PSYCHOLOGY

ICT TRADING PLAN

)TOP DOWN ANALYSIS (BIAS AND DIRECTION

DETAILED TOP DOWN ANALYSIS RULES

)UNDERSTANDING COMMITMENT OF TRADERS (COT

MARKET PROFILES

SUPPORT / RESISTANCE AREAS

AREAS OF CONFLUENCE

FIBONACCI

OTE PATTERNS

SESSION TRADING

PRICE ACTION

HIGH PROBABILITY PRICE PATTERNS

TRADING SWINGS

ICT TRADING CONCEPTS

ICT TRADING METHODS

INSIDERS TRADING METHODS

PROFESSIONALS USE OF INDICATORS

MISC VIDEO NOTES

TRADE RULES

RISK MANAGEMENT

TRADING INSIDE THE RANGE

ICT TERMS AND ABBREVIATIONS

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PSYCHOLOGY

Below is basic psychology a trader needs to understand before beginning to

trade. Ensure the following concepts are understood and planned out before
trading:
1. Understand the asset class you are trading (i.e. don’t follow 20 pairs at
once)
2. Think independently and use your own analysis (turn off the TV and
rumor sites)
3. Develop and adhere to your personal trade profile and compressive
trade plan
4. Utilize and exercise impeccable equity management (1-1.5% risk per
trade for new, 2% for exp.)
5. Don’t assume to know where price will go (i.e. no predictions), setup
your trades per your analysis in anticipation IF the market moves in
your direction
6. Think in terms of probability and not absolutes, there are no absolutes
in trading

Trade like a Sniper

Traders who learn to pick and choose their trades like a Forex “sniper” are
typically the ones who succeed. Traders who fail act like machine-guns by
shooting at everything they see (overtrading) and/or tend to run out of
ammo (money) very quickly.
1. Less is More
○ Wait patiently for anticipated target to come into view as a result
of your own analysis.
○ Act only when your set of criteria are met.
3. Higher Time Frames
○ The higher the timeframe the more reliable the target,
information is presented. Looking at Monthly or Weekly time
frames only does not give you enough targets to trade.
○ Base most of your analysis off of Daily and 4-Hour charts to
identify high value, probability targets.
○ Work with the lower timeframes (1-Hour and 15-Min) to manage

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 the circumstances around the trade.
4. Patience
○ Most beginning traders lose money in the markets, and most
beginning traders are also anything BUT patient.
○ For beginner traders, fight the tendency to make yourself trade
because you have the idea that trading will earn you money.
Only smart trading with a plan can make you money.
○ Wait for confirmation by multiple factors before jumping into a
trade to avoid false moves.
5. Fear and Greed
○ Combat natural tendencies of fear and greed by documenting and
diligently following a trading plan.
○ Make trading about following rules, plans, and risk management.
NOT about emotions.

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ICT TRADING PLAN

Every night at Midnight (New York) I calculate new day Pivot Points for the
Cable (GBP/USD) and post them on my charts. I then note key support and
resistance levels from Monthly charts down to five minute charts.

I determine my trade bias for the new session and while I do look for trades
in this direction, I'm not married to the notion the market must bend to my
expected direction... I am flexible. The market is always right and I can
accept being wrong every day as long as I can be willing to change my bias
based on current price action.

If we are trading in the Pivot levels above the Central Pivot level... I
demand a lot for buys. Ideally I focus on trades that show a short term
overbought condition and price in the area at or above R1 or R2 for shorts.
This is even more powerful if the previous day’s high is slightly below the
R1 or R2 level.

In other words, I look for false breakouts above previous day’s highs at R1
and or R2 levels. I use stops and limits to get me in at the levels and use a
30 pip stop or less initially. As the trade makes the spread up and moves in
my favor, I look to reduce the risk and tighten the stop. My exits are
predetermined and can be at market if things get hairy.

I use candle formations and basic chart patterns to determine low risk trades
and targets are typically 25-30 pips before scaling out some of the position.
I generally try to hold for the average daily range in pips before exiting for
the remaining portion.

The reverse can be said for buys. I like short term oversold conditions and
price in the S1 and or S2 levels under the Central Pivot. I like buying
previous day’s low or a false break under this level given the conditions
warrant a bounce.

I like trading at the figure, the markets like round numbers and options get

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tripped at these points so they are an easy trade multiple times per month.
You can trade for a living just doing that as a method, new traders!

So here is what I will be doing this week:

I will short previous day’s highs and buy previous day's lows. If I get
stopped out and the market finds support above the previous day’s low, I
will buy. If the market finds resistance at the previous day’s high after being
penetrated I will short it.

I take two trades per day max, if I win on the first; I close shop and bank the
wins. If I lose on the first I try to capture the trade as described above... if it
loses too, I close shop. No emotions, no muss no fuss.

If a Pivot level finds itself at the Figure, say Cable 1.51, I will look to buy it
at that point if price has traded down to it and conversely for price trading
up to it. I just found the MeetPips.com site and created an account. I will do
my best to highlight trades with this as it apparently gives real time or close
to it tracking?

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TOP DOWN ANALYSIS (BIAS AND DIRECTION)

1. The Basic Top Down Analysis:

a. Study US Dollar Index for general market direction
b. Refer to the COT report and note the Commercial Trader's net
position
c. Consider the Commercial Traders as the "Smart Money" - thus
try to position like trades
d. Refer to and monitor daily the 2, 5, 10, and 30 year note line
chart overlay
e. On the Treasury Note overlay, look for failure swings to provide
clues to the future direction of the US Dollar
f. If the yields are dropping and one of the three yields fail to make
a lower low, look for US Dollar to bounce
g. If yields are rising and one of the three yields fails to make a
higher high, look for US Dollar to slide lower
h. A bullish US Dollar translates to lower foreign currencies
i. A bearish US Dollar translates to higher foreign currencies
j. Look at the monthly, weekly, and daily charts of the currency
pairs traded, noting key support and resistance levels
k. Determine the market flow on the daily, 4-hour, and 1-hour
charts via swing highs and lows
l. Try to trade in line with the long term (top down) directional bias
and when the 4-hour market flow is in sync. This will filter many
false signals and assist us in high probability trade setups
m. When there is no clear definable direction, remain flat and
sidelined until there is a clear bias
3. Market Bias
a. Bias is determined by swings, use fractals to help quickly and
visually identify swing areas on the daily, 4hr, 1hr
b. Want to have confluence of daily/4hr or 4hr/60m, or all 3 in
terms of swings
c. When swing low fractal is formed, the PA must trade below that
low fractal to the downside for market flow to be considered
short
d. If price does not trade below the low fractal formed, then price

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 action is long
e. Only consider fractals to the immediate left of the price action,
prior fractals are no longer valid
4. Higher Time Frame Analysis
a. Higher Time Frame to Lower
i. Monthly Chart > Identify key S&R levels and direction
ii. Weekly Chart > Identify key S&R levels and direction
iii. Daily Chart > Identify key S&R levels and direction
iv. 1-Hour Chart > Spend most of your time here learning
tendencies of hourly
v. 15-Min Chart > Timeframe where most trends, projections,
objectives are made. Trade management timeframe
vi. 5-Min > Enter trades at 5-min
b. Stops - If there are trades that require more than a 30 pip stop
loss, probably let that trade go and look for another opportunity
to enter
c. Respectable Swing - When looking for swings to draw Fib, etc.,
look for price moves of 40 pips or greater
d. Seasonal Tendencies
i. USD
1. Typically tops out in the middle of February and
declines into mid-March.
2. Last half of March is usually strong and then sells off
in April (and last bit of March).
3. Beginning to middle of May is a strong time for the
USD.
4. Middle of June usually marks a short-term high and
the USD declines into the end of August.
5. Rally from beginning of August to early to
mid-September.
6. After this the lines become divergent meaning signals
are less clear and no strong seasonal patterns are
blatantly present.
ii. EUR
1. The Euro typically forms a bottom in mid-February
and then moves higher into mid-march. A pull back
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 then occurs then we see another climb into the end of
April.
2. Another low in June which climbs into late July/early
August.
3. Usually a decline from early August to early
September.
4. Early to late September begins a bullish trend for
Euro through year end with a pullback in October.
iii. GBP
1. The Pound typically forms a bottom in early March
and then moves higher into the end of April.
2. Early May to mid-May is usually a bearish time.
3. A bottom typically forms again in mid-May we see a
move higher into early August.
4. Price usually peak early in August and decline into
mid-September.
5. Price peaks in early November and the price slides
into mid-to-late November.
6. Prices bottom in late November and rally into the end
of the year.

DETAILED TOP DOWN ANALYSIS RULES

1. Long Term Analysis Use USDX – General market direction

a. USDX is a measure of the value of the U.S. dollar relative to
majority of its most significant trading partners. Basket index of
6 currencies (the euro, Japanese yen, Canadian dollar, British
pound, Swedish krona and Swiss franc.)
b. Risk Off Environment - If USD Index is poised to go higher
(lack of risk tolerance), foreign currencies may see selling
pressure. Example: GBP/USD would move lower
c. Risk On Environment - If USD Index is poised to go lower (risk
tolerance), foreign currencies may see buying pressure.
Example: GBP/USD would move higher
2. COT (Commitment of Traders)
a. Consider the Commercial Traders as the “Smart Money”.

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 Examine actual positions of traders and the net change from
prior report (commercials)
b. Look for extreme net positions in the data, warn of major trend
change
c. Commercial sentiment is contrary to commercial activity (i.e.
hedging)
i. When sentiment is bearish while commercial hedges hold
large net longs, expect a rally to unfold or trend change
long
ii. When sentiment is bullish while commercial hedges hold
large net short, expect sizable decline to unfold in the
market
iii. When above is not in effect, trade the trend with Large
traders; commercials are hedgers on other side of positions,
large traders will have largest net on at extreme levels, look
for extremes between large and commercial positions for
clue of market change
4. Bond Yield Analysis – T-Note Analysis
a. Debt Interest Rates
i. Increasing interest rates, increased foreign currency value,
decreased local currency.
ii. Decreasing interest rates, decreased foreign currency value,
increased local currency.
b. Bond Yield Divergence - Monitor yields of 2, 5, 10, and 30 year
notes. Identify divergence of one or more of the yields as a chart
overlay.

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 c.As yields move higher (or lower) at some point, 1 will form a
failure sign as one yield fails to post higher highs or lower lows
on the line chart, this is signal confirmation that USDX poised to
change direction
5. Market Flow - Fractals
a. Swing Highs - Ideal setup is having two lower high candles on
each side of the Fractal High candle. Most recent Swing High is
the Pivot Point and must be breached to the upside before
Market Flow turns up.
b. Swing Lows - Ideal setup is having two higher low candles on
each side of the Fractal Low candle. Most recent Swing Low is
the Pivot Point and must be breached to the downside before
Market Flow turns down.

c. Only the most recent Swing High / Low are utilized for
determining Market Flow with old Swings disregarded
d. There is strong agreement of Market Flow if Daily, 4 Hour, and

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 1 Hour timeframes are in line. Focus on 4 Hour Market Flow for
consistency.
e. Fractals by definition can be identified from the higher time
frame on down to each lower time frame. You should be able to
find an OTE at each time frame down to the lower ones. (July 12
- Pro Traders Club 32:00)
6. Futures Contracts
a. Look at future contract closing and whether the lead month
closed higher than 2nd month (i.e. this month’s contract closed
higher than next month’s contract)
b. Backwardation– when 2nd month closes lower than lead month,
indicates that premium is no lead month and therefore there is
strong demand for the contract
c. If a huge difference in close prices, can indicate a change in price
movement…the further the price difference in the futures
contract the more price will likely change towards the future
price
7. Open Interest (OI)
a. This is the total number of longs and shorts moving into the
future’s instrument
b. If increase in OI, indicate commercials increasing net shorts,
when OI decreases, commercials reducing net shorts (i.e. price
will go up)
c. OI useful in the following case: want to see market trade in
direction, go into consolidation, then see OI drop or rise around
15% suddenly during consolidation
i. If market trades up, consolidates, and OI drop, probability
market will move up
ii. If market trades down, consolidates, and OI increases,
probability market will move down (as commercials are
adding to hedge)
d. Cannot use OI move by itself

KEY POINTS:
● Trade in line with the long term (Top Down) directional bias and when
the 4-hour Market Flow is in sync.
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● When there is no clear definable direction, we remain flat and
sidelined until there is a clear bias.

