ICT FOR DUMMIES | LIQUIDITY PT. 1 EP. 4 — Transcript

Full transcript

1. 0:00What is going on guys? Welcome to ICT
2. 0:02for dummies episode four. Today we're
3. 0:05going to be going over liquidity, which
4. 0:07is essentially the foundation of ICT
5. 0:10concepts. So we hinted a little bit at
6. 0:12this with the previous video on market
7. 0:14structure. We showed you how the bodies
8. 0:16and the wicks tell two very different
9. 0:17stories and we're going to elaborate on
10. 0:19this today with liquidity.
11. 0:21So the market moves in two ways. It
12. 0:23moves to seek liquidity and it also
13. 0:26moves to rebalance the range. And we'll
14. 0:28talk about rebalancing the range in the
15. 0:29next video, but for this video we're
16. 0:31going to be talking about liquidity. So
17. 0:33liquidity is essentially fuel for the
18. 0:35next move. So the market makers, the big
19. 0:37money, when they need to fill their
20. 0:39orders, they need to grab this cash that
21. 0:42is resting in the market to then move
22. 0:44price in the way that they want to. And
23. 0:47where is this cash that is lying, you
24. 0:50may ask? Well, it's going to be resting
25. 0:52in swing highs and swing lows. This
26. 0:54candle formation is a three candle
27. 0:56pattern. So a swing high is a lower
28. 0:58high, a high, and then another lower
29. 1:01high. And then a swing low is a higher
30. 1:03low, a low, and then a higher low. I
31. 1:06also see a lot of beginner traders
32. 1:07getting messed up thinking that the
33. 1:09actual color of the candle matters when
34. 1:12we are creating a swing high and we are
35. 1:13creating a swing low. For example here,
36. 1:15we have two green candles and then one
37. 1:17red candle, these colors don't matter,
38. 1:20right? This can be a red candle, this
39. 1:21can be a red candle, like bearish,
40. 1:23bearish, bullish. These candles here,
41. 1:25these can be two green candles, this can
42. 1:26be a red candle. The colors do not
43. 1:28matter. What you should be focusing on
44. 1:30is the lows and the highs that are
45. 1:31created to make the swing lows and to
46. 1:34make the swing highs. Okay, so what does
47. 1:36buy side liquidity and sell side
48. 1:37liquidity actually mean? We have to
49. 1:39understand first the psychology of
50. 1:41traders. Let's say you want to take a
51. 1:44short position, right? You're betting
52. 1:45that the market is going to move down in
53. 1:47this scenario. Where are 90% of traders
54. 1:50putting their stop losses? Well, you're
55. 1:52most likely going to put it at that
56. 1:54recent swing high, right? So this is
57. 1:56referred to as buy-side liquidity. If
58. 1:59you are in a short position, you put
59. 2:00your stop loss at this high. So, you
60. 2:02have sold contracts here, and then you
61. 2:04need to buy them back to actually get
62. 2:06out of that position. So, there is a lot
63. 2:08of cash that is resting here. So, what
64. 2:11is big money going to do to enter into
65. 2:13the market? Well, they're going to take
66. 2:14all that cash, and then they're going to
67. 2:17move towards the direction they want it
68. 2:18to go. Versus here, when you have swing
69. 2:21lows resting here, if you are in a long
70. 2:23position, where are 90% putting their
71. 2:25stop losses? Well, they're going to be
72. 2:27putting it at that low, at that swing
73. 2:30low. So, what's resting here is sell
74. 2:33stops, right? You have sell-side
75. 2:34liquidity here, because if you're in a
76. 2:36buy position, you then need to sell
77. 2:38those orders to get out. And this is
78. 2:40just a huge pool of liquidity and a huge
79. 2:43pool of cash for the market makers and
80. 2:45for big money to then step in and take
81. 2:48this to then move higher.
