Market Core Structure

A Higher High forms when price creates a peak that exceeds the previous peak. This is the fundamental sign of an uptrend. Each new HH confirms bullish market structure.

A Higher Low occurs when a pullback ends at a level higher than the previous pullback low. Combined with HH, it confirms a strong uptrend with ascending market structure.

A Lower High forms when a rally fails to reach the previous high. This signals weakening bullish momentum and is typically seen in downtrends or during distribution phases.

A Lower Low occurs when price breaks below the previous swing low. Combined with LH, it confirms bearish market structure. Smart money is distributing and selling positions.

A Break of Structure occurs when price closes beyond a significant swing high (bullish BOS) or swing low (bearish BOS). It signals continuation of the current trend and a possible entry.

Change of Character is the FIRST sign of a potential trend reversal. A CHoCH after a series of HH/HL (breaking a HL) or LL/LH (breaking a LH) signals the trend may be shifting.

Market Structure Shift is a CHoCH that occurs after a liquidity sweep. Price first grabs stops above a swing high or below a swing low, THEN shifts structure — confirming the reversal.

A Market Structure Break is a decisive, impulsive break of a key swing level — often leaving a Fair Value Gap. MSB signals strong institutional intent and confirms directional bias.

Inducement is a small liquidity grab designed to trick retail traders into poor entries or stop-outs before the real move. Often seen just before an Order Block is reached.

Equilibrium is the 50% midpoint (0.5 Fibonacci) of any price range or swing. ICT considers price at EQ as fairly valued — Premium zones are above EQ, Discount zones are below EQ.

Buy Side Liquidity rests above swing highs and equal highs as stop losses from short sellers and breakout buy orders. Smart money targets these areas to fill sell orders at premium prices.

Sell Side Liquidity pools below swing lows and equal lows. These are stop losses from long traders and breakout sell orders. Institutions sweep these to accumulate long positions.

Equal Highs form when price tests the same resistance level multiple times. These are high-probability BSL targets — banks will sweep above EQH to grab stops before reversing lower.

Equal Lows are SSL magnets. When you see price testing the same support multiple times, expect a sweep below EQL to grab stop losses before a strong bullish reversal.

A Liquidity Sweep occurs when price briefly penetrates beyond a key level to trigger stops, then rapidly reverses. The sweep wick is the tell. This is where institutional orders are filled.

A Liquidity Raid is a more aggressive form of liquidity sweep where price makes a clear raid of a stop cluster, often with a displacement candle on the return, confirming the manipulation.

A Stop Hunt is the deliberate move by smart money to trigger retail stop losses placed at obvious levels. After the hunt, price reverses sharply, leaving retail traders stopped out at the worst price.

Internal Range Liquidity refers to price imbalances (FVGs, OBs) WITHIN the current price range. Price often rebalances these internal levels before seeking External Range Liquidity.

External Range Liquidity is the liquidity resting OUTSIDE the current range — the swing highs (BSL) and swing lows (SSL). This is the ultimate draw on liquidity when IRL is consumed.

A Fair Value Gap is a 3-candle formation where the middle candle moves so strongly that candles 1 and 3 don't overlap. This gap is considered imbalanced and price often returns to fill it.

An Inverse Fair Value Gap forms when a bullish FVG is fully filled (mitigated) and then acts as resistance on the next visit, or when a bearish FVG is filled and acts as support.

An Order Block is the last opposing candle before a strong impulse move. Bullish OB: last red candle before a big move up. Bearish OB: last green candle before a big move down. Banks reenter here.

A Breaker Block is a FAILED Order Block. When price takes out the high/low of an OB, it flips polarity — a bullish OB becomes a bearish Breaker Block, and vice versa. Trade the flip.

A Mitigation Block is the candle where price returns to mitigate (partially fill) orders left at a reversal point. Smart money often leaves partial orders that are filled on a pullback.

A Rejection Block is formed by a candle with a significant wick showing strong rejection from a level. The wick range represents the rejection zone where institutional orders were placed.

A Volume Gap is an area with thin volume and sparse price action between two levels. Price tends to move quickly through VGs but reacts strongly at VG boundaries.

