Oftentimes the market seems to move against you by hitting your stop loss and then moving in the direction you predicted – right after that. And there is a reason behind this behavior. This phenomenon is not random. It’s a calculated move done by institutions and it is called the power of three trading strategy.
This same concept is also known as PO3 or AMD (Accumulation, Manipulation, Distribution) across different traders. This strategy was first devised by the founder of ICT (Inner Circle Trader) Michael J. Huddleston as a part of his smart money concepts trading strategy.
In this article you will learn
- The 3 phases of PO3 or AMD (Accumulation, Manipulation, Distribution)
- How PO3 forms on the daily candle
- How kill zones fit into the PO3 strategy
- How to utilize the Power of three trading strategy
You will be able to identify the PO3 on charts with confidence.
This article is for educational purposes only and does not constitute financial advice. Trading involves significant risk of loss. Always do your own research before making any trading decisions.
What is PO3 (Power of three) Trading strategy
Power of Three is an ICT price action framework built on smart money principles, according to which institutions distribute the price in three distinct phases across any time frame. A critical thing to keep in mind is that it is not just a chart pattern, instead it is a price distribution framework.
AMD in PO3 Animated Chart
You might be wondering why do institutions do that? The answer to this question lies in the trading nature of smart money. They deal with large amounts of money and their orders are in the range of millions to billions at a time.
They cannot just hit one buy or sell button and expect a clean fill. If they do this it would move the market against them and they would have to buy at ever increasing prices or sell at ever decreasing prices.
According to the ICT framework they engineer a move in which they first grab the liquidity of the other side of their trade and then move the market where it was going. That engineered move of price distribution consists of three distinct market phases of AMD (Accumulation, Manipulation, and Distribution ).
The PO3 framework forms at almost all time frames i.e monthly, daily, weekly or intraday. The key concept to keep in mind while trading PO3 is that it is not a traditional chart pattern like Head and shoulders pattern or double top etc. It is a method which shows the footprints of institutional activity.
Accumulation:
Accumulation is the first phase of PO3 price distribution. In the accumulation phase the price moves within the high and low range. The reason behind this type of formation is the build up of large blocks of institutional orders during consolidation. They continue to buy (or sell) in small increments avoiding the unnecessary impulsive move in the market.
When a retail trader looks at this type of formation they see a totally dead and indecisive market phase. They let the market go on without actively participating themselves. During this range a build up of stop losses is happening.
The upper side of the range is the buy side liquidity BSL and the lower side of the range is called the sell side liquidity or SSL. But this ranging accumulation cannot continue forever and eventually the breakout does happen but not in the way retail traders expected. What happens next is a false breakout which is the foundation of the next phase: Manipulation
Manipulation:
During manipulation the market moves very sharply but opposite to the true direction of institutions’ intentions. ICT calls this sharp move Judas Swing based on biblical betrayal. Judas Swing is essentially a stop hunt.
The sole purpose of this move is to trigger the stop losses, sweep liquidity, and trap the breakout entries of retail traders. This action, referred to by some traders as a stop hunt — provides institutions the much-needed liquidity they need to fill their positions at favorable prices.
So when the breakout happens in one direction, retail traders believe that the range breakout is happening and they enter the trades. But right after their entry price reverses back into the range of accumulation and hits their stop losses creating liquidity for smart money.
The timing of this manipulation phase in price distribution is critical; it mostly appears in high liquidity windows like the London session open or the New York session open. ICT calls these high volatility areas near each session as kill zones.
This is where the Judas Swing most often occurs. Now once the market has taken out the retail traders’ stop losses institutions show their real intent and move the market impulsively in the direction opposite to the false breakout. This sharp, sustained move is exactly what defines the next phase: Distribution.
Distribution
Once the liquidity has been taken in the manipulation phase, smart money drives the price very impulsively and decisively in its true intended direction. This is the distribution phase where price is delivered to the targeted level. This phase is very impulsive because by now the institutions have filled their positions and price has freedom to expand without any counter pressure.
During this phase, all retail traders can do is watch the price move aggressively against them, as they had entered in the wrong direction during the Judas Swing. However, traders who understand ICT concepts may look for entries aligned with the distribution phase.
Once the price distribution has started, price has freedom to expand (expansion phase) toward a draw on liquidity like a previous swing level, previous session range or a key level.
