Market Foundations

A market is an auction that never stops

Forget the image of a stock price as a single "true" number. A market is a place where buyers and sellers meet, and price is simply the last level where a buyer and a seller agreed to trade.

Think of an auction house, but with two differences. First, there are sellers bidding against each other too, not just buyers. Second, it never pauses: every second, people raise prices, lower them, cancel and re-enter.

When more people want to buy right now than want to sell right now, buyers must pay higher prices to get filled, and price rises. When sellers are more urgent, they must accept lower prices, and price falls. That's it. Every chart pattern, indicator and concept you'll learn sits on top of this one mechanism.

Bid, ask, spread and last price

At any moment, a market shows you two prices, not one:

• Bid: the highest price a buyer is currently willing to pay.
• Ask (also called the offer): the lowest price a seller is currently willing to accept.
• Spread: the gap between them. Spread = Ask − Bid.
• Last price: the price of the most recent trade. This is usually what a chart plots.

If you want to buy immediately, you pay the ask. If you want to sell immediately, you receive the bid. That means a trader who buys and instantly sells loses the spread. The spread is the price of immediacy.

The order book and depth

Behind the bid and ask sit many more orders waiting at other prices. The list of all these waiting orders is the order book (sometimes called depth of market, or DOM).

A simplified MNQ book might look like this:

The best ask is 20,000.25 with 4 contracts offered. The best bid is 20,000.00 with 5 contracts wanted. Everything further away is depth.

Orders that sit in the book waiting are called resting orders or limit orders. They provide liquidity. Orders that trade immediately against the book (market orders) take liquidity.

What happens when someone hits the market

Suppose a trader sends a market buy for 12 MNQ contracts into the book above. The market fills them against the cheapest available sellers, level by level:

• 4 contracts at 20,000.25 (best ask now empty)
• 6 contracts at 20,000.50 (next level now empty)
• 2 contracts at 20,000.75 (3 left at this level)

This is the most important picture in the whole module: aggressive orders move price by eating through resting orders. Big moves happen when a lot of aggressive volume hits a thin book.

Liquidity: the fuel of the market

Liquidity means how easily you can trade size without moving the price much. A liquid market has tight spreads and deep books (lots of size at each level). An illiquid market has wide spreads and a thin book, so even modest orders cause slippage.

• NQ, ES, GC, CL and EURUSD are among the most liquid instruments in the world during their main sessions.
• The same instruments are noticeably thinner overnight, around holidays and in the minutes right before big news.
• Small-cap crypto tokens and memecoins can be extremely thin: a few thousand dollars can move price several percent.

Liquidity also has a second meaning that you'll use constantly at EdgeFlow: clusters of resting orders at predictable prices. Many traders place stop-losses just above recent highs or just below recent lows. A buy stop is a buy order waiting to fire. So above an obvious high there is often a pool of buy orders (stops from short sellers plus breakout entries). Below an obvious low there's a pool of sell orders.

Large participants who need to buy a lot often need sellers to trade against. A pool of sell stops below a low is exactly that. This is the core idea behind liquidity-based trading: price is often drawn toward where orders are resting.

Price discovery

Price discovery is the process of the market finding a level where buying and selling balance. New information, such as an inflation number, a Fed decision or an oil supply shock, changes what people are willing to pay, so the auction searches for a new balance.

Discovery is often fast and messy. After a surprise CPI print, NQ can move 100+ points in seconds as resting orders are pulled and aggressive orders flood in. Then the market often slows, probes back and forth, and finds a new range.

A useful mental model: markets alternate between balance (ranging, two-sided trade, price rotating around a fair value) and imbalance (trending, one side clearly in control). Learning which state you're in is a big part of reading a chart.

Who is on the other side of your trade?

Every trade has a buyer and a seller. Knowing who those people are helps you understand why price moves the way it does.

Two practical points follow from this table:

1. Big players can't enter all at once. A fund buying $500 million of Nasdaq exposure would crash through the book. It needs a lot of sellers, which is why large buying often happens into selling pressure, for example below a prior low where sell stops get triggered.
2. Market makers withdraw liquidity before news. The book gets thin just before CPI or FOMC, which is why spreads widen and slippage spikes around those times.

Why this matters for how EdgeFlow trades

The EdgeFlow framework (ICT / Smart Money Concepts) is built on this chapter. We ask three questions on every chart:

1. Where is liquidity resting? (Obvious highs, lows, equal highs and equal lows.)
2. Which liquidity has already been taken? (A sweep of a low suggests sell-side orders were used.)
3. Where is price likely to be drawn next? (Usually the opposite pool of liquidity.)

You'll learn the tools for answering these in the Technical Framework module. For now, just keep the order book picture in your head.

