What it means
ICT's idea: price moves from external to internal liquidity and back.
In practice
The idea gives price a rhythm to follow. After taking the stops beyond a range's high or low, price is expected to head back inside to fill a gap, and after filling a gap inside the range it is expected to head for the outer highs or lows.
Traders use it to choose targets: a trade entered from a fair value gap inside the range aims for the liquidity beyond its edge.
What to watch for
This is a way of organising expectations, not a law. The sequence often plays out over more time and with more back and forth than the tidy description suggests.
Related terms
3 terms- Fair value gapFVGA three-candle gap where candle 1's wick and candle 3's wick don't overlap, left by a fast move.
- Dealing rangeThe range between the swing low and swing high of the current leg, usually the one that broke structure.
- LiquidityIn SMC, the pools of resting orders, especially stop-losses, that sit beyond obvious highs and lows.