ICT FOR DUMMIES | Liquidity PT. 2 EP. 7 transcript

welcome to ICT for dummies episode 7 liquidity part two highest probability liquidity probability liquidity yo yo check it we going to do this session I don't even want to go back to my reverends listen we going to the probability liquidity pools don't be asking me where I'm going because I'm going to liquidity she W to be with me all right yo cut this [ __ ] right now stop it liquidity part two highest probability liquidity pools today we're going to be going over all the different types of liquidity pool in the first liquidity video we went over the basic buy side liquidity and sell-side liquidity which is essentially the foundation of liquidity but there is way more to that than just buy side liquidity and sells side liquidity so hopefully you can learn something new with this video and show you how to truly identify the different types of liquidity whether it is time liquidity whether it's internal liquidity whether it is external liquidity there's a whole lot of it whether it's your mom's liquidity I'm just kidding um anyways so let's start off pretty simple here all right guys the first type of liquidity that we're going to go over is session liquidity why is this important is because price often reacts very strongly to previous session highs and lows this is where the major high and major lows are going to be of each session for example on the left side here you can see we have Asian session so you have the entire Asia session and you can see here's the major high and here's the major low there is going to be a lot of liquidity resting in both the High and the low and so for example when a new session starts you can see like you can see London session for example once it sweeps Asia highs it'll typically get a reaction and then trade to maybe Asia lows same thing will apply once you're trading New York session right you want to be looking out for these highs and lows so very often when we're trading New York session we're looking to Target maybe London highs or maybe London lows as our external liquidity why because there is a lot of liquidity resting in both those highs and lows okay so the indicator I have here is ICT kills zones and pivot so this marks out these sessions that we have for example here we have Asia session we have London session and this shows us our Asia session High and the also the Asia session low this is the lowest point at which Asia session has traded to and this is the highest point and at these two levels there are going to be a lot of liquidity resting there a lot of stop losses resting there right just think about this logically if someone's taking for example a short during Asia session they're most likely putting their stop loss at that Asia session high or if they're taking along at that Asia session low considering that these are both incredibly prominent liquidity pools what can you expect when previous session trades to either these high or these lows you're going to expect rejection now let's look at London session let's see what happens here as you can see during London session we went ahead and ran up to Asia highs after we swept Asia highs what happened we got this placement lower and then we ran to London lows and as you guys have heard us say before price is always doing one of two things it is either rebalancing ranges or it is seeking liquidity in the case of session highs and lows it will typically run from one session High to another session low or from one session low to another session High understanding the importance of previous session highs and lows is going to help you determine your bias every single day right so if we're going into New York session and we see that London highs has been swept we can expect price to now trade to London session lows and you're also probably wondering what are these other sessions on the chart so for example if I'm trading during New York PM session there's going to be resting liquidity at what the previous session right so lunch hour or New York am session we went over these sessions guys in the last video so if you need to look back at that to see what times these sessions are happening at go look back at that other video but as you can see here Asia session lows that's a draw on liquidity as session highs that's a draw on liquidity and your goal as a Trader is to always find the next draw on liquidity in order to catch the highest probability trades right if you're trading London session for example in this day and you see okay we just took out Asia session highs we could potentially be looking for shorts to wear now Asia session lows that's how price is going to play out most of the time right we sweep Asian highs London session trades Asia session lows now let's look at New York session for example after New York session is done what do we create we we create these extreme lows and these extreme highs this is New York session am high New York session Am low what happens here price takes out New York session Am low and then runs to New York am session High the only thing you really need to be taking out of this is that you always want to be referring to previous session highs and lows to find the next draw on liquidity all right guys once again just to emphasize how these draw on liquidity works you can think about it like this let's say you have Asia session here lend the session here and now we're currently in New York am session if we're trading New York am session and we see that price during New York am session runs to London lows and now this extreme low from London session has been swept we can now anticipate that there will be rejection at this level if other confluences are in line of course and look to see if Longs will present themselves towards where London session highs right and guys note that this doesn't always need to happen just because if we sweep