All Five ICT Entry Models Explained | JadeCap

The majority of traders lose money because they enter the market at the wrong time. In this breakdown, I will explain the exact entry models I utilized to generate over one million dollars in just two years, analyzing each one step by step. Although I have been trading for 14 years, it was only in the last few that I truly refined my strategy. It took nearly a decade for me to achieve consistency; consequently, I am sharing my experience and knowledge here to help you shortcut your own journey toward becoming a profitable trader. 

ICT Entry Models: Premium/Discount—Liquidity Raids—Fair Value Gaps—Order Blocks—Breaker Blocks. 

I. Premium and Discount

The first entry model is the fundamental concept of premium and discount. We utilize the Fibonacci retracement tool to define our specific trading range by anchoring it to a swing low and a swing high if we are bullish, or a swing high and a swing low if we are bearish. This allows us to identify the 50% equilibrium level, as well as the deep discount and premium zones.

Discount, Equilibrium, and Premium Zones: S&P 500 (1 hour candles).

 

After establishing these swing points, we wait for a retracement beyond the 50% threshold—into discount for buys or premium for sells—before hunting for an entry. Our objectives are typically a Fibonacci extension outside the range or the range high/low. In a bullish scenario, we wait for price to dip into the discount zone before targeting the previous high or a specific Fibonacci extension. Conversely, in a bearish scenario, we target the previous low or the extension.

 

Discount, Equilibrium, and Premium Zones: EURUSD (15 minute candles).

Regarding execution, candle confirmation is not strictly necessary. For instance, within a bullish range, any area below the 50% mark is considered a discount and serves as a favorable entry point. This model is particularly effective for limit orders, allowing traders to execute without being anchored to their screens. We enter long via a buy limit and place the stop loss outside the range. Because a setup is not technically invalidated until the initial swing point is breached, your stop loss should remain at that level to avoid being "chopped up" by price volatility.

II. Liquidity Raids 

This entry model identifies zones where "smart money" is likely accumulating positions: liquidity raids, commonly known as "Turtle Soup." First, we identify the specific liquidity pool we expect to be raided, such as a Previous Weekly High (PWH), Previous Daily Low (PDL), or session-specific levels like the Asian range.  

 

Liquidity Raids: EURUSD (5 minute candles).

A common mistake among novice traders is entering the market the moment a level is penetrated. Instead, we wait for a candle to close back inside the range. We look for a strong rejection followed by a close above or below the previous swing point. Only then do we enter, placing our stop loss beyond the newly created swing high or low. This ensures a superior risk-to-reward ratio, as it allows the market to signal an actual intent to reverse rather than forcing us to catch a "falling knife."

 

III. Fair Value Gap (FVG)

The Fair Value Gap (FVG) is a three-candle pattern where the second candle is so impulsive that the wicks of the first and third candles do not meet, leaving an imbalance, a "gap." We wait for the market to rebalance by trading back into this zone. 

 

Bullish Fair Value Gap: EURUSD (15 minute candles).

Ideally, the entry should be executed as price moves against the desired order flow. If we are looking to go long, we buy while price is actively dipping into the gap. While many traders demand extra confirmation, the most effective entries often occur when the market looks visually "weak," as this is where you secure the best pricing. 

 

Stop-loss placement can be aggressive (at the gap's edge) or conservative (at the high/low of the first candle). I recommend the conservative approach to give the trade sufficient room to breathe.

 

IV. Order Blocks

An order block is a down-closed candle prior to a move higher or an up-closed candle prior to a move lower. High-probability order blocks are those paired with an FVG. When an FVG rests immediately above or below an order block, it validates the level as a high-probability zone for institutional activity. 

 

Order Blocks and Breaker Blocks: Gold (5 minute candles).

We enter as the market retraces into that order block, anticipating a rejection. For instance, if several consecutive candles form an order block that aligns with an FVG, the bodies of the subsequent candles should respect that level.

