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

welcome back folks this is lesson 1.5 defining institutional swing points okay we're going to be talking about institutional swing points now you've heard me teach in many instances where the swing high swing low forms in the price action swing high being a high with a lower high to the left of it and a lower high to the right of it just a three consecutive three candle or three bar pattern one with a high with two lower highs to the either side of it and then obviously the same thing would be said just in opposite terms

for a swing low one candle with a higher candle to the left of it and a higher candle to the right of it that's a swing low that's what i learned from my mentor larry williams pretty simple easy pattern there's been a lot of patterns i've come across through my development as a trader some of them rather elaborate they really didn't mean too much in terms of future prognostication but nonetheless they were fun to read about initially got my hopes up but didn't really deliver anything i'm not talking about swing points in that degree here

i want you to think about institutional swing points in terms of concept in other words what's going on behind the scenes i don't want to draw any charts up i don't want to pull any examples up i want you to think about it conceptually because we're going to be building on these ideas i want you to understand that there's really only two forms of swing points in the marketplace as it relates to institutional trading it's in the form of a stop run or a failure swing that's it there's nothing else so we're going to talk

about the two forms of swing points and we're going to talk about the contrasting differences between the two and what makes them opportunities for us as traders and how we can see the characteristics of both the first one we're looking at here is essentially the breaker okay this is a breaker where the market will generally make a higher high fail then break down and have a rejection at the highs many times this is a very surprising and deflating pattern for some traders and everyone's experienced at some time in their development where they've bought a specific

price point with the expectation it's going to go higher initially does and then once it makes that new higher high it breaks lower aggressively and you probably experience it as well where you market you sell a low and it starts to break lower you feel good about the trade now sudden just by moving below a previous low a little bit explodes on the upside and now you're trapped or stopped out this pattern in my opinion is the most powerful the most dynamic the most significant price pattern you need to learn conceptually and you understand some

of the characteristics about where it forms but what generally happens is when you have a selling scenario the market will generally make a rally up to an area of old resistance now that resistance can come in the form of how we interpret resistance as a bare shoulder block it could be a breaker or mitigation block it could be an old low it's returning to or it could be you know high it's returning to and it may fall short just by a few pips or points initially and start to trade lower and retail traders and like

myself when i first started i thought that this was most likely going to be when the market would break down aggressively and start trading lower and i could be expecting lower prices well the market makes one more pass higher driving out that short term high it creates and it spooks the marketplace and it upsets those traders that are already short and ultimately goes to the level at which you would have expected it to trade to the first time which is that a resistance level or in this case it could be a bearish order block for

us or could close in a gap but when we see price hovering just below a key institutional reference point like we learned in september which are the bearish order blocks bullshore blocks liquidity voids fair value gaps when we see these things in our charts we anticipate price trading to them to the pip or into them a little bit like as it were for a order block the the idea is once you see the level and these levels are going to be delineated with the blue lines uh the diagram on the left represents a selling opportunity

or where we expect some measure of resistance that could be a bearish order block uh the short-term high that forms prior to that higher high that's what gets many traders caught and if you understand order blocks many times the bearish order block is just above that it didn't it didn't trade to it or it leaves a little bit of a fair value gap and price comes up and just falls short of filling it in and then finally drives up and closes that little bit of a range in that's when you get this breaker swing point

now why is it a breaker the fact that it creates that little short term low in between the higher high and the previous high for the sell side diagram on the left when the market breaks down and takes out that short term low prior to the new high that is indicating that the market has broke those individuals that were initially short and now they're trapped so when that move takes place what you're seeing is the opportunity for the marketplace to move aggressively away from the level it was an initial fake out and then the buy

stop sometimes also are what's targeted so it could be a order block it could be a fair value gap it could be a liquidity void getting closed in it didn't get closed the initial time and then searched up the second leg up many instances by looking at your charts you'll have a plethora of examples and gaining experience by looking at hindsight examples of how that occurs the one of the benefits of looking at intraday charts not that we're going to be talking about intraday in this month but when we practice with intraday charts it gives

us a lot of examples of where these types of events take place because this very pattern here this materializes every single day it materializes every single day and in every single pair it's there you have to study every single time frame and see how this pattern manifests itself when the bias of being bullish the market diagram here that we have on the right hand side where the cell stops are ran out below a short-term low once it hits the level or short falls short of a support level the market many times will drive lower and