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UNDERSTANDING COMMITMENT OF TRADERS (COT)

1. Why the COT Report?

It is difficult to quantify volume traded at each price level since the
currency market is decentralized and there is no single exchange that
tracks all trading activities. In place of volume-based trading, many
traders look to the Commodity Futures Trading Commission's (CFTC)
Commitments of Traders (COT) report for more information on
positioning and volume. If used wisely, the COT data can be a pretty
strong gauge of price action. The caveat here is that examining the
data can be tricky, and the data release is delayed as the numbers are
published every Friday for the previous Tuesday's contracts, so the
information comes out three business days after the actual transactions
take place.

2. Reading the COT Report

Here is a quick list of some of the items appearing in the report and
what they mean:
● Commercial - Describes an entity involved in the production,
processing, or merchandising of a commodity, using futures
contracts primarily for hedging
● Long Report - Includes all of the information on the "short
report", along with the concentration of positions held by the
largest traders
● Open Interest - The total number of futures or options contracts
not yet offset by a transaction, by delivery or exercise
● Noncommercial (Speculators) - Traders, such as individual
traders, hedge funds and large institutions, who use futures
market for speculative purposes and meet the reportable
requirements set forth by the CFTC
● Nonreportable Positions - Long and short open-interest
positions that don't meet reportable requirements set forth by the
CFTC
● Number of Traders - The total number of traders who are
required to report positions to the CFTC
● Reportable Positions - The futures and option positions that are

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 held above specific reporting levels set by CFTC regulations
● Short Report - Shows open interest separately by reportable and
non-reportable positions
● Spreading - Measures the extent to which a non-commercial
trader holds equal long and short futures positions

Taking a look at the sample report, we see that open interest on

Tuesday June 7, 2005, was 193,707 contracts, an increase of 3,213
contracts from the previous week. Noncommercial traders or
speculators were long 22,939 contracts and short 40,710 contracts -
making them net short. Commercial traders, on the other hand, were
net long, with 19,936 more long contracts than short contracts
(125,244 - 105,308). The change in open interest was primarily caused
by an increase in commercial positions as non-commercials or
speculators reduced their net-short positions.

3. Three Primary Premises

a. Flips in market positioning may be accurate trending indicators.
b. Extreme positioning in the currency futures market has
historically been accurate in identifying important market
reversals.
c. Changes in open interest can be used to determine strength of

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 trend.

4. COT – Commitment of Traders

a. Commercials – Most informed group and provide countertrade
position for the majority of open interest in the market. These are
the “Smart Money”.
i. Standard Commercial Accumulation Phase:

ii. Commercials are the largest short sellers in the marketplace

because they are hedging their business needs.
iii. Commercials control the long term trend based on 12
month or 4 year extremes.
1. Coming from 12- mon or 4-yr extreme net short,
we're in sell program.
2. Coming from 12-mon or 4-yr extreme net long, we're
in buy program.

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 b. Large Speculators – Large firm traders, funds, and high level
private speculators who for the most part trend trade. Generally
on the right side of the market
c. Small Speculators – Majority of traders. They are the “Dumb
Money”. Consistently wrong on the side of the market.
6. Open Interest in COT Data

a. Open interest tends to increase when new money is poured into

the market, meaning that speculators are betting more
aggressively on the current market direction. Thus, an increase in
total open interest is generally supportive of the current trend,
and tends to point to a continuation of the trend, unless sentiment
changes based on an influx of new information.
b. Conversely, overall open interest tends to decrease when
speculators are pulling money out of the market, showing a
change in sentiment, especially if open interest has been rising
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 before.
c. In a steady uptrend or downtrend, open interest should (ideally)
increase. This implies that longs are in control during an uptrend,
or shorts are dominating in a downtrend. Decreasing open
interest serves as a potential warning sign that the current price
trend may be lacking real power, as no significant amount of
money has entered the market.
d. Therefore, as a general rule of thumb, rising open interest should
point to a continuation of the current price move, whether in an
uptrend or downtrend. Declining or flat open interest signals that
the trend is waning and is probably near its end.
e. When open interest rises or drops quickly, likely price moves in
the opposite direction.
f. Conventional Price Relationship:
i. Open Interest Up, price up is bullish
ii. Open Interest Up, price down is bearish
iii. Open Interest Down, price up is bearish
iv. Open Interest Down, price down is bearish

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MARKET PROFILES

1. Consolidation Range Profile

a. Consolidation Range Profile - Understand where you are in the
move that may already exist. If in bearish market environment,
during a consolidation range you can identify false breakouts to
trade against or opportunities to enter short with an OTE.
b. Establish Position During Consolidation - Periods of
consolidation are typically the opportunity to establish your
position in anticipation of where the trend will go. Look for
times candles/bars are small to enter trades.

c. Trade Entry on Opposing Candle - You want to enter trades

when the bar/candle goes against the market profile direction. If
profile is long, enter trades on a down candle.
d. ICT Preference - ICT prefers not to follow trades into new
territory as it usually tries to come back down to the range. Base
trading on known levels.
2. Breakout - Valid & False Profile
3. Trending Profile
4. Reversal Profile - The profile will form a sell day during a bullish
Asian, London and possibly NY session but fail to hold its rally and
reverse lower. It will form a buy day during a bearish Asian, London
and possibly NY session but will fail to hold its lower price slide and
reverse higher. Typically NYO, LC and late NY session will post the
reversal.
a. Swing Down
i. Swing down to a key weekly and/or daily support and

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 breakthrough before turning up and reversing.
ii. Reversal may break into new session highs before it settles
into a trading range for a new trading day.

b. Swing Up
i. Swing up to a key weekly and/or daily resistance and
breakthrough before retracing down.
ii. Reversal may break into new session lows before it settles
into a trading range for a new trading day.

5. Search & Destroy – Trending Sideways Market: Banks will look to

clear out stops to gain additional liquidity.
a. A range forms after swing low and swing high. Support and
Resistance areas are formed in the range. Market will look to
take out the longs by dipping below the established support level
of the range.

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b. Next the market will look to take out the shorts by shooting back
up above the resistance levels.

c. Dealers will then target the stops around the swing points and
shoot above previous highs to trigger the stops of the shorts.

d. Traders thinking that the previous move finally signals a buy

breakout will then be fooled as the dealers will look to take out
the stops around the previous swing low point.
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SUPPORT / RESISTANCE AREAS

1. Support (Demand): This is an area where buyers are likely going to

overwhelm sellers causing the market to go up. When a market falls
down to a prior low, it is more significant than when a market falls
down to a prior high.
2. Resistance (Supply): This is an area where sellers are likely going to
overwhelm buyers, causing the market to go down. When a market
trades up to a prior high, it is more significant than when a market
trades up a prior low.
3. Support can become resistance and resistance can become support if
prices break through these areas.

4. Confluence of S&R areas is a key concept to the trade entry. The

listings below are considered key S&R areas to consider for
confluence. There is no right or wrong confluence setup, the more
confluence you have the higher the probability the trade outcome. The
easiest way to find Key levels to anticipate reactions in the future is to
begin with the long term charts and work your way down to the lowest
timeframe you intend to trade from.
5. Natural S&R Levels
a. High / Lows based off: 12 months rolling; Quarterly; Monthly;

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Weekly; Daily; 4hr
i. Monthly Charts - Note the highs the market turned at and
the lows the market turned at. These levels are the obvious
levels that any quick glance would reveal. Do not strain
your eyes and waste time wondering if a specific level is a
Key level... it is because it is obvious. These market
turning points are obvious... do not over think them.

ii. Weekly Charts - The long term Monthly Key S&R levels
will appear on these charts as well as new Key Levels the
Monthly timeframe was not so apparent to see.

iii. Daily Charts - This is where the banks work from. All the
longer term Monthly and Weekly S&R levels are to be
plotted on this Daily time frame. The Daily chart will
present its own Key S&R levels and these need noting as
well.

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 iv. Intraday Time Periods (4-hour, 1-hour, and 15min) -
These will show excellent reaction levels to anticipate
trades to set up on far in the future and this is the key to
proper trade selection and developing patience. Note the
Key S&R levels on your individual intraday charts you like
to use.
b. Session Highs and Lows (Asia most important)
i. Asian Session sets the parameters for the following
London session
1. Begins: 7pm EST or 12am GMT
2. Ends: 4am EST or 9am GMT
3. Allow up to 1 hour before and after these times
ii. London Session sets the parameters for the following New
York session
1. Begins: 3am EST or 8am GMT
2. Ends: 12pm EST or 5pm GMT
3. Allow up to 1 hour before and after these times
iii. New York Session sets the parameters for the following
new trading session’s trading
1. Begins: 8am EST or 1pm GMT
2. Ends: 5pm EST or 10pm GMT

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 3. Allow up to 1 hour before and after these times
c. Intraday Fractal (money flow and ITL or ITH) - Use the 15
minute as a go to chart for monitoring short term swings for
lower risk entries and fine tuning stop placement on open
positions.
d. Trend Line Analysis (channels, obvious trends)
6. Implied S&R Levels
a. Fib Levels
i. Retracement
ii. Extensions
b. Pivot Points
i. Monthly Pivots
ii. Weekly Pivots
iii. Daily Pivots
7. Other S&R Levels
a. Previous Day Close/Open
b. Institutional Price Levels (IPL) - Institutional Traders may
determine timing of trades around 100 pip price levels (0.20,
0.50, 0.80, etc.)
c. Trading to a prior low or high
d. Daily ADR high/low

KEY POINTS:
● The more times a support and resistance area is “hit”, the more
significant it is.
● Only the most recent Swing High / Low are utilized for determining
Market Flow with old Swings disregarded.

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AREAS OF CONFLUENCE

1. Market Structure - As markets decline and make lower lows, each

new swing lower in price is anchored or directly reacting to another
swing higher or lower. Every swing in price has an equal counter
swing it is unfolding from and attempting to fulfill.
a. Any Short Term Long (STL) that has a higher STL on both sides
of it is considered an Intermediate Term Low (ITL). Any ITL
that has a higher ITL on both sides of it is considered a Long
Term Low (LTL).
b. Any Short Term High (STH) that has a lower STH on both sides
of it is considered an Intermediate Term High (ITH). Any ITH
that has a lower ITH on both sides of it is considered a Long
Term High (LTH).
c. Trade primarily on the side of the trend. Long on bullish and
short on bearish.

2. Swing Points - Market declines and makes lower lows; on each new
swing lower in price, the price is “anchored” or directly reacting to
another swing lower
a. Each swing in price has equal counter swing
b. PA needs to move at least 40 pips to be considered a swing (on
GU at least)
c. Market trades from short term lows (STL) to short term highs
(STH) back to new STL. At STL and STH, PA will develop
market structures
i. Intermediate term low (ITL): STL that has higher STL on
either side
ii. Intermediate term high (ITH): STH that has lower STH on

26
 both sides
iii. Long term low (ITL): ITL that has higher ITL on either
side
iv. Long term high (ITH): ITH that has lower ITH on both
sides
d. Swings: look at swings and understand every move is anchored
to previous low or high and PA becomes clear it is pivoting on a
50% basis of the previous lows and highs
i. If swing moves 50 pips, after consolidation if it continues
higher and breaches the swing high, anticipate another 50
pips move added to the low during consolidation
ii. If PA fails to trade above the previous swing high,
anticipate a decline of 50 pips from the high made on most
recent rally/consolidation
3. Session High/Low- the high/low of the 3 different sessions. Asia is
most important and the high/low usually sets the day’s S&R for
London and UK.
a. Session Time- Asia 7pm EST -9pm EST (12-4 GMT); London 3
am – 12 pm EST (9-17 GMT); NY 8am – 5pm EST (12-20
GMT)
b. When drawing the high/low of Asia, use the hard bodies and not
the wicks. Only use wicks if a candle is a strong hammer.
5. Range Expansion / Contraction - Daily ranges typically swing from
large range days to small range days and vice versa.
5. Institutional Price Level (IPL) - Price levels where commercials
usually enter the market. They are 00, .20, .50, .80 located between
every 100 pip marking (e.g. 1.0100, 1.0120, 1.0150, 1.0180)

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 a. The Figure - Term used by traders to refer to a 100 point/pip
level or even a mid point to the Figure. Example, 1.5550, 1.5450,
and 1.5350.
b. Basic Big Figure Model
i. Price can trade to and bounce/retrace from a big figure
level.
ii. Look for confluence of supporting levels, OTE, etc.
Always take the Figure in light of where we stand in the
overall market flow, structure, and trend.
c. Anticipate Sweeps - Anticipate price sweeping higher and lower
than the Figure to take out stops above and below the level.
6. Trading to Prior Low or High:
d. On Long, when market falls down to prior low, this move is
more significant than when market falls down to prior high
e. On Short, when market trades up to prior high, this move is more
significant than when market trades up to prior low
f. Fibs- Draw fibs using the swings, sweet spot is the 62-79% level
with 72% being most optimal
g. Range Cycle Calculations
i. Market cycles in large and small ranges, as daily starts to
close near prior close it is a small range
ii. For swing high ranges, count day/bars between previous
swing highs and multiply by 1.28, then count forward that
#. Should indicate where a new high will unfold
iii. For swing lows, count days between prior lows and

multiply by 1.28
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7. Pivot Points - Typically, when price is trading above central pivot, it's
time to sell. When trading below, it's time to buy. If price has not gone
below central pivot for the day, it may act as support. It may act as
resistance if price has not gone above central pivot for the day.
Daily Pivots

Use pivots as a tool to find anticipated levels to trade on in the future.

