Foundations of ICT: Market Structure, Liquidity,

Institutional Order Flow

1. Market Structure
Market Structure is the cornerstone of the ICT trading methodology. It refers to the way
price moves through a sequence of swings—specifically higher highs and higher lows in an
uptrend (bullish structure), or lower highs and lower lows in a downtrend (bearish
structure).
 Dynamic Nature: Market structure is not static; it evolves constantly as price
interacts with key levels. Traders must continuously monitor swing points to detect
breaks or shifts.
 Breaks in Structure: A break of a previous swing low or high often signals a potential
change in directional bias. For instance, if a bullish market breaks below a recent
higher low, it may indicate bearish intent and a possible trend reversal.
 Market Phases: ICT divides price action into phases such as accumulation (where
institutions build positions), manipulation (where price is engineered to create
liquidity), and distribution (where institutions exit positions).
 Market Structure Shift (MSS): This is a critical ICT concept where an early indication
of trend reversal is identified by a break of previous swing points, signaling a change
in market direction.
Practical Application:
Traders use market structure to define bias and identify high-probability trade setups. For
example, entering long trades only when the structure is bullish and waiting for confirmation
of breaks to avoid false signals.
2. Liquidity
Liquidity is the “fuel” that drives price movement in the markets and is central to ICT
trading. It represents clusters of stop-loss orders or pending orders placed by retail traders
around key price levels, such as previous highs and lows.
 Buy-Side Liquidity: Located above recent highs, where stop-loss orders for short
positions accumulate. Institutions often push price into these zones to trigger stops
and create liquidity before reversing price downward.
 Sell-Side Liquidity: Located below recent lows, where stop-loss orders for long
positions accumulate. Price is driven into these zones to trigger stops and generate
liquidity before moving upward.
 Liquidity Pools as Magnets: These zones act like magnets for price because
institutions need liquidity to fill large orders. Recognizing these pools allows traders
to anticipate where price may be “sucked” before reversing.
 Liquidity Hunts: Institutional traders deliberately push price into these liquidity zones
to trigger retail stop orders, which provides the liquidity needed to enter or exit large
positions without causing excessive slippage.
Practical Application:
ICT traders watch for price to approach liquidity zones to anticipate reversals or breakouts.
For example, a liquidity sweep above a previous high may signal an impending reversal after
stops are triggered.
 3. Institutional Order Flow
Institutional Order Flow refers to the buying and selling activity of large market participants
such as banks, hedge funds, and other financial institutions.
 Market Manipulation: Institutions manipulate price to create liquidity and induce
retail traders to take positions prematurely. This includes stop hunts, false breakouts,
and engineered price swings.
 Smart Money Behavior: Institutional traders operate with vast resources and
information, allowing them to move markets in ways that retail traders cannot easily
predict.
 Order Blocks: Zones where institutions have placed significant buy or sell orders,
often visible as consolidation areas before a strong price move. These blocks serve as
supply and demand zones.
 Market Sessions & Timing: Institutional activity is often concentrated during key
market sessions such as the London and New York opens, times when liquidity and
volatility peak.
Practical Application:
Understanding institutional order flow helps traders align their positions with the “smart
money,” avoiding traps and trading in the direction of institutional moves. For example,
entering trades during killzones or after confirmation of order block rejections.

Summary Table
Concept Definition Key Points Trading Use
The pattern of price swings Dynamic; breaks signal potential
(higher highs/lows or lower trend shifts; includes phases of Define bias; identify trade
Market highs/lows) indicating trend accumulation, manipulation, entries/exits; confirm trend
Structure direction distribution continuation or reversal

Clusters of stop-loss and Anticipate reversals or

pending orders where Buy-side liquidity above highs; sell- breakouts; trade liquidity
institutions seek to fill large side liquidity below lows; liquidity sweeps for high-probability
Liquidity orders pools attract price setups

Includes stop hunts, false Align trades with smart

The buying/selling activity of breakouts, order blocks; money; trade order block
Institutional large players manipulating price concentrated during key market rejections; enter during
Order Flow to create liquidity sessions killzones

Conclusion
The Foundations of ICT—market structure, liquidity, and institutional order flow—form the
essential framework for understanding how financial markets move under the influence of
smart money. Mastery of these concepts enables traders to anticipate market behavior,
avoid common retail traps, and execute trades aligned with institutional intent, significantly
improving the probability of success.
Core ICT Concepts: Order Blocks, Fair Value Gaps,
Breaker Blocks, BOS/CHoCH

