Inner Circle Trader (ICT) Methodology:

Comprehensive Guide
This guide provides an in-depth exploration of the trading methodology known as Inner Circle
Trader (ICT), developed by Michael J. Huddleston. ICT's approach is rooted in Smart Money
Concepts (SMC), which emphasize understanding how institutional traders (the "smart money")
operate in financial markets. The concepts covered here range from foundational ideas suitable
for beginners to advanced strategies used by experienced traders. We will delve into each major
ICT concept, explaining what it is, why it matters, and how traders apply it. By the end of this
brief, readers of all skill levels should have a clear understanding of ICT's core principles and
how they interconnect to form a comprehensive trading framework.

The Smart Money Concepts (SMC) Approach

At the heart of ICT methodology is the belief that markets are largely driven by smart money –
institutions and large players who have the capital to influence price. Unlike typical retail trading
approaches (which might rely on basic chart patterns or indicators), the SMC approach seeks to
follow the footprints of these big players. Smart money leaves clues in price action, such as
specific patterns of market structure and liquidity. ICT teaches traders to recognize these
clues:

●​ Instead of chasing breakouts or using lagging indicators, an SMC trader focuses on

where liquidity lies and how institutional order flow moves the market.​

●​ Key levels where big orders have been executed (for example, order blocks) and gaps
left by fast moves (such as fair value gaps) are viewed as important reference points.​

●​ The emphasis is on anticipating manipulative moves (like stop hunts or false breakouts)
and positioning alongside the likely institutional move, rather than reacting emotionally
like the crowd.​

By adopting the SMC mindset, even a beginner trader starts to ask, “Where are the big players
likely entering or exiting?” rather than “What is a simple pattern telling me to do?”. The following
sections detail the individual concepts that make up this approach, from basic structural analysis
to the finer points of timing and execution.

Market Structure
Understanding market structure is fundamental for any trader, and ICT places great
importance on it. Market structure refers to the pattern of highs and lows that price forms over
time, which reveals the prevailing trend and possible turning points. A clear grasp of market
structure helps traders identify the trend (bullish, bearish, or ranging) and anticipate when that
trend might be weakening or reversing.

Swing Highs and Swing Lows

Market structure is built on swing highs and swing lows. A swing high is a peak in price,
typically identifiable when a high point is flanked by lower highs on both its left and right.
Conversely, a swing low is a trough, evident when a low point has higher lows on its left and
right. These swings are the building blocks of trends:

●​ In an uptrend, the market will produce higher swing highs and higher swing lows (each
peak and trough is higher than the last).​

●​ In a downtrend, the market produces lower swing lows and lower swing highs (each
trough and peak is lower than the previous).​

●​ When swings do not consistently ascend or descend, the market may be in a

consolidation or range.​

For beginners, identifying swing highs and lows on a chart is the first step in reading market
structure. For more advanced insight, traders pay attention to which swing points are significant
(major vs. minor swings) as this can influence how meaningful a break of that level might be.

Break of Structure (BOS)

A Break of Structure (BOS) occurs when price moves beyond a previous notable swing high or
swing low, indicating a potential shift in trend or continuation of a strong trend. For example, in a
bullish trend, if price has been making higher highs and higher lows, a BOS to the upside
happens when price rallies above a previous swing high, confirming the uptrend's strength.
Conversely, a downside BOS happens when price falls below a prior swing low in a downtrend.

●​ Continuation BOS: If the market is trending up and breaks above the last swing high, it
signals trend continuation; the market structure remains bullish. In a downtrend, breaking
below the last swing low confirms bearish continuation.​

●​ Reversal BOS: If the market was in an uptrend but then breaks below a significant
swing low, this break of structure is an early warning of a potential trend reversal to the
downside. Similarly, breaking above a significant swing high in a downtrend hints the
downtrend could be ending.​
Recognizing a BOS is critical for strategy. Beginners use BOS to confirm trends, while advanced
traders might anticipate BOS by analyzing lower time frames or volume. A BOS with forceful
movement (see Displacement below) is given more weight, as it suggests strong participation
by smart money.

Change of Character (CHoCH)

A related concept is Change of Character (CHoCH). Where a BOS often refers to continuation
or obvious trend break, a change of character is typically noted when the market shifts from
making one type of structure to another. It's often the first hint of a trend reversal on a smaller
scale before a major BOS happens.

●​ Imagine a market in a downtrend (lower highs and lower lows). A CHoCH might be
observed if the price that has been steadily making lower highs suddenly creates a
higher high or if the sequence of lower lows is interrupted by a higher low. This
"character" of price action has changed from bearish to potentially bullish, even if only
temporarily.​

●​ In practice, traders spot a CHoCH when the market stops following its previous pattern
(say, stops breaking lows and instead breaks a short-term high). This can mark the
transition from a trending phase to a ranging or reversing phase.​

For example, if price has been declining and then for the first time rallies above a prior minor
swing high, that could be a CHoCH signaling that bearish momentum is waning. Advanced
traders use CHoCH as an early alert to tighten stops or look for counter-trend opportunities,
while beginners learn that CHoCH is a caution flag that the market’s tone is shifting.

Understanding BOS and CHoCH in tandem allows traders to differentiate between a normal
retracement and a true trend shift. In summary, market structure analysis via swing highs/lows,
BOS, and CHoCH gives a roadmap of trend direction and potential reversal points – a crucial
foundation for applying all other ICT concepts.

Liquidity
Liquidity in trading refers to the ease of transactions – specifically where orders exist in the
market. In the context of ICT and smart money, liquidity often means clusters of stop-loss orders
or pending orders that accumulate at obvious price levels. These areas represent pools of
liquidity that the market can target. A key tenet of ICT is that smart money will often seek out
liquidity to facilitate large orders: they push price to grab that liquidity (for example, triggering
stop orders) which then provides fuel for the next move.

