1. Understanding Market Structure in ICT Trading
Market structure is the foundation of ICT Inner Circle Trading. It defines the natural flow of price action and helps traders anticipate breakouts, reversals, and liquidity hunts.
By learning how to read market structure properly, traders can identify trend direction, potential trade setups, and key levels where institutions are likely to interact with price.
As Dave – No Nonsense Trader, my goal in this chapter is to simplify these concepts so that you can recognize high-probability trade opportunities using ICT methodology.
2. Identifying Bullish vs. Bearish Market Structure
Market structure consists of uptrends, downtrends, and consolidations.
📌 Bullish Market Structure – Defined by:
- Higher Highs (HH) and Higher Lows (HL)
- Break of Structure (BOS) to the upside
- Price respecting key support levels
📌 Bearish Market Structure – Defined by:
- Lower Highs (LH) and Lower Lows (LL)
- Break of Structure (BOS) to the downside
- Price respecting key resistance levels
🔍 Example:
If price is forming higher highs and higher lows, but suddenly fails to make a new high and breaks below the last HL, this signals a Market Shift (MS)—a possible trend reversal.
3. Break of Structure (BOS) & Market Shift (MS)
📌 Break of Structure (BOS):
- Occurs when price breaks a key swing high/low.
- Confirms trend continuation (bullish or bearish).
📌 Market Shift (MS):
- A break of a significant level that shifts market direction.
- Indicates potential reversals or a major liquidity grab.
🔍 Example:
A Break of Structure (BOS) to the upside confirms bullish continuation, while an MS in a bullish trend could signal a bearish reversal.
4. Liquidity & Stop Hunts in Market Structure
Liquidity is the fuel behind price movements in ICT trading. Understanding how institutions use liquidity pools helps traders position themselves before major price moves.
📌 Types of Liquidity & Stop Hunts:
✔️ Buy-Side Liquidity (BSL) – Stops placed above previous highs.
✔️ Sell-Side Liquidity (SSL) – Stops placed below previous lows.
✔️ Stop Hunts – Large institutions triggering liquidity before reversing price direction.
🔍 Example:
If price is consolidating near a recent swing low, many traders will place their stop-losses below this level. Institutions may push price below the low (SSL) to trigger stops before reversing the move back up.
5. Fair Value Gaps (FVG) & Price Imbalances
📌 Fair Value Gaps (FVG):
- A gap in price action where institutions might return to fill orders.
- Seen as an inefficient price movement that needs correction.
🔍 Example:
If price moves aggressively upward, leaving a large gap on the lower timeframe, expect price to retrace into the gap before continuing in the original direction.
6. How to Use Market Structure for Trade Entries
By combining:
✔️ Break of Structure (BOS) → Confirms trend continuation
✔️ Market Shift (MS) → Signals potential reversal
✔️ Liquidity Grabs → Identifies smart money manipulations
✔️ Fair Value Gaps (FVG) → Provides areas of interest for entries
Traders can identify high-probability setups using ICT methodology.
🔍 Example Trade Setup:
1️⃣ Identify liquidity pools near swing highs/lows.
2️⃣ Watch for stop hunts or a Market Shift (MS).
3️⃣ Look for Fair Value Gaps (FVG) where price may return.
4️⃣ Enter a trade with risk managed stop-loss placement.
7. Conclusion & What’s Next
📌 Key Takeaways from This Chapter:
✅ Market Structure Defines Trends – Learn how to read bullish and bearish price movements.
✅ Break of Structure (BOS) & Market Shift (MS) – Identify trend continuation vs. reversals.
✅ Liquidity & Stop Hunts – Understand how institutions manipulate price.
✅ Fair Value Gaps (FVG) – Recognize inefficiencies that price may correct.
📌 Action Steps Before Moving Forward:
✅ Analyze historical charts and mark BOS, MS, liquidity zones, and FVGs.
✅ Observe how price reacts at liquidity pools and Fair Value Gaps.
✅ Prepare to learn how ICT traders execute high-probability trade entries in Chapter Four.