Same chart, different product

You can "trade gold" in at least five ways: a COMEX gold futures contract (GC or MGC), a gold CFD from a broker, a gold ETF such as GLD, spot gold (XAUUSD) via a forex/CFD broker, or tokenised gold on a crypto exchange. The charts look almost identical. The product underneath is very different: who you're trading with, what it costs, when it's open, how much leverage you get and what protections you have.

Choosing the right product is one of the first real decisions a trader makes.

Futures

A futures contract is a standardised agreement, traded on a regulated exchange, to buy or sell a set quantity of something at a set price on a future date. In practice, almost all short-term traders close out before expiry and never touch the underlying asset.

• Where: Centralised exchanges such as those of CME Group (CME, COMEX, NYMEX, CBOT).
• Counterparty: A central clearing house stands between every buyer and seller, which greatly reduces the risk of the other side not paying.
• Leverage: Built in through margin. You post a fraction of the contract's value.
• Transparency: One central order book; real exchange volume.
• Costs: Commissions plus exchange and clearing fees per contract; tight spreads in major contracts.

You'll go deep on futures in Chapter f3.

Forex (spot FX)

The foreign exchange market is where currencies trade against each other, such as euros against dollars (EURUSD). It's the largest market in the world by volume.

• Where: Over-the-counter (OTC). There's no single exchange; banks and brokers quote prices to each other and to clients.
• Counterparty: Your broker (or its liquidity providers). Broker quality matters a lot.
• Hours: 24 hours a day, five days a week, roughly Sunday 17:00 ET to Friday 17:00 ET.
• Costs: Mostly the spread, sometimes plus a commission; overnight financing ("swap") if you hold positions past the daily rollover.

Crypto: spot and perpetual futures

Spot crypto means you buy the actual coin. If you buy 0.5 BTC, you own 0.5 BTC, and it can be withdrawn to a wallet.

Perpetual futures ("perps") are derivative contracts that track a coin's price but never expire. Instead of expiry, they use a funding rate, a periodic payment between longs and shorts, to keep the perp's price close to spot. Perps allow high leverage and easy shorting. They're the most traded crypto product by volume.

• Where: Crypto exchanges (centralised exchanges and decentralised/on-chain venues). CME also lists regulated bitcoin and ether futures with expiries.
• Hours: 24/7, including weekends.
• Counterparty: The exchange itself. Exchange failures have happened (FTX in 2022 is the famous example), so venue choice matters.
• Costs: Maker/taker fees, the spread, funding payments on perps.

Chapter f4 covers perps in detail.

Stocks and ETFs

A stock (share) is part-ownership of a company. An ETF (exchange-traded fund) is a basket of assets that trades like a single stock. QQQ, for example, tracks the Nasdaq-100, the same index NQ futures track.

• Hours: US regular session 09:30–16:00 ET (17:30–00:00 GST in US summer time / 18:30–01:00 GST in US winter time). Extended sessions exist before and after, with thinner liquidity.
• Leverage: Limited (for US accounts, typically up to 2:1 overnight on a margin account and up to 4:1 intraday for accounts that qualify as pattern day traders; rules vary by country and broker).
• Pros: Ownership, dividends, simple to understand, good for long-term investing.
• Cons for short-term trading: Restricted hours, lower leverage, and (in the US) pattern-day-trader rules on small margin accounts.

CFDs (Contracts for Difference)

A CFD is a contract with your broker to exchange the difference in an asset's price between when you open and close. You never own anything. The broker is your counterparty.

• Availability: Popular in the UK, EU, UAE, Australia and elsewhere. Not available to US retail clients.
• Leverage: Varies by regulator. Under ESMA (EU) and FCA (UK) retail rules, leverage is capped, for example at 30:1 on major FX pairs and lower on gold, indices and crypto. Professional clients and offshore brokers may offer more.
• Pros: Small sizes, many markets from one account, no expiry.
• Cons: You're trading against your broker's price, not a central exchange; overnight financing costs; quality varies widely between brokers.

Comparison table

What EdgeFlow focuses on, and why

EdgeFlow's core markets are NQ/MNQ (Nasdaq-100 futures), gold (GC/MGC or XAUUSD), crude oil (CL/MCL) and major crypto (BTC, plus selected large coins).

Why futures first?

1. Liquidity and clean structure. NQ, GC and CL have deep books and massive participation, so liquidity concepts (highs, lows, sweeps) play out clearly.
2. Transparent exchange data. One central order book and real volume. No broker-specific price feed.
3. Micro contracts. MNQ, MGC and MCL are 1/10 size, which lets small accounts size positions sensibly.
4. Defined sessions. Futures respect the Asia/London/New York rhythm that ICT killzones are built around.
5. Prop firm access. Most futures prop-firm evaluations use these exact contracts.

Crypto is included because it trades 24/7, reacts to the same macro drivers as NQ more and more, and suits traders in time zones like Dubai's. It needs extra care because of leverage, funding and venue risk.