Some important liquidity concepts include:

 ●​ Equal Highs and Equal Lows: When price prints a pair (or more) of highs at nearly the
same level (a flat or equal high), it suggests there are likely stop-loss buy orders resting
just above those highs (placed by traders who went short, or breakout buy orders from
traders looking to buy a breakout). Similarly, equal lows indicate sell-stop orders below.
These equal levels act like magnets for price – they are tempting targets for a liquidity
hunt because smart money knows many orders reside there.​

●​ Liquidity Pools (Buy-Side and Sell-Side): A liquidity pool is an area in the market with
an abundance of orders. Buy-side liquidity refers to buy orders (or stops that would buy
to cover shorts) above the current market price – for instance, above a recent high.
Sell-side liquidity refers to sell orders below the current price – for example, below a
recent low. The market, driven by big players, will often gravitate to one of these pools to
trigger those orders. Grabbing buy-side liquidity (taking out a previous high) often
precedes a reversal downward, as those buy stops fuel bullish momentum that smart
money can use to sell into. Conversely, grabbing sell-side liquidity (taking out a prior low)
can precede a move up, using those sell stops as fuel to buy.​

●​ Engineered Liquidity: Sometimes the market seems to "engineer" or set up obvious

liquidity. For example, price might consolidate in a tight range creating multiple equal
highs or lows, or repeatedly bounce off a level, making more and more traders place
stop orders just beyond that boundary. ICT suggests this is not accidental – it's a trap
being set. The engineered pattern of equal highs or well-known support levels builds up
a larger liquidity pool, which the market will later exploit by breaking through, catching
traders off guard.​

Why liquidity matters: In the ICT view, large institutional traders cannot simply buy or sell huge
volumes at the market price without causing slippage. Instead, they often drive price to known
liquidity pools so that their large orders can be executed against the cluster of stop orders. This
results in the sharp moves often observed when a prior high or low is suddenly violated – stops
get triggered, providing liquidity, and then price often swiftly reverses as the intended
institutional move plays out.

Both beginners and advanced traders should study liquidity because it explains why sudden
spikes and reversals happen at certain levels. A novice might memorize that “price often
reverses after taking a previous high,” while an advanced trader internalizes that “the stops
above that high provided liquidity for smart money to fill short orders, hence the reversal.” The
concept of liquidity is foundational to anticipating such stop raids and is closely tied to several
ICT strategies and patterns.

Turtle Soup (Liquidity Raid Strategy)

One specific trading setup that exemplifies the liquidity concept is known as Turtle Soup.
Originally coined by trader Larry Williams and adopted in the ICT methodology, the Turtle Soup
strategy is essentially a stop-hunt reversal tactic:

●​ The idea is to exploit the moment when the market takes out a previous important high
or low (raiding the liquidity there), and then fades that breakout, entering in the opposite
direction.​

Here’s how it works in practice: suppose yesterday’s low (a well-watched level) was 1.2000 in a
currency pair. Many traders might place sell-stop orders just below 1.2000, assuming that if
price breaks that low, it signals a continuation of the downtrend. Smart money, however, sees an
opportunity to grab liquidity. In a Turtle Soup setup, price might dip below 1.2000 (triggering all
those stop orders and breakout sells) but only briefly – it quickly springs back above. This false
break suggests the move was just a liquidity hunt:

●​ A trader employing Turtle Soup would wait for the low to be broken and then look for
evidence of reversal (such as price quickly returning above the old low). They would then
go long (buy), essentially taking the opposite side of the crowd that just got stopped out.​

●​ The logic: all the sells that triggered below the old low provide fuel for a bullish reversal
(smart money bought into those panic sells). Once that liquidity is taken, there’s often no
interest in pushing price further down, so the market reverses upward sharply.​

The Turtle Soup can be applied to previous highs as well (taking out a high and then dropping).
For beginners, this strategy teaches not to trust every breakout; many breakouts are actually
traps. For advanced traders, Turtle Soup is a powerful pattern to anticipate – they might
combine it with other confluences (like an order block near that level or time-of-day factors) to
increase the probability of success. The broader lesson is that significant prior highs/lows are
not just support/resistance levels; they are liquidity pools, and when they are raided, a savvy
trader watches for the potential snap-back move.

SMT Divergence (Smart Money Divergence)

SMT Divergence is a tool used to gauge whether a price move is likely a true move or a
manipulation, by comparing the behavior of related instruments. SMT stands for Smart Money
Technique (often referenced in ICT context) and typically involves observing two correlated
markets side by side for divergences. The idea is that if smart money is distributing (selling off)
in one market, you might see a subtle sign of weakness that is not yet reflected in the other
market, and vice versa.
Consider two markets that usually move together – for example, the S&P 500 and the NASDAQ
stock indices, or two currency pairs like EUR/USD and GBP/USD (which often have positive
correlation). An SMT divergence occurs when:

●​ One of these instruments makes a higher high, but the other fails to make a new high (in
a context where they normally should move similarly). Or one makes a lower low while
the other does not.​

●​ This mismatch can indicate that the broader "smart money" may be quietly using one
market to distribute positions. For instance, if the S&P 500 makes a higher high but the
NASDAQ does not (it makes a lower high instead), it could signal underlying weakness
in the equity move – perhaps institutions are selling tech stocks (NASDAQ) even as the
S&P blips to a nominal new high. The divergence suggests the new high in S&P might
not be sustainable.​

Traders use SMT divergence as a confirmation tool around liquidity events and key levels:

●​ If a currency pair sweeps a previous high (takes buy-side liquidity) but its correlated pair
does not confirm that strength (fails to break its own similar high), it hints the move was a
stop hunt rather than a genuine rally. A reversal may be imminent on the pair that swept
the high.​

●​ Similarly, in downtrends, one market making a lower low without the other can signal a
potential bear trap and impending reversal up.​

Beginners might find SMT divergence complex initially, as it requires watching multiple charts.
However, it's a powerful concept to confirm false breakouts or pinpoint reversal setups.
Advanced ICT practitioners often incorporate SMT divergence in their analysis when trading
pairs or correlated assets, because it provides a window into whether a price move has broad
institutional support or if it's likely a cunning maneuver by smart money in one market.

Order Blocks
Order Blocks are a cornerstone of ICT strategy. An order block is essentially a price range
(often identified by a specific candlestick or series of candles) where a large cluster of
institutional orders was executed. In practical terms, an order block is often marked by the last
opposing candlestick before a significant move. For example, in a bullish scenario, a trader
might identify a bullish order block as the last notable down candle (or consolidation) before a
strong rally that breaks structure. Conversely, a bearish order block could be the last up candle
before a sharp decline.
The theory is that these areas represent institutional footprints. Price often returns to these
blocks later because institutions that created the original move may have left some orders
unfilled or may want to rebalance positions there. When price revisits an order block, it often
finds support or resistance (depending on the context) and can be an entry opportunity aligned
with the original direction of the big move.

