Michael J. Huddleston created the trading approach known as the ICT trading strategy. By learning and imitating the techniques employed by major institutions, this advanced method of forex trading allows retail traders to predict market moves by simulating the behaviour of these institutions. This approach is based on a thorough comprehension of price movement, order flow, and market structure.
Who Is Michael J. Huddleston?
A pioneer in trading education, Michael J. Huddleston is renowned for his distinct method of comprehending and controlling the markets.
He wants both novice and seasoned traders to be able to use these sophisticated trading strategies, also referred to as ICT trading. Providing insights into strategies such as “Bank Trading,” “Interbank Trading,” and price action trading has earned him a reputation.
He also asserts that no other mentor or system can equal the complexity of his techniques and that his ideas are founded on his own study.
ICT mentorship videos are Huddleston’s most popular videos on his YouTube channel, which now has 1.46 million subscribers.
Structure of ICT Trading Strategy
It is essential to comprehend market structure in order to use the ICT methodology effectively. The detection of trends through particular patterns of highs and lows defines market structure in the context of ICT. You are going to get full understanding of ICT Trading Model. If you want to learn through us. Then feel free to contact us
Market Structure
An uptrend is usually defined by a sequence of higher highs and lower lows, while a downtrend is characterized by a series of lower highs and lower lows. The attitude and momentum of the market are visually represented by this sequential pattern.
Crucially, market trends are fractal, reproducing comparable patterns across many timescales or scales. For instance, a short-term bearish trend may really be a corrective stage of a longer-term positive trend. Traders can more effectively match their methods with the dominant trend at various trading intervals by comprehending this fractal character.
Break of Structure (BOS)
When there is a noticeable departure from these well-established highs and lows, it is called a Break of Structure. A BOS indicates the strength and continuance of an uptrend when prices surpass a prior high without dropping below the most recent higher low.
A BOS, on the other hand, indicates that a downtrend is still strong when prices fall below a previous low without breaking the previous lower high. Finding a BOS provides traders with important hints about whether the present market movement will continue.
Change of Character (CHoCH)
A market experiences a “Change of Character” when price movements exhibit a discernible shift in behaviour, indicating a possible reversal of a certain trend. This could occur during an uptrend if the price falls below a recent higher low after failing to hit a new high, suggesting that the buying impetus is weakening and that a bearish reversal is possible.
Finding a CHoCH enables traders to spot changes in market momentum, which is essential for modifying positions to profit from or hedge against emerging trends.
Market Structure Shift (MSS)
A major shift in the market that has the potential to upset the current trend is known as a “market structure shift” in ICT Trading Strategy. A price moving sharply (a displacement) through a significant structural level, such as a lower high in a downtrend or a higher low in an uptrend, is usually indicative of this particular sort of CHoCH.
These movements frequently precede a new, long-lasting trend, and they might indicate a significant shift in the dynamics of the market. Given its obvious indication, identifying an MSS enables traders to reassess their present bias and adjust to a new trend.
Order Blocks
A key element of ICT trading are order blocks, which offer vital information about possible regions where the price may respond sharply as a
result of substantial buy or sell demand from major market players.
Regular Order Blocks
An area on the price chart that shows a concentration of purchasing (demand zone) or selling (supply zone) activity is called a regular order block.
A bullish order block in an uptrend is the final selling area prior to a significant upward price movement, and it is detected during a downward price movement. In contrast, a bearish order block develops during an uptrend when the final buying activity occurs before to a notable decline in price.
Order blocks are regarded as reversal locations in the ICT trading method. Therefore, it is believed that a bullish order block will hold and trigger a reversal that results in a new higher high if the price revisits it after a BOS higher.
Breaker Blocks
Breaker Block can be a finest weapon of traders who follow ICT Trading Strategy. When it comes to spotting trend reversals, breakers are essential. In order to preserve the current market structure, they are usually created when the price makes a BOS before reversing and breaking past an order block. It is evident from this formation that liquidity has been taken.
For example, in an uptrend, the bullish order block above the low becomes a breaker block if the price makes a new high but then reverses below the previous higher low. Similar to how support can turn become resistance and vice versa, a breaker block can be a location that triggers a reversal as the new trend develops.
Mitigation Blocks
Like breaker blocks, mitigation blocks follow a failed swing, in which the price tries to break through a prior peak in an uptrend or a prior trough in a downtrend but is unsuccessful. When the price is unable to maintain its prior trajectory, this pattern suggests a lack of momentum and possible reversal.
The order block created at the previous low becomes a mitigation block, for instance, if the price breaks the structure by falling below the previous low after making a lower high in an uptrend. Because it is anticipated that these blocks will result in a reversal if a new trend has been initiated, they are crucial for traders.
Liquidity
Areas of the price chart with a high concentration of trading activity are referred to as liquidity in ICT Trading Strategy; these areas are usually identified by stop orders placed by individual traders.
Buy- and Sell-Side Liquidity
Where there is a probable accumulation of stop orders from short-selling traders, usually above recent highs, buy-side liquidity is present. On the other hand, sell-side liquidity is found below recent lows, as stop orders from bullish traders build up. Stop orders can trigger a reversal when prices approach certain regions, indicating a possible level of support or resistance.
Liquidity Grabs
When the price rapidly surges into these high-density order locations, causing stops to be placed and then reversing course, this is known as a liquidity grab. According to ICT theory, bigger players frequently plan this move in an effort to profit from the rush of orders and carry out their high-volume trades with the least amount of slippage. It’s a calculated move that alters price momentum momentarily, usually long enough to set stops before the market turns around.