 

V. Breaker Blocks

The breaker block combines liquidity concepts with order blocks. It is an order block formed prior to a raid on liquidity that is subsequently broken by a decisive move. If price sweeps liquidity and then aggressively trades through the original order block, that level transitions into a "breaker." We enter on the retracement back into the breaker's range.

 

Breaker Block: EURUSD (5 minute candles).

Stop-loss placement can be complex; I tend to favor a conservative placement because breakers can produce deep wicks that may stop out aggressive traders before the trend resumes. Often, a breaker overlaps with a fair value gap; in such cases, you might utilize the 50% equilibrium of the gap or the high/low of the original order block to set your invalidation point.

 

Every ICT Entry Model in 23 Minutes.

 

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Ultimately, whether you are utilizing premium/discount, liquidity raids, or gaps, success depends on proper stop-loss placement and trade management. A stopped-out trade does not necessarily mean the setup failed—it often suggests the stop loss was too aggressive for the market's inherent volatility.

 

Reference:
JadeCap (2025) - Every ICT Entry Model in 23 Minutes. (video)

 

A Secret to Liquidity Sweeps.

 

See also:

JadeCap (2026) - One Trading Strategy for Life: The "Daily Sweep."

orderbloque (2025) - Market Logic Based on Liquidity, Volume, and Inefficiency. 

TPR - ICT Price Action. 

One Trading Strategy for Life: The "Daily Sweep" | JadeCap

The 'Daily Sweep' strategy changed my life forever, powering me to a world-record $2.5 million payout from Apex Trader Funding in April 2024. Before mastering this methodology, I was caught in the cycle of 'strategy hopping,' constantly jumping from one system to the next. That ended here. This approach is the last one I will ever need, and my goal today is to teach it to you in full. By the end of this, you’ll have a clear, mechanical system to help you escape the noise and finally achieve consistent profitability.

 

» Mark all hourly swing points that haven't yet been traded to from yesterday leading up to 8AM.

If we are trading beyond yesterday's price action, use the next most recent day. «

 

Step One: Identifying Hourly Swing Points

Step one is deceptively simple, yet its precise execution is mandatory for the rest of the system to work. Every morning at 8:00 a.m. EST—ninety minutes before the US equity open—I sit down to map out the field. I meticulously mark every hourly swing point from the previous day leading up to the current session. If price action has moved beyond yesterday's range, simply pull data from the next most recent day. This pre-market routine ensures that by 9:30 a.m., I have a crystal-clear map of where liquidity is resting.  

» By 9:30 a.m., I have a crystal-clear map of where liquidity is resting. «  

Higher highs and higher lows or lower highs and lower lows?

 

It is critical to perform this analysis exclusively on the one-hour timeframe. While intraday trading involves lower timeframes, we require the one-hour chart to serve as our higher timeframe anchor to guide our decision-making. In the context of the Daily Sweep model, the hourly chart provides the necessary indication of when we can begin hunting for specific setups. We do not descend into lower timeframes until we receive high-level confirmation on the hourly chart.

To understand this step, one must first master the technical definition of a swing point. A swing low is defined by a three-candle pattern where a specific candle’s low is flanked by two candles with higher lows. Once the third candle in the sequence closes at the top of the hour, the central low is officially validated as a bullish swing point. Conversely, a swing high occurs when a central candle is flanked by two candles with lower highs. Again, we must wait for the closure of the third hourly candle before that peak is confirmed as a bearish swing point.

These swing points are vital because they allow us to identify market structure. When the market creates higher highs and higher lows, it is objectively bullish; lower highs and lower lows indicate a bearish trend. In a trending market, opposing swing points will often fail as the trend continues. However, the market rarely moves in a linear fashion, and we frequently see short-term "runs" on these swing points—where the market raids a low to gather liquidity before continuing higher. As traders, we are not seeking 100% certainty; rather, we are making a high-probability educated guess, ideally with a 60% to 70% success rate, to align ourselves with the higher timeframe trend.