What a futures contract is

A futures contract is a standardised, exchange-traded agreement to buy or sell a fixed amount of an asset at a future date. "Standardised" is the key word: every NQ contract is identical, so they're freely interchangeable, and that's what makes one central, liquid order book possible.

When you buy (go long) one futures contract, you profit if price rises. When you sell (go short), you profit if price falls. Shorting in futures is as easy as buying. You don't need to borrow anything.

The exchanges

All of EdgeFlow's futures markets are listed by CME Group, which owns four US exchanges:

• CME (Chicago Mercantile Exchange): equity index futures such as NQ, MNQ, ES, MES; also CME bitcoin and ether futures.
• COMEX: metals, including gold (GC) and micro gold (MGC).
• NYMEX: energy, including WTI crude oil (CL) and micro WTI (MCL).
• CBOT: interest rates, grains, and Dow futures.

All trade electronically on CME Globex, CME Group's electronic trading platform.

Tick size, tick value and point value

Three numbers let you convert any price move into money:

• Tick size: the smallest price increment the contract can move.
• Tick value: how many dollars one tick is worth for one contract.
• Point value (also called the multiplier): how many dollars a 1.00 move in price is worth for one contract.

They're linked by one formula: Tick value = Tick size × Point value.

Contract specifications

Typical trading hours (all eight contracts on CME Globex): Sunday 18:00 ET to Friday 17:00 ET, with a daily one-hour break from 17:00 to 18:00 ET (Monday–Thursday).

Converting moves into money

Contract month codes

Every futures contract has an expiry month, coded by a single letter. The symbol is usually root + month code + year digit(s).

Examples: - NQZ6 = E-mini Nasdaq-100, December 2026. - MNQH7 = Micro Nasdaq-100, March 2027. - GCZ6 = Gold, December 2026. - CLF7 = WTI crude, January 2027 delivery.

A memory aid for the quarterly codes used by equity index futures: H-M-U-Z (March, June, September, December).

Quarterly vs monthly expiry

• Equity index futures (NQ, MNQ, ES, MES) expire quarterly. They're cash-settled, and the final settlement is based on a special opening quotation of the index on the third Friday of the contract month (trading in the expiring contract stops at 09:30 ET that day).
• Gold lists many months, but the active ones are every second month (Feb, Apr, Jun, Aug, Oct, Dec).
• Crude oil (CL, MCL) expires every month. CL's last trading day falls a few business days before the 25th of the month before the delivery month, so a "January" CL contract (CLF) stops trading in mid-to-late December. MCL stops trading slightly earlier than CL. Check the exchange calendar for exact dates.

Rollover

Because contracts expire, traders roll from the expiring contract to the next one. Volume naturally migrates to the next contract before expiry. For equity index futures, most volume typically moves across about a week or so before the third-Friday expiry. For CL, traders roll several days before the front month's last trading day.

Two things to know:

1. The next contract trades at a different price. For NQ, the next quarter usually trades at a premium to the expiring one, reflecting interest rates minus dividends. Your chart may "jump" on roll day if you use a non-adjusted continuous chart.
2. Never hold a physically settled contract into delivery. Retail brokers will typically force-close or block positions in physically delivered contracts (GC, CL) before the delivery period. You do not want to be asked to take delivery of 1,000 barrels of oil.

Notional value and leverage

Notional value is the full dollar value of the asset a contract controls:

Notional = Price × Point value × Number of contracts

Effective leverage = Total notional ÷ Account size.

[Embed Lab 2: Contract calculator here.]

Margin: initial vs day-trading

Margin in futures is not a loan. It's a good-faith deposit that shows you can cover daily losses.

• Initial margin: the amount required to hold a position overnight. Set by the exchange (CME Group publishes a minimum), and brokers may require more. Exchanges change margins when volatility changes, sometimes at short notice.
• Maintenance margin: the minimum equity you must keep while holding overnight. Fall below it and you get a margin call (deposit more or be closed out).
• Day-trading margin (intraday margin): a lower amount many brokers allow for positions opened and closed within the same session. This is set by each broker, not the exchange, and varies widely. Some brokers offer very low day margins on micros. Brokers can raise it at any time, especially before big news, and positions not closed before the broker's cut-off may be liquidated or charged full initial margin.

Settlement and daily mark-to-market

Every trading day, the exchange sets a settlement price for each contract. Open positions are marked to market: gains are credited and losses are debited to your account in cash, daily. That's why futures accounts can be margin-called even if you haven't closed the trade.

At expiry, contracts settle in one of two ways:

• Cash settlement (NQ, MNQ, ES, MES, MCL): the final gain or loss is paid in cash. No asset changes hands.
• Physical delivery (GC, CL; MGC via a certificate representing a share of a gold bar): the actual commodity changes hands. Retail traders avoid this by closing or rolling before expiry.