So during the complete AMD cycle the market moves in a range during accumulation, then it gives a false breakout to take out the retail traders during manipulation and finally moves aggressively in its intended direction during distribution.
PO3 and the Daily Candle (OHLC):
The daily candle gives the full story of the AMD cycle showcasing the price action that happened at lower timeframes. The candle’s Open, High, Low, and Close correspond directly to each phase of PO3.
In the chart below there is a daily timeframe chart for XAUUSD. We can see this bullish candle. But if we look closely this candle shows a full AMD cycle happening. The market opens and then consolidates near the open representing the accumulation phase.
Then the market drops below the open, sweeping the lows and triggering the stop losses. This is the Judas Swing or the Manipulation happening according to PO3. Finally the price reverses and moves very aggressively in the upward direction closing near the swing high. This is the third phase distribution of price in accordance with the AMD model.
Similarly, if we look at the bearish candle we can see the market opens and moves in a range for a brief time showcasing the accumulation phase. Then for a very brief moment it breaks the high of the range and takes out the stop losses of short retail traders and triggers entries for long traders.
After taking out the stop losses, the market reverses and comes back within the range forming the manipulation phase of PO3. Then the market moves aggressively in the bearish direction and closes near the low. This move represents the distribution phase of the AMD cycle in PO3. The opening of a daily candle is very important in ICT.
When price opens and initially moves away from the opening price before reversing, this represents the Judas Swing: the manipulation phase.
Session Timing & Killzones
The PO3 cycle does not occur randomly on the chart. Global trading sessions matter a lot because the three phases of PO3 unfold in different market sessions. The manipulation phase happens during the high volatility windows in a trading day. This sets the stage for the formation of kill zones. Kill zones are the high volatility windows across different trading sessions, mostly around the opening hours of the market, during which the market is concentrated and highly likely to trap the retail traders in manipulation and give false breakouts. So the Judas Swing mostly forms in kill zones.
In the below table you can see the proposed timeframes for the formation of kill zones according to ICT.
| Killzone | New York Time | What Tends to Happen |
| Asian Killzone | 7:00 PM – 9:00 PM | Price tends to range/accumulate |
| London Killzone | 2:00 AM – 5:00 AM | Judas Swing often forms before the London trend move |
| New York Killzone | 7:00 AM – 10:00 AM | Most volatile — manipulation before the main NY move |
The London and New York session overlay is also very important in AMD. If the market sweeps the low during the London session then traders following this model anticipate distribution in the upward direction during the New York session. Traders who follow the PO3 model often avoid taking positions during the Asian session accumulation phase. They instead look for trading opportunities during the London and New York session because by then the AMD cycle starts to take visible shape and they can identify and trade accordingly.
The Fractal Nature of PO3
PO3 is fractal in its nature. The same AMD cycle forms and repeats at every timeframe. For example, a weekly candle has its own AMD cycle. The daily candle also has its own. Similarly, a 4-hour, 1-hour, 15 min, 5 min, each have their own AMD cycle.
Another quality of this pattern is that the PO3 cycles nest inside each other at different timeframes. For example, the manipulation phase of the weekly candle may look like a complete bullish daily candle. That daily candle itself is the Judas Swing of the weekly but on the daily timeframe, it contains its own complete AMD cycle.
If you look at the weekly chart of GBPUSD you can see these bullish candles. Now when we go to the daily timeframe you can see there are these 5 candles. Now if we look closely this third candle is the manipulation phase of the weekly candle but it in itself is also a complete AMD cycle.
The correct understanding of this concept is critical because according to PO3 trading strategy traders first analyze higher time frames to build directional bias and then switch to lower time frames to find entries during the distribution phase of the higher timeframe candle. This understanding also answers what many traders wonder like why the market shows distribution on one timeframe but consolidation on the other. They can simply be different phases of the AMD cycle.
How to Trade PO3 Step-by-Step
According to ICT, the PO3 trading strategy can be observed through the following steps.
- Step 1: First of all, traders following PO3 typically identify the higher timeframe bias to determine the overall trend in the market. The focus is on identifying in which direction the market is distributing at a higher timeframe. The key is to identify if the market is trading above or below the key levels and where the draw on liquidity is. This sets the stage for clean trade setups at lower time frames.
