If you’ve ever wondered why professional traders seem to predict price moves so accurately, it’s often because they understand ICT trading.
ICT stands for Inner Circle Trader, a strategy created by Michael J. Huddleston, a veteran trader who trained thousands of successful traders worldwide.
In simple terms, ICT trading helps you understand how big institutions (banks, hedge funds, etc.) manipulate price movements to trap retail traders — and how you can trade with them instead of against them.
Think of it like this:
Imagine a fisherman throwing bait to catch fish. The bait is where the “retail traders” (the fish) jump in, but the fisherman (the big institutions) controls the entire pond. ICT trading helps you spot the bait and follow the fisherman, not the fish.
1.1 What Is ICT in Trading Strategy?
ICT in trading is a technical analysis method that focuses on how liquidity, market structure, and institutional manipulation shape price movement.
Unlike ordinary strategies that only use indicators like RSI or moving averages, ICT goes deeper into how price truly works — the psychology and mechanics behind every candle.
Let’s simplify this:
Think of the market like a classroom test.
- Most students (retail traders) copy each other’s answers (following indicators).
- But one student (the ICT trader) understands how the teacher (the market makers) designs the questions.
ICT teaches traders to:
- Identify liquidity pools (areas where many traders have stop losses).
- Understand market structure (how price creates highs and lows).
- Trade based on institutional order flow (the direction big players are pushing price).
- Use smart money concepts (SMC) to catch high-probability entries.
1.2 What Is the Core Idea Behind ICT Trading?
The main idea is simple:
Big institutions move the market, not retail traders.
So if you learn how to read where these institutions are placing their orders, you can follow their footprints.
For example:
- When you see the market suddenly drop below a support level and then quickly reverse — that’s often a liquidity grab.
ICT helps you recognize those traps before they happen.
2. The Key Components of the ICT Trading Strategy
Let’s break down ICT step by step so even a total beginner can follow.
2.1 Market Structure (The Skeleton of the Market)
Imagine the market as a staircase — it goes up when buyers are in control (bullish structure) and down when sellers dominate (bearish structure).
ICT traders study swing highs and swing lows to determine:
- When a trend is continuing.
- When a trend is about to reverse.
Example:
If price keeps making higher highs and higher lows → the market is bullish.
Once a lower low appears, it signals a shift in structure (potential reversal).
2.2 Liquidity (The Market’s Fuel)
Liquidity is where orders are collected.
Think of it like puddles of water on the road — the market (a car) moves from one puddle (liquidity pool) to the next.
Common liquidity areas:
- Equal highs/lows → where many stop losses are placed.
- Support and resistance levels.
- Big round numbers (like 2000.00 on gold).
ICT traders look for where the liquidity is most likely to be taken next — because that’s often where price is heading.
2.3 Fair Value Gaps (FVGs)
A Fair Value Gap happens when price moves too quickly in one direction, leaving a “gap” between candles.
ICT traders see this as an imbalance — and price often comes back later to “fill” it.
Example:
If price shoots up from 100 to 110 in seconds, skipping 105–108, it will often return to fill that area.
That “gap” becomes a high-probability zone to look for entries.
2.4 Order Blocks (Where Smart Money Enters)
Order blocks are the last candle before a strong move.
They show where big institutions placed their orders before pushing price in one direction.
In a bullish setup:
- The last bearish candle before a big upward move is a bullish order block.
- Price often revisits this candle area before continuing up.
Think of it as the “launch pad” of the move.
3. How to Trade Using ICT Concepts
Now that you know the building blocks, let’s see how to combine them into a simple trade setup.
3.1 Step-by-Step ICT Trade Example
Imagine you’re watching EUR/USD:
Identify Market Structure:Price is making higher highs → bullish trend.
Spot Liquidity:
- You notice equal lows around 1.0650 (liquidity pool).
- Price dips below 1.0650 (grabs stop losses) then shoots up fast.
- The sharp move up leaves a gap between candles.
- The last bearish candle before that move is your bullish order block.
- When price returns to that order block, you buy.
Set Stop Loss and Take Profit:
- SL below the order block
-TP at the next liquidity pool
3.2 Risk Management in ICT Trading
No matter how good the setup looks, risk management is your lifeline.
Use:
- 1–2% risk per trade
- Reward-to-risk ratio of at least 2:1
- Don’t trade during major news — ICT setups often fail in high volatility
Think of it like driving: even if you’re a skilled driver, you still wear a seatbelt.
