Understand the language of ICT trading

A

Asian range

The high and low formed during the Asian session. Traders often use it as a liquidity reference for London and New York. Read the full guide →

B

BOS (Break of Structure)

A close beyond the previous swing high or low in the direction of the trend, suggesting the trend is continuing. Read the full guide →

Breaker block

A failed order block that price has broken through. It may later act as support or resistance in the opposite direction. Read the full guide →

Buy side liquidity (BSL)

Liquidity above highs, made of buy stop orders and the stop losses of short sellers. Read the full guide →

C

CHoCH (Change of Character)

The first break against the existing trend, such as price closing below the last higher low in an uptrend. It can be an early sign that the trend is shifting. Read the full guide →

Confluence

Several reasons that agree on a trade idea, such as higher timeframe bias, liquidity, structure and an entry zone. Read the full guide →

D

Dealing range

The price range between a significant swing high and swing low that traders use to measure premium and discount.

Demo account

A practice account that uses virtual money so you can test a strategy without risking capital. Read the full guide →

Displacement

A fast, strong move with large candles and little overlap that shows aggressive participation. Read the full guide →

Drawdown

The fall in account value from a peak to a later low, usually shown as a percentage. Read the full guide →

E

Equal highs and equal lows

Two or more highs or lows at nearly the same price. Traders see them as obvious places where stop orders gather. Read the full guide →

Equilibrium

The 50% level of a price range, used as the dividing line between premium and discount.

F

Fair value gap (FVG)

A three-candle pattern where the wicks of the first and third candles do not overlap, leaving an imbalance in the middle candle. Read the full guide →

FOMO (fear of missing out)

The urge to chase price after a move has already happened. Read the full guide →

H

Higher timeframe bias

The expected direction taken from larger timeframes such as the daily and 4-hour charts. Read the full guide →

I

ICT (Inner Circle Trader)

A price action approach popularised by Michael J. Huddleston that studies market structure, liquidity and imbalances to understand where price may be drawn next. Read the full guide →

Imbalance

An area where price moved quickly in one direction so that trading in the other direction was limited. Fair value gaps are one type of imbalance. Read the full guide →

Inducement

A minor high or low that tempts traders to enter early before price moves the other way.

K

Killzone

A time window of higher volume and volatility, such as the London open or New York open, when traders focus their attention. Read the full guide →

L

Liquidity

Resting orders in the market, such as stop losses and pending orders, usually clustered above highs and below lows. Read the full guide →

Liquidity sweep

A move that pushes through a level holding liquidity and then reverses. It is also called a stop run or liquidity grab. Read the full guide →

M

Market structure

The pattern of swing highs and swing lows that shows whether price is trending up, trending down or ranging. Read the full guide →

Mitigation

Price returning to a zone, such as an order block or fair value gap, to rebalance or react. Read the full guide →

MSS (Market Structure Shift)

A break of structure against the prevailing direction, often used as confirmation that the short-term direction has changed. Read the full guide →

O

Order block

The last opposite candle before a strong move that breaks structure. Traders watch it as an area where price may react when it returns. Read the full guide →

OTE (Optimal Trade Entry)

A retracement zone, often taken as 62% to 79% of a move, where some ICT traders look for entries.

P

Position sizing

Calculating how many lots or units to trade so that a stop-out loses only a planned percentage of the account. Read the full guide →

Power of 3 (AMD)

A model describing a session as accumulation, manipulation and distribution.

Premium and discount

A way to split a price range at its 50% level. The upper half is premium and the lower half is discount. Buys are usually sought in discount and sells in premium. Read the full guide →

R

Revenge trading

Trading again immediately after a loss to win the money back, usually with higher risk. Read the full guide →

Risk-to-reward ratio

The comparison between the amount risked and the potential gain. A 1:2 ratio aims to make twice what is risked. Read the full guide →

S

Sell side liquidity (SSL)

Liquidity below lows, made of sell stop orders and the stop losses of buyers. Read the full guide →

SMT divergence

When two correlated instruments disagree, for example one makes a new high while the other does not. It is used as confirmation, not as a standalone signal.

Stop loss

A pre-set exit price that limits the loss if the trade idea is wrong. Read the full guide →

Swing high

A candle high that has lower highs on both sides. Swing highs are used to mark market structure. Read the full guide →

Swing low

A candle low that has higher lows on both sides. Swing lows are used to mark market structure. Read the full guide →

T

Trading journal

A record of every trade with the setup, risk, result, screenshots and notes about discipline. Read the full guide →