Step Two: The Swing Failure Pattern (SFP)

Once you have identified your major swing points, you must integrate the concept of the Swing Failure Pattern (SFP). Without this secondary layer, the identified swing points are merely arbitrary lines on a chart. An SFP occurs when the price briefly breaches a significant swing high or low but reverses rapidly, failing to sustain momentum and closing back within the previous range. This phenomenon indicates a liquidity grab or a potential trend reversal.

Bullish and Bearish Swing Failure Patterns: When price briefly breaks a significant swing high or low but quickly reverses, 

failing to sustain the move and closing back within the previous range, indicating a potential trend reversal or liquidity grab. 

Why do they work? Instead of trying to anticipate the reversal, this provides confirmation that it is actually happening. 

In the marketplace, liquidity often clusters around these swing points. Traders entering "long" positions typically place their protective stop-loss orders just below a swing low, while "short" sellers place theirs above a swing high. The SFP allows us to capitalize on the moment these stop-losses are triggered. We are looking for the market to run through a swing point and then show a definitive rejection in the opposite direction.

A key distinction must be made: the mere breach of a level is not an SFP. We require a strong closure back within the range for confirmation. For instance, if the market raids a swing low, we do not simply buy the moment the level is touched; we wait for a bullish hourly candle to close back above that previous low. This provides confirmation that the "Smart Money" has entered the market, allowing us to ride their coattails rather than attempting to front-run the move.

 

"In professional trading, you do not want to be the first person rushing through the door. Those who rush in first are often the ones who get shot. Waiting for confirmation allows you to capture the 'meat' of the move rather than obsessing over 'top-ticking' or 'bottom-ticking' the market."

My mentors at a major Chicago trading firm emphasized that this filter saves significant capital. In my earlier years, I lost thousands of dollars attempting to trade "Turtle Soups" or liquidity raids by entering as soon as a level was breached. I would often watch the price drift slightly further, trigger my stop loss, and only then move in my intended direction. By waiting for the hourly SFP closure, we ensure that the lows or highs we are trading against are protected by confirmed institutional activity.

Intraday Execution and Case Studies

Once an SFP is confirmed on the one-hour chart, you can transition to lower timeframes—such as the one-minute, five-minute, or fifteen-minute charts—to refine your entry. The goal is to anticipate that the next several hourly candles will trade in the direction indicated by the SFP.

 NASDAQ (hourly charts): Setups and Trading Examples.

Looking at the NASDAQ (NQ) as an example (charts above), we can observe this pattern nearly every day. On a typical morning, if we identify a swing low and witness an SFP at the 8:00 a.m. candle closure, we can anticipate a bullish expansion during the New York session. In one specific instance, an SFP provided a move with a 3R (three times the risk) return on the hourly chart alone. If a trader were to refine that entry on a five-minute chart with a tighter stop-loss, the reward-to-risk ratio could be significantly higher.

All Five ICT Entry Models: Premium/Discount, Liquidity Raids, 

Fair Value Gaps, Order Blocks, and Breaker Blocks. 

 

It is important to note certain market conditions, such as holiday gaps. For example, during the period surrounding Thanksgiving and Black Friday, the lack of overnight data can make SFPs "sketchy" or unreliable. In such cases, it is often prudent to wait for the market to return to normal volume. However, on standard trading days, the pattern is remarkably consistent. Whether the market is trending or ranging, plotting the previous day's swing points and waiting for a session-open SFP—during either the London or New York sessions—provides a crystal-clear roadmap.  

 

The "Daily Sweep" Trading Strategy I Will Use for Life.

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I encourage you to perform your own "homework" by backtesting this on your charts. Plot your hourly swing points, identify the swing failure patterns, and observe how the subsequent hourly candles behave. This is the exact strategy I utilized to generate millions of dollars. While many traders have access to profitable strategies, they often fail due to a lack of discipline. I struggled for ten years before I was able to make this work, but by sticking to this one clear system, you can finally overcome the cycle of inconsistency.

