Come join forex, they said. You’ll be rich overnight, they said. No such luck, huh?! The fact of the matter is that the forex market is, in fact, a land of opportunities. And we say that despite the fact that, just like you, there have been times when we tried every tool and analysis approach possible and still got no results.
The problem here is the approach that most novice retail traders follow solely based on guesswork and generic technical indicators. To really set yourself apart in a huge market like forex, you have to think like those who run it. Enter ICT forex trading. Short for Inner Circle Trader, this methodology teaches traders to think and act like institutions, predicting market movements rather than merely reacting to them.
You, too, have probably heard the name a time or two. But what is ICT strategy in forex, and more importantly, can it truly be the trading savior you need it to be? Let’s find out.
Forex ICT at Its Core
As mentioned above, the forex market’s ICT is all about turning traders into institutional investors who run the market with tools that are more precise than generic technical indicators and price action patterns. The methodology ultimately helps traders improve their risk-to-reward ratios and win rates.
ICT forex strategy teaches traders to deeply evaluate fundamentals such as orders flows, liquidity shifts, and market inefficiencies. In the best case scenario, a seasoned ICT trader will be able to successfully predict the ups and downs of the market, rather than make impulsive decisions when they happen.
The strategy was initially introduced by Michael J. Huddleston, AKA the Inner Circle Trader, to help retail traders benefit from the forces dominating the forex market. Although it was slow to get the appreciation it deserved, more and more traders started implementing the ICT strategy into their forex routines.
Key Elements Considered by Inner Circle Traders
ICT forex trading digs deeper than surface-level tools and indicators, equipping its followers with key metrics they can evaluate to amplify their trading accuracy.
1- Liquidity Analysis
Liquidity is the spine that keeps the forex market upright, allowing for trades to be executed at different price levels. Liquidity pools, in particular, are one of the most basic yet vital factors ICT traders come to know very well.
In essence, liquidity pools are areas on the chart where lots of stop-loss and pending orders are placed. Institutions usually aim to execute their orders in these areas, as the high liquidity provides minimal slippage.
By recognizing liquidity pools and their significance, forex ICT traders can turn these areas into opportunities rather than traps set by institutional players.
2- Order Blocks (OBs)
Order blocks (OBs) are areas where large orders are placed by institutional investors. They are usually marked by the last bearish or bullish candle before a trend reversal. The nature of OBs turns them into price magnets, as they represent significant, unfilled institutional orders.
ICT forex traders look for OBs to find optimum entry and exit points. Prices tend to react harshly to order blocks, providing high-probability trade opportunities for those who know what they should look for.
3- Fair Value Gaps (FVGs)
Fair value gaps (FVGs) are signs of market inefficiency that occur when there is rapid price movement that leaves gaps between candlesticks. In essence, they show that there’s a difference (or gap) between the asset’s current price and the fair value associated with it.
Without the price balancing the supply and demand, FVGs also become price magnets that require the market to bounce back and “fill the gap”. As far as ICT strategy, forex traders use these zones to refine their entry points, avoiding rash trading decisions and increasing the likelihood of profitable outcomes.
4- Market Structure Shifts (MSS)
Simply put, market structure shifts (MSS) show a change in trend directions, whether it’s a shift from bullish to bearish or vice versa. These shifts are usually recognized when the price breaks significant highs or lows on the chart.
For ICT forex traders, MSS is essential for timing entries and exits. Recognizing an early shift allows traders to align with the new trend, avoiding the pitfalls of holding onto outdated biases. By combining MSS with OBs and liquidity analysis, traders can build a holistic view of market dynamics.
5- Killzones
Killzones are basically time periods where institutional activity peaks, also increasing market volatility in its wake. The increased volatility, of course, leads to more reliable trading setups. Key Killzones include the London Open (7-9 AM GMT), the New York Open (1-3 PM GMT), and other overlapping sessions.
Because of institutional price manipulation during killzones, traders use these areas to better time their entries and exits. Killzones ensure that the efforts of ICT forex traders are concentrated during periods of maximum market efficiency, reducing wasted time and effort.
ICT Pros and Cons in Forex Trading
The pros of forex ICT strategy include:
- Precision: By following institutional behavior and omitting the guesswork, ICT forex trading allows for extremely accurate entry and exit points.
- Risk Management: By aligning with smart money, traders can minimize losses, avoid common retail traps, and ultimately better manage their risk.
- Scalability: The principles of ICT trading apply across multiple timeframes and market conditions.
- Deep Market Understanding: ICT forex traders gain a comprehensive understanding of market mechanics, enhancing their long-term success.
On the other hand, some possible limitations of ICT Strategy forex trading include:
- Steep Learning Curve: ICT trading requires time and effort to master its concepts and tools.
- Discipline Needed: Traders must remain patient, trade, avoid impulsive decisions, and trade with discipline to fully benefit from ICT strategies.
- Complexity: The methodology involves multiple elements, which may overwhelm beginners.
- Time Commitment: Killzones and detailed analysis demand significant time investment for consistent results.
Where Can I Learn ICT Trading?
If you’re looking for an ICT forex full course, the best way is to learn it from the pioneer of the methodology, Michael Huddleston. He provides free basic insights and live trading videos on his YouTube channel. However, for a more comprehensive guide on ICT forex strategy, you can subscribe to the Inner Circle Trader website and get the full deal.
While Huddleston himself is the best source of learning this approach, some of his students mention that the concepts he teaches are not simplified for traders with fewer experiences.
Many choose to take an ICT strategy course with his successful students as a result. Since these traders have also experienced any possible confusions about this trading method, they can better clarify it for those who are just getting started with ICT trading.
Final Words
ICT forex trading focuses on deep undercurrents that lead the market. Institutional behavior, liquidity shifts, and market inefficiencies provide Inner Circle Traders with the means to omit the otherwise usual trading guesswork and take part in more precise and profitable trades.
Although the methodology seems complex and requires a significant amount of time and commitment to master, ICT trading can be massively profitable if used correctly.
To learn it straight from the source, you can subscribe to Micheal J. Huddleston’s (the founder of Inner Circle Trader) website and YouTube channel, where he offers valuable insights on recognizing and correctly using liquidity pools, order blocks, fair value gaps, market structure shifts, and killzones.
However, if you’re interested in more forex trading courses, where you learn about other approaches, our blog would be a great starting point for you to start streamlining your trades!
ICT (Inner Circle Trader) forex trading is a methodology that focuses on institutional behavior and fundamental factors like liquidity and market inefficiency. It aims to enable traders to predict the market rather than react to it.
ICT trading aims to take advantage of various factors, including liquidity and volatility, both of which the forex market is known for. It’s also scalable on several timeframes, allowing traders to increase their trading precision and profitability regardless of their preferences.
There are numerous courses on the internet, both in written and video formats, claiming to teach traders the ICT methodology. However, the best source of learning would be Michael J. Huddleston’s website and YouTube channel, as he invented the strategy himself.
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