Bullish and Bearish Order Blocks

●​ A Bullish Order Block is typically a down candle (or series of candles) at a swing low
from which a strong bullish move originates. It indicates that institutions were likely
buying heavily during that down move (accumulating longs), causing price to later spring
upward. When price retraces to this bullish order block area in the future, traders
anticipate a potential support zone and a chance to join the bullish side (buy from that
block), as the smart money did before.​

●​ A Bearish Order Block is the opposite: an up candle (or small range of candles) at a
swing high from which a notable bearish move starts. It suggests heavy selling
(distribution) by institutions during that up move. When price later rallies back to that
bearish order block, it often acts as resistance, and savvy traders look for short
opportunities from that zone, aligning with the institutional selling that occurred there
initially.​

In identifying order blocks, context is key. Not every small candle before a move is significant –
traders look for order blocks that led to a break of structure or a sizable move, which signals
institutional involvement. Beginners learn to draw these blocks and watch price reaction;
advanced traders refine this by noticing which order blocks are likely to hold (for instance, those
aligning with higher timeframe trend or that confluence with liquidity pools).

Breaker Blocks

A Breaker Block is a special type of order block that comes into play after a failed move. It
represents an order block that initially looked like it would support the trend, but price broke
through it, turning it into a sort of "flip" level.

Consider a bullish example: suppose there was a bullish order block and price rallied from it, but
soon after, the market reverses and falls back below that order block, breaking its structure.
That former bullish order block, which had been support, has now failed. It becomes a bearish
reference – this failed block is now termed a bearish breaker block. Essentially:

●​ A breaker block is the remnant of an order block that failed to hold its intended direction
and instead becomes a level of interest for the opposite direction. In our example, the
bullish order block that didn’t hold becomes a bearish breaker (potential future
resistance).​
 ●​ For a bearish scenario, imagine a bearish order block from which price fell, but then the
market reverses upward and rallies back above the order block level. That order block
failed to hold as resistance and thus turns into a bullish breaker block (potential support
when revisited).​

Breaker blocks often align with overall trend shifts. They signal that the previous order flow has
been overwhelmed and that an opposite move is taking control. Traders watch breaker blocks
as clues to reversal: if a key order block fails and flips to a breaker, it confirms a change in
market sentiment. Advanced traders might use breaker blocks as entry zones after a trend
change (entering on a retest of the breaker), while beginners are advised to note that a prior
trusted support/resistance (order block) gave way — a strong sign of trend reversal.

Mitigation Blocks

Mitigation Blocks are another nuanced form of order block in ICT lore. The idea of a mitigation
block centers on the concept of institutions mitigating or reconciling previously held positions.

Here's the scenario: sometimes price will reverse direction without grabbing an obvious liquidity
pool first. Perhaps an uptrend reverses down not because it took out a clear equal high
(liquidity) but due to internal distribution. The last bullish candle before a sharp move down in
this case might be labeled a bearish mitigation block. It wasn’t a breaker (because price didn't
make a new high first), but it still marks where institutions likely unloaded positions and then
drove price the other way.

●​ A Mitigation Block is typically identified as the last candle of the prior trend (often a
small candle or series) that price later returns to in order to "mitigate" any remaining
orders. For instance, in a downtrend reversal to up: the last down candle before the
reversal up could serve as a bullish mitigation block — price might retrace there to allow
institutions to close out any remaining shorts (mitigating losses or breaking even) and
then continue rising.​

●​ The difference from a breaker is that a mitigation block does not involve taking out a
prior high/low first. It is more about the market shifting without that external liquidity grab,
possibly due to internal order flow reasons.​

For traders, mitigation blocks are used similarly to order blocks: as potential zones for price
reaction. They often occur at subtle points in price action where a reversal began. Advanced
traders identify mitigation blocks to catch entries that others might miss, since these blocks may
not be as obvious as standard order blocks or breakers. By understanding mitigation blocks,
one appreciates that not every reversal is preceded by a huge stop raid; sometimes institutions
simply decide to reverse price, and the footprints of that decision lie in the final candles of the
old trend, which later get revisited for mitigation purposes.
In summary, order blocks (and their variants like breaker and mitigation blocks) are all about
spotting where big players did business in the chart’s history. Those zones often become
decision points in the future. Beginners practice marking these blocks and observing price
behavior around them. Experienced ICT traders will often line up multiple factors (an order block
coinciding with liquidity and the right time of day, for example) to formulate high-probability
trades.

Fair Value Gaps (FVG) and Imbalances

Markets do not always trade in a perfectly efficient manner; sometimes price moves so fast in
one direction that it leaves behind an imbalance or void in the price action. ICT highlights these
occurrences through the concept of Fair Value Gaps (FVG), which are a specific kind of
imbalance on a price chart.

An imbalance generally refers to a situation where buy orders far outweighed sell orders (or
vice versa) for a period, resulting in price skipping over certain levels. On a candlestick chart, an
imbalance is often seen as a gap or a large candle with little overlap with the preceding candle.
In the context of ICT:

●​ When we say the market has an imbalance, it means there were not enough opposite
orders to facilitate smooth two-way trading at that moment. As a result, price may later
retrace into that area to "fill in" the imbalance, reflecting the idea that markets seek
efficiency (often called mean reversion or filling the fair value).​

A Fair Value Gap (FVG) is defined more specifically as the gap between the wicks of
consecutive candles. For example, consider three consecutive candles in an up move:

1.​ A large bullish candle.​

2.​ The next candle continues upward.​

3.​ If the second candle’s low is higher than the first candle’s high, a gap exists between
those prices where no trading took place (on that timeframe). That gap is the FVG.​

So, an FVG is basically a noticeable blank or thin spot on the chart indicating a one-sided move.
ICT teaches that these gaps often act like magnets for price later on. Price tends to revisit these
FVG zones at some point, as if to check that area for any unfilled orders or to rebalance the
order flow.

