I have seen many ICT trading strategies, most of which are tedious and long. I highly recommend watching the ICT taught by the great Fractal Flow, which has already garnered 1.46 million views. I declare this is the ceiling of ICT!
Everyone who wants to learn ICT trading strategies must take 10 minutes to watch this! If you miss it, you won't be able to figure it out.
Concepts and examples like swing points and liquidity / highs and lows / discounts and premiums / optimal trading entries / fair value gaps / volume imbalances / order blocks / intraday trend direction, etc., will be explained thoroughly all at once!
Swing points and liquidity are the entrance to uncovering the market's hunting ground. The market is like a huge hunting ground, with swing points being the coordinates where prey gathers, hiding the secrets of retail and institutional battles!
Swing points come in two types: swing highs and swing lows. Identifying them only requires looking at three candles, with the middle one being the protagonist.
A swing high is where both adjacent candles' highs are lower than it, like the price climbing to a peak; a swing low is where both adjacent candles' lows are higher than it, like the price falling into a valley. Don’t underestimate these three candles; they determine market liquidity.
Retail traders have a common habit: when going long, they set stop-loss sell orders just below the swing low; when going short, they set stop-loss buy orders just above the swing high. These orders pile up together, forming a liquidity pool. Whenever institutions see it, they’ll shout, 'Opportunity has come, let’s exploit it!'
Buyer liquidity is above the swing high, where stop-loss buy orders and buy orders wanting to go long fill this space. Once the price breaks above the high, these orders will trigger, allowing institutions to harvest.
Seller liquidity is below the swing low, where stop-loss sell orders and sell orders wanting to go short are clustered. Once the price breaks below the low, the orders are activated, and institutions scoop up another wave!
Highs and lows are the keys to cracking the market's layout code. Once you start marking these points, you'll find they either cluster together or stand out alone, forming two key types: equal highs/equal lows and old highs/old lows!
Equal highs and equal lows are when three to five swing highs or lows cluster around roughly the same price level. They may not perfectly align, but are generally in the same area. You can see three highs huddled together on the chart, indicating equal highs; three lows grouped together indicate equal lows. These are hot zones repeatedly tested by the market, often with ample liquidity!
Old highs and old lows are past swing highs or lows without any nearby companions. Don’t underestimate them; sometimes, the price will intentionally pierce an old low but not close below it, quickly rebounding. This is not coincidence but rather intentional by institutions.
By triggering the liquidity of these isolated points, they pretend to break through to induce retail traders to position incorrectly, and then they reverse to profit, which is the core idea of market manipulation in ICT. Grasping this secret makes you stronger than 90% of retail traders!
Besides these, the market has higher-level landmarks, like the highs and lows of the previous week, the highs and lows of the previous day, the highs and lows of the trading session, and even the highs and lows of the intraday timeframe. Identifying these highs and lows is not difficult, like finding coordinates on a map, but just looking isn’t enough; you need to practice!
It’s recommended to repeatedly mark using replay mode or real-time charts, turning it into your second nature. Missing these points is like losing the key to making money intraday!
Discounts and premiums are the lifeblood of buying low and selling high. What is the core of trading profit? Location, location, location!!
In ICT trading methods, market prices are not a chaotic mess, but have clear ranges, from swing lows to swing highs, or from swing highs to swing lows. It’s like a price runway; dividing it into two halves, you find the discount zone and the premium zone. This is the golden rule of buying low and selling high.
Setting the range for discounts and premiums is simple: in an uptrend, it’s from a swing low to a swing high; in a downtrend, it’s from high to low, the activity space of the two prices.
Taking the example from low to high, split this range in half; the upper part is the premium zone, and the lower part is the discount zone. Conversely, from high to low, the upper part is premium, and the lower part is discount!
The discount zone is the lower half, the cheap goods area. If you want to go long, this is where to enter. You can enter at a lower cost, set your stop loss below the swing low, and if it breaks, you lose less. Aim for the swing high to make significant profits, and the closer you are to the low, the smaller the risk and the higher the return; the risk-reward ratio takes off!
The premium zone is the upper half, the high-price area. If you want to go short, sell here. Set your stop loss above the swing high to prevent a breakout and minimize losses, targeting the swing low for larger gains. The closer you are to the high, the greater your profit potential, the risk-reward ratio remains fully loaded!
The optimal entry point (OT) is crucial for precise entry! Knowing just about discount and premium zones is not enough. To find the exact shooting point like a sniper, Fibonacci tools must be utilized!
In the discount or premium zone, lock in a golden retracement area, from 0.62 to 0.79, with the midpoint of 0.5 being particularly significant. In simple terms, OT helps you buy smarter in the cheap goods zone and sell more accurately in the high-price zone!
To find OT, first define the range, for example, from low to high. Use the Fibonacci retracement tool to draw the interval from 0.62 to 0.79. Bullish trading OT falls in the discount zone; bearish trading OT falls in the premium zone. These three key levels, 0.62, 0.5, and 0.79, are like the scale of a sniper's scope; when the price reaches here, you need to watch its reaction!
