ICT Consequent Encroachment is a highly refined Smart Money Concept introduced by Michael J. Huddleston (ICT – Inner Circle Trader) that helps traders pinpoint precise entry or reaction zones within a Fair Value Gap (FVG).
1. What is Consequent Encroachment in ICT?
Consequent Encroachment (CE) is the 50% equilibrium level of a Fair Value Gap (FVG).
It marks the midpoint between the high and low of the imbalance created by a large displacement candle.
In simple terms:
When a Fair Value Gap forms (usually in a 3-candle sequence), the middle point of that gap is called the Consequent Encroachment.
2. Why is CE Important in ICT?
- It acts as a high-probability reaction zone
- Institutions often deliver price into the CE level before a continuation or reversal
- More refined than the general FVG zone
3. How to Calculate Consequent Encroachment in ICT
If an FVG forms between:
- Low of Candle 1: 1.1000
- High of Candle 3: 1.1050
Then,
Consequent Encroachment (CE) = (1.1000 + 1.1050) / 2 = 1.1025
So, 1.1025 is the CE level, and this is the precise zone where Smart Money is expected to show interest.
4. Where Does Consequent Encroachment in ICT Apply?
CE can apply in:
- Bullish or Bearish Fair Value Gaps
- Imbalance candles
- Entry confirmation after Liquidity Sweeps
- Use with Breaker Blocks, Order Blocks, and OTE entries
5. Example 1 – Bullish Scenario (Buy Side CE)
Context:
- EUR/USD rallies with a large up candle.
- A Bullish FVG forms between 1.0800 and 1.0850.
- CE = (1.0800 + 1.0850)/2 = 1.0825
Application:
- Wait for price to return into the gap.
- Instead of entering at 1.0800 (bottom of FVG), wait for 1.0825 (CE).
- If market structure is bullish, price is likely to react from CE and go higher.
6. Example 2 – Bearish Scenario (Sell Side CE)
Context:
- GBP/USD sells off sharply.
- A Bearish FVG forms between 1.2300 and 1.2250.
- CE = (1.2300 + 1.2250)/2 = 1.2275
Application:
- Price retraces back up into the FVG.
- Instead of selling at 1.2300, wait for CE level at 1.2275.
- If market context is bearish, this level often results in rejection and continuation lower.
7. How to Use CE in Your Trading Strategy in ICT
- Identify FVG using 3-candle structure.
- Calculate the midpoint = CE.
- Watch price reaction at CE.
- Confluence with:
- Market Structure Break (BOS)
- Liquidity Sweep
- Order Block or Breaker Block
- Optimal Trade Entry (OTE) levels
- Enter trade with tight stop and high R:R.
8. Key Benefits of Using CE in ICT
- Provides precision in entries
- Avoids premature trades at extremes of FVG
- Helps confirm Smart Money presence
- Improves trade accuracy when aligned with other ICT tools
9. Conclusion
Consequent Encroachment is a subtle but powerful ICT concept that refines your entries into Fair Value Gaps by focusing on the midpoint of imbalance.
It reveals where Smart Money is most likely to engage with price.
Used correctly, it provides excellent confluence with market structure, liquidity raids, and institutional order flow.
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