How traders use FVGs:

●​ If price is rallying and leaves an FVG below, a trader might expect a pullback into that
fair value gap before the trend continues upward. That gap becomes a potential buying
 area (for a bullish scenario) because it’s viewed as a "fair value" zone after an
overextended move. Essentially, the gap fill provides a better price for institutions to
re-enter in the direction of the trend.​

●​ In a downtrend, an FVG above price might be a future shorting opportunity when price
retraces up into it.​

For beginners, identifying FVGs trains the eye to see where the market moved too fast. Marking
out imbalances adds another layer of understanding why price might reverse or stall at
seemingly random places (often it’s coming back to an old imbalance). Advanced traders
incorporate FVGs with other tools: an FVG overlapping with an order block, for instance, is a
stronger reference than either alone. They also gauge which imbalances are more likely to be
filled based on trend context and time (not all gaps fill immediately; some can remain open for a
long time).

In essence, FVGs and imbalances underscore the ICT principle that price often returns to areas
of prior inefficiency. Recognizing these spots allows traders to anticipate retracements and form
more precise entry and exit plans.

Displacement
Displacement in ICT terminology refers to a sudden, forceful price movement that indicates a
significant shift in order flow. When displacement occurs, it means the market moved with
urgency and strength, often breaking through levels in a decisive way. This concept helps
traders differentiate between a minor, choppy move and a meaningful drive likely led by
institutional activity.

Key features of displacement:

●​ It is usually seen as one or a series of large-range candles pushing strongly in one

direction.​

●​ Displacement often accompanies a break of structure. For instance, if price barely peeks
above a swing high, that might be a false breakout, but if it slices through that high with a
big candle, that break of structure has displacement – a sign of conviction in the move.​

●​ When displacement is present, it typically leaves clues like fair value gaps in its wake
(because the move was one-sided).​

Why displacement matters: It’s a proxy for institutional involvement. Small, hesitant moves
can be just retail noise or range activity, but a move with displacement implies that one side of
the market (buyers or sellers) overwhelmed the other aggressively. ICT traders interpret
displacement as confirmation. For example:

●​ If you anticipated a bullish reversal and suddenly see a strong bullish displacement
candle breaking above a recent high, that’s a confirmation that bulls (likely smart money)
have taken control. It validates the idea to look for longs on a pullback (perhaps into an
FVG or order block created by that displacement).​

●​ Conversely, in a bearish scenario, strong displacement down through a support level

confirms that sellers dominated, and you would then seek to rally into the void (like an
FVG left behind) to join the downtrend.​

Advanced traders watch for displacement to identify the momentum shift. It’s not just about
speed, but the context: displacement following a liquidity grab or displacement at a key time of
day is especially telling. Beginners learn that not every break of a level is equal—one with
displacement is far more significant. In practice, integrating displacement means being more
selective: you trust signals that are backed by forceful price action and avoid those that are limp
or indecisive.

Institutional Order Flow

Understanding Institutional Order Flow is about seeing the forest for the trees – identifying the
overarching buying or selling pressure by big players that guides market direction over time. ICT
encourages traders to align with this order flow rather than fight it.

Institutional order flow can be thought of as the prevailing bias in price caused by institutions
accumulating or distributing positions. Unlike retail traders who might jump in and out,
institutions build or unload large positions gradually (often around liquidity events and over
sessions). The clues to institutional order flow are:

●​ Consistent Market Structure in One Direction: If on higher time frames (say, daily or
4-hour charts) you see repeated higher highs and higher lows, the institutional order flow
is bullish. Price shows a pattern of respecting demand (bullish order blocks holding) and
violating supply (breaking above old highs). The opposite (lower lows and lower highs,
bearish order blocks holding) indicates bearish institutional flow.​

●​ Respect of Key SMC Levels: In a bullish order flow environment, you’ll notice that
when price dips into areas like a known bullish order block or a discount of a dealing
range (concept explained later), it tends to find support and resume upward. This implies
institutions are using those dips to accumulate more longs. Similarly, in bearish flow,
rallies into bearish order blocks or premiums are sold off.​
For a trader, the goal is to discern this underlying narrative. A beginner might identify the daily
trend and bias trades in that direction. An advanced trader might track multi-timeframe order
flow: e.g., noting that weekly order flow is bullish even if there are short-term bearish
retracements on the daily – thus, they will seek long entries on the daily when the shorter-term
down move shows signs of exhausting.

Why follow institutional order flow? Because fighting it means going against the grain of the
market. Even the best counter-trend setups (like Turtle Soup or breaker trades) work best when
they capture a temporary counter move but eventually rejoin the larger order flow. For instance,
an advanced ICT trader may play a Turtle Soup long at a low of a range, but take profits at a
modest target if the higher time frame order flow is still bearish, knowing that the larger
downtrend likely will resume.

In summary, institutional order flow is the macro context. It’s identified by analyzing market
structure and key level reactions over the bigger picture. Aligning with it improves trade success
rates – you’re effectively "swimming with the tide". ICT methods train you to read these cues
(structure breaks, level holds, etc.) so that you can trade in harmony with the smart money’s
dominant flow, except perhaps in special situations when a clear reversal is underway.

Dealing Ranges and Premium/Discount Pricing

ICT often references the idea of dealing ranges and the related concept of premium versus
discount pricing. A dealing range is simply the range between two significant price points,
often a prominent swing high and swing low that encapsulate a move. By analyzing this range,
traders can determine what constitutes an expensive price (premium) or a cheap price
(discount) within that context.

