Relative Strength Analysis – Accumulation & Distribution is an ICT method used to identify which market within a related group is showing the strongest institutional buying or selling pressure.
This concept was taught by Michael J. Huddleston, the founder of ICT (Inner Circle Trader), in the 2017 ICT Private Mentorship Core Content Month 10.
Instead of assuming that every market in the same asset class will move equally, traders compare related instruments to find the market receiving the strongest institutional sponsorship.
Michael J. Huddleston explains this principle clearly:
“Not all commodities are equal.”
The objective is to trade the market showing genuine leadership rather than selecting a market that is only moving sympathetically with the broader group.
What Is Relative Strength Analysis?
Relative strength analysis compares the price action of several related markets to determine which one is:
- Strongest during bullish conditions
- Weakest during bearish conditions
- Under professional accumulation
- Under professional distribution
- Leading the broader market
- Moving only in sympathy with another market
This does not involve using a traditional relative strength indicator.
ICT relative strength analysis is based entirely on price action, including:
- Higher highs and higher lows
- Lower highs and lower lows
- Failure swings
- SMT divergence
- Short-term liquidity
- Premium and discount arrays
- Order blocks
- The behavior of correlated markets
The trader compares how markets respond under the same external conditions.
The Role of the US Dollar Index
When analysing commodities, the US Dollar Index often establishes the broader directional environment.
Michael J. Huddleston states:
“The greenback is the king.”
Most internationally traded commodities are priced in US dollars. Therefore, movements in the Dollar Index can influence the general direction of commodity prices.
The basic relationship is:
- A strengthening Dollar Index may pressure commodity prices lower.
- A weakening Dollar Index may support commodity prices higher.
However, not every commodity will react in the same way.
Some commodities will show greater strength or weakness than others. Relative strength analysis helps identify these leadership markets.
The Dollar Index should provide the broader narrative, while the individual commodity provides the trade setup.
Professional Accumulation
Professional accumulation occurs when institutions or large market participants are consistently buying an instrument.
The accumulation may not initially appear as a strong rally. It can first appear as a market refusing to decline when it should normally be weak.
For example, suppose the Dollar Index is making a higher high.
Under normal conditions, commodity prices would be expected to move lower. However, one commodity fails to make a lower low and instead forms a higher low.
That failure to decline indicates relative strength.
The higher low may suggest that institutional buyers are absorbing available sell-side liquidity.
The common characteristics of professional accumulation include:
- Price fails to make a lower low.
- A higher low forms while related markets remain weak.
- Short-term highs are repeatedly broken.
- Bullish candles are larger than bearish candles.
- Bearish retracements remain shallow.
- Bullish order blocks support price.
- Discount PD Arrays hold as support.
- Premium PD Arrays are broken without significant resistance.
This type of price action suggests that large participants are accumulating positions before a larger expansion.
Professional Distribution
Professional distribution is the opposite of accumulation.
Distribution occurs when institutions or large market participants are selling positions into the market.
A market under distribution may fail to make a higher high when related markets or the broader market environment suggest that it should move higher.
For example, suppose the Dollar Index is expected to strengthen.
A stronger dollar may place bearish pressure on commodities. The commodity that fails to make a higher high before the dollar rallies may be showing underlying weakness.
The common characteristics of professional distribution include:
- Price fails to make a higher high.
- A lower high forms while related markets remain stronger.
- Short-term lows are repeatedly broken.
- Bearish candles are larger than bullish candles.
- Bullish retracements remain shallow.
- Bearish order blocks provide resistance.
- Premium PD Arrays reject price.
- Discount PD Arrays are broken easily.
This behavior suggests that institutional selling is present and that the market may become a downside leader.
Failure Swings and SMT Divergence
Failure swings are one of the most important components of Relative Strength Analysis – Accumulation & Distribution.
A bullish failure swing develops when one market fails to make a lower low while a related market or the Dollar Index makes a corresponding higher high.
This is a form of bullish SMT divergence.
It shows that the market is stronger than it appears because it refuses to continue lower under bearish external pressure.
A bearish failure swing develops when one market fails to make a higher high while a related market makes a corresponding high.