Drawn by hand or indicator from 12am EST. Central pivot acts as an
anchor for PA. PA acts like a rubber band; it moves away from central
pivot and then pulls back towards it. However, like a rubber band,
once trend takes off it will snap and fly. Used best in range trading
periods.
a. Buy Zone- Area below central pivot
b. Sell Zone- Area above central pivot
c. You can buy in a sell zone if you are trading between pivots
opposed to trend trading
8. OTE – Optimal Trade Entry - Deep Fib Retracement - The ~62 and
~79 retracement levels because they are almost at the full 100%
retracement. OTE would be roughly the 50% level between the 62 and
79 levels.

29
FIBONACCI

Traders use the Fibonacci Retracement levels as potential support and

resistance areas. Since so many traders watch these same levels and place
buy and sell orders on them to enter trades or place stops, the support and
resistance levels tend to become a self-fulfilling prophecy.

Traders use the Fibonacci Extension levels as profit taking levels. Again,
since so many traders are watching these levels to place buy and sell orders
to take profits, this tool tends to work more often than not due to
self-fulfilling expectations.

The Fibonacci tool works best when the market is trending. The idea is to
go long (or buy) on a retracement at a Fibonacci support level when the
market is trending up, and to go short (or sell) on a retracement at a
Fibonacci resistance level when the market is trending down. In order to
find these retracement levels, you have to find the recent significant Swing
Highs and Swings Lows. Then, for downtrends, click on the Swing High
and drag the cursor to the most recent Swing Low. For uptrends, do the
opposite. Click on the Swing Low and drag the cursor to the most recent
Swing High.

1. Previous Three Days - Reference the previous three days when trying
to determine points to draw Fibs at the Highs/Lows.
2. Session Highs Lows - You can use a Session High/Low when drawing
Fibs. Not just only daily highs/lows.
UPTREND

30
 DOWNTREND

1. Targeting - Using Fib Retracement

a. Upside Objective: Pull Fib from recent swing high to the swing
low. First take profit would be around the 100 level and then the
200 level.
b. Downside Objective: Pull Fib from recent swing low to the
swing high. First take profit would be around the 100 level and
then the 200 level.
c. Always look to the left of price to identify other key price levels
which may coincide with the targeted price objective.

31
2. Targeting - Using Fib Expansion
a. Upside Objective: Pull from the buy point on the swing low
towards the previous swing high. This will show the expansion
levels.
b. Downside Objective: Pull from the sell point on the swing high
towards the previous swing low. This will show the expansion
levels.

3. Prolonged Targeting - Use Fib Retracement and instead of pulling

from high to low and the high sits on the 100 level, raise the Fib tool
so that the high sits on the 50 level. You'll see the extension levels
move higher for a longer range price objective in a trending higher
market.

32
33
OTE PATTERNS

1. Standard OTE
a. OTE Pattern – Long: Don’t react to price movements,
anticipate. Anticipate and trade into key support levels. Buy as
price goes down and approaches the swing low. If bar "wicks",
you can move stops or take trades off to break even.

v. Anticipate price to go down to support level and bounce

up. The touch of the support is #1.
vi. Bounce up to a short term high at point #2. Anticipate trade
to go back down and retest support.
vii. Look to enter long in the ""Sweet Spot"" (Between 62 and
79 levels ~70.5)
viii. First take profit point would be when trade reaches point
#2 price or 20 pips.
ix. Protective stop loss is 10 pips minimum below point #1.
b. OTE Pattern – Short: Don’t chase price action. If price goes
up, don’t assume it will always move up. Anticipate and trade
short into key resistance levels. Sell as price goes up and
approaches the swing high. If bar "wicks", you can move stops
or take trades off to break even.

34
 x. Identify, anticipate price to go down to resistance level and
retraces down. The touch of the resistance is #1.
xi. Retrace down to a short term low at point #2. Anticipate
trade to go back up and retest resistance.
xii. Look to enter short in the "Sweet Spot" (Between 62 and
79 levels ~70.5)
xiii. First take profit point would be when trade reaches point
#2 price or 20 pips.
xiv. Protective stop loss is 10 pips minimum above point #1.

2. ICT Reflection Pattern - The Anti-OTE

a. Buy Example: You'll have a significant low and you anticipate
the move is to chase stops below the level. In order to
approximate the price level to enter, draw a Fib from low to high
and look to go long at the 100 level. When looking to the left, it
will appear to be an OTE Reflection.

35
 You can pull the Fib from the high to line up the previous low at
the OTE level and you'll see how the recent low at the 100 level
was spot on.
b. Sell Example: You'll have a significant high and you anticipate
the move is to chase stops above the level. In order to
approximate the price level to enter, draw a Fib from recent high
to low and look to go short at the 100 level.

You can pull the Fib from the low to line up the previous high at
the OTE level and you'll see how the recent high at the 100 level
was spot on. When looking to the left, it will appear to be an
OTE Reflection.

36
3. Hidden OTE
You can draw Fibs from other important areas of confluence like
recent highs/lows or session highs lows to find an OTE.

37
SESSION TRADING

1. Asian Session - The Asian Range determines the directional bias or

likely direction for the majority of the London & NY sessions. Where
the money is positioned in Asian dictates the profit release on the
trading day. Typically trades counter the NY session direction in a
corrective bounce.

a. Asian Kill Zone

i. 6:00pm - 10:00pm EST is typical Asian Kill Zone for
trades. Kill Zone is the time of day where you'd ideally
look for a trade.
ii. Asian Session is better for position trading in long term
positions.
b. Whiplash Short & Catapult Buy
i. Sunday Open Gap Higher from Friday's Close
ii. Wait for initial attempts to continue higher and watch SMT
for Negative or Bearish Divergence.
iii. Short near Sunday Opening and look for exit at the Friday
Closing Range.
iv. For bullish environments you can buy the SMT Positive or
Bullish Divergence inside and or at the Friday closing
range upon gap filling.
v. Take profits at 20 pips and set remaining portion to
breakeven and look for London continuation into NY
session.

38
c. Whiplash Buy & Catapult Short
i. Sunday Open Gap Lower from Friday's Close
ii. Wait for initial attempts to continue lower and watch SMT
for Positive or Bullish Divergence.
iii. Buy near Sunday Opening and look for exit at the Friday
Closing Range.
iv. For bearish environments you can short the SMT Negative
or Bearish Divergence inside and or at the Friday closing
range upon gap filling.
v. Take profits at 20 pips and set remaining portion to
breakeven and look for London continuation into NY
session.

d. Lazy Asian Session - Session doesn’t typically attempt to break

into new highs / lows.
e. Asian Session Buy - Typically trades counter the NY session
direction in a corrective bounce.
i. Asian Session rarely sees follow through on new lows.
ii. On higher timeframes like Weekly, Daily, 4 Hour, and or
60 minute charts, note Key Support Levels.
39
 iii. Anticipate OTE Buys to form in Asian Session when price
trades down into Support.
iv. Take profits at OTE levels for NY Swing and leave portion
for continuation into London.

f. Asian Session Sell - Typically trades counter the NY session

direction in a corrective bounce.
i. Asian Session rarely sees follow through on new highs.
ii. On higher timeframes like Weekly, Daily, 4 Hour, and or
60 minute charts, note Key Resistance Levels.
iii. Anticipate OTE Sells to form in Asian Session when price
trades up into Resistance.
iv. Take profits at OTE levels for NY Swing and leave portion
for continuation into London.

2. London Open
a. London Open Kill Zone Sweet Spot – 7:30am - 8:30am GMT
b. Long Opportunity - Raid Stops then Shoot for Support
i. Goal is to dial in on the Low of the day to go long from.
1. First objective after London Open is to raid Asian

40
 High stops.
2. After stops are taken out, price moves lower testing
key support levels & OTE.
3. From London Open to Close or 18:00 GMT, the
Daily Range is put in and you should not use tight
trailing stops.
ii. In Bullish conditions you may leave a portion of the trade
on beyond 18:00 GMT for short term overnight trades that
can pay well with only 10-20% of original position.

c. Short Opportunity - Raid Stops then Shoot for Resistance

i. Goal is to dial in on the High of the day to short from.
1. First objective after London Open is to raid Asian
Low stops.
2. After stops are taken out, candles move higher to test
key resistance levels & OTE.
3. From London Open to Close or 18:00 GMT, the
Daily Range is put in and you should not use tight
trailing stops.
ii. In Bearish conditions you may leave a portion of the trade
on beyond 18:00 GMT for short term overnight trades that
can pay well with only 10-20% of original position.

41
d. London Open
i. During a higher TF consolidation, we wait for the daily
range to contract. Monitor the hourly charts for
consolidation near key S/R levels. The ideal setup would
lead to range expansion which means that the previous day
is usually a short range day. Use the high/low of previous
day to measure OTE.
ii. The setup usually occurs after a daily fractal forms at a key
level. Look for confluence of Support & Resistance,
weekly pivots and projection targets. Number the bars of
the Head & Shoulders pattern from 1 to 5, 3 being the
head. In a perfect world days 3 & 4 are short range days
and I would use Bar #4 as the green light to anticipate
range expansion on days 5 & 6.
iii. The setup occurs more frequently during a higher TF range
expansion. In this environment sentiment is a major
catalyst for frequent LO setups. I use a 30 Period Williams
%R on the 4Hr chart to gauge short term sentiment.
iv. Price is relentlessly reaching for a key level. Look for
confluence of Support & Resistance, weekly pivots and
projection targets. If price retraces during LO, to retest a
S&R level, the run is usually short lived and a swift move
42
 towards our target can be expected at NYO.
v. During a smaller TF range expansion, I use the 50 period
%R on the 30Min chart as a sentiment meter. Also used to
gauge counter-trend exhaustion and key off of S/R role
reversals.
3. London Close
a. London Close Kill Zone
i. London Close at 11am EST Approx.
ii. Kill Zone is between 10am - 1pm EST.
iii. Generally the market will look to encounter profit taking
around 11am EST as London traders close their trading day
and NY traders are taking lunch.
b. Two Dominant Trade Types
i. Counter Trend Trade: Quick 15-20 pip scalp using 5-min
chart for short-term market exposure.
ii. London Close Trend Trade: Trend trade entry to get in sync
with the daily trend or long term price swing.
c. Average Daily Range
i. Identify 5, 10, and 20 day ADR to get an idea of the pips
trading in the current environment.
ii. Use 5 day ADR around NY Open which is when the
market has ""priced in"" the high or low of the day. Add
the 5 day ADR to the highest high and lowest low to ADR
highs and lows.
d. Optimal Trade Entry
i. P. Stop is placed 10 pips beyond the High or Low on Fib.
ii. First objective is 15-20 pips profit.
iii. Last profit is taken at the High or Low of the swing.
iv. The Entry Point is the 62-79% levels or between them
(~70.5)
e. London Close Counter-Trend Buy
i. Reference the US Dollar Index and determine if it has met
its 5 day Average Daily Range
ii. Determine if the pair traded has met its 5 day ADR.
iii. Prior to the London Close Kill Zone window determine
higher timeframe Weekly, Daily, 4-hour, 1-hour S&R
43
 levels.
iv. Note the previous 3 days highs and lows, Session
Highs/Lows, and Pivot Points
v. As price drops down into the ADR level and Kill Zone,
look at the 5-min lows for a bounce off of one of the levels.

vi. After the bounce, pull a Fib over the short term upswing
and consider buying the pair at OTE on the 5-min chart.
vii. Risk 10 pips under the low used for the Fib and take profits
on 15-20 pips and hold for the high of the Fib based swing.
viii. Ideally, better trades form on swings measuring at least
15%-20% of the daily range of the trading day.
f. London Close Counter-Trend Sell
i. Reference the US Dollar Index and determine if it has met
its 5 day Average Daily Range
ii. Determine if the pair traded has met its 5 day ADR.
iii. Prior to the London Close Kill Zone window determine
higher timeframe Weekly, Daily, 4-hour, 1-hour S&R
levels.
iv. Note the previous 3 days highs and lows, Session
Highs/Lows, and Pivot Points
v. As price rises up into the ADR level and Kill Zone, look at
the 5-min lows for a bounce off of one of the levels.

