ICT Mentorship Core Content - Month 04 - ICT Breaker Block

Summary

In this video, "The Inner Circle Trader" delves into the concept of breaker blocks, a trading technique useful for highlighting potential trade setups. He explains how to identify bullish and bearish breakers by examining price movements, support and resistance levels, and market structure shifts. The emphasis is on understanding how market repricing happens and the significance of old highs and lows in determining trading strategies. The tutorial provides a comprehensive breakdown of how traders can mitigate losses and profit from price expansions by leveraging breaker blocks.

Highlights

• The video explains how to use the breaker block as a form of trade mitigation. 🚦
• A potential false break is a signal for a long or short-term trade setup under certain conditions. 🕵️
• Market structure shifts are key indicators of potential trade opportunities in breaker block strategy. 🔍
• Understanding the relationship between old highs/lows and current price can identify bullish or bearish trends. 🤔
• Market repricing can turn resistance levels into support in bullish breakers or the opposite in bearish scenarios. 🔄

Key Takeaways

• The Breaker block is a tool for identifying potential trade setups by leveraging market repricing moments. 📊
• Bullish Breakers focus on buying opportunities when the price breaks above a resistance level formed by previous highs. 🟢
• Bearish Breakers involve looking for selling opportunities as the price retraces back to a recent swing low. 🔴
• Understanding the concept of breaker blocks can enhance trading strategies by providing insights into potential market moves. 💡
• The study of old highs and lows can help in predicting future price expansions or retractions. 📈

Overview

Welcome to the intricate world of breaker blocks in trading, where strategic insights into price actions and market behaviors can unlock new opportunities for traders. In this video, 'The Inner Circle Trader' sheds light on how understanding the market structure through breaker blocks can significantly improve trading decisions.

The analysis begins with identifying potential false breaks in price, which serve as signals for bullish or bearish trade setups. By observing how the price interacts with old highs and lows, traders can anticipate support or resistance levels, effectively turning market configurations to their advantage.

The magic of breaker blocks lies in their ability to transform market understanding by highlighting repricing moments, where a breached resistance becomes a support, or the reverse, in bearish markets. As a powerful trading tool, breaker blocks reveal the hidden narratives behind price moves, enabling traders to act with more precision and confidence.

Chapters

• 00:00 - 00:30: Introduction to Breaker Blocks The chapter titled 'Introduction to Breaker Blocks' explores the concept of breaker blocks, a form of mitigation in trading. It focuses on utilizing breaker blocks to highlight and set up trades.
• 00:30 - 01:30: Identifying Short-term Lows and Highs Identifying Short-term Lows and Highs: This chapter discusses a technique for monitoring price movements to identify short-term lows and highs. The focus is on spotting a short-term low which, when pierced, could indicate a false break often termed as 'turtle soup.' When the price breaches a previous short-term low and moves down towards a support level, it may suggest a potential market reversal opportunity for traders.
• 01:30 - 02:30: Market Structure Shift and Breaker Blocks The chapter discusses the concept of market structure shifts and breaker blocks in trading. It highlights the strategy of observing sell stops to understand if the market intends to rise above a short-term low, possibly treating it as a resistance point. The focus is on identifying a significant price move higher to confirm a market structure shift.
• 02:30 - 04:30: Bullish Breaker Blocks Explained The chapter explains the concept of 'Bullish Breaker Blocks' in trading. It focuses on the behavior of price relative to previous highs and lows. When a price takes out a high or a short-term high, traders anticipate it will retrace back to that high, treating it as a strong support level. This is due to existing orders at that high look to be mitigated. Traders who were initially short at this level might want to remove their positions and potentially align with a new upward price move.
• 04:30 - 06:30: Bearish Breaker Blocks Explained This chapter explains the concept of bearish breaker blocks in trading. It focuses on the confirmation of a breaker as price moves away and the strategy of waiting for higher objectives to be met in price action. The chapter emphasizes the importance of focusing on the high positioned between two lower lows, where one low must be traded below to trigger the running out of sell stops. The attention is then directed towards the short-term high located between the two lows, which is used as a crucial point in analysis.
• 06:30 - 09:00: Bullish Breaker Blocks in Real Price Action In this chapter, the concept of 'Bullish Breaker Blocks' is discussed with a focus on real price action. It explains how resistance levels, once broken, often turn into support levels, forming what is known as a 'bullish breaker'. The chapter emphasizes understanding market dynamics by observing when the market moves higher to surpass an old high and subsequently drops below the low that created the new high. This change in focus helps in identifying potential support zones.
• 09:00 - 10:00: Conclusion and Further Learning The chapter focuses on bearish breakers, specifically examining their characteristics and trader behaviors surrounding them. A bearish breaker is defined as a bearish range or a down close candle occurring at the most recent swing low before an old high is surpassed. It is noted that when this swing low is eventually violated, traders who initially bought at this position may aim to recover their losses when the price revisits this level.

