If you’ve been exploring forex or any financial markets, you’ve probably heard whispers about ICT trading. But what is ICT trading, and why are so many retail traders diving deep into this method?
ICT stands for Inner Circle Trader, a trading approach developed by Michael J. Huddleston.
This methodology pulls back the curtain on how institutional traders and “smart money” actually move markets.
While most retail strategies rely on indicators and patterns, ICT trading focuses on price action, liquidity, and the behaviors of big institutions.
In this blog post, we’re going to break down ICT trading for beginners.
We’ll explain its core concepts, reveal how it differs from traditional strategies, and show you how smart money leaves clues on the charts.
What Is ICT Trading?
ICT trading is a market theory based on the idea that institutional players – like banks and hedge funds – dominate price movements.
These institutions need liquidity to enter and exit large positions without disrupting price too much. ICT traders aim to understand these dynamics and trade with the smart money, not against it.
The phrase “what is ICT trading” can be answered simply as this: It’s a way to understand how price moves based on liquidity, market structure, and institutional behavior – not retail indicators.
Who Is Michael J. Huddleston?
Michael J. Huddleston, also known as the Inner Circle Trader (ICT), is a well-known educator in the trading space.
Over the years, he’s released countless hours of free content, mentorships, and courses. His teachings are rooted in his interpretation of institutional trading practices.
He argues that many retail traders fail because they trade in the wrong areas of the chart – they chase price, enter at liquidity zones, and use tools institutions use to manipulate them.
ICT teaches how to think like the entities that move the markets.
Core Concepts of ICT Trading
1. Liquidity Pools
Institutions need liquidity. ICT teaches that stop losses are often clustered around obvious areas – like swing highs and lows. These stop losses become liquidity pools, and smart money hunts them.
Traders learn to spot these zones, not to avoid them, but to anticipate potential market reversals or breakouts.
2. Market Structure
Forget about lagging indicators. ICT emphasizes price action and market structure:
- Higher highs & higher lows (bullish)
- Lower highs & lower lows (bearish)
This structural framework tells traders which way the market is leaning and where smart money may be accumulating or distributing.
3. Order Blocks
Order blocks are one of the most powerful ICT concepts. They represent areas where institutions have previously entered positions. These zones can act as magnets for price or areas of strong support/resistance.
For example:
- A bullish order block might be the last down candle before a big move up.
- A bearish order block might be the last up candle before a sharp drop.
These areas often see price react sharply.
4. Fair Value Gaps (FVG)
An FVG is a price imbalance created when price moves so quickly that it leaves a gap between candles. ICT teaches that price often returns to these areas to “rebalance” before continuing the trend. They’re great for spotting potential entries.
5. Time and Price Theory
Markets are not random, according to ICT. Smart money moves in patterns and cycles based on time as well as price. Certain times of day, like the London or New York open, are more likely to produce volatility and key setups.
6. Smart Money Concepts
At its core, ICT is about smart money. This includes:
- Stop runs (liquidity grabs)
- False breakouts
- Market maker buy/sell models
- Institutional accumulation/distribution
When you ask, “what is ICT trading?”, you’re really asking: How does smart money trap retail traders — and how can I avoid being one of them?
ICT vs Traditional Retail Trading
| ICT Trading | Traditional Retail Trading |
|---|---|
| Price action based | Indicator based (MACD, RSI, etc.) |
| Focuses on liquidity & timing | Focuses on patterns and signals |
| Uses order blocks & FVGs | Uses support/resistance, trendlines |
| Emulates institutional thinking | Often mirrors other retail traders |
ICT is a shift in mindset. You’re not reacting to the market; you’re anticipating what the big players are doing.
Why ICT Trading Is Gaining Popularity
- It Makes Sense Many traders find that once they understand smart money tactics, everything else on the chart starts to make sense. Price isn’t random; it’s intentional.
- It Removes Clutter ICT trading strips away indicators and focuses on clean charts and price levels.
- It Creates an Edge While not foolproof, ICT concepts can give traders an edge by aligning with the flow of institutional capital.
- It’s Based on Logic, Not Hype ICT trading isn’t about 100% win rates or overnight wealth. It’s a realistic approach to building skill, patience, and process.
How to Start Learning ICT Trading
- Free Content on YouTube Michael Huddleston has uploaded a wealth of free content. Start with his “2022 Mentorship” series for a structured approach.
- Join ICT Trading Communities Discord servers, Reddit groups, and Telegram channels are filled with ICT learners sharing ideas, charts, and setups.
- Use a Journal Document your trades. What did you see? Where did price react? Were you trading with or against smart money?
- Master One Concept at a Time Don’t try to learn it all at once. Focus on:
- Liquidity grabs
- Market structure
- Order blocks
- Fair Value Gaps
- Practice in a Demo Account ICT trading takes time. Don’t rush into live trades. Use demo platforms to test your understanding.
Common Mistakes New ICT Traders Make
- Overloading with Concepts: Pick one or two setups and master them.
- Trading Without a Model: ICT trading uses specific models like the market maker sell/buy model. Know your model.
- Ignoring Risk: Even if you understand smart money, you must still manage risk per trade.
- Skipping Time of Day: ICT is time-sensitive. Focus on London and New York sessions for optimal setups.
Does ICT Trading Really Work?
Yes – but only if you put in the work. ICT trading isn’t a cheat code. It requires discipline, backtesting, and emotional control. The concepts are powerful, but execution matters.
If you’re still wondering what is ICT trading, the answer is this: It’s a methodology that teaches you to think like an institution. And when you align with institutional behavior, you stop reacting and start anticipating.
Final Thoughts
ICT trading is not for everyone. It demands patience, precision, and a hunger to understand how markets really move. But for those willing to study the process, the rewards can be life-changing.
Instead of jumping on the next trend or indicator, take a deeper look at what drives price – liquidity, time, and institutional intent. That’s the ICT way.
So next time you hear the question, “what is ICT trading?”, you’ll know the answer: It’s a strategic, institutional-inspired approach that helps traders find smart entries, avoid traps, and trade with purpose.
Ready to learn how the big players trade? Then maybe it’s time you took ICT seriously. Start watching, studying, journaling, and see what happens when you stop chasing price and start thinking like a pro.