1. Order Blocks (OB)

Definition:
An Order Block is a price zone on the chart where large institutional traders have placed
significant buy or sell orders, causing a strong price move afterward. These areas represent
the footprints of “smart money” and often act as future support or resistance zones.
Key Characteristics:
 Typically identified as the last bearish candle before a strong bullish move (Bullish
Order Block), or the last bullish candle before a strong bearish move (Bearish Order
Block).
 Marked by consolidation followed by an impulsive price expansion.
 Price often revisits these zones, where it tends to react strongly, offering high-
probability trade entries.
 Order blocks align closely with market structure points like swing highs and lows.
How to Identify:
 Find a consolidation or pause in price action.
 Look for a strong impulsive move following this consolidation.
 For a bullish OB, locate the last bearish candle before the bullish impulse; for bearish
OB, find the last bullish candle before the bearish impulse.
 Draw the zone from the candle’s high to low (bearish OB) or low to high (bullish OB).
Trading Application:
 Use OBs as potential entry zones for trades aligned with the prevailing trend or
reversal.
 Combine with other tools like Fibonacci retracements, support/resistance, and trend
lines for confluence.
 Place stops just beyond the OB zone to manage risk.
2. Fair Value Gaps (FVG)
Definition:
A Fair Value Gap is a price inefficiency or imbalance created when price moves rapidly,
leaving a gap between candles where no or little trading occurred. Technically, it’s a three-
candle pattern where the high of the first candle and the low of the third candle do not
overlap the middle candle’s range.
Key Characteristics:
 Represents an area where liquidity was not fully consumed.
 Price tends to return to these gaps to “fill” or correct the inefficiency.
 Acts as a magnet for price, often serving as a retracement or entry zone.
How to Identify:
 Spot a strong impulsive candle followed by a weaker candle, then another impulsive
candle that creates a gap.
 Mark the gap between the first candle’s high and the third candle’s low (for bullish
gaps) or vice versa for bearish gaps.
Trading Application:
 Use FVGs as zones to anticipate price retracements for optimal trade entries.
 Combine with order blocks or liquidity zones for higher probability setups.
 Stops can be placed beyond the gap to protect against invalidation.
3. Breaker Blocks
Definition:
A Breaker Block is a former order block that has been breached and then acts as a reversal
zone in the opposite direction. It is essentially an order block that has “flipped” from support
to resistance or vice versa.
Key Characteristics:
 Formed when price breaks through an order block and then returns to test it from
the opposite side.
 Acts as a strong confluence zone for trade entries, often signaling a change in market
structure.
 Provides a reliable area to anticipate reversals or continuation of the new trend.
How to Identify:
 Identify an existing order block.
 Observe price breaking through this block, creating a break of structure (BOS).
 Wait for price to return and retest the block from the opposite side.
Trading Application:
 Enter trades on retests of breaker blocks in the direction of the new trend.
 Use breaker blocks in conjunction with BOS and liquidity zones for confirmation.
 Place stops just beyond the breaker block’s invalidation point.
4. Break of Structure (BOS) and Change of Character (ChoCH)
Break of Structure (BOS):
 A BOS occurs when price decisively breaks a previous swing high or swing low,
confirming a continuation of the current trend.
 In an uptrend, BOS is a break above the last higher high; in a downtrend, a break
below the last lower low.
Change of Character (ChoCH):
 A ChoCH signals a potential trend reversal or shift in market sentiment.
 It occurs when price breaks a previous swing low in an uptrend or swing high in a
downtrend, indicating weakening momentum and possible trend change.
Key Points:
 BOS confirms trend continuation; ChoCH signals early reversal.
 Both are critical for timing entries and exits in ICT methodology.
 BOS and ChoCH are often used alongside order blocks and breaker blocks to validate
trade setups.
Trading Application:
 Use BOS to confirm bias and enter trades in the direction of the trend.
 Use ChoCH as a warning to tighten stops or prepare for reversal trades.
 Combine with liquidity zones and order blocks for high-probability setups.
 Summary Table

Concept Definition Identification Trading Use

Last bearish candle before bullish
Institutional order zones impulse (bullish OB), last bullish Entry zones for trend
Order causing strong price moves; act candle before bearish impulse continuation/reversal; combine with
Block as support/resistance (bearish OB) other tools; place stops beyond OB

Fair Price inefficiency gap caused by Three-candle pattern with no Use as retracement zones for entries;
Value rapid movement, leaving overlap between first and third combine with OB and liquidity; stops
Gap unfilled liquidity candle ranges beyond gap

Former order block breached Enter trades on retests aligned with

Breaker and flipped to act as reversal Order block broken by BOS, then new trend; confirmation with BOS
Block zone retested from opposite side and liquidity

Price breaks previous swing Break above last higher high

high/low, confirming trend (uptrend) or below last lower low Confirm trend bias; time entries in
BOS continuation (downtrend) trend direction

Price breaks previous swing Break below last swing low in

low/high, signaling potential uptrend or above last swing high Early reversal signal; tighten stops or
ChoCH trend reversal in downtrend prepare reversal trades

