Master ICT trading with this comprehensive glossary! Learn key terms like CHoCH, MSS, OB, FVG, and OTE with clear explanations and examples.
Introduction
If you’re diving into ICT (Inner Circle Trader) concepts, you’ve probably come across terms like CHoCH, MSS, OB, and FVG. At first, these might seem overwhelming, but mastering them is crucial for understanding smart money concepts (SMC) and improving your trading edge. This glossary breaks down these terms in a simple and practical way so you can apply them to your trading strategies with confidence.
📖 Key ICT Terms Explained
CHoCH (Change of Character)
Definition: A shift in market structure that signals a potential trend reversal.
Example: If the market is making higher highs and higher lows, then suddenly breaks below the last higher low, a CHoCH may be occurring, indicating a bearish reversal.
⏩ Why It Matters: It helps traders spot early trend shifts and prepare for potential trade setups.
MSS (Market Structure Shift)
Definition: A major shift in market direction, confirming a trend change.
Example: A market that consistently trends upward but then starts making lower lows and lower highs signals an MSS.
⏩ Why It Matters: MSS provides confirmation for traders to enter or exit positions.
OB (Order Block)
Definition: A zone where institutions and smart money place large orders, often leading to price reactions.
Example: A bullish order block forms when price consolidates before a strong upward move. When price returns to this area, it may act as support.
⏩ Why It Matters: Identifying OBs helps traders anticipate areas of high probability for price reversals.
FVG (Fair Value Gap)
Definition: A price imbalance between buyers and sellers, creating gaps in the market.
Example: If price rapidly moves in one direction without filling orders in the opposite direction, an FVG is created.
⏩ Why It Matters: These gaps are often revisited, providing key entry points for traders.
OTE (Optimal Trade Entry)
Definition: A Fibonacci-based retracement level (between 61.8% and 79%) where smart money enters trades.
Example: If price retraces to 70% of a prior move and shows bullish confirmation, it’s an ideal long entry.
⏩ Why It Matters: OTE gives traders precision in choosing their entry points.
SMT (Smart Money Technique)
Definition: A method of analyzing institutional activity and liquidity.
⏩ Why It Matters: Helps traders align with the moves of large financial institutions.
Liquidity Grab
Definition: A manipulation tactic where price spikes to trigger stop-loss orders before reversing in the intended direction.
⏩ Why It Matters: Helps traders avoid being stopped out before the main move occurs.
Institutional Candle
Definition: A large bullish or bearish candle showing smart money’s strong presence.
⏩ Why It Matters: Indicates areas of potential order blocks.
Breaker Block
Definition: A failed order block that price later respects as support or resistance.
⏩ Why It Matters: Acts as a critical level in price action trading.
BISI (Buy Side Imbalance Sell Side Inefficiency)
Definition: A zone where buying pressure dominates, leaving inefficiencies in price action.
⏩ Why It Matters: Provides potential retracement zones for trades.
SIBI (Sell Side Imbalance Buy Side Inefficiency)
Definition: A zone where selling pressure dominates, creating price inefficiencies.
⏩ Why It Matters: Helps traders spot potential retracement areas.
PD Array (Premium/Discount Array)
Definition: A set of tools like OB, FVG, and Breaker Blocks to determine whether price is in a premium (sell) or discount (buy) zone.
⏩ Why It Matters: Helps in identifying optimal entry and exit levels.
How to Use These ICT Terms in Trading
✅ Identify Market Structure: Use CHoCH and MSS to recognize trend changes early.
✅ Find High-Probability Entry Zones: Look for OBs and FVGs to predict price reactions.
✅ Refine Your Entries: Use OTE to pinpoint precise trade setups with minimal risk.
✅ Follow Institutional Moves: Watch for liquidity grabs, breaker blocks, and SMT signals.
📌 Final Thoughts
Mastering ICT terminology is crucial for any serious trader. Understanding CHoCH, MSS, OB, FVG, OTE, and more will give you a strategic edge in the markets. Start applying these concepts to refine your trading strategies today!
💡 Want to dive deeper? Check out our full guide on ICT trading strategies.
This article was researched and curated by Madina Afzali
