Introduction to #ICT Concepts

Beginners guide on the main principles of trading with the algorithm and smart money techniques which control the indexes

$ES_F $NQ_F

Market structure (ICT) is a way of viewing the market which includes the following baseline concepts: liquidity, imbalance, discount, order block, and structure

Understanding these topics allows the ability to anticipate where price is likely to be delivered with optimal entries

Liquidity | What is it?

For each buyer in the market, there must be a seller, and for each seller in the market, there must be a buyer. Due to this aspect, the market is always seeking resting liquidity

Run buyside - target sellside
Run sellside - target buyside

Buyside Liquidity “Resistance”

Level where buy-stops are resting which will stop profitable shorts and trap entering longs. Buying liquidity is created in order for smart money to sell them short and enter positions for downside

Charted on both equal highs and major swing highs

Sellside Liquidity “Support”

Level where sell-stops are resting which will stop profitable longs and trap entering shorts. Selling liquidity is created in order for smart money to buy them long and enter for upside

Charted on both equal lows and major swing lows

Market Structure Shift | Basics

Shifts in market structure are simple and occur when price takes out previous short term lows or highs within a trend. Identifying these shifts allows for an understanding on which side of the market to be trading with

Fair Value Gap

“FVG” are identified as the body of the candle which is not violated by both the previous and following candle wicks. This area is classified as an imbalance where inefficient price action has taken place and are on all timeframes

Used as both entires and targets

Order Block | Rules

Bullish: Delivery to upside, displacement creating an imbalance, shift in market structure, price drawing to buyside liquidity

Bearish: Downside delivery, displacement creating an imbalance, shift in market structure, price drawing to sellside liquidity

Order Block | Identifying

Bullish - Last down-close candle prior to upside displacement and bullish structure targeting buyside liquidity

Bearish - Last up-close candle prior downside displacement and bearish structure targeting sellside liquidity

Valid on ALL timeframes

Discount & Premium Market

Measured by using the 0.5 level on the fib retracement tool. Anchor from either swing high-low, or swing low-high depending on the direction of the move

When the market is trading within a premium, it will seek discounted prices for optimal entries

Premium to Discount Retracement | Example

Market makers will not be entering positions on overextended continuation moves. Retracing price into a discount not only provides optimal trade entires, but creates liquidity for a reversal

SMT Divergence

Related indexes are meant to trade in sympathy, however identifying divergences in price can be used to an advantage. Take safer and more profitable positions by entering long setups on the index showing strength and short setups on the index showing weakness

NYSE 00:00 | Equilibrium

Chart a horizontal line from the opening zero hour to determine the equilibrium price for the trading day. Level can be used to determine positioning and trend for the day. Price is often drawn back to equilibrium and will break away on trend days