44
 vi. After the bounce, pull a Fib over the short term downswing
and consider selling the pair at OTE on the 5-min chart.
vii. Risk 10 pips above the high used for the Fib and take
profits on 15-20 pips and hold for the low of the Fib based
swing.
viii. Ideally, better trades form on swings measuring at least
15%-20% of the daily range of the trading day.
g. London Close Setup
i. During a higher TF consolidation, we wait for the daily
range to expand. Monitor the hourly charts for range
expansion towards key S&R levels. The ideal setup would
lead to range contraction which means that we are coming
off a LO profit release.
ii. The setup usually occurs during trend exhaustion at a key
level. Look for confluence of S&R, weekly pivots and
projection targets. LC setups are counter trend trades. Use
the 30 period Williams %R on the 4hr chart and try to stick
the weekly high/low on Bar #3.
iii. During a higher TF range expansion this setup is not
recommended.
4. Trading the New York Session
a. NY Open Kill Zone Sweet Spot – 11:00am – 13:00 GMT
b. Range Expansion - Small range or series of small range
days/bars will suggest an upcoming large trading range day/bar.
c. Close Probability
i. 80% odds of the close being at or near the high or low for

45
 the day/bar.
ii. If in a bearish scenario, ~75% odds that the open is near the
high and the close is near the low.
d. NY Open - Easiest session to trade. London high/low already in
place.
e. Ideal Entry
i. For Shorts, Sell on a move up.
ii. For Longs, buy on a move down.
f. Setting a Stop when ideal level is too many pips - When the ideal
stop is too many pips away from the 20-30 pip stop level, go to
smaller timeframes and identify a stop level on what price is
telling you on the smaller level.
g. NY Session Trades Notes:
i. Get in sync with what the higher level timeframes are
telling you. Majority of the time the trades will follow that
trend.
ii. If looking at daily timeframe and market opened near the
day’s highs and has trended lower, we'd look for more
shorts to push to a day's low. London Session created the
day's high.
iii. London Close coinciding with NY Session lunch time
allowed for a counter trade opportunity. Take profit at the
38% retracement level of the full days range.

46
PRICE ACTION

What is Price Action?

Very basically, Price Action is everything that traders are doing and how
they are behaving placed onto a chart for others to analyze. Price Action is
everything that price is doing and has done on a Forex pair or trading
instrument for a trader to see on a chart. All price represents on a chart is
what traders have done and how they have behaved given a certain
situation. For example price gets to a support area and price bounces higher.
This is traders buying up at a level in the market where they think support
is.

Another example of price action at work on a chart is a Pin Bar. Price gets
to a certain level in the market before rejecting that level and snapping back
the other way. On a chart we see a Pin Bar but that Pin Bar was made up of
traders all around the world buying or selling at the same area and rejecting
higher or lower prices. This is a method that has been around for a long
time and will be around for a long time to come. Unlike other rubbish
indicators or black box systems Price Action trading does not stop working
when the market dynamics change.

How can we use Price Action to profit?

Traders and humans are very habitual and will do the same given the same
circumstances. As traders we can begin to recognize patterns that form on
the chart. These patterns will tend to repeat themselves and have the same
outcomes. No two trades will ever be the same and no outcomes will ever
match a previous trade’s, but by perfecting these high probability price
action patterns we can begin to place trades that over time will give us an
edge in the market!

Traders can learn and perfect these trading patterns and begin to implement
strategies that will over time give them an edge on the market. An edge is
simply something that gives a trader a better chance than 50/50 of placing a
winning trade.

47
48
HIGH PROBABILITY PRICE PATTERNS

1. The Doji - Form when open and close are virtually equal. Doji alone
is neutral. Bullish or bearish bias is based on preceding price action
and future confirmation. Best used as confirmation of anticipated
action, changes in direction.

2. The Hammer aka Pinbar - Form when price moves significantly

lower after the open, but rallies to close well above the intraday low.
Works in the opposite direction (bullish and bearish). Ideally like
seeing these patterns at OTE or at key Support & Resistance Levels.

3. The Tweezer Low - Looks like consecutive Bullish Pinbars. Indicates

that price held twice at the exact same level. Sellers not able to push
price lower. The longer the wicks the better. Preference is to see the
pattern at 4-Hour and 1-Hour charts at higher time frame S&R levels.
If accompanies SMT Divergence, look to trade maximum risk
exposure!

4. The Tweezer High - Looks like consecutive Bearish Pinbars.

49
 Indicates that price held twice at the exact same level. Buyers not able
to push price higher. The longer the wicks the better. Preference is to
see the pattern at 4-Hour and 1-Hour charts at higher time frame S&R
levels. If accompanies SMT Divergence, look to trade maximum risk
exposure!

5. Railroad Tracks - Two candlesticks with smaller wicks for

highs/lows where the preceding candle's body matches that of the
current candle's body in the opposite direction. Look for these at key
levels to signify an engineered reversal. Very strong pattern.

6. Head & Shoulders Top Formation - Selling Pattern

a. Typically occurs at intermediate or long-term high.
b. Price objective from highest high of head to the lows at the
neckline. Measure from high to the neckline and price objective
would be that distance extending below the neckline.
c. Selling Pattern.

50
7. Three Indians Climax Reversal Pattern
a. Three progressively higher price slope highs reaching a top near
an area of resistance. This would be a sell pattern as we'd
reasonably expect price to fall. Look for OTE at a lower time
frame.
b. Selling Pattern.

8. Triangles & How ICT Trades Them

a. Note a key resistance level where you find consolidation and
support/resistance. Plot a general trend-line from low point to its
intersection with the key resistance level. Measure from low up
to the resistance level.
b. Use the widest portion of the triangle and add that pip range to
the low point dips along the trend line. Not each level as it

51
 progresses and these levels would be where you'd expect take
profit points in the future during a buy program.
9. Inverted Head & Shoulders Bottom Formation
a. Typically occurs at intermediate or long-term low.
b. Price objective from lowest low of inverted head to the highs at
the inverted neckline. Measure from low to the inverted neckline
and price objective would be that distance extending above from
the inverted neckline.
c. Buying Pattern
10. Bull Flag Continuation Pattern - Look for the flag pole which would
be a sharp price run up followed by descending range of price between
channel. Price objective would be done by getting the pip range from
low to high and adding that distance to the lowest low of the flag and
to the breakout of the flag. There would be a reasonable expectation
that price will appreciate to meet those levels.

11. Bear Flag Continuation Pattern - Look for the flag pole which
would be a sharp price run down followed by ascending price
range/channel. Price objective would be done by getting the pip range
from high to low and adding that distance to the highest high of the
flag and to the breakout lower of the flag. There would be a
reasonable expectation that price will depreciate to meet those levels.

52
12. Coil Expansion Pattern
a. Draw trend-line of lower highs and trend-line of higher low to a
point where they look to intersect. As price approaches the
intersection, we'd expect price to range higher or lower from that
point.
b. Use higher time frame analysis to get in sync and anticipate
which direction price will due to directional bias. If pattern
occurs at key support level, anticipate price to range higher.
c. Measure range from the low to the touch point of the upper trend
line of lower highs above it. Add the range to the upper or lower
trend line to identify a price objective once price begins to range
out of the coil.

53
13. Turtle Soup Reversal Pattern - Turtle Soup is when price takes out
stops beyond an old high or low and immediately reverses direction
a. Identify the lowest low and highest high in the last 20
periods/candlesticks.
b. Go long at the time price goes below the lowest low in the
previous 20 periods. This is done on the notion that the price
move below is a false break.
c. Go short at the time price goes above the highest high in the
previous 20 periods. This is done on the notion that the price
move above is a false break.
14. Riptide Reversal - Any significant high or low broken/rejected over
any period, number of candles should move in the opposite direction
after broken.
15. Outside Day with Down Close
a. Pattern where second candle has a higher high and lower low
than the period before with a down close. Bullish scenario when
it occurs at an oversold period using Williams %R.
b. Get long at the following bar using 30 and 70 levels for the
indicator to determine overbought/oversold and 10 period.

54
16. Inside Day - Pattern when the second candle has a higher low and a
lower high than the previous day. Upon the close of the candle, it
signifies a trending day or large range expansion day to follow.

55
TRADING SWINGS

1. The Judas Swing

a. Judas Swing - An engineered price swing meant to lead
reactionary traders into the wrong direction. Typically a false
rally that appears initially to emotional traders as the next big run
in price. In the market, traders that follow this swing find
themselves trapped on the wrong side and pay the price.

b.When Judas Swing Forms - Essentially is a stop raid that many

times trades into:
i. Key S&R Level
ii. Previous High or Low
iii. Counter-Swing to Form OTE
iv. Raid the Previous Week High
v. Raid the Previous Week Low
vi. Raid the Previous Session Stops
vii. Raiding Session Stops
1. If trading London Open, look for Asian stops to be
raided.
2. If trading NY Session, look for London Open stops to
be raided.
2. Market Swing Points
a. 10:00 GMT @ 5-min Chart
i. Standard Judas Swing
1. Use opening price on midnight candle, draw open
line into the day.

56
 2. If Bearish, look for shorts at points above the line.
b. Judas Swing Once Every 24-Hour
i. The Swing should happen at least once in a 24-hour
session.
ii. Swing should be in the opposite direction of what the trend
for the day has been.
c. Confluence of S&R - Use 15 pip buffer when looking for
confluence of S&R
d. Trade After Swing High / Low
i. If market is trading lower, then look for a sell after a recent
swing high.
ii. If market is trading higher, then look for a buy after a
recent swing low.
e. Two Trends in a Day
i. Morning Trend that is the market open to around 11am and
consolidates to around the NY lunch period.
ii. Around 1pm - 2pm, things heat up to fulfill the PM trend
for the remaining portion of the daily range.

57
ICT TRADING CONCEPTS

1. The Trader's Trinity - Inner Circle Trader's Exclusive

Overbought - Oversold & S&R Concept - Day 11
a. Trader’s Trinity
i. Upper Portion - Overbought zone. Look for shorts.
ii. Middle of the Range - Fair value / Equilibrium
iii. Lower Portion - Oversold Zone. Look for buys.
b. Monthly Trinity
i. Look for periods where price has broken out of the Trinity
Range to the low and high using the daily chart as
sectioned off by Monthly Trinity.
ii. Reference the 3 previous periods in the time frame to look
back for relevant levels/information.
c. Trinity Levels
i. Upper boundary price levels would signify an overbought
area and we should look for opportunities to sell.
ii. Lower boundary price levels would signify an oversold
area and we should look for opportunities to buy.
iii. Always see if this is in agreement or against higher time
frame analysis.
iv. Price will typically come back to the fair value zones in the
center area of the Traders Trinity. Try not to trade in the
Fair Value Zone.

58
 d. Broken Trinity
i. Whenever seeing a broken Trinity, prepare the likelihood
of a major high or low forming in the marketplace.
ii. When price breaks out above the Trinity, use Fib by taking
high of Trinity and bring down to the low. When breaking
to the low, use Fib by taking low and bring down to the
low. The two levels to focus on are the 162 and 200
extension. These two levels will usually have a reaction or
correction to be used to get targets.
iii. Look for correction at the breakout high/low point.
iv. 162 and 200 Extension - These levels should hold true as
targets until they are reached. If price does not reach these
levels and pulls away, you may think that the levels are not
valid any longer but they tend to still hold true in the longer
time frame.
v. Previous Week Traders Trinity - Same premise as Monthly
Trinity. Identify areas where price breaks out of the Trinity
to the Low or High. Use Fib to project 162 and 200
extension levels to estimate where price may go.
2. Trading Smart Money Correlation Concepts - Day 12: Smart
money actions get revealed through cracks in the market. They leave
fingerprints as they switch the tide of the current price swing. When
the correlation materializes at predetermined support & resistance
59
levels we can be confident a reaction will unfold.
a. USDX SMT Divergence: Given inverse correlation of pairs,
when price on one has lower lows, it is expected that the other
should reach higher highs. When this does not occur, we have
SMT Divergence. This is suggestive of major
accumulation/consolidation in advance of a major move in the
opposite direction.

b. Correlated Pair SMT Bullish Divergence: Should occur at and

confirm predetermined Support Levels. If one pair fails to make
a lower low while the other succeeds, then expect both pairs to
shoot higher at a key support level.
i. When looking at Support plays or "buys" - consider the
pair that fails to make the lower low respectively. Premise
behind this: The pair that fails to drop lower, it is being
bought and hence, not willing to go lower... this is
essentially "Demand in Operation"... anticipate Higher
prices.
ii. EUR/USD is making higher lows while GBP/USD is
making lower lows > Buy EUR/USD

c. Correlated Pair SMT Bearish Divergence: Should occur at

and confirm predetermined Resistance Levels. If one pair fails to

60
 make a higher high while the other succeeds, then expect both
pairs to shoot lower at a key support level.
i. When looking at Resistance plays or "sells" - consider the
pair that fails to make the higher highs respectively.
Premise behind this: The pair that fails to rally higher, it is
being sold and hence, not willing to go higher... this is
essentially "Supply in Operation"... anticipate Lower
prices.
ii. EUR/USD is making higher highs while GBP/USD is
making lower highs > Sell GBP/USD

d. Real Example of Correlated Pair SMT Divergence (GBP/USD

vs. EUR/USD): GBP made a higher high while EUR failed to
make higher highs. This signaled a reversal for both pairs.

