Power of Three (PO3)
The Power of Three (PO3) is a simple but powerful framework taught by ICT that describes how smart money typically moves the market over a specific period usually a day. The model breaks market behavior into three distinct phases:
- Accumulation – A range where price consolidates.
- Manipulation – A fakeout or liquidity grab that tricks traders.
- Distribution – The real move in the intended direction.
It’s called the Power of Three because these three steps repeat over and over—daily, weekly, even intraday. Once you know what to look for, it gives structure to the chaos.
Why Is PO3 Important?
The PO3 helps traders avoid getting trapped during false breakouts or random volatility. It shows you:
- When not to trade (accumulation)
- What the trap looks like (manipulation)
- When the real move begins (distribution)
Most retail traders get shaken out during the manipulation phase. Smart money uses that phase to trigger stop losses and gather liquidity before taking price in the real direction. The PO3 gives you a way to align yourself with that smart money flow.
PO3 is a market pattern that reflects how smart money operates. Instead of moving the price randomly, large institutions move the market in a structured way:
Accumulation – A period of sideways price movement where orders are being built up. This is often seen as a tight range where the price forms equal highs and lows. Liquidity builds up above and below these levels.
Manipulation – This is when price makes a fake move outside the range to grab liquidity. For example, price might break below the equal lows, tricking traders into going short, only to quickly reverse back inside the range. This move is designed to trap breakout traders and trigger stop losses.
Distribution – After collecting liquidity, the market quickly shifts in the opposite direction. This is where the real move begins. Smart money is now distributing their positions, and price moves with strong momentum.
How to Trade the PO3
Identify the Range
Look for accumulation during Asian or London sessions. Mark out the highs and lows of that range.
Watch for the Manipulation
During New York open (or another kill zone), look for a false breakout beyond the range. This is where stop hunts happen.
Wait for Confirmation
Look for signs that the move is reversing:
- Break of structure (BOS)
- Displacement with a fair value gap
- Liquidity sweep with SMT divergence
Enter on a Pullback
Use an FVG, OTE, or Order Block as your entry. Align with the trend of the distribution move.
Manage Risk
Stop loss goes above/below the manipulation wick. Target the opposite side of the range or the next liquidity pool.
Key Tips to Remember
- PO3 isn’t a pattern—it’s a price behavior model.
- Always wait for manipulation to finish before entering.
- Don’t trade accumulation or chase manipulation.
- Use time-based context: Asian session = accumulation, NY open = manipulation, NY session = distribution.
- Combine PO3 with FVGs, OBs, SMT, and Kill Zones for higher confluence.
Smart Money Technique (SMT)
The Smart Money Technique (SMT) is a powerful tool used by traders to spot hidden signs of strength or weakness in the market by comparing the behavior of two correlated or inversely correlated markets. It helps identify potential reversals and refine trade entries by revealing when smart money may be entering or exiting the market.
SMT is based on divergence. It compares the price action of two assets that usually move together. When these assets start to behave differently at key levels, it indicates a potential shift in market direction. This break in correlation is what SMT focuses on.
What Is SMT Divergence?
SMT divergence happens when one asset makes a new high or low and sweeps liquidity, while the other does not. This signals that one market may be manipulated while the other shows true intent. It helps traders spot potential reversals before they happen.
Bullish SMT Divergence
Occurs when:
- Asset A makes a lower low and takes out sell-side liquidity.
- Asset B makes a higher low holding above key support.
This signals strength in Asset B. It suggests that price may reverse to the upside.
Bearish SMT Divergence
Occurs when:
- Asset A makes a higher high and sweeps buy-side liquidity.
- Asset B makes a lower high and fails to follow.
This signals weakness in Asset B. It suggests that price may reverse to the downside.
This divergence is a sign that smart money may be preparing to reverse price direction. It helps traders avoid traps and fakeouts caused by liquidity grabs.
Correlated and Inversely Correlated Pairs
SMT works best with pairs that are highly correlated or inversely correlated:
Correlated examples
- EUR/USD and GBP/USD
- NASDAQ (NQ) and S&P 500 (ES)
- Bitcoin (BTC) and Ethereum (ETH)
Inversely correlated examples
- EUR/USD and Dollar Index (DXY)
- GBP/USD and DXY
When using SMT on correlated pairs, you expect them to move in the same direction. When they don’t, that divergence gives you valuable information. In inversely correlated pairs, when one moves up, the other should move down. A failure to do so signals a potential reversal.
Discount & Premium
Before we talk about discount and premium zones, we need to understand what a range is.
What Is a Range?
A range is just the distance between two points on the chart — a high and a low. In ICT trading, we call this the dealing range.
You can create a range by:
- Picking a swing low and a swing high (if the price moved up)
- Or a swing high and a swing low (if the price moved down)
Once you find the high and the low, you divide the range into two equal halves. This gives you the premium zone and the discount zone.
What Is the Discount Zone?
The discount zone is the bottom half of the range.
This is where the price is considered cheap. ICT traders look to buy in the discount zone, but only if other things line up — like a good market structure or a fair value gap.
The lower price goes into discount, the better the potential reward, because you’re buying low and targeting higher prices.
What Is the Premium Zone?
The premium zone is the top half of the range.
This is where the price is considered expensive. ICT traders look to sell in the premium zone, but again, only if other signs support the trade, like bearish structure or a liquidity grab above a high.
Now, how do you find the discount and premium zones?
It’s simple. First, find a swing high and a swing low — that gives you your range. Then, divide that range in half. The top half is your premium zone, and the bottom half is your discount zone.
You can use the Fibonacci retracement tool to make this easier. Just draw it from the low to the high (for an upward move) or from the high to the low (for a downward move). The 50% level marks the middle.
Everything above 50% is premium, and everything below 50% is a discount.
This helps you know where smart money is more likely to sell (premium) or buy (discount).
Optimal Trade Entry (OTE)
Now that you understand discount and premium zones, we can move into one of the most useful ICT tools for finding high-quality entries — the Optimal Trade Entry, or OTE.
OTE helps you enter a trade at the best level, where smart money is most likely to step in. It gives you a high-probability entry during a pullback, with a better risk-to-reward setup.
What Is OTE?
OTE is a specific retracement zone inside the premium or discount area of a range.
- For a buy setup, OTE should be inside the discount zone.
- For a sell setup, OTE should be inside the premium zone.
In simple terms:
You’re buying cheap at a discount, or selling expensive at a premium — but with more precision.
How to Find the OTE Zone
You’ll use the Fibonacci retracement tool to mark this zone.
- The OTE zone is between the 62% and 79% retracement levels (0.62–0.79).
- The 0.75 level (or midpoint of this zone) is especially important and often acts as a strong reaction point.
OTE for a Buy Setup (In Discount)
Find a swing low to high (bullish move).
Draw your Fibonacci tool from low to high.
Look for price to pull back into the 0.62–0.79 zone.
Make sure this zone is within the discount area.
Watch how the price reacts — this is where you look for long entries.
OTE for a Sell Setup (In Premium)
Find a swing high to low (bearish move).
Draw your Fibonacci tool from high to low.
Look for price to retrace into the 0.62–0.79 zone.
Make sure this zone is within the premium area.
Watch for reactions — this is where you look for short entries.
