Mastering the ICT Power of 3 (PO3) Strategy

Ever felt like the market is personally out to get you? You set a perfect buy order on EUR/USD, price dips just low enough to hit your stop loss, and then—as if by magic—it rockets 80 pips in the direction you originally predicted.

It’s frustrating, but it’s not a conspiracy. It’s the ICT Power of 3 (PO3) in action.

If you’ve been trading for a while and find yourself constantly on the wrong side of 'fakeouts,' this strategy is your roadmap. The Power of 3 isn't just a pattern; it’s the literal DNA of how a price candle is formed. By the end of this guide, you’ll stop being the liquidity and start trading with it. We’re going to break down the mechanics of Accumulation, Manipulation, and Distribution so you can spot the 'Judas Swing' before it happens.

The Core Philosophy: The DNA of a Candle

To master the Power of 3, you first have to understand what a single candle represents. Whether it's a 15-minute candle or a Daily candle, every bullish candle follows a specific lifecycle: Open, Low, High, and Close (OHLC).

In a bullish scenario, the price opens, moves below the opening price (creating the wick), rallies to a high, and then retraces slightly to close. The PO3 strategy maps these four points to three market phases:

1. Accumulation (The Open/Range)
2. Manipulation (The Low/Wick)
3. Distribution (The High/Body)

Think of it like a spring being compressed. The market spends time sideways (Accumulation), snaps in the 'wrong' direction to trap traders (Manipulation), and then explodes toward its true destination (Distribution). Understanding this cycle allows you to stop guessing and start anticipating. For a deeper dive into how price moves, check out our guide on market structure basics.

Phase 1: Accumulation - The Setup

Accumulation is where the 'Smart Money' (institutional banks and large hedge funds) builds their positions. To the untrained eye, this looks like a boring, sideways range. To a PO3 trader, this is the calm before the storm.

During this phase, price stays within a tight horizontal corridor. Retail traders often get chopped up here, trying to trade breakouts that don't lead anywhere. The goal of the institutions is to keep price stable while they fill their large orders without moving the market too much—yet.

Pro Tip: Look for Accumulation near the 'Midnight Opening Price' (00:00 EST). If price stays near this level during the Asian session, a massive PO3 move is likely brewing for the London or New York sessions.

Phase 2: Manipulation - The Judas Swing

This is the part of the strategy that saves your account. After Accumulation, the market will almost always move aggressively in the opposite direction of the actual intended trend. This is called the Judas Swing.

Why does this happen? Two reasons:

1. To Engineer Liquidity: If the banks want to buy, they need people to sell to them. By pushing price below a support level, they trigger 'Sell Stop' orders from retail traders. These sell orders provide the liquidity the banks need to fill their massive buy positions.
2. To Clear the Board: It knocks out the 'early' buyers who had their stop losses sitting just below the accumulation range.

Example: Imagine GBP/USD is accumulating between 1.2650 and 1.2670. Suddenly, at 3:00 AM EST, price drops sharply to 1.2630. Retail traders think: "The support broke! Time to sell!" In reality, the 'Smart Money' is just buying up all those panicked sell orders at a cheaper price. This 20-pip drop is the Judas Swing.

Phase 3: Distribution - The Payoff

Once the manipulation is complete and the stops have been hunted, the real move begins. Distribution is the 'expansion' phase where price trends aggressively toward the target.

If you correctly identified the Manipulation phase, you aren't chasing the move; you're already in it. In our GBP/USD example, after the dip to 1.2630, price would reverse and blast through the 1.2670 accumulation high, heading toward 1.2720 or higher.

Distribution is where you make your money. It’s characterized by large, energetic candles with very little pullback. This is the 'body' of the daily candle. To manage your trades during this volatile phase, it's vital to have solid risk management strategies in place.