go right into that level to me i love this pattern because number one i can see when it's forming okay i can see when it's just falling short of a level and where we're going to anticipate one more drive lower or in this case it could be a drive higher on the bullish side but when we look at price it's important to have the key levels or the institutional reference points that we taught in september those ideas have to already be on your chart if you don't see them already outlined you're not going to be

able to capitalize on the opportunities that these patterns present themselves with so if we see cell stops being ran out or if we see a fair value gap below the marketplace or a liquidity void that didn't initially fill in the first pass lower and then dries lower then closes it in all those scenarios can lend well to this pattern by itself conceptually it doesn't do you any good just hearing me talk about it so you have to go into the charts and literally pull out examples where a short-term high was passed through just a little

short period time right after that and then it creates that re rejection or reversal high same thing is said for the buy side of the uh the breaker pattern these swing points if you look at them they many times offer outstanding entry points what makes them scary is the fact that the number one question i get about them is how do you know if you're going to see it reverse if you sell above the previous high and that comes by experience with trusting the institutional reference points that we taught in september and throughout all the

free tutorials order blocks breakers mitigation blocks liquidity voids and now you've learned fair value gaps so having these ideas in your chart you'll be able to anticipate these patterns unfolding before they actually do if you don't have the levels on your chart you're going to be surprised by these things but that's okay i already know that most of you aren't going to be able to see this pattern readily before that happens so what can you do with it once you see the pattern break down in the example on the left-hand side for our bearish swing

point in the form of a bearish breaker when that high is broken and it takes out that short-term loan between that market structure shift breaking point that becomes your trigger if price ever comes back up to that level you can be a seller now the beautiful thing is we already have a stop run on this pattern now think institutionally there was a short-term high right here the market comes down creates a short-term low and it rallies up taking out this short-term high blowing out the buy stops closing in a liquidity void that didn't get filled

in completely when this first pass came up or it came into a bearish order block maybe it fell short of the various order block here or maybe this is just a simply an old high and price comes right back above the old high and then rejects and trades lower you don't have to fear this pattern here if you can't if you don't have the confidence to get in here and sell that idea like an institutional trader would go right in there and sell it rate as it trades through it wait for it to break down

if it takes out that short term low when market trades back up to that trigger point right here that's when you would be looking to be a seller the wonderful thing again is about this pattern is we already have the stop run so if it's already stopped out those individuals here there's no reason for it to want to come back up and trade back in there because these traders are already knocked out so we can be a seller here with a great deal of confidence that our stop loss could actually be above this high or

rate at that high the likelihood of coming back up there after an aggressive breakdown once a level has already been arrived at discerning that there has been an expectation of the market being bearish if we see evidence is that we've already seen a stop run here if we've seen a move start to break lower at or just below that that resistance level this is going to lull traders into believing and let you know what it feels like as well you want to see price action moving in your favor many times as a new trader so

this dropping off will get traders short where's their buy stock going to be placed right above this high so this pass through clears out that buy side liquidity that they can engineer new shorts on so when we see it return back up to this level here it gives a great deal of confidence even on a daily time frame that we're most likely not going to see price trade back up to this level here because it's already done its job of knocking out those players that are already short they don't want to give them an opportunity

to get a good price in a short they've already done that themselves by knocking out the initial bears this breaking point here we want to be selling at that point right there so when we look at price we're looking for this pattern for ourselves this is the highest most probable condition to be a short seller in the marketplace because it has a built-in advantage even though it's the most fearful thing for you right now you don't want to sell above an old high because you haven't practiced enough you haven't seen the effects of looking at

institutional order flow on a higher time frame or any other time frame for that matter that frames the support ideas around these particular reads on stops the same thing is said just in opposite terms for when you're looking to be a buyer you want to see a short term low form at or just above a key support level it could be a bullish order block it could be a liquidity void that hadn't filled in on this pass here that does here it could be an old load it just simply runs down below if it's an

old low there is no limit to time between this low and the new load it forms okay and that re in that regards there's no there's no time limit like you can look at an old low here and it could be six months and then finally it trades down below that low and then it runs that's still the same pattern here okay ideally you want to see something that has just recently created a low came back a little bit a few days maybe a week and then it dries one more time through it and hits