3. Trading Accumulation / Distribution

a. Opportunities to trade Accumulation / Distribution indicator
occur when price diverges with the direction of the indicator and
is supported by the overbought/oversold Williams %R (10
period) indicator.
b. Bullish / Long Setup
i. Price makes a lower low.

61
 ii. Accum / Distr for same period makes a higher low
iii. Williams %R is in oversold zone
iv. Given time and price action, find opportunity to go long

c. Bearish / Short Setup

i. Price makes a higher high
ii. Accum / Dist for same period makes a lower high
iii. Williams %R is in overbought zone
iv. Given time and price action, find opportunity to go short

62
4. MACD Divergence
a. Type 1 Bullish Divergence - Price meets a lower low while the
MACD reaches a higher low. Draw Fib from the swing low
where the divergence was established to the recent swing high
and look for OTE to enter long.

63
 b. Type 1 Bearish Divergence - Price meets a higher high while
the MACD reaches a lower high. Draw Fib from the swing high
where the divergence was established to the recent swing low
and look for OTE to go short.

5. ICT Grail (Market Review 7/15 ~32min)

The ICT Grail forms at the OTE when there is a Type 2 Trend
Following Divergence of price vs. the Stochastic Oscillator. Oscillator
setting is %K @ 10, %D @ 3, Slowing @ 3.
a. Buy Setup - Price finds a higher low at the OTE level. For the
same period, the indicator finds a lower or equal low at the same
time.

64
 b. Sell Setup - Price finds a lower high at the OTE level. For the
same period, the indicator finds a higher or equal high at the
same time.

6. ICT Stinger (Day 15 Notes ~20:30)

Type 1 and 2 Combined (STINGER) Over a period, price
moves with the high time frame trend but diverges with the
indicator. This combined with a smaller period where price
moves against trend and diverges with indicator. Very powerful
indication of price taking off.
a. Type 1 - Lower low in price but a higher low in the

65
 stochastic (yellow lines in chart)
b. Type 2 - Trend following divergence a higher low in price
but lower reading in the stochastic (green lines in chart)
c. Most powerful when this occurs at key support and
resistance levels and OTE.

7. Interest Rate Yield Triad (Market Review 7/29) 26:15

a. US 10 year yield vs two correlated country’s 10 year bond
yields.
b. Rising yields means rallying price (rising) as the higher
yields draw attraction to the currency.
c. Look for divergence among the correlated currencies and
the US bond yield
d. The yield that was unwilling to go lower vs. the other two
yields, identifies the currency which will be attempting to
go higher.
e. When one currency goes higher, it should affect the other
correlated currency in the same manner.

66
67
ICT TRADING METHODS

1. 20 Pip Per Day Scalping Method – Day 19

a. Keys to Profitable Scalps
i. Understand Price Action Theory
ii. Firm Grasp of Key S&R Levels
iii. Trade Higher Timeframe Bias
iv. Take Profits Routinely & Often
v. Trade One or Two Pairs at Max
b. Basic Scalping Buy Method
i. Identify a key support level
ii. Anticipate a Judas Swing Lower
iii. Look for OTE around key support level to go long
iv. Risk 20 pips
v. Look for SMT Divergence to anticipate low of day
vi. Take first profit @ 20 pips
vii. Enter on Double Tap
viii. Let second portion run and hold for Daily Range
ix. Look for Time of Day Objective around NYO, LOC, and
18:00 GMT.

c. Enter on Double Tap

i. Assuming total risk on trade is 2% of Equity, Take 50% of
position off @ ~20-30 pips for 1% gain (Scalp). Remaining
1% portion will be held for the daily range. Look for time

68
 of day objective and keep protective stop outside the daily
range.
ii. Protective stop at Breakeven after taking profit on first half
of trade.
d. Basic Scalping Sell Method
i. Identify a key resistance level
ii. Anticipate a Judas Swing Higher
iii. Look for OTE around key resistance level to go short
iv. Risk 20 pips
v. Look for SMT Divergence to anticipate high of day
vi. Take first profit @ 20 pips
vii. Enter on Double Tap
viii. Let second portion run and hold for Daily Range
ix. Look for Time of Day Objective around NYO, LOC, and
18:00 GMT

2. Short Term Intraday Method – Day 20

a. Method
i. Plot EMA(40) and EMA(18)
ii. Buy Signals - Look for periods where the 18 period EMA
is above the 40 periods EMA. Buy program when you see
the widening of the areas between EMA
iii. Sell Signals - Look for periods where the 18 period EMA
is below the 40 periods EMA. Sell program when you see
the widening of the areas between EMA
iv. Once price makes a fractal, swing low during Buy

69
 Program, look for open after the fractal is formed and go
long once price attempts to move down (Judas Swing)
v. Take 70% off when you can and let the remaining run.
b. Higher Time Frame Stops - As price moves higher, bring stop to
~10 pips below the next fractal low once two near fractals form.

3. Swing Trading Method – Day 21

a. ICT Swing Trade Setup
i. Quarterly Shift in Flows
ii. Old Highs & Lows
iii. SMT Divergence on Daily
iv. Market Structure
v. Swing Point Analysis
vi. Optimal Trade Entry Strategies
vii. Swing Projection for Profit Objectives

b. Higher Timeframe Resistance - Price will swing higher into a

key resistance and the short will be traded on the 4-hour and/or
1-hour chart for setup. The entry will be taken on the 5-min chart
Turtle Soup Sell and/or OTE Sell Pattern. When daily Fractal
swing high forms, look for Judas rallies to short into for new
entry points.
70
4. How To Capture Explosive FOREX Profits - Day 25
a. Weekly Highs/Lows - The Weekly High or Low forms 80% of
the time between Sunday's Open & Tuesday's London Open.
When it fails, it will likely form between Tuesday's London
Open and Wednesday's London Open.

b. Week's Opening Price

i. Identify the Opening Price for the Week and keep it noted
on the chart through the trading week. If we're bullish on
market conditions, we look for an opportunity to go long
when the low for the week is formed (likely to form before
Tuesday's London Open). The same is true for shorts.
ii. If it has not formed by Tuesday's London Open, then very
likely to occur between Tuesday's London Open and
Wednesday's London Open.

71
INSIDERS TRADING METHODS

1. The Four Market Groups

a. Domestic & Foreign Bond and or Interest Rates
i. 30 Year Treasuries
ii. 10 Year Treasuries
iii. 5 Year Treasuries
iv. 2 Year Treasuries
b. Stocks and Equities
i. Dow Stocks
ii. S&P 500 Stocks
iii. NASDAQ Stocks, etc...
c. Commodities and Futures
i. CRB Index
ii. Agricultures
iii. Financials
d. Currencies
i. The US Dollar
ii. Foreign Currencies
2. Inflationary Environment Inter-market Relationships
a. A POSITIVE relationship between bonds and stocks
b. An INVERSE relationship between interest rates and stocks
c. Bonds usually change direction BEFORE stocks
d. An INVERSE relationship between commodities and bonds
e. A POSITIVE relationship between commodities and interest
rates
f. A POSITIVE relationship between stocks and commodities
g. Commodities usually change direction AFTER stocks.
h. An INVERSE relationship between the US Dollar and
commodities
3. Deflationary Environment Inter-market Relationships
a. An INVERSE relationship between bonds and stocks
b. A POSITIVE relationship between interest rates and stocks
c. An INVERSE relationship between commodities and bonds
d. A POSITIVE relationship between commodities and interest

72
 rates
e. A POSITIVE relationship between stocks and commodities
f. An INVERSE relationship between the US Dollar and
commodities

4. Big Events in the market (i.e. EU crisis) can throw certain

relationships out of whack.

73
PROFESSIONALS USE OF INDICATORS

1. Revisiting the Market Profiles

a. Consolidation Range Profile
b. Breakout - Valid & False Profile
c. Trending Profile
d. Reversal Profile
2. Overbought & Oversold
a. Focus on Oversold in Market Profiles that suggest prices are
bullish is Optimal
b. Overbought in Market Profiles that suggest Prices are Bearish is
Optimal.
c. Stoch(14,3,3) that says we're oversold. We'd expect to see a price
rise. Other examples of overbought and we'd expect to see a
price fall.

3. False Signals - Overbought signals were no longer suggestive of price

movements because price traded off of a higher time frame support
level.

74
4. Price Divergence - Classic use with indicators is to look for
Divergence between price and the indicator. Price reaches new low but
indicator does not reach a new low. This is a divergence between price
and indicator.

a. Type 1 Divergence (Reversal in Nature) - Price moves

opposite the higher time frame trend and diverges with indicator.
Price moves opposite the higher time frame trend and diverges
with indicator because it is a sign of a reversal by nature.
i. Bullish Type 1 Divergence: Price finds a lower low while
the indicator finds a higher high for the same period

75
 ii. Bearish Type 1 Divergence: Price finds a high high while
the indicator finds a lower low for the same period.

b. Type 2 Trend Following Divergence - Divergence from

indicator when price follows the trend but diverges with
indicator.
i. Bullish Type 2 Divergence: Price finds a higher low while
the indicator finds a lower low for the same period
ii. Bearish Type 2 Divergence: Price finds a lower high
while the indicator finds a higher high for the same period.

76
77
MISC VIDEO NOTES

1. 3.1 Interest Rate Overlay Tutorial

a. Stockcharts.com EOD Yields
b. Free Charts > PerfChart >
$UST2Y,$UST5Y,$UST10Y,$UST30Y
2. 3.2 Interest Rate Overlay Tutorial
a. SMT - Smart Money Tool
b. EUR / USD vs. GBP / USD correlation. Divergence may
indicate favor in one vs. the other.
3. 4.3 Swing Projection Application & Fib Configuration - 1.28
Projection
a. Daily High / Lows - 90% chance that the daily high/low is
established in the first 4 hours of trading after NY midnight.
b. Range Expansion / Contraction Cycle - You can typically expect
big ranges on timeframes after small ranges and vice versus.
c. Open @ Hi vs. Close at Low?
i. When high/close is closer in proximity after wide ranges as
price goes up, it's more likely/suggestive you're at a top.
ii. When low/close is closer in proximity after wide ranges as
price goes down, it's more likely/suggestive you're at a
bottom
d. 1.28 Projection - Measure swing low to swing low, count the
days. Multiple that number by 1.28 (round down) and add that
number of bars to the swing high in the middle of the two swing
lows. This should bring you to the next swing high.
4. Day 14 - The Power of Three - Accumulation - Profit Release -
Distribution
a. 3 Major Market Cycles
i. Accumulation Phase - Smart Money accumulating longs or
shorts
ii. Profit Release Phase - Range expansion where profit is
permitted
iii. Distribution Phase - Smart Money distributes long or shorts
b. The Open - Smart money distributes above the open and
accumulates below the open.
78
c. 3 Bar Pattern
i. Sell @ Swing High - A high with two lower highs on each
side. Look to go short on the first bar after the close of the
3rd lower high bar. Look for this action at key resistance
levels.
ii. Buy @ Swing Low - A low with two higher lows on each
side. Look to go long on the first bar after the close of the
3rd higher low bar. Look for this action at key support
levels.
d. Price Targets
i. NY Open - 12:00 GMT (7AM EST)
ii. London Close - 15:00 GMT (12AM EST)
iii. And - 18:00 GMT
e. Williams %R (10 period) - If it goes oversold, look at the next
day's trading. If we open/start ranging at the Asian range and it
trades down, there is an 80% likelihood that it will be a tradable
day to go long. Look for an exit around NY Open or London
Close.
f. Anticipating False Rally - If you don't get the high made in
Asian Session, it'll form in London. If it does not form in
London, you'll see trading range and Judas swing in NY Session.
g. Trading Judas Swing After Fractal High/Low (55:00 – 1:00:04)

