Understanding ICT's Silver Bullet

Introduction to ICT's Silver Bullet

Before delving into the ICT Silver Bullet Trading Model, it's crucial to grasp
the concept of "ticks," "points," and "pips" and their relevance to Forex and
futures trading.

In the context of this model, the minimum trade framework for index futures
or indices should be 10 points (ES) or 40 ticks and 20 points (NQ) or 80 ticks.

For Forex pairs, it should be 15 pips. This framework represents the ideal
price movement you expect to see, not the actual range from your trade entry
to exit. It's important to set realistic expectations and comprehend the
potential of your trades.

Three Time Periods for the Trade

The ICT Silver Bullet Trade can be executed during three specific time periods
throughout the day. These time periods are as follows:

Each of these time periods presents unique opportunities for executing the
Silver Bullet Trade. By understanding the characteristics of each time period,
we can effectively identify potential trade setups and maximize their chances
of success.

Understanding Fair Value Gaps

One of the key elements of the ICT Silver Bullet Trade is the concept of fair
value gaps. A fair value gap is a price range that is left behind after a
directional move in the market. It represents an area where price has the
potential to retrace or continue its momentum.

The Fair Value Gap, also known as FVG, is a widely used tool among price
action traders to identify market inefficiencies or imbalances. These
imbalances occur when there is significant buying or selling pressure,
resulting in a substantial upward or downward movement that leaves behind
a market imbalance.

The concept behind FVGs is that the market will eventually revisit these
imbalances before resuming its movement in the same direction as the initial
impulsive move. FVGs are significant because traders can gain an edge in the
market by utilizing them. Price action traders can use these imbalances as
entry or exit points in their trading strategies.

For a Fair Value Gap to form, there must be a sequence of three candles
characterized by substantial buying or selling in the same direction. When
there is a significant move in either direction, a gap will be formed between
the wick of the first candle and the wick of the last candle, as depicted in the
figures below.
Traders must familiarize themselves with the concept of fair value gaps in
order to effectively execute the Silver Bullet Trade. By identifying these gaps
and understanding their significance, traders can make informed decisions
on when to enter and exit trades.

Importance of Previous Highs and Lows

Another crucial aspect of the ICT Silver Bullet Trade is the consideration of
previous highs and lows. These levels serve as important reference points for
determining potential entry and exit points for trades. By analyzing the
relationship between current price action and previous highs or lows, we can
gain valuable insights into market dynamics and make more accurate trading
decisions. These levels can act as support or resistance, providing traders
with key areas to watch for potential trade setups.
Liquidity Levels and Time Window

Understanding the concept of liquidity levels in trading:

Liquidity is the lifeblood of the markets. Liquidity is what allows anyone to

buy or sell for a profit, or a loss. It is what creates opportunity in the
markets. While liquidity may not hold much significance for a retail trader, it
is of paramount importance to big players who must carefully consider it in
order to execute positions successfully.

To help you better understand what liquidity is, I have drawn some simple
diagram. It illustrates why we refer to certain levels as “liquidity”. The point
is not that the models themselves are liquidity, but that when a certain price
model appears, liquidity is attracted at key levels and price points.

In the figure above, the zones marked in blue are the places where liquidity
accumulates. This is where most trading systems place buy, sell and stop loss
orders.

Types of liquidity:

1. Equal Lows/Highs EQL and EQH.

2. Swing Points - significant swing high or low.
3. Range (the market moves sideways).
 4. Trendline - liquidity behind the trendline: All liquidity accumulates on
highs and lows and that liquidity is not going to be taken immediately.
It remains so that after taking a large position, the price moves freely
and renews the key high of the structure. All liquidity at the bottom
acts as a magnet for the price In the future, the trader can see the
formation of equal EQLs.

Marking buy side and sell side liquidity levels:

*Buy and sell side liquidity (BSL/SSL) are areas of price in which buy stops
and or sell stops are mostly residing. If you can understand the higher time
frame perspectives and see where the “money” is, then you have a bias once
you see price moving off known areas of support or resistance.

Price will seek the liquidity to either reverse or continue in within its
expansion move. If we see price as reversing at the buy or sell side of
liquidity, then we trade the developed price action, if we see price continue to
move through the buy or sell side liquidity.

According to the classics, if there is a bullish structure, that the next high
and low is higher than the previous one, it is this idea that allows a large
player to lure traders into buying and reverse the price after collecting
liquidity. The same is true for the bearish structure. We do NOT buy at the
break of the old HIGH and we do NOT sell at the break of the old LOW!
Reminder: Daily Chart - locate liquidity and imbalances. Hourly Chart -
observe price seeking liquidity or imbalances.