A Balanced Price Range occurs when a Bullish FVG and Bearish FVG overlap. The overlapping zone represents a highly balanced price area — strong confluence for entries and reversals.

The New Week Opening Gap is the gap between Friday's close and Sunday's open in Forex. This gap acts as a magnet — price frequently returns to fill NWOG before making its weekly move.

The New Day Opening Gap is the gap between the previous day's close and the current day's open. Like the NWOG, this acts as a magnet and provides high-probability intraday reference points.

Consequent Encroachment is the 50% midpoint of a Fair Value Gap. Price often reacts at the CE level, especially when targeting a FVG — the CE provides a precise entry target within the gap.

Optimal Trade Entry is the ICT entry model using Fibonacci 0.62–0.79 (62%–79%) retracement of a swing. Wait for price to pull back into this zone after a BOS/CHoCH for high-probability entries.

The Premium/Discount Array divides any swing into two halves at the 50% EQ. In an uptrend, ONLY buy in Discount (below 50%). In a downtrend, ONLY sell in Premium (above 50%). Never buy in premium.

Power of 3 (AMD) describes the 3-phase candle delivery: Accumulation (building orders), Manipulation (false spike to grab liquidity), Distribution (actual direction). Seen on all timeframes.

SMT Divergence is when two correlated pairs (e.g. EUR/USD and GBP/USD) diverge — one makes a new high/low while the other fails to. This signals weakness and a high-probability reversal setup.

The Judas Swing is the false move at the start of a session (especially London/NY open) designed to trap traders in the wrong direction. The real move is the reversal AFTER the Judas Swing completes.

Kill Zones are the specific time windows when institutional order flow is highest and setups are most reliable. The main Kill Zones are London Open (02-05 EST) and New York Open (07-10 EST).

London Open (08:00 GMT / 03:00 EST) marks the start of the highest-volume forex session. The Judas Swing typically occurs here, followed by the real directional move that sets the daily range.

New York Open (13:00 GMT / 08:00 EST) creates the highest-volume Kill Zone. The NY session often reverses or extends the London move. The overlap of both sessions creates explosive volatility.

London Close (17:00 GMT) marks when European institutional flow stops. Trending moves often stall or fade at London Close. Many ICT traders take profits or avoid new entries after this time.

The Asian Session Range is the high/low bracket formed during the Asian session (00:00–08:00 GMT). London often sweeps one side (BSL or SSL) of the ASR to grab liquidity before the real move.

Draw On Liquidity is the next destination where price is being delivered — a swing high/low, EQH/EQL, FVG, OB, or opening gap. ICT teaches that price is ALWAYS moving toward a liquidity pool.

The Premium zone is the upper half of any price range — above the 50% EQ level. In an uptrend, smart money sells at Premium. Retail traders who buy here are buying expensive, into distribution.

The Discount zone is the lower half of any price range — below the 50% EQ level. In an uptrend, smart money accumulates longs at Discount. This is where institutions buy at wholesale prices.

The 0.62 Fibonacci level marks the beginning of the Optimal Trade Entry zone. Price retracing to 62% represents the first valid pullback level for ICT entries after a confirmed structural break.

The 0.705 level is ICT's "sweet spot" — the ideal entry within the OTE zone. Not a standard Fibonacci level, but the precise midpoint of the 0.62–0.79 OTE zone offering the best risk/reward.

The 0.79 Fibonacci level marks the end of the OTE zone — the deepest acceptable retracement before the setup is invalidated. Entries at 0.79 carry more risk but also better reward potential.

The Fibonacci 0.5 (50%) Equilibrium is the dividing line between Premium and Discount. Used on every timeframe — only buy below EQ in bullish markets, only sell above EQ in bearish markets.

The Selling Climax is the final panic low in Wyckoff Accumulation. Characterized by extremely high volume and wide spread, it marks where institutions absorb all retail selling — the structural bottom.

The Automatic Rally is the sharp bounce following the Selling Climax. Shorts cover, buying pressure exceeds supply briefly. The AR high defines the upper boundary of the Wyckoff accumulation range.

The Secondary Test revisits the SC area to check if supply has dried up. Critically, ST volume should be much LOWER than the SC — this confirms institutions absorbed supply and a base is forming.

