ICT Concepts Explained: Fair Value Gaps and Killzones

title: "ICT Concepts Explained: Fair Value Gaps and Killzones"

The Inner Circle Trader (ICT) methodology is the grandfather of modern Smart Money Concepts. While highly complex and rich in proprietary terminology, the core of ICT focuses on time and price algorithms that deliver the market.

1. Fair Value Gaps (FVG)

A Fair Value Gap is one of the most traded ICT concepts. It occurs when there is a sudden, aggressive move in price, leaving a "gap" between the wick of the first candle and the wick of the third candle in a three-candle sequence. This inefficiency in price delivery means that only one side of the market (buyers or sellers) was offered liquidity. The algorithmic nature of the market will typically seek to return to this gap to balance the price action before continuing its expansion.

2. Killzones

Unlike traditional retail strategies that look for setups 24/7, ICT preaches that true algorithmic volatility is injected at very specific times of the day, known as Killzones.

• London Killzone (2:00 AM - 5:00 AM EST): Often creates the high or low of the day.
• New York Killzone (7:00 AM - 10:00 AM EST): Often provides a continuation or reversal of the London session.
• Asian Session (8:00 PM - midnight EST): Typically ranges, building up liquidity above and below for London to sweep.

3. The Judas Swing

A classic ICT setup is the "Judas Swing." This is a false run at the start of a session (like the London open) that sweeps the Asian session liquidity, inducing retail breakout traders to enter the wrong direction. Once liquidity is grabbed, price aggressively reverses.

Passing Prop Firm Challenges with ICT

Many traders use ICT to pass challenges at firms like FTMO and FundedNext. Because ICT relies on precise timeframes (Killzones) and high risk-to-reward ratios (targeting deep FVGs), it is perfectly suited for managing the strict drawdown rules of proprietary trading firms.