Forex trading involves trading currency pairs, where one currency is exchanged for another.
From an ICT (Inner Circle Trader) perspective, it is essential to understand how smart money manipulates foreign currency pairs by targeting liquidity, utilizing order blocks, and creating fair value gaps.
This guide will break down key forex pairs, how they move under institutional trading conditions, and present a quiz-style learning method to reinforce ICT concepts with real examples.
1. Understanding Currency Pairs in ICT
1. Types of Currency Pairs
- Major Pairs – The most liquid pairs that include the US dollar (USD).
- Examples: EUR/USD, GBP/USD, USD/JPY, USD/CHF
- Minor Pairs (Crosses) – Do not include USD but are still heavily traded.
- Examples: EUR/GBP, AUD/NZD, EUR/JPY
- Exotic Pairs – Pairs involving emerging market currencies, which are less liquid and more volatile.
- Examples: USD/TRY, EUR/ZAR, USD/SGD
2. How Smart Money Trades Currency Pairs in ICT
Institutional traders use liquidity pools, order blocks, and fair value gaps to move the market.
Let’s see how these concepts apply to different types of pairs.
Example 1: Trading EUR/USD Using Order Blocks
- Institutional Setup: EUR/USD is in a strong bullish trend.
- Liquidity Pools: Retail traders place sell stops below 1.0800.
- Smart Money Strategy:
- Price breaks below 1.0800 to trigger stops, then reverses.
- A bullish order block forms at 1.0780.
- ICT traders enter long positions at the order block, targeting 1.0900 liquidity zone.
Example 2: Trading GBP/JPY Using Fair Value Gaps (FVGs)
- GBP/JPY often experiences fast-moving price action due to low liquidity.
- Institutional Setup: Price surges from 150.00 to 152.00, leaving an imbalance at 151.20.
- Smart Money Strategy:
- Price revisits the 151.20 FVG to rebalance orders.
- ICT traders enter long positions at 151.20, targeting a new high at 153.00.
3. Foreign Currency Pairs Quiz – Test Your ICT Knowledge
Question 1:
If EUR/USD has formed equal highs at 1.1200, what will smart money likely do before a major price reversal?
a) Keep price below 1.1200
b) Break above 1.1200 to take liquidity, then reverse
c) Move directly downward without breaking highs
d) Consolidate indefinitely
Answer: (b) Break above 1.1200 to take liquidity, then reverse
Explanation: ICT concepts show that liquidity above equal highs is a prime target for institutions.
They will push price above 1.1200 to trigger stop losses before reversing.
Question 2:
USD/JPY has moved aggressively from 146.00 to 147.50, leaving a fair value gap at 146.80. Where is smart money likely to enter long positions?
a) 147.50
b) 146.80 (Fair Value Gap)
c) 146.00 (Previous Low)
d) Anywhere in the range
Answer: (b) 146.80 (Fair Value Gap)
Explanation: Institutions will often allow price to revisit the FVG to rebalance orders before continuing higher.
Question 3:
Which of the following best describes a currency pair’s reaction to an order block?
a) Price moves straight past it without reacting
b) Price bounces off the order block before continuing the trend
c) Price only reacts to order blocks in the stock market
d) Order blocks don’t exist in forex
Answer: (b) Price bounces off the order block before continuing the trend
Explanation: Order blocks represent areas of institutional interest.
Price often revisits them before continuing in the direction of the dominant trend.
4. Conclusion: Mastering Forex Pairs with ICT Concepts
To trade forex pairs successfully using ICT strategies, you must understand:
✔ How liquidity pools influence market movements
✔ Why fair value gaps and order blocks provide high-probability entries
✔ How smart money traps retail traders before major moves
This quiz-style approach helps traders apply ICT knowledge in real trading scenarios while refining their understanding of institutional forex market behavior.
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