Reference:
JadeCap (February 14, 2026) - The "Daily Sweep" Trading Strategy I Will Use for Life. (video)

 

 
See also:

JadeCap (2025) - The Only ICT Daily Bias Video You'll Ever Need. (video) 

JadeCap (2025) - Simple ICT Day Trading Strategy That Works Every Day. 

Darya Filipenka (2024) - ICT Daily and Intraday Bias. 

Darya Filipenka (2024) - ICT Optimal Trade Entry (OTE). 

Max Singh (2019) - Turtle Soup—Day In, Day Out. 

 Richie Naso (2025) - How Algorithms Impact Market Direction: 80% of Breakouts Fail.

Larry Williams (2022) - How Markets Move: The Natural Cycle of Range Change. 

Larry Williams (2000) - Swing Points as Trend Change Indication. 

Larry Williams (1999) - Three Bar Patterns: The Smallest Fractals of Market Structure.  

Engulfing Bar Strategy | JadeCap

This one pattern helped me make over $4 million in the last three years and even break the world-record payout at Apex. Let me show you exactly how it works:

 

» For a true engulfing pattern, the new candle must break the previous candle’s low and the previous candle’s high. «

 

What Is an Engulfing Bar? We’re simply looking for two candles—along with proper context—to define the pattern: Imagine we have a down candle with its open, high, low, and close. The next candle is what determines whether we have an engulfing bar. For a true engulfing pattern, the new candle must break the previous candle’s low and the previous candle’s high. It completely “engulfs” the previous range (aka Outside Bar/Candle).

 

So picture the first down candle closing. The next candle runs below that low, takes it out, reverses, pushes above the prior high, and closes somewhere near the top half of its range. That two-candle formation gives us a tremendous amount of information about where the next candle—or even the next several candles—may go.

 

Understanding the Context: Inside a higher-timeframe candle (4-Hour or daily), there are dozens of smaller candles—1-minute, 5-minute, 15-minute—that form all the micro-structure. Within that lower-timeframe structure, the engulfing pattern represents:

 

▪ A Liquidity Raid

▪ A Shift in Market Structure

▪ A Smart Money Reversal

▪ A Market Maker Buy Model (for bullish engulfing)

So although it's only two candles on a higher timeframe, those two candles often reflect an entire lower-timeframe reversal model.

The key is the closure. Many beginners think a candle will close as an engulfing bar, only for it to close weakly or back inside the prior range. That invalidates the pattern. A proper engulfing bar should close with a strong, decisive body—typically in the upper 50% for bullish setups, or the lower 50% for bearish setups.

Bullish vs. Bearish Examples: For a bullish engulfing bar, the second candle runs below the prior low, reverses, and breaks the prior high (Outside Candle). For a bearish engulfing bar, it runs above the prior high, reverses, and breaks the prior low. Both reflect a higher-timeframe representation of a lower-timeframe Market Maker Model.

 

» Every setup has a failure rate. «

 

What Most Traders Don’t Realize: Every setup—Engulfing Bars, Fair Value Gaps (FVGs), Market Maker Models—has a failure rate. I learned this the hard way after blowing dozens of accounts trying to trade every engulfing bar I saw. Two things matter:

1. Every setup fails sometimes. If you backtest these candles, you'll see some of them lose. Your job is not to find the magical 100%-win-rate setup. It doesn’t exist. You may find these patterns work 60% of the time. Your winners must be managed well enough to pay for the losers.
2. Location matters. A lot. When I was new, I took every engulfing bar. That was a huge mistake.
   ▪ If you're bullish, you want the engulfing bar to form at a swing low, ideally after taking out sell-side liquidity.
   ▪ If it forms after taking out buy-side liquidity—at a high—it's often a sign of exhaustion and more likely to fail.
   ▪ The reverse is true for bearish setups.