Inducement
An Inducement is a particular kind of liquidity grab that draws other traders into the market by setting off stops. It has a key role to make Higher High or Lower Low in ICT Trading Strategy. It frequently manifests as a peak or trough in a tiny countertrend within the broader market trend, usually into an area of liquidity. Smart money creates inducements to provide the appearance of a trend change, which leads to a surge in retail trading that goes in the incorrect direction. The price quickly reverses and returns to the initial major trend after the retail traders have committed.
Trending Movements
Fair value gaps and displacements are two distinct forms of sharp trending movements that indicate important changes in market dynamics according to the Inner Circle Trading methodology.
Fair Value Gaps
When there is a discernible lack of trade within a price range, usually shown by a quick and significant price move without retracement, this is known as a fair value gap (FVG). In ICT Trading Strategy FVG is the first identification to understand the Displacement.This gap, which indicates a strong directional push, frequently appears between the wicks of two adjacent candles where no trade has taken place.
Fair value gaps are crucial because they show where the price might “fill” the gap on the chart, typically prior to an order block, providing possible trading opportunities as the market tries to reach equilibrium.
Displacements
Displacements, sometimes referred to as liquidity voids, are defined by abrupt, strong price swings that take place between two chart levels without the usual slow trading activity that is typically seen in between. They are basically larger, more pronounced versions of fair value gaps that indicate a greater imbalance between buy and sell orders. They frequently span several candles and FVGs.
Other Components
There are a few more specialized elements in addition to basic ICT ideas.
Swing Points
A swing high is reached, for instance, when a stock price has been climbing and then peaks before beginning to decline. On the other hand, a low is a swing low if the price has dropped and then hit a low before rising once more.
Finding these points enables you to identify possible entry or departure positions as well as market trends.
Discount & Premium Zones
Discount zones are price points that are regarded as undervalued in ICT Trading Strategy, which makes them possible buy opportunities.
For instance, a currency pair enters a discount zone, indicating a favourable buying opportunity, when its price falls below its perceived worth.
Conversely, premium zones are overpriced areas that are best suited for sales.
The price moves into a premium zone, suggesting a possible selling opportunity, if it surpasses its perceived value.
Volume Imbalance & Gaps
Uneven buying and selling volumes at particular price points are referred to as volume imbalances.
Strong demand may cause the price to rise if there is noticeably more purchasing volume than selling volume at a given price.
Finding these imbalances might help traders make better decisions by revealing possible market changes.
Daily Bias
The general anticipated market direction for the day is known as the daily bias.
Traders can ascertain whether the bias is bullish (upward trend) or bearish (downward trend) by examining market trends as a first step of ICT Trading Strategy.
Kill Zones
If you follow ICT Trading Strategy then try to limit your trading decisions only in Kill Zones. Kill Zones are designated periods of the trading day when there is a notable surge in market activity as a result of the opening or closing of important financial centres. Because they frequently set the tone for price changes based on the heightened volume and volatility, these times are critical for traders: These periods include the London Opening Session, the New York Opening Session and the London Closing Session.
Optimal Trade Entry
Fibonacci retracement levels are used to determine an Inner Circle trading method known as an optimal trade entry (OTE). The Fibonacci retracement tool is used by traders to identify entry points following an enticement that causes a displacement (leaving behind an FVG).
While the second point is placed at the subsequent substantial swing high or low that emerges, the first point is set at the major high or low that causes the displacement. For instance, the first point in a bearish movement is the swing high before to the displacement, and the second point is the new swing low. The 61.8% to 78.6% retracement level is frequently used by traders to find entry.
Balanced Price Range
When two opposing displacements produce FVGs in a brief period of time, it indicates a vast zone of price consolidation and a balanced price range. Prices usually test both extremes during this time in an effort to close the discrepancies. As the price attempts to reach a new equilibrium, this scenario provides traders with important levels to watch for a breakout as well as possible trend reversal zones.
The Bottom Line
Gaining an understanding of ICT ideas enables traders to interpret intricate market signals and adjust their tactics to fit the powerful trends influenced by the biggest players in the market. To engage with the markets through a strong platform that supports advanced trading tactics, Subscribing Trading Wizard is the first step for people who want to put these trading techniques into practice.
FAQs
Is ICT a good trading strategy?
Many traders find success with the ICT trading strategy because of its methodical approach to market analysis. It places a strong emphasis on comprehending important price levels, institutional order flow, and market behavior. But because of its intricacy, it might not be appropriate for every trader, particularly novices who can find it daunting at first.
What is the ICT trading strategy?
By utilizing the actions and strategies of institutional traders, the ICT (Inner Circle Trader) strategy uses a variety of methods and ideas to enhance trading success. It entails comprehending the order flow, important trading sessions, and ICT market structure.
What is the ICT market structure?
A framework for comprehending and analyzing the general direction and behavior of the market is the ICT market structure. It entails spotting changes in market trends as well as identifying critical stages like accumulation, manipulation, and distribution. Breaks in important price levels, which may indicate possible trading opportunities, are indicative of these changes. For the ICT trading strategy to be implemented successfully, it is essential to comprehend market structure.
What is the ICT silver bullet strategy?
One intraday trading method that aims to capture big price movements quickly is the ICT silver bullet strategy. It entails determining important liquidity points and trading at particular times of the day when there is a greater chance of predicted market changes. The approach is intended to operate under extremely liquid market conditions and seeks to profit from quick price fluctuations.
Is ICT trading Profitable?
If traders fully comprehend and successfully apply ICT trading’s concepts and tactics, it can be profitable.