a bias that is bullish on the daily chart weekly chart and monthly chart we're expecting higher prices"

"the bias cannot be derived until you at least confer with what the present narrative is the market is long-term bullish we're at all-time highs avoid trying to pick top"

Stop Run Recognition

"below that low is going to be what sell stops someone's going long there so if we're bullish and we see that they did in fact take out Traders the head stops below here at a time of day when it creates the high or low of the day"

"when it creates that low we want to see some kind of displacement to the upside cuz if it does do that that's indicating the algorithm is flashing like a billboard sign it's going to go up now"

Body Work - First Indicator

"see the Wicks are they're trading down and past that low that's the damage you see where the close of this candle is here yes this candle went all the way down there but then closed right there and then this candle opened went all the way down here pass that low again and then closed right there"

"the bodies respecting the fact that it didn't close below that low that tells me that this was a stop rate"

Swing Low Formation

"it closes here then I want to see the next candle what does it do does a little movement below that but then the body stops there what is that at that candle's close right there what is that that's a swing low at a time when I'm bullish at a time of the day when it creates the low of the day"

High Probability Reversal Point Recognition

"if I'm bullish it's knocked out traders that are long that had sell stops below that so we crossed all boxes off that this is a high probability reversal in a in a day that likely to go higher so that right there is my first indication that that's a a very high probability reversal point"

"you wait for the next candle does it create a swing low yes that's also part of power three"

Body Work - Reversal Recognition Prior Low Candle 1 Wick below Body above Candle 2 Wick below Body above Swing Low "body stops there" Displacement Key Observation "the bodies respecting the fact that it didn't close below that low that tells me that this was a stop rate"

Displacement & Fair Value Gaps

Premium Price Definition

"focus on seeking a premium price so what is a premium price it's going to be a short-term high and or a fair value Gap above market price"

Range Annotation

"between this low here to this candle here those are the range extremes that you're annotating"

Buy Side Imbalance

"I'm looking at how this offered buy side imbalance it's inefficient in the scope that it is not offered enough opportunity for people to sell it's moved one-sidedly on this time frame the 15minute time frame"

"so I'm anticipating price to want to do what offer price on the downside or offer it through sell-side delivery this is buy side delivery when price is expanding higher"

Sell Side Imbalance (Fair Value Gap Entry)

"when price shows you this this displacement to the upside and then you wait patiently for it to trade right back down into this candlesticks movement higher the market will want to offer down close or down expansion candles which is sells side delivery"

"it really means just simply this the market moved up right here one candle so it first started off real quick right here so it wants to come right back down and what that does it affords smart money to now enter to get long accumulate long positions"

Entry Framework

Waiting for Displacement

"the highest probability trade is to wait to see if there's displacement I'm going to wait for this right here I want to see it dig up into remember this is the sell side IM balance buy side efficiency"

50% Rule for Confirmation

"I want to see it run up into these extremes from here to here I want to see how it trades there does it trade all the way up to and close above halfway here's 50% of it does it close above that yes so what does that tell me algorithmically that it's going to use this inbalance here okay it's going to use that as a draw in liquidity"

Retracement to Fair Value Gap

"and now I want to see it do what work its way back down into this Gap from this candle's high and that candle's low this Gap right here I only going to refer to it in terms of its consequent encouragement which is the midpoint of that Gap the 50%"

"and I would use that on a lower time frame chart to see if it's going to offer me an opportunity to go long"

Entry Framework - Fair Value Gap Retracement 1. Stop Run Prior Low 2. Displacement Fair Value Gap (Created during displacement) 50% of Imbalance 3. Close Above 50% "does it close above that yes" 4. Retrace to FVG 50% Consequent Encroachment "the midpoint of that Gap the 50%" 5. Entry & Move Up ENTRY Relative Equal Highs Smart Money Entry "it affords smart money to now enter to get long accumulate long positions"

Body Work Analysis

Smart Money Entry Level

"where would they buy if you look at the high to the low here's the midpoint of that big up closed candle we went past it yes but look at where the bodies are closing are they closing at or below that candlestick's high no"