one of the highs or the lows of that session does not mean that we need to trade back to the other side of the range but it is typical of price and you can't expect that reaction to happen like Patrick was saying if we start getting that structure higher or if if we start getting that structure lower and actually breaking through this low then we can expect this High just not to get traded back to yeah so like Blake was saying if you notice that during New York a session we go ahead and displace through London lows and we're not getting a reaction out of it what can you expect well you can probably expect price to continue trading lower during New York am session rather than trading back to a previous session high so truly the importance of all this is that if you understand how strong these liquidity pools are in these previous session highs and lows you can identify whether or not price wants to react from them and reverse or continue in that direction all right guys so the next major draw on liquidity that we have is going to be previous day high and previous day low you can also see this getting referred to as pdh or PDL now how you actually find these draws on liquidity is just by going on The Daily candle right here so if you just go to your time frames if you click on the daily candle this previous day low candle and this previous day high candle is all going to be draws on liquidity all right so looking at this range right here guys we can Mark out our previous day high high and previous day low so this is the candle from yesterday right here this is previous day high and then this is our previous day low and as you can see right here guys the previous day high is just the highest point in which price has traded to for that day and the previous day low is the lowest point in which price has traded to for that day there's going to be a very high probability draw on liquidity when you're going into the next day because at the end of the day this is going to help you find your daily bias where the daily candle is actually expanding towards and as you can see here guys we ended up forming some bullish structure towards this previous day high we ended up taking it out and then displacing back lower and I want you guys to remember that liquidity pools can not only be areas where you want price to go to but also where areas that price can react off of and trade the opposite direction from so for example here you could be taking Longs towards this draw on liquidity because we are in this bullish structure but then after that once we get that reaction off of that liquidity pool we start forming structure to validate a bearish bias right then shorts could be valid a good practice to have every single morning just going into trading session would be to Mark out something like previous day high and previous day low so you know the range that you're trading within previous day high and previous day low is going to serve as an external liquidity point right these are never going to be your first TPS previous session highs and previous session lows previous day highs and previous day lows these shouldn't be your first TPS a general rule of thumb is that your first CPU should be internal liquidity now previous stay high and previous stay low like every other liquidity Pool Guys doesn't necessarily have to get traded to right but if you can start seeing that structure to validate your bias towards that draw on liquidity and we'll get into structure structure and we'll get into you know our entry models later on but it's good to know actually just what these draws on liquidity actually are all right guys so for this next liquidity pool we have low resistance liquidity also known as trendline liquidity or you'll also hear it referred to as failure swings so this is known as trend line liquidity because you can usually just draw a line and it will look like a trend line now trend line liquidity is important or lrl or failure swings right this is what the books teach you right every time you hit this line right here these people are going long and they're placing their stop loss is where well at these swings this is also called a failure swing because it's not taking the recent low as you can see here we make a low we make a high we make a higher low we don't make a lower low we make a higher low and we have another high higher low so these are all failure swings because they're not taking that recent low and every time this trend line is getting hit there's going to be stop losses placed there in other words if you refer back to our last liquidity video we went over buy side liquidity and sells side liquidity so if we are generating low resistance liquidity in bullish order flow what are we generating we're generating a bunch of sell side liquidity right we have price continuing to run higher but failing to take out the previous low so what do we have amongst all these lows more sell-side liquidity and so when you have all this sell-side liquidity just bunched up together that creates low resistance liquidity same applies for a bearish sense right if we are trending bearish we can Mark out this trend line liquidity then we can see here that among all these failure swings we have what buy side liquidity and so we have a bunch of buy side being generated amongst this trend line therefore creating low resistance liquidity so now let's actually look at this on the charts all right guys as you can see right here we have bullish trend line liquidity bullish low resistance liquidity now why is this low resistance liquidity because there are failure swings being made at every single swing Point meaning that every time we make a swing High the next swing high is not taking that previous swing high so we just keep making these lower highs so as you can see here we have a swing there stop losses being rested here we have another swing