82. 2:49So, these newly initiated swing highs
83. 2:51and lows are going to serve as stop
84. 2:53losses for retail traders, which is
85. 2:55going to act as a magnet for price to
86. 2:56trade back into, grab that liquidity
87. 2:58before the real move is actually
88. 3:00initiated. And the reason liquidity and
89. 3:02this lesson in general is so important
90. 3:04is because it's going to help you
91. 3:05understand how to avoid being liquidity,
92. 3:07how to avoid being stopped out
93. 3:09unnecessarily. All right, guys, think
94. 3:11about it this way. You want to go buy
95. 3:13some drip, but you got no money. But
96. 3:15your homie, he's always leaving cash at
97. 3:17his crib just laying around, $100 bills
98. 3:20on his nightstand. So, what do you do?
99. 3:22Obviously, you can't go buy clothes if
100. 3:24you got no money. So, you hit a lick on
101. 3:26this kid, take all that cash, cash grab,
102. 3:28liquidity sweep, and then you go buy all
103. 3:31the drip. There's cash that's resting,
104. 3:33and it needs to be taken if you want to
105. 3:35get dripped up. Okay, guys, so start
106. 3:37getting in the habit of marking out
107. 3:39those obvious swing highs and swing
108. 3:40lows, which is going to serve as
109. 3:41sell-side liquidity and buy-side
110. 3:43liquidity. If you look at the charts,
111. 3:44you can clearly see that here we have
112. 3:45sell-side liquidity, and then at this
113. 3:46swing high, we have buy-side liquidity.
114. 3:48So, as you can see here, we make our new
115. 3:50swing low, this is going to serve as our
116. 3:51sell-side liquidity, and then we deliver
117. 3:53higher, we take out this buy-side
118. 3:54liquidity, and we create our new
119. 3:56buy-side liquidity, right? This is our
120. 3:57new swing high. Then, what happens? We
121. 4:00deliver lower, and we create a swing
122. 4:02low. Here, we generate a new level of
123. 4:05sell-side liquidity. This is going to be
124. 4:07our new swing low, and then price
125. 4:10delivers higher and starts delivering
126. 4:12lower. This becomes our new buy-side
127. 4:14level. This is going to be our buy-side
128. 4:15liquidity. Price delivers lower and
129. 4:18creates this new swing low. This is our
130. 4:20new sell-side liquidity, and then we
131. 4:23create another swing high, which is
132. 4:25going to be our new buy-side liquidity
133. 4:27once again. So, as you can see now,
134. 4:29right? There's a sequence of buy-side
135. 4:30and sell-side being generated. We had
136. 4:32the sell-side, we had this buy-side, we
137. 4:34create a new swing low, sell-side, new
138. 4:36swing high, buy-side, new swing low,
139. 4:38sell-side, new swing high, buy-side, new
140. 4:40swing low, sell-side, new swing high,
141. 4:42buy-side,
142. 4:44and then this move runs through all of
143. 4:46this liquidity, comes down all the way
144. 4:48back to this first level, and uh this
145. 4:50becomes our new sell-side liquidity.
146. 4:52Finally, you can see that price runs
147. 4:54through all this liquidity and takes out
148. 4:56all these buy-side levels, and this is
149. 4:58our new swing low, and this is our new
150. 5:01swing high right here. So, from this
151. 5:03range, guys, just mark out the most
152. 5:06obvious swing highs and swing lows that
153. 5:08you see. The most obvious in the
154. 5:09scenario is going to be this high here,
155. 5:11and then this low here. This is
156. 5:13sell-side liquidity here. This is
157. 5:15buy-side liquidity here. These liquidity
158. 5:18levels should be sticking out like a
159. 5:19sore thumb, guys, right? They should be
160. 5:21easy to spot, and the more you practice
161. 5:23spotting these liquidity pools, the
162. 5:25easier it's going to get. Also, when
163. 5:26you're starting out, like Blake said,
164. 5:28focus on these major liquidity pools,
165. 5:29right? You don't want to just mark out
166. 5:31every single high and low you see, and
167. 5:33then cram up your charts with
168. 5:34unnecessary information. This is going
169. 5:36to end up putting you into a gnosis
170. 5:37paralysis, and you're going to get more
171. 5:38confused than you have to be. Keep your
172. 5:40charts clean, guys.
