Bread & Butter Sell Setups

Date: 2025-01-09

Offset Distribution Mechanics

[00:08] Welcome back, folks. This is Lesson 7 of the May 2017 ICT Mentorship, Amplified Day Trading and Scalping: Bread and Butter Sell Setups—Day Trading Opportunities and Scalping. All right, we’re going to be looking at consistent small price movements for sell program offset distribution and redistribution. In sell programs, IPDA will perform one of two price engine models: accumulate buy-side liquidity by repricing above an old high. Buy stops will be triggered, inducing counterparty buyers to pair short entries with. Price will seek a lower short-term discount array to offset positions.

[00:57] Reaccumulate fair value in retracements higher at premium arrays. Weak short holders will be squeezed in the retracement higher. Price will seek to expand lower to a short-term discount array to offset positions. Engineering buy-side liquidity: offset distribution. IPDA will reprice the market above an old high to promote buy stops to market orders that would be residing there for current short holders. This, in essence, engineers buyers at premium prices. The open float above that old high may also have buy stops for breakout systems that wish to buy on strength.

Redistribution at Premium Arrays

[01:45] This model is called offset distribution. Its primary purpose is to offset current short holders and/or induce more buyers at a premium price. The model is seen frequently in bearish market conditions and while higher time frame institutional order flow is suggesting lower prices. Typically, offset distribution models unfold quickly, and you must learn to anticipate them at key highs intraday. Providing banks new shorting opportunities: redistribution. IPDA will reprice the market higher to a fair value PD Array to provide Smart Money premium pricing for short entries. The market will be bearish from an institutional perspective and many times unfolds after a recent buy-stop raid.

[02:35] The retracement higher in price will place pain on current short holders and tends to induce buying, thus providing buy-side liquidity to pair Smart Money short entries with. This model is called redistribution. Its primary purpose is to redistribute new short entries and/or induce more buyers at premium pricing. The model is seen frequently in bearish market conditions and while higher time frame institutional order flow is suggesting lower prices. Typically, redistribution models unfold quickly, and you must learn to anticipate them at key premium arrays intraday. Intraday offset distribution. Okay, like I mentioned in the Bread and Butter Buy Setups, I’m not going to rehash all this.

[03:18] This is obviously everything you had seen in the previous teaching, just in reverse. And the same thing for fair value. So everything we saw for the Bread and Butter Buy Setups is just being reversed for sell setups here.

All the parameters—pips per trade, how many hours the hold time is, all the statistics here—apply the same, just reversed from what we saw in the buy setups. Everything that we’re looking for with Bread and Butter Sell Setups is strongly related to kill zone setups. They must occur inside the kill zone.

Bearish Daily Range Structure

[04:05] We’re not looking to scalp outside of the highest-volume session times of the day: London Open, New York Open. Okay, down-close days or bearish days. We’re going to be revisiting the daily range just for completeness’ sake. When the market is poised to trade lower based on higher time frame institutional order flow, in essence, we expect the open to be at or near the high of the daily range. There can be a small rally above the opening price. Again, that opening price could be 0 GMT or the midnight candle in New York.

[04:38] Now, London Open posts the initial leg lower intraday, and then price will wait for New York Open. So the initial swing can see a rally above the opening price. It doesn’t have to, but generally that first leg in price is lower. Inside that initial price swing, we’ll be looking for—or we look for, let’s say it that way—London scalps. Just a small little retracement that takes place between 5:00 AM and 7:00 AM New York time. This is the London lunch. It’s pre-New York Open. Then during New York Open, we see the second leg generally of the daily range unfold.

[05:30] Usually, if it’s a high formed in London, we’re seeing the continuation going on in New York until price hits the 5-day Average Daily Range, until the 5-day Average Daily Range low is reached. Then there’s a retracement off of the low that forms between 10 o’clock and noon New York time. Okay, so the London Open—we’ll be looking for that scalp to sell short during the London session. When higher time frame institutional order flow is bearish, we anticipate London session high-of-the-day formation.

London Judas Swing Entries

[06:32] The open at 0 GMT or 12:00 AM in New York can see a protraction phase higher in price. This can be scalped from the open or just below it prior to 1:00 AM New York time. The classic London Judas Swing higher can be scalped even easier. The market retraces between 5:00 AM and 7:00 AM New York time, and this can provide a short-term scalp entry once a premium array is hit. Even after the ideal Judas entry point has passed, a 5-minute retracement can be entered short on to scalp the remainder of the London Open to 5:00 AM New York time.