High stop loss is being rested here more swing highs stop losses are being rested here and these stop losses aren't getting taken right so they just keep getting generated keep getting generated this is also known as generated liquidity you'll hear often times and then eventually the market likes to take out these stop losses usually really fast we usually see super fast movement through all these swing highs through all of these stop losses and that's exactly what the market does right here so in really simple words just look for a bunch highs or bunched up lows that's going to be your low resistance liquidity if we pair this with a little bit of previous Concepts here you can see that before price ran this low resistance liquidity we went ahead and swept some sell side we react off that sell side and then price goes ahead and rips through all this LR and typically will run through all the LR rather than just you know the first swing high and that is something you should really not because low res liquidity in general is a pretty obvious uh draw liquidity especially on the lower time frames so definitely make sure you can understand the concept of lowers liquidity because is if you're able to spot it you're going to be able to take trades targeting the low RK liquidity just think about it like a bunch of stop losses ready to get ran through all right now we'll show an example of what bearish low resistance liquidity looks like all right now here's an example of bearish low resistance liquidity now this is trend line liquidity because every time we make that swing low the next swing low is not taking that previous swing low and it's just making a higher low as you can see here we have a swing low then we have that higher low another swing low we have another higher low and we have another higher low and these are all just stop losses ready to get R we have stop losses here we have stop losses here here here here you have a bunch of bunched up sell side liquidity using some previous Concepts right we reject off of this bearish P Valle got to the left of us and then all these lows end up getting ran through so yeah being able to spot this guys is going to help you a lot also just with bias in general if you can see where the low resistance liquidity is being generated and that is most likely where the market is going to be drawing towards all right guys so next up we have equal highs and equal low lows mark this out using EQ and eql so equal highs and equal lows are going to be highs and lows printed at the same exact price point so as you can see here this candle's high is printed exactly at what 27201 point0 and then the high right next to it it's printed exactly at 27201 and on the right of this you can see that these are not equal highs why because it's not printed at the exact same price point in equal lows same thing and also it doesn't matter guys what candle color it is this can to be a green candle this can to be a red candle candle but these equal lows are printed also at the exact same price point and these are not equal lows cuz these are not printed at the exact same price point let's just get into some now chart examples now very similarly to the last concept about trend line liquidity how the books often teach you to be you know longing when there's a bullish trend line and to be shorting when there's like this bearish trend line that's not always the case and that's not really how we're going to be trading because we trade icg Concepts right and equal highs the books teach you that this is an area of resistance and that you should short this and where are people going to be putting those stop losses well at that resistance level right at those equal highs so there's going to be a lot of liquidity generating there and same thing for the equal lows well people are going to be longing this area why because they see it as support right they see this bouncing off the same price point again they're going to be like oh this is a great area to go long and then they're going to be putting their stop losses there and then this is just a great liquidity pool for us smart Money traders to be targeting you'll see them getting made on both NQ and also es but what should you actually be paying attention to well es since it is a less volatile index not many people are trading on ES versus NQ right you're going to see a lot more equal highs and lows getting made but then they're not actually getting taken you're going to just see a lot more equal lows and equal highs getting made on ES you don't want to be paying attention to it because the liquidity pools are not as prominent as NQ all right so as you guys see on the left here we have NQ and on the right here we have es now NQ is going to be having a lot less of these equal highs and equal lows versus es has a lot more of these equal highs and lows now this just because there's more volatility there's more liquidity being traded on NQ versus es right so you do not want to be paying attention to these equal highs and lows on ES it's going to be messing you up and because we're trading on NQ this is actually what you should be focusing on now this indicator I use guys is just equal highs and lows by Jay Zer so this just marks out all of the equal highs and lows that are being made even when they're spread apart like this and just to sort of play off what Blake was saying the reason there's so many equal highs and equal lows on for example es S&P 500 futures charts is because they are created due to the lack of volatility in comparison to NQ where equal highs and equal lows are an actual generation of liquidity rather than just a result of low volatility if that makes sense so when they're created on NQ Andes you can anticipate those to be way more prominent liquidity pools you can expect price to trade to those levels to react from those levels in comparison to es where