173. 5:41All right, so we're now going to be
174. 5:42talking about liquidity sweeps and what
175. 5:44that actually means. I'm sure you guys
176. 5:46have heard this term used a lot by a lot
177. 5:48of smart money concepts traders and ICT
178. 5:50traders. What this refers to is when big
179. 5:52money and the market makers are grabbing
180. 5:55sell stops or grabbing these buy stops
181. 5:57that we have marked out to then move the
182. 5:59market in their direction. So, we have
183. 6:01to think about it in this way. 90% of
184. 6:03retail traders fail in the market. What
185. 6:06do 90% of retail traders trade? So, they
186. 6:09either trade support and resistance, so
187. 6:11they trade very objectively in the sense
188. 6:13that, okay, they see this move getting
189. 6:15made, right? We have a really big
190. 6:17uptrend here. So, they think, well, if
191. 6:19we come down and retest this low, we
192. 6:22should do the same exact move since, you
193. 6:24know, we just had that move. So, this is
194. 6:26called support. So, they'll see this as
195. 6:28a big support level. And so, they'll see
196. 6:30this big support level and they'll go
197. 6:32long here thinking that this same move
198. 6:34is going to happen and will push up
199. 6:36higher. And where will they put their
200. 6:37stop losses? Well, at that low. So, they
201. 6:40think about trading in a really
202. 6:41objective way and you end up seeing that
203. 6:45these stop losses end up getting ran
204. 6:47before price actually wants to make its
205. 6:49move. Now, there's also another way that
206. 6:51retail traders often trade and this is
207. 6:53using breakouts. So, what this breakout
208. 6:55looks like is they'll think, okay, if we
209. 6:57break below this low, then we should
210. 7:00continue trading lower. And they'll put
211. 7:02a short position here and where are
212. 7:04their buy stops going to be rested?
213. 7:05Well, at that swing high that we had,
214. 7:07right? This is our buy side liquidity
215. 7:09level. And then, they will get stopped
216. 7:11out of their position and smart money
217. 7:13and the market makers end up winning in
218. 7:15the end.
219. 7:15So, to really simplify that whole
220. 7:17analysis, just understand that when one
221. 7:19person is getting out of the market,
222. 7:20another person is getting put into the
223. 7:22market.
224. 7:23Because not only are people looking to
225. 7:25get long here off that support level and
226. 7:27then getting stopped out, but what this
227. 7:28liquidity sweep is essentially doing is
228. 7:30also putting people in orders. So,
229. 7:32they're also filling orders and getting
230. 7:34people into short positions and
231. 7:35generating even more liquidity at these
232. 7:37buy side levels. And this is why I love
233. 7:40ICT concepts so much because there's
234. 7:41always this narrative behind every
235. 7:43single trade that I'm taking, right? I'm
236. 7:44not just marking out random support
237. 7:45levels and random resistance levels.
238. 7:48Like there's a reasoning for every
239. 7:49single trade that I'm taking. And this
240. 7:51is, I think, absolutely necessary when
241. 7:53you're first learning to actually
242. 7:54understand how the market is truly
243. 7:57moving.
244. 7:57The thing with ICT concepts is that
245. 7:59you'll actually understand why you're
246. 8:01taking a win or why you're taking a loss
247. 8:03every single time. You'll understand why
248. 8:05price is going to the next target. As
249. 8:07you get better at understanding
250. 8:08liquidity, you'll get better at
251. 8:09determining the overall narrative of
252. 8:11price. This is why liquidity is so
253. 8:13essential to ICT concepts because it is
254. 8:16how the market moves. Right, guys? The
255. 8:17market moves in two ways, to either seek
256. 8:19liquidity or rebalance ranges. We'll get
257. 8:21into the whole ranges thing in the next
258. 8:23video, but eventually you'll see after
259. 8:24this whole series that everything ties
260. 8:26together and plays off each other one
261. 8:28way or another. And that's why ICT is so
262. 8:30effective because not only does it make
263. 8:32sense technically, but it makes sense
264. 8:34logically as well. And if you feel lost
265. 8:37right now, don't worry. We're going to
266. 8:38keep showing you some more examples to
267. 8:40help you get the understanding of it.
