Reference appendix
A modern price-action framework that reads the chart as a hunt for liquidity: where orders are resting, how price goes and takes them, and the footprints the move leaves behind. Each concept is drawn as a small annotated chart.
SMC reads the chart as a story about liquidity. Price reaches for resting orders, takes them in a sweep, then moves away with force — and that forceful move leaves footprints behind in the form of fair value gaps and order blocks, while breaking structure as it goes. The trade, in this framework, is taken when price comes back to one of those footprints, in the discount half of the range for a long or the premium half for a short, ideally during a killzone. Almost every concept on this page is one step in that sequence.
How a trend is defined, and how it is declared broken — the SMC versions of higher highs and lower lows.
Inside a trend, price closing beyond the most recent swing point in the same direction — a new higher high in an uptrend, a new lower low in a downtrend. It confirms the trend is still intact. SMC traders insist on a candle close beyond the level, not just a wick poking through it.
The first break of structure against the trend: in an uptrend, price closing below the most recent higher low. It is the earliest structural sign that control may be changing hands — a warning that the trend is in question, not yet a confirmed reversal.
ICT's term for a change of character that arrives with force — typically straight after a liquidity sweep, on large fast candles that leave fair value gaps behind. The extra conditions are meant to separate a genuine reversal from an ordinary pullback that happens to dip through a level.
A burst of large-bodied candles moving in one direction with little overlap between them. It is the signature SMC traders look for as evidence of heavy participation — and it is what creates fair value gaps, the shaded bands it leaves behind in the figure.
Where the resting orders sit, and the moves that go and take them. SMC treats liquidity as the thing price is always travelling toward.
The cluster of buy orders resting above swing highs — stop-losses on short positions and breakout buy orders. Equal highs, where several candles top out at the same price, are treated as an especially obvious pool. SMC reads price as being drawn toward these levels.
The mirror image: stop-losses on long positions and breakout sell orders resting below swing lows. Equal lows mark the pools traders consider most likely to be targeted next.
Price runs through a prior high or low just far enough to trigger the orders resting there, then closes back inside the range — the long wick through the level is the tell. Read as fuel being collected before a move the other way. Classical analysis calls the same thing a false breakout or a stop run.
A minor, obvious swing point that draws early traders in before price reaches the level that actually matters. When price takes out the inducement and carries on into a deeper zone before reversing, those early entries become the liquidity for the real move.
A false move shortly after a session opens, in the opposite direction to the day's eventual trend — a drop before the rally, or a pop before the sell-off. Named for the betrayal: it traps traders who follow the first move of the session.
The footprints a forceful move leaves behind, and the price levels traders wait for it to return to.
Three candles where the high of the first sits below the low of the third, leaving a band that price skipped through on a strong up-candle. Traders treat that band as likely support if price returns to it. Unlike an ordinary gap, it can form without any gap between one close and the next open — it is the wicks that fail to overlap.
The mirror image: the low of the first candle sits above the high of the third, leaving an unfilled band behind a strong down-candle. Watched as likely resistance when price rallies back into it.
The last down-candle before a strong rally that breaks structure. The theory is that this is where large buyers built their position, so that candle's range becomes a zone to buy from on the first return. Many traders only count it as valid if the rally also left a fair value gap or broke structure.
The last up-candle before a strong drop that breaks structure — the zone where large sellers are assumed to have distributed. Watched as resistance on the first rally back into it.
An order block that failed. When price breaks straight through a zone that was supposed to hold — usually after sweeping liquidity on the far side — the zone flips its role: failed resistance becomes support, failed support becomes resistance.
Take any trading range and mark its 50% level, called equilibrium. The upper half is premium, the lower half is discount. The rule that follows is simple: look to buy in discount and sell in premium, and never chase an entry in the wrong half of the range.
ICT's preferred entry: a pullback into the 62% to 79% retracement of the move just made, with 70.5% as the sweet spot. It is a narrower, deeper slice of the discount zone — entering there means paying well below the midpoint of the move you are joining.
When the framework expects the real moves of the day to happen.
The windows ICT teaches as the most active times to trade, in New York time: roughly 8 p.m. to midnight for Asia, 2 to 5 a.m. for the London open, 7 to 10 a.m. for the New York open, and 10 a.m. to noon for the London close. Sources shift these by about an hour around daylight-saving changes.
ICT's name for a three-phase pattern within a day or session: accumulation (a quiet range), manipulation (a false move out of it that sweeps liquidity) and distribution (the real, extended move the other way). It is the sweep-then-displacement sequence stretched across a whole session.
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