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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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Reclaimed OB in Smart Money Concept

Reclaimed Order Blocks (OB) in Smart Money Concepts (SMC): A Deep Dive

In the world of Smart Money Concepts (SMC), one of the most intriguing and powerful setups traders focus on is the Reclaimed Order Block (OB). Understanding this concept can significantly enhance your edge in the market by aligning your trades with institutional activity.

This article will explore what a reclaimed OB is, why it's important in the context of smart money trading, and how you can identify and trade it effectively.

What Is a Reclaimed Order Block?

A Reclaimed Order Block is a previously invalidated or broken Order Block (OB) that later regains its relevance as a point of interest or liquidity.

In traditional SMC, an Order Block is the last bullish or bearish candle before a significant move in the opposite direction—essentially where institutions or “smart money” placed large orders. However, markets are dynamic, and sometimes price breaks through these OBs, seemingly invalidating them.

But when price later returns to the same level and respects it—bouncing off or rejecting it with conviction—that order block is said to be reclaimed. This reaffirms its significance, often signaling a strong area of institutional interest.

Why Are Reclaimed OBs Important in SMC?

Reclaimed OBs offer high-probability trade setups because they show:

  • Smart Money Re-engagement: Institutions may be re-entering the market or defending a key position.

  • Liquidity and Manipulation: These levels often trap retail traders who believe the OB has failed.

  • Market Structure Realignment: When reclaimed, an OB can flip a zone from supply to demand (or vice versa), signaling a new directional bias.

Key Characteristics of a Reclaimed OB

  1. Initial Break: Price must violate the OB level, often inducing traders to believe the zone is invalid.

  2. Return and Respect: After the break, price returns and shows clear respect or reaction to the same level.

  3. Confluence with Market Structure: Reclaimed OBs are most effective when aligned with BOS (Break of Structure), CHoCH (Change of Character), or liquidity grabs.

  4. Volume or Volatility Spike: Often accompanied by increased volume or aggressive price movement.

How to Trade Reclaimed OBs: Step-by-Step Guide

1. Identify the Original OB

Look for a strong move (impulse leg) preceded by a clear bullish or bearish candle—this is your potential order block.

2. Wait for a Break

Let price break through the OB and show signs of invalidation. Avoid reacting too soon.

3. Monitor Price Action on Return

When price returns to the OB level:

  • Look for confirmation signals (e.g., rejection wicks, engulfing candles).

  • Use lower timeframes (1M–15M) for precision entries.

4. Align with SMC Concepts

Ensure confluence with other elements:

  • Liquidity sweep

  • Break of Structure (BOS)

  • Fair Value Gap (FVG)

  • Change of Character (CHoCH)

5. Define Entry and Risk

  • Entry: Upon confirmation candle at OB

  • Stop Loss: Below/above OB wick

  • Take Profit: Next structural high/low or liquidity zone

Reclaimed OB vs. Regular OB: What’s the Difference?

Feature Regular OB Reclaimed OB
Validity Remains untouched Initially broken
Market Sentiment Fresh institutional move Reasserted dominance
Risk Lower Slightly higher
Reward Potential High Very High (trap setup)

Common Mistakes to Avoid

  • Trading without confirmation: Always wait for signs of reclaim, don’t preemptively enter.

  • Ignoring liquidity: Reclaimed OBs work best near key liquidity zones.

  • Forcing setups: Not every OB will be reclaimed—be selective and wait for clean market structure.

Final Thoughts

In the world of Smart Money Concept trading, understanding the behavior of Reclaimed Order Blocks can elevate your strategy. These zones represent a powerful blend of liquidity, manipulation, and institutional engagement—core principles of SMC.

If you’re serious about trading like the pros, add reclaimed OBs to your playbook. Just remember: patience, structure, and confluence are key.


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