A Sign of Strength is a strong, high-volume rally that breaks above the Automatic Rally high. SOS confirms institutions are in control and distribution is near — it's the first major confirmation of an uptrend.

The Last Point of Support is the pullback after a Sign of Strength — price returns to the broken resistance (now support) on low volume. This is the optimal Wyckoff entry point before markup begins.

An Upthrust is a false breakout above the distribution range high designed to trap bulls. Price briefly exceeds resistance, triggers stop-buy orders, then quickly falls back — confirming distribution.

UTAD is the final, most powerful false breakout in a Wyckoff distribution — occurring after extended sideways action. It creates maximum bullish euphoria before the devastating markdown phase begins.

The Spring is a Wyckoff Accumulation event — a brief false breakdown below the trading range support that triggers stops, then immediately reverses upward. The Spring is the highest-conviction Wyckoff entry.

A Shakeout is a more aggressive version of the Spring — a deep, high-volume breach below support that rapidly reverses. It clears all weak long positions at once before the most explosive markup phase.

An Inside Bar is a candle whose entire range (high and low) fits within the previous candle's range. It indicates consolidation and compression — a breakout in the trend direction is expected.

An Outside Bar (Engulfing Bar) has a higher high AND lower low than the previous candle, completely engulfing it. It signals a strong momentum shift and is a key entry signal in price action trading.

A Pin Bar has a small body and a long wick showing strong rejection from a level. The wick indicates institutional orders — trade in the direction the body points. Long bottom wick = bullish, long top wick = bearish.

A Bearish Engulfing Order Block is a large bearish candle that engulfs the previous bullish candle, creating a supply zone. Price often returns to this zone for a bearish continuation entry.

A Bullish Engulfing Order Block is a large bullish candle engulfing the previous bearish candle, creating a demand zone. Price returning to this zone offers high-probability long entries.

A Drop-Base-Rally pattern identifies a demand zone: price drops, consolidates (base), then rallies strongly. The base zone is where institutions accumulated — a return to this zone is a high-probability long entry.

A Drop-Top-Rally pattern in reverse — Rally-Base-Drop — identifies a supply zone. Price rallies, consolidates at the top (where institutions distributed), then drops. Return to the top zone = short entry.

A Doji forms when open and close are nearly equal, creating a cross shape. It signals indecision between buyers and sellers. Context matters: Dragonfly Doji is bullish, Gravestone Doji is bearish.

A High Volume Node is a price level with high historical trading volume. HVNs act as strong support/resistance levels — price gravitates toward them and often consolidates at these areas.

A Low Volume Node is a price level with minimal historical trading. Price passes through LVNs quickly with little resistance — they often correspond to FVGs and price imbalances on the chart.

The Value Area High is the upper boundary of the Value Area — the price range containing 70% of trading volume. Price above VAH is considered premium and often faces selling pressure.

The Value Area Low is the lower boundary of the Value Area. Price below VAL is considered discount and often attracts buying. VAL-to-VAH is a common range target for day traders.

The Point of Control is the single price level with the highest traded volume in the profile. It acts as the strongest magnet — price is drawn to POC and often finds major support/resistance there.

Cumulative Volume Delta tracks the net difference between buying and selling pressure over time. When price rises but CVD falls, it reveals hidden selling — a powerful divergence signal for reversals.

Open Interest is the total number of outstanding futures/options contracts. Rising OI with rising price confirms bullish conviction. Falling OI during a rally signals short covering — weaker move.

The Put/Call Ratio measures options market sentiment. PCR below 0.7 signals excessive bullishness (contrarian bearish). PCR above 1.0 signals excessive fear (contrarian bullish). Used as a contrarian indicator.

Implied Volatility reflects the market's expectation of future price movement, derived from options prices. High IV = expensive options (sell premium). Low IV = cheap options (buy directional). IV crush follows events.

Historical Volatility is the actual realized volatility of an asset over a past period, measured by standard deviation of returns. Compare HV to IV: when IV exceeds HV significantly, options are expensive.

Max Pain is the strike price where the most options contracts expire worthless, causing maximum financial loss to option buyers. Price is often magnetically drawn toward Max Pain near options expiration.

Delta measures how much an option's price changes per $1 move in the underlying. ATM options ≈ 0.5 delta. Deep ITM options approach 1.0. Delta also represents approximate probability of expiring in-the-money.