This creates bearish SMT divergence.
The market that forms the lower high is showing relative weakness and may become the strongest downside performer.
However, divergence alone is not enough to justify a trade.
The trader must also consider:
- Higher-timeframe direction
- Dollar Index bias
- Seasonal tendencies
- Institutional order flow
- Premium and discount location
- Liquidity objectives
- Relevant PD Arrays
SMT divergence helps identify the stronger or weaker market, but the complete ICT narrative determines whether the setup is tradable.
Leadership Markets vs Sympathetic Markets
A leadership market is the instrument showing the clearest institutional sponsorship.
During bullish conditions, the leadership market usually:
- Forms a higher low before related markets
- Breaks short-term highs aggressively
- Produces shallow retracements
- Respects bullish PD Arrays
- Expands faster than related instruments
During bearish conditions, the leadership market usually:
- Forms a lower high before related markets
- Breaks short-term lows aggressively
- Produces weak bullish retracements
- Respects bearish PD Arrays
- Declines faster than related instruments
A sympathetic market moves in the same general direction as the leader but does not display the same degree of strength or weakness.
A sympathetic bullish market may still rally, but the rally is often:
- Slower
- More volatile
- Less efficient
- Smaller in magnitude
- More likely to experience deeper retracements
A sympathetic bearish market may still decline, but the decline may be less aggressive than the true downside leader.
The goal is not simply to find a market moving in the correct direction. The goal is to identify the market most likely to deliver the cleanest and strongest expansion.
Comparing Related Market Groups
Relative strength analysis is most effective when markets are divided into related groups.
Grain Markets
Common grain markets include:
- Corn
- Wheat
- Soybeans
Suppose the Dollar Index is expected to weaken and commodities are expected to rise.
If corn and wheat make lower lows while soybeans form a higher low, soybeans are showing relative strength.
Soybeans may become the bullish leadership market within the grain group.
Livestock Markets
Common livestock markets include:
- Feeder cattle
- Live cattle
- Lean hogs
If all three markets are expected to rise but feeder cattle refuses to make a lower low and begins breaking short-term highs first, feeder cattle may be under stronger accumulation.
The other livestock markets may rise sympathetically, while feeder cattle produces the strongest expansion.
Currency Futures
Currency futures can also be compared against the Dollar Index.
Common currency futures include:
- Australian dollar
- Canadian dollar
- Japanese yen
- British pound
- Swiss franc
- Euro
- New Zealand dollar
When the Dollar Index forms a higher high, a foreign currency that forms a higher low may be showing institutional accumulation.
When the Dollar Index begins weakening, that currency may become one of the strongest upside performers.
Metals
Related metal markets include:
- Gold
- Silver
- Copper
If the Dollar Index is strengthening but gold fails to make a lower low, gold is showing underlying strength.
When the dollar eventually weakens, gold may outperform silver or copper.
Energy Markets
Crude oil can also be analysed using the same principles.
If crude oil refuses to make a lower low while the Dollar Index is rising, it may indicate that institutional accumulation is taking place.
When the dollar weakens, crude oil may expand higher from that accumulated position.
How to Identify Accumulation Step by Step
A practical bullish analysis process may look like this:
- Establish the expected direction of the Dollar Index.
- Determine whether the broader commodity market should strengthen.
- Divide commodities into related groups.
- Compare the lows of markets within each group.
- Identify the market that fails to make a lower low.
- Look for a higher low or bullish SMT divergence.
- Confirm that short-term highs are being broken.
- Observe whether bearish retracements remain shallow.
- Identify bullish order blocks or discount PD Arrays supporting price.
- Wait for a valid ICT entry model.
The market showing the strongest accumulation should receive priority for bullish setups.
How to Identify Distribution Step by Step
A practical bearish analysis process may look like this:
- Establish whether the Dollar Index is expected to strengthen.
- Determine whether commodities should experience bearish pressure.
- Compare related markets within the same group.
- Identify the market that fails to make a higher high.
- Look for a lower high or bearish SMT divergence.
- Confirm that short-term lows are being broken.
- Observe whether bullish retracements remain shallow.