they're just really another swing high or swing low or another random set of equal highs and equal lows don't refer to equal highs and equal lows on ES make sure you're trying to spot them on NQ and see and start noticing how price reacts at those levels so you can obviously see that there's times where you will have equal lows or equal highs that are practically one or two three candles apart for example right here you have equal lows um and then there's times where you have equal highs that are two swings apart right so you have a swing high right here and a swing high right right here these swing highs and swing lows when they're two separate uh trading legs and like separate swings apart that's they're going to hold more power than something like a pair of equal lows that are backed by you know two consistent candles or something like that so anytime you do identify equal highs or equal lows that are created from two major swings just know that that's going to hold a lot more power as a liquidity pool in general all right guys next up we have data Wick these are going to be your data lows and your data highs now what actually is a data Wick well a data Wick occurs when there is news now remember guys when we were talking about time in the last video where we brought up Forex Factory so Forex Factory again guys is going to be telling you when this high impact news is occurring so you'll most likely be seeing these data Wicks happen during high impact red folder News this is going to be typically at times like 8:30 a.m. 10: a.m. yeah fomc at 2: and 2:30 p.m. and really just any other red folder News event um that you can find on a website like Forex Factory or whatever other news um news event website you use but just know that anytime these high impact newses are released there's typically going to be one incredibly volatile candle in the market which is going to create a data high and it's going to create a data low and obviously as you can see in this illustration here that high and low is going to serve as what a very prominent liquidity pool so you'll see price typically do stuff like this where news will drop let's say it's like an 830 CPI after CPI drops price will trade to the CPI High the data High it will sweep it and then react and then maybe trade to the data low this is actually a super super common occurrence that you'll see with data Wix and actually will serve as a great Confluence when it comes to the inversion model which we'll get into later in the future but get in the habit of marking out data highs and data lows anytime red folder News drops because those are really really really important levels now the reason these data Wicks are actually draws on liquidity is because these are seen as imbalances in the market these huge Wicks are imbalances because there's not orders getting filled here right so price needs to trade back towards these prominent Wicks and again they're going to be very very obvious price will typically fill orders here or seek liquidity here now this might be like a stupid thing to say but if you ever do see a random candle it's not a news event create two in like two crazy volatile Wicks don't just Mark that as data highs and data lows make sure it is actually a news event that is creating these Wicks if not you're simply not going to be marking out data highs and data lows and it might fusio all right guys so on this day this was Friday March 7th if we go over to Forex Factory right here we see that there is NFP right so this is non-farm employment change this is a red folder high impact news event and as you can see here in the next candle that drops we have a extremely volatile candle that takes out a lot of buy side a lot of sells side liquidity it's a huge huge candle of around this was around 200 points this day and it creates this data high and this data low now like what Patrick was saying when you see these highs and lows being made you can wait for one of these ranges to be taken to then Target the posing range so for example here we end up taking out this data High we end up trading lower we have a bearish for Value gap which eventually delivers us to this data low so really like I was saying all you got to take away from this anytime you have those high impact news days uh just Mark out that candle um as you can see here immediately after 830 which was a news candle you have 831 sweep that data high and then you start getting displacement lower towards data lows honestly my best advice to you guys is that when you have days like this you have high impact news really try to identify these levels and wait for price to take out one of these highs or lows whether it is the data high is first or the data lows first and then look to see if there are entry opportunities towards the level that hasn't been taken out yet right in this case you had the sweep of data highs first so now you can anticipate okay maybe we can find shorts to data lows regarding your entry we're going to elaborate on that more in future videos but for now just focus on always marking out these data highs and data lows anytime on these high impact news is okay so next up here guys we have is unfilled for valid gaps you also hear this being referred to as your internal range liquidity your IRL and this is just how the market moves we move from internal range liquidity to external range liquidity and external range liquidity is just those buy side and sell side those major swing highs those major swing lows we went over that in our first video right discussing uh liquidity part one and this is how we get to those external range liquidity Pools by this internal range liquidity or these unfilled F valid gaps so often times what you'll see the market do is we will have this being our external range liquidity right here the market will then trade towards this internal range liquidity being this