Strategy Library

ICT

ICT 2022 model

The entry model Michael J. Huddleston (ICT) taught in his 2022 mentorship, written as a checklist. You know where price is likely to go on the higher timeframe, wait for it to take liquidity on the other side during a killzone, then for a sharp move that breaks structure and leaves a fair value gap, and enter when price comes back into that gap.

AdvancedForex majors, index futures, goldLondon and New York killzonesM1, M5, M15
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Example 01

ICT 2022 model on a chart

EURUSD · M5Sweep, MSS, FVGsweep, shift, return

Swept low: 1.0832Gap: 1.0836 to 1.0842Stop: 1.0824Target, the draw: 1.0872Sample candles, not market data

The rules

Setup
  • Name the higher timeframe draw: the liquidity or gap price is likely to reach next
  • Trade only inside a killzone (London 02:00 to 05:00 or New York 07:00 to 10:00, New York time)
  • Wait for a sweep of a known liquidity pool against the draw
Entry
  • A sharp move (displacement) breaks structure the other way and leaves a fair value gap
  • Enter on the return into that gap (or the order block behind it)
Stop
  • Beyond the swing that made the sweep
Target
  • The opposing liquidity: the draw you named on the higher timeframe
Manage
  • Risk a fixed amount on every trade
  • Write your no-trade conditions down, such as news within a set number of minutes

Common mistakes

  • Leaving rules as adjectives. "Strong displacement" and "clean sweep" cannot be tested. Give each one a number or a yes or no.
  • Marking on finished charts. Every step looks obvious afterwards. Practice it bar by bar in the backtester.
  • Skipping the draw. Without a written higher timeframe call, any sweep looks like a setup.
  • Forcing a trade in the killzone. The killzone is a filter, not a reason to trade.

When it's off

  • No trade without a gap from the displacement
  • No trade against your higher timeframe draw
  • Call it off if a candle closes through the far side of the gap before entry

Words to know

Liquidity sweep
Price trades beyond an obvious high or low, fills the orders resting there, and closes back inside. Academy's test is a wick beyond the level with the same candle's body closing back inside; a body close beyond is a real break, and a sweep alone reverses nothing. ICT's loose use of "turtle soup" means this.
Displacement
A strong, fast, wide-range, one-directional move, usually fast enough to leave a fair value gap. A slow, overlapping grind through a level does not count.
Market structure shift
The first break against the trend: in an uptrend, a candle body closing below the last higher low (the low that launched the latest high). The ICT course requires displacement, a fast move that usually leaves a fair value gap; a wick through that closes back is a rejection, not a shift.
Fair value gap
A three-candle pattern where a strong middle candle leaves a space between the wicks of candles 1 and 3: bullish when candle 3's low is above candle 1's high, bearish when candle 3's high is below candle 1's low. Academy marks it wick to wick, and if those wicks touch or overlap there is no gap.
Killzone
Windows of the day, in New York time, when ICT looks for setups: London open 02:00 to 05:00 and New York open 07:00 to 10:00 (index traders often use 08:30 to 11:00). Sources disagree by up to an hour, and the times follow US daylight saving.
Previous day and week highs and lows
The previous day's high and low (PDH and PDL) and the previous week's (PWH and PWL), used as levels where stops are likely to rest. Academy's ICT course runs the day midnight to midnight New York time; many brokers close the day at 17:00 New York, which gives different levels.
Liquidity
Orders already waiting at a price, many of them thought to be stop losses and breakout orders. Buy-side liquidity rests above swing highs, sell-side liquidity below swing lows.
Draw on liquidity
The level price is most likely to reach next, read from the higher timeframe.

When you make it yours, I'll ask what the rules above leave open. Start with one of these:

  • How do you decide the higher timeframe draw, and do you write it down before the session?
  • Which liquidity pools count for the sweep: previous day high and low, session highs and lows, equal highs and lows?
  • What makes a move displacement for you: a body size, a number of candles, a gap left behind?
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From DT Academy

What testing exists

No independent or peer-reviewed test of this model was found. Testing it means writing each step as a rule and comparing it with a simple control in the backtester.

Before you trust a backtest

  • Many professional traders risk under 1% of their account on one trade idea, and the common guideline is 1 to 2%.
  • The more versions of a rule you try on the same data, the more likely a good backtest is luck. Decide your rules before you test.
  • Include spread and commission, and practice on dates you have not looked at, before you trust a result.

Sources