- Step 2: Now switch to a lower time frame like 4 hours and look at the accumulation formation according to the AMD framework. Traders typically observe multiple candles moving within a defined range. Mark the high of this range – this is the BSL(Buy side liquidity level). Mark the low of the range, this is the SSL(Sell side liquidity level).
- Step 3: As we discussed earlier, according to PO3, practitioners do not enter during accumulation but wait for the formation of Judas Swing (manipulation) . It will most likely appear in the kill zones, the London session open or the New York session open. This is the moment where most retail traders will likely enter the market anticipating the breakout, But rather than entering, PO3 traders wait for the manipulation to complete.
- Step 4: After the manipulation, wait for the price to come back into the range or break the range in the opposite direction. This reversal signals the manipulation phase may be done and now it might be time for distribution.
- Step 5: Now once again drop to the lower timeframe like 15 min or 5 min and look for trading opportunities like the formation of an FVG or an order block in the direction of expected distribution.
- Step 6: For the distribution target according to PO3 strategy the target is mostly the significant key level like the session high or low, a swing point or key liquidity pool. This is the draw on liquidity.
Entry Tools for trading PO3: FVG + Order Block
After Judas Swing formation in the AMD cycle, PO3 traders need to identify from where the price will resume distribution. They need this information to set up their entries. According to ICT, while looking for entries in PO3 trading strategy the two commonly referenced tools are FVG and Order Block. Let’s talk in detail about how each tool is typically used within the PO3 framework.
PO3 + Fair Value Gap (FVG):
A fair value gap is a 3 candle formation in which the market moves so aggressively that it leaves behind visible gaps in the form of impulsive candles. It is a zone of imbalance in the market. The bullish fair value gap can be marked as a zone from the high of the first candle to the low of the 3rd candle or vice versa for bearish fair value gaps. A fair value gap formation indicates that price did not trade efficiently during this zone.
FVGs often form during the Judas Swing formation. So after its formation price may retrace back into this zone before continuing in the distribution direction. PO3 traders typically watch for price to tap into the FVG as a potential signal, with the draw on liquidity as the intended target.
PO3 + Order Block (OB):
An order block is the last candle in the opposite direction of the Judas Swing, just before the aggressive reversal. According to ICT something happened during that last candle, likely institutional activity which caused the market to move impulsively in one direction aggressively.
This Order Block zone is a key level which PO3 traders use for entry.
For example let’s say the market is moving in accumulation and then enters the second phase – manipulation. Now at the end of manipulation when the price reverses the direction it moves aggressively in one direction.
The last candle in the opposite direction of the manipulation phase, just before the aggressive move, is the Order Block zone. ICT traders anticipate entries at the high of the zone because price is likely to revisit this zone before continuing the distribution phase.
Both FVG and Order Block are used to identify potential entry areas within the PO3 distribution phase and not as guarantees of price direction. They are most effective when used within the full AMD context.
Frequently Asked Questions:
Power of three trading strategy is an ICT framework according to which there are three phases in the market. The first phase is the accumulation during which the market forms a ranging structure. The second phase is the manipulation in which the market breaks either the high or low of the range and then reverses back after taking out the stop losses of retail traders. And the third phase is the distribution in which the market distributes the price and moves aggressively in the direction opposite to the false breakout.
AMD stands for accumulation, manipulation, distribution. These are the three phases of Power of Three trading strategy, which is a framework introduced by Inner Circle Trader.
The Judas Swing is the manipulation phase in the AMD cycle. Price breaks one side of the accumulation range, triggering the stop losses of retail traders and pulling in breakout entries on the wrong side. The market then reverses sharply, closing back within the range before beginning the distribution phase
PO3 works on all time frames because of its fractal nature. It is worth noting, however, that manipulation at daily time frame could appear as distribution on the 4H time frame because the PO3 framework has nested structures across different timeframes.
Kill zones are the areas of high volatility in trading sessions. These are the zones in which most of the time the manipulation phase of the AMD occurs and the kill zones are mostly formed around the opening of the London session and the New York session because of high volatility in the market.
The Power of Three trading strategy requires a solid understanding of ICT concepts such as liquidity, the Judas Swing, manipulation, and distribution. It may present a learning curve for newer traders, but many find it a structured way to observe the market and identify potential setups based on price action and institutional behaviour. As with any trading framework, thorough study and practice in a risk-free environment is advisable before applying it with real capital.