268. 8:41We'll even give you some homework at the
269. 8:42end so you can look over on your
270. 8:43own and just get better at analyzing
271. 8:45this whole thing. But right, the general
272. 8:46consensus is that swing highs are going
273. 8:48to serve as buy-side liquidity, swing
274. 8:50lows are going to serve as sell-side
275. 8:51liquidity. The reason we're teaching you
276. 8:52how to identify this liquidity is
277. 8:54because if you can learn to identify
278. 8:55where that liquidity lies, then you'll
279. 8:57also be able to identify when it is
280. 8:59taken and when it is the right time to
281. 9:01enter a trade. But for now, just focus
282. 9:03on learning how to identify liquidity.
283. 9:05All right, guys. So, looking at this
284. 9:06chart, take a few minutes here, pause
285. 9:08the video, and mark out your
286. 9:10significant swing highs that you see in
287. 9:11your significant swing lows. So, this is
288. 9:13going to be your major buy-side levels
289. 9:15and your major sell-side levels that
290. 9:17you're seeing right now on this chart.
291. 9:19And we're going to give you guys some
292. 9:20background music while you're doing
293. 9:21this.
294. 9:22Swing high,
295. 9:24swing low,
296. 9:26liquidity, take it then we go. Swing
297. 9:30high,
298. 9:31swing low,
299. 9:33liquidity, we take it then we go. Got
300. 9:37buy-side and sell-side.
301. 9:43Got buy-side and sell-side.
302. 9:48Okay, so here we have your major
303. 9:49buy-side liquidity and then your major
304. 9:51sell-side liquidity. So, look at what
305. 9:53has been taken and then also we have
306. 9:55sell-side liquidity resting here in the
307. 9:57form of swing low, sell-side liquidity
308. 9:59here, sell-side liquidity resting here,
309. 10:01and also sell-side liquidity resting
310. 10:03here. We also then have buy-side
311. 10:05liquidity resting here,
312. 10:07resting here, and then this buy-side
313. 10:10liquidity to the left of us has been
314. 10:11taken. So, this buy-side level here,
315. 10:14here, and here.
316. 10:15And if you're wondering why it has been
317. 10:17{quote} taken, it's because price
318. 10:18already traded above these levels,
319. 10:20meaning therefore that liquidity has
320. 10:22been taken and these three buy-side
321. 10:23levels that haven't been taken is going
322. 10:25to be the liquidity that is still valid
323. 10:26and where stop losses are going to be
324. 10:28placed. So, once again, here you have
325. 10:29your two major liquidity levels, your
326. 10:30buy-side up here and your sell-side
327. 10:32right here, and then you have the
328. 10:34sell-side liquidity right here and this
329. 10:35buy-side liquidity right here.
330. 10:37This has already been taken. So, watch
331. 10:39as I play out price now and it targets
332. 10:40this buy-side liquidity up here, which
333. 10:42is going to be holding a bunch of buy
334. 10:44stops right for anyone who's in a short,
335. 10:46anyone who's in a short is stopped out
336. 10:48right here cuz this this is where all
337. 10:49the stop losses are resting for shorts.
338. 10:51And then we go ahead and trade towards
339. 10:54that sell-side liquidity.
340. 10:56Bang. And after all of these sell stops
341. 10:58are ran and these retail traders are
342. 10:59taken out of the market, and once the
343. 11:01market makers have grabbed all of that
344. 11:03cash and grabbed all of that liquidity,
345. 11:05they then move price towards the
346. 11:07direction that they want it to and they
347. 11:09target this buy-side liquidity here and
348. 11:11also these swing highs that are put into
349. 11:13the market here.