your bullish institutional reference point it could be again trading down to an old high or it could be a lower low it trades down but the main thing is you want to see a low that makes no real sense stopping there and giving a little tiny little bounce and then expect that drive lower closing in on that real level you're having on your chart which constitutes support just like we mentioned over here the opposites said here any buyers over here on this little pop is going to have their protective cell stop just below that low

we want to think institutionally about accumulating those sell stops so if they're going to sell it to us we're going to be a buyer and we're going to be buying a deep discount with the expectation now here's the thing you want to see an immediate response away from that level you don't want to see it trade down below this low and hang around for a while okay you don't want to see that the problem you're going to encounter is because we're trading on a daily time frame as position traders we're gonna have to wait a

long time sometimes for that confirmation it may it may require the whole entire daily range before the daily candle creates the wick here so this many times will become the wick the market will trade down make that low here and then wick away from that low and then you'll see what many people get excited about as a hammer or some kind of a doji okay and i'm not teaching classical if you want to call it that candlestick patterns but the idea is candlestick traders trade the candlesticks that have formed institutional traders we trade it when

it's a bold face candle before it becomes that that wick or that hammer or doji it takes a great deal of confidence to be buying down here below an old low whereas retail traders they all have reasons to justify why something should be done after some form of confirmation if you're demanding confirmation you're not going to get this entry down here but you can get a favorable entry point by waiting for a market structure shift here so when the market structure shifts on the bullish side here all eyes go back to this reference point here

we're not worried about coming back down here again we don't care about that we're worried just simply for a return to this level here so again the same mindset we said about the sell side or bearish breaker on swing point this we know this has already been arrayed on cell stops there's no expectation or reason to believe that the market needs to come back down into this level again because it's already done its work it's cleared out the sell stops and the market is quickly rejected the market if it does give you an opportunity to

come back down into this breaking point we can be a buyer here with the exception that there may be a bullish order block over here it doesn't have to come back down to this level just like it doesn't have to come all the way back up to this level it could just come right back up to an area over here where there would be another order block to trade off of depending on how aggressive the selling was away from this high or where the buying was in terms of magnitude you may never get that return

back down to this price point it may just keep on screaming higher and that's sometimes going to happen and that's going to be a missed opportunity but i want you to think about the marketplace in two conceptual ways as it relates to swing points you have a breaker swing point which is what we're describing here and i'm giving you the classification of it and i'm teaching this one first because this is the one i trade predominantly because it's based around the pattern i like to trade which is the turtle suit a false break above an

old high rejection and quickly it moves away and if i don't get the entry off like i want to it i always give it an opportunity to get back in here so it's like a two-chance setup and many times you don't get two second chances in trading you know you either miss it and you never get it again or you take it you lose money and here this pattern is in my opinion the best pattern in in market structure when you're looking for uh institutional evidences to what should be taking place in price when you

see this pattern unfold and you learn to anticipate it you're going to have the highest probable entries for all your setups because you're actually entering at the lowest possible point for buys and you're selling at the highest possible point for sales and yes it takes a great deal of conviction to do that but it also doesn't demand it you can wait for this pattern to give it to you by waiting for the break above the market structure here which is ironic because you don't get that same forgivingness with the next pattern we're going to talk

about which is the failure swing all right this is the failure swings is the second form of institutional swing points again i understand that you know you probably understand this a little bit but i'm giving you some additional points because if we're going to start breaking the market down into modular form where we can go in and start utilizing these things not just speak about them in broad terms i want you to narrow your focus to only two ways of viewing the marketplace when it turns we already mentioned the breaker swing point and now we're

talking about the failure swing the failure swing is when you identify when there is a resistance level and it trades through it breaks down and comes back and retests it it can't make another pass through now this level could be up here it could have been just touching it here and then failed to make another pass to it it's the same thing in same conditions but we're focusing primarily on is the ability for the market to get back to this high and make a higher high or the fact that it makes a failure swing we

don't ever know with great deal of conviction if we're gonna get the breaker set up so while this may be unfolding we could be anticipating this high being taken out to be a seller up here but many times what will happen is the market will come up and fall short and then break lower and that's a missed opportunity we can't be a seller at a high price we may have may have even second guessed this entry as a short but we are demanding a breaker to occur which would be selling above this old high but

