Optimal trade entry (OTE): the ICT 62 to 79 percent retracement

Optimal trade entry (OTE) is an ICT term for the zone between the 62% and 79% Fibonacci retracements of a price leg. Traders look to buy a pullback into that zone in an uptrend, or sell a rally into it in a downtrend, because it is a deep retracement with a short distance to the stop.

In short

• The OTE zone is the 62% to 79% retracement of the most recent leg, with 70.5% as the level many ICT traders treat as its centre. Some charts use the standard Fibonacci values of 61.8% and 78.6%, which move the zone by about half a pip on a 120-pip leg.
• The leg is measured from a swing low to a swing high for a buy, and from a swing high to a swing low for a sell. The zone sits in the discount half of a buy leg and the premium half of a sell leg.
• A deeper entry shortens the stop but fills less often, and price can run through the whole zone. The zone is a place to look for an entry, not a reason to enter.
• On a $10,000 Direct account, a 37-pip stop on 0.27 lots of NZD/USD risks about $100, a quarter of the $400 first-day daily loss limit.

What is optimal trade entry (OTE)?

Optimal trade entry is a retracement zone, drawn with the Fibonacci tool, that ICT traders use to time an entry within a trend. It spans from 62% to 79% of the last leg, and 70.5% is its midpoint. In an uptrend you buy the pullback there. In a downtrend you sell the rally.

The idea comes from Michael Huddleston, the Inner Circle Trader (ICT). It uses the same retracement ratios as ordinary Fibonacci trading, but with a narrower band and a rule for the direction of the trade. A Fibonacci retracement divides a price move into proportions that traders watch for pullbacks, and the 62% and 79% levels come from that tool. The distinctive ICT parts are the band itself, the 70.5% centre, and the use of the zone inside a larger plan: a trend, a break of structure and a target at liquidity.

The case for the zone is arithmetic. A deep entry puts you close to the swing the leg started from, so the stop can sit just beyond it, and a small stop allows a bigger position for the same dollar risk or a better reward to risk for the same target. The case against is that price often turns before it reaches the zone, or goes through it, and the trade is missed or stopped.

How do you draw the OTE on a chart?

To draw the OTE, select the Fibonacci retracement tool, click the start of the leg and then its end, and mark the levels 0.62, 0.705 and 0.79. For a buy, drag from the swing low to the swing high. For a sell, drag from the swing high to the swing low.

The direction of the drag matters. Most platforms put 0% at the end of the leg and 100% at the start, so the levels measure how much of the move has been given back. If your platform shows them the other way round, the 0.62 to 0.79 zone ends up in the wrong place, so check that for a buy the levels fall below the midpoint of the leg.

There is one more choice that changes the result: which leg. Typical choices are the leg that broke the last swing high (a break of structure) or the leg that followed a liquidity sweep. The break of structure guide explains how to identify the break, and the liquidity sweep guide how to find the low or high that started a leg. If you choose a different start point, the zone moves. Two traders with different swing rules will draw different OTE zones on the same chart, so fix your swing rule first.

Take a rising leg from 0.5900 to 0.6020 on NZD/USD, 120 pips. The retracement levels are:

The OTE zone for a buy therefore runs from 0.5925 to 0.5946, and the 50% level at 0.5960 lies above it. Using 61.8% and 78.6% instead moves the zone's edges to 0.5946 and 0.5926, a difference of about half a pip at the lower edge and almost nothing at the upper edge.

Why 62 to 79 percent, and what is special about 70.5?

The band takes in the 61.8% and 78.6% Fibonacci ratios, with 70.5% as the midpoint of 62% and 79%. These are conventions that ICT teaches, not laws of price. No published test shows that markets turn in this band more often than at other depths, so treat the band as a way to define an entry and a stop, not as a forecast.

The reasons given for it are structural. The 50% level of a leg is the line between premium and discount. An entry below it, in discount for a buy, follows the rule many smart money traders use of buying cheap relative to the range. The OTE zone is the deepest part of that discount, short of the start of the leg. Inside the zone, 70.5% is where traders place the single entry, and the zone's edges are where they place a first and a last attempt.

There is a practical use too. Fibonacci tools make the entry objective. Without a fixed zone, "buy the pullback" becomes buy wherever it feels right, which is hard to test and easy to stretch. The zone gives you a price to write in the plan before the trade starts, and it gives your records a consistent entry level to compare.

