1. Welcome to the Inner Workings of Price Action
📌 Price doesn’t move randomly—there’s an algorithm behind it.
You’ve learned about liquidity, Order Blocks (OBs), and Fair Value Gaps (FVGs). But now, we’re diving into why price moves the way it does and how Smart Money systematically targets liquidity before every major move.
🚀 By the end of this chapter, you will understand:
✔️ The ICT Algorithm & Price Delivery Model.
✔️ How price naturally seeks liquidity before reversing.
✔️ Why every move in the market follows a structured liquidity cycle.
✔️ How to predict future price movements using liquidity mapping.
This is Dave – No Nonsense Trader, and if you’ve ever wondered why price reacts in seemingly predictable ways, you’re about to uncover the real structure behind price movement.
📌 Image Guide:
📷 Suggested Image: A visual representation of price moving toward liquidity pools before reversing, demonstrating algorithmic price delivery.
🎨 AI Prompt:
“Create a trading chart illustrating how price moves toward liquidity pools before reversing, following a structured price delivery model. Highlight key liquidity zones and Smart Money manipulation points.”
2. The ICT Algorithm: Understanding Price Delivery
📌 Smart Money doesn’t chase price—they direct it.
Price moves according to a pre-determined algorithm designed to seek liquidity. Every movement in the market follows a pattern of:
1️⃣ Accumulation – Smart Money builds positions at key liquidity zones.
2️⃣ Manipulation – Price moves against retail traders to induce liquidity.
3️⃣ Expansion – The real move happens after liquidity is taken.
4️⃣ Distribution – Positions are offloaded before the next cycle begins.
🔍 Example:
A trader who doesn’t understand Smart Money pricing might think a breakout is real, while an ICT trader knows it’s just an inducement to grab liquidity before price moves the other way.
This is why Dave – No Nonsense Trader always emphasizes waiting for the liquidity grab before entering a trade.
📌 Image Guide:
📷 Suggested Image: A four-phase price delivery cycle showing Accumulation, Manipulation, Expansion, and Distribution.
🎨 AI Prompt:
“Create a financial trading infographic illustrating the four phases of the ICT Price Delivery Model: Accumulation, Manipulation, Expansion, and Distribution. Use clean annotations and Smart Money trading elements.”
3. How Price Seeks Liquidity Before Every Major Move
📌 Price is always hunting liquidity before making a move.
Key Liquidity Targets:
✔️ Buy-Side Liquidity (BSL) – Stops & breakout orders above key highs.
✔️ Sell-Side Liquidity (SSL) – Stops & breakout orders below key lows.
✔️ Liquidity Voids (Fair Value Gaps) – Areas of price imbalance that act as magnets.
✔️ Order Blocks (OBs) & Mitigation Points – The last stop before price continues moving.
🔍 Example:
A retail trader might go long at resistance thinking a breakout is real, but an ICT trader waits for a liquidity grab above Buy-Side Liquidity (BSL) before entering short.
This is why Dave – No Nonsense Trader always tells traders to map out liquidity zones first—never trade blindly.
📌 Image Guide:
📷 Suggested Image: A trading chart showing price sweeping Buy-Side Liquidity (BSL) before reversing.
🎨 AI Prompt:
“Create a trading chart illustrating a Buy-Side Liquidity (BSL) sweep before price reverses downward, following Smart Money principles. Highlight stop hunts and institutional entry points.”
4. Liquidity Mapping: How to Predict Future Price Moves
📌 Liquidity mapping is the process of identifying where Smart Money is likely to move next.
Steps to Map Liquidity Correctly:
✔️ Step 1: Identify key highs/lows (BSL/SSL).
✔️ Step 2: Find Fair Value Gaps (FVGs) & Order Blocks (OBs).
✔️ Step 3: Wait for a liquidity sweep before entering.
✔️ Step 4: Target the next liquidity pool.
🔍 Example:
A trader sees price approaching a Bearish Order Block near BSL—instead of entering long, they wait for price to sweep liquidity, confirm reversal, and enter short at the OB.
This is the same method used by Dave – No Nonsense Trader to enter trades with Smart Money precision.
📌 Image Guide:
📷 Suggested Image: A step-by-step guide to liquidity mapping, showing how to mark BSL, SSL, FVGs, and OBs.
🎨 AI Prompt:
“Create a structured liquidity mapping trading chart, showing how to mark Buy-Side Liquidity (BSL), Sell-Side Liquidity (SSL), Fair Value Gaps (FVGs), and Order Blocks (OBs). Use clear trading annotations.”
5. Trading the ICT Algorithm with Precision Entries
📌 Once liquidity is swept, price typically moves aggressively in the opposite direction.
How to Trade the Algorithm Correctly:
✔️ Step 1: Identify liquidity targets (BSL/SSL).
✔️ Step 2: Wait for price to sweep liquidity.
✔️ Step 3: Confirm entry with an OB or FVG.
✔️ Step 4: Target the next liquidity pool for profit-taking.
🔍 Example:
A trader sees New York Open sweeping liquidity, then confirms entry at a Bullish OB + FVG confluence zone—resulting in a high-probability Smart Money trade.
This is why Dave – No Nonsense Trader always preaches waiting for confirmation instead of guessing entries.
📌 Image Guide:
📷 Suggested Image: A full trade setup using the ICT algorithm, showing liquidity sweep, OB entry, and exit at the next liquidity pool.
🎨 AI Prompt:
“Create a financial trading chart illustrating a complete ICT trade setup, showing a liquidity sweep, Order Block (OB) entry, and exit at the next liquidity pool. Use professional trading annotations.”
6. How to Backtest the ICT Algorithm
📌 Refining your ability to trade liquidity sweeps requires backtesting.
How to Backtest the ICT Algorithm:
✔️ Step 1: Replay past price action and mark all liquidity levels.
✔️ Step 2: Identify where price swept liquidity and reversed.
✔️ Step 3: Log whether an OB or FVG existed at the reversal point.
✔️ Step 4: Track your results and refine your execution strategy.
🔍 Example:
A trader backtests 50 liquidity sweeps and finds that OBs + FVGs confirm reversals 75% of the time. This data helps them execute with confidence in live markets.
📌 Image Guide:
📷 Suggested Image: A backtesting log showing liquidity sweeps, Order Block entries, and win/loss analysis.
🎨 AI Prompt:
“Create a structured backtesting log template for ICT traders, tracking liquidity sweeps, Order Block (OB) entries, and trade outcomes. Use a clean, professional trading journal format.”
7. What’s Next?
🔥 In the next chapter, we’ll take it even further. You’ll learn:
✅ How to refine Kill Zone trading & execute with precision timing.
✅ How to combine liquidity sweeps with time-based Smart Money entries.
✅ How to avoid fake liquidity sweeps & enter the highest-probability setups.
📌 Key Takeaways from This Chapter:
✅ Price seeks liquidity before every major move—learn to track it.
✅ Liquidity mapping allows traders to predict Smart Money moves.
✅ Backtesting the ICT algorithm builds confidence in live trading.
📌 Next Up: Chapter Five – Advanced Kill Zone Trading: Timing Entries Like an Institution 🚀
🔥 You’re now seeing price action through the eyes of Smart Money. Keep going!