Additional Notes and Practical Tips

 Confluence is Key: The highest probability trades occur when multiple ICT concepts
align—e.g., a fair value gap inside an order block near a breaker block with a
confirmed BOS.
 Multi-Timeframe Analysis: Use higher timeframes to identify major order blocks and
liquidity zones; use lower timeframes to pinpoint entries around these zones.
 Stop Placement: Always place stops just beyond the invalidation point of the order
block or fair value gap to protect capital.
 Trade Management: Monitor price action closely after entry for signs of rejection or
continuation, adjusting stops and targets accordingly.
 Practice: Regularly mark these zones on historical charts to build pattern recognition
and confidence.
ICT Market Maker Model (MMXM/MMBM)
Overview
The Market Maker Model is a core ICT concept that explains how institutional players
(“smart money”) manipulate price to efficiently accumulate or distribute positions. It
describes the transition of price between Premium and Discount (PD) Arrays, which are
zones where institutions are likely to buy or sell.
 Market Maker Sell Model (MMXM): Price moves from a bullish PD Array to a bearish
PD Array.
 Market Maker Buy Model (MMBM): Price moves from a bearish PD Array to a
bullish PD Array.
This model helps traders anticipate market moves by understanding how institutions
engineer liquidity and execute their trades.
Key Preconditions for the Market Maker Sell Model (MMXM)
1. Higher Timeframe Market Structure Must Be Bearish: The overall trend on higher
timeframes (daily, weekly) should show lower highs and lower lows, indicating
institutional selling dominance.
2. Daily Bias and Draw on Liquidity Point Lower: The market’s daily directional bias and
liquidity targets must align with the bearish scenario.
3. Buy Program on Lower Timeframes: Prior to the price reaching the higher timeframe
bearish PD Array, a buy-side liquidity hunt or “buy program” should occur on lower
timeframes, creating liquidity for institutions to sell into.
Components of the Market Maker Sell Model
1. Original Consolidation:
A range-bound price action between two limits where institutions accumulate orders
and prepare for the next move.
2. Engineering Liquidity:
Price moves upward within the consolidation, creating higher lows that act as buy-
side liquidity. This liquidity is engineered to be swept later by institutions.
3. Smart Money Reversal (SMR):
The pivotal reversal where price shifts from buying to selling pressure as it reaches
the bearish PD Array on the higher timeframe.
4. Liquidity Hunt:
Price sweeps old lows created during the engineering liquidity phase and the original
consolidation to trigger stop-losses and collect liquidity before continuing downward.
How to Trade the Market Maker Sell Model
 Confirm Bearish Market Structure on higher timeframes.
 Draw Liquidity Zones to the downside on the higher timeframe.
 Wait for Buy Program on lower timeframes that pushes price into the bearish PD
Array.
 Look for Bearish Confirmations:
o Market Structure Shift (BOS/ChoCH) signaling trend reversal.
o Smart Money Divergence (SMT) confirming weakening buying pressure.
 Enter Sell Trades on retracements into Fair Value Gaps (FVG) or order blocks near the
bearish PD Array.
  Stop Loss: Place 10–20 pips above the last swing high before the market structure
shift.
 Profit Targets: Use Fibonacci extensions from the Smart Money Reversal high to the
market structure shift low, targeting levels like -1, -1.5, -2, and -2.5, or old lows and
original consolidation lows.
Market Maker Buy Model (MMBM) — Summary
The buy model mirrors the sell model but in bullish conditions:
 Higher timeframe market structure is bullish (higher highs and higher lows).
 Institutions accumulate buy-side liquidity during consolidation.
 Price manipulates sell-side liquidity to trap shorts.
 Smart Money Reversal to the upside initiates the bullish move.
 Buy programs on lower timeframes push price into bullish PD Arrays.
 Entries are taken on retracements into order blocks or fair value gaps.
 Targets are set using Fibonacci retracements/extensions and liquidity zones.
Importance of PD Arrays (Premium and Discount)
 PD Arrays are zones on the chart where smart money is likely to accumulate or
distribute positions.
 These zones represent “fair value” areas on higher timeframes.
 Price tends to revert or react strongly when reaching these arrays, making them
critical for trade entries and exits.

Power of Three (Po3)

Overview
The Power of Three is an ICT concept that explains the typical market cycle of accumulation,
manipulation, and distribution, helping traders anticipate institutional behavior and market
turning points.
Phases of the Power of Three
1. Accumulation Phase:
o Market consolidates sideways after a downtrend.
o Institutions quietly accumulate positions without moving price significantly.
o Liquidity is being gathered on both buy and sell sides.
2. Manipulation Phase:
o Institutions “engineer” price movements to induce retail trader participation.
o This often involves false breakouts, liquidity hunts, and stop-loss sweeps.
o The goal is to create liquidity pools to fill large institutional orders.
3. Distribution Phase:
o Price begins a clear trending move as institutions distribute their positions to
retail traders.
o This phase sees strong directional movement (uptrend or downtrend) with
increased volatility and volume.
Application in Trading
 Recognize the Accumulation phase as a period to prepare for a breakout.
 Identify Manipulation moves (false breakouts, liquidity sweeps) as traps for retail
traders.
 Enter trades during the Distribution phase once the trend confirms, ideally on
retracements to order blocks or fair value gaps created during manipulation.
 Use higher timeframe analysis to confirm the phase and align entries with the overall
market bias.
Visual and Practical Tips
 Use multiple timeframes to identify the phase:
o Higher timeframes for accumulation zones.
o Lower timeframes to spot manipulation and precise entries.
 Watch for liquidity sweeps and market structure shifts as signals of phase
transitions.
 Combine with other ICT tools like order blocks, fair value gaps, and SMT
divergence for confluence.

