Mastering the ICT Trading Methodology: A Concise Guide to Breakers and Liquidity Pools | from Dr. Lester Leong | gradient growth | Aug 2023

Unlocking the Inner Circle Trader (ICT) concepts for precision trading

Photo by Justus Menke on Unsplash

In the world of trading, understanding the intricacies of market movements is crucial. It’s not just about buying low and selling high, but also understanding the underlying mechanisms that drive these movements. One such mechanism is the concept of breakers and liquidity pools. In this article, we will delve into these concepts.

A breaker is a price range in a market where the algorithm that provides the price reacts and maintains certain price levels. It is not a simple support and resistance level, but a dynamic level that the market algorithm respects.

To understand breaker, let’s consider a price segment that represents a significant price movement from point A to point B. This price section is used to calculate standard deviations, which are then used to identify potential breakers.

Bearish breaker by ICT.Bullish Breaker by ICT.

These breakers are not just static levels, they are areas that can be used to buy or sell. In the examples above, postings can only be made once liquidity has been reached. For the buy side it would be the red line segment while for the sell side it would be the blue line segment. This approach is more sophisticated than traditional support and resistance trading as it takes into account the algorithmic behavior of the market.

Liquidity pools refer to areas in the market where there is a significant amount of buy or sell orders. These areas act like magnets and attract the price. The algorithm that provides the price continually re-evaluates the market, regardless of the number of sellers or buyers. This revaluation will be aligned to these liquidity pools.

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