[07:18] See here an example of scalping the London session. This is a redistribution. Price trades up to a fair value level—Fair Value Gap, bearish Order Block, of that nature. Price comes down to an old low, and you can see the offset positions there, all inside of the London Open Kill Zone.

Scalping the New York session: when London Open confirms institutional sponsorship on the short side and posts the daily high, we expect to see New York Open continue lower unless a higher time frame discount array has been hit intraday and/or the Average Daily Range low is reached.

New York Short Setup

[08:13] We look for the intraday swings lower to determine premium arrays to go short at in the New York Kill Zone. Using the 8:20 AM New York time CME open, we anticipate the New York Judas Swing to fade. Targets will be the 5-day Average Daily Range low and the next higher time frame discount array found on a 4-hour or 60-minute basis. If ADR low is reached prior to 10:00 AM, take 80% off and leave a small portion on to capture any range expansion that may unfold. And here’s an example of scalping short the New York session.

[08:58] London has created the high of the day, trades lower, consolidation into a small retracement. At the 8:20 AM CME open, the retracement up as a Judas Swing goes up into a Fair Value Gap and bearish Order Block. There’s your redistribution, and price trades down into a Fair Value Gap below price at the time of the entry in New York. Okay, scalping the London close. When the New York and London sessions have moved in tandem and the 5-day Average Daily Range low has been reached, and it is at least 10:30 AM New York time, expect a retracement off the daily low.

[09:41] Again, it has to be between 10:30 AM and 1:00 PM New York time. Ideally, price should exceed the 5-day Average Daily Range for this type of trade, so you really want to see an expansion on the daily range. We look for a 5-minute failure swing at the low and a bullish Order Block to enter on, risking 10 pips below the daily low and targeting 20 to 30% of the total daily range in a retracement higher. Keep in mind, this trade can be very difficult to see pan out some days, as the range can and could expand far more than the Average Daily Range low.

[10:21] Ideally, take 1:1 reward-to-risk, targets based on a required stop at no more than 20 pips. And here’s an example of that London close trade. Price makes a low in the London close time period, makes a failure swing to get down to the low of the day and fails. It’s a reaccumulation during the London close time period. Price trades up, returns into 20% of the daily range for the London close objective.

Scalping the Asian Open: when the market is bearish, we can enter short at or just above the 0 GMT opening price and expect an expansion of 15 to 20 pips lower as the Asian range is established.

[11:21] Asian sessions can traditionally be very narrow, and while this trade has proven profitable in the past, like London close trades, we are looking at the lowest-volatility periods of the daily range formation. Always aim for 15 to 20 pips in this session, as the range can be limited on the basis that it will be the Asian range formation. Take full exits on scalps in this time of day. It’s not optimal to expect a second leg in price. Avoid greed here, and if you are fortunate to get 20 pips, be content and exit.

Average Daily Range Framework

[11:58] And here’s an example of the Asian session opening and selling short at the opening of 8:00 PM New York time for a sell. All right, let’s talk about 5-day Average Daily Range. The Average Daily Range, or ADR, does not have to fill for the day. Just because we have the indicator on our chart, just because we make it available to see an overlay on price action, price is not going to always trade to that level. Many times it’ll fall just short of it or wildly exceed it.

[12:39] So it’s a general rule of thumb. Again, it’s the average, not the absolute range, okay? It’s the Average Daily Range. So it could be a little less, it could be a little more, but it gives us a range to reach for where we can blend PD Arrays on the lower time frame and up to a 60-minute or 4-hour chart. By blending these things, also blending it with the Central Bank Dealers Range, with the pivots, with the Asian range projections and standard deviations, and using the Average Daily Range highs and lows, it will help formulate a probable objective for the day.

[13:28] Until that objective is met, with the overlap or confluence of all the Fibonacci levels that we look for in between those ranges, we can see scalps form. Ideally, you’re going to get one in London, you’re going to get one in New York, and you’re going to get one in London close. Maybe not always, but maybe you will get one in Asia. Not on every single pair. Most likely you’re going to see something form, like I said, on a daily basis in one of the majors if you follow them all.

[14:00] Now, Average Daily Range, or ADR, can be expected to act as one half of the actual daily range in some conditions. What do I mean by that? Well, if we have an Average Daily Range of, say, 50, and the ADR is calling for 50 pips for the day, if we are in a condition when long-term trends are underway and an intermediate-term swing has begun, a large impulse swing can surge the daily range twice the Average Daily Range, especially when ADR is under 60 pips.