it doesn't give it to you here that would be a missed opportunity but it doesn't mean there's no trading opportunity same thing can be said for the buy side we have a support level down here the market trades down into it may trade through it or the blue line representing our support level could be down here right at the low it's not important as it relates to where the actual level is what we're anticipating is is the market's gonna probably make another pass through and retest this low again we're aiming for and trying to get

breaker swing points if we don't get the breaker swing point that's not a problem we have an opportunity to trade off of this pattern as well if we get the buy set up like this and it retraces off of the the level that we are anticipating seeing support at and it comes back and starts to come back down and fails and makes one more pass up if it takes out this short term high or on the sell side takes out this short term low we have another opportunity because what we have here is the market's

already shown a willingness to do what it's run an area of liquidity out it's trap traders above here and traders below here so sellers are stuck down here and buyers are stuck up here they're not giving them an opportunity to get out they're quickly repricing here so now when we understand that think like an institutional trader if you know you have a guy on the hook or a fund on the hook up here he's he's long now if you can reprice the market and go lower with it leave them holding the bag up here or

vice versa they sold on some weakness down here because again think like those turtle traders long-term position traders they're selling on a breakout they're selling below 20 period lows and buying above 20 period highs so if we can see this phenomenon taking place where they've moved away from a low aggressively came down but failed to make a low and then broke through a short-term high in an area where we anticipate bullishness on an institutional basis we have to sit back and simply just wait because we'll understand that this movement could have been moved into a

order block that's bullish this could be a bearish order block this could be a move that goes into a old high to run out buy stops here it could be an older hot you know height is not being shown in this diagram just like this could be an older low you know to the left of the truck that wouldn't be shown in this diagram but we're seeing the evidences that they've already did the manipulation down here we don't know that for certain until we see the retracement back up here so all this retracement here this

is a gray area we don't know for certain if this is going to stop here or if it's going to continue up and give us a break or swing point just like we don't know that there's going to be a continuation to go lower to have a breaker swing point for buys here we don't know if it's going to go down below that low i never know that for certain i never know that i anticipated the most optimal entry i'm looking for that scenario but it may not give it to me so if it doesn't

and it starts to run the other way i'm just simply going to put my eye sight right here for the buy and here for the cell if i can't get a retracement back here or on an idea for a short if i don't see anything to justify a short here and sometimes that occurs sometimes i just you know i don't get it right and i'm human just like anybody else will if i can't get a short off there and i don't have strong convictions to sell there it's no problem i'm going to just simply wait

for that swing point right here to be violated and then i'm going to be aiming for this level right there that's where i'll sell now if i'm going to sell at this level here i can have great confidence that myself can be protected with a buy stop right above this short-term high because it's in inside this area at which they had already ran the stops out on the form of buy stops so if my buy stop is here now they're not going to come back up here and give these opportunity to get off they're not

going to let them out so i can be a seller here with my stop here and look for lower prices same way can the same thing can be said here if i don't know with great deal of conviction that this is a good buy or i miss it and it takes off it's no problem i'm waiting for this little swing point here to be broken once that high is broken i can wait for price to come back down to this level right here when this level is retreated to down here i can be a buyer

with a great deal of confidence that my stop loss can be placed just below this low because it's going to be in an area where they had already ran the cell stops now this is probably very 101 ict okay but i want you to come away with this idea that the institutions go into the marketplace to trap or they go into knock off that's what they do they are in the business of knocking the funds out when they're going to be correct and they'd like to put them in on the wrong side when they have

pending orders that are allow them to be offside for instance in this case here funds could have buy stops here with the expectation if it goes out they're thinking this could be a long-term trend filing buy program where they can hold on to it for many months the institutions will drive the price up there take those buy stops in but when those buy stocks become market orders to buy they're selling with the expectation they're going to reprice aggressively and then go short i may read it wrong just like you're going to read it wrong i

may be looking for a breaker scenario up here where it makes a pass above this old high i may be looking to sell this old high on turtle suit it may never give it to me and i may not be astute enough watching price to see this is the scenario to really be selling at so if i miss it just like you're going to miss it too and you see this breakdown in here no problem wait for it to trade back up to this level here and that's where your shorts going to be and your