Gamma measures the rate of change of delta per $1 move. Highest for ATM options near expiration (Gamma Risk). Gamma squeezes occur when market makers are forced to rapidly hedge, amplifying moves.

Theta is the daily dollar amount an option loses due to time passing. Theta accelerates exponentially as expiration approaches. Option sellers benefit from theta decay — sell premium when IV is high, theta is working for you.

Vega measures how much an option's price changes per 1% change in implied volatility. Buy options when IV is low (vega works for you as IV expands). Sell options when IV is high (IV crush destroys premium).

Contango occurs when futures prices are above spot (upward curve) — costly for ETF holders due to roll costs. Backwardation is the opposite — futures below spot, benefiting long roll-yield strategies.

Risk/Reward Ratio compares potential profit to potential loss on a trade. A 1:2 RR means risking $1 to make $2. Professional traders typically require minimum 1:2 RR, with high-quality setups offering 1:3 or better.

Break Even means moving your stop loss to the entry price once the trade moves in your favor. This creates a risk-free trade — you cannot lose money even if stopped out. Standard practice at 1:1 RR.

A Stop Loss is a predetermined exit that limits losses when a trade moves against you. Professional stop placement is structural (below an OB, swing low, or FVG) — not arbitrary pip distances. SL = trade invalidation level.

Take Profit is the predetermined exit level to lock in gains. Professional traders use partials (50% at TP1, 30% at TP2) and let a runner ride to the next major liquidity target. Always align TP with structural levels.

Drawdown is the decline from a peak in your trading account equity. Maximum Drawdown (MDD) measures the largest peak-to-trough decline. Professional traders risk 1-2% per trade to keep drawdowns under control.

Maximum Adverse Excursion is the worst point a trade moves against you before reaching your target (if it wins). Analyzing MAE across winning trades helps optimize stop placement — are you stopping out too close?

Maximum Favorable Excursion tracks the best point a trade reaches in your favor before closing. Analyzing MFE vs. actual exit helps identify if you're taking profit too early and leaving significant gains on the table.

Position Sizing determines how many lots/shares to trade based on your account size, risk percentage (1-2%), and stop loss distance. Correct sizing ensures consistent risk regardless of trade structure.

Accumulation is the phase where institutional traders quietly build large long positions within a trading range. Volume is relatively low and price movement appears choppy — smart money buys all available supply.

Distribution occurs at market tops where institutions sell long positions to eager retail buyers. Price struggles to make new highs despite positive news. The quiet offloading that precedes a significant decline.

Expansion is the impulsive, wide-range directional move driven by institutional order flow. Characterized by large candles, expanding volume, and minimal wicks. This is where the real money is made — ride the expansion.

A Retracement is a temporary counter-trend pullback before the dominant trend resumes. Unlike a reversal, it does not break major structure. The OTE zone (0.62–0.79) is the ideal entry during a retracement.

Consolidation is a period of sideways, range-bound price action between support and resistance. It represents a balance between buyers and sellers before the next directional expansion. The longer the consolidation, the bigger the breakout.

Compression is an extreme form of consolidation where price action tightens significantly, with shrinking ranges and reducing volatility. The tighter the coil, the more explosive the eventual breakout — a high-probability setup.

Displacement is a strong, impulsive move driven by institutional order flow — typically one or two wide-range candles that break structure and leave a Fair Value Gap behind. It confirms smart money direction.

Rebalancing is when price returns to fill a Fair Value Gap or imbalance created by a displacement. Markets seek equilibrium — they frequently revisit FVGs to rebalance before continuing in the original direction.

Mitigation is when price returns to an Order Block or key level to fill remaining institutional orders that weren't fully executed during the initial move. A mitigated level loses its significance after being fully filled.

A Continuation setup is when the trend resumes after a pullback or consolidation — in the same direction as the dominant trend. Confirmed by a BOS above/below the last swing. Trade with the trend, not against it.

A Reversal is a change in dominant trend direction — from bullish to bearish or vice versa. Requires multiple confirmations: CHoCH, MSS, break of key structure, and change in HH/HL or LL/LH sequence. Never call a reversal from one candle.