Part A — Forex

Currency pairs: base and quote

Currencies always trade in pairs. In EURUSD = 1.0850:

• EUR is the base currency (the thing you're buying or selling).
• USD is the quote currency (what the price is measured in).
• The price means 1 euro costs 1.0850 US dollars.

Buying EURUSD means buying euros and selling dollars. You profit if the euro strengthens against the dollar (price rises). Selling EURUSD means the opposite.

Major pairs all include the US dollar: EURUSD, GBPUSD, USDJPY, USDCHF, AUDUSD, USDCAD, NZDUSD. Gold also trades in FX format as XAUUSD (one troy ounce priced in dollars).

Pips and pipettes

A pip is the standard unit for measuring FX moves.

• For most pairs, 1 pip = 0.0001 (the fourth decimal place).
• For JPY pairs (USDJPY, EURJPY, GBPJPY), 1 pip = 0.01 (the second decimal place), because the yen's unit value is much smaller.
• A pipette is one-tenth of a pip: the fifth decimal (0.00001) on most pairs, the third (0.001) on JPY pairs. Most brokers quote to pipettes.

Lot sizes

Position size in forex is measured in lots (units of the base currency):

Many brokers let you trade any size in 0.01 increments, so "0.37 lots" (37,000 units) is fine.

Pip value

Pip value (in quote currency) = Pip size × Units

If the quote currency is your account currency (USD), you're done. For EURUSD: 0.0001 × 100,000 = 10 USD per pip per standard lot.

If the quote currency is not USD, convert:

Pip value (USD) = Pip size × Units ÷ (USD/quote exchange rate)

FX costs

• Spread: paid every round trip. A 0.8-pip EURUSD spread on 1 standard lot costs $8.
• Commission: some account types charge, for example, a fixed amount per lot per side in exchange for tighter raw spreads. Amounts vary by broker.
• Swap / rollover: an overnight financing charge or credit if you hold past the daily rollover (commonly 17:00 ET), based on the interest-rate difference between the two currencies. Many brokers apply triple swap on Wednesday to cover the weekend. Rates vary by broker.

Part B — Crypto

Spot vs perpetual futures

Spot: you buy the coin itself. No leverage (unless you use a margin account), no funding, no liquidation. If BTC goes to zero you lose what you put in, but no more.

Perpetual futures (perps): a derivative that tracks the coin's price and never expires. You can go long or short with leverage. Perps are where most crypto trading volume happens and where most retail blow-ups happen too.

Two prices matter on a perp:

• Last price: the most recent trade on that exchange's perp market.
• Mark price: a fair-value price the exchange calculates (typically from an index of spot prices on several exchanges plus a smoothed premium). Unrealised P&L and liquidations are based on the mark price, not the last trade. This protects traders from being liquidated by a single bad print on one exchange.

Funding rates

Because a perp never expires, something must stop its price drifting away from spot. That something is funding: a periodic payment directly between longs and shorts (not to the exchange).

• Positive funding (perp trading above spot, usually because longs are crowded): longs pay shorts.
• Negative funding (perp below spot, shorts crowded): shorts pay longs.
• Many major exchanges settle funding every 8 hours, often at 00:00, 08:00 and 16:00 UTC (04:00, 12:00 and 20:00 GST; Dubai doesn't change clocks, so these GST times are fixed year-round). But this varies: some exchanges and some contracts use 1-hour or 4-hour intervals, and some change the interval during volatile periods. Always check the contract page.
• You only pay or receive funding if you hold a position at the funding timestamp.

Funding cost = Position notional × Funding rate × Number of funding intervals held

Funding also tells you something: persistently high positive funding means longs are crowded and paying up, which can set the stage for a long squeeze if price dips and leveraged longs get liquidated.

Margin modes and liquidation

On most perp exchanges you choose a margin mode:

• Isolated margin: only the margin you assign to that position is at risk. If it's liquidated, the rest of your account is untouched.
• Cross margin: your whole account balance backs all positions. Losses on one position can eat into everything.

Liquidation happens when your position's margin falls below the maintenance margin requirement. The exchange then force-closes the position (usually with a liquidation fee) to stop your losses exceeding your collateral.

For a rough estimate in isolated margin, ignoring fees and funding:

Approximate liquidation distance ≈ (1 ÷ Leverage) − Maintenance margin rate

Maker and taker fees

Crypto exchanges charge per trade, as a percentage of notional:

• Maker: your order rested in the book and someone else traded against it (a limit order that didn't fill immediately). Usually cheaper.
• Taker: your order traded immediately against the book (market orders, or limit orders that cross the spread). Usually more expensive.

Fee levels vary by exchange, account tier and trading volume. As an illustration only, if taker fee were 0.05% per side:

A 24/7 market

Crypto never closes. That brings specific behaviours:

• Weekend liquidity is thinner. Moves can be sharper on lower volume, and gaps versus CME bitcoin futures (which do close) can appear.
• Macro still matters. BTC often reacts strongly to CPI, FOMC and NQ moves during US hours.
• Funding timestamps can cause short bursts of activity.
• You can't watch it all the time. Leveraged positions left on overnight are exposed to moves while you sleep. Use stops.

