ICT trading: the Inner Circle Trader concepts and how to test them

ICT trading is a way of reading price charts with the concepts taught by the Inner Circle Trader (ICT): liquidity above old highs and below old lows, fair value gaps, order blocks, market structure, premium and discount, and session windows called kill zones. It uses no indicators. Traders combine the pieces into a direction, an entry and a target.

In short

• ICT stands for Inner Circle Trader, the name Michael J. Huddleston teaches under. His concepts overlap heavily with smart money concepts (SMC).
• Most of the building blocks can be written as exact price rules. A fair value gap, a swing high, a run below a prior low and a 50% level are all measurable.
• The explanation that comes with them, that banks or an algorithm deliberately run traders' stops, cannot be checked from a chart. You can test the rules without accepting the story.
• The London kill zone is usually taught as 2:00 to 5:00 am New York time, which is 7:00 to 10:00 am UK time for most of the year.
• On a $10,000 Direct account the daily loss limit is $400. Four losing trades of $98.90 each use $395.60 of it before costs.

What is ICT trading?

ICT trading is a discretionary approach to price charts built from the terms and setups taught by the Inner Circle Trader. You look for places where stop orders are likely to sit, wait for price to run through them at set times of day, then enter on a pullback into the gap or order block left by the move that follows.

ICT is the teaching name of Michael J. Huddleston, and the three letters now stand for both the person and the method. The material is spread across years of online videos. There is no single ICT strategy, so traders talk about named models instead, such as the Silver Bullet or the "2022 model".

Many of the ideas also exist outside ICT under other names: price action traders talk about stop runs and trapped traders, and supply and demand traders mark zones much like order blocks. ICT gave them a specific set of labels and tied the setups closely to the clock.

Smart money concepts is the wider label, used by many educators who teach the same building blocks under their own terms. SMC courses often call the first break against a trend a change of character (CHoCH), close to what ICT calls a market structure shift. Our smart money concepts guide covers the broader family.

What are the core ICT concepts?

The core ICT concepts are liquidity, market structure, fair value gaps, order blocks, premium and discount, and kill zones. The first five describe places on the chart where a trade might start or end, and kill zones describe when to look. Each one below comes with a version you could write down as a rule.

Liquidity: buy-side and sell-side

In ICT terms, liquidity means a cluster of resting orders. Buy-side liquidity sits above old highs, especially two or more highs at about the same price ("equal highs"), where short sellers' stop-losses and breakout buy orders gather. Sell-side liquidity sits below old lows.

When price trades a few pips beyond one of these levels and then closes back inside, ICT traders call it a liquidity sweep and treat it as a possible turning point. Say the Asian session low on GBP/USD is 1.2662, and a 5-minute candle trades down to 1.2651 before closing at 1.2663. That is a sweep of sell-side liquidity, covered in depth in the liquidity sweep guide.

Market structure and the market structure shift

An uptrend makes higher highs and higher lows. A break of structure (BOS) is a move past the last swing high in an uptrend, or the last swing low in a downtrend, and it signals continuation.

A market structure shift (MSS) is a close beyond the swing that protects the trend, such as a close below the last higher low in an uptrend. ICT wants it to come in a fast, one-sided move, which it calls displacement. The usual sequence is a sweep in one direction, then an MSS in the other.

Fair value gaps

A fair value gap is a three-candle pattern in which the wicks of candles 1 and 3 do not overlap. In a bullish gap the zone runs from candle 1's high to candle 3's low. ICT uses the gap as an entry zone and its midpoint, called consequent encroachment, as a common limit price. The fair value gap guide works through bullish, bearish and inverse gaps with prices.

Order blocks

An order block is the last opposite-coloured candle before the displacement that broke structure. For a buy setup, that is the last down candle before the rally. Traders mark its range (some use the body, some the full high-to-low range) as a zone where price may react when it returns. The order block guide covers the variations.

Premium, discount and the optimal trade entry

Take a dealing range from a swing low to a swing high and mark its 50% level, which ICT calls equilibrium. Above 50% is premium and below is discount, and the rule is to buy only in discount and sell only in premium. With a range from 1.2600 to 1.2800, equilibrium is 1.2700.

The optimal trade entry (OTE) is a narrower band: the 61.8% to 78.6% retracement of the same leg. On the 1.2600 to 1.2800 range, that is 1.2643 to 1.2676.

What are ICT kill zones and the Silver Bullet?