Avoid:

▪ Bullish engulfing bars printed at or after taking out buy-side liquidity.

▪ Bearish engulfing bars printed at or after taking out sell-side liquidity.

 

These filters alone drastically improve your win rate.

 

The $98,000 Example: Let’s walk through the trade from last week. We printed a large bullish engulfing candle immediately after FOMC. The candle swept sell-side liquidity, reversed, broke the prior high, and closed strongly—exactly what we want at a swing low. We were also inside a daily Fair Value Gap (FVG), adding even more confluence.

 

Bullish Engulfing Bar Setup in the NZDUSD (4-Hour candles). 

My first target was buy-side liquidity above the highs. Since the market was near all-time highs, I was also looking for a move toward the psychological 25,000 level. As soon as the futures market reopened at 6 p.m., I entered with a 20-lot position. My stop was below the weekly open. I was looking for roughly a 1:3 risk-to-reward.

 

On the lower timeframes, the price action continued to confirm the model—bullish FVGs forming on the way up, continuation structure holding. Meanwhile, bearish engulfing candles printed at swing lows failed, exactly like we want to see.

 

I showed the live account login on the video: real balance, real fills, floating around $93,000 at one point. But the dollar amount doesn’t matter. If your account is small, making $200 or $400 using the same rules is identical—it’s just a matter of position size. Years ago, I was risking $500–$1,000. As my net worth grew, I increased my risk proportionally. Eventually, price hit my target and I closed the trade for roughly $98,000.

 

Final Thoughts: Engulfing bars are easy to spot—but only powerful when combined with

 

    ▪ Proper context

    ▪ Liquidity understanding

    ▪ Market structure

    ▪ Higher-timeframe narrative

    ▪ Disciplined trade management

 

Your homework is to backtest and forward-test these exact setups: where the engulfing bar forms, where the liquidity sits, where your stop should go, and how to trail it as price moves in your favor. Scaling in, adjusting stops, and managing the trade all revolve around that one pattern.

With this engulfing bar strategy and the rules I just shared, you now have everything you need to start identifying high-probability opportunities. Remember: profitable trading isn’t about talent or luck—it’s about discipline, patience, and following your rules every single time.

Reference:

JadeCap (Sep 27, 2025) - I made $98,741 Trading This Simple Candlestick Strategy. (video)

 

Stop using the wrong timeframes. Use H4 and M15.

 

See also:

JadeCap (July 18, 2025) - Simple ICT Day Trading Strategy That Works Every Day.
JadeCap (July 17, 2025) - ICT Intraday Liquidity & Volatility Trading Playbook.

Michael J. Huddleston (2022) - Trading the Outside Day Candle. (video) 

Michael J. Huddleston (2022) - The Two Fair Value Gaps: Profiting from Imbalance. (video) 

Larry Williams (1998) - Outside Bar Trading Setups. 

ICT Advanced Market Structure | Darya Filipenka

ICT market structure refers to the way the market behaves and shifts based on various factors such as institutional order flow, imbalances, and key levels. It is represented in a series of either higher lows and higher highs = bullish, or series of lower highs and lower lows = bearish, and the actual turning points that include highs and lows within it (intermediate highs and lows). 

 

The market trades in a generic pattern or rhythm and it is easy to read if one is aware of the basic structure price tends to move in.

1. Generally, the market trades from short term low (STL) to short term high (STH) back to a new short-term tow (STL). As these STL’s and STH's form, they will develop a 'market structure' of price action.
2. Any short term low (STL) that has higher short-term lows (STL) on both sides of it is considered an Intermediate term low (ITL).
3. Any short term high (STH) that has lower short-term highs (STH) on both sides of it is considered an intermediate term high (ITH).
4. Any Intermediate term low (ITL) that has higher intermediate term lows (ITL) on both sides of it is considered long term low (LTL).
5. Any Intermediate term high (ITH) that has lower intermediate term highs (ITH) on both sides of it is considered long term high (LTH).

