Valid Pullbacks in SMC ICT Trading (4 Easy Steps + 2 Examples)

In Smart Money Concepts (SMC), mastering the concept of a valid pullback is crucial for identifying high-probability trade entries that align with institutional order flow.

A valid pullback refers to a retracement within a trend that does not violate the structure, and instead offers a refined opportunity to enter the trend at a discounted (for buys) or premium (for sells) price.

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1. What Is a Valid Pullback in SMC?

A valid pullback is a corrective price move against the prevailing trend that:

1. Respects market structure – it doesn’t break the last higher low (in uptrends) or lower high (in downtrends).
2. Returns to areas of interest – like an Order Block, Fair Value Gap (FVG), or Equilibrium (50% of the move).
3. Occurs with low volume or slower momentum, showing it’s a retracement, not a reversal.

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2. Key Criteria to Identify a Valid Pullback

1. Trend Confirmation
   • Identify the overall trend (via higher highs and higher lows in an uptrend, or lower highs and lower lows in a downtrend).
2. Structure Holding
   • Price must not violate the previous structural point (e.g., higher low in an uptrend).
3. Return to Institutional Price Points
   • Look for confluence with:
     • Fair Value Gaps (FVGs)
     • Order Blocks (OBs)
     • Discount/Premium zones
     • 61.8%–78.6% Fibonacci retracements
4. Entry Trigger
   • Price shows signs of rejection like:
     • Rejection wicks
     • Bullish or bearish engulfing candles
     • Break of lower timeframe structure
     • Liquidity sweep and reversal

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3. Examples of Valid Pullbacks in Trading – SMC

Example 1: Uptrend Pullback into a Bullish Order Block

• The GBP/USD is forming higher highs and higher lows.
• Price breaks structure and forms a new HH.
• It retraces to a previous Bullish Order Block (OB).
• Inside the OB, a bullish engulfing candle appears.
• Entry is taken with stop-loss below the OB.

Result: Trend resumes upward, offering a high-probability entry.

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Example 2: Downtrend Pullback into Fair Value Gap

• The EUR/USD is in a clear downtrend.
• Price breaks structure to form a new LL.
• Pullback forms into a 50%–61.8% retracement zone, where a bearish FVG also exists.
• After grabbing liquidity above the FVG, price rejects and forms a lower timeframe BOS.

Result: Perfect short entry aligned with SMC structure and liquidity principles.

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4. Tips to Master Valid Pullbacks

• Always trade with the trend, not against it.
• Use multi-timeframe analysis for confluence.
• Wait for liquidity sweeps or confirmations inside the pullback zone.
• Combine FVG + OB + BOS concepts to increase the probability of success.

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