Another words, liquidity is an established level in the market where stops

and orders can be resting, leaving these areas exposed for smart money to
hunt these areas taking stop losses and triggering new buy and sell orders
into the market.

The more liquidity accumulates above a significant price level, the more likely
that liquidity will be taken. Where the price consistently bounce from the level
of support or the level of resistance several times, there is a huge number of
stops of some players and orders in the opposite direction of another players. It
is important to focus on finding such places, as you can find great entries after
collecting liquidity. The more bounces, the better.

Identifying the preferred price range:

• The ICT mentions that the preferred price range is when the price is
in the middle of the liquidity levels.
• This indicates that there is a balance between the buying and selling
pressure in the market.
• Traders can use this information to determine potential entry points
for their trades.
***Traders should wait for the price to take the buyside or sellside of the
liquidity levels within this time window before considering a trade.

By marking buy side and sell side liquidity levels, traders can determine areas
of high concentration of buyers or sellers. The preferred price range is when
the price is in the middle of these levels, indicating a balance between buying
and selling pressure.

Analyzing the First Time Period (3 AM - 4 AM New York Time)

Identifying the first Silver Bullet time period

Let's dive into a trade example within the first Silver Bullet time period. We'll
go through the steps involved in analyzing this trade and understanding its
potential.

1. Directional Move: The Silver Bullet trade begins with a directional

move either up or down. In our example below, the price initially
moves down.

2. Fair Value Gap: After the directional move, a fair value gap is left
behind. This gap is an important indicator for the Silver Bullet trade. It
signifies a potential trading opportunity.

3. Market Structure Shift after taken liquidity. Market Structure Shift

(MSS) - is a shift in direction of price delivery. When price is going in a
direction and shifts to the exactly opposite. It occurs when price takes
 out previous short-term lows or highs within a trend. Identifying these
shifts allows for an understanding on which side of the market to be
trading with. Market structure shifts must be energetic and leave
behind displacement to ensure that market is looking to reverse.

4. Displacement is a location in price where someone with a lot of money

comes into the marketplace with a strong conviction to move price
higher or lower very quickly. Displacement is characterized by strong
and quick price movement that leave behind Fair Value Gaps.

Again, a displacement candle is a candle that breaks through a previous high

or low. When there is displacement over structure, it means that the price
has broken through a key level of support or resistance. Conversely, a lack of
displacement occurs when the price fails to break through a previous high or
low. Identifying displacement is important because it can signal a trend
reversal or continuation. To identify displacement, look for aggressive moves
and closes below a low or above a high. In a bullish trend, look for lows taken
without displacement as potential long entries. In a bearish trend, look for
failures to displace over highs as potential short entries. For example, if the
price breaks below a low but immediately moves back into the range, it is not
a displacement candle. On the other hand, if there are large aggressive
candles down, that is displacement over structure.

5. Entering the Fair Value Gap: Once the fair value gap is identified, we
enter inside it. This means we take a position in the market.
 6. Target and Exit: In the Silver Bullet trade, I aim for at least a 2R trade.
This means I stay in the trade for a minimum of 2R target will be
reached.

Analyzing the Second Time Period (10 AM - 11 AM New York

Time)

According to ICT, the second Silver Bullet trade formation occurs between 10
AM and 11 AM New York time.

During this time frame, we wait for the market to be bearish/bullish with
relative equal lows/highs and sell/buy side resting below/above. This is
followed by a fair value gap, which is a bearish/bullish FVG. When the market
trades up/down into this gap, we can sell/buy short.

It is important to note that the trade is many times held in duration longer
than the window that the framework and entry is derived from. This means
that you're looking for the setup to form to get you into the trade within the
scope of 10 o'clock to 11 o'clock near local time. Shorting/Long into the FVG
and covering at the old low/high allows for at least 5 handles. The key
takeaway is to focus on the skill set first and look for high probability trades
using the framework.
Every day between 10am & 11am EST, identify an obvious pool of liquidity
that has not been tapped into or engaged.

Wait for displacement (use 1-3-5m) towards liquidity pool between that
time. Find a FVG (FVG has to be opposite the targeted liquidity pool).

Wait for price to trade back into FVG and then reprice out of the FVG towards
the targeted pool of liquidity.