350. 11:16So guys, as we wrap up this video on
351. 11:18liquidity, I decided to show you a
352. 11:21four-part illustration which summarizes
353. 11:23exactly what we had taught you. So, if
354. 11:25you look all the way on the left here,
355. 11:26the first thing that happens is a swing
356. 11:28high is created. That swing high becomes
357. 11:31a buy-side liquidity, right? If people
358. 11:32are going to be shorting the market,
359. 11:34where are the buy stops going to be
360. 11:35sitting? At the swing high, at this
361. 11:37buy-side liquidity. Remember, those are
362. 11:39interchangeable words. Buy-side
363. 11:41liquidity, swing high. Then, what
364. 11:43happens? This buy-side liquidity is
365. 11:45traded away from. People are shorting
366. 11:47and their buy stops are resting right
367. 11:49here. Why is it called buy stops?
368. 11:51Because they're shorting the market and
369. 11:53so if they get stopped out, in the case
370. 11:54where you're trading futures, your
371. 11:55contracts are being bought back. Then,
372. 11:58third step. In the process of buy-side
373. 12:00liquidity being traded away from,
374. 12:02sell-side liquidity is created. And
375. 12:05after the sell-side liquidity is
376. 12:06created, price goes ahead and takes out
377. 12:10the buy-side liquidity. So, now we are
378. 12:12stopping out all the people who were
379. 12:13shorting the market, where buy stops are
380. 12:15resting at this swing high. And finally,
381. 12:19price trades now to the next liquidity,
382. 12:22which is going to be, you know, that
383. 12:23sell-side liquidity we had created or
384. 12:25any other liquidity that is resting
385. 12:27further down in the market. So, break it
386. 12:29down into four parts, guys. First,
387. 12:31identify where these swing highs and
388. 12:32swing lows are created. Once you find
389. 12:34that, notice how price will typically
390. 12:36trade away from this level, which ends
391. 12:38up resulting in a manipulation move for
392. 12:4090% of retail traders. Then, that level
393. 12:43is traded back into. Those retail
394. 12:45traders are stopped out and then the
395. 12:48real move is initiated. The whole reason
396. 12:50that ICT concepts is so important and
397. 12:53that liquidity is so important is
398. 12:55because it one serves as a foundation,
399. 12:57but two is going to help you avoid being
400. 13:00liquidity, right? You need to understand
401. 13:02liquidity to avoid ending up as
402. 13:04liquidity. That being said, this
403. 13:06practically concludes our
404. 13:08ICT for dummies episode four.
405. 13:11Liquidity.
406. 13:13We teach you how to make money.
407. 13:15Identify the swing low.
408. 13:19Identify the swing high.
409. 13:23Then, liquidity gets taken.
410. 13:26And now for your homework after that
411. 13:28lovely song on liquidity, we're going to
412. 13:30give you two assignments. First being
413. 13:32identify simply buy side and sell side
414. 13:35liquidity levels on the chart, and then
415. 13:37also identify liquidity sweeps. So first
416. 13:39find out where the swing highs and swing
417. 13:40lows are being created, and then when
418. 13:42price goes ahead and takes them, and try
419. 13:44to start noticing how price reacts off
420. 13:46of these liquidity levels. We're going
421. 13:47to get way more into liquidity with more
422. 13:49videos. It's actually going to be three
423. 13:50parts of liquidity. So this is liquidity
424. 13:52part one. You're going to have liquidity
425. 13:53part two and liquidity part three cuz
426. 13:54there is a lot to talk about, but for
427. 13:56now let's keep it simple. This is your
428. 13:58homework, fellas. That being said,
429. 14:00that's it.
430. 14:01L I Q U I D I T Y, don't know if I
431. 14:05spelled that right, but it's time for
432. 14:07you to learn ICT
433. 14:10with me, Blakey.
434. 14:12Thanks, guys.