Optimal Trade Entry in ICT - What Is It and How Does It Work? (2024)


  • The OTE in Inner Circle Trading is the zone where retail traders are likely to get the best return for their risks if they place their entries there.
  • The two keys in identifying an OTE are trend identification and Fibonacci Retracement levels.
  • Combining OTE with other trading strategies is the best way to maximize its potential in the forex market.

Do you ever feel like you’re never able to catch trends at the best spots? Your stop loss is either too much or too little, making your profit target a little too far beyond reach or too little. Inner Circle Traders (ICT) have a concept to help you do that: Optimal Trade Entries (OTE), which is the range between the 0.62 and 0.79 levels of the Fibonacci Retracement tool.

This technique leverages price action analysis and Fibonacci retracements to identify high-probability entry points within established trends. By understanding where “smart money” might enter the market, OTEs aim to help you get the best reward for your risk.

After going through this piece, you’ll understand:

  • What Optimal Trade Entry is about.
  • How to identify it on your chart, and,
  • How to trade it.

Optimal Trade Entry in ICT - What Is It and How Does It Work? (1) Table of Contents

  • What is the Optimal Trade Entry in ICT?
  • How Do You Identify Optimal Trade Entry (ICT) Zones in Your Chart?
  • Optimal Trade Entry: Setup and Rules
  • How Do You Trade Using the Optimal Trade Entry Strategy?
  • How Do You Learn the ICT Optimal Trade Entry?

What is the Optimal Trade Entry in ICT?

The Optimal Trade Entry, as the name implies, is the zone where you’re likely to get the best reward for your risk. It is the range between the 0.62 to 0.79 levels of the Fibonacci retracement tool. According to the ICT trading methodology, this zone is where your risk is neither too little nor too high and is likely to give you the best return.

Optimal Trade Entry in ICT - What Is It and How Does It Work? (2)

The core principle lies in recognizing temporary price retracements within an established trend. Markets rarely move in a straight line, and these retracements offer potential entry points for capitalizing on the trend’s resumption.

By combining price action analysis, Fibonacci retracements, and an understanding of smart money behavior, OTEs equip you with a targeted approach to entering trades. The core idea is to align your entries with the potential moves of these big players, riding the trend wave they might be creating.

How Do You Identify Optimal Trade Entry (ICT) Zones in Your Chart?

Generally, due to the theory behind Optimal Trade Entry, OTEs are more effective in a trending market. When the price is trending, it forms higher highs and lows in a bullish trend and lower highs and lows in a bearish trend. This makes it easier for a trader to identify OTEs in trending markets rather than sideways market conditions.

With this understanding, here’s how to identify Optimal Trade Entry Zones in your chart in two steps.

1. Trend Confirmation: The first step is to confirm a clear uptrend or downtrend using market structure analysis. Higher highs and higher lows denote an uptrend, while lower lows and lower highs denote a downtrend.

2. Fibonacci Retracement Levels: Once you have a confirmed trend, Fibonacci retracement levels are overlaid on the price chart spanning across the swing points. For that matter, you need to learn how to use the Fibonacci retracement tool. The OTE zone typically ranges from 0.62 to 0.78. This zone represents a potential retracement area where prices might stall or reverse before continuing the trend.

Check out our daily market analysis page for insights about leading FX pairs, global indices, and commodities.

Optimal Trade Entry: Setup and Rules

The Optimal Trade Entry zone uses different levels of the Fibonacci retracement from the tool’s default settings. For the ideal OTE setup, edit your default Fib levels according to the following settings.

Fibonacci Retracement LevelDescription
0First Profit Scale
0.62OTE Boundary 1
0.79OTE Boundary 2
1Starting Position
-0.5Target 1

Take note that the actual OTE level is 0.705, but anything between 0.62 and 0.79 still falls within the OTE boundary.

If you’re on the TradingView charting software, this is what the OTE Fibonacci levels are likely to look like for you:

Optimal Trade Entry in ICT - What Is It and How Does It Work? (3)

How Do You Trade Using the Optimal Trade Entry Strategy?

The OTE is one of the most straightforward ICT tools with which you can make trade entries, and there are two ways to go about this:

1. Entering Trades Directly on the OTE

The first and most direct way to use the OTE is to set limit orders at the OTE zone. It gets even better when this OTE zone coincides with another important Inner Circle Trader concept, e.g., Fair Value Gaps or Breaker Blocks.