4. ICT Trading Mistakes Beginners Make and How to Avoid Them
Even with a solid strategy like ICT, beginners often make mistakes that cost time, money, and confidence. I’ll explain each clearly and show how to avoid them.
4.1 Mistake 1: Ignoring Market Structure
Problem: Many beginners jump into trades without checking if price is in a trend or reversal.
Example:
You see a bullish candlestick and immediately buy, but the market just made a lower low, signaling a potential trend change. You end up losing.
How to Avoid:
- Always identify higher highs/lows (bullish) or lower highs/lows (bearish).
- Wait for a structure shift before considering entry.
- Think: “Am I trading with the big fish or against them?”
4.2 Mistake 2: Trading Without Liquidity Awareness
Problem: Beginners often trade at obvious highs and lows without realizing these are liquidity traps.
Example:
Price breaks above a recent high, and you think the trend will continue — but it’s a stop-hunt, and price quickly reverses.
How to Avoid:
- Learn to spot liquidity pools above/below swing highs/lows.
- Wait for price to return to fair value gaps or order blocks for better entries.
4.3 Mistake 3: Ignoring Fair Value Gaps
Problem: Beginners often enter trades as soon as they see a move, ignoring imbalances left by sharp moves.
Example:
Price moves up fast and leaves a gap at 1.1050–1.1065. You buy at 1.1070 — too early. Price often retests the gap first before continuing.
How to Avoid:
- Mark all FVGs on your chart.
- Wait for price to revisit the gap before entering.
- Treat gaps like a “magnet” that pulls price back.
4.4 Mistake 4: Overtrading and Chasing Setups
Problem: Beginners feel FOMO (fear of missing out) and enter trades without confluence.
Example:
You see a bullish candle forming and immediately buy, even though there’s no order block, no fair value gap, and no liquidity alignment.
How to Avoid:
- Trade only when multiple ICT concepts align.
- Keep a daily limit on trades — quality over quantity.
- Remember: “It’s better to miss a trade than to take a bad one.”
4.5 Mistake 5: Poor Risk Management
Problem: Even a correct setup can fail if risk isn’t controlled. Many beginners risk too much per trade.
Example:
You risk 10% of your account on one trade. Even if ICT setup is correct, one loss wipes a big chunk of capital.
How to Avoid:
- Never risk more than 1–2% per trade.
- Use stop-losses and adjust lot size according to account size.
- Focus on reward-to-risk ratio, aiming for at least 2:1.
4.6 Mistake 6: Not Backtesting or Journaling
Problem: Beginners rarely track their trades, so they repeat the same mistakes.
How to Avoid:
- Use TradingView or MetaTrader 5 replay mode to backtest ICT setups.
- Keep a journal: record entry, exit, reason, and outcome for every trade.
- Over time, you’ll notice patterns and improve faster than relying on “intuition.”
Quick Tip: Even professional traders still make mistakes — the key is learning from them consistently. By understanding these beginner traps, you’ll fast-track your path to profitable ICT trading.
5. People Also Ask
5.1 What Is ICT in Trading Strategy?
ICT trading is a smart money-based approach to analyzing how institutions manipulate markets.
It focuses on liquidity, order blocks, market structure, and fair value gaps to predict price moves before they happen.
5.2 What Is the Best ICT Trading Strategy?
The most popular ICT strategy is the Liquidity Grab + Fair Value Gap + Order Block combo.
This setup helps traders catch reversals with very high accuracy.
It’s like waiting for the trap to be set, then striking when everyone else panics.
5.3 Is ICT Trading Profitable?
Yes — but only if applied with discipline.
The concepts are powerful, but they’re not magic.
You need practice, backtesting, and strong risk management.
Many traders become profitable once they stop chasing signals and start understanding liquidity.
5.4 Is ICT Better Than SMC?
ICT is a deeper, more refined version of Smart Money Concepts (SMC).
While SMC explains the basics of institutional trading, ICT adds precision and timing tools — like fair value gaps and dealing ranges — making it more advanced for serious traders.
6. Conclusion
In summary, ICT trading is not just another strategy — it’s a complete framework for understanding how price truly moves.
By learning how liquidity, order blocks, and market structure interact, you stop guessing and start anticipating.
If you’re a beginner, start small:
- Watch charts on the 1-hour timeframe.
- Try identifying liquidity grabs and fair value gaps.
- Don’t rush to trade live — observe, learn, and practice.
With patience, ICT trading can transform how you see the market — helping you trade like the institutions, not against them.