The highest time frame will act as a Long-Term Perspective. This time frame will show you Higher Time Frame (HTF) Levels which will offer Trade Setup Opportunities. Trade ideas will be built upon levels derived from the HTF.
 

The mid-level time frame will act as an Intermediate-Term Perspective. Following the Trade Setup Opportunity found on the HTF, the mid-level will give you more definition in terms of structure based on that HTF Level. Managing trades will be done via a mid-level time frame.
 

The lowest time frame will act as a Short-Term Perspective. Following the Trade Setup Opportunity found on the HTF and insights given with the mid-level. The Short-Term Perspective will give you even more definition in terms of structure. Timing trades with entries will be done via the lowest time frame.

 

ICT Advanced Market Structure pairs very well with the ICT Market Maker Buy Model and Sell Model.

 

(Source)

 

Reference:

Darya Filipenka @ Twitter/X.

Darya Filipenka (2023) - Unlocking Success in ICT 2022 Mentorship: The Smart Money Guide to the Full ICT Day Trading Model. 

Michael J. Huddleston (2019) - Essentials to ICT Market Structure. (video)

ICT Deep Dive Into Institutional Order Flow | Darya Filipenka

 

Institutional order flow refers to the way large institutions and banks interact with the market, either as buyers or sellers, to achieve their intended purpose. This can involve taking participants out of the market or drawing them in as counter-parties to their trades. Institutional order flow is not visible on volume profile analysis, depth of market, ladder, or level 2 data, as these can be spoofed. Instead, it can be identified through price action and understanding how price is being delivered in the market.

Reference:

Darya Filipenka @ Twitter/X.

Darya Filipenka (2023) - Unlocking Success in ICT 2022 Mentorship: The Smart Money Guide to the Full ICT Day Trading Model. 

Michael J. Huddleston (2023) - ICT Mentorship 2023 - Deep Dive Into Institutional Order Flow. (video)

Turtle Soup—Day In, Day Out │ Max Singh

The Turtle Soup trading strategy was developed by Linda Bradford-Raschke and published in her 1996 book Street Smarts: High Probability Short-Term Trading Strategies. 

 

The strategy’s name is a reference to a well-known strategy called Turtle trading, taught by Richard Dennis and William Eckhardt in the 1980s to a group of novice traders called the 'Turtles'. 

 

 

Linda Bradford-Raschke inverted the reasoning behind the original Turtle strategy in order to develop a short-term trading method using false breakout reversals at key levels. The strategy can be used on 1 hour, 4 hour or daily charts. The method is simple but requires understanding of order flow and market structure. 

 

Reference:

Linda Bradford Raschke & Laurence A. Connors (1996) - Street Smarts: High Probability Short-Term Trading Strategies.

 Max Singh (2019) - The Turtle Soup Trading Strategy. (video)

 

 

 Darya Filipenka (July 28, 2023) - ICT Turtle Soup.

The Importance of Buy/Sell 50% Retracements | Jason A. Jankovsky

Fifty percent retracements are important because they balance the net inequality between the competing net order flows [...] Fifty percent retracements happen because once enough buyers square off against enough sellers, only half of those contracts will be profitable. 

 

At the 50% number, exactly half the bulls have a profit and half the bears have a profit. When I say this, it is important to note that this is a net perspective. The actual result to any one trading account isn’t the issue. If you could find a way to look into the total number of open trades, you would see that of the sum total of the open longs, about half of that total number of open contracts will have an open-trade profit—the others will have losses. 

 

In other words, if there were 10,000 open longs, around 5,000 of them will have some open-trade gain and the other 5,000 will have some open-trade loss. The exact same situation will be accurate for the shorts. The market is now temporarily balanced from the net perspective. 

