Overview
This lecture covers how to identify institutional sponsorship in long setups, focusing on key price action concepts like order blocks, liquidity runs, and time-of-day influences to improve trade selection and timing.
Identifying Institutional Sponsorship in Long Setups
- Institutional sponsorship is confirmed by higher time frame price displacement, such as reversal, expansion, or return to fair value.
- Price often moves to a discount or runs sell-side liquidity before showing signs of institutional buying.
- Look for short-term buy liquidity above current price, which provides targets for long exits.
- Time-of-day influences, especially London and New York sessions, help pinpoint when institutional moves are likely.
- Market maker perspective is crucial; institutions buy at lows to sell to buyers at higher levels, often above previous highs.
- High-probability setups require clear evidence of large-player involvement.
Key Chart Patterns and Price Action
- Price running below old lows typically triggers sell stops, creating liquidity pools for institutions to buy.
- Fractal nature: Patterns on higher time frames repeat on lower time frames, aiding in multi-timeframe analysis.
- Bullish order blocks form when down candles at support are followed by buying.
- Dynamic, immediate price responses from anticipated levels indicate true institutional sponsorship.
- If price is slow or lacks response at these levels, consider reducing risk or exiting the trade.
Targeting and Trading Around Liquidity
- Logical targets for longs include buy stops above recent highs and old swing highs.
- As each liquidity level is taken out, institutions may scale out, but ultimate targets are large buyer pools above key highs.
- Once a structural breakout occurs, price is unlikely to revisit the original institutional entry point.
Role of Order Blocks and Session Timing
- Order blocks, especially those formed in London and New York sessions, mark areas of institutional interest and support.
- Retesting old bullish order blocks gives new buying opportunities and signals institutional defense.
- Trades should favor buying near or below the daily open (power of three concept) to capture maximum daily range.
Multi-Timeframe Execution
- On lower timeframes, use order blocks and opening prices to refine entries.
- Expect price to consolidate and bounce from old order blocks before final moves to higher objectives.
Key Terms & Definitions
- Institutional sponsorship — Large entities' willingness to protect or fund a price move, giving it momentum.
- Order block — An area defined by a down (bullish) or up (bearish) candle where institutions initiate trades.
- Liquidity pool — A cluster of stop orders (buy or sell) providing fuel for institutional moves.
- Buy stop — An order to buy above a current high, commonly targeted by institutions.
- Liquidity void — A price range with low traded volume that price may quickly fill.
Action Items / Next Steps
- Review charts to practice spotting order blocks and liquidity pools in London/New York sessions.
- Focus on recognizing dynamic price responses at key levels.
- Continue studying concepts from previous lessons, like the market maker model and liquidity runs.