Memecoins and thin tokens: extra risks

Large coins like BTC and ETH have deep liquidity. Small tokens and memecoins are a different world:

• Thin liquidity and slippage. A $5,000 market order in a small token can move price several percent. On decentralised exchanges, you set a slippage tolerance; set it too wide and you can be filled far worse than expected (and be targeted by front-running bots).
• Rug pulls. Creators or insiders can remove liquidity or dump holdings, sending price to near zero in minutes.
• Holder concentration. If a handful of wallets hold most of the supply, they control price. Check on-chain holder distribution before trading.
• Contract risk. Some tokens have code that blocks selling, adds hidden taxes or lets the owner mint more.
• Listing and delisting risk. Perps on small tokens can be delisted, and their funding and liquidation behaviour can be extreme.

Long and short

• Long = buy first, sell later. Profit if price rises.
• Short = sell first, buy back later. Profit if price falls.

In futures, forex and perps, shorting is just as easy as going long. Use a direction multiplier: +1 for long, −1 for short.

P&L formulas by market

Futures: P&L = (Exit − Entry) × Point value × Contracts × Direction

Forex: P&L (quote currency) = (Exit − Entry) × Units × Direction, converted to account currency if needed. Or, more simply: P&L = Pips × Pip value × Lots × Direction.

Crypto (spot or linear USDT/USDC perps): P&L = (Exit − Entry) × Quantity of coins × Direction

Then subtract costs: commissions, fees, spread and slippage, and (for perps/FX) funding or swap.

Leverage: notional vs account

Leverage = Total notional exposure ÷ Account equity

Leverage isn't something a broker "gives" you so much as a ratio that falls out of how big your position is compared with your account. You can have a high-leverage account and still run low effective leverage by trading small.

A 0.5% day in the Nasdaq-100 is completely normal. On 1 NQ with a $10,000 account, that normal day is a 20% swing in your equity.

Margin calls and liquidation

When losses shrink your account equity below what's needed to hold your positions:

• Futures: If equity drops below maintenance margin on an overnight position, you get a margin call. Intraday, many brokers have an automatic liquidation threshold: they close positions when equity falls to a set level. Futures losses are not capped at your deposit. In an extreme gap, you can owe the broker money.
• Forex/CFDs: Brokers use a margin level (equity ÷ used margin). Below a stop-out level (often somewhere between 20% and 50%, depending on the broker), positions are closed automatically, largest loser first. Many regulated retail CFD providers (e.g. under ESMA/FCA rules) provide negative balance protection; offshore brokers may not.
• Crypto perps: Liquidation at the maintenance margin, based on mark price (see Chapter f4).

Position sizing: the formula that matters most

Professionals don't start from "how many contracts can I afford?". They start from "how much am I willing to lose if I'm wrong?".

Step 1: Risk amount = Account equity × Risk % Step 2: Risk per contract = Stop distance (in points) × Point value Step 3: Contracts = Risk amount ÷ Risk per contract (always round down)

For forex: Lots = Risk amount ÷ (Stop in pips × Pip value per lot) For crypto: Coin quantity = Risk amount ÷ (Entry − Stop) (absolute difference)

Why sizing beats leverage

Consider two traders with $10,000 accounts and the same strategy: wins 50% of the time, average winner twice the size of the average loser.

• Trader A risks 1% per trade. Ten losses in a row (unlikely but entirely possible over a long career) leaves about $9,044, down roughly 9.6%. Recoverable.
• Trader B risks 10% per trade. Ten losses in a row leaves about $3,487, down 65%. To get back to $10,000 they now need a +187% gain.

(Check: 0.99¹⁰ = 0.9044; 0.90¹⁰ = 0.3487; 10,000 ÷ 3,487 = 2.868, a +186.8% gain needed.)

Losses compound against you. Small, consistent risk keeps you alive long enough for your edge (if you have one) to play out.

The two basic trade-offs

Every order type trades off two things:

• Certainty of fill (will I get in or out?)
• Certainty of price (at what price?)

You can't have both perfectly. Market orders guarantee a fill but not the price. Limit orders guarantee the price (or better) but not the fill.

Market order

"Fill me now, at the best available price."

• Buys at the ask, sells at the bid.
• Fills almost instantly in liquid markets.
• In thin or fast markets, it can sweep several price levels (see Chapter f1) and fill worse than expected.

Use when: getting in or out matters more than the exact price, for example closing a position that's going wrong fast.

Limit order

"Fill me only at this price or better."

• A buy limit sits below the current price (or at it). It fills at your price or lower.
• A sell limit sits above the current price (or at it). It fills at your price or higher.
• It rests in the book and provides liquidity.
• If price never reaches it, it never fills. If price only just touches it, you may get a partial fill or none at all because other orders at that price were ahead of you in the queue.