Summary
Concept Definition Key Points Trading Use
Market Maker Bearish market structure, buy Sell entries on retracements
Sell Model Price transition from programs, liquidity engineering, smart into bearish PD Array with
(MMXM) bullish to bearish PD Array money reversal, liquidity hunt tight stops

Market Maker Bullish market structure, sell-side

Buy Model Price transition from liquidity hunts, smart money reversal, Buy entries on retracements
(MMBM) bearish to bullish PD Array buy programs into bullish PD Array

Premium and
Discount (PD) Zones where smart money
Arrays accumulates or distributes High probability reversal zones Key entry/exit areas

Market cycle:
Accumulation → Helps anticipate market
Manipulation → Institutions accumulate, manipulate turning points and trade
Power of Three Distribution retail traders, then distribute positions timing

Final Notes
 The Market Maker Models and Power of Three concepts provide a framework for
understanding institutional market behavior beyond retail price patterns.
 Mastery requires chart study, multi-timeframe analysis, and practice to recognize
these phases and zones reliably.
 Always combine these models with risk management and confirmation tools (e.g.,
SMT divergence, market structure shifts) to improve trade probability.
 Use stop losses and defined profit targets to protect capital and lock in gains.

Practical Tips for ICT Mastery

1. Focus on One Concept at a Time Before Combining Them for Confluence
ICT trading encompasses multiple sophisticated concepts such as order blocks, fair value
gaps, liquidity, and market structure shifts. Attempting to master all simultaneously can
overwhelm and dilute learning. Instead, master each concept individually—understand its
identification, purpose, and trading application thoroughly. Once comfortable, begin
combining concepts to form confluence zones, which significantly increase the probability of
successful trades. For example, pairing an order block with a fair value gap inside a liquidity
zone offers a powerful entry setup.
2. Use Higher Timeframes for Bias and Lower Timeframes for Precise Entries
Higher timeframes (daily, weekly, monthly) provide the overall market bias and structure,
helping traders identify the dominant trend and key institutional zones such as
premium/discount arrays and major order blocks. Lower timeframes (1H, 30min, 15min) are
then used to fine-tune entries, pinpointing optimal trade execution points like fair value gap
fills or breaker block retests. This multi-timeframe approach aligns micro entries with macro
trends, reducing noise and increasing trade accuracy.
3. Journal Every Trade to Identify Patterns in Your Strengths and Weaknesses
Maintaining a detailed trading journal is critical. Record not only entry and exit points but
also the ICT concepts applied, market conditions, emotional state, and trade outcome. Over
time, this practice reveals patterns—such as which setups yield the highest win rates or
where mistakes commonly occur—allowing for continuous refinement of strategy and
discipline. Journaling transforms trading from guesswork into a data-driven process.
4. Regularly Review and Adapt Your Plan as Market Conditions Evolve
Markets are dynamic, influenced by macroeconomic events, seasonality, and shifting
institutional behavior. A static trading plan can become obsolete. Regularly reviewing your
performance and market context enables you to adapt your ICT strategy—for instance,
adjusting killzone timings during low-volatility periods or emphasizing certain setups in
trending vs. ranging markets. Flexibility and ongoing learning are hallmarks of successful ICT
traders.
5. Engage with ICT Communities for Support and Continued Learning
ICT concepts can be complex and nuanced. Joining dedicated trading communities, forums,
or mentorship groups provides access to collective knowledge, real-time chart discussions,
and feedback. This engagement accelerates learning, exposes traders to diverse
perspectives, and fosters accountability. Many successful ICT traders credit community
interaction as a key factor in their development.
 Key ICT Concepts Reference Table
Concept Description Usage / Trading Application
Zones targeted by institutional traders Anticipate price reversals or breakouts; trade
where retail stop-losses and pending alongside smart money by entering near
Liquidity orders cluster. liquidity pools.

Institutional buying/selling zones Serve as high-probability entry and exit points;

marked by the last consolidation act as dynamic support/resistance zones for
Order Blocks candle before a big move. reversals or continuations.

Market inefficiencies or price gaps Used as entry or target zones; price tends to
created by rapid moves, leaving retrace to fill these gaps, offering low-risk trade
Fair Value Gaps (FVG) unfilled liquidity. opportunities.

Former order blocks that have been Provide entries after a break of structure (BOS);
breached and flipped to act as reversal confirm new trend direction and offer strong
Breaker Blocks zones. confluence zones.

Break of Structure Signals trend continuation (BOS) or Confirm trend bias and timing for entries or
(BOS) / Change of early reversal (ChoCH) via swing exits; BOS confirms continuation, ChoCH warns
Character (ChoCH) high/low breaks. of potential reversals.

Strong, impulsive price movement Confirms the direction of smart money flow;
Displacement driven by institutional activity. used to validate trade bias and momentum.

Price moves designed to trap retail Helps avoid false entries; wait for price to
traders into false entries, creating reverse after inducement before entering
Inducement liquidity for institutions. trades.

Fibonacci retracement zone (61.8%– Provides low-risk, high-probability entries

Optimal Trade Entry 78.6%) offering premium entry points aligned with institutional order flow; often
(OTE) within a trend. combined with OBs and FVGs.

