ICT Trading Strategy: The Inner Circle in Forex Trading
The Inner Circle Trader (ICT) Trading course is like a detailed school for people who want to trade in the Forex market. It’s designed to teach you everything you need to know to make successful trades. This course covers many things, such as how good traders think and act, technical analysis, fundamental analysis, and risk management.
The ICT Trading Course aims to give traders the knowledge and skills they need to do well in the fast-moving world of Forex trading. You’ll learn through lessons, videos, and practice.
Inner Circle Forex Trading Strategy
Forex trading is when people trade currencies to make money. There are many ways to do this, and one way is called the Inner Circle Trader strategy. It’s all about understanding how big traders in the market act.
In this article, we’ll tell you about the Inner Circle Trader and why it’s a good choice. The ICT method is a guide to help traders be successful. It was made by Michael J. Huddleston, a trading expert. It has evolved over the years to help traders understand the market better and find good opportunities.
The ICT strategy uses charts and market trends to make trades. It believes that you can predict market trends by looking at how prices move, support and resistance levels, and places where many people trade.
The strategy was made by a trader known as the Inner Circle Trader, who is famous in the trading world for using this strategy successfully. It’s a detailed approach that involves looking at different timeframes, using different technical tools, and understanding how the market works.
ICT Trading Fundamentals
Interest rates have a big impact on currency trading. Here are some important things to know:
- Interest rates are a major factor that affects how the market behaves.
- Understanding changes in interest rates can help you make better trading decisions.
- Looking at interest rates from a technical analysis perspective can help you see how professional traders move their money.
- Interest rate combinations can show how smart investors gather and distribute their money.
Interest Rate Combinations:
- The 30-Year Bond is a key long-term interest rate.
- The 10-year Note is an intermediate-term interest rate.
- The 5-year Note is a short-term interest rate.
- Comparing or analyzing these three interest rates can help you understand how prices change.
- When there are unexpected price changes at the correct times, it can confirm that big institutions are making significant trades.
Understanding the Inner Circle Trader Strategy
The Ict trading strategy is based on the idea that big institutional traders, also called “smart money,” control the forex market to make money. These institutions have many resources, which lets them influence market prices and find good trading chances. The goal of the Inner Circle Trader strategy is to figure out what these big traders are doing and follow their actions to have more successful trades.
What Smart Money Looks Like in Price Action:
When the market is going down (bearish conditions), smart money does certain things to make money. When the market is going up (bullish conditions), smart money has its way of making money.
Interest Rate Triad:
Three different interest rates can show us when smart money moves money in the interest rate market. By looking at all three of them and comparing their movements, we can see when smart money is making important decisions. This helps us know when the US Dollar Index (USDX) is at an important price level. When there are big price swings, it means smart money is involved, and that can confirm trading opportunities.
Applying the ICT Trading Strategy
To use the Inner Circle Trader strategy well, traders must carefully study charts and find chances to trade by understanding how big players manipulate liquidity pools and look for stop hunts. Here are the steps:
Inner Circle Traders start by looking at price charts of currency pairs to find important levels and patterns in the market. They search for places where lots of money is gathered or spread out, called liquidity pools.
Finding Liquidity Pools:
After they find these potential liquidity pools, Inner Circle Traders watch how prices move in those areas. They pay attention to any signs that show someone might be trying to control the market, like sudden price jumps or drops, big trading amounts, or specific candlestick shapes.
When Inner Circle Traders see good chances to trade based on liquidity pool tricks and stop hunts, they enter trades. They decide when to get in and out of the trade, considering how the market works and following rules for managing risks.
Risk Management in Ict Trading Strategy
Even though this strategy can lead to making money, it’s important to use good techniques to control risks. Here are some key aspects of risk management in this strategy:
Setting Stop Loss and Take Profit Levels
Inner Circle Traders decide on specific points to stop a trade if it’s not going well and when to take their profits if it is doing well. They pick these points by looking at how the market works, how much prices move, and how much risk they can handle.
Managing Position Sizes
To stay safe and not risk too much, Inner Circle Traders choose how much money to use for each trade. They think about how big their account is, how much they can win compared to what they might lose, and how the market is acting. They do this so that one trade doesn’t put all their money at risk.
Monitoring Market Conditions
Inner Circle Traders keep a close watch on how the market is doing and change their trading plans as needed. They also keep up with the latest news and events that can affect how much money they make, and if necessary, they change their trades or finish them.
ICT Trading Action Plan
In the first month of the Mentorship, traders learn about specific points to pay attention to. When the price in trading reaches a Focus Point, such as an order block, Liquidity Pool, Liquidity Void, or Fair Value Gap, specific strategies and actions are applied.
Liquidity Pool Manipulation
The Ict trading strategy focuses on “liquidity pool manipulation.” This means that big professional traders intentionally create fake movements in the market to trick regular traders into making hasty buying or selling decisions when their stop-loss orders are triggered. Inner Circle Traders aim to predict and use these tricks to profit from the market’s reactions.
Stop hunts are when prices purposely move to make regular traders stop losing orders. Professional traders use these stop hunts to buy more or sell their holdings at reasonable prices. Inner Circle Traders pay close attention to these stop hunts and use them as chances to start or finish their trades.
To use the Inner Circle Trader strategy effectively, it’s really important to know how the market behaves. Inner Circle Traders study price charts to find important levels and patterns in the market, like where prices tend to stop or change direction and how trends move. They try to make their trades fit with how the market naturally works, which helps them have a better chance of making money.
Reinforcing Liquidity Concepts and Price Delivery
External Range Liquidity
- When trading, there are times when there’s much buying interest above the current price range.
- In other situations, there’s much selling interest below the current price range.
- Traders try to match their orders with other pending orders to tap into areas where many orders are waiting.
- Sometimes, these areas with many pending orders can be hard or easy to break through.
Internal Range Liquidity
- If the current price range is expected to stay the same, any empty spots with no trading will probably get filled, and there’s a risk of gaps.
- Similarly, if the current price range is likely to stay, empty areas known as Fair Value Gaps may also get filled, posing a gap risk.
- Inside the trading range, areas with Buy and Sell orders may start to have new orders placed.
- In these trading ranges, models for buying and selling from Market Makers can develop.
Reinforcing Order Block Theory
Definition: The lowest candle or price bar with a closing price lower than its opening price, and it’s near a “Support” level.
Validation: When a later candle or price bar goes above the highest point of the lowest down-close candle or price bar.
Entry Techniques: When the price moves higher away from a specific supportive area and then returns to the highest point of that supportive candle or price bar, it’s considered a good sign.
Defining Risk: Placing a Stop Loss order just below the lowest point of the supportive candle is a safe way to protect your investment. If the price moves away from that supportive area, you might consider moving the Stop Loss just below the middle point of the candle to reduce risk if it makes sense.
The Inner Circle Trader strategy is a special way to do forex trading. It’s based on how big institutional traders act in the market.
By learning about things like liquidity pool tricks, stop hunts, and how the market works, traders might find good chances to make money. But it’s also crucial to control risks and understand that the strategy has limits. If you study it well and trade carefully, the Inner Circle Trader strategy can be useful for experienced forex traders.
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