Bullish OT is when the price retraces to the discount zone, for example, touching 0.62 or 0.5 without breaking, then decisively buying in, with stop loss set below the low, targeting the high — it's cheap enough, low risk, and large profit potential.
Bearish OT is when the price retraces to the premium zone, for example, selling at 0.62 or 0.5, with stop loss set above the high, targeting the low, maximizing profit potential!
The fair value gap (FVG) is a special three-candle pattern, where the key point is that the shadows of the first and third candles do not overlap, creating a gap, like a flaw in the market waiting for you to exploit it.
There are two types of FVG, representing an imbalance of buying and selling power. Learn to identify and utilize them, and you'll be able to make money ahead of retail traders!
A bullish FVG is called BC, where the upper shadow of the first candle and the lower shadow of the third candle do not touch, leaving a gap in between. This means buyers suddenly exert strength while sellers cannot keep up, creating a gap favoring buyers. If the upper shadow of the first candle and the lower shadow of the third candle overlap, it’s not a gap and not an FVG!
A bearish FVG is called CB, where the lower shadow of the first candle and the upper shadow of the third candle do not overlap, also forming a gap. This time, sellers are strong while buyers cannot hold, leaving a mark favoring sellers. If the shadows overlap, it’s not an FVG!
Subsequent erosion is the midpoint of the gap, and a 50% retracement is a key line, acting like support or resistance. Ideally, the price returns to the gap, piercing the upper limit of the bullish FVG or the midpoint and then retracting, indicating the gap is valid.
For example, in a bullish FVG, if the price pierces the upper limit and closes above, or touches the midpoint and then closes back up, or even tests the midpoint again immediately, these are all good signals. But if the price disrespects the gap and tests the other side, like a bullish FVG turning bearish, that’s an FVG reversal, just like support turning into resistance, and vice versa!
Volume imbalance is similar to gaps and FVGs, both are tools to catch market flaws. Although these two are somewhat like FVGs, learning to distinguish and utilize them can elevate your trading skills, doubling your opportunities!
Volume imbalance is a little secret between two adjacent candles. Look at the opening and closing prices; if there’s a gap but the shadows overlap, it indicates trading activity still exists within the gap. This is volume imbalance, and this pattern can support the price; the next wave of rise often starts from here, like stepping on a spring!
A gap is a Gap, where there is completely no trading between the highs and lows of adjacent candles, like the market suddenly jumping a gap.
A bullish gap is when there is no activity from the high of the first candle to the low of the second candle; a bearish gap is when there is no trading from the low of the first candle to the high of the second candle. It’s like a no-man's land left by the market, where prices often return to fill and run again, giving you an entry signal.
The relationship with FVG is that the three brothers have similar functions, all can act as support or resistance. FVG is an imbalanced gap, volume imbalance is a semi-active gap, and a gap is a pure void gap, all can help you make money!
Order blocks are evidence of institutions sweeping liquidity in the market, divided into high probability order blocks and low probability order blocks, each with unique shapes and uses!
High probability order blocks: This is the main show of big fish eating small fish, sweeping liquidity with large-bodied candles and then breaking the structure.
A bullish order block consists of one or more large bearish candles, first sweeping the stop-loss orders of sellers below the swing low, then the price breaks above the old high. The order block is set at the opening price of the last large bearish candle, and the price often retraces to this point before rising again!
A bearish order block consists of one or more large bullish candles, sweeping the stop-loss orders of buyers above the swing high, then breaking below the old low. The order block can be the opening price of the last large bullish candle, or it can use the average threshold from opening to closing at the 50% Fibonacci retracement. The price retraces to this point and then falls.
The principle is that high probability order blocks come from extended pivot patterns, with bullish being a low-low followed by a high-high, and bearish being a high-high followed by a low-low, marking trend reversals.
Low probability order blocks are small intermissions within a single trend, represented by small-bodied candles with significant shadows.
A bullish order block is a small bearish candle sandwiched among a bunch of bullish candles. The order block is set in the space from high to opening, and the price retraces to this point and continues to rise.
A bearish order block is a small bullish candle sandwiched among a bunch of bearish candles. The order block is set in the space from low to opening, and the price retraces to this point and continues to fall!
The intraday trend direction is predicted using the previous day's highs and lows, simple yet practical, like a weather forecast that tells you if tomorrow will be sunny and bullish or cloudy and bearish!
Bullish bias uses the previous day's high and low as reference lines, with two triggering methods: one is breaking the previous high, where the price breaks above the previous day's high and closes above, indicating strong buying pressure; the other is not breaking the low, where the price pierces below the previous day's low but does not close below it, indicating sellers are weak, and a rebound is likely on the next trading day. The same applies to bearish bias!
This tactic is not limited to daily charts; it can be applied to hourly charts as well. Just focus on the highs and lows of the previous period, and see if they break or not; the principle is the same!