Using Fibonacci retracement to determine entry points, stop loss, and

potential targets

AM SESSION RANGES: 9:30am TO NOON NY (ETH).

PM SESSION RANGES: 1:30pm to 4:00pm NEW YORK LOCAL TIME.

Analyzing the Third Time Period (2 PM - 3 PM New York Time)

The PM Session Silver Bullet (2 PM — 3 PM New York local time).

Identify an obvious pool of liquidity that has not been tapped into or
engaged. I recommend watching short-term liquidity level around 1:30-2:00
PM.

Wait for displacement (use 1-3-5m) towards liquidity pool between that
time. Find a FVG (FVG has to be opposite the targeted liquidity pool).
Wait for price to trade back into FVG and then reprice out of the FVG towards
the targeted pool of liquidity.

Again, we can consider AM Session BSL/SSL or NY Lunch BSL/SSL as our

obvious pool of liquidity that was taken. Then we can wait for MSS and
displacement.
In addition to fair value gaps, ICT also mentions the use of order blocks and
Fibonacci retracement levels for identifying entry points, setting stop losses,
and determining potential targets.

• Order blocks are areas on the chart where significant buying or selling
activity has occurred. These levels can act as support or resistance,
providing potential entry points for trades.

The logic of order block is that a major player moves the price up or down in
search of liquidity, actually blocking their positions in the OB area and
making them unprofitable. To close a trade in the zone of interest, they need
the price to return to the order block, after which it will continue to move in
the opposite direction.

The Order Block is validated when the high of the lowest down close candle
or the low of the highest up-close candle is traded through by a more
recently formed candle.

Ideally the best OB will not see the price trade down below the midway point
(mean threshold) of the entire body of the candle (bearish).
 • Fibonacci retracement levels are based on the Fibonacci sequence and
are used to identify potential price reversals. Traders often look for
retracements to key Fibonacci levels, such as the 50% level, to enter
trades.

Backtesting is a crucial step in the trading process as it helps traders gain

insights into the effectiveness of their strategies and make informed
decisions.

For example, a trader identifies a fair value gap on a candlestick chart and
sets entry and exit points based on the gap.

The trader enters the trade just inside the gap and places a stop-loss below
the low of the gap.

The trader sets a target based on their risk-reward ratio. After monitoring
the price movement, the trader assesses whether the price moves in the
intended direction and reaches the target. This analysis helps the trader
determine the effectiveness of the fair value gap strategy.

Entry Criteria for Sell Trade

1. Waiting for price to take the buy side of the sell side liquidity

• Start by marking the liquidity levels on both the buy side and sell
side.
• The ideal entry point is when the price is in the middle of this range.
• Wait for the price to take the buy side of the sell side liquidity.
2. Market structure shift and entering the sell trade at the edge of imbalance
or fair value gap

• Look for a market structure shift as an additional confirmation for

the sell trade.
• Enter the trade at the edge of imbalance or fair value gap.
• This is the best scenario that could happen with all the
confirmations in place.

3. Additional confirmation through the break of mini trend and classic

reversal schematic

• Wait for the sell side liquidity to be taken for extra confirmation.
• Look for a break of the mini trend as another signal.
• Pay attention to the market structure shift and the classic reversal
schematic.
• Enter the trade at the FVG.

Additional Considerations

• In some cases, there may be aggressive buy liquidity sweeps, which

create an imbalanced zone.
• Be flexible in these situations and adapt the entry criteria
accordingly.
• Remember, price might sweep the liquidity levels, so stay vigilant.

Entry Criteria for Buy Trade

1. Waiting for Sell Side Liquidity

The first step in the entry criteria for a buy trade is to wait for the sell side
liquidity to be taken for extra confirmation. This means that we need to
observe the market and wait for the price to take the buy side of the sell side
liquidity. This provides us with additional confirmation that the market is
shifting in our favor.
 2. Market Structure Shift and Fair Value Gap

Once we have confirmed the buy side liquidity, the next step is to wait for a
market structure shift. A market structure shift refers to a change in the
overall trend or direction of the market. We need to wait for this shift to
occur before entering the buy trade.

When the market structure shift occurs, we look for a fair value gap. This is a
price level that is considered fair based on the current market conditions. We
want to enter the buy trade at this fair value gap, as it provides us with the
best scenario for a successful trade.

3. Exploring the Best Scenario with Confirmations

In the best scenario, we have all the necessary confirmations for a successful
buy trade. This includes the sell side liquidity being taken, a market structure
shift, and a fair value gap. When all these confirmations align, it increases
the likelihood of a profitable trade.