79
TRADE RULES
1. Risk
a. Risk per trade will be limited to 1.5% or less per trade or an
overall open risk of 1.5% or less
b. Value per pip- determined by risk: risk per trade / SL amount =
$/pip
i. e.g. 5k account, 2% risk = $100 risk, SL is 25 pips ::
100/25= $4/pip or 4 mini lots
2. Trade Entry
c. Time: Look for entries near the open/close of a session; optimal
entries are London open, NY open, London close
d. Want bias confluence on daily/4hr or 4hr/1hr or all 3…regardless
trade with bias direction of 4hr
e. Optimal Trade Entry (OTE)
i. Draw fib from swing of the day or yesterday high/low to
today’s high/low (can use the 4hr fractals as quick showing
of the swing)
ii. Look for trade direction in bias of 4hr
iii. Want to see confluence of key S&R areas (listed in 5)
between the 62-79% fib zone
iv. Double check pivot trade zone
f. Dealer’s Spread – Include the dealer spread when determining
the price to enter a trade to ensure it is covered?
g. Trade Into Opposing Direction – Enter trades on PA that is
opposite the anticipated price direction. Enter long on down
candles. Enter short on up candles.
3. Take Profit Goals
h. Using the fib to draw OTE, 127 and 168% are good TP zones
i. Using the fib to draw OTE, move the fib so that the 50% is at the
top of the swing (if long) and use 100% as TP
j. Any confluence of major S&R areas that might exist, not
necessarily a TP area but something to monitor
4. Exit- Monitor trade risk until trade is closed
k. 30-50% of trade taken off at 30 pips into move, remainder at
ultimate TP
80
 l. Exit trade if trade bias changes during trade or analysis suggest
trade is no longer valid
5. Stop Loss
m. SL- place 10-20 pips below/above swing used for Fib
n. Move SL to BE when PA trades above/below the previous swing
high/low used to draw the Fib
o. Do not use trail stops, only manual stops

RISK MANAGEMENT

1. Handling Losses & Inevitable Drawdowns - Day 13

a. 2% Risk - Never risk more than 2% per trade.
b. Cutting Risk - At first loss, cut 2% risk per trade to 1% risk per
trade. If consecutive losses continue, cut risk again to 0.5% per
trade.
c. Walking Back
i. Stay at the decreased risk tier until you made back 50% of
the previous risk level drawdown.
ii. If you lost at 2%, stay at 1% level till you've made back
half of the 2% tier loss.
iii. If you lost at 1%, stay at 0.5% level till you've made back
half of the 1% tier loss.

81
TRADING INSIDE THE RANGE

1. Monthly Range Overview

a. Determine Monthly Range Market Structure
b. Identify Monthly Range Swings/Turning Points
c. Highlight Key S&R Levels
d. Trade in Direction of the Primary
2. Weekly Range Overview
a. Determine Weekly Range Market Structure
b. Identify Weekly Range Swings/Turning Points
c. Highlight Key S&R Levels
d. Trade in Direction of the Primary
e. Look for New OTE Reversals - Anticipate
3. Daily Range Overview
a. Determine Current Range Market Structure
b. Identify Daily Range Swings/Turning Points
c. Highlight Key S&R Levels Monthly - Weekly
d. Trade in Direction of the Swing Point
e. Look for New OTE Reversals - Anticipate
4. Asian Range
a. Note the Initial Range High & Low
b. Narrow Focus to Higher Market Trend
c. Note Key S&R Levels Old Highs & Lows
d. Trade the Direction of Daily Swing Point
e. Anticipate London Stop Rade - Fade It!
5. ADR (Average Daily Range)
a. Align Trade Expectation to 5-Day ADR
b. Once Trade Entry - Stalk ADR Objectives
c. Blend Time of Day & Price Theory
d. Anticipate Profit Objectives Near ADR
e. Expect 15:00 - 16:00 GMT and ADR Convergences &
Other Technicals to Confirm Profit Taking Objectives
6. Entry Concept
a. Focus on Optimal Setups
b. Apply Power of Three & Range Expansion

82
 c. If Bullish, anticipate Banks to SELL first
d. If Bearish, anticipate Banks to Rally up first
e. Explain the Raids of Old Swings & Expect Patterns to
Form to Confirm Entries (High Probability Trading Patterns
Video)
7. Profit Objective
a. If ADR is 100 pips, take profit at 80 pips
b. Always look to Scale Out of Trades
c. ADR does NOT have to be fulfilled
d. Develop Professional Mindset in Targeting (Preservation of
Capital is goal #`1)
e. Leave Greed out of the Process
8. Professional Order Placement
a. Try Keeping Entry & Exit to Limit Orders
b. Market Orders are Last Ditch Protection
c. Do Not try to get the best Entry Price
d. Do Not try to exit at the very High or Low
e. Always Factor the Spread Plus 2-3 pips

ICT TERMS AND ABBREVIATIONS

Certain words and phrases, below, are italicized to indicate that they are
defined separately, elsewhere in the Glossary. In the following definitions,
two abbreviations are used frequently: i.e., meaning "that is"; and e.g.,
meaning "for example".

A
accumulation --- smart money buying either (1) to enter long positions, or
(2) to cover short positions, at or near a swing low (i.e., smart money
"buying low")
AD (or A/D) --- accumulation and/or distribution
ADR --- (see average daily range)
A-KZ --- (see Asian Kill Zone)
anticipatory trade analysis phase --- top-down analysis, phase 2: seasonal
tendencies, SMT divergences (yields, USDX, etc.), COT report, and key S/R

83
levels
Asian Kill Zone --- nominally 8am-12pm Tokyo time (this time period may
be expanded at the discretion of the trader); this is one of 4 kill zones
Asian range --- this term may refer to (1) the 9am-2pm Tokyo time period,
(2) the H-L price range within that period, or (3) price action within that
H-L range
Asian session --- 9am-7pm Tokyo time (a low-volume trading session,
typically characterized by price consolidation within a restricted range)
ATR --- (see average true range)
AU --- AUD/USD pair
Aussie --- nickname of the AUD/USD pair
average daily range (ADR) --- the average of the most recent daily H-L
ranges; typically, the last 5 daily H-L ranges are averaged to yield the ADR
for day 6
average true range (ATR) --- daily ATR is similar to average daily range
(ADR), except that ATR accounts for price gaps (e.g., Sunday gaps), but
ADR does not

B
banks (or "big banks") --- top-tier investment banks, participants in the
interbank network, engaged in high-volume currency trading --- see list on
page 4
bazooka (or ICT bazooka) --- Michael sometimes refers to a standard type 2
oscillator divergence as a "bazooka", to contrast it with the more powerful
stinger
BE --- (see break-even)
bear flag --- a fairly tight, fairly short-duration consolidation pattern formed
at the bottom of a sharp down-move, marking a pause in the down-move
bias --- (see directional bias)
big figure --- (see figure)
break-even --- the price at which closing a position (either manually, or by
being stopped-out) results in zero profit and zero loss
BST --- British Summer Time (BST=GMT+1), the time zone in the U.K.
and Ireland between March and October --- see London time
bull flag --- a fairly tight, fairly short-duration consolidation pattern formed
at the top of a sharp up-move, marking a pause in the up-move
84
buy program --- a trending market profile in which the directional bias is up
(bullish), and trades in the direction of the trend are long (buys)
buy zone --- given either (1) a HTF bullish bias, or (2) a ranging market, a
buy zone is the price range below the pivot (P), or below the TT fair-value
zone

C
cable --- one of the nicknames of the GBP/USD pair
central bank --- the entity responsible for overseeing the monetary system of
a nation, or group of nations --- see list on page 4
CFTC --- (see Commodity Futures Trading Commission)
Chris Lori --- athlete, fund manager, Forex trader, and teacher/mentor ---
often mentioned positively by Michael
City of London (or The City, or The Square Mile) --- the financial district in
London
classic Asian session buy signal --- a signal to go long after (1) a late NY
session price decline, and (2) an Asian session price bounce off a key
support level
classic Asian session sell signal --- a signal to go short after (1) a late NY
session price rise, and (2) an Asian session price bounce off a key resistance
level
coil expansion pattern --- a consolidation pattern (the coil) which is
followed by a break-out (the expansion) whose extent depends on the
dimensions of the coil
commercials --- large (futures/options) hedgers whose position sizes require
reporting to the CFTC; their net (aggregate) position appears in the COT
report
Commitment of Traders (report) --- weekly CFTC report on positions held
by 3 classes of traders in individual futures and options contracts (incl.
currencies)
Commodity Futures Trading Commission --- U.S. regulator of commodity
futures and spot Forex; the CFTC compiles and publishes the COT report
confluence --- occurrence of two or more significant technical levels (e.g., a
pivot level and an OTE) at the same (or nearly the same) price on a chart
consolidation --- a time period (consolidation period) in which price moves
in a narrow range (consolidation range), typically bounded by short-term
85
S/R levels
correlated pairs --- two currency pairs whose prices move roughly in tandem
(example: EUR/USD and GBP/USD; another example: AUD/USD and
NZD/USD)
COT (or COT report) --- (see Commitment of Traders report)
CRB Index --- Commodity Research Bureau Index of 19 commodities
(agriculturals, metals, oil & gas); the Index is used as one element of
inter-market analysis

D
day trade (or intraday trade) --- a trade in which the entry and exit are
expected to occur within the same trading day, and the profit target is
30-100 pips
DD --- (see drawdown)
demo --- a practice platform, practice account, or practice trade, etc.
directional bias --- current direction of price movement (as determined on
HTF's), deemed to be the trade-able trend (see buy program, and sell
program)
distribution --- smart money selling either (1) to enter short positions, or (2)
to liquidate long positions, at or near a swing high (i.e., smart money
"selling high")
doji --- a candlestick having a very small real body (or no real body), with
upper and/or lower wicks of any length; it often indicates a swing high or
swing low
double-tap --- given an OTE retracement from a SH (or SL), a double-tap
involves taking 1st profit at the SH (or SL), and 2nd profit at a higher
profit-target
drawdown --- a measure of account depletion due to accumulated losses
dumb money --- (see street money)

E
EDT --- Eastern Daylight Time (EDT=GMT-4), the time zone in the eastern
U.S. and Canada between March and November --- see New York time
EJ --- EUR/JPY pair
EMA --- (see exponential moving average)
equity management --- (see risk management)
86
EST --- Eastern Standard Time (EST=GMT-5), the time zone in the eastern
U.S. and Canada between November and March --- see New York time
ET --- Eastern Time in the U.S. and Canada (New York time) --- ET is either
EST or EDT, depending on time of year
EU --- EUR/USD pair
euro --- proper name of the European Union single currency; also, one of
the nicknames of the EUR/USD pair
exponential moving average --- a moving average of data from n-number of
periods, weighted exponentially to give greater weight to more recent data

F
fair value --- the median price in a previous H-L price range (e.g., a previous
Daily price range, or a Trader's Trinity price range); see no-man's land
fib --- shorthand for Fibonacci tool, or Fibonacci level; (note: in common
usage, Fibonacci is sometimes capitalized)
Fibonacci extension --- continuation of a Fibonacci retracement scale,
beyond the 100% retracement level, typically to 127.2%, 161.8%, 200%,
etc.
Fibonacci retracement --- a scale for measuring retracements as percentages
of a price range, typically 0%, 23.6%, 38.2%, 50%, 61.8%, 76.4% and
100%
Fibonacci tool --- a price-measuring tool which divides a price range into
percentages (see Fibonacci retracement, and Fibonacci extension)
fiber --- one of the nicknames of the EUR/USD pair
fig --- shorthand for figure
figure --- price of the form x.xx00 (also called fig, big figure, full figure, and
00's)
fractal --- (def.1) one of the many price patterns which repeat themselves in
all markets, on all time frames from 1-minute (or lower) to 1-Month (or
higher)
fractal --- (def.2) a pattern of 5 consecutive candles, in which the center
candle has the highest high of the 5 candles, or the lowest low of the 5
candles
fractal high --- in a 5-candle fractal pattern, if the center candle has the
highest high of the 5 candles, then that high is a fractal high
fractal low --- in a 5-candle fractal pattern, if the center candle has the
87
lowest low of the 5 candles, then that low is a fractal low
fundamental analysis --- analysis of macro-economic factors (interest rates,
inflation, GDP, unemployment, etc.) which influence long-term currency
trends

