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Internal and External Liquidity in ICT

Internal and External Liquidity in ICT | Smart Money Concepts (SMC) Trading Introduction In the world of ICT (Inner Circle Trader) and Smart Money Concepts (SMC) trading , understanding liquidity is critical for anticipating market moves and aligning with institutional players. Two key types of liquidity every trader should understand are internal and external liquidity . This guide breaks down the difference between internal and external liquidity in ICT trading, why they matter, and how to use them to your advantage in your strategy. What Is Liquidity in ICT Trading? In ICT and SMC terminology, liquidity refers to areas in the market where orders are clustered — primarily stop-loss orders and pending buy/sell orders. These zones are attractive to smart money (institutions, banks, hedge funds) because they offer high-volume areas to execute large positions with minimal slippage. Liquidity is often hidden behind price action structures, and understanding where it's ...
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New Day Opening Gap in Smart Money Concept

New Day Opening Gap in Smart Money Concept: What Smart Traders Need to Know

In the world of trading, Smart Money Concepts (SMC) have reshaped how retail traders view price action, structure, and liquidity. One particularly powerful but often overlooked concept is the New Day Opening Gap—a strategic point on the chart that reveals valuable information about institutional interest, price inefficiencies, and potential trading opportunities.

In this article, we’ll break down what the New Day Opening Gap is, why it matters in the context of Smart Money Concept trading, and how traders can use it to refine entries and anticipate price movements.

What is the New Day Opening Gap?

A New Day Opening Gap refers to the price difference between the New York session close and the next day's opening price. It typically forms during the Asian session when the market is less volatile and liquidity is lower.

This gap often appears as a small imbalance in price and can act as a magnet for price to revisit, especially if it aligns with other SMC concepts like liquidity pools, order blocks, or fair value gaps (FVGs).

Why the New Day Opening Gap Matters in Smart Money Concept

Smart Money Concept is built on understanding how institutional traders—banks, hedge funds, and other large market participants—move the markets. These entities leave behind footprints, and gaps are often one of them.

Key Reasons the Opening Gap is Important:

  1. Liquidity Target: Institutions often return to these gaps to mitigate positions or fill unexecuted orders.

  2. Price Inefficiency: Gaps reflect an imbalance that the market may want to correct, especially if it occurred with low volume.

  3. Market Sentiment Clue: The direction and size of the gap can provide insight into upcoming momentum or reversals.

How to Identify the New Day Opening Gap

To spot this gap:

  1. Mark the New York session close (typically around 5 PM EST).

  2. Identify the open of the next trading day, usually around the Asian session.

  3. Highlight the difference between the two prices.

The gap is most reliable when:

  • It aligns with a premium/discount zone.

  • It exists within or near a daily imbalance.

  • It’s in confluence with an order block or breaker.

Practical Use: Trading the New Day Opening Gap

Here’s how SMC traders can integrate this concept:

1. Wait for Price to Fill the Gap

  • If price opens with a bullish gap and then retraces into the gap zone, look for long opportunities—especially if it aligns with a bullish order block.

  • The reverse applies for bearish gaps.

2. Combine with Liquidity Sweeps

  • Look for stops being taken near the gap zone, signaling a potential reversal.

  • Watch for signs of inducement—where price draws in retail traders before reversing.

3. Use as a Target Zone

  • If a gap remains unfilled for several sessions, it often becomes a price magnet, making it a strong target for trades from other setups.

Real-World Example

Let’s say you’re analyzing GBP/USD. The New York session ends, and the next day opens with a small bullish gap during the Asian session. During the London session, price returns to fill that gap, tapping into a 15-minute bullish order block before launching higher.

This gap acted as:

  • A liquidity pocket

  • A retracement level

  • A launchpad for institutional buying

This is a classic example of how smart money uses the gap to fill orders efficiently and move price with minimal resistance.

Final Thoughts

The New Day Opening Gap is a small but powerful element within the Smart Money Concept framework. It reveals institutional intent, highlights price inefficiencies, and provides high-probability trade setups when combined with market structure and liquidity concepts.

By incorporating this into your trading strategy, you can better anticipate reversals, refine your entries, and target zones where price is likely to react.

Pro Tip: Backtest this concept on your charts, especially on major Forex pairs and indices like NAS100 and SPX500. You’ll be surprised how often price respects these tiny “invisible magnets.”


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