Strategy Library

ICT

Power of three and the Judas swing

Michael J. Huddleston (ICT) reads a day as three phases: a quiet range near the open (accumulation), a move against the day's direction that takes liquidity (manipulation), and the main move (distribution). The Judas swing is that false move at a session open. You trade the turn back once the false move fails.

AdvancedForex majors, index futuresLondon and New York opensM5, M15
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Example 01

Power of three and the Judas swing on a chart

EURUSD · M15Judas swingrange, false move, turn

Midnight open: 1.0851Entry: 1.0854Stop: 1.0826Target, previous day high: 1.0874Sample candles, not market data

The rules

Setup
  • Mark the midnight open (00:00 New York time) and the range from 00:00 to 02:00
  • Have a written bias for the day from the higher timeframe
Entry
  • For a bullish day: price trades below the midnight open and the 00:00 to 02:00 low (the Judas swing)
  • Enter once an M15 candle closes back above the midnight open before 05:00 New York time (mirror it for a bearish day)
Stop
  • Beyond the low (or high) of the Judas swing
Target
  • The liquidity on the other side, such as the previous day high, in the direction of your bias
Manage
  • Take no new entry after your cut-off time

Common mistakes

  • Treating it as a daily law. Plenty of days trend from the open with no false move at all.
  • Naming phases afterwards. Any finished day can be described in three phases. The test is spotting the false move while it happens.
  • No written bias. Without a bias first, every early move can be called the Judas swing.

When it's off

  • No close back above the midnight open by 05:00 means no trade
  • Skip days that open and trend with no false move

Words to know

Power of three
Reads a daily (or session or weekly) candle as three phases: accumulation, a quiet range near the open; manipulation, a move against the day's eventual direction that takes liquidity; and distribution, the main move. On a bullish day the low tends to form early and the close near the high.
Judas swing
The false move at a session open that runs stops, then reverses. Academy's testable version (M15, New York time): price trades below the midnight open and the 00:00 to 02:00 range low, then an M15 candle closes back above the midnight open before 05:00 (mirror for bearish).
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.
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.
Midnight open
ICT's reference price for the day: the price at 00:00 New York time.

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

  • How do you set the day's bias before the open, and do you write it down?
  • Which open do you measure from: midnight New York, the London open or the New York open?
  • How far past the open or the early range must the false move go?
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From DT Academy

What testing exists

No independent test was found. The idea overlaps with older Wyckoff ideas about accumulation and distribution.

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