G
general market analysis phase --- top-down analysis, phase 1: analysis of
interest rates, USDX, Treasuries, stock indices, CRB Index, and gold and oil
GJ --- GBP/JPY pair
GLGT --- Good Luck and Good Trading (signature used by Michael, and
others)
GMT --- Greenwich Mean Time, the world's commercial reference time
zone, to which all other time zones are related by "offsets" (e.g., GMT-1,
GMT+1, etc.)
GMT pivots --- see London pivots
GU --- GBP/USD pair

H
H&S (or HS, or H-S, or H/S) --- (see head-and-shoulders top)
H1, H4, D1, etc. --- chart time-frames (1-hour chart, 4-hour chart, Daily
chart, etc.); expanded list: m1, m5, m15, m30, H1, H2, H3, H4, H6, H8, D1,
W1, M1
hammer --- a candlestick (of either color) having a short real body, a very
short upper wick, and a long lower wick; it typically occurs following a
down-move
hanging man --- a candlestick identical to a hammer, except that it typically
occurs following an up-move
head-and-shoulders top --- an ITH (the "head") preceded by, and followed
by, a lower ITH; or a LTH (the "head") preceded by, and followed by, a
lower LTH
HH --- higher high
hidden divergence --- trend-following divergence (see type 2 divergence)
hidden OTE --- in a strong downtrend, a price move from one STL to the
next STL may result in a "hidden" OTE retracement; (or, in a strong uptrend,
use STH's)
high probability price patterns --- selected candlestick patterns and chart
88
patterns which reliably signal price direction --- see list on page 4
higher time frame --- for most day traders and short-term traders, HTF
means a time frame higher than 1-hour (e.g., 4-hour, Daily, Weekly, or
Monthly)
HL --- higher low
H-L --- high-low (or high minus low) referring to a price range (e.g., Daily
H-L range, Weekly H-L range, etc.)
Holy Grail (or ICT grail, or ICT holy grail) --- an OTE (either buy or sell)
confirmed by a type 2 (hidden, trend-following) oscillator divergence
HTF --- (see higher time frame)

I
ICT --- InnerCircleTrader (may refer to Michael Huddleston, his
methodology, his tools, his forum threads, or his videos)
Indi --- (see indicator)
indicator --- a derivative of recent price data, computed by algorithm, which
purports to reveal certain trends or tendencies regarding future prices
inside day --- a daily candle with a lower high, and a higher low, than the
previous daily candle; usually it signals a trend continuation
institutional level (or institutional price level) --- price of the form x.xx20
(the 20 level), or x.xx80 (the 80 level)
interbank network --- a group of top-tier banks, electronically linked
through EBS or Reuters for currency trading among themselves and with
major clients
inter-market analysis --- analysis of correlations between interest rates,
equities, commodities and currencies during conditions of inflation or
deflation
intermediate-term high --- a fractal high preceded by, and followed by, a
lower fractal high
intermediate-term low --- a fractal low preceded by, and followed by, a
higher fractal low
inverted head and shoulders bottom --- an ITL (the "head") preceded by, and
followed by, a higher ITL; or a LTL preceded by, and followed by, a higher
LTL
ITH --- (see intermediate-term high)
ITL --- (see intermediate-term low)
89
J
JST --- Japanese Standard Time (JST=GMT+9), the time zone, year-round,
throughout Japan --- see Tokyo time
Judas swing --- a false price move (by smart money) to run stops and lure
street money to the wrong side of the market, ahead of the real (opposite)
move

K
Ken Roberts --- trading and lifestyle guru, author, and lecturer; Michael
credits Ken Roberts with the 62%-79% retracement concept (which Michael
calls OTE)
key S/R (or KSR) --- (see key support and resistance levels)
key support and resistance levels --- S/R levels identified on HTF charts
(H4, D1, W1), and then transferred to the LTF charts being analyzed or
traded
kill zone --- one of 4 high-probability time periods (typically 2 hours each)
in which to find trade set-ups using ICT tools; see A-KZ, LO-KZ, NYO-KZ,
and LC-KZ
Kiwi --- nickname of the NZD/USD pair
KZ --- (see kill zone)

L
large range day --- a day whose H-L price range (the day's high minus the
day's low) substantially exceeds the day's ADR
large specs --- large (futures/options) speculators whose position sizes
require reporting to the CFTC; their net (aggregate) position appears in the
COT report
Larry Williams --- well-known millionaire commodity trader, author, and
lecturer; Michael refers to Larry Williams as one of his mentors
LC --- (see London Close)
LC-KZ --- (see London Close Kill Zone)
LH --- lower high
LL --- lower low
L/NY overlap --- London/New York overlap (both markets open) 1pm-5pm
London time, 8am-noon, New York time; see London session and New York
90
session
LO --- (see London Open)
LO-KZ --- (see London Open Kill Zone)
London Close --- 5pm London time, the end of the normal business day in
London
London Close Kill Zone --- nominally 4pm-6pm London time (this time
period may be expanded at the discretion of the trader); this is one of 4 kill
zones
London Open --- 8am London time, the beginning of the normal business
day in London
London Open Kill Zone --- nominally 7am-9am London time (this time
period may be expanded at the discretion of the trader); this is one of 4 kill
zones
London pivots --- daily pivot levels based on midnight London time as the
start of each Forex trading day
London session --- 8am-5pm London time; the final 4 hours of this session
(the L/NY overlap) are typically the highest-volume period of the trading
day
London time --- GMT (October-March), or BST=GMT+1 (March-October)
--- Note: Michael always refers to London time as GMT, regardless of time
of year
long-term high --- an intermediate-term high preceded by, and followed by,
a lower intermediate-term high
long-term low --- an intermediate-term low preceded by, and followed by, a
higher intermediate-term low
loonie --- nickname of the USD/CAD pair
lower time frame --- for most day traders and short-term traders, LTF means
a time frame lower than 1-hour (e.g., 30-minute, 15-minute, or 5-minute)
LTF --- (see lower time frame)
LTH --- (see long-term high)
LTL --- (see long-term low)

M
MA (or SMA) --- (see moving average)
MACD --- a momentum indicator which tracks the difference between two
EMA's, compares that difference to a third EMA, and shows the result as a
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histogram
major market analysis (MMA) --- (see inter-market analysis)
market flow --- market direction (trend) indicated by the most recent break
of a fractal high or low on a HTF chart (H1, H4, D1); compare to market
structure
market-maker --- a top-tier bank, a member of the interbank network (where
the currency market is literally "made"); see banks, and smart money
market-maker profile ---
market profile --- one of 4 current market environments: consolidation
range profile, breakout (real or false) profile, trending profile, and reversal
profile
market structure ---an analysis method based on patterns of STH's, STL's,
ITH's, ITL's, LTH's and LTL's on higher time frame (HTF) charts (H4, D1,
and W1)
MF --- (see market flow)
Michael --- Michael Huddleston (screen-name InnerCircleTrader), veteran
American stock/commodity/currency trader, contributor/teacher on the
Babypips site
mid fig --- (see mid figure)
mid figure --- price of the form x.xx50 (the 50 level)
Millionaire Traders' Guild --- Michael's thread on the "Show Me the Money
- Daytrading" forum, emphasizing a plan-based approach to using the ICT
tools
MM --- def.1 (see market-maker)
MM --- def.2 (see money management)
MMA --- major market analysis (see inter-market analysis)
MMP --- (see market-maker profile)
momentum indicator --- a technical indicator (e.g., MACD) which measures
the strength of a prevailing trend; it can be used instead of a price oscillator
money management --- the proper use (in planning a trade) of position size,
stop-loss, and R/R (reward/risk) ratio in order to limit losses and preserve
capital
moving average (or simple moving average) --- the average of the data from
the most recent n-number of periods, not weighted (compare to EMA)
MR1, MR2, etc. --- intermediate resistance levels (computed from
pivot-point formulas) --- see ICT Pivot-Point Formulas on page 4
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MS --- (see market structure)
MS1, MS2, etc. --- intermediate support levels (computed from pivot-point
formulas) --- see ICT Pivot-Point Formulas on page 4
MT4 --- a retail trading platform, licensed worldwide to brokers, popular for
its MQL4 scripting language allowing creation of EA's, custom indicators,
and scripts
MTG --- (see Millionaire Traders' Guild)

N
negatively correlated pairs --- two currency pairs whose prices move
(roughly) in opposite directions (example: EUR/USD and USD/CHF)
nested OTE --- an OTE within an OTE --- a smaller (LTF) price swing with
an OTE retracement, nested within a larger (HTF) price swing with its
(larger) OTE
New York Open --- 8am New York time, the beginning of the normal
business day in New York
New York Open Kill Zone --- nominally 7am-9am New York time (this time
period may be expanded at the discretion of the trader); this is one of 4 kill
zones
New York pivots --- daily pivot levels based on midnight New York time as
the start of each Forex trading day
New York session --- 8am-5pm New York time; the first 4 hours of this
session (the L/NY overlap) are typically the highest-volume period of the
trading day
New York time --- EST=GMT-5 (Nov-March), or EDT=GMT-4
(March-Nov) --- Note: Michael always refers to New York time as EST,
regardless of time of year
news --- shorthand for scheduled economic data releases, whose release
dates/times are known in advance, and whose metrics are forecast in
advance
NFP --- (see Non-Farm Payroll report)
Nick Van Nice --- originator of the concept of hidden divergence (which
Michael refers to as type 2 divergence)
no man's land --- on a Trader's Trinity chart, no-man's land is the middle
25% of the (previous) H-L price range; the center of this zone is the
fair-value price
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Non-Farm Payroll (report) --- U.S. employment report (often a market
mover), released on the first Friday of each month by the U.S. Department
of Labor
NYO --- (see New York Open)
NYO-KZ --- (see New York Open Kill Zone)

O
OB/OS --- overbought or oversold (this term usually refers to readings
generated by a price oscillator)
OHLC (or O-H-L-C) --- Open, High, Low and Close (the 4 prices which are
displayed graphically on each candle, or each price bar)
OI --- (see open interest)
One-shot-one-kill --- ICT sniper tactic: Lie in wait (for a set-up), take aim
(at the set-up), pull the trigger (enter the trade), nail the target (collect pips)
open interest --- the number of open contracts (those not yet offset or
delivered) in a specific commodity/delivery month; one of the metrics in a
COT report
open trade reaction phase --- top-down analysis, phase 4: market failure to
move, price rejection at S/R, news releases, global events, and/or trader
issues
optimal trade entry --- entry zone between the 62% and 79% retracement
levels --- note that 62% and 79% are not standard fib retracement levels
OTE --- (see optimal trade entry)
oscillator --- a technical indicator (e.g., RSI, stochastics, or W%-R) which
plots price as a percentage (from 0% to 100%) of some variable
outside day with a down close --- an engulfing Daily candle with a lower
close; if confirmed by an oversold indicator, it signals a reversal to the
upside
overbought --- a price which appears to have moved too far counter to a
bearish bias (as indicated by pivots, Trader's Trinity, or any of various
oscillators)
oversold --- a price which appears to have moved too far counter to a bullish
bias (as indicated by pivots, Trader's Trinity, or any of various oscillators)

P
P (or PP, or CP) --- pivot, or pivot-point, or central pivot (computed from
94
pivot-point formulas) --- see ICT Pivot-Point Formulas on page 4
PA --- (see price action)
Pac-man --- slang term referring to smart money "gobbling up" stops (like
Pac-Man gobbling up pac-dots in the 1980's arcade game)
PB&J --- peanut butter and jelly
Perf Chart --- Performance Chart (StockCharts.com), tracks %-change in
price over a selected time period, starting from a 0% base-line --- see list on
page 4
pin --- shorthand for pin-bar
pin-bar --- a candlestick, of either color, having a long upper or lower wick
(or both), signaling market "hesitation" in the direction of the long wick
position trade --- a trade in which the entry and exit are expected to occur
weeks, months (or even years) apart, and the profit target is 1,000 pips or
more
pound --- informal name of the U.K. currency (proper name: pound
sterling); also, one of the nicknames of the GBP/USD pair
Power of Three --- entry immediately after the close of a three-bar high (or
low) at a key resistance (or support) level on a Daily chart (advanced
technique)
price action --- a method of analyzing and/or trading any market, based only
on price patterns and simple price measuring tools, but excluding indicators
profit release phase --- in a typical accumulation/distribution scenario, this
is the price range between the accumulation phase and the distribution
phase
Pro Traders' Club --- one of Michael's threads on the "Newbie Island"
forum, devoted to daily reviews and ICT tool application
PTC --- (see Pro Traders' Club)
pull a fib --- use a Fibonacci tool to delineate a price swing (from initial
price to final price) showing Fibonacci retracement levels and Fibonacci
extension levels