Kill zones are the windows of the day in which ICT teaches that setups are most likely, chiefly the London open and the New York morning, set in New York local time. The ICT Silver Bullet is a one-hour version: inside each window you wait for a run on liquidity, then trade a fair value gap left by the move away from it.

The windows sit where forex volume usually picks up, including the New York morning, when many US data releases come out at 8:30 am New York time. Sources disagree on some edges: some teach the New York kill zone as 7:00 to 9:00 am, and the Asian range as 7:00 to 10:00 pm.

The US changes its clocks on the second Sunday of March and the first Sunday of November; the UK changes on the last Sundays of March and October. In those gaps New York is four hours behind London, so each UK time in the table moves an hour earlier. Check what time zone your chart uses.

Which parts of ICT can you test, and which are vague?

The price and time rules can be tested on past charts, because gaps, sweeps, swing breaks, 50% levels and kill zone hours can all be defined exactly. What a chart cannot show is the claim that institutions or an algorithm deliberately engineer each move, or which level "mattered" before the fact.

Results drift at the judgement calls. On a finished chart the level that held is easy to pick out, but live there are usually three or four candidates, and two people using ICT can take opposite trades on the same chart. As for the institutional story, the chart shows only that price went beyond a level and came back; the buyers and sellers behind each trade are invisible to you.

How do you turn ICT concepts into a rule-based strategy?

Pick one setup and settle every judgement call in writing before you test it. A common ICT sequence is a higher-timeframe direction, a liquidity sweep inside a kill zone, a market structure shift that leaves a fair value gap, and an entry in that gap in discount, with the stop beyond the sweep.

Here is one written version for buys:

1. On the 1-hour chart, the last swing to break was a high. Look for buys only.
2. Mark the dealing range from the last 1-hour swing low to the swing high. Entries must be below 50% of it.
3. Trade only in the London kill zone, 7:00 to 10:00 am UK time.
4. A 5-minute candle trades below the Asian session low and closes back above it.
5. Within the next six candles, a 5-minute candle closes above the last lower high, and the move leaves a bullish fair value gap of at least 8 pips.
6. Place a buy limit at the midpoint of the gap, with the stop 4 pips below the sweep low.
7. Target the next buy-side liquidity. Skip the trade if it is less than twice the stop distance away.
8. Cancel the order if it has not filled by 10:00 am. One trade per kill zone.

The six candles, 8 pips and 4 pips are this example's choices. ICT material does not fix them, so set your own and keep them identical across every trade you test. The Silver Bullet follows nearly the same steps inside a one-hour window.

What does an ICT trade look like with real numbers?

This example follows the rules above on a 5-minute GBP/USD chart, for a $10,000 account risking 1% ($100) per trade. A pip is 0.0001, and one standard lot of GBP/USD moves $10 per pip. Prices are for illustration.

1. The 1-hour chart is rising, with a dealing range from 1.2600 to 1.2800. Equilibrium is 1.2700, so buys must be below it.
2. Overnight, the Asian session ranges from 1.2662 to 1.2690. The previous day left equal highs at 1.2718 and 1.2719.
3. At 7:40 am UK time, a 5-minute candle trades down to 1.2651, 11 pips under the Asian low, and closes at 1.2663. Its high is 1.2664. This is the sweep.
4. The next candle rallies to 1.2688 and closes at 1.2685, above the last lower high at 1.2678: the market structure shift.
5. The candle after it has a low of 1.2676. The fair value gap runs from 1.2664 to 1.2676, 12 pips, with a midpoint of 1.2670. That midpoint also sits inside the OTE band of 1.2643 to 1.2676.
6. You place a buy limit at 1.2670 and a stop at 1.2647, 4 pips under the sweep low. The stop is 23 pips away.
7. Size: $100 ÷ (23 × $10) = 0.43 lots after rounding down, or $4.30 per pip. The risk is 23 × $4.30 = $98.90.
8. The target is 1.2716, just under the equal highs. That is 46 pips, worth 46 × $4.30 = $197.80, twice the risk.

If price dips into the gap at 8:20 am, fills you at 1.2670 and reaches 1.2716 at 9:45 am, the trade makes $197.80 before costs. If instead a 5-minute candle closes at 1.2660, below the gap, and price goes on to 1.2647, the stop costs you $98.90. Had price never returned to 1.2670 by 10:00 am, the order would have been cancelled at no cost.