Dealing Range:

●​ To establish a dealing range, you typically take a notable swing low as the start and a
swing high as the end (for analyzing a bullish context), or vice versa for a bearish
context. For example, suppose price rallied from 1.2500 (major swing low) up to 1.3000
(swing high) before a pullback began. That 1.2500 to 1.3000 is the dealing range for that
bullish swing.​

●​ This range can be drawn with a Fibonacci retracement tool, which conveniently marks
0% at one end and 100% at the other (some traders will do 100% at the swing high and
0% at the swing low for a bullish move, so levels in between are percentages of
retracement).​

Premium and Discount:

●​ In a bullish dealing range (swing low to high), any retracement below the 50% level of
that range is considered entering discount territory (price is relatively cheap compared
 to the range’s high). Retracing beyond 50% means sellers have pushed price into a zone
where buyers (especially institutions) might see value in buying, since it's "on sale"
relative to the recent high. The deeper into the range (towards the low), the greater the
discount.​

●​ Conversely, any retracement above the 50% level (toward the highs of the range) is
premium territory in that bullish range. If price is near the top half or near the previous
high, it's expensive relative to that swing—smart money would prefer to sell or take
profits in these upper reaches rather than initiate new longs.​

●​ In a bearish dealing range (swing high down to swing low as 0% to 100%), the roles
reverse. Above 50% (a retracement upward) is discount for sellers (a good price to sell
from, since it's high relative to the low), and below 50% is premium for buyers (a bad
price to sell since it's too low; good for potential buys or profit-taking on shorts).​

ICT traders combine this concept with other tools. For instance, if the bias is bullish (expecting
another move up), they want to initiate longs at discount prices within the dealing range of the
previous swing. That might coincide with, say, a bullish order block around the 62% retracement
level. The idea is to avoid buying at premium prices (chasing near highs) and instead wait for
the market to come to a discount price (a pullback).

This concept instills patience and discipline:

●​ Beginners learn not to fear missing out on a rising market; instead of buying high, they
wait for a pullback into the lower half of the range.​

●​ Advanced traders will refine this further by identifying optimal zones within discount or
premium (such as the Optimal Trade Entry region, discussed next).​

By always asking "Am I buying at a discount or selling at a premium relative to the recent
range?", traders can avoid poor entries. Premium/discount analysis essentially enforces the
classic wisdom of buying low and selling high, but does so in a systematic, range-based way
that aligns with how institutional traders scale into positions.

Optimal Trade Entry (OTE)

The concept of Optimal Trade Entry (OTE) is an ICT-specific term for a particular sweet spot
within a dealing range retracement where a trader can aim to enter a trade. OTE builds on the
idea of premium and discount pricing by identifying a narrower zone that ICT found to be
high-probability for reversals.
In numeric terms, the OTE is often defined around the 61.8% to 79% Fibonacci retracement
levels of a significant price swing:

●​ After a noticeable move (say a swing low to high), instead of just saying "buy in the lower
50%", the OTE concept zeroes in deeper, roughly between the 62% and 79%
retracement of that swing. Many ICT traders specifically watch the 70.5% level (the
midpoint of 62% and 79%) as a refined point of interest.​

●​ For a bearish swing (swing high to low), the OTE for a short entry would be roughly the
62% to 79% retracement back up of that move (i.e., a rally into that zone is an optimal
sell area).​

Why this zone? It has roots in the idea that institutional orders often overwhelm the market
around those deeper retracements. Retail traders might see a market pull back 50% and think
"downtrend over, time to buy", but often price will push a bit further to shake them out, entering
the OTE zone where the smart money is waiting to pounce in the original trend direction (e.g., to
buy at a cheaper price before a larger up move resumes).

Using OTE:

●​ Suppose the market rallied from 1.2000 to 1.3000. You suspect the trend is up and want
to join, but not at expensive prices. You draw the fib; 61.8% retracement is around
1.2380, 79% is around 1.2180. The OTE buy zone would be roughly 1.2180–1.2380.
Instead of buying right at 1.2500 (50%), an ICT trader might set alerts or orders as price
dips into the mid-1.23s or low-1.22s, anticipating that is where the final flush of the
pullback will find support and turn.​

●​ Confirmation: Ideally, some confluence occurs in that zone (perhaps a small bullish order
block resides there, or it's near a prior low which is liquidity, etc.). Traders don’t blindly
buy the OTE level; they use it as a guide to find an optimal entry once price action
confirms a likely turn (for instance, a small BOS on a lower timeframe off that zone).​

The benefit of OTE is a better reward-to-risk ratio. Entries in that deeper retracement zone
mean your stop-loss can often be tighter (just below the swing low if going long, or above the
swing high if shorting), but your target (retesting the swing high or beyond) is large – yielding a
favorable risk/reward trade.

Beginners might use OTE as a simple rule to avoid shallow entries: it teaches them to be patient
for a deeper pullback. Advanced traders combine OTE with other ICT elements fluidly, e.g., “the
daily bias is bullish, the New York session just swept sell-side liquidity, price is in a higher
timeframe OTE and in a 15-min order block – this is an ideal long setup.” In other words, OTE
itself is one piece of the puzzle, but a powerful one for timing entries.
Kill Zones (London, New York, Asian Sessions)
Not all times of day are equal in the markets. ICT emphasizes certain "Kill Zones", which
correspond to major financial center trading sessions, as periods when the most significant price
moves and setups are likely to occur. By focusing on these key time windows, traders can align
their activity with when liquidity and volatility are at their peak due to institutional participation.

The primary kill zones ICT often references are:

●​ London Kill Zone: Generally spans the London market open and the hours just around
it. In New York local time (EST/EDT), this is roughly from 2:00 AM to 5:00 AM (which
corresponds to approximately 7:00-10:00 AM London time). This window captures the
burst of activity as European markets open. It's common to see important highs or lows
of the day being established during this period, often via a stop hunt (for instance, the
Judas swing, discussed soon, often happens in this window).​

●​ New York Kill Zone: This aligns with the New York session's start. Approximately 8:00
AM to 11:00 AM New York time is particularly active (overlapping with the latter part of
London session). Within this, the NY equities open at 9:30 AM can add volatility. Key
reversals or continuations often set up in the NY kill zone, especially as it overlaps the
London close (around 11:00 AM). For example, if London established a high of the
morning, New York might make a run for that high or drive price in a new direction based
on incoming U.S. news or orders.​

●​ Asian Kill Zone: The Asian session (including Tokyo) is generally quieter compared to
London/NY, but ICT still notes an Asian session range or moves often from 7:00 PM to
10:00 PM New York time. This period can set the stage for what London might do. Often
the Asian session creates a relatively small range that later sessions will use as an
accumulation phase.​

By restricting attention to kill zones, traders are essentially timing their entries to when the big
players are most active. Outside of these times, price may stagnate or move erratically with low
volume, which can be harder to trade. During kill zones, one can observe the day's liquidity
being taken and the true trend unfolding.

Additionally, ICT mentions specific intra-day times to watch, often at the top of the hour or
certain GMT/EST clock times (like 7:30 AM or 8:30 AM for economic reports, etc.). But broadly,
if a trader aligns their strategy to London and New York session opens, they stand a better
chance of catching meaningful moves.