[14:32] Sixty pips is a number I like, and it’s just, over the years, I’ve seen that as a filter or buffer, if you will. If we see 60 pips or less and the conditions are likely that we’ll see a strong directional move higher or lower, it doesn’t make a difference. We’re obviously going to be looking to trade in the direction of the most likely institutional order flow, whether it’s bullish or bearish. But if we are expecting large ranges and the Average Daily Range is calling for 50, chances are we could probably see the ADR double.

[15:09] And when an intermediate-term price swing is completing at a higher time frame array and on the strength of high-impact news, this is usually capitulation. That means the move’s been going on for a while, it’s finally reaching an objective on the daily or weekly levels, and once it hits that, it’s going to reach for it to get to it in one day. Many times you’ll see it go well beyond what your Average Daily Range is. ADR not filled at New York Open but during London close is ideal.

[15:43] The reason why I state this is because it gives us potential range expansion that has yet to come to fruition on the day. Again, as I prefaced it by saying, you can’t expect ADR to always fill. Just because we see it’s looking for a potential 80-pip or 100-pip range for the day doesn’t mean it’s going to make that number of pips. So in my opinion, if we look for our indicator to tell us ADR is, say, for instance, 75 for the 5-day Average Daily Range, what I like to do is back off that about 15 pips.

[16:22] Because even if I’m exiting early, I may see the Average Daily Range fulfill, but then sometimes it’ll not get to it. But if I get out 15 pips before the Average Daily Range high or low, I have a great deal of probability to be profitable and not have to demand myself to be right. It’s not about being right; it’s about being profitable. So there are a couple ways you can handle that. You can take your full position off 15 pips before the Average Daily Range high or low, respective to the daily range direction.

[16:56] Obviously, you’re going to be looking to take profits at the Average Daily Range high during bullish days and the Average Daily Range low on bearish days. But whatever the Average Daily Range is, I want to be taking the bulk of my position off, or scaling the bulk of it off, about 15 pips before that number because everyone’s data is going to be slightly skewed. No one has the right number. No one has the absolute, okay? So there’s going to be some variance amongst all data providers and brokers. If there’s that variety amongst what daily highs and lows are going to be intraday and on the daily ranges, the understanding is that we have to build in a model that helps facilitate efficient exits.

[17:40] Again, this is one of those things I talked about in the live session of this particular day of this recording. I was discussing how my efforts in my trading have been more aligned with getting out with more efficient exits, not so much the entries. I don’t mind the entries. The entries are okay. The problem I’m having as an old dinosaur trader is that I want my exits to be more efficient, and I want them to be more accurate. I have built into the model 15 pips before the ADR as my exit.

[18:18] So many times, if you watch some of my trades, you’ll see now with this explanation why I’m always exiting just a little bit earlier, and it’s always a uniform 15 pips before ADR. Now, if ADR fills at or before New York Open, the Average Daily Range will likely be exceeded, especially if high-impact news is due out after equities open. That means after the stock market opens at 9:30, if ADR has been filled right at the opening of New York or during the London session, chances are, if there’s going to be high-impact news later on in the afternoon or at 10 o’clock or 11 o’clock, we’re probably going to see Average Daily Range be exceeded.

[19:05] It doesn’t mean double; it just means exceeded. So when we look at these tools, again, they’re just that—a tool. They’re not a secret weapon. They’re not a silver bullet. You’re not going to be the perfect trader, Trader X, Mr. “I’m going to be able to accomplish everything now because I have this indicator on my chart.” You’ll see that it, again, just complements everything else in our toolbox. Is it essential that we see Average Daily Range on our chart?

[19:40] No. And that’s why I spent a lot of time during this mentorship not even including it. But because we have a lot more tools and a lot more perspective now—we went from a higher time frame all the way down to these smaller micro moves inside the daily range—we can now start fleshing out ideas on how these little movements intraday line up with the larger moves. By using tools to help us determine the probable expansion or the magnitude of how big that daily range is going to be, it helps us frame ideas on where the market may go for objectives.

Blending Time and Price

[20:18] So we’re going to be blending time and price. All right, so in a nutshell, the scalping model that I use—essentially, the setups are micro setups on the 5-minute charts that we outline on higher time frame charts. Everything we’ve seen happen in explanation across the board on all the setups in the previous months of this mentorship, they’re all applicable to the lower time frame. But the elements of time of day are essential to framing the intraday price swings on every daily range. Now, the higher time frame PD Arrays will draw price.

[20:57] They’re the catalyst that makes price move, so you have to understand where they are relative to our time frame. The intraday lower time frame PD Arrays will provide the timing and/or price levels to enter on. Ideally, we use scalps to fill in slow periods or enter trades that may have already started and the lowest-risk entry has long passed. If you spend your time studying whether the higher time frame is moving higher or lower and wait for small-range days to form, the market will reward your patience and supply you with daily ranges that expand and form clear intraday swings perfect for scalping.