Simulated trades carry trading costs, as they would on a live account: a commission when a trade opens and when it closes, a price markup on some symbols, and holding costs on positions kept overnight.

How ICT trading fits CMC Funded Classic and Direct rules

On CMC Funded the daily loss limit decides how many ICT setups you can afford to get wrong in one day. It is a share of your equity at the start of each day, measured on equity, so open losses count as well as closed ones, and reaching it ends the account with no warning stage. On the first day of a $10,000 Direct account it is $400; on a $10,000 Classic account, $500.

With the $98.90 risk from the example:

• On the $10,000 Direct account, four full stops cost $395.60 and leave $4.40, which the commissions on those four trades could use up.
• On the $10,000 Classic account, five full stops cost $494.50 and leave $5.50.
• A trade that is open and 15 pips against you already counts as a $64.50 loss.

The one-trade-per-kill-zone rule caps the damage. With the rules as written, London only, the worst planned day is one stop of $98.90, about a quarter of the Direct limit. Adding the New York kill zone makes it two stops, or $197.80: under half the Direct limit and about 40% of the Classic one.

The maximum loss is fixed. On the $10,000 Direct account the floor is $9,400, and six full stops ($593.40) leave $6.60 of room; on the $10,000 Classic account the floor is $9,000, and ten stops ($989) leave $11.

For scale, the Classic Phase 1 profit target is 8%, or $800, and four winners of $197.80 make $791.20. The Direct target is 10%, or $1,000, which five winners miss by $11. There is no time limit, so a day with no sweep in the kill zone can simply be a day without a trade, though you need at least 3 trading days. News trading is allowed, but the 8:30 am New York releases fall inside the New York kill zone and often bring wider spreads and wider gaps, so plan a wider stop and a smaller size.

Does ICT trading work?

Nobody can answer that for ICT as a whole, because ICT is a vocabulary that supports many different rule sets. Results shared online are self-selected, and the traders who stopped rarely post. The result you can rely on is the one you measure for your own written version.

Start with the arithmetic. The break-even win rate is 1 ÷ (1 + the reward-to-risk ratio), so with a target twice your stop you need to win one trade in three (33.3%) before costs. With a 1.5 to 1 target, you need 40%. Costs push both figures up.

Then mark at least 30 to 50 past setups that meet every rule, including the ugly ones, and record each as a win, a loss or a cancelled order. A win rate near the break-even line means the rules have no edge yet.

Common mistakes

• Calling every wick beyond a high a sweep. Write down how far past the level price may go and how quickly it must close back inside.
• Finding the gap after the fact. A 1-minute chart has gaps everywhere, so fix a timeframe and a minimum size before you look.
• Taking a trade at 10:10 am because the setup almost formed inside the kill zone. Log it as a missed setup instead.
• Moving the stop inside the gap to trade a bigger size. Size from the stop the rules give you.
• Switching from OTE to Silver Bullet to order block in one session until something fits. Test one model at a time.
• Ignoring the spread on small 5-minute gaps. A 2-pip spread is a quarter of an 8-pip gap.

Questions traders ask

Is ICT the same as SMC?

ICT is one teacher's version of what is now usually called smart money concepts. SMC courses from other educators use most of the same ideas, such as liquidity, order blocks, fair value gaps and structure breaks, often under different names and without ICT's focus on kill zones and time-based models like the Silver Bullet.

Does ICT work on gold, indices and crypto?

Traders apply ICT material to forex, indices, gold and crypto. Kill zones fit forex and indices most naturally, because they are built around the London and New York sessions. Crypto trades around the clock, so the time windows carry less meaning there.

Is ICT trading suitable for beginners?

ICT has a lot of vocabulary, and much of it depends on judgement, which makes it a hard first method. Learning swing highs and lows, support and resistance and position sizing first gives you the base; then add one ICT setup at a time, written as rules and tested on past charts.

Which timeframe do ICT traders use?

Most ICT setups use two or three timeframes. A higher one, such as the 1-hour or 4-hour chart, sets the direction and the dealing range. A lower one, often between the 1-minute and 15-minute charts, is where traders look for the sweep, the structure shift and the fair value gap to enter on.

Next steps

The Academy lesson on sessions and kill zones walks through marking the Asian range and the London and New York windows on practice charts. Turn each stop distance into a lot size with the position size calculator, and check the daily loss limit for your account size on the rules page.

You can compare the Classic and Direct routes on the challenges page.