your position is going to be protected with a stop loss right above this high it's going to be in an area where it's already been traded to with manipulation buy stops have already been violated here they're not going to come back up to take those out if it does you're probably wrong anyway you want to be out same thing is said over here just in opposite terms when the market comes down here and rejects you you may not see that initially as a rejection you may anticipate one more pass lower to get that ideal buy

and it doesn't do it and if you can't get this off as a long and it starts to take off no problem you go right back to this price point here and wait for it to come back down you can be a trader that takes a long position there with your stop-loss right here again with the expectation that if your stop loss is already below this low you're in an area where they already ran out sell stops so there's no reason for them to come back down there again especially if they have a very dynamic

price response here the the magnitude of which they move away here and the magnitude at which they move away here indicates that they have already trapped a sizable number of orders net long here and seismo orders that are net short here they're not going to want to let them off and if they are short how can they get out of their short position if they aggressively reprice higher they're going to collapse their trade by doing what buying it back they're going to reprice quickly so that way they force them to buy back at a higher

price where they can now start scaling off their position that they bought down here and down here at a net profit and the opposites being said here where they could quickly reprice here smart money sells here and sells here so if price aggressively moves lower those that are along in this point here they're going to want to collapse their trade and they have to sell it so they're not going to sell it down here where smart money can buy it back after being short from this point here so when we look at price i want

you to think again in two institutional swing point theories you have a breaker which is the ideal most optimal trade entry pattern there is in the marketplace because it's absolutely the deepest discount buy and the absolute most premium to sell it's scary to do it it's absolutely uncomfortable when you first start doing it and i i know what that feels like it's scary but that's the whole purpose of getting into a demo account where you learn to do those types of things you cannot learn it doing with live money that's all part of this mentorship

you have to be practicing in a demo where you can literally go in there and step in front of the marketplace once it rolls into a new high sell it get that responsiveness of seeing what happens in price sometimes it'll keep on going okay no problem you're gonna be wrong but you're gonna know right away that you're wrong and you don't have a hundred pip stop on you can have a relatively modest stop one point is when you're right you get immediate feedback and it's very encouraging it's confidence building and usually if you enter on

the right side and you're selling an old high it's amazing because you'll see how fast the market tanks if you buy an old low and you're doing it on a breaker setup and it's a swing point in the form of a breaker you're going to be able to see dynamic rallies just like that take off and it would they'll be explosive so don't think in terms of classical char patterns like head and shoulders or think in terms of uh bear flags and bull flags things like that only try to convince yourself that there's only two

real ways the market's going to turn around it's going to be on a breaker where they run stops or it's going to be a failure swing both of them are indicating a manipulation but they both have to be used slightly different the first one being the breaker swing point that is the ideal one you want to be looking for that scenario all the time on any time frame not just a daily chart but any time frame but if you can't get the breaker don't fear or be upset about missing that move because it still gives

you the opportunity to get in there because they're only going to turn the market one of these ways that's it and nothing else happens in price i challenge you to go in and show me something where that doesn't do this because i can tell you it's either a breaker or it's a fair swing every single time it's never anything else so you're you're limited it's really just two conditions in the marketplace if you're going to be a seller how are you going to be a seller you're going to be selling it at ohi or you're

going to be selling it on a retracement back to a break in market structure that's it if you're going to be a buyer are you going to be buying an old low or are you going to be buying on a return or retracement back to a market structure break to be a buyer at support there it's just that simple nothing else can happen there's no there's not 50 000 patterns to be looking for there's not all these different candlestick patterns to memorize okay new dark clouds covering this and no inverted hammer that it's just simply

understanding where are the orders relative to old institutional order flow reference points key support resistance on high time frames how is the market behaving at that level did was it able to pass through it and did it reject if it went up to it fell short it's probably going to make one more pass higher and it might give you that breaker entry if it doesn't give you a breaker inch and it gives you a fair swing this is how you trade them but there's nothing you need to worry about in a demo account while you're

teaching yourself if you're if you're worrying about rushing to get in with live money if you don't know the characteristics between these two swing point theories you're going to hurt yourself you're going to be frustrated you're not going to be able to focus and you're going to end up chasing price or blowing your account and then you're gonna be frustrated you know or taking taken completely out of the marketplace where you can't fulfill your dreams as a trader so hopefully this has been insightful to you guys i'm gonna wish you a good luck and good

trading i'll talk to you again in the next lesson