Predict and Profit 9 Out of 10 Trades: Combining ICT with EMA/SMA for Market Mastery

ICT refers to Inner Circle Trading, a conceptualized trading method designed to analyze the market structure and understand the institutional trading activity.

ICT also considers concepts of price action and candlestick patterns, but its main focus is oriented to detect moments where the smart money is flowing. Situations, like stop hunts, liquidity sweeps, and false breakouts are interpreted as institutional price manipulation tactics. ICT aims to make a profit from those tactics, caring not to fall into the trap.

Simple Moving Average

A Simple Moving Average (SMA) is a technical indicator that, by performing a calculation of the different prices quoted by an asset over a period, indicates an average price as a result plotted in the price chart in the form of a line.

This line is intended to smooth out the price fluctuations at the time that follows the price direction, potentially revealing an underlying trend in the market. According to the period, the line will react more or less faster and more or less precisely. The shorter the period, the more responsiveness and less precision.

The most used period are:

• 20-period
• 26 period
• 50-period
• 100-period
• 200-period

Exponential Moving Average

An Exponential Moving Average (EMA) also performs a calculation of the different prices quoted by an asset over a period, but in this case, the result indicates an exponential average price that is more responsive to the fluctuations, trying to reveal trend conditions more quickly and effectively.

According to the period, the exponential line will react more or less faster. The precision of the EMA is severely affected in shorter periods.

The most used period are:

• 20-period
• 50-period
• 100-period
• 200-period

ICT, EMA, AND SMA

Combining ICT with EMA can add weight to the analyses made on swing highs/lows and equal highs/lows. Analyzing the market under the ICT concepts at the time that the EMA and SMA can reveal the direction of the price is, with no doubt, a powerful method for finding high-probability setups.

Let’s embark on some potential scenarios.

Check out also about ICT trading and key concepts!

Manipulation Tactics and 20 EMA

The 20 EMA in the frame of day trading and scalping can spot valuable trading opportunities.

• Crossover following a false breakout: Let’s say the price is struggling in some area of support or resistance at what seems the end of a trend, consequently forming a range. At some moment the price breaks the range in favor of the trend but then plunges back, inducing the rest of the traders into a trap. This movement could be a sign of institutional activity. If the price continues falling, reaching an EMA 20 and crossing below it, could indicate a potential trend reversal opportunity.

Learn more: Comparing EMA and SMA: Which Moving Average is Right for You?

50 EMA with Order Block  

The 50 EMA and Order Block concept working together can be a powerful indicator for swing trading entry opportunities when analyzing the chart in an hourly time frame.

• Following an Order Block: Let’s say you have detected an order block in the market structure and are expecting the price to catch up to it, eventually. The price is already trending up. The market pulls back reaching the order block at the time that reacts from the EMA line bouncing back to further continuation. This could be a signal for a buying entry.

Conclusion

ICT, EMA, and SMA are a powerful combination to address the crypto market. While ICT can spot opportunities based on institutional trading, moving averages can confirm those price movements.