Module 7: Smart Money & ICT Concepts · Lesson 105/144
9 min 60 XP
Inducement (IDM) is the most recent pullback inside a structure — and it is a trap. Naive structure traders look at that pullback low (in an uptrend) and treat it as a clean higher low to buy from, placing their stops just under it. Smart money sees something else entirely: a tidy pool of liquidity sitting right there, waiting to be taken. The IDM "induces" the crowd into the trade early, so their stops can be run.
The rule that changes everything
A structure is NOT valid until its inducement has been taken. Before a swing high becomes a true Higher High, price will usually dip and grab the IDM below it first. That is why classic breakout traders get stopped out moments before the move they correctly predicted — they ignored the inducement.
This refines everything from the last lessons. A point only becomes a structure point when a specific action happens: a Higher High prints when price takes out the latest pullback (the IDM); a Higher Low prints when price then closes above the BOS. (Bearish is mirrored: a Lower Low when the IDM is taken, a Lower High when price closes below the BOS.) Notes that matter: candle colour and close do not matter for the IDM itself — it only matters that the liquidity gets taken; but the close does matter for the BOS/CHoCH.
Put it together into a repeatable routine. 1) Identify a BOS or CHoCH point. 2) Mark the most recent pullback as the IDM. 3) When price takes out the IDM, mark the extreme as HH (bull) or LL (bear). 4) When price closes beyond that HH/LL, mark it as the new BOS. 5) After the BOS, mark the new pullback extreme as the HL (bull) or LH (bear) to watch for the next CHoCH. Repeat. This is the engine that maps any chart cleanly.