ICT Liquidity Setup Guide — Step-by-Step Guide & Transcript

[00:02] episode of Smart Risk. In today's video, I'm going to break down one of the most powerful smart money concepts and ICT's trading strategy. A strategy that has the potential to skyrocket your win rate and help you consistently find A+

[00:17] This is not just a random setup or some basic concept. It's an advanced trading model that combines liquidity, fair value gaps, and market session timing into one complete system. So, make sure you watch until the end

[00:31] because I'm going to walk you through it step-by-step and show you exactly how to apply it on your own charts using clear mechanical rules and a clean, actionable roadmap. We always appreciate your support. So,

[00:44] please give this video a thumbs up and subscribe to our channel if you are new. subscribe to our channel if you are new. See you after the intro.

[01:01] So, let's get started. This powerful trading model is one of the most today's markets. It works so well because it combines multiple key elements into one complete system.

[01:15] Higher time frame dynamic liquidity delivery, external liquidity sweeps, and session timing all aligned within a single trading plan. And when all of these factors come together, they create high probability

[01:27] setups that can consistently deliver A+ trades with strong win rates. In a bullish scenario, this setup forms when price sweeps sell-side liquidity from a key level right before tapping into an unmitigated bullish fair value

[01:41] gap. Then price quickly reverses back inside continues pushing higher. But keep this in mind. Not every liquidity sweep at a random time, combined with a random fair value gap,

[01:55] will yield A+ setups. For the best results, you need proper alignment with specific time windows and time frames. In a bearish scenario, the same concept applies in reverse.

[02:08] Price sweeps by-side liquidity from a key level at a specific time, taps into an unmitigated bearish fair value gap, and then quickly reverses lower. But once again, for this setup to work

[02:22] met. Before we go deeper into those conditions and see exactly how this setup plays out, let's first understand powerful. The logic behind this setup is simple,

[02:36] but extremely effective. The real edge appears when the market sweeps liquidity and mitigates a fair value gap at the same time. When price takes liquidity near a key level, such as a swing high or swing

[02:49] while also filling a fair value gap, it removes two major sources of pressure from the market at once. First, the liquidity imbalance inside the fair value gap, and second, the stop losses of early traders who entered too

[03:04] Once both of those are taken out, the path becomes much cleaner for price to liquidity pool. And that is exactly what makes this setup so effective. It's not just a technical pattern. It's

[03:17] built on real market logic. Now, let's break this setup down step-by-step and see exactly how to execute trades with it. To take advantage of this powerful setup in a bearish scenario, the first step is

[03:29] to identify a previous session high that sits just below an unmitigated 15-minute fair value gap. For example, if you're trading the London session, you want to focus on the Asian session high that forms right

[03:42] below a 15-minute unmitigated fair value gap. Then, wait for London to open and monitor price action closely. the Asian high, taps into the 15-minute fair value gap,

[03:57] the range. That gives you your first layer of confirmation. From there, we zoom into a lower time frame, such as the 5-minute or 1-minute chart, to track the higher time frame

[04:10] delivery and look for reversal confirmations. This is where your entry model must appear before opening a trade. At this stage, if I'm using the 1-minute chart, I usually prefer to look for an

[04:23] inversion fair value gap forming right after the liquidity sweep. But if I'm using the 5-minute chart, I prefer looking for a breaker block, prefer looking for a breaker block, mitigation block, or IFVG

[04:35] that forms after the manipulation move. Now, in the next step, if we are using the 1-minute time frame, we look for a violated fair value gap that flips into an inversion fair value gap. This becomes our second layer of

[04:48] confirmation. Once the IFVG forms, it often acts as a new resistance level, giving us a strong area for a potential sell entry. And if a market structure shift happens at the same time, that adds another

[05:02] powerful layer of confluence and makes the setup even stronger. With these confirmations in place, we can expect price to retrace back into the IFVG, now acting as resistance, before

[05:14] continuing lower toward the next sell-side liquidity pool. For placing an entry using this model, you have two options. mind that you can always add extra confluences, such as a V-shaped recovery

[05:28] or a change in the state of delivery. Now, here's exactly how I place the Option one, enter immediately after the IFVG forms candle open with the stop-loss placed above the most

[05:43] recent swing high. Option two, place a sell limit at the lowest point of the newly formed IFVG and wait for price to retrace into the zone and activate your entry.

[05:56] zone and activate your entry. For take profit, you have a few choices. liquidity point on the 1-minute time frame. Or if you're aiming for a bigger move, target the Asian session midpoint or the Asian low.

[06:10] Another clean approach is using a fixed risk to reward target like 2.5 or 3 R to R depending on your style. Now, in cases where price has already started moving in my expected direction and my first position is already running

[06:25] in profit while there is still enough room for price to continue lower, I often look for an add-on continuation entry. This usually happens when price creates a new bearish fair value gap during the

[06:37] bullish pullback that follows the new break of structure. In that case, the next unmitigated bearish fair value gap becomes our second entry point where we can place another sell limit order with the stop

[06:49] loss a few pips above the most recent swing high. if you're looking for a trusted prop firm with fast and reliable payouts, then you need to check out Funded Next. Funded Next is one of the pioneer prop

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[07:32] the link in the description. However, if you choose the 5-minute chart as your entry time frame, then right after the liquidity sweep and higher time frame fair value gap delivery, you must look for either a

[07:44] breaker block or a mitigation block. For a valid bearish breaker block, price should first create a swing high, then a swing low, followed by a higher high. After that, we need to see an immediate bearish expansion that breaks the

[07:59] structure and confirms the shift. In this case, the down close candle, or series of down close candles, formed between the first swing high and the zone. This is the area where we plan our short

[08:14] The next step is to place a sell limit order at the lowest point of that breaker block and wait for the price to retrace into it. Now, keep in mind, this is different from a mitigation block because with a

[08:27] mitigation block, we look for a lower high, not a higher high. So, for a valid bearish mitigation block, the price must first create a swing high, then a swing low, followed by a lower high.