 

This situation won’t last long; it will only take a short time for new buying or selling pressure to come in. Whoever has the net advantage at that point will tip the balance. Most of the time it is in the original direction back toward the previous high or low because from the net perspective the late loser entered from the short-term trend—that is, the few days or so just before the 50% level is reached.

 » You can make a fortune following this one rule alone. «
W.D. Gann - The Tunnel Through the Air, 1927.

This is a factor of the Rule of 72. Most market participants operate on a time frame of 72 hours or less. That means that in all the various ways of creating a market timing signal that now is the time to initiate a position, most traders have gotten at least one signal in a 72-hour period and have executed, creating net order-flow. Once they have initiated, they must liquidate to accept their open-trade profit or loss. 

 

Most methodologies will have given the exit signal within that time frame as well, with the net result that almost everybody has gotten in and out at least once within a 72-hour period. If this process happens at a 50% balance point, the net result is usually a resumption of he previous trend.

 

 Mark Fisher's Three-Day Rolling Pivot = 72 hours

How to use the rule: First you must select a significant high or low price previous to the price the market is currently retreating from. When I say significant price I mean a price that is around 72 bars back in time; also they are usually weekly, monthly, or daily price points. If we use a bullish scenario, you are looking for a previous important low price and the market is retreating from the most recent high. If you use a daily chart, your previous low price must be about 72 days/bars back or so, I find that on longer time frames anything substantially less is not as accurate, and anything significantly more is usually ignored by traders as “old data.” 

 

Place a 50% retracement study between the old low and the new high—that would be your best buy point. That point will be some time in the future that approximately reflects the 72-bar ratio. This is why a price could trade to a high. The opposite would be a sell point if you were tracking a rally in a bear market. But the underlying psychology behind the 50% retracement is not about resumption of a previous trend or a failed reversal; it is about the late trader who entered in the last 72 hours. 

 

Most people who initiate a position—about 80% of the total warm bodies sitting in front of a trading screen—are going to do at least one full round turn in the market just prior to the market reaching the 50% price area. The vast majority of those traders are looking to make money right now. If they follow standard technical analysis or use any of the most common methodologies, because the market was trending lower for more than 30 bars from the rejected high to the 50% point, they are looking to sell into the market and join the apparent downtrend currently in progress, from their point of view. Their focus is to get positioned on the short side because “the trend is your friend.” 

 

But the market has just become balanced momentarily. That means only one thing. The shorts from above the market will cover; they have the most recent 72-hour open-trade profit. The late shorts cover, adding to the buy order imbalance as they take their loss. Last, the old longs on the greater-than-72-bar time frame (the 20% of long-term traders, the ones who know how to follow this rule—the professionals who know you need more than 72 hours to beat the loser) add to net winning open positions, many of which they have owned since the turn under the market. They know that the retracement is coming and it will draw in late blood. So they gladly sit through the 50% retracement with at least part of their original position. Of course, the exact opposite scenario develops when a declining market rallies 50%.

 

 Gerald Marisch (1990) - Gann’s 50% Retracement Rule.

Now obviously, markets don’t always turn on a dime once they retrace 50%. Sometimes they take more time to balance temporarily; sometimes they need several more or fewer bars than 72; sometimes they sit at the 50% level for a bit and then retrace farther before moving back in the original trend. None of that is the point. The point is, if you want to make a lot of winning trades and keep it simple, enter your position at the 50 percent retracement point and wait. More often than not you will get at least something you can work with.

Reference:
Jason Alan Jankovsky (2007) - Trading Rules that Work.

See also:

 Robert Miner (2023) - Trend Reversal Entry Strategies.

Galen Woods (2020) ‐ 50% Retracement Swing Trading Strategy.

Gerald Marisch (1990) - Gann’s 50% Retracement Rule. In: The W.D. Gann Method of Trading: A Simplified, Clear Approach.

W.D. Gann (1927) - The Tunnel Through the Air. Or: Looking Back From 1940.