GOLD JUNE 2023
Inner Circle Trader (ICT) is a trading methodology developed by a trader named Michael J. Huddleston. It focuses on understanding the market dynamics through the concept of accumulation, manipulation, and distribution. According to ICT, the market moves through distinct phases driven by large institutional players, and by analyzing these phases, traders can gain insights into potential price movements.
1. Accumulation: The accumulation phase refers to the period when institutional players or "smart money" start acquiring a large position in a particular financial instrument, such as a stock or a currency pair. During this phase, prices generally remain low or range-bound as these players accumulate their positions without attracting much attention from the broader market.
2. Manipulation: After the accumulation phase, the market enters the manipulation phase. In this phase, institutional players begin to push prices in their desired direction by creating an illusion of a new trend. They use various techniques, such as false breakouts, stop runs, and other market manipulation tactics, to trigger the entry of retail traders who follow the perceived trend.
3. Distribution: Once institutional players have built a significant position during the accumulation and manipulated the market in their favor, they enter the distribution phase. During this phase, they start selling or distributing their accumulated positions to the broader market, including retail traders who entered during the manipulation phase. As a result, prices start to decline or reverse, and the trend established during the manipulation phase begins to weaken or reverse altogether.
The ICT methodology aims to identify these phases by analyzing price action, volume, and market structure. Traders using this methodology try to understand the intentions and actions of institutional players, as they are seen as the driving force behind significant market movements.
By recognizing the accumulation, manipulation, and distribution phases, traders using the ICT methodology attempt to position themselves in alignment with institutional players' actions. They look for signs of accumulation, avoid being caught in manipulation traps, and take profits or even reverse their positions during the distribution phase.
It's important to note that the ICT methodology is just one approach to trading and has its own set of strengths and limitations. As with any trading strategy, it requires practice, experience, and continuous analysis of market conditions to be used effectively.
1. Accumulation: The accumulation phase refers to the period when institutional players or "smart money" start acquiring a large position in a particular financial instrument, such as a stock or a currency pair. During this phase, prices generally remain low or range-bound as these players accumulate their positions without attracting much attention from the broader market.
2. Manipulation: After the accumulation phase, the market enters the manipulation phase. In this phase, institutional players begin to push prices in their desired direction by creating an illusion of a new trend. They use various techniques, such as false breakouts, stop runs, and other market manipulation tactics, to trigger the entry of retail traders who follow the perceived trend.
3. Distribution: Once institutional players have built a significant position during the accumulation and manipulated the market in their favor, they enter the distribution phase. During this phase, they start selling or distributing their accumulated positions to the broader market, including retail traders who entered during the manipulation phase. As a result, prices start to decline or reverse, and the trend established during the manipulation phase begins to weaken or reverse altogether.
The ICT methodology aims to identify these phases by analyzing price action, volume, and market structure. Traders using this methodology try to understand the intentions and actions of institutional players, as they are seen as the driving force behind significant market movements.
By recognizing the accumulation, manipulation, and distribution phases, traders using the ICT methodology attempt to position themselves in alignment with institutional players' actions. They look for signs of accumulation, avoid being caught in manipulation traps, and take profits or even reverse their positions during the distribution phase.
It's important to note that the ICT methodology is just one approach to trading and has its own set of strengths and limitations. As with any trading strategy, it requires practice, experience, and continuous analysis of market conditions to be used effectively.
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