- Identify bearish order blocks or premium PD Arrays rejecting price.
- Define the likely sell-side liquidity objective.
- Wait for a valid ICT bearish entry model.
The market showing the clearest distribution should receive priority for short positions.
Combining Relative Strength With PD Arrays
Relative strength identifies the market to focus on, while PD Arrays help determine where the trade may form.
For a bullish setup, the trader may look for accumulation inside:
- A bullish order block
- A fair value gap
- A discount array
- A liquidity void
- A previous low
- An optimal trade entry area
For a bearish setup, the trader may look for distribution inside:
- A bearish order block
- A fair value gap
- A premium array
- A liquidity void
- A previous high
- An optimal trade entry area
A market may show relative strength but still require a retracement into an appropriate discount area before offering a high-probability entry.
Similarly, a weak market may need to trade into premium before a short setup becomes attractive.
Signs of a Strong Bullish Leader
A bullish leadership market commonly displays the following price characteristics:
- Failure to make a lower low
- Clear bullish SMT divergence
- Repeated breaks of short-term highs
- Strong bullish displacement
- Shallow bearish retracements
- Bullish order blocks consistently respected
- Premium arrays broken easily
- Discount arrays supporting price
- Larger bullish candles than bearish candles
- Faster expansion than correlated markets
These characteristics indicate that institutional buying may be supporting price.
Signs of a Strong Bearish Leader
A bearish leadership market commonly displays:
- Failure to make a higher high
- Clear bearish SMT divergence
- Repeated breaks of short-term lows
- Strong bearish displacement
- Shallow bullish retracements
- Bearish order blocks consistently respected
- Discount arrays broken easily
- Premium arrays rejecting price
- Larger bearish candles than bullish candles
- Faster decline than correlated markets
These characteristics indicate that institutional distribution may be underway.
Common Mistakes Traders Make
Trading Every Market in the Group
Not every commodity or related instrument will provide the same opportunity.
Some markets lead, while others follow weakly.
Focus on the strongest bullish market or the weakest bearish market.
Using Divergence Without a Narrative
A failure swing does not automatically create a trade.
It must align with higher-timeframe direction, Dollar Index analysis, liquidity and PD Arrays.
Selecting the Sympathetic Market
A sympathetic market may eventually reach the same directional objective, but it may move more slowly and produce deeper retracements.
The leadership market generally offers better efficiency.
Ignoring Market Groups
Corn should be compared with other grains. Gold should be compared with related metals. Currency futures should be evaluated against the Dollar Index and other currencies.
Comparing unrelated markets can produce misleading conclusions.
Chasing an Extended Leader
Relative strength identifies the preferred market, but it does not mean the trader should enter after a large expansion.
The trader should still wait for a retracement, liquidity event or valid ICT entry model.
Practical Trading Example
Suppose the Dollar Index forms a higher high but is expected to reverse lower.
You compare gold, silver and copper.
Gold forms a higher low, while silver and copper make lower lows.
Gold is showing relative strength because it refuses to decline despite dollar strength.
You then observe that:
- Gold breaks a short-term high.
- Price retraces into a bullish order block.
- The order block is located in discount.
- Sell-side liquidity has already been taken.
- Bullish displacement appears from the PD Array.
Gold becomes the preferred market for a long setup.
Silver and copper may also rally if the Dollar Index weakens, but gold has already shown the strongest evidence of professional accumulation.
Final Thoughts
Relative Strength Analysis – Accumulation & Distribution helps ICT traders identify where institutional sponsorship is most likely present.
The method is not about buying every strong market or selling every weak market.
It is a process of comparing related instruments, identifying failure swings and determining which market is leading the broader directional move.
Professional accumulation is often revealed when a market refuses to make a lower low.
Professional distribution is often revealed when a market refuses to make a higher high.
By combining relative strength with the Dollar Index, SMT divergence, liquidity, institutional order flow and PD Arrays, traders can reduce the number of markets they follow and focus on the instruments offering the clearest potential expansion.
The central lesson is simple: trade the market displaying the strongest institutional fingerprint, not the market merely following the group.