Use when: you have a specific level you want, such as entering a long at a retracement into a level, or taking profit at a target.

Stop-market order (stop order)

"When price reaches this level, send a market order."

• A buy stop sits above current price. Used to enter breakouts or to exit a short.
• A sell stop sits below current price. Used to exit a long (a stop-loss) or to enter a breakdown.
• Once triggered, it becomes a market order, so it will fill, but possibly with slippage.

Use when: protecting a position (stop-loss). This is the standard stop-loss order for most traders because a guaranteed exit matters more than a perfect price.

Stop-limit order

"When price reaches the stop level, place a limit order at this price."

• Two prices: the stop (trigger) and the limit.
• Gives price control after triggering, but may not fill if price jumps past the limit.

Use when: entering on a breakout where you refuse to chase beyond a price. Rarely appropriate as a protective stop.

Trailing stop

"Keep my stop a set distance behind price, moving only in my favour."

• For a long, the stop rises as price makes new highs, but never falls.
• The distance can be in ticks, points or percent.

Use when: riding a trend without picking a fixed target. Drawback: a fixed-distance trail ignores market structure and can get triggered by normal pullbacks.

OCO (One-Cancels-Other)

Two linked orders: when one fills, the other is cancelled automatically.

• Classic use: a take-profit limit and a stop-loss stop on the same position. Whichever triggers first cancels the other.
• Also used for "breakout either way" entries: a buy stop above a range and a sell stop below it.

Bracket order

A bracket is an entry order plus an attached OCO pair (stop-loss and take-profit) that becomes active when the entry fills.

Brackets are strongly recommended for beginners: your stop is in the market the moment you are.

Order-type summary

[Embed Lab 3: Order-type visualizer here.]

Slippage

Slippage is the difference between the price you expected and the price you got.

It's most likely: - During news releases (CPI, NFP, FOMC), when liquidity is pulled. - At session opens (e.g. 09:30 ET US cash open), when volume surges. - In thin markets: overnight, holidays, small crypto tokens. - With large orders relative to book depth.

[Embed Lab 1 in execution mode here.]

Partial fills

A partial fill happens when only part of your order executes. Common with limit orders in thin markets or when you're near the back of the queue at a price. Your platform will show, for example, "3 of 5 filled". Decide in advance whether you'll take the partial position or cancel the rest.

Gaps

A gap is when price jumps from one level to another without trading in between. Gaps happen:

• Over the weekend in futures (Friday 17:00 ET close to Sunday 18:00 ET open; that's Saturday 01:00 to Monday 02:00 GST in US summer time).
• At the daily reopen, though this is usually small.
• On major news, a "gap" can occur intraday within milliseconds.

Stops don't protect you at the stop price in a gap. A sell stop at 69.60 on CL that opens at 68.90 after the weekend fills around 68.90.

Spread cost

Every round trip using market orders pays the spread at least once.

Why time matters

Markets aren't equally active all day. Liquidity, volatility and the kind of price action you see change with who is awake and trading. A move at 03:00 ET in NQ means something different from the same move at 09:35 ET. ICT-based trading leans heavily on time: specific windows (killzones) where the largest participants are most active and where liquidity is most often taken.

Three time zones you need

The rule for Dubai traders: - US summer time (EDT, roughly mid-March to early November): GST = ET + 8 hours. - US winter time (EST, roughly early November to mid-March): GST = ET + 9 hours.

So the US cash open at 09:30 ET is 17:30 GST during US daylight time and 18:30 GST in US winter time. Dubai didn't move; New York did.

The daylight-saving "gap weeks"

The US and UK change their clocks on different dates. That creates a few weeks each year when London and New York are only 4 hours apart instead of 5:

• Spring: the US moves forward on the 2nd Sunday of March; the UK on the last Sunday of March. For 2–3 weeks, the US is on summer time while the UK isn't.
• Autumn: the UK moves back on the last Sunday of October; the US on the 1st Sunday of November. For about one week, the UK is on winter time while the US is still on summer time.

What this means in practice:

• During gap weeks, London-anchored events happen one hour later in ET terms (London 08:00 = 04:00 ET instead of 03:00 ET). In GST, a London 08:00 open is 11:00 GST when the UK is on BST, 12:00 GST on GMT.
• New York-anchored events (09:30 cash open, 08:30 data, 14:00 FOMC) keep their ET time and shift in GST only with the US change.

2027 change dates for the same table: US on 14 March and 7 November; UK on 28 March and 31 October.

The three sessions

Session boundaries are conventions, not exchange rules. Different sources draw them slightly differently. These are commonly used definitions:

(London rows assume the normal 5-hour London–NY difference. In gap weeks, London's ET times move one hour later.)

