Last Updated on 3 months by ICT Team
Dive into the world of ICT Power of 3 and uncover the methods employed by smart money to ensnare traders. Gain a deep understanding of how big banks operate, reap significant profits, and trap retail traders.
This blog post is your guide to comprehending the essence of the Power of 3 ICT concept. Join us as we take a closer look at the ICT Power of 3, boosting your trading knowledge along the way.
ICT Power of Three – An Overview:
The ICT Power of Three (PO3) is a strong and proven trading strategy that focuses on three main phases – accumulation, manipulation, and distribution.
PO3’s goal is to find specific patterns in the way prices move, so traders can make informed decisions in both bullish and bearish markets. What makes this strategy great is its flexibility – it can be used on different timeframes and with various financial instruments.
Main Component of ICT Power of 3 or PO3
1. Accumulation Phase
The accumulation phase is a stage within a financial market’s price movement where smart and informed traders start gradually buying a particular asset, such as stocks or cryptocurrencies, at or around a certain price level. During this phase, the asset’s price tends to rise slowly and steadily as buyers accumulate more shares or units of the asset.
The term “accumulation” implies that these informed traders are acquiring the asset in larger quantities, indicating their confidence in its potential future growth. They believe that the asset’s value is currently lower than its true worth or that it has the potential to increase significantly in the future.
2. Manipulation
When informed money trades below the open price in a bullish and trades above the open price in a bearish market to stop loss and kick out the early buyers or sellers.
3. Distribution
In Forex trading, distribution refers to the process of selling off a large amount of a currency that a trader has accumulated over time. This selling can cause the currency’s price to decrease, especially if it happens quickly.
In a bullish market, distribution occurs when the buying pressure gradually decreases. As a result, the price starts to fall slowly because more people are selling their positions than buying. This phase typically comes after a period of rising prices, signaling that the upward trend might be coming to an end.
In a bearish market, distribution happens when the selling pressure decreases steadily. This leads to a gradual price increase because more traders are buying back their positions than selling. This phase usually follows a period of falling prices, suggesting that the downward trend may be nearing its conclusion.
Understanding the distribution phase is crucial for traders because it provides valuable insights into market trends and potential reversals. By closely monitoring the market during this phase, traders can make informed decisions and potentially benefit from price movements.
Bullish ICT Power of Three PO3:
The market enters a range (accumulation phase).
The market sells off below the range, creating liquidity (manipulation phase).
Price expands upwards, breaking market structure with strong bullish candles (distribution phase).
Retracement to the range high is awaited, and a long position is entered with a stop loss below the range low, targeting the distribution high.
In a bullish scenario, we enter in buy when the price is below the open value.
Bearish ICT Power of Three PO3
The market enters a range (accumulation phase).
Price expands downwards, breaking the market structure with strong bearish candles (distribution phase).
Retracement to the range low is awaited, and a short position is entered with a stop loss above the range high, targeting the distribution low.
In a bearish scenario, we enter in short when the price is above the open value.
Preferred Time Frame:
The preferred time frame for this strategy is between 5 to 15 minutes.
Mastering the ICT Power of Three (PO3):
- Anticipate Market Direction: The first step is to identify your market expectation for the day – bullish or bearish. This sets the foundation for the Power of Three strategy.
- Align Your Trade Entry: Once you have a clear market outlook, align your trade entry accordingly. Buy below the open price for upward movements and sell above the open price for downward movements.
- Combine with Technical Analysis: Enhance the Power of Three by integrating technical analysis tools such as chart patterns, moving averages, and support and resistance levels. Technical analysis provides additional confirmation for your trades.
- Embrace the Phases: Extend your knowledge to encompass the accumulation, manipulation, and distribution phases. Recognize the patterns within these phases to enter positions at opportune moments.
Chart Examples of ICT P03
Conclusion:
The ICT Power of Three (PO3) stands as a powerful and versatile trading strategy, combining simplicity with multi-phase precision. By aligning your trades with market direction and leveraging technical analysis, you gain a strategic edge in the ever-changing financial markets. Embrace the dynamics of accumulation, manipulation, and distribution phases, and apply the PO3 strategy confidently in both bullish and bearish conditions.
As with any trading approach, continuous learning, disciplined practice, and prudent risk management are essential. ICT Power of Three (PO3) be your trusted ally in navigating the complexities of the financial world!
Post a Comment