Buy Side Balance Sell Side Efficiency Fair Value Gap

"the fact that these candles are closing above the high that candle which makes this a buy balance cell efficiency Fair back you got trading down to that inefficiency and these candles bodies not closing at or below tells me that we're really going to move higher"

"did we trade to that candle and through it yes because we allow the Wicks to do that"

Stop Loss Placement

"so when you're using stop losses I'm looking at where those Wicks have done the damage prior to my entry or before I mov my stop loss"

"and because I know I see damage was done here and I I know that it can overshoot this a little bit okay so if I was long down here I my stop loss wouldn't be jammed up underneath these bodies because if it was I would have been stopped out prematurely"

Stop Loss Placement - Avoiding Premature Stop Out ENTRY at FVG 50% Midpoint of Big Up Candle Wick below Wick below Wick below "bodies are closing above" ❌ WRONG "stop loss wouldn't be jammed up underneath these bodies" ✓ CORRECT "below where Wicks have done the damage" Damage Zone Key Principle "I know that it can overshoot this a little bit" "if it was I would have been stopped out prematurely"

Study & Review

Click each card to reveal the answer (from transcript quotes)

What is a Judith swing?
"a Judith swing is a fake price Run for the express purposes of taking Traders out of potentially profitable Traders position being long in this case or to put them into the opposite direction because there's always going to be Traders out there that trade a breakout"
What is a premium price?
"what is a premium price it's going to be a short-term high and or a fair value Gap above market price"
What time frame does ICT use to see salient points of liquidity and pertinent imbalances?
"on the 15-minute time frame this is going to give me all of the Salient points of liquidity that I believe is going to be pertinent to the session that I'm going to trade or about to trade and it also will have the built-in advantage of showing me the daily levels"
What does displacement to the upside indicate after a low is created?
"when it creates that low we want to see some kind of displacement to the upside cuz if it does do that that's indicating the algorithm is flashing like a billboard sign it's going to go up now"
How do you know if bodies are respecting a level during a stop run?
"the bodies respecting the fact that it didn't close below that low that tells me that this was a stop rate"
What is the first indication of a high probability reversal point?
"if I'm bullish it's knocked out traders that are long that had sell stops below that so we crossed all boxes off that this is a high probability reversal in a in a day that likely to go higher so that right there is my first indication that that's a a very high probability reversal point"
What does ICT wait to see after displacement for the highest probability trade?
"the highest probability trade is to wait to see if there's displacement I'm going to wait for this right here I want to see it dig up into remember this is the sell side IM balance buy side efficiency"
What is the 50% rule ICT uses for confirmation?
"does it trade all the way up to and close above halfway here's 50% of it does it close above that yes so what does that tell me algorithmically that it's going to use this inbalance here okay it's going to use that as a draw in liquidity"
What does ICT call the midpoint of a fair value gap?
"I only going to refer to it in terms of its consequent encouragement which is the midpoint of that Gap the 50%"
What does sell-side delivery mean when price retraces after displacement?
"the market will want to offer down close or down expansion candles which is sells side delivery it really means just simply this the market moved up right here one candle so it first started off real quick right here so it wants to come right back down and what that does it affords smart money to now enter to get long accumulate long positions"
Where should stop losses NOT be placed to avoid premature stop out?
"if I was long down here I my stop loss wouldn't be jammed up underneath these bodies because if it was I would have been stopped out prematurely"
What does ICT look at when using stop losses?
"when you're using stop losses I'm looking at where those Wicks have done the damage prior to my entry or before I mov my stop loss"
What does it mean when candles bodies close above the midpoint of a big up candle during retracement?
"the fact that these candles are closing above the high that candle which makes this a buy balance cell efficiency Fair back you got trading down to that inefficiency and these candles bodies not closing at or below tells me that we're really going to move higher"
What is the bias requirement before deriving a trading decision?
"the bias cannot be derived until you at least confer with what the present narrative is the market is long-term bullish we're at all-time highs avoid trying to pick top"
What time does the new day start in ICT's framework?
"we start the day at midnight New York local time that's the beginning of the new day"