ICT killzones

ICT teaching names specific time windows, called killzones, where it expects higher-probability moves because institutional activity is concentrated. These are commonly cited windows; different educators and even different ICT materials use slightly different boundaries. They're defined in New York time and are not adjusted for UK daylight saving.

CME Globex schedule and key US times

Notice the 16:00 ET close lands at or after midnight in Dubai. A "US Tuesday" session ends during Wednesday in Dubai. Journal trades by trading-session date, not just your local calendar date.

High-impact news events

Some scheduled releases regularly move NQ, gold, oil, EURUSD and BTC by large amounts within seconds.

What happens around news

• Before: liquidity thins as market makers pull orders. Spreads widen. Price may drift or compress.
• At release: a sharp move (sometimes in both directions within a minute), large slippage, possible gaps.
• After: the market often retraces part of the initial spike, then picks a direction. ICT traders often watch for the initial spike to take liquidity on one side before the real move.

Using an economic calendar

A good routine:

1. Weekly (Sunday): Open a calendar (for example ForexFactory, Investing.com or your broker's calendar). Filter to USD high-impact events, plus EUR/GBP for FX, and add the EIA report if you trade oil. Note dates and times in both ET and GST.
2. Daily (before your session): Re-check today's events. Mark them on your chart as vertical lines.
3. Set your rule: for example, "No new entries from 5 minutes before to 5 minutes after high-impact USD news; existing positions have stops in place or are flat." Many prop firms have their own news rules; know them.
4. After: note what the event did. Over time you'll learn how each market typically reacts.

Calendars show forecast, previous and actual. The market moves on surprise: actual versus what was expected.

Candlestick anatomy

A candlestick summarises all trading in one time period (one minute, one hour, one day…) with four prices: OHLC.

• Open (O): the first traded price of the period.
• High (H): the highest traded price.
• Low (L): the lowest traded price.
• Close (C): the last traded price.

Its parts:

• Body: the box between open and close. Size = |Close − Open|.
• Upper wick (shadow): from the top of the body to the high. Size = High − max(Open, Close).
• Lower wick: from the bottom of the body to the low. Size = min(Open, Close) − Low.
• Range: High − Low.

Bullish candle (close above open; usually green/white): buyers won the period. Bearish candle (close below open; usually red/black): sellers won. Doji (open ≈ close): indecision. A common convention is a body ≤ 10% of the range.

[Embed Lab 6: Candle builder here.]

What wicks tell you

A long wick shows rejection: price went somewhere and was pushed back.

• A long upper wick at a prior high often means price ran the buy stops above that high (took buy-side liquidity) and sellers stepped in.
• A long lower wick under a prior low often means sell stops were taken and buyers absorbed them.

This connects directly to Chapter f1: wicks are often the visible footprint of liquidity being taken.

Timeframes

The same market looks different on different timeframes:

• Higher timeframes (HTF): monthly, weekly, daily, 4-hour. Show the big picture, major levels and overall direction.
• Lower timeframes (LTF): 1-hour, 15-minute, 5-minute, 1-minute. Show detail, used to time entries.

A 1-hour candle contains four 15-minute candles. Its open is the first 15m open; its high is the highest of the four highs; its low is the lowest low; its close is the fourth candle's close.

Top-down analysis

Top-down analysis means starting high and working down:

1. Daily / 4-hour: Bias. Is price trending up, down or ranging? Where are the major highs and lows (liquidity) it might be drawn to?
2. 1-hour / 15-minute: Narrative. Where is price relative to those levels? Has it taken liquidity recently? What's the likely next target?
3. 5-minute / 1-minute: Entry. Within a killzone, look for a precise entry aligned with the higher-timeframe bias, with a clear stop.

A common pairing is a ratio of about 4–6 between steps: Daily → 4H → 1H → 15m → 5m → 1m.

Chart types

Heikin Ashi caveat. Heikin Ashi candles are calculated, not traded: - HA Close = (O + H + L + C) ÷ 4 - HA Open = (previous HA Open + previous HA Close) ÷ 2 - HA High = max(H, HA Open, HA Close) - HA Low = min(L, HA Open, HA Close)

The displayed open and close aren't prices that actually traded. Never place orders or mark exact levels from a Heikin Ashi chart. Use real candles for anything precise.

Volume basics

Volume is the number of contracts (or coins/shares) traded in a period.

• In futures, volume is real, centralised exchange volume. Very useful.
• In spot forex, there's no central exchange. "Volume" on FX charts is usually tick volume (number of price changes) from your broker, a rough proxy only.
• In crypto, volume differs by exchange; aggregated volume is more meaningful than one venue.

Simple uses: - Rising volume with a move suggests real participation. - A volume spike at a high or low with a long wick suggests a lot of orders were exchanged there, often liquidity being taken. - Volume is highest around session opens and news. Compare like with like (today's 09:30 bar with previous 09:30 bars), not with a 03:00 bar.