Timing the PO3: The Killzones

You can't trade PO3 at 8:00 PM on a Sunday. Context is everything. The Power of 3 is a time-based phenomenon. The most reliable PO3 setups occur during specific "Killzones" when volatility is highest:

• London Killzone (02:00 – 05:00 EST): Often forms the Low of the Day for bullish days or the High of the Day for bearish days.
• New York Killzone (07:00 – 10:00 EST): Can either provide a second PO3 setup or continue the distribution started in London.

According to CME Group's market data, the highest volume of transactions occurs when the London and New York sessions overlap. This is exactly where the 'Distribution' phase often hits its peak velocity.

Step-by-Step Execution with Real Numbers

Let's put this into a concrete trading plan using a Bullish PO3 setup on EUR/USD.

1. Identify the Opening Price: Note the price at 00:00 EST. Let’s say it’s 1.0850.
2. Wait for Accumulation: Price drifts between 1.0845 and 1.0860 during the Asian session.
3. Spot the Manipulation: At 3:15 AM (London Open), price aggressively drops to 1.0825. It breaks the Asian session low. Do NOT sell. Look for a reversal pattern (like a Market Structure Shift) on a lower timeframe (1m or 5m).
4. The Entry: You enter a Buy at 1.0835 after price rejects the 1.0825 level and moves back toward the opening price.
5. Stop Loss: Place your stop below the manipulation low—at 1.0815 (20 pips risk).
6. Take Profit: Your first target is the top of the accumulation range (1.0860). Your second target is a liquidity pool (previous day's high) at 1.0895.

Calculations: At 1.0895, your profit is 60 pips. With a 20-pip risk, that’s a 1:3 Risk-to-Reward ratio. If you are trading a standard lot ($10/pip), you are risking $200 to make $600.

Common Pitfalls and How to Avoid Them

Even the best strategies fail if applied blindly. Here is where intermediate traders usually get it wrong:

• Ignoring the Higher Timeframe Trend: If the Weekly and Daily charts are screaming 'Bearish,' don't look for a Bullish PO3 just because it's London open. The PO3 should align with the higher timeframe narrative.
• Entering Too Early: Many traders see price drop 5 pips and scream "Manipulation!" Wait for price to actually reach a logical liquidity area (like an old low or a Fair Value Gap) before looking for the reversal.
• Trading Outside Killzones: If a 'breakout' happens at 11:30 PM EST, it’s likely just noise, not a Judas Swing.

Warning: Never assume a move is manipulation until you see a shift in market structure on a lower timeframe. A move below support can easily become a real trend if the macro environment supports it.

Conclusion

The ICT Power of 3 strategy is more than just a setup; it’s a shift in perspective. Instead of seeing price action as a series of random zig-zags, you start seeing the intent behind the moves. You begin to realize that the 'dip' you used to fear is actually the 'discount' you’ve been waiting for.

Your next step? Go to your charts and mark the 00:00 EST opening price for the last five trading days. Observe how price interacts with that level during the London session. Did it move above or below it before the main trend started? Once you see the pattern, you can't unsee it.

Ready to refine your entries? Check out our guide on trading killzones to align your PO3 strategy with the highest probability times of day.

Frequently Asked Questions

What is the 'Judas Swing' in ICT trading?

The Judas Swing is a deceptive price move that occurs at the start of a trading session (usually London). It moves in the opposite direction of the day's true intended trend to trap retail traders and engineer liquidity for institutional orders.

How do I identify the Accumulation phase?

Accumulation is identified as a tight, sideways price range that usually forms around the midnight opening price during the Asian session. It represents a period where 'Smart Money' is building positions without significantly moving the price.

Can I use the Power of 3 (PO3) strategy on any timeframe?

While the PO3 concept is fractal (meaning it happens on all timeframes), it is most commonly and effectively used on the Daily chart to understand the formation of the daily candle (OHLC). Intermediate traders often apply it to the 15-minute chart for intraday entries.

Why is the 00:00 EST price important for PO3?

In ICT methodology, the midnight New York price (00:00 EST) serves as the 'true' opening price for the daily candle. Trading relative to this level helps determine if you are buying at a discount (below the open) or selling at a premium (above the open).