IPDA in ICT Concepts: Understanding the Interbank Price Delivery Algorithm
What Is IPDA in Trading?
IPDA, or the Interbank Price Delivery Algorithm, is a concept central to ICT (Inner Circle Trader) methodologies. It explains how the interbank system—dominated by major financial institutions and central banks—manages price delivery across global markets.
Think of this interbank algorithm as the “invisible hand” behind market movements. Unlike traditional views of price as a result of simple supply and demand, IPDA posits that price is systematically delivered with precision to target liquidity and maintain market efficiency.
Have you ever wondered why price often seems to “hunt” stop-losses before reversing or why a breakout sometimes feels like a trap? That’s IPDA in action, systematically managing price to fulfill institutional objectives.
How IPDA Shapes Market Behavior
The concept of IPDA suggests that the market operates in a calculated way, prioritizing liquidity collection and rebalancing over randomness. Markets are not chaotic; they are algorithmic, and the algorithm’s main purpose is to ensure that liquidity is consistently targeted and absorbed.
Why Is This Important for Traders?
Understanding IPDA means stepping into the mindset of institutional players. You’re no longer just reacting to price—you’re predicting its moves based on the logic of liquidity targeting and delivery.
Core Principles of IPDA
1. Liquidity Targeting
Liquidity is the lifeblood of financial markets, and IPDA is designed to seek out liquidity pools to fulfill orders.
What Does This Look Like?
- Buy-Side Liquidity: Price gravitates toward resistance levels where buy stop-loss orders are clustered.
- Sell-Side Liquidity: Price moves toward support levels to trigger sell stop-losses.
By understanding this principle, you can identify areas on the chart where price is likely to be drawn, improving your ability to anticipate market movements.
2. Price Rebalancing
Markets constantly aim to balance inefficiencies created by rapid price movements. This is where Fair Value Gaps (FVGs) come into play.
Example:
If price moves quickly upward, leaving a gap in the structure, IPDA ensures that price revisits the gap to rebalance. This phenomenon creates excellent opportunities for traders to enter in alignment with the algorithm’s logic.
3. Time and Price Theory
IPDA emphasizes that price delivery isn’t just about where but also when. This is where the concept of Killzones becomes essential.
ICT Killzones Include:
- London Killzone: 2:00–5:00 AM (New York Time).
- New York Morning Killzone: 7:00–11:00 AM.
- New York Afternoon Killzone: 1:00–4:00 PM.
During these times, market activity intensifies, and interbank algo is most active in driving price toward liquidity zones.
IPDA’s Role in ICT Strategies
1. Liquidity Inducement
IPDA doesn’t just target liquidity—it induces it. When the market shows false breakouts or sharp reversals, these are deliberate moves to trap retail traders and collect their stop-losses.
How to Identify Liquidity Inducement:
- Look for sharp price wicks around support and resistance zones.
- Observe price creating equal highs or lows, which attract stop-loss orders.
2. Market Structure and Displacement
IPDA operates within the framework of market structure, using displacement to signal directional intent.
Example:
When a Break of Structure (BoS) aligns with a displacement move, it often signals that the interbank algorithm has completed a liquidity grab and is now driving price toward a new target.
3. Optimal Trade Entry (OTE)
One of the most powerful tools in ICT trading, OTE zones, aligns with IPDA’s logic. These zones, located between the 61.8% and 78.6% Fibonacci retracement levels, are where the algo often delivers price for optimal trades.
How to Use IPDA in Your Trading
Step 1: Identify Liquidity Pools
Mark areas of buy-side and sell-side liquidity on your chart. These are typically located around:
- Recent highs and lows.
- Psychological levels (e.g., round numbers).
Step 2: Watch for Displacement
Wait for significant price moves that indicate a shift in market structure. Combine this with tools like FVGs to identify potential entry zones.
Step 3: Time Your Trades
Align your trading with ICT Killzones to capitalize on periods of heightened algorithmic activity.
Step 4: Backtest IPDA Concepts
Before applying these strategies with real money, spend time backtesting on historical data. Look for recurring patterns that align with IPDA principles.
Conclusion: The Power of IPDA in Trading
The Interbank Price Delivery Algorithm (IPDA) provides a roadmap for understanding how institutional players control price movements. By incorporating IPDA principles into your trading, you can shift from reacting to market moves to proactively positioning yourself for success.
Whether you’re new to ICT concepts or an experienced trader looking to refine your strategy, mastering IPDA will undoubtedly elevate your trading game. Now the question is, are you ready to embrace this level of precision and discipline in your trading?
Private Coaching
If you’re ready to take your trading skills to the next level, book your free discovery session with me today! We’ll discuss your goals, create or assess your current trading system, and develop a personalized plan for you to become a consistent and successful trader.