Introduction to market structure

Market structure is the pattern of swing highs and swing lows that price makes. It's the backbone of the EdgeFlow technical framework.

• Swing high: a candle whose high is higher than the highs of the candles on either side (a simple definition uses at least one candle each side; many traders use more).
• Swing low: a candle whose low is lower than the lows on either side.

Label each new swing relative to the previous one of the same type:

• HH (Higher High): a swing high above the previous swing high.
• HL (Higher Low): a swing low above the previous swing low.
• LH (Lower High): a swing high below the previous swing high.
• LL (Lower Low): a swing low below the previous swing low.

Uptrend (bullish structure): HH and HL. Downtrend (bearish structure): LH and LL. Range: swings roughly level, with no clear sequence.

Every swing high has buy-side liquidity above it, and every swing low has sell-side liquidity below it. Market structure and liquidity are two views of the same thing.

Charting vs execution

Most traders separate where they analyse from where they place orders.

• Charting: TradingView is the industry standard for charts. It runs in a browser, desktop and mobile app; it has drawing tools, alerts and multi-timeframe layouts. Real-time CME data on TradingView usually requires a paid data add-on; delayed data is free. Some brokers connect directly to TradingView so you can trade from the chart.
• Futures execution: platforms such as NinjaTrader, Tradovate, and Rithmic-based platforms (Rithmic is a data and order-routing provider used by several trading front-ends). Many prop firms specify which platforms and data feeds they support.
• Crypto execution: directly on a crypto exchange's web or app interface, or via TradingView where the exchange supports it.

Make sure the price on your chart matches the instrument you're trading. A TradingView chart of NQ1! (continuous front month) is fine for analysis; your order goes to a specific contract (e.g. NQZ6).

Choosing a broker or exchange

Prop firm evaluations (how they generally work)

A proprietary trading firm (prop firm) lets you trade its capital, or a simulated account linked to payouts, after you pass an evaluation. You pay a fee for the evaluation. Rules vary by firm and change often, so always read the current rules of the specific firm you choose. The common building blocks:

• Profit target: reach a set profit (e.g. a hypothetical $3,000 on a $50,000 account) to pass.
• Daily loss limit: a maximum loss in one day. Breach it and you fail (or are paused for the day, depending on the firm).
• Maximum drawdown: the largest allowed drop from a reference point. Types:
• Static: fixed below the starting balance.
• Trailing: follows your highest balance (sometimes your highest unrealised balance intraday) upward, and doesn't move down. Some trailing drawdowns stop trailing once they reach the starting balance.
• End-of-day trailing: only updates at the end of each session.
• Consistency rules: limits on how much of your total profit can come from one day (for example, no single day being more than a set percentage of total profit).
• Minimum trading days: you must trade a set number of days.
• Position limits: maximum contracts at once (often scaling up as you profit).
• News and time rules: some firms restrict trading around major news or require positions to be flat by a set time (often before the 17:00 ET daily close, which is 01:00/02:00 GST).
• Payout rules: a minimum profit before withdrawal, a buffer above the drawdown, a profit split, minimum days between payouts, and sometimes caps on early payouts.

Demo vs live

• Demo (simulated) accounts are free and essential for learning the platform, order types and your routine. But fills are often idealised (your limit order may "fill" when it wouldn't have in reality), and there's no emotional pressure.
• Live trading adds real slippage, real queue position, and real emotions.

A sensible path: demo until your process is consistent → smallest live size (1 micro) → scale slowly based on journaled results, not on a good week.

Journaling

A trade journal turns experience into skill. Record, for every trade:

• Date, session, time (ET and GST), instrument, contract
• Direction, entry, stop, target, size
• Risk in $ and R (R = your planned risk; a trade that makes twice the risk is +2R)
• Result in $ and R, including costs
• Setup and reason (HTF bias, liquidity taken, killzone, entry trigger)
• Screenshot before and after
• Emotions and rule adherence (Did I follow my plan? Did I move my stop?)

Review weekly. Look at win rate, average R per trade, results by session and setup, and how often you broke rules.

Your first 30 days

Pre-session checklist

• [ ] I know today's high-impact news and times (ET and GST).
• [ ] I've confirmed whether the US/UK are in a daylight-saving gap week.
• [ ] I'm trading the correct front-month contract.
• [ ] HTF bias noted (Daily/4H): bullish, bearish or neutral, and why.
• [ ] Key liquidity marked: previous day high/low, Asian high/low, London high/low, obvious equal highs/lows.
• [ ] I know which killzone I'm trading and when it ends.
• [ ] Risk per trade set in $ (and it's within my plan).
• [ ] Daily loss limit set in $ (my own, plus any prop firm limit), and I will stop for the day if I hit it.
• [ ] Platform connected, data live, bracket order template loaded.
• [ ] I'm rested, focused and not trading to "make back" yesterday.

Review the moduleGlossary flashcards →