In practice:
 ●​ A beginner might simply avoid trading during off-hours and focus attention around these
key sessions.​

●​ An advanced trader might drill down further: for instance, expecting a possible reversal
around 10:00 AM New York if one occurred around 3:00 AM during London (mirroring
patterns), or watching the last hour of London (just before NY open) for potential setups
as London traders close out positions.​

Kill zones tie into the idea that time is a crucial element (co-equal with price). Good setups
often have both a price factor (like liquidity or an order block) and a timing factor (happening
during a kill zone). This leads to the next concept: the synergy of time and price.

Judas Swing
The Judas Swing is a colorful term ICT uses to describe a deceptive price move that occurs
typically in the early part of the trading day, often around the London session open. Just as
Judas in the biblical story betrayed Jesus, the Judas swing "betrays" early traders by luring
them in the wrong direction before the market reverses.

Here’s the scenario: Often in the London kill zone (or sometimes early New York), price will
make a sharp move that seems to be a breakout in one direction. Many unsuspecting traders
chase this move, believing a big trend day is starting. For example, right after London open, the
market surges upward, breaking above a short-term range or previous highs. It looks very
bullish, convincing breakout traders to buy. However, this move is soon revealed as false; the
market suddenly pivots and reverses into a strong move downward for the rest of the session
(or vice versa).

Key points about the Judas swing:

●​ It is essentially a stop hunt or manipulation move engineered by smart money. The

purpose is to trigger the orders of traders who are caught off guard (like breakout
buyers/sellers), allowing institutions to fill their own large orders in the opposite direction
at good prices.​

●​ The Judas swing usually happens at a time of high liquidity (like a session open)
because that's when there are enough orders to facilitate the move.​

●​ It often creates the high or low of the day (or at least the high/low of the morning
session). For instance, a Judas up-move might set the day's high by spiking up and then
the true trend is down for the rest of the day, never breaching that Judas high again.​

How traders handle it:

 ●​ Aware ICT traders do not chase the initial breakout during the kill zone frenzy. Instead,
they suspect it might be a Judas swing if it aligns with other context (say, higher
timeframe bias is opposite or liquidity conditions suggest a trap).​

●​ Some advanced traders will actually trade the Judas swing deliberately: for example,
they might have identified a liquidity pool above and expect a quick run up (Judas) into
that and then plan to short it when it shows signs of failing.​

●​ Beginners, at the very least, are taught by ICT to be cautious during those opening
moves. If you see a sudden jump in price right at London open, think twice: is it truly the
start of a big trend or could it be the Judas swing? Usually, confirming evidence (like lack
of displacement or an SMT divergence with another pair) might reveal it's a head-fake.​

By understanding the Judas swing concept, traders learn the importance of patience and
confirmation. The biggest takeaway: the first move of the day is often a false one. Many ICT
setups actually involve waiting for that Judas swing to occur (grabbing the liquidity), and then
taking the real trade in the opposite direction once the trap is sprung.

Time and Price Theory

ICT’s Time and Price Theory encapsulates the idea that successful trading setups require a
convergence of the right price at the right time. It's not enough for price to hit a key level; it often
needs to do so during a key trading time to produce the expected move. Likewise, even during a
kill zone, if price is not at an interesting level, a move might not materialize.

This theory breaks down into a few principles:

●​ Certain prices are more significant than others: For example, previous day
highs/lows, weekly highs/lows, order block levels, etc., all create price points of interest.
If the market reaches one of these levels, there's potential for something to happen (like
a reversal or acceleration).​

●​ Certain times are more significant than others: As discussed under kill zones, times
around major session opens or closes, or specific recurring times (e.g., 8:30 AM for
economic data, or even midnight New York time for the daily Forex open) often see
volatility shifts or trend initiations.​

The intersection of time and price is where the magic lies. For instance, assume you have
identified a strong bearish order block at 1.3050 on your chart from yesterday’s New York
session high. That’s a key price. Now, price is trading back up near that level the next day. If
price reaches around 1.3050 during the low-liquidity Asian session, it might just poke through
without much fanfare. But if it touches 1.3050 right at the London open, the context is very
different: you’re at a significant price exactly during a moment when markets are primed for a
move. The likelihood of a reaction (perhaps a sell-off from that order block) is much higher.

Another aspect of time and price is the idea of the daily and weekly cycle:

●​ Markets often have a rhythm within a day: e.g., consolidation in Asia (time), expansion in
London (time), possibly a reversal or continuation in New York (time).​

●​ Within a week, there’s a time element: Monday and Tuesday might establish a high or
low of the week, mid-week (Wednesday/Thursday) might see a reversal or an
acceleration of the trend. Many ICT traders observe that significant highs or lows of the
week often form by mid-week, with Thursday/Friday either extending the move or
retracing.​

ICT also emphasizes not forcing trades at "wrong times". For example, if it’s late Friday or a
public holiday, even if price hits a level, the context (time) isn’t supportive for a big move. Or if
it’s deep into the Asian session, you might not get far in a trade because the real move might
wait for London.

For beginners, this theory instills the lesson: always ask “Is this the right time for this price
move?” not just “Is this the right price?”. Advanced practitioners have almost an internal clock
for market behavior, often stepping aside when time conditions aren't met. They blend this with
their analysis so that, say, a setup will only be taken if the time window aligns (like, "I will trade
this order block if price gets there during New York open; otherwise, I stand down").

In summary, Time and Price Theory in ICT teaches that timing is as crucial as price levels. A
trade setup is highest probability when a key price level is engaged at a key time of day or
week. This confluence is what many ICT strategies seek to exploit.

Weekly and Daily Bias (and PD Arrays)

Determining the daily or weekly bias means forming an informed expectation of market
direction for that day or week. ICT places a lot of importance on establishing a bias as it guides
which setups to favor (longs or shorts). A bias is derived from higher timeframe analysis and
recognizing where price is likely to gravitate in the near term.