In the EURUSD chart below, for instance, the market is in an uptrend because we have a series of higher highs (HH) and higher lows (HH). To confirm this, we use the 50-period Exponential Moving Average indicator, which clearly shows that the price is in an uptrend because the line is below the price.

Optimal Trade Entry in ICT - What Is It and How Does It Work? (4)

We then draw the Fibonacci retracement tool with the OTE settings from the most recent low to the most recent high. Notice how our OTE coincides with a huge FVG roughly at the same level, confirming our trade.

Optimal Trade Entry in ICT - What Is It and How Does It Work? (5)

Next, place a buy limit order at the 0.62 OTE level, which is the upper boundary. If you’re feeling good about your chances, you can lower the limit order to the 0.705 OTE level. Our stop loss is just underneath the most recent swing low, and our first profit target is the previous high.

Optimal Trade Entry in ICT - What Is It and How Does It Work? (6)

The chart below shows that the price dips into the OTE level and immediately rises to continue its trend.

Optimal Trade Entry in ICT - What Is It and How Does It Work? (7)

The advantage of using the OTE this way is that it simplifies things. You don’t need to worry too much about other complicated trading strategies or concepts. You just confirm the trend, map out your OTE, and then set a limit order in the direction of your trend.

On the flip side, this strategy does not always guarantee trade entry opportunities. The price won’t always return to the OTE, so you’ll miss out on some chances using this method. Also, there’s no way to confirm that the price will hit your OTE level and reverse, which is what this next strategy attempts to tackle.

NOTE: The forex market is fractal, so chart patterns often replicate themselves across various timeframes. So, whether you’re into day trading or swing trading, the ICT OTE still works.

2. Combining the OTE With Other ICT Concepts

This second OTE trading strategy involves other ICT concepts. As a result, it can fit into any ICT trading strategy.

In the chart below, for instance, we plot the Fibonacci OTE on the EURUSD. It’s bearish on the daily chart because we have a series of lower highs and lower lows forming.

Notice that this OTE coincides with a breaker block from the past and a more recent order block. These two extra ICT concepts add confluence to our OTE level. As the price retraces into this OTE zone, we dip into the hourly timeframe to scout trade entries.

Optimal Trade Entry in ICT - What Is It and How Does It Work? (8)

On the hourly chart, notice how a Market Structure Shift appears, confirming that the trend is indeed about to reverse at the OTE. Another confirmation is that the price first dipped into the order and breaker blocks, which tend to reverse the price.

Optimal Trade Entry in ICT - What Is It and How Does It Work? (9)

What we do next is to simply get it on the trade. One way to do this is to wait for the price to retrace into the nearest FVG. Another way to enter a trade is to plot another OTE on this smaller timeframe and get in that zone. You could also identify another order block and place your trade there. There are so many ICT concepts and so many ways to use them.

For the sake of our example, though, we’ll simply enter the FVG that led to the Market Structure Shift. We’ll place our stop-loss at the top of the daily swing high, and our profit target will be the daily swing low.

Optimal Trade Entry in ICT - What Is It and How Does It Work? (10)

If you’re feeling aggressive, you can place your stop loss above the breaker block and target the daily swing low. This will give you a bigger risk-to-reward ratio, but your stop loss will be smaller.

How Do You Learn the ICT Optimal Trade Entry?

The OTE is one of the most straightforward concepts in Inner Circle Trading. Yet, using it in isolation is not the best approach. You’ll need to learn and combine other ICT concepts with the OTE to get the best out of it. Even non-ICT trading strategies can work with the OTE.

To start with, here’s a list of 14 key ICT concepts you’ll need to know to help you get the best out of the OTE. That’s the first step you need to take to learn how to trade OTEs.

But you also need to remember that while ICT concepts can be easy to understand, they can be tricky to use on the chart. That’s why you should have a guide who can look over your shoulders as you learn to trade. Our resources about trading can give you the push not only to learn the basics of trading but also how to trade using smart money and ICT trading strategies.

Optimal Trade Entry in ICT - What Is It and How Does It Work? (2024)


Optimal Trade Entry in ICT - What Is It and How Does It Work? ›

Optimal Trade Entry

What is the ICT trading entry model? ›

The Inner Circle Trader (ICT) Trading Strategy is a strategy that empowers traders with a deep understanding of how the market functions that is the structure of the market and how institutional players or traders influence price movements.

How does ICT trading work? ›

The ICT strategy allows traders to recognize patterns of market manipulation, such as stop hunts and false breakouts, which institutional traders often employ to manipulate prices. Stop hunts are deliberate market movements by institutional traders to trigger stop-loss orders of retail traders before a reversal.

