ICT Trading Strategy Basics: Liquidity, Imbalance, Market Structure, and Timing

ICT trading (Inner Circle Trader) isn’t just another indicator or system. It’s a way of thinking about how the market really moves – who controls price, where big orders sit, and when the real moves happen. Michael Huddleston (ICT) built this approach around one idea: retail traders get trapped at obvious levels, while smart money (institutions) uses that to their advantage.

For beginners it can seem overwhelming at first, but once you break it into four core pieces – liquidity, imbalance, market structure and timing – it starts making sense. This guide explains each part simply, shows how they connect, and gives practical ways to start using ICT concepts right away. No fancy indicators needed – just price, volume and logic.

Liquidity: Where Smart Money Hunts Stops

Liquidity is the foundation of ICT. Institutions need huge orders filled without moving price too much against them. They look for pools of retail stops or pending orders – usually at obvious places like previous highs/lows, equal highs/lows, round numbers or trendline breaks.

Types of liquidity grabs:

• Buy-side liquidity: stops above previous highs or equal highs. Price pushes up to trigger them, then reverses down.
• Sell-side liquidity: stops below previous lows or equal lows. Price drops to grab them, then reverses up.

The classic setup: price sweeps liquidity (takes out stops), creates imbalance, then reverses. Look for sweep followed by strong candle in opposite direction – that’s often your entry.

In my experience, liquidity sweeps happen most reliably during London and New York session opens. That’s when institutions are most active.

Imbalance and Fair Value Gaps (FVG)

Imbalance is an area where price moved too fast and left a “gap” in the order book – little trading happened there. These are called Fair Value Gaps (FVG) or inefficiencies.

How to spot FVGs:

• Three-candle pattern: strong move creates a gap between candle 1 high/low and candle 3 high/low.
• Price tends to return to fill the FVG before continuing the trend.

In ICT, FVGs are high-probability zones. Enter when price returns to the gap and shows rejection (pin bar, engulfing).

Here’s a quick comparison table of liquidity grabs vs FVGs (based on common setups):

Liquidity grabs are reversal plays. FVGs are continuation zones after the sweep.

Market Structure: Who Is in Control

Market structure shows the trend direction through higher highs/lows (bullish) or lower highs/lows (bearish).

Key ICT terms:

• BOS (Break of Structure): price breaks previous high/low, confirming trend change.
• CHOCH (Change of Character): price breaks structure but fails to continue – often a fakeout or reversal signal.

Trade in direction of structure. After BOS, look for pullback to FVG or liquidity level for entry. Avoid trading against BOS unless CHOCH confirms reversal.

Simple rule: if higher timeframe (H4/D1) shows bullish BOS, only take longs on lower TF pullbacks.

Timing and High-Probability Windows

Timing is everything in ICT. Institutions are most active during certain sessions:

• London open (08:00 GMT): highest volatility, liquidity grabs.
• New York open (13:30 GMT): big moves, especially around news.
• Kill zones: London open (08:00-11:00 GMT), NY open (13:30-16:00 GMT), Asian kill zone (00:00-03:00 GMT for some pairs).

Best trades happen in kill zones. Avoid low-volume periods like Asian session unless strong setup.

Common Mistakes Beginners Make (and How to Avoid Them)

Jumping on every liquidity sweep without confirmation is a fast way to lose. Wait for candle rejection, volume spike or delta shift before entering.

Ignoring higher timeframe structure often leads to fighting the bigger trend. Always check H4/D1 bias before taking M15 trades – if higher TF is bullish, skip shorts unless CHOCH is clear.

Placing stops too tight or too wide ruins good setups. Use liquidity levels or 1 ATR for logical stops.

Overleveraging is the silent account killer. Stick to max 1 % risk per trade, no exceptions.

Chasing after the move wastes capital. Train yourself to wait for pullback to FVG or imbalance.

Conclusion

ICT trading is built around understanding smart money: where they grab liquidity, create imbalances, shift structure and time their moves. It’s not about complex indicators – it’s about reading price, volume and context.

Start simple: mark liquidity levels, FVGs and structure breaks on your chart. Trade only in kill zones with confirmation, risk 1 %, and journal everything. Over time you’ll start seeing how institutions really operate.

For full breakdowns, visual examples and how to combine ICT with other tools like ICT trading strategy, check the detailed guide. It’s one of the best free resources to get started.

Trade with context, protect capital, and let smart money show you the way.