It is important to note that there may be other variables and factors to

consider for this entry type. For example, aggressive liquidity sweeps may
occur, where price creates an imbalanced zone without a clear market shift.
In such cases, we still follow the same rule of entering at a fair value gap or
imbalance.

Applying the Concepts on Charts

Identifying buyside and sellside liquidity on a 5-minute timeframe.

• On a 5/15-minute timeframe, it is important to identify the buy side

and sell side liquidity levels. These levels represent areas where
there is a significant amount of buying or selling pressure.
• Also, it is important to keep AM, PM Session Range Liquidity Levels
on your chart.
Observing the market structure shift and price pullback

• As we analyze the chart, we need to observe the market structure shift

and price pullback. These are key indicators of a potential trade
opportunity.

Identifying FVGs and entry levels

• In order to enter a trade, we need to identify FVGs and entry levels.

These gaps occur when there is an imbalance between buyers and
sellers, creating an opportunity for price to move in a specific
direction.
• The entry levels can be determined by waiting for price to take the
buy side of the sell side liquidity, followed by a market structure
shift. This shift confirms a potential reversal and provides a clear
entry point.
• On the other hand, for the sell side liquidity, we wait for it to be
taken and for a break of the mini trend. This confirms a shift in
market structure and allows us to enter a buy trade at the fair value
gap.

Analyzing Market Shift in Upside Direction

To begin, we need to shift our focus to a 1-minute timeframe. By zooming in

on smaller time intervals, we can better detect subtle changes in market
dynamics. This allows us to be more precise in our analysis and decision-
making.

Once we have shifted to the 1-minute timeframe, we can start identifying the
structure and lines that will aid our analysis.

To validate the market shift in the upside direction, we need to look for a
clear break of the last lower high. This break indicates a change in the
pattern of lower highs and suggests a potential upward movement in the
market.
By closely monitoring the price movements and comparing them to previous
highs, we can identify this break and use it as a signal to enter the market. It
is worth noting that this confirmation should be supported by other technical
indicators and analysis methods to increase the reliability of our decision.

Analyzing market shifts in the upside direction requires us to shift to a 1-

minute timeframe, identify the structure and lines for better understanding,
and confirm the shift with a clear break of the last lower high.
Putting It All Together

1. The Silver Bullet trade is a directional move either up or down,

followed by a fair value gap left behind.
2. It can occur during three time periods: 3 AM to 4 AM, 10 AM to 11 AM,
and 2 PM to 3 PM, all in New York time.
3. The goal is to enter inside the FVG and aim for at least a 2R trade with
specific target levels.

Creating a Personalized Trading Plan

Now that we have a solid understanding of the ICT Silver Bullet Trade
strategy, it's time to create a personalized trading plan based on the concepts
we have learned. Here are some steps to consider:

1. Identify your preferred time period: Determine which of the three time
periods align with your trading schedule and preferences. This will help
you focus on specific opportunities and avoid unnecessary distractions.

2. Define your entry criteria: Based on the strategy, you need to identify
the directional move and FVG. Determine the specific criteria you will
use to enter a trade, such as waiting for a certain price level or pattern
confirmation.

3. Set your stop loss and target levels: Determine your risk tolerance and
set appropriate stop loss levels to protect your capital. Additionally,
identify potential target levels based on previous highs or lows, or
areas of opposing liquidity.

4. Incorporate Fibonacci retracement levels: As we have seen in the

examples, Fibonacci retracement levels can be used to pinpoint entry
levels within the fair value gap. Experiment with different Fibonacci
levels and find what works best for your trading style.

Developing a Systematic Approach

To effectively trade the ICT Silver Bullet strategy, it's important to develop a
systematic approach that you can consistently follow. Here are some steps to
consider:

1. Create a checklist: Develop a checklist that includes all the criteria you
have identified for entering a trade. This will help you stay disciplined
and avoid impulsive decisions.

2. Practice patience: Understand that not every time period will offer a
Silver Bullet trade opportunity. Be patient and wait for the right
conditions to align before entering a trade.

3. Backtest and analyze: Take the time to backtest previous fair value gaps
and analyze the results. This will help you gain confidence in the
strategy and identify any patterns or adjustments that can improve
your trading.

4. Journal your trades: Keep a trading journal to record your trades,

including the reasons for entering and exiting, as well as the outcome.
This will allow you to review your performance and make necessary
adjustments.