Overview
This lecture introduces the use of standard deviation as an ICT concept for projecting trade targets, adding confluence, and identifying support/resistance zones in trading strategies.
Introduction to Standard Deviation in ICT
- Standard deviation is used as a projection tool, not as a standalone entry signal.
- It is applied with a Fibonacci retracement to project where price may reach after a manipulation move.
- Standard deviation adds confluence to existing trade models and helps set realistic targets.
How to Draw and Use Standard Deviation
- Identify the manipulation move: the last move before a market structure shift (e.g., break of structure).
- Draw the Fibonacci tool from high to low (or low to high) of the manipulation move.
- Main target zones are the 2 to 2.5 standard deviation levels, preferably aligning with higher timeframe PD arrays (liquidity or fair value gaps).
- The 4 standard deviation area is considered a more extended target.
- Standard deviation levels often act as future support or resistance.
Example Walkthroughs
- Example 1 (NQ): Wait for buy side liquidity to be taken, identify manipulation move, project targets using standard deviation zones, and confirm with sell side liquidity.
- Example 2 (EURUSD): Buy side taken, manipulation move identified, standard deviation applied; price hits 2.5 and 4 targets aligning with external sell side levels.
- Example 3 (AUD): Sell side swept, structure forms, draw standard deviation for upside projections, observe price reacting at 2.5 and 4 levels.
- Standard deviation can indicate areas where bias might be inverted (e.g., possible reversal at 2.5/4 if price reacts strongly).
Advanced Usage and Key Insights
- Chart models are fractal; manipulation moves and projections can occur at different timeframes and be nested.
- Standard deviation’s 2–2.5 levels often act as temporary support/resistance, potentially causing rejections/reversals.
- Combine standard deviation insights with overall ICT and price action context for high-probability setups.
Key Terms & Definitions
- Standard Deviation (in ICT) — A projection technique using Fibonacci retracement to set targets beyond a manipulation move.
- Manipulation Move — The last aggressive move before a break of structure, used for projecting future price moves.
- PD Array — Price Delivery Array; significant liquidity zones or fair value gaps in higher timeframes.
- Internal/External Liquidity — Areas of clustered stops or orders inside (internal) or outside (external) recent price ranges.
- Fair Value Gap — Price imbalance zone used for entries/exits.
- Displacement — Strong, directional market move indicating a shift in market structure.
Action Items / Next Steps
- Backtest usage of standard deviation on historical price charts after manipulation moves.
- Journal how often price reaches the 2/2.5 and 4 standard deviation projections.
- Note reactions (rejection, reversal, or continuation) after price hits these projected regions.