To form a bias, traders consider:

●​ Higher Timeframe Market Structure: For example, if the weekly chart is showing
bullish order flow (higher highs, higher lows), the bias for the week ahead might be
bullish, meaning you expect the week to eventually trade higher (and perhaps take out
the previous week's high).​
 ●​ Previous Highs/Lows and Liquidity: If the market is trading below last week’s midpoint
and has not yet taken out last week’s low, an ICT trader might hold a bias that the low
will be taken (bearish bias) before any significant upmove happens – or vice versa.​

●​ Economic Calendar and Time Factors: The beginning of the week or specific news
events might tilt a bias (though ICT often focuses on technical factors primarily).​

Once you have a bias (say, bullish for the day), you primarily look for longs that day, ideally after
an early-day dip that sets up that long.

PD Arrays (Premium/Discount Arrays) are a set of reference points and levels that ICT traders
use to support their bias and find targets. Essentially, think of a collection (an "array") of all
possible price levels of interest, arranged in terms of premium vs discount relative to a certain
range or context. These can include:

●​ Previous day’s high and low.​

●​ Previous week’s high and low.​

●​ Order blocks on higher time frames (e.g., a 4h bearish order block above current price
could be a target if you have a bullish bias aiming to reach that supply).​

●​ Fair value gaps or imbalances above or below.​

●​ Equilibrium (50%) of the current week's projected range or current dealing range.​

The term premium and discount array reflects that these levels can be thought of hierarchically
from high to low. For example, above the current price (in premium) you might have yesterday’s
high, then perhaps a daily FVG, then last week’s high – these form an array of potential upside
objectives or reference points if the bias is bullish. Below current price (in discount), you might
have yesterday’s low, a bullish daily order block, last week’s low, etc., which form downside
reference points if bias is bearish.

How bias and PD arrays work together:

●​ First, an ICT trader sets a daily or weekly bias (e.g., expect a bullish day that will take
out yesterday’s high, or a bearish week targeting last week’s low).​

●​ Given that bias, they consult the PD array of likely targets in that direction: maybe a
liquidity pool at yesterday’s high is the primary draw, and beyond that an FVG on the
daily chart could be secondary. This guides trade planning – one might hold a trade until
that key liquidity is taken, and perhaps partial out at subsequent array levels.​
 ●​ Simultaneously, PD arrays on the opposite side help in invalidation: if price is bullish
bias, but then violates a key discount array level (say, it breaks below a significant low
that was not expected to break), that can invalidate the bullish bias and call for
re-evaluation.​

For beginners, understanding bias is crucial to avoid random trading. It’s like having a compass
for the session – you decide to mostly buy or mostly sell, which simplifies decision-making and
aligns with the likely institutional direction for that period. PD arrays might seem advanced, but
they simply ensure you are aware of all important levels so you’re not surprised by where price
goes. Advanced traders meticulously map out these arrays at the start of the week or day, so
they know, "if we go up, these are the checkpoints/targets; if we go down, these are the levels to
watch."

In essence, establishing a weekly/daily bias and using PD arrays is about preparation and
context. It means you enter the trading day with a roadmap: a directional leaning and a set of
price landmarks. Trades are then executed in alignment with that roadmap, rather than on
whims or lower timeframe noise.

Market Maker Models (Accumulation, Manipulation,

Distribution)
ICT’s methodology often references Market Maker Models, which describe how price tends to
move in phases that reflect the actions of "market makers" or large operators in accumulating
and distributing positions. These phases are commonly labeled as Accumulation,
Manipulation, and Distribution (AMD).

Here's a breakdown of these phases:

●​ Accumulation: This phase is characterized by consolidation or ranging price action. It's

where smart money is stealthily building a position (either long or short) without
significantly moving the price. For example, during an accumulation phase for a long
position, price might be in a tight range as institutions gradually buy (accumulate) from
sellers coming in. Retail traders often see this as a sideways, indecisive market. It
usually occurs during quieter sessions (like the end of New York or the Asian session) or
over several days in a range.​

●​ Manipulation: Once enough position is accumulated, comes the shakeout. Manipulation

is the deceptive move designed to trigger stop losses and lure traders to the wrong side,
effectively clearing the way for the real move. This corresponds to the idea of the Judas
swing or stop hunts. In a bullish model, manipulation might be a sharp false drop (to hit
stop-losses of those who are long and to entice breakout shorts) which quickly reverses.
In a bearish model, it might be a quick spike up that fails.​
 ●​ Distribution: After manipulation clears out opposition and grabs liquidity, the market is
free to move in the desired direction. Distribution here means the price is now
"distributed" to the broader market at new levels as the large players unload their
profitable positions into the move (or if they were accumulating longs, they start
distributing by selling into higher prices). This phase is the actual trending move that
follows the manipulation. It often happens quickly and forcefully since the path was
cleared by the manipulation phase.​

One can see these phases play out on various timeframes. For example, in a single day: Asian
session could be accumulation (flat range), London open provides the manipulation (stop run)
and then the rest of London/NY is distribution (trending move). On a larger scale, one might find
a week where Monday-Tuesday accumulate in a range, Wednesday gives a false breakout
(manipulation), and then Thursday-Friday trend (distribution).

Trading with the market maker model in mind means:

●​ Being cautious during accumulation (range-bound markets) and not getting chopped up.​

●​ Anticipating the likelihood of a manipulation move; not being fooled by it when it

happens.​

●​ Positioning for the distribution phase, which is where the larger profit potential lies.​

Advanced ICT traders often can visualize these phases playing out and use them to narrate
what the market is doing currently. For example, if they see a long, protracted sideways
movement, they think "accumulation – a big move is likely brewing." When they see a sudden
spike against their bias, they might think "this could be manipulation – a Judas swing – and an
opportunity to enter with the real move." Beginners benefit from this model as it gives a storyline
to price action beyond simple trend vs. range. It teaches that every big trend move usually had a
setup (accumulation of positions and a shakeout) before it, and recognizing those can give
confidence to act when the time comes.

