I.C.I. is a swing trading strategy where you identify impulse above a structure level, wait for the correction and confirmation, and once confirmed, you take a trade on the second impulse.
You need to be able to identify the structure and know-how to use Fibonacci.
You need to have EMA 10, EMA 20, and MACD with default settings on your chart. I like to have EMA 10 red and EMA 20 blue but it’s up to you which colors you prefer.
I’m using TradingView for my charts. If you don’t have a TradingView account, you create one here.
Let’s get to the rules of the strategy.
Start with opening D(aily) timeframes of your favorite pairs. Why daily timeframe? It has the highest probability of showing valid patterns for the I.C.I. strategy. And we will be looking for clear impulses. We need to have an impulse that breaks through a structure – either upside or downside. Or in other words, the market needs to create a higher high or lower low.
Example of EURUSD Impulse on the daily chart.
Once you identify impulse and correction, move to the Weekly timeframe to validate it. Ideally, the weekly timeframe is supportive of the move of your pair.
The weekly chart of the previous EURUSD impulse. We had a strong impulse to the upside followed by a consolidation and we see impulse being created.
The second rule is that you need to have a correction to a minimum of 38.2 level of Fibonacci. And you measure it by taking the low and the high of the impulse to the upside; taking the high to the low of the impulse to the downside.
You don’t take a trade unless the market has done a correction to a minimum of 38.2 (0.382) level of Fibonacci.
Following the example of EURUSD, the correction was to 50 level (0.5)
Now that we identified an impulse followed by a correction according to rules, we need to find a valid entry for us. To identify a valid entry point, we move to the 4H timeframe and this is where we start to use MACD.
On the 4H timeframe, we want to see MACD being in a bullish environment (above the zero line) and also MACD and signal line crossing. The MACD in a bullish environment applies to our current example of trade. If you’re taking short, you will be looking for MACD below the zero line.
Below is an example of the EURUSD 4H chart where we’re still waiting for our entry point.
You can see on the chart that EMAs have almost crossed and MACD is forming also. You don’t want to enter yet. Don’t front-run a trade. Always wait for confirmation.
Now that we have a forming signal, we will add 4H Fibonacci and we will take it from the low of the correction to the high of the correction (or from the high to the low if you’d be taking short) which gives us the stop loss and take profit for the trade.
As you can see, our MACD has moved above the zero line, and MACD and signal line has crossed. EMAs have crossed to bullish environments as well.
The next move is to set pending orders on the test of the structure. I’ve highlighted the structure with a red rectangle below.
And once it hits your pending order, you just let the trade ride, and here is the result.
We had a nice EURUSD swing trade based on I.C.I. strategy that hit 4.11 RR and the trade took 2 weeks to complete.
One additional tip for better results. If you’re in a swing trade that breaks the previous high, you move your stop loss to break even to ensure you don’t lose money if the market turns different direction. Here, you’d move your stop loss to break even once there is a close above the white horizontal line on the chart below.
There you go. You know all the rules of I.C.I. swing strategy now. Before you start using it, I recommend testing on paper account to learn how to identify impulses and corrections to get used to it.
As with any swing strategy, I.C.I. strategy is about patience. But when you find the right setup, patience is well rewarded.
Thanks for reading and good luck.