unfilled fair value Gap this is an imbalance of the market right same thing like the data Wix where we wanted to fill orders the market likes to fill orders at this internal range liquidity at these fair value gaps and then once we trade into this this is your internal range liquidity and then we trade to that external range liquidity right and this keeps happening where we keep trading into internal range Equity to external until we obviously have a shift in structure and for a bearish sense here we trading with this external range liquidity we then trade higher into this bearish re Val gap which is that internal range liquidity to then trade back lower to the external range liquidity okay guys now let's get into some examples of this okay guys so as you can see here we have a bunch of these bullish Fair valy gaps here that are unfilled so this is that imbalance right this is that internal range liquidity and then above here we have our external range liquidity here and we also have some buy side liquidity right here so typically what you'll see the market do after we take out buy side liquidity is for then price to rebalance towards this internal range liquidity right so we can mark this out as our erl this is your external range this is also your external range but since we are bullish right and we are creating these bullish fality gaps you can expect this to trade towards that buy side external range liquidity price then trades into these imbalances and then trades towards this external range of liquidity and then again we create more unfilled bullish F Val gaps we have one right here we can then Mark out our external range liquidity price then trades into this very Val Gap we SE got that liquidity and we will keep doing this until we have a shift in structure right we keep trading to these FAL gaps we then have another unfilled bullish 5 minute FAL Gap right here we then Mark out our external range liquidity this our internal range liquidity we trade into this falap and that delivers us towards this external range liquidity so this is simply just how the market moves guys through these unfilled for Valle gaps and through this buy side and sell side external range liquidity and this will keep happening until we have that shift in structure that market structure shift and if you think back to our first liquidity video where I was just talking about you know bullish structure and bearish structure we're in bullish structure you're generating lots of sells side bearish structure you're generating lots of buy side right and in order to maintain bullish order flow or bearish order flow you need to be trading back towards this internal liquidity right so if we were to draw this out with simply just a strong tool bullish price action is going to look like this it's going to move up it's going to create that higher low every single time and higher high and every single time that it's doing this what are you also doing you're trading back towards this internal liquidity these unfilled gaps that's delivering price price higher same is going to apply vice versa in a bearish sense so this is just good to know because anytime for example you want to take a long and bullish order flow you want to wait for price to hit that internal liquidity before you execute a long and take a trade higher right you don't want to be longing at these Peaks you want to wait for price to trade back towards that internal liquidity and then you can Target that external liquidity all right guys and finally for the last liquidity pool we have the devil's mark this is also known as just a wickless candle a candle without a wick so typically every single candle you guys see will have a wick on the top and have a wick on the bottom with the devil's Mark the candle fails to print a wick and for this example we fail to print that open high that you typically see with a bullish candle and we just print an open low for example here in the bear sense we fail to print that open low and we just create that open high and this is actually just an imbalance in price so what price typically likes to do is we trade away from this and then add that Wick later on you really want to focus on Devil's marks just on the higher time frame because typically with lower time frame candles you can see that you know it is common for price to fail to create a wick but it's not going to be as prominent as like a liquidity pool as it would be on the higher time frame right if you have an hourly candle fail to make a wick then you can expect price at one point to trade back to that level and correct that imbalance in price now again guys the reason this is just so important is because you will rarely see candles without Wicks like pretty much every single candle here you'll see has a wick has a wick has a wick has a wick but what have we noticed about this candle right here right this is that 11:00 candle so this is an hourly candle so as you can see with this hourly candle we create an open low but there's no high so you can mark this out as your 11:00 Devil's Mark and again like what Patrick was saying you want to be focusing on this for like the hourly time frame 30 minute maybe 15 minute 4 hour but usually that higher time frame is going to be a higher probability liquidity pool so here 11:00 opens we fail to print the Open high we end up trading away from it and then price trades towards that Devil's Mark printing the WID on this wickless candle and I don't know why it's called Devil's Mark don't ask me I don't know why it's any of these like I don't know I don't know why it's called Devil's Mark yeah actually don't ask me I I don't know I don't know why a lot of these things have [ __ ] weird ass names but it's called a wickless candle just know they work just know they work please but I do I do want to emphasize like all this works only when you pair it with all the other confluences we've taught you right you're not just going to take along because you see this Devil's Mark get printed obviously that makes no sense what do you want to wait for you most likely want to wait for in this case to have like a sell side sweep and then present maybe a long opportunity towards that 11:00 a.m.

