**Ultimate Guide to Trading Forex Using the ICT Method – Based on Concepts by Inner Circle Trader (ICT)**
*Inspired by the content from YouTube creator The Trading Channel and Michael J. Huddleston (ICT)*
The world of Forex trading has been revolutionized by advanced methodologies, and one of the most respected and studied among professional traders is the ICT (Inner Circle Trader) approach developed by Michael J. Huddleston. This method emphasizes smart money concepts, including institutional order flow, liquidity hunting, and precision entries based on market structure. Whether you’re a beginner or an advanced trader, understanding ICT concepts can reframe your entire view of the markets.
Below is a fully expanded guide exploring the ICT trading strategy, with insights gathered from Michael Huddleston’s teachings and explained comprehensively for practical application in today’s Forex markets.
—
## What is ICT Trading?
The ICT (Inner Circle Trader) strategy is a structured methodology for trading the Forex market used by institutions. Michael Huddleston developed this approach to reveal how smart money (e.g., institutional traders and market makers) move markets and how retail traders can align their trades with this flow rather than against it.
The core of the ICT method is rooted in:
– Market structure analysis
– Liquidity concepts
– Time-based trading windows
– Order blocks
– Fair value gaps (FVG)
– Optimal Trade Entry (OTE)
– Institutional order flow
—
## Key Principles of ICT Forex Strategy
Mastering the ICT strategy involves understanding and applying the following core components:
### 1. Market Structure
Everything starts with identifying market structure. You must understand where price is trending — up, down, or sideways — before making a trading decision.
– **Bullish market structure**: Series of higher highs and higher lows.
– **Bearish market structure**: Series of lower highs and lower lows.
– **Market structure shift**: When the current trend is disrupted, this signals a potential reversal or deep retracement.
– Market structure helps determine when an impulse move is likely to begin or end.
### 2. Liquidity Pools
Liquidity is fundamental to ICT concepts. Markets are driven by stop hunts, and liquidity pools represent the clusters of stop losses or pending orders that institutions target.
– **Buy-side liquidity**: Resting above swing highs; usually created by retail traders with stop losses above recent highs.
– **Sell-side liquidity**: Below swing lows; stops are placed under lows, and institutions know this.
– **Liquidity runs**: Institutions hunt stops by pushing the price beyond these levels to fill larger orders.
Understanding where this liquidity lies allows traders to anticipate price movements that go beyond what retail logic expects.
### 3. Order Blocks
Order blocks are unmitigated zones left by institutional traders. These areas often act as strong support or resistance and are prime areas for entry.
– **Definition**: The last bullish or bearish candle before an impulsive move that breaks market structure.
– **Bullish Order Block**: In bullish market structure, typically the last down candle before a strong up move.
– **Bearish Order Block**: In bearish market structure, usually the last up candle before a strong down move.
– These become areas of interest for potential entries, as price frequently returns (“retests”) these areas before continuing in its earlier direction.
### 4. Fair Value Gap (FVG)
FVGs or Imbalance gaps occur when price moves aggressively in one direction, creating a gap between the wicks or bodies of three consecutive candles.
– **Definition**: A fair value gap is formed when a candle leaves both the previous and following candle with no overlapping wicks.
– **Use**: These areas are revisited for liquidity rebalancing before a continuation of the trend.
– Traders look to FVGs as precision entries in alignment with market direction and smart money positioning.
### 5. Optimal Trade Entry (OTE)
ICT’s Optimal Trade Entry concept helps traders
Read more on USD/CAD trading.