1. Understanding the Language of ICT Trading
Before diving deeper into market structure, price action, and trade execution, it’s essential to understand the core concepts and terminology used in ICT Inner Circle Trading (ICT).
Michael Huddleston’s teachings are built on specific Smart Money Concepts (SMC) and price action principles that allow traders to analyze the markets like institutions do. By mastering these foundational terms, you’ll be able to follow ICT strategies with precision and confidence.
As Dave – No Nonsense Trader, I’ve structured this chapter to ensure you grasp these concepts quickly, making the rest of the course easier to apply in real trading.
2. Market Structure: The Foundation of ICT Trading
📌 Market Structure refers to the way price moves in trends and ranges, forming key highs and lows that traders use to anticipate future movement.
Key Market Structure Terms
✔️ Break of Structure (BOS) – A clear break above or below a key high/low, signaling trend continuation.
✔️ Market Shift (MS) – A sudden reversal in trend direction, indicating a possible change in momentum.
✔️ Higher Highs & Higher Lows (HH/HL) – Signs of a bullish trend.
✔️ Lower Highs & Lower Lows (LH/LL) – Signs of a bearish trend.
Understanding BOS and MS helps traders identify when price is likely to continue or reverse, allowing for precise trade execution.
🔍 Example:
If price creates a higher high (HH) and a higher low (HL), it suggests bullish structure. However, if price fails to make a new high and breaks the last low (BOS), it signals a possible trend shift to the downside.
3. Liquidity: The Engine Behind Price Movements
In ICT trading, liquidity is one of the most important concepts. Institutions need liquidity to execute large trades, and price is naturally drawn toward liquidity zones where orders are stacked.
Types of Liquidity
✔️ Buy-Side Liquidity (BSL) – A pool of buy stop orders resting above swing highs.
✔️ Sell-Side Liquidity (SSL) – A pool of sell stop orders resting below swing lows.
✔️ Liquidity Voids (Fair Value Gaps – FVGs) – Areas of price imbalance where the market may return to “fill the gap.”
🔍 Example:
If price is consolidating between two clear highs, many traders place stop-losses above those highs. Institutions hunt these stop-losses by pushing price above them before reversing the market direction.
4. Order Blocks: Institutional Footprints in the Market
📌 Order Blocks (OBs) are price areas where institutions place large orders, often seen as a final down move before an uptrend (bullish OB) or a final up move before a downtrend (bearish OB).
Key Order Block Types
✔️ Bullish Order Block – A strong down candle before a rally, acting as future support.
✔️ Bearish Order Block – A strong up candle before a drop, acting as future resistance.
✔️ Mitigation of Order Blocks – When price returns to an OB before continuing in the original direction.
🔍 Example:
A bullish order block forms when price drops sharply, then reverses into an uptrend. If price later retraces to that OB level, it often finds support and resumes the trend.
📌 Image Guide:
5. Mitigation: Why Price Retests Key Levels
📌 Mitigation is the process where institutions return to an Order Block or Liquidity Zone to fill unexecuted orders before continuing in the trend direction.
🔍 Example:
If price breaks higher from a bullish OB, institutions may push it back down to that OB to mitigate (fill orders) before continuing upward.
This is why traders often wait for a retest of key OBs before entering trades.
📌 Image Guide:
6. Conclusion & What’s Next
By understanding these core ICT concepts, you now have the foundation to start analyzing charts like an institutional trader.
📌 Key Takeaways from This Chapter:
✅ Market Structure – Recognize BOS, MS, HH/HL, and LH/LL for trend analysis.
✅ Liquidity – Identify BSL and SSL to anticipate where price is likely to move.
✅ Order Blocks – Learn to spot institutional footprints in the market.
✅ Mitigation – Understand why price revisits key levels before moving further.
In Chapter Three, we’ll apply these concepts in real charts, breaking down ICT trade setups and identifying high-probability trading opportunities.
📌 Action Steps Before Moving Forward:
✅ Go to your trading platform and mark BOS, MS, BSL, SSL, and Order Blocks on historical charts.
✅ Review price reactions to liquidity zones and mitigation levels.
✅ Prepare to analyze real-time market movements using ICT concepts.