The honest limit is that the retracement ratios are popular, which is partly why price reacts at them. They attract orders, but they are not reliable. In a strong trend, price often retraces only 38% or less and never touches the zone. In a weak one it runs past 79% and takes the stop. Your records show which of these happens on your symbol and timeframe.

How do you trade the optimal trade entry?

To trade the OTE, identify a trend and a recent leg in its direction, draw the zone, wait for price to pull back into it, look for a sign that the pullback is ending, and enter with the stop beyond the start of the leg. The target is usually the end of the leg or the next pool of liquidity.

A workable sequence:

1. Find the trend on a higher timeframe such as the 4-hour chart and decide whether you are only buying or only selling.
2. On the entry timeframe, find the leg that created the latest break of structure and draw the zone over it.
3. Wait for price to enter the zone. If it turns before the zone, there is no trade. Do not redraw the leg to make it fit.
4. Within the zone, look for confirmation. Common signs are a fair value gap or an order block inside the band, a sweep of a minor low followed by a close back above it, or a break of structure on a lower timeframe.
5. Place the stop beyond the swing that started the leg, with a few pips of room for the spread.
6. Set the target at the end of the leg or at the next high or low where stops are likely to rest, and skip the trade if the room is smaller than your minimum.

The most useful addition is the overlap. A fair value gap that sits inside the OTE band, such as the one in the fair value gap guide, gives two reasons for one price, and traders who use smart money concepts often accept only entries where such an overlap exists. Our ICT trading guide shows how the zone sits next to kill zones and liquidity in a full plan, and the ICT Silver Bullet guide uses a gap entry in a fixed hour.

Where should the entry go inside the OTE zone?

The entry can go at the 62% edge, at the 70.5% centre or at the 79% edge. The shallower the entry, the more often it fills and the wider the stop. The deeper the entry, the tighter the stop and the more often price turns before reaching it or runs straight through.

Many traders use 70.5% as a compromise. Others scale in, placing part of the position at 62% and part at 79%, with the same stop for both. Scaling can look attractive because one fill is usually enough to take part, but it also means the average entry is shallower than the deepest one and the risk is still counted on the full position. If you scale, size the sum of the parts to the dollar risk you chose.

The worked example below compares the three single entries on one leg. It uses the same stop for all three, so the differences come only from the entry.

What does an OTE trade look like with real numbers?

This example is a long trade on a 1-hour NZD/USD chart, for a $10,000 account risking 1% per trade, which is $100. One standard lot of NZD/USD moves $10 per pip. The prices are made up for the illustration.

1. The 4-hour chart is in an uptrend. On the 1-hour chart, price breaks above a swing high and the leg runs from a swing low of 0.5900 to a swing high of 0.6020, 120 pips.
2. Draw the zone: 62% at 0.5946, 70.5% at 0.5935 and 79% at 0.5925.
3. Price pulls back and, in the zone, a 15-minute candle sweeps below a minor low and closes back above it. A buy limit goes at 0.5935, the 70.5% level.
4. The stop goes at 0.5898, 2 pips below the swing low at 0.5900. The risk is 37 pips.
5. Size: $100 divided by (37 pips × $10) is 0.27 lots after rounding down. Each pip is $2.70, so the risk is 37 × $2.70 = $99.90.
6. Set the target at 0.6018, 2 pips under the swing high. That is 83 pips, so the reward at the target is 83 × $2.70 = $224.10, about 2.2 times the risk.

Here is the same leg with the other two entries, and the stop at 0.5898 each time.

On paper the deepest entry looks the strongest. In practice you only get the 79% fill if price reaches 0.5925, and a pullback that stops at 0.5940 fills the 62% order and misses the other two. A pullback that falls through 0.5925 and the 0.5898 stop loses all three orders that filled. Count how often each depth fills in your own records before choosing one.

If price pulls back to 0.5937, turns and rallies to 0.6018 without touching your 0.5935 order, the trade does not happen and costs nothing. If a 1-hour candle closes below 0.5900, the idea has failed, because the leg is no longer intact. 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 this works on CMC Funded

On a $10,000 Direct account the daily loss limit is $400 on the first day, 4% of that day's starting equity, measured on equity. The maximum loss is 6%, fixed, so the floor is $9,400. The $100 trade above uses a quarter of the daily limit, and four stop-outs cost $399.60 before costs, which leaves 40 cents of the allowance. The limit ends the account when it is reached, with no warning stage.