[21:35] Not all of us are going to lean towards scalping or intraday scalping or short-term price movements in a daily range because the daily range is very limited. The range can be small. In recent months, we’ve seen daily ranges that are very minute in terms of how high the high is and how low the low is. Inside that range, there are even smaller, tighter consolidations that we’ve had to contend with. So just because we’re in smaller ranges doesn’t equate to, “Well, I’m just going to scalp the market.”

[22:11] There has to be some measure of volatility. What we’d like to see is when the markets start to contract, we know there’s going to be a large-range day soon. When we see those conditions embodied in price action, when we’re expecting expansion, when at the same time we’re expecting the market to be bullish or bearish, and we’re expecting the market to react on specific news events during the specific trading days that we’re looking to trade—Monday, Tuesday, and Wednesday being highest probability—and the key select times of the day, the kill zones: London Open and New York Open.

[22:46] Not so much the London close and not so much the Asian session. If you want to be in here as a hardliner, you can trade in those, but you’re not going to get a lot of volatility or bang for your buck. You can scalp very small short-term positions in London and in New York. Now, I get questions a lot: “How can you take a small account and trade it up and build it up?” My advice has always been, if you can do it, if you can scalp, that’s one way to do it because you’ll be able to get velocity with your money.

[23:20] Now, it does not mean go in there and trade 7% of your account on these trades. It just means that if you put 1% up, you can get 1% made for that session in London. If you are trading one pair and you’re really dialed in, you get another trade 1:1 in New York and it’s 1%, you make another percent. So you can get 2% in that one day. While it’s not a terrible amount of money, and you’re not retiring on it, if you combine that same element of trading with your One Shot One Kill and maybe short-term trading, one- or two-day trades, or swing trading, or blend in Mega Trades, as we’ll teach in July for long-term position trades—

[24:09] those will help complement one another. And if you have margin that’s being used for One Shot One Kill, you may not have a whole lot free. So you can do intraday scalps risking 0.5% or 1%. Then you can do other things like hedging. In other words, if you have a long EUR/USD position on and you’re expecting some measure of normal retracement, you can go in and scalp—okay, not the euro if you’re in the States, obviously, because you can’t do that—but you can scalp the opposite direction in, for instance, cable.

[24:49] Or you can trade the retracement lower in EUR/USD. You can look for trades like EUR/JPY that would see weakness. So you could scalp that EUR/JPY pair and get a little bit of a percentage return as that larger position, that One Shot One Kill, may experience some normal drawdown that wouldn’t shake you out otherwise. But you can capitalize on that retracement by trading another pair that’s closely correlated to EUR/USD and short it and scalp it in London and New York while it’s applicable for that retracement to unfold in EUR/USD.

[25:29] So you can use scalping as a tool for hedging. You can do it as a save-all for if you missed the opportunity to be a seller at the high of the day. You can go into a 5-minute chart and look for a Fair Value Gap and/or a retracement up into a bearish Order Block if you’re bearish, sell short there, and then ride the rest of the London session and maybe position yourself for the remainder of the day. It’s only limited by your understanding and the conditions of the marketplace at the time.

[26:01] Over time, you’ll see examples of how we use it, where it’s applicable, and in your own trading you’ll also learn where it’s most apt to be the best way of trading, especially when we get into August and when we go over how to break the market down completely into the four divisions of how the market is going into accumulation-distribution models. These types of trades—you can build a very small account up, you can do it in short order—but it’s not everyday trading.

[26:34] The problem is you’re going to see how nimble you can become in these intraday charts, but it’ll end up taking you away from the larger time frames if you allow it. That’s not what I’ve been doing here. I don’t want to take your eyes off the higher time frame. That’s why we spent so much time working from a higher time frame all the way down to finally these little 5-minute charts. If it was that important, we would have started with the 5-minute chart. But if you don’t have all the things we talked about since September, scalping is going to be not the answer, but a problem for you.

[27:07] So with that, I wish you good luck, good trading, and our next lesson gives us the complete outline of what I do on a daily basis from the time I wake up to get ready for London—everything. So I’m actually going to go through the whole process in a video: everything I do normally, where I get the information from, what I do with that information, what I’m weighing out, all those types of things. That’s my daily routine for scalping and intraday trading. With that, we’ll be closing this month’s teachings, and we’ll be moving on into June, where we’re jam-packed with commodities, stocks, indexes, and bond trading.

[27:48] So until the next lesson, I wish you good luck and good trading.