Power of Three (Accumulation, Manipulation,

Distribution)
The Power of Three is closely related to the Market Maker Model and essentially describes the
same three phases of price behavior within a single trading period (often discussed in terms of a
daily candle, but it can apply to other timeframes too). The phrase "Power of Three" in ICT lingo
underscores how each significant period can be understood by breaking it into three
components:
 1.​ Accumulation phase – often reflected in the candle or period as the opening range or
initial consolidation. The period’s open may see sideways movement or a small range as
positions are built up (accumulation of orders by smart money).​

2.​ Manipulation phase – this shows up as a false move to one side of the period’s range.
For example, price might dip below the opening price (creating the lower wick of a daily
candle) only to then reverse upward. That dip was the manipulation, running stops below
the range or open to facilitate large buying.​

3.​ Distribution phase – this is the true move of the period where price trends to the
opposite side, creating the body of the candle and often closing near the far end of the
range. Continuing the example, after dipping down (manipulation), the market rallies
strongly (distribution), and the daily candle closes near its high, with a long lower wick as
evidence of the earlier shakeout.​

When applied to a daily chart:

●​ If it's going to be a bullish day (market expected to rise), the Power of Three suggests
the day may start with a bit of bearishness (accumulation and manipulation downward)
to enable smart money to accumulate longs. Then the main bullish run (distribution
upward) happens, resulting in a strong up close. In practical terms: the day opens,
perhaps dips below the open or a prior low (that’s the manipulation), then reverses and
trends up for the rest of the day, closing higher.​

●​ For a bearish day, the opposite: the day might open and rally a bit (upward manipulation,
forming an upper wick), then spend the majority of the session selling off (distribution
downward) to close near the low of the day.​

The importance of the Power of Three:

●​ It teaches traders not to panic if, early in the period, price moves against the eventual
trend. If it's part of the accumulation/manipulation phase, that initial move is actually
creating the opportunity for the main move.​

●​ It helps in structuring a trading plan. For instance, if you expect a bullish day, you might
anticipate a stop run below the open (or a key low) in the morning – which you could
either sidestep or carefully trade counter-trend – and then focus on getting long for the
real move up once that manipulation phase appears complete.​

Advanced traders often view daily candles or intraday sessions through this lens, noting the
open, initial false move, and subsequent trend. Even on smaller timeframes, one can observe
micro versions of this pattern. Beginners can practice by reviewing historical charts and
identifying these three phases in hindsight to sharpen their ability to recognize them in real time.

In short, the Power of Three is a handy shorthand to remember that each significant trading
period often has a fake-out and a genuine move. It reinforces patience (wait for the manipulation
to play out) and conviction (when distribution starts, stick with it until it’s played out). Combined
with other ICT principles (like kill zones and bias), it becomes a powerful mental model for
forecasting intraday behavior.

ICT Macros (Monthly/Quarterly/Weekly Opening Ranges)

ICT methodology doesn't stop at daily and intraday concepts; it also considers larger time
scales, which Michael Huddleston often refers to as ICT Macros. This typically involves
analyzing monthly, quarterly, and weekly opening ranges to predict how price may behave
over those extended periods. The idea is that just as each day has an "opening range" that can
set the tone (as in the Power of Three concept), each week, month, or quarter has a similar
early period that can establish either the high or the low of that timeframe and indicate the likely
direction for the remainder.

Key ideas with ICT macros:

●​ Weekly Opening Range: Many ICT traders observe how price behaves on Monday and
Tuesday to gauge the weekly bias. Often, one of those early days sets a pivotal high or
low for the week. For example, if by Tuesday the market has made a significant low and
then starts moving up, that low might stand as the low of the week, meaning the rest of
the week will be spent above it (bullish bias). Traders will then anticipate bullish setups
for Wednesday through Friday aiming to take out the opposite end (perhaps the weekly
high). Conversely, if early week establishes a high and then price falls away, that could
be the high of the week with a bearish bias going forward.​

●​ Monthly Opening Range: Similarly, the first roughly week (or few days) of a new month
often sees price create either the high or the low of the month. Suppose in the first week
of April, the EUR/USD drops hard to a new low and then rebounds sharply. That low
might remain the lowest point of April, indicating April will be a bullish month from that
point onward. Traders aware of this can position swing trades accordingly, with the
expectation that price will eventually aim for higher targets (perhaps the previous
month’s high or an upper monthly imbalance).​

●​ Quarterly (and Yearly) Analysis: On an even larger scale, financial markets sometimes
exhibit patterns at the quarter boundaries. Each quarter (Q1: Jan–Mar, Q2: Apr–Jun, Q3:
Jul–Sep, Q4: Oct–Dec) has a beginning where major institutional reallocations might
happen. ICT’s macro teachings suggest observing how price behaves around the
transition of one quarter to the next. For instance, if price in early January (start of Q1)
surges to a peak and then drifts down, that peak might be the high of Q1. There's also
 the concept of the "true open" of a period – the price at the very start of the
week/month/quarter – and whether the market stays above or below that can hint at
bullish or bearish bias for the rest of that period.​

Using macros in trading:

●​ A trader might use the weekly opening range concept to avoid getting trapped early in
the week. If one expects, say, a bullish week, they might actually wait for
Monday/Tuesday to potentially create a low (maybe via a Tuesday Judas swing down),
and then use that low as a springboard for longs mid- to late-week.​

●​ Monthly bias gleaned from the monthly open can help filter daily trades for the entire
month. If price is trading above the monthly open and showing strength, one could keep
looking for longs in intraday setups that align with that monthly bullish bias (since likely
the month is going to finish higher).​

●​ In conjunction with PD arrays, macro levels such as previous quarter highs/lows or

yearly midpoints can serve as longer-term targets or context for swing trades.​

For beginners, macro analysis might be overwhelming at first, but even noting the weekly
pattern (when does the high/low of the week typically occur?) can vastly improve understanding
of market rhythms. Advanced traders who hold positions for days or weeks find these concepts
essential, as they align short-term tactics with the big-picture roadmap. It again ties back to time
and price: macros give the time context on a grand scale, ensuring that one’s trading is not just
zoomed into the weeds of the 5-minute chart, but is also in harmony with what the market is
doing on a monthly or quarterly level.

Conclusion
The ICT methodology, with all its concepts from market structure to kill zones to macros, may
seem complex at first glance. However, each concept interlocks with the others to form a
cohesive view of the market driven by institutional behavior. Beginners are encouraged to build
up their understanding step by step – start with structure and liquidity, then add layers like order
blocks and time-of-day significance. Advanced traders can appreciate the nuance and depth
each tool provides, allowing for sophisticated analysis and precise execution. By thoroughly
understanding these ICT principles, a trader gains a comprehensive framework to navigate the
markets more akin to a professional, leveraging the "inner circle" knowledge of how markets
truly operate.