Market cycle phases: Accumulation → Helps anticipate major moves; identify when
Manipulation → Distribution by institutions are accumulating, manipulating
Power of Three (Po3) institutions. retail traders, or distributing.

High-activity trading periods (e.g., Focus trade entries during these times for
London Open, New York Open) when increased volatility and higher probability
Killzones institutional volume peaks. setups.
Final Expert Recommendations
 Combine Concepts for Confluence: The strongest ICT setups arise when multiple
concepts align, such as an OTE within an order block coinciding with a fair value gap
during a killzone.
 Patience and Discipline: ICT trading rewards waiting for optimal setups rather than
chasing trades. Rushing leads to poor entries and losses.
 Risk Management: Always define stop-losses beyond invalidation points (e.g.,
outside order blocks) and target logical liquidity zones or Fibonacci extensions.
 Continuous Practice: Regularly backtest and forward-test ICT concepts on live charts
to build pattern recognition and confidence.
 Emotional Control: Maintain psychological discipline to follow your trading plan
strictly, avoiding impulsive decisions.
By integrating these practical tips with a deep understanding of the key ICT concepts, traders
can systematically improve their edge, consistency, and profitability in the markets.

In-Depth Exploration of Key ICT Concepts with

Real Market Examples

1. Liquidity
Concept Overview
Liquidity in ICT refers to specific price zones where retail stop-loss orders and pending
orders cluster, creating pools of liquidity that institutional traders target to execute large
orders efficiently. These zones are typically just beyond obvious swing highs and lows, where
retail traders place stops.
Why Liquidity Matters
Institutions cannot move markets without liquidity. They need to fill large orders without
causing excessive slippage. To do this, they engineer price moves to “hunt” these liquidity
pools, triggering retail stop-losses and pending orders, which provides the volume necessary
for institutional fills.
Real Market Example
Consider a Forex pair like EUR/USD during a quiet session. Price approaches a recent swing
high where many retail traders have placed stop-losses above. Suddenly, price spikes above
this high, triggering stops (liquidity sweep), then quickly reverses downward. This move is
not random but a deliberate liquidity hunt before a strong institutional sell-off.
Trading Application
 Identify liquidity pools above swing highs (buy-side liquidity) and below swing lows
(sell-side liquidity).
  Anticipate price reaching these zones to trigger stops and then reverse.
 Trade in the direction of institutional flow after liquidity is taken.
2. Order Blocks (OB)
Concept Overview
Order blocks are zones of institutional buying or selling, often visible as the last
consolidation candle(s) before a strong directional move. They represent where smart
money has placed significant orders and are key support/resistance zones.
Characteristics
 Bullish OB: Last bearish candle before a strong bullish impulse.
 Bearish OB: Last bullish candle before a strong bearish impulse.
 Price often returns to these zones to retest before continuing the trend.
Real Market Example
In the S&P 500 futures, after a strong rally, price pulls back to a previous consolidation zone
(order block). This zone holds as support, and price resumes the uptrend. Traders who
entered at the OB zone enjoyed a low-risk entry aligned with institutional buying.
Trading Application
 Mark order blocks on higher timeframes for bias.
 Use lower timeframes to enter on retests of OBs.
 Place stops just beyond the OB to protect capital.
3. Fair Value Gaps (FVG)
Concept Overview
Fair Value Gaps are price inefficiencies created by rapid moves, leaving gaps where little or
no trading occurred. These gaps represent unfilled liquidity and imbalance, which price
tends to revisit to “fill” and restore equilibrium.
Identification
 A three-candle pattern where the middle candle’s range does not overlap with the
first and third candles’ wicks.
 The gap between the first candle’s high and the third candle’s low (or vice versa)
forms the FVG.
Real Market Example
On a GBP/USD 1-hour chart, a sharp upward move creates an FVG. Price later retraces to this
zone, fills the gap, and then resumes the bullish trend. This retracement offers an optimal
entry aligned with institutional order flow.
Trading Application
 Use FVGs as entry zones or profit targets.
 Combine with order blocks and liquidity zones for confluence.
 Stops are placed beyond the FVG boundaries.
4. Breaker Blocks
Concept Overview
Breaker blocks are former order blocks that have been breached and then flip roles—from
support to resistance or vice versa. They signal a change in market structure and provide
strong confluence for trade entries.
Identification
 Identify an order block.
 Observe a break of structure (BOS) where price moves through the OB.
 Price returns to retest the OB from the opposite side, now acting as a breaker block.
Real Market Example
In the Nasdaq futures, a bullish order block is broken to the downside (BOS). Price retraces
to retest this zone, which now acts as resistance (breaker block), before continuing lower.
Traders enter short on this retest with confirmation.
Trading Application
 Use breaker blocks to confirm trend shifts.
 Enter trades on retests of breaker blocks with tight stops.
 Combine with BOS and liquidity analysis for validation.
5. Break of Structure (BOS) and Change of Character (ChoCH)
Break of Structure (BOS)
 Occurs when price decisively breaks a previous swing high (in an uptrend) or swing
low (in a downtrend), confirming trend continuation.
 Signals institutional commitment to the current trend direction.
Change of Character (ChoCH)
