ICT Po3 - Candlestick Formation

AMD/PO3 (Power of Three) means Accumulation, Manipulation, and Distribution.

Accumulation

Price consolidates near the opening price.

During accumulation, the market may trade in a small range while liquidity builds above and below short-term swing points.

This stage may appear quiet and directionless.

However, the market is often preparing for the next move.

Manipulation

Forms the Low/High of a candle. Price temporarily moves in the opposite direction of the intended expansion.

This move is designed to take liquidity, trigger stop losses, and attract traders into the wrong side of the market.

In a bullish Power of 3, manipulation usually moves below the opening price.

In a bearish Power of 3, manipulation usually moves above the opening price.

Distribution

This is the range-expansion phase—a low-resistance liquidity run that occurs after manipulation. This is where the body of the candle forms.

These three stages help us understand how a candle may form from its open to its close.

For a bullish candle, price will often follow an Open–Low–High–Close formation.

For a bearish candle, price will often follow an Open–High–Low–Close formation.

Understanding these formations can help us anticipate where manipulation may occur and which direction price may deliver afterward.

Bearish Power of 3 Formation

Imagine a new daily candle opens at 6 PM EST.

Price may initially consolidate near the daily opening price.

After accumulation, price trades above the daily open.

This move may take:

• Buy-side liquidity.

• The Asia high.

• The London high.

• A previous short-term high.

• Equal highs.

• An internal swing high.

Price may also reach a higher-timeframe bearish PD Array during this manipulation.

After taking liquidity, price creates bearish displacement and begins expanding lower.

The daily candle may create its high first, trade toward sell-side liquidity, and close bearish.

The complete sequence is:

Open → manipulation higher → high of the candle → bearish distribution → low → close

This creates an Open–High–Low–Close formation.

Bearish Distribution

After buy-side liquidity / HTF level is taken, price may begin its bearish distribution.

This move should ideally show:

• Bearish displacement.

• A break below a relevant swing low.

• A change in the state of delivery.

• A bearish fair value gap.

• A bearish order block.

• Acceptance below the opening price.

• Continuation toward sell-side liquidity.

The manipulation creates the high of the candle, while the distribution creates the low.

The opening price acts as a reference point for the entire candle or trading period.

It can help us understand:

• Whether price is trading in premium or discount relative to the open.

• Which side of the open may be used for manipulation.

• Whether price is accepting above or below the open.

• The likely direction of the candle’s body.

• Whether the candle may close bullish or bearish.

For a bullish formation, we often want to see price manipulate below the opening price and later reclaim it.

For a bearish formation, we often want to see price manipulate above the opening price and later trade back below it.

Once a candle opens:

• Its high can continue moving higher.

• Its low can continue moving lower.

• Its closing price continues changing.

• Its opening price never changes.

This gives us a stable level that separates bullish candle-body formation from bearish candle-body formation.

The opening price helps us answer an important question:

Is price forming a manipulation wick or beginning its real distribution?

For a bullish candle, price may initially trade below the open, create the low, reclaim the opening price, and then expand higher.

This creates an Open–Low–High–Close formation.

For a bearish candle, price may initially trade above the open, create the high, move back below the opening price, and then expand lower.

This creates an Open–High–Low–Close formation.

Therefore, we do not simply look at whether price is above or below an open.

We study how price arrived there.

When price breaks above an important opening price and holds above it, the market is showing bullish signature. It shows that low of the current candle most likely was drawn!

This means price is beginning to build the candle body above its open.

A high-probability bullish sequence may look like this:

1. Price trades below the opening price.

2. Sell-side liquidity/HTF level is taken.

3. Price reaches a bullish PD Array.

4. Bullish displacement appears.

5. Price closes above the opening price.

6. A retracement respects the open or a bullish PD Array above it.

7. Price continues toward buy-side liquidity/HTF level.

To trade this phase, we will use the Timeframe Alignment Chart.

The move above the open may have created the upper wick or manipulation phase.

The break below the open suggests that bearish distribution is beginning.

This is why we often prefer shorts after price breaks and holds below an important opening price.

We are waiting for sellers to prove that price can move below the level and begin forming a bearish candle body.

Price can cross an opening price many times during consolidation.

Therefore, a small wick above or below the open should not automatically be treated as confirmation.

We want to see a signature.

Bullish signature may include:

• Displacement above the open.

• A candle body closing above the open.

• A break of a relevant swing high.

• A bullish FVG/OB.

• A retracement that holds above the open.

• Continuation toward buy-side liquidity/HTF level.

Bearish signature may include:

• Displacement below the open.

• A candle body closing below the open.

• A break of a relevant swing low.

• A bearish FVG/OB

• A retracement that stays below the open.

• Continuation toward sell-side liquidity/HTF level.

The stronger the displacement and the cleaner the hold, the more meaningful the break becomes.

The 10:00 AM Open is one of the most important intraday reference levels for New York session traders.

The 10:00 AM Open is important because it represents the opening price of a new four-hour candle.

Once the new four-hour candle opens, we want to observe how price trades around this level because the market may begin forming:

• The manipulation wick.

• The body of the four-hour candle.

• The next stage of distribution.

When we expect the new 4-hour candle to form bullish, we anticipate an:

Open–Low–High–Close formation.

After the candle opens at 10:00 AM, price may initially trade below the 10:00 AM Open.

If the draw on liquidity remains higher, we want to see a minor pullback below the 10:00 AM Open into internal sell-side liquidity, an untapped Order Block, or an FVG.

Once price reclaims and breaks back above the 10:00 AM Open, it signals that the manipulation may be complete and price is ready to begin forming the body of the new four-hour candle.

Phase 1: Accumulation (Around / Just After NYMO)

• Price trades around NY Midnight Open

• Range is narrow

• No direction yet

This is where the dealing range is being built.

At this stage:

• Being above or below NYMO means nothing

• Bias is not confirmed

This is where the “buy below / sell above” logic fails most of the time.

Phase 2: Manipulation (False Move Relative to NYMO)

Price will usually:

• Move below NYMO or

• Move above NYMO

But without follow-through. Most likely it will tap HTF level.

This is the manipulation leg of Power of 3.

Key point:

• Price being below NYMO does NOT mean discount

• Price being above NYMO does NOT mean premium

It only means manipulation is active.

Phase 3: Distribution (THIS Is Where Real Move Happens)

Distribution begins ONLY AFTER:

• Price breaks NY Midnight Open

• A candle closes beyond it

• Price stays away from the origin

Why?

Because price cannot expand if it keeps returning to where it started.

If price keeps coming back:

• You are still in manipulation

• The dealing range is not finalized

Why Break & Close Works Better

When price breaks and closes above NYMO:

1. Accumulation is finished

2. Manipulation has completed

3. Distribution has begun

4. The dealing range is expanding upward

So now:

• Buying makes sense after the break up

• Selling makes sense after the break down

You are trading distribution. Not guessing manipulation

Why the Retest Shifts to 8:30–11:00 AM

Between 8:30–11:00 AM:

• The session enters active expansion

• The range needs:

  • Balance

  • Repricing

  • Continuity

If NYMO is still untouched, it becomes the most logical internal target.

So price often:

• Pulls back to NYMO

• Mitigates it

• Then continues distribution

This is range maintenance, not reversal.

What It Means When NYMO Is Not Retested

If price:

• Expands away from NYMO

• Does not come back to it by ~7 AM

Then mechanically:

• The dealing range is imbalanced

• The origin of the range is untested

• Distribution is incomplete

In Power of 3 terms:

• Accumulation → Manipulation happened

• Distribution started without mitigation

That creates unfinished business in the range.