Devils Mark so as you can see here price eventually delivers lower it takes out this sell side and then you get that delivery up to the devil's Mark of course with more confluences here you can see fair value gots are getting created that are getting respected and then delivering price at that 11:00 a.m. Devil's Mark I say it in every single video but you never use these Concepts individually you try to pair them with other things that's how you create these strategies that deliver towards these liquidity pools towards these imbalanced ranges all right so now let's pair some of this [ __ ] together so imagine this is a current price action you're looking at you see New York am session deliver to what let's say this this is London lows price sweeps London lows and then you identify oh damn we got some low resistance liquidity above we have a nice buide level above right here this buy side level also has an unfilled Gap and on top of that we have equal Highs at this level oh my God this is an amazing opportunity to long we took out London lows we have LR above biset above unfilled Gap equal highs bang There you go now you're using your [ __ ] brain you're putting all this [ __ ] together you realize we swep London lows we have all this generated buy side above this is a great chance to long and that's when you'll truly see these Concepts work if we're in bearish order flow but we finally hit some sort of bullish pay we sweep some sell-side liquidity now we can look for Longs because we know there's actually a reason for price to deliver in this direction right there's imbalances in price there's liquidity being generated this needs to get taken or at least should get taken most of the time therefore you know long opportunities are very viable in this scenario so what do you wait for you wait for anything to validate Longs in this sense right let's say we end up opening a bullish rare value Gap here we tap into this five minute bullish rare value Gap we see it getting respected awesome great now let's smack some [ __ ] Longs take this LR take this buy side equal highs [ __ ] 10 TPS and we got a damn Bugatti and you can expect price to go to all of this maybe Edge those equal highs and then stop yach I'm kidding but yeah like I said pair everything with everything we've taught you you're slowly going to start building your understanding of how all these Concepts work foundationally how to use them with other stuff and how to properly execute on the market we know that there's a lot of information on this video it might have been a bit overwhelming but definitely go back rewatch anything try to find it on the charts yourself get in the habit of marking out all these things and it's going to help you identify these liquidity pools you're going to know where the next draw on liquidity is hence the name draw on liquidity where is Price going to draw next the only way to know where price is going to draw next is by being able to identify these types of liquidity pools please guys your homework is to find some low resistance liquidity find some unfilled gaps some internal range liquidity find some equal highs some equal lows find the [ __ ] data high at data low find that session liquidity find those London lows those London highs those Asia highs those those Asal lows and notice how price is reacting off of them dude when I first started trading I would spend [ __ ] hours on the charts just tape reading like literally I would just sit on my phone and look at how price is moving where it's reacting off of and it's going to help you understand the charts right sit there analyze try to piece together confluences and you're going to understand The Narrative of price it is a language trading is a language and you really need to put the time in while you're learning to be able to identify these levels to be able to see how they react how they deliver price and it's going to make you a great Trader you're not going to become great overnight right in the beginning you're going to spend tons of tons of hours just analyzing but event it will click it'll make sense you'll understand this stuff like the back of your hand and you're going to be able to execute with super high conviction and low hesitation and catch Banger trades so yeah guys I mean we hope you learned something from our liquidity part two episode 7 we look forward to posting more for you guys we have some cool Vlogs coming out as well look forward to that please subscribe if you haven't already we're going to be trying to push out this boot camp as much as possible we have tons of [ __ ] going on but we're really trying our best we want to make sure this is the best series there is on YouTube for ICT for people who really want to get into the markets efficiently and know the right information we're not going to be teaching you nonsense that you don't need everything we teach you is important and is applied every single day by both Blake and I and this is how we've gotten to the point where we can have high conviction biases that play out nearly every single day where we can have high conviction Dr liquidities that play out nearly all the time and have high win rate with our trading models that being said thanks so much for watching I see for dummies episode s liquidity all right peace out boys make sure to like follow no no there's no following in but follow our Instagram follow our Tik Tok follow our Twitter that we never post on ever subscribe to our only [Laughter] fans wow I'm so sorry we have to teach you guys it's a ing in a curse it is much love