 Occurs when price breaks a previous swing low in an uptrend or swing high in a
downtrend, signaling a potential trend reversal.
 Represents a shift in institutional sentiment.
Real Market Example
On the EUR/USD daily chart, after a series of higher highs and lows, price breaks below the
last swing low (ChoCH), signaling a potential bearish reversal. Traders use this as a cue to exit
longs or prepare for shorts.
Trading Application
 Use BOS to confirm trend bias and enter trades accordingly.
 Use ChoCH as an early warning for reversals, tightening stops or reversing positions.
 Combine with order blocks and liquidity zones for high-confidence setups.
6. Displacement
Concept Overview
Displacement is a strong, impulsive price movement driven by institutional activity, often
characterized by large, directional candles with minimal wicks.
Significance
 Confirms smart money’s directional intent.
 Often follows liquidity hunts or order block retests.
 Signals momentum continuation.
Real Market Example
During the London open, GBP/USD shows a strong bullish displacement candle after a
liquidity sweep below recent lows. This confirms institutional buying and signals a high-
probability long entry.
Trading Application
 Recognize displacement candles as confirmation of institutional flow.
 Enter trades aligned with displacement direction after retracements.
7. Inducement
Concept Overview
Inducement refers to price moves designed to trap retail traders into false entries, creating
liquidity for institutions. These moves often look like breakouts or trend continuations but
quickly reverse.
Real Market Example
In the USD/JPY pair, price breaks above a resistance level, triggering retail buy orders and
stops. Immediately after, price reverses sharply downward, trapping buyers and providing
liquidity for institutional sellers.
Trading Application
 Avoid entering during suspected inducement moves.
 Wait for confirmation of reversal before entering trades.
 Use inducement recognition to avoid common retail traps.
8. Optimal Trade Entry (OTE)
Concept Overview
OTE is a Fibonacci-based retracement zone (61.8%–78.6%) within a trend, offering a
premium entry point with favorable risk-reward.
Real Market Example
On the EUR/USD 4-hour chart, after a bullish displacement, price retraces to the 70%
Fibonacci level (OTE). Price shows rejection here and resumes the uptrend, providing a low-
risk entry for traders.
Trading Application
 Use OTE in conjunction with order blocks and liquidity zones.
 Enter trades within the OTE zone with tight stops.
 Target previous highs/lows or liquidity pools.
9. Power of Three (Po3)
Concept Overview
Po3 explains the institutional market cycle:
 Accumulation: Institutions quietly build positions in a consolidation phase.
 Manipulation: Price moves to induce retail participation and create liquidity.
 Distribution: Institutions distribute positions, resulting in a trending move.
Real Market Example
In the Nasdaq futures, a prolonged sideways range (accumulation) is followed by a false
breakout (manipulation) that traps retail traders. Price then breaks out strongly in the
opposite direction (distribution), confirming institutional dominance.
Trading Application
 Identify Po3 phases to anticipate market moves.
 Avoid trading during manipulation; enter during distribution.
 Use higher timeframe analysis to confirm phases.
10. Killzones
Concept Overview
Killzones are specific high-activity trading periods, such as the London Open (3:00–5:00
GMT) and New York Open (8:00–10:00 EST), when institutional volume and volatility peak.
Significance
 Price moves with greater momentum and liquidity.
 Optimal time for trade entries aligned with institutional flow.
Real Market Example
During the New York open, EUR/USD often shows strong directional moves as institutions
execute large orders. Traders focusing on killzones capture these moves with higher
probability.
Trading Application
 Time entries during killzones for better trade quality.
 Combine killzone timing with order blocks and liquidity zones.
  Avoid trading outside killzones to reduce noise and false signals.
Conclusion
The ICT methodology reveals the hidden footprints of institutional traders through concepts
like liquidity pools, order blocks, fair value gaps, and market structure shifts. By mastering
these concepts and observing real market behavior—such as liquidity hunts, inducements,
and killzone activity—traders can align their strategies with the smart money, significantly
improving their edge.
Practical mastery requires:
 Continuous chart study across timeframes.
 Identifying these institutional footprints in live markets.
 Patience to wait for confluence of multiple ICT concepts.
 Strict risk management and journaling to refine skills.

ICT MASTERY

├── Practical Tips

│ ├── Focus on One Concept

│ ├── Higher Timeframes for Bias
│ ├── Lower Timeframes for Entries
│ ├── Journal Trades
│ ├── Review & Adapt
│ └── Engage with Community

├── KEY ICT CONCEPTS

│ ├── Liquidity
│ │ ├── Buy-side Liquidity
│ │ ├── Sell-side Liquidity
│ │ └── Liquidity Hunts

│ ├── Order Blocks

│ │ ├── Bullish OB
│ │ └── Bearish OB

│ ├── Fair Value Gaps

│ ├── Breaker Blocks
│ ├── BOS / ChoCH
│ ├── Displacement
│ ├── Inducement
│ ├── Optimal Trade Entry
│ ├── Power of Three
│ └── Killzones

How to Use This Mind Map

 Start by mastering each concept individually (e.g., Liquidity zones first).
 Use the hierarchical structure to understand how concepts relate (e.g., BOS leads to
Breaker Blocks).
 Apply multi-timeframe analysis: use higher timeframes for bias, lower for entries.
 Combine concepts for confluence setups (e.g., OTE inside an Order Block during a
Killzone).
 Use the practical tips to maintain discipline, journal trades, and engage with
communities for continuous improvement.

