ICT Vacuum Block – Opening Gaps
Do you want to know about ICT vacuum block and trade it accurately?
In this blog post we will teach you all about the ICT vacuum block from its formation to identification along with its use in trading with real market examples.
Lets begin with defining the ICT vacuum block.
What is ICT Vacuum Block?
ICT vacuum block is a gap created in price action because of a high volatility event like FOMC, NFP or a geopolitical event like war.
It can also be created because of a week, day or session opening.
Its called vacuum block because of the vacuum of liquidity.
When price opens up or down from the market price leaving a gap behind it is called ICT vacuum block. Because there has been no trading activity in that gap as no trader was able to execute trade because of high volatility.
Mostly price tends to fill these gaps and then continue its move in the direction of gap.
(I) Bullish ICT Vacuum Block
Bullish ICT vacuum block is created when price opens above the current market price leaving a gap behind which may be due to a high volatility event or a geo political event.
As economic or geo political events affect the price of assets so price can increase heavily because of these events.
This bullish vacuum block indicates that prices are in strong up trend and a vacuum of liquidity is created because of the volatile event.
So price tends to fill the vacuum of liquidity and it can reprice the gap.
How to Trade Bullish ICT Vacuum Block?
To trade a bullish vacuum block first of all you have to understand the event and its impact which caused the gap in price.
If the event and its impact looks to have a long term impact on the markets then wait for price to retrace back into the vacuum block.
When price retraces back you have to mark Consequent Encroachment level of vacuum block.
When price approaches the consequent encroachment level or goes beyond it, look for bullish trade confirmation like ICT Market Structure Shift in lower time frame.
After the confirmation you can execute a buy trade with stop loss below the low of vacuum block.
For take profit you can use ICT Fibonacci Levels or next draw on liquidity.
(II) Bearish ICT Vacuum Block
Bearish ICT vacuum block is created when price opens below the current market price leaving a gap behind which may be due to a high volatility event or a geo political event.
As economic or geo political events affect the price of assets so price can decrease instantly because of these events.
This bearish vacuum block indicates that prices are in down trend and a vacuum of liquidity is created because of the volatile event.
So price tends to fill the vacuum of liquidity and it can reprice the gap.
How to Trade Bearish ICT Vacuum Block?
To trade a bearish vacuum block first of all you have to understand the event and its impact which caused the gap in price.
As we discussed if the event and its impact looks to have a long term impact on the markets then wait for price to retrace back into the vacuum block.
When price retraces back you have to mark Consequent Encroachment level of vacuum block.
When price approaches the consequent encroachment level or goes beyond it, look for bearish trade confirmation like ICT Market Structure Shift in lower time frame.
After the confirmation you can execute a sell trade with stop loss above the high of vacuum block.
For take profit you can use ICT Fibonacci Levels or next draw on liquidity.
Does Price Fill the Gaps for Sure?
No its not sure whether the price will fill the gap or not. And nor its necessary for price to fill the gaps.
But if it comes back to fill the gap then you can look for trade entry.
Does Price Fill the Gaps Completely?
If price fills a gap completely then it will be a perfect price delivery. But it is not the case in most circumstances.
Price may just tap the gap and go away or it may fill the gap completely.
Does the Vacuum Block Fails to Hold the Price?
Yes the vacuum block/gap may fail to hold the price if it is created as a result of a temporary volatile event whose impact does not last longer.
