Mastering ICT Concept Liquidity: Trading to Capture Wicks at the Opening Price with High Probability
In stocks and FX, the opening price of a candlestick is often highly regarded.
ICT also makes effective use of such opening prices.
There are two opening prices used in trading.
Midnight Opening Price
In ICT, there is something called the True Opening Price.
The reason for this is that the market moves based on the time zone when the algorithm starts running.
The True Opening Price is also called the True Day Open.
Daylight Saving Time: 13:00
Standard Time: 14:00
In other words, the daily candle is not formed from 7:00 as we usually see, but the true daily candle starts from 13:00!
The blue line is the regular opening price.
The red line is the Midnight Opening Price.
New York Opening Price
In Japan, it is:
Daylight Saving Time: 21:30
Standard Time: 22:30
I have added it to the previous chart with a green line.
It is quite effective, isn't it!
How to use the opening price
1. Use as DOL (Draw on Liquidity)
Since the opening price is easily recognized, price tends to be drawn to it or bounce off it, meaning it acts as a DOL.
2. Above the opening price is overvalued, and below is undervalued.
If going long, look below the opening price; if short, do the opposite.
3. Determine wick formation
Look for SMT occurring above each opening price to determine the formation of a wick.
A high-probability trade is to go long in a very undervalued market that is below both opening prices.
For a short, do the opposite.
Image
Short when NYO is below MDO
This is a strategy where the daily high is formed during the London session, and since there is distance to the MDO, you sell the retracement at the NYO.
The long position is the opposite.
Short when NYO is significantly overvalued above MDO
This is a highly overvalued case where the daily high is set during the NY session.
You trade aiming for the daily upper wick.
The long position is the opposite.
Practical Example
Buying when NYO is below MDO
Green is Midnight Open
Red is SSL
Blue is New York Open.
When an upward move is expected at an undervalued level where all of these are below, aim for an entry within the red box.
Buying below the opening price means buying at the candle wick, which allows you to aim for a good risk-reward ratio.
This is the daily chart of the above chart.
In this case, entering below the NYO
shows that we successfully captured the wick!
Example 2
I am aiming for an upward move based on daily chart analysis.
An SMT occurred at the red line, which is the SSL.
In other words, there is a possibility that a daily wick has been formed.
Add each opening price.
The red arrow is the daily low.
It would be ideal if you could enter here.
For the actual entry, draw the red line, which is the Key Level, in advance, and prepare for entry once the price reaches it.
This is the 5-minute chart of the above chart.
Define the range and observe the price action.
Before sweeping the Key Level, which is the red line, a false low is created as indicated by the arrow.
This is Deferred Delivery.
This is evidence that fuel has been created to reach the Key Level.
Then, sweep the SSL.
At that time, a Failure Swing is created, generating liquidity in the upward direction.
Click here for Deferred Delivery!
Example 3
There is a daily FVG.
I anticipate a rebound after the price rises to that level.
The price has reached the FVG.
It is currently at a very overvalued level.
I want to go short, but the 4-hour candle is strong.
In this case,
I want to see it either break the red line and rebound, or see an SMT.
Click here for content regarding the 4-hour chart!
1-hour chart
An SMT occurred and a reversal candle was formed!
The rest is up to your preferred entry method, but I will check the range to identify the DOL.
There is an unfilled NDOG at the bottom of the range.
This is the first DOL.
Above that, there is an EQL.
This is the second DOL.
You can short down to these two DOLs.
TP!
Summary
1. Confirm HTF Key Levels
2. Wait for SMT
Long if bullish SMT, short if bearish.
3. Confirm Sweep near Key Level
Sweep of the day's SSL
4. Observe the range and confirm DOL
5. Confirm opening price and structural shift to determine wick formation
It has shifted trend and returned to the MDO.
Since MDO is the DOL, it can be used for a reversal.
6. Look for a reversal on LTF and enter!
7. If there is still distance to the DOL, it's an entry opportunity!
If it were that easy to enter at such a pinpoint, we wouldn't struggle.
It's easy to say in hindsight because the chart is already formed...
So, if there is still distance to the DOL, the rest is buying the dips or selling the rallies!
In this example, there is an hourly OB and an SMT on the LTF, so you can enter there.
Even if you can't catch the wick, the assumption is that the daily low has been set, so you are predicting it won't go any lower.
In conclusion
The purpose of using MDO and NYO is to determine whether the price is undervalued or overvalued and to enter at or near the opening price!
If you ask whether I look at the actual daily opening price, I do look at it.
However, since the daily highs and lows are overwhelmingly created during the London or NY sessions, it is easier to judge the formation of wicks based on the MDO.
I hope this is helpful!