Examples of Key ICT Concepts on Charts

ICT Concept How to Identify on Chart Example Description & Trading Insight
Example: On EUR/USD daily chart, price rallies near
Look for clusters of stop-loss orders just 1.1500 (a round number and recent swing high). Price
above swing highs (buy-side liquidity) or spikes above 1.1500, triggering stops (liquidity sweep),
below swing lows (sell-side liquidity). then reverses sharply downward. This is an
These often coincide with obvious institutional liquidity hunt before a sell-off. Traders can
Liquidity support/resistance or round numbers. anticipate the reversal by spotting this liquidity zone.

Identify the last bearish candle before a Example: On S&P 500 4H chart, price consolidates
strong bullish move (bullish OB) or last sideways, then a strong bullish candle follows. The last
bullish candle before a strong bearish bearish candle before this move forms a bullish OB.
Order Blocks move (bearish OB). Mark the candle’s Price later retraces to this zone and bounces, offering a
(OB) high-low range as the OB zone. low-risk buy entry aligned with institutional buying.

Example: On GBP/USD 1H chart, a rapid upward move

Spot a three-candle pattern where the creates an FVG between the first candle’s high and the
middle candle’s range does not overlap third candle’s low. Price later retraces to fill this gap
Fair Value Gaps with the first and third candles’ wicks, before continuing higher. Traders use this as a
(FVG) creating a gap. premium entry zone.

Example: On Nasdaq futures 1H chart, a bullish OB is

Find an order block that price breaks broken downward (BOS). Price retraces up to retest
through (BOS), then price returns to this OB, now a bearish breaker block, then continues
retest this zone from the opposite side, lower. This retest offers a short entry aligned with the
Breaker Blocks now acting as resistance/support. new bearish trend.

Price breaks above the previous swing Example: On EUR/USD daily chart, price breaks above
high (uptrend) or below the previous the previous swing high at 1.1400, confirming bullish
Break of swing low (downtrend), confirming trend continuation. Traders use this to validate long bias and
Structure (BOS) continuation. enter on retracements.

Example: After bullish BOS on GBP/USD, price breaks

Change of After a BOS, price breaks the opposite below the last swing low, signaling ChoCH and a
Character swing low/high, signaling a potential possible bearish reversal. Traders tighten stops or
(ChoCH) trend reversal. prepare to reverse bias.

Example: During London open, USD/JPY shows a large

Look for large, impulsive candles with bullish candle with minimal wicks, signaling strong
long bodies and short wicks indicating buying pressure and momentum continuation. Traders
Displacement strong institutional moves. enter aligned with this displacement.

Example: On BTC/USD 15-min chart, price breaks

above resistance, triggering retail buy orders, then
Price makes false breakouts or quickly reverses downward, trapping retail traders and
countertrend moves designed to trap providing liquidity for institutional selling. Traders wait
Inducement retail traders before reversing. for confirmation before entering.

Example: On EUR/USD 4H chart, after a bullish

Use Fibonacci retracement (61.8%-78.6%) impulse, price retraces to 70% Fibonacci level (OTE).
Optimal Trade of the last impulse move to find premium Price shows rejection and resumes uptrend. Traders
Entry (OTE) entry zones. enter long here with tight stops.

Example: On Nasdaq daily chart, price consolidates

Identify accumulation (range), sideways (accumulation), then makes a false breakout
manipulation (false breakout/liquidity up (manipulation), trapping retail traders, followed by
Power of Three hunt), and distribution (trend) phases on a strong sell-off (distribution). Traders enter short after
(Po3) the chart. manipulation confirmation.
How to Visualize These Examples on Your Chart

1. Liquidity:
o Draw horizontal lines at recent swing highs/lows and round numbers.
o Watch for sharp price spikes beyond these lines (liquidity sweeps).
2. Order Blocks:
o Identify consolidation candles before a strong move.
o Highlight the last bearish candle before bullish impulse or vice versa.
3. Fair Value Gaps:
o Look for 3-candle patterns with gaps between 1st and 3rd candle wicks.
o Shade the gap area as a potential retracement zone.
4. Breaker Blocks:
o Mark an OB.
o Identify when price breaks through and then retests it from the opposite side.
5. BOS / ChoCH:
o Mark swing highs/lows.
o Note when price breaks these levels (BOS).
o Watch for reversals breaking previous swing points (ChoCH).
6. Displacement:
o Highlight large impulsive candles during key sessions.
7. Inducement:
o Identify false breakouts or quick reversals after liquidity sweeps.
8. OTE:
o Apply Fibonacci retracement on the last impulse.
o Highlight 61.8%–78.6% zone.
9. Power of Three:
o Identify range-bound accumulation.
o Spot false breakouts (manipulation).
o Confirm trending distribution phase.
10. Killzones:
o Mark London and New York open times on your chart.
o Observe volume and volatility spikes.