What is optimal trade entry in Tradingview? ›

Optimal Trade Entry is a concept taught by the Inner Circle Trader utilizing fibonacci retracements to gauge when price is considered in Premium or Discount. When price reaches 62% retracement of the anchored swings, price enters an area considered for an optimal trade entry.

How do you take perfect entry in trading? ›

Deciding the Entry Right Price

Utilise technical analysis tools like Support and Resistance levels, Fibonacci retracements, and candlestick patterns to pinpoint optimal entry points. Avoid entering trades at extreme price levels or when there is uncertainty in the market, as this could expose you to higher risks.

What is optimal trade entry in ICT pattern recognition? ›

The ICT (Inner Circle Trader) Optimal Trade Entry (OTE) is a trading concept developed by Michael J. Huddleston, focusing on precision entry points within the Forex market. This strategy leverages the natural retracement phases of price movements to identify high-probability entry points for trend continuation trades.

What are the 4 stages of ICT? ›

This article maps the development of four convergent stages of ICT development: pictography, ethography, phonography, and prography. The stages are developed onto- and phylogenetically.

Is ICT trading worth it? ›

So, yes, the ICT methods are profitable if you refine, backtest, and study them over the course of many months. If you're expecting to just copy and paste the strategies and become profitable overnight, this won't be happening.

Which is better, ICT or SMC? ›

If learning one or the other is the question, if you want to learn in under 6 months go with SMC, if you have an extra 1 to 2 years to dedicate to the journey then go with ICT.

How does ICT affect trade? ›

The rapid development of ICT has transformed the world into a digital economy era bringing significant benefits (World Bank, 2016). There is an ample evidence in the literature that shows the development of ICT has continuously reduced communication and trade costs.

What is the most powerful indicator in TradingView? ›

Best TradingView Indicators: Bollinger Bands. Bollinger Bands are essential for understanding and navigating market volatility in futures trading. Bollinger Bands, when used through TradingView on the Optimus Futures platform, are indispensable for understanding and navigating market volatility in futures trading.

What are the top 3 indicators in TradingView? ›

What is a Trading Indicator on TradingView?
  1. 1 - Moving Average (MA) ...
  2. 2 - Relative Strength Index (RSI) ...
  3. 3 - Moving Average Convergence Divergence (MACD) ...
  4. 4 - Bollinger Bands. ...
  5. 5 - Volume. ...
  6. 6 - Stochastic Oscillator. ...
  7. 7 - Fibonacci Retracement. ...
  8. 8 - Average True Range (ATR)
Mar 12, 2024

Can you actually trade on TradingView? ›

On TradingView you can trade CFDs, forex, stocks and Crypto FX. Click on the relevant icon below to see full pricing information and trading conditions.

What is the 3-5-7 rule in trading? ›

The 3–5–7 rule in trading is a risk management principle that suggests allocating a certain percentage of your trading capital to different trades based on their risk levels. Here's how it typically works: 3% Rule: This suggests risking no more than 3% of your trading capital on any single trade.

What is the 5-3-1 rule in trading? ›

The numbers five, three, and one stand for: Five currency pairs to learn and trade. Three strategies to become an expert on and use with your trades. One time to trade, the same time every day.

What is the easiest market entry strategy? ›

The simplest form of entry strategy is exporting using either a direct or indirect method such as an agent, in the case of the former, or countertrade, in the case of the latter. More complex forms include truly global operations which may involve joint ventures, or export processing zones.

Is ICT a good trading strategy? ›

This strategy provides a very high win rate and typically a great risk-to-reward ratio for traders. The strategy must be taken during a period of high market volume. For example, this is typically 10 am-11 am ET, but 3 am-4 am ET also works.

What is a model ICT? ›

A computer model is a representation of a real-life system or situation, such as the workings of a nuclear reactor or the evacuation of a football stadium. A collection of rules is created to study what would happen in real-life situations.

What does ICT mean in market research? ›

The Information and Communications Technology (ICT) market comprises various components such as devices (., smartphones, laptops), software (., operating systems, applications), IT infrastructure (., servers, storage systems), data center systems (., cloud computing, virtualization), communication services (., internet ...

What does ICT stand for in logistics? ›

The information and communications technology (ICT) supply chain is a globally-interconnected ecosystem that involves CT software, hardware, and services including suppliers, vendors, and contractors.


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