ICT Mentorship Core Content - Month 04 - ICT Breaker Block Transcription

• 00:00 - 00:30 we're going to be looking at the breaker okay and what we're looking at is how we can use this form of mitigation to highlight a trade setup
• 00:30 - 01:00 we're going to assume that we're watching price and it trades lower and creates a short-term low eventually when that short term low is violated and trades down into a support level we view that initial drop down below the previous low as a potential false break or turtle soup long below short-term lows there's going to
• 01:00 - 01:30 be sell stops and our expectation is we want to see if the market wants to get back above that short-term low initially it may come up and flirt with that same old low and give an indication it may want to view that as a resistance price point we're more inclined to wait to see if it wants to show a real significant price move higher eventually when we see that here this is going to be in the form of a market structure shift
• 01:30 - 02:00 it takes out the high or the short-term high that high is what we focus on wait for price to come back down into that old high when it trades there we view that as real support because there's going to be orders inside that high that will be looking to be mitigated in other words those individuals that were short at that high they're going to want to take those positions off and maybe get in sync with a new leg higher in price
• 02:00 - 02:30 as price moves away that confirms the breaker and then we wait for higher objectives to be met in price action again focusing on the high in between the two lower lows one low has to be traded below and it's going to run out to sell stops we focus our attention on the short term high that's in between the two lows we use that as a
• 02:30 - 03:00 resistance level that's broken that will become support making it a bullish breaker contrarily we can look at the market in this way when the market trades higher and takes out an old high and then breaks below the low that makes that new high our focus is there and we view that as
• 03:00 - 03:30 a bearish breaker okay so take a look at a closer look at a bearish breaker okay a bearish breaker is a bearish range or down close candle in the most recent swing low prior to an old high being violated the buyers that buy this low and later see this same swing low violated will look to mitigate the loss when price returns back to the swing low
• 03:30 - 04:00 this is a bearish trade setup worth considering so we have an old high here that's traded through and rejected it runs the stops above the old high those buy stops are now neutralized and we focus our attention on the swing low that formed between the two highs we see a market structure break
• 04:00 - 04:30 retrains back to the swing low that is the bearish breaker we look for another low to form with a new leg in price moving lower the salient points are what we're looking for is an old high to be ran out or a false break above an old high this rate on buy stops indicate buyers are trapped long
• 04:30 - 05:00 we know this is true when the market quickly does a repricing that's seen here repricing lower after buy stops are taken that is a confirmation that we are potentially seeing a new breaker forming the low gets violated here once market structure is broken down and all future retracements will be viewed as new selling opportunities especially once it trades back up to
• 05:00 - 05:30 the low here that gives us our bearish breaker okay for a bullish breaker it's a bullish range or up close candle in the most recent swing high prior to an old low being violated the sellers that sold this low and later see this same swing high violated will look to mitigate the loss when price returns back to the swing high this is a bullish trade setup worth considering
• 05:30 - 06:00 again we have an old low that's violated taking out cell stops below that old low our swing high is where we're going to be looking for our bullish breaker we have to wait for price to break through that swing high to confirm that there has been a run on stops and that that old swing high will house or inside that swing high will reside a bullish breaker as price trades back down to that swing high we would be buying that but the
• 06:00 - 06:30 expectation that there is going to be a mitigation that's taking place those sell orders that they use to drive prices down below the old low they would be underwater here or not making a profit so they're going to want to take those off and add more longs that's our bullish breaker and then we would expect to see and anticipate a range expansion to the upside to tell tell signs that you have a
• 06:30 - 07:00 breaker in formation or confirmation the rate on sell stops indicates sellers are trapped below the old low [Music] the range expansion that takes out the short term high in between the two lows this repricing higher after cell stops are taken as a confirmation that the market is in fact a run on stops below an old low and the old high that's violated
• 07:00 - 07:30 that supports a market structure shift for bullishness this run here supports the market structure being broken higher and any retracements from this point on will be viewed as a new buying opportunity when it trades back into the old swing high here when we see that that's a bullish breaker so let's take a look at it in real price action okay we have an old low here the market trades down below that low and punches through it again and it rallies up so what we're seeing here is
• 07:30 - 08:00 that market structures shift after stops have been taken on the sell side so there's been a massive repricing so the market's going to want to look to reprice lower and retrace back down into what where's our focus point we find the short term high and the last up candle in between the two lows that most recently formed and taking out those cell stops that's seen here so right now this would be viewed as a bullish breaker
• 08:00 - 08:30 we would anticipate saying the market to trade higher where those orders would be collapsed once retraded back down to with price any selling orders would be mitigated and new buying orders would be replacing them and there's the subsequent price actions you would anticipate seeing in your charts so study your charts look at examples where you see this formation where you have the market creating a low and then the market trades down lower one more time and runs through the short term high in
• 08:30 - 09:00 between this is where classic support ideas are effective that you've probably done what i've done as a new trader where we look for support resistance ideas by drawing a horizontal line and you think that you know it's that easy well you have to have a storyline behind why price is doing what it's doing if you understand what the breaker is doing it's indicating that it's running a stop pull of liquidity out when you find the short-term load that's
• 09:00 - 09:30 been violated find the short-term height that this recently formed when it trades back down to that that will be in fact a support level that is highly probable for bullish prices you see that here it's trading inside the range that's created with this last up candle why am i using this one and not this one here because this one was the highest one prior to the drop down and we're using the entire range price trades down into it recapitalizes
• 09:30 - 10:00 all the selling they sold here that drove prices down to take these sell stops out they're underwater or losing money here they have deeper pockets than us they'll wait for price to get back to an area where they can mitigate those shorts and add new longs and that's why you see that explosive price action seen here so hopefully this has been more insight to breakers and we'll talk more about these as we go through the mentorship in futures months until next time wish good luck and good trading