Optimal Trade Entry (OTE): The 62–79% Retracement Zone
Optimal trade entry (OTE) is ICT’s name for the retracement zone between 62% and 79% of a price leg, with 70.5% as its midpoint. After a displacement that shifted structure, ICT looks for an entry when price retraces into that zone, deep in discount for a long or deep in premium for a short.
Advanced · 11 min read · Updated
What you will learn
Draw the OTE zone on a displacement leg, combine it with an entry pattern and size the position from the stop.
Read first: Premium, Discount and Equilibrium: The ICT Dealing Range · Fair Value Gap (FVG): Definition, Consequent Encroachment and Rules
Drawing the zone
For a bullish leg, draw a Fibonacci tool from the swing low to the swing high of the displacement. Keep the levels 0, 0.5, 0.62, 0.705, 0.79 and 1. The OTE zone runs from 0.62 to 0.79 measured from the high, so it sits in the lower part of the leg, inside discount.
Hypothetical example · Calculating the levels
The leg runs from 100.00 to 110.00, a range of 10 points. A 62% retracement is 110.00 − 6.20 = 103.80; 70.5% is 102.95; 79% is 102.10. The OTE zone is 102.10 to 103.80.
Which leg qualifies
- The leg should come from a market structure shift or a clear trend leg, not from a random swing.
- The leg should be recent and unbroken: if price trades below its low, the leg is invalid.
- The retracement should happen during an active session, ideally a kill zone.
Confluence inside the zone
The zone is wide. Traders narrow it with a precise element inside it: a fair value gap, an order block, or the 70.5% level itself. The free OTE indicator applies this logic with fixed rules: it marks the zone of each displacement leg and flags a fair value gap or order block inside it.
Stop, target and position size
The idea is invalidated if price trades beyond the start of the leg, so the stop goes beyond the 100% level, with a margin. Targets are usually the opposite liquidity: the leg high first, then the next buy-side pool.
Hypothetical example · Sizing on the Micro Nasdaq-100
Suppose a similar setup on a larger leg of the Micro E-mini Nasdaq-100, with the entry 15 index points above a stop placed beyond the leg origin. One point of that contract is worth $2, so the stop risks $30 per contract. With a risk budget of $100, three contracts risk $90; a fourth would exceed the budget. The position size calculator does this calculation with the official tick values.
Limits of the method
- Strong trends often retrace less than 62%, so OTE entries are missed in the best moves.
- A retracement can go through 79% and keep going; the zone is not a floor.
- Fibonacci ratios have no physical meaning; they are a convention that makes entries consistent and testable.
The bearish case: the same rules upside down
For a short, the leg runs from a swing high down to a swing low, and the OTE zone sits in the upper part of the leg, in premium.
Hypothetical example · Bearish OTE levels
A bearish displacement falls from 18,640 to 18,560, a leg of 80 points. Retracements are measured from the low: 62% is 18,560 + 49.6 = 18,609.60; 70.5% is 18,616.40; 79% is 18,623.20. The OTE zone is 18,609.60 to 18,623.20. The stop goes above 18,640, the start of the leg, and the first target is the leg low at 18,560 or the sell-side liquidity below it.
Check one thing before relying on the zone: the leg must still be intact. If price has already traded above 18,640, the leg is broken and its retracement levels no longer describe anything.
Common mistakes
- Drawing the tool on a leg that did not shift structure.
- Entering at 62% without any confirmation inside the zone.
- Placing the stop inside the zone, where normal noise reaches it.
Practice exercise
Find five displacement legs on a 5-minute chart. For each, draw the OTE zone, note whether price retraced into it, whether a fair value gap or order block sat inside, and what the outcome would have been with a stop beyond the leg origin and a target at the leg high. Use a spreadsheet or the free trading journal.
Check your understanding
1. Between which levels is the OTE zone?
- 38% and 50%
- 62% and 79%
- 100% and 127%
Show the answer
Answer: 62% and 79%. ICT’s OTE zone runs from 62% to 79% of the leg, with 70.5% in the middle.
2. A leg runs from 200 to 220. Where is the 70.5% retracement?
- 205.90
- 214.10
- 210.00
Show the answer
Answer: 205.90. 220 − 0.705 × 20 = 205.90.
3. Where does the stop of an OTE long usually go?
- At 62%
- Beyond the start of the leg (100%)
- At the leg high
Show the answer
Answer: Beyond the start of the leg (100%). The idea is invalidated if the leg origin is broken.
Practise with the free tools
Frequently asked questions
Why 62%, 70.5% and 79%?
They are the levels ICT uses: 62% and 79% bound the zone and 70.5% is its midpoint. They are conventions, not laws of the market.
Can I use OTE without a market structure shift?
You can draw it on any leg, but the framework expects a leg that shifted structure. Without it, the zone has less context.
What if price never reaches the OTE zone?
Then there is no trade. Missing moves is part of the method; chasing price outside the zone changes the risk.
Related lessons
References and further reading
- Micro E-mini Nasdaq-100 futures contract specifications — CME Group
- The Inner Circle Trader — official YouTube channel — Michael J. Huddleston
Written with the help of AI tools, then checked against the sources listed and our methodology. Report an error and we will correct it. Methodology · Editorial policy · Report an error
Educational content only, not investment advice. Futures and leveraged products can lose more than the initial deposit.
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