Small accounts feel this. At 0.27 lots a pip is worth $2.70, so the 37-pip stop is $99.90. A position held through a deeper pullback than planned, say a further 30 pips before you close it, adds $81 of floating loss, and floating loss counts against the day. Because the limit is measured on equity, open positions count at every price, so a zone that price runs through hurts before the stop is reached.

The Direct profit target is 10%, which is $1,000 on $10,000. The $224.10 win covers about 22% of it. Direct requires at least 3 trading days, there is no time limit, and holding overnight and over the weekend is allowed with holding costs, so a pullback entry on the 1-hour chart can be left in place for days. On the Classic route the daily limit is 5% and the maximum loss 10%, so the same trade would use a fifth of a $500 daily limit.

The limit is worked out again each day from that day's starting equity, so it moves with your account, and an unused allowance does not carry over. Use the position size calculator for each entry level, and read the rules for the exact definitions.

Does optimal trade entry work?

There is no reliable evidence that the 62% to 79% zone gives better outcomes than other entries, and no published win rate for OTE trading. It is a way to define an entry and a small stop, which helps with sizing and consistency, but whether price turns in the zone on your chart is an open question that your own records can answer.

A few things make results hard to read. The leg is a choice, so the same chart supports several zones. Looking back, the pullbacks that reached the zone and turned stand out, while the many that fell short or ran through are easy to forget. And a fixed zone depth with a fixed stop gives a reward to risk that depends entirely on the leg's size. With a 2:1 target you need to win more than one trade in three, before costs, to come out ahead. A 1.5:1 trade needs more than two in five.

To test it, write the swing rule, the zone depth and the stop rule, mark 50 legs on one symbol and record whether price reached the zone, where it turned and what the trade would have returned. Our trading journal template guide shows what to log.

Common mistakes

• Drawing the Fibonacci from the wrong end of the leg. For a buy, the zone must fall below the leg's midpoint. If it sits above, the drag went the wrong way.
• Redrawing the leg after price misses the zone. A leg you can change after the fact will always show a good entry.
• Treating the zone as a signal. Price entering the band is a place to look for confirmation, not a trade.
• Placing the stop inside the zone. A stop at 0.5920 on the example trade is only 15 pips from the 70.5% entry, but price often probes the 79% edge before turning, so it is hit more often.
• Ignoring the trend. A buy zone on a 15-minute leg against a falling 4-hour trend is usually a pause in a bigger move down.
• Sizing from the zone and not the stop. The lot size follows the distance to the stop, 37 pips here. If you move the stop to 0.5880 and keep 0.27 lots, the risk becomes 55 pips × $2.70 = $148.50, nearly 40% of a $400 daily limit in one trade.
• Using a leg too small to matter. A 12-pip leg gives a zone about 3 pips deep, which is inside the spread on many symbols.

Questions traders ask

What is the 70.5 Fibonacci level?

It is the midpoint of the 62% and 79% retracements, and the level ICT traders treat as the centre of the OTE zone. It is not one of the standard Fibonacci ratios, so you add it as a custom level. Its value is as a single, fixed entry price for the plan.

Is OTE the same as the 61.8 golden ratio?

The two overlap. The 61.8% retracement is the upper edge of the OTE zone and the golden ratio is the same number, but OTE is a band that runs to 78.6% and has rules about direction and confirmation. A plain 61.8% entry is one price, not a zone.

Which timeframe suits OTE?

Traders use it on every timeframe from the 5-minute chart to the daily, and none has been shown to beat the others. A common split is a 4-hour or daily chart for the trend and a 15-minute or 1-hour chart for the leg. Longer legs give wider zones, and wider zones allow bigger stops and smaller sizes.

Can you use OTE for sells?

Yes. Draw the tool from the swing high down to the swing low, and the zone falls in the premium half, above the midpoint. A leg from 0.6020 down to 0.5900 gives a sell zone from 0.5974 to 0.5995, with the stop above 0.6020.

Next steps

The Academy lesson on premium and discount walks through marking the range and its midpoint on practice charts. The ICT Power of Three guide and the breaker block guide cover two other setups that combine with a retracement zone. Size each entry from its stop with the position size calculator, and read the daily and maximum loss limits on the rules page. The Fibonacci retracement guide covers the standard levels and extensions behind the zone.

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