ANNOTATED EXAMPLE CHARTS FOR KEY

ICT CONCEPTS
1. Liquidity
 Asset: EUR/USD
 Timeframe: Daily
 How to Annotate:
o Identify recent swing highs and lows.
o Draw horizontal lines just above swing highs (buy-side liquidity) and just
below swing lows (sell-side liquidity).
o Look for price spikes beyond these levels (liquidity sweeps), followed by
reversals.
 Example Annotation:
o Mark a liquidity sweep above a swing high where stops are triggered.
o Note the subsequent reversal as institutional liquidity hunt completes.
2. Order Blocks (OB)
 Asset: S&P 500 Futures (ES)
 Timeframe: 4-Hour
 How to Annotate:
o Find consolidation candles before a strong bullish or bearish impulse.
o Highlight the last bearish candle before a bullish move as a bullish OB
(rectangle covering high to low).
o Mark price retests of this zone as potential entry points.
 Example Annotation:
o Draw the OB zone and label “Bullish Order Block.”
o Mark entry on price retest with stop-loss just below OB.
3. Fair Value Gaps (FVG)
 Asset: GBP/USD
 Timeframe: 1-Hour
 How to Annotate:
o Identify a three-candle pattern where the middle candle’s range does not
overlap the first and third candles.
o Shade the gap area between the first candle’s high and the third candle’s low.
o Observe price retracement into this gap before continuation.
 Example Annotation:
o Label the shaded area “Fair Value Gap.”
o Mark entry zone and stop placement.
4. Breaker Blocks
 Asset: Nasdaq Futures (NQ)
 Timeframe: 1-Hour
 How to Annotate:
o Identify an order block that price breaks through (BOS).
o Mark the retest of this zone from the opposite side as a breaker block.
o Highlight the entry on retest confirming new trend direction.
 Example Annotation:
o Label “Breaker Block” with arrows showing BOS and retest.
o Mark entry and stop-loss.
5. Break of Structure (BOS) / Change of Character (ChoCH)
 Asset: EUR/USD
 Timeframe: Daily
  How to Annotate:
o Mark swing highs and lows.
o Draw arrows indicating BOS when price breaks above previous swing high
(trend continuation).
o Highlight ChoCH when price breaks below previous swing low (early reversal).
 Example Annotation:
o Label “BOS – Trend Continuation” and “ChoCH – Potential Reversal.”
o Use different colors for clarity.
6. Displacement
 Asset: USD/JPY
 Timeframe: 15-Minute
 How to Annotate:
o Identify large impulsive candles with long bodies and minimal wicks during
key sessions (e.g., London Open).
o Highlight these candles as “Displacement Candles.”
 Example Annotation:
o Mark entry aligned with displacement direction.
o Note momentum continuation.
7. Inducement
 Asset: Bitcoin (BTC/USD)
 Timeframe: 15-Minute
 How to Annotate:
o Identify false breakouts or quick reversals trapping retail traders.
o Mark the breakout candle and the immediate reversal candle.
 Example Annotation:
o Label “Inducement – Retail Trap.”
o Advise waiting for confirmation before entry.
8. Optimal Trade Entry (OTE)
 Asset: EUR/USD
 Timeframe: 4-Hour
 How to Annotate:
o Apply Fibonacci retracement on last impulse wave.
o Highlight 61.8% to 78.6% retracement zone as OTE.
o Mark price rejection and entry within this zone.
 Example Annotation:
o Label “OTE Zone – Premium Entry.”
o Mark stop-loss below OTE.
9. Power of Three (Po3)
 Asset: Nasdaq Futures
 Timeframe: Daily
 How to Annotate:
o Identify accumulation phase (sideways range).
o Mark manipulation phase (false breakout/liquidity hunt).
o Highlight distribution phase (strong trending move).
 Example Annotation:
o Label each phase clearly on the chart.
o Show entry point after manipulation phase confirmation.
10. Killzones
 Asset: EUR/USD
 Timeframe: 15-Minute
 How to Annotate:
o Mark London Open (3:00–5:00 GMT) and New York Open (8:00–10:00 EST)
sessions on chart.
o Highlight increased volume and volatility during these periods.
 Example Annotation:
o Label “London Killzone” and “New York Killzone.”
o Note trade entries during these times for higher probability.
How to Create These Annotations Yourself
1. Open your preferred charting platform (e.g., TradingView).
2. Select the asset and timeframe as specified above.
3. Use drawing tools:
o Horizontal lines for liquidity zones.
o Rectangles for order blocks and fair value gaps.
o Fibonacci retracement tool for OTE.
o Arrows and text boxes for BOS, ChoCH, displacement, inducement, and
killzones.
4. Save your annotated charts for review and journaling.
If you want, I can prepare sample annotated charts on TradingView and share the links with
you, where you can interactively explore these concepts live. Just let me know which assets
and timeframes you prefer for the samples!