R
R1, R2, R3, etc. --- resistance levels (computed from pivot-point formulas)
--- see ICT Pivot-Point Formulas on page 4
range contraction --- the tendency for a series of large range days to be
followed by one or more small range days
95
range expansion --- the tendency for a series of small range days to be
followed by one or more large range days
reflection pattern --- a pattern in which price retraces beyond the OTE zone,
the 100% fib retracement, and the 127% fib extension, creating a "reverse"
OTE
regular divergence --- trend-reversal divergence (see type 1 divergence)
reversal profile --- an early-day price swing (up or down), taking out a key
Daily or Weekly S/R level, followed by a reversal and a larger late-day price
swing
rip-tide reversal --- similar to a turtle soup reversal, but based on a false
breakout of a SH or SL which formed more than 20 periods prior
risk management (or equity management) --- the combination of money
management plus trade management
risk off --- widespread trader attitude (or sentiment) in which high-risk
positions are abandoned in favor of lower-risk-lower-return safe-haven
positions
risk on --- widespread trader attitude (or sentiment) in which low-risk
safe-haven positions are abandoned in favor of higher-risk-higher-return
positions
RR (or R/R, or R:R) --- risk/reward ratio (e.g., SL/TP), or reward/risk ratio
(e.g., TP/SL), depending on the order in which the numbers are stated
RR tracks --- railroad tracks (refers to two, long, side-by-side candle bodies,
with opposite colors, denoting an engineered price reversal)
RSI --- (relative strength index) one of 3 price oscillators (RSI, stochastics,
and W%-R) included in the ICT tool-set; use one of these (or MACD)

S
S1, S2, S3, etc. --- support levels (computed from pivot-point formulas) ---
see ICT Pivot-Point Formulas on page 4
scalp (or scalping trade) --- a trade in which the entry and exit are expected
to occur seconds or minutes apart, and the profit target is 30 pips or less
search and destroy --- a smart money tactic (which savvy retail traders can
imitate) of systematically gunning stops above and below a consolidation
range
seasonal tendencies --- tendencies of many markets (currencies, equities,
commodities, bonds) to make LTH's or LTL's at specific times of year
96
sell program --- a trending market profile in which the directional bias is
down (bearish), and trades in the direction of the trend are short (sells)
sell zone --- given either (1) a HTF bearish bias, or (2) a ranging market, a
sell zone is the price range above the pivot (P), or above the TT fair-value
zone
session --- daily period of high-volume Forex trading in a particular market,
generally 8am-5pm local time (see Asian session for an exception to this
rule)
SH --- (see swing high)
shorter time frame --- a time frame shorter than the time frame being
discussed; "shorter time frame" is not necessarily synonymous with lower
time frame (LTF)
short-term high --- a fractal high which has not evolved into an ITH or an
LTH
short-term low --- a fractal low which has not evolved into an ITL or an LTL
short-term trade --- a trade in which the entry and exit are expected to occur
within 2 to 5 trading days, and the profit target is 100-300 pips
SL --- def.1 (see stop-loss)
SL --- def.2 (see swing low)
SM --- (see smart money)
SMA --- simple moving average (see moving average)
small range day --- a day whose H-L price range (the day's high minus the
day's low) falls substantially short of the day's ADR
smart money --- large banks and certain other institutions which have
information on resting (stop and limit) orders -- information not available to
street money
Smart Money Tool --- an overlay of line charts of 2 (or 3) correlated
instruments, on which short-term price divergences are readily seen --- see
list on page 4
SMT --- (see Smart Money Tool)
SMT div --- (see SMT divergence)
SMT divergence --- deviation from the normal positive or negative
correlation between 2 instruments on an SMT chart, signaling a potential
price move
sniper --- a trader "lying in wait" for a trade set-up to come into range
S/R (or S-R, or S&R) --- (see support and resistance)
97
sterling --- informal name of the U.K. currency (proper name: pound
sterling); also, one of the nicknames of the GBP/USD pair
STF --- (see shorter time frame)
STH --- (see short-term high)
STL --- (see short-term low)
stinger --- in an up move, a bullish type 1 divergence nested inside a bullish
type 2 divergence; in a down move, nested bearish type 1 and type 2
divergences
stoch --- (see stochastic)
stochastic --- one of 3 price oscillators (stochastics, RSI, and W%-R)
included in the ICT tool-set; use one of these (or MACD)
stop hunt --- a price move engineered by smart money in order to trigger
stop and limit orders resting above or below the current market price
stop-loss --- the price level at which a resting order has been placed to close
a position at a loss; or, the anticipated loss, in pips, when that price is hit
stops --- loose term referring to buy-stop or buy-limit orders resting above
the current market, or sell-stop or sell-limit orders resting below the current
market
street money --- market participants other than the smart money; street
money is not privy to the inside information on which smart money trades
Sunday gap --- price difference between Friday's close and Sunday's open,
representing price movement over the weekend, while the retail market was
closed
support and resistance --- significant levels below and above the current
market where price has reacted in the past, and might do so again in the
future
sweet spot --- the center of the target area for an OTE, at the 70.5%
retracement level (which is midway between the 62% and 79% retracement
levels)
swing high --- any of the following: a three-bar high, a standard 5-bar
fractal high, an intermediate-term high (ITH), or a long-term high (LTH)
swing low --- any of the following: a three-bar low, a standard 5-bar fractal
low, an intermediate-term low (ITL), or a long-term low (LTL)
swing point --- when price breaks a swing high (or swing low) for the first
time, that swing high (or swing low) becomes a swing point
swing trade --- a trade in which the entry and exit are expected to occur a
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week or more (up to several weeks) apart, and the profit target is 300-1,000
pips
Swissy --- nickname of the USD/CHF pair

T
TA (or T/A) --- (see technical analysis)
take-profit --- the price level at which a resting order has been placed to
close a position with a profit; or, the anticipated profit, in pips, when that
price is hit
technical analysis --- market analysis based on price action, with or without
technical indicators, but not utilizing fundamental analysis
TF --- (see time frame)
three-bar high --- a truncated fractal high, containing 3 bars (instead of 5),
with the center bar having the highest high of the 3 bars
three-bar low --- a truncated fractal low, containing 3 bars (instead of 5),
with the center bar having the lowest low of the 3 bars
three Indians climax reversal --- a series of 3 closely-spaced impulse price
moves (higher or lower), followed by a price reversal
time and price theory --- the use of (1) higher time frames (H4, D1, W1, and
M1) to find key S/R, MS, and MF, and (2) confluences (on LTF's) to time
trades
time frame --- usually refers to a chart time frame, such as a 5-minute chart,
a 4-hour chart, etc.
time zone --- a designated geographical area whose time-of-day is
determined in relation to GMT-time (or UTC-time); example: Moscow time
= MSK = GMT+4
Tokyo session --- 8am-5pm Tokyo time --- compare to Asian Session, which
includes the Tokyo session plus the (GMT+8) Singapore and Hong Kong
sessions
Tokyo time --- JST=GMT+9 (year-round) --- Japan does not observe
daylight saving time
top-down analysis --- (1) general market analysis phase, (2) anticipatory
trade analysis phase, (3) trade execution phase, and (4) open trade reaction
phase
top-down approach --- (see top-down analysis)
TP --- (see take-profit)
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TPDS --- (see Trading Plan Development Series)
trade execution phase --- top-down analysis, phase 3: market tone, risk on or
off, buy or sell program, HTF S/R levels, MS, MF, time and price, and trade
entry
trade management --- management of open trades to (1) reduce trade-risk to
zero and protect profits on profitable trades; or (2) cut losses on losing
trades
Trader's Trinity --- chart dividing a Daily, Weekly or Monthly H-L range
into zones: lower 25% (oversold), middle 25% (fair value), and upper 25%
(overbought)
trading plan --- written rules specifying the pairs, sessions, times of day,
etc., to be traded; and the analysis methods, money management, etc., to be
used
Trading Plan Development Series --- a video series detailing the use of risk
management, plus fundamental, inter-market, technical, and top-down
analysis
trend line --- an upward-sloping line below a series of progressively higher
lows; or a downward-sloping line above a series of progressively lower
highs
triangle --- a consolidation pattern bounded by upper and lower lines which
converge at a point somewhere to the right of the current candle
TT --- (see Trader's Trinity)
turtle soup --- a smart money trade placed counter (opposite) to a typical
"turtle trade", anticipating a failure of the turtle trade (i.e., the turtles get
"eaten")
tweezers --- refers to two, long, side-by-side, upper (or lower) candle wicks,
with opposite colors, typically at a swing high (or swing low)
type 1 divergence --- price and oscillator diverge, signaling a probable trend
reversal --- bullish: price-LL, oscillator-HL --- bearish: price-HH,
oscillator-LH
type 2 divergence --- price and oscillator diverge, signaling a probable trend
continuation --- bullish: price-HL, oscillator-LL --- bearish: price-LH,
oscillator-HH
TZ --- (see time zone)

U
100
UJ --- USD/JPY pair
U.S. Dollar Index --- the USD measured against a weighted basket of 6
currencies: EUR 57.6%, JPY 13.6%, GBP 11.9%, CAD 9.1%, SEK 4.2%,
and CHF 3.6%
USDX --- (see U.S. Dollar Index)
USDX triad divergence ---
UTC --- Coordinated Universal Time; the world's scientific reference time
zone; (for our purposes, the following are equivalent: UTC = UT1 = Zulu
time = GMT)

W
W%-R (or Williams%-R, or Williams%-Range) --- one of 3 price oscillators
(W%-R, stochastics, and RSI;) included in the ICT tool-set; use one of these
(or MACD)
Wall Street --- the financial district in Lower Manhattan (New York)
What Every New & Or Aspiring Forex Trader...Still Wants To Know ---
Michael's "sticky" thread on the "Newbie Island" forum; starting point for
ICT instruction
whiplash long and catapult short --- trading long, then short, when Sunday's
open gaps lower; the whiplash fills the gap; the catapult extends the
down-move
whiplash short and catapult long --- trading short, then long, when Sunday's
open gaps higher; the whiplash fills the gap; the catapult extends the
up-move

Y
yen --- proper name of the Japanese currency; also, nickname of the
USD/JPY pair

Z
Z-configuration --- a fractal (def.1) price consolidation pattern, seen on all
time frames, of which the Z-day is the most often observed
Z-day --- a day of price consolidation within a defined range, clearly
bounded by S/R levels; Z-days are often followed by search and destroy
stop hunts

101
Numerical Items
00's --- x.xx00 price level (see figure)
1.28 projection --- this rule says that, if the 2 most recent SL's were n days
apart, then the next SH will form (approx.) 1.28 x n days after the most
recent SH
18 EMA --- 18-period EMA; together, the 18 EMA and the 40 EMA
comprise a moving-average-crossover indicator, useful for day-trading and
short-term trading
20 level --- x.xx20 price level (see institutional level)
40 EMA --- 40-period EMA; (see 18 EMA, above, for an explanation of its
use)
50 level --- x.xx50 price level (see mid figure)
62 level --- shorthand for the 62% retracement level (not a standard fib
retracement level)
70 level --- shorthand for the 70.5% retracement level, which is the OTE
sweet spot (not a standard fib retracement level)
79 level --- shorthand for the 79% retracement level (not a standard fib
retracement level)
80 level --- x.xx80 price level (see institutional level)

Perf Chart abbreviations (a partial list)

$USD --- U.S. dollar index (see USDX in the alphabetical listing)
$XEU --- the euro priced in U.S. dollars (PHLX pricing, not spot Forex
pricing)
$XBP --- the British pound priced in U.S. dollars (PHLX pricing, not spot
Forex pricing)
$XJY --- 100 yen priced in U.S. dollars (PHLX pricing, not spot Forex
pricing) --- note: this chart is the inverse of a standard USD/JPY Forex chart

$UST1M --- U.S. Treasury 1-month treasury bill

$UST1Y --- U.S. Treasury 1-year treasury bill
$UST2Y --- U.S. Treasury 2-year treasury note
$UST5Y --- U.S. Treasury 5-year treasury note
$UST10Y --- U.S. Treasury 10-year treasury note
$UST30Y --- U.S. Treasury 30-year treasury bond
102