[08:40] After that, we need to see a strong bearish displacement that breaks below In this case, the mitigation zone becomes the last down close candle, or series of down close candles, formed between the first swing high and the

[08:55] Then, we place a sell limit order at the lowest point of that mitigation block with a stop loss a few pips above the nearest swing high and wait for the price to retrace into the zone. If the first trade is already running in

[09:10] profit, we can always add another position as a continuation setup if price forms a new bearish fair value gap during the next pullback. In that case, the next unmitigated bearish fair value gap becomes our

[09:23] second entry zone. Now, before going any further, let's go through a few pro tips. Usually, the higher time frame fair value gap forms after price experiences a strong move during the previous day's

[09:37] session or over the past few sessions. Also, this setup can remain valid every time price sweeps a previous session high and fills the higher time frame fair value gap. But, keep this in mind.

[09:51] This setup only remains valid until price fully mitigates that 15-minute fair value gap. So, the moment the upper fair value gap is completely filled the setup starts to lose its probability and is no longer as

[10:04] Let's put everything together and move into some real chart examples to see exactly how to apply this trading model step by step. Here we have the Euro/Dollar 15-minute chart on the screen.

[10:16] As you can see, price created a large unmitigated fair value gap during the Asian session and it has remained unfilled for some time. notice that the New York session high is sitting just below that higher time

[10:30] frame fair value gap. So, everything we need for this setup is already in place. We have an unmitigated bearish higher time frame fair value gap. And we also have a key buy side

[10:42] liquidity level created by the New York high sitting right beneath it. That means all the conditions are met. So, now the next step is simple. We wait for the price to sweep the New York high, tap into the higher time

[10:56] frame fair value gap and then reject back below the range. Now, as you can see, once London opens, price starts pushing higher. tapping into the 15-minute fair value gap it begins to show rejection.

[11:14] At this point, I zoom into the 1-minute chart to closely monitor for reversal chart to closely monitor for reversal signs. clearly see that after sweeping the liquidity above the New York high and

[11:27] delivering into the higher time frame fair value gap price immediately drops back inside the New York highs range. At this point, everything looks clean. But before opening a position, we still need an entry model to appear.

[11:42] If you look closely, you can see that after entering the manipulation phase and mitigating the higher time frame fair value gap, price starts pushing lower and first violates this large bullish fair value

[11:54] gap, flipping it into an inversion fair value gap. Then, at the same time, price gives us a CISD confirmation by closing below the bullish candles that led into the sweep, while also forming a market structure

[12:07] shift. That gives us full confirmation. Once the IFVG forms, it is likely to act as a new resistance zone, giving us a strong area for a sell entry. So, in the next step, I immediately open

[12:22] a sell position at the open of the next candle, right after the IFVG forms, with the stop loss placed above of the most recent swing high. For take profit, I target the nearest buy side liquidity on the current time

[12:36] frame, which gives us almost a 2.5 R-to-R setup. R-to-R setup. Now, let's play the chart forward.

[12:53] price pushes lower and eventually hits the take profit cleanly. Now, let's move on to the next real chart example. Here, once again, we have the Euro dollar 15-minute chart on the screen.

[13:05] As you can see, we have an unmitigated 15-minute bullish fair value gap formed during the London session, sitting just below the New York low. So, the next step is to wait for the price to sweep the New York low, tap

[13:18] into that fair value gap, and then immediately show rejection. can see that as Asia closes, price pushes lower, sweeps the lowest point of

[13:31] the New York low, and then immediately starts to reject. At this point, I zoom into the 1-minute chart to closely monitor for reversal chart to closely monitor for reversal signs and a valid entry.

[13:46] has formed a bullish market structure shift along with a breaker block. followed by a lower low, and finally a bullish displacement move that breaks

[14:00] the structure and confirms the shift. becomes the two consecutive up close candles formed between the first swing low and the swing high. With these confirmations in place, we

[14:14] can anticipate that the price will retrace back into the breaker block zone before continuing higher. So, in the next step, I place a buy limit order at the highest point of the breaker block with the stop

[14:26] loss below the swing low. For take profit, I target the nearest key buy-side liquidity on the current time frame, liquidity on the current time frame, which gives us almost a 3.5 R2R setup.

[14:40] Now, let's play the chart forward. As you can see, my order gets triggered and the price continues pushing higher as expected. Now, in cases where price has already started moving in my expected direction

[14:53] and my first position is already running in profit, I often look for an add-on continuation entry. This usually happens when price forms a new bullish fair value gap during the pullback that follows the new break of

[15:05] structure. So, here, for my second entry, I place a buy limit order at this bullish 1-minute fair value gap the most recent swing low while targeting the London high.

[15:30] As you can see, price pushes slightly lower, triggers our second buy order, and then quickly reverses with strong bullish momentum, eventually hitting the take profit on both trades, once again proving how effective this model can be.

[15:45] That's it, traders. Thanks for watching. I hope you found this video valuable. If notifications so you never miss an update. Drop a comment below with your thoughts or topics you'd like to see next.