hello guys it's etm effects and in this lesson we're going to cover what inducement is and how to find the correct inducement and how to use it in your Trading so what is liquidity inducement liquidity inducement is an act though for when liquidity is being engineered around the area over price actually wants to go it's basically that price is hovering around the area where price actually wants to go so it doesn't go there directly it hovers around it prior to approaching the Zone order level where prices intended to go in transact orders which would be your order fulfillment it needs to make a few stops which are in form of inducing traders to make a mistake and force the early entry price will react from a level or Zone nearby the intended level or the zone to entice Traders into taking positions so here we have our level that the institutions intend to sell at so this decision has been made prior to the reaction and we would call this our POI our point of Interest why it's at our point of interest because this this level is more than likely a supply candle which would be a order block or let's say a high resistance level or a gap it's a level that we anticipate price will react from in the way we trade which is smart money right so we anticipate price to react from this level but price wouldn't just head directly to that level it would cause an inducement which would be in a in a fashion of price would get close to the area so as you can see this is our level our level starts right here price would get close to the level and come back down get close and come back don't get close come back down what is happening here it's trying to entice Traders into taking cell positions earlier than the initial point of Interest why because as let's say the first swing happens nobody sells the second swing you're like okay and it might even come in the form of a stop plan which would be even more enticing you're like okay it might be time to sell sell the market so as all this is going on liquidity is being built here stop losses are being placed stop losses are being placed so then later on price will fake react from uh from our inducement area and drive up to the price and react from our initial point of Interest where the markets actually intend to sell at and then price will sell off so it will take out all the stops cause the actual stop button which would be the reaction from our point of interest and then react so what occurs during an inducement liquidity will be built via retail Trader stop losses and false breakout Traders especially for scalpers who dominate majority of the trading Market in the retail World due to not being patient and wanting quick results so it's basically um the market capitalized on traders who are trigger happy and if you think about it on a micro and a micro level on a macro on a micro level a one hour consolidation which could be close to your POI which would be inducement on a one minute time frame that's multiple ranges that's over 50 ranges on a buy to a sell on a buyer to a cell so believe it or not somebody's out there trading this and the market capitalized on it this prints on the chart as a liquidity gram where the stop Point takes out the stops and proceeds to the level institutions intent to buy or sell it which would be your poi so here we have our point of Interest being built so let's for hypothetical senses let's say this is a supply candle or order block a cell or the block right price drops down and ask price is trying to make its way back to this level it's starting to consolidate and acting as if it's going to react from this level while that happens that builds liquidity so then price comes out stop hunts the liquidity takes the liquidity and reacts from the point of Interest right so it's a start point that we know where to anticipate the reaction from but prior to that you need to see that the liquidity has been built in this and this segment right here this is what we call an inducement comes from the word induce it's inducing Traders into taking cell positions let's say people try to take self positions here here thinking the market is going to sell just because of uh the market reacting over here just for price to come up stop on them use the POI as a catalyst and drop down so let's go over this example and again if you're a Trader that's been turning inducement I know exactly what question you have in mind how do we pick the correct of Interest don't worry we'll get to that but first let's cater to the beginners here the point of Interest has been formed which would be your order block so the or Black's been formed and we're tracking this area so as price reacts from this orbuck of course a validated order block the broke structure and had a strong reaction from here price came close to this area but did not react directly from our point of Interest it reacted from an area close by like we said price will react from an area nearby your point of interest and give you a convincing reaction so this would be your convincing reaction so now that we had the convincing reaction and the fact the price came close to our point of interest but did not react directly from it we would call this an inducement so this will be your liquidity build so now what we're expecting we're expecting price to come down take out the stops form the stop Point while reacting from this level and continue higher and as you can see that's what happened here price took out the liquidity Force the stop hunt reacted from our order block and continued higher so let's go over this example we have a validated order block and you guys know why it's validated or the block no need to waste time to explain this but we're we're waiting for a reaction from this order block what would this order block be it'll be our point of Interest right so we're waiting for price to come up here get a reaction and continue lower along with the downtrend right so let's see as you can see price reacted from a level close to our point of Interest as you can see got closed but not really so we can start considering this as an inducement reacted again this is even more convincing so now all our checklists are complete so now we are just waiting for price to reach our point of interest in this case would be this order block for price to react and continue down so this would be the inducement phase this entire thing a lot of orders got stuck in here retail stop losses got taken many tried to take a short position during this consolidation especially like we know scalpers just for price to come up stop on them use our point of Interest as reaction and continue lower so let's get to the advanced part of this lesson what are the inducement criterias the most important thing when identifying true inducement is that it's occurring at fair price price is going to fair price to balance books and keep options open is key to an inducement before reacting from a price extremes expect inducement at fair price so what are the price extremes obviously premium and discount and why would they keep options open what I mean by that what I mean is if price is a fair price which would be the 50 Mark Price can go either way so there will be no losses taken as far as institution goes it's a it's cheaper way to move the market when price is at fair price let me explain so let's say this is our premium level and this is our discount level and this is the median which would be our fair price so price will cause the inducement around the fair price area while you're on the fair price area to keep options open because when when you're in the middle of the range you can go either way and it'll be a lot cheaper for the institutions to move price from fair price instead of forcing an inducement and premium just to take it a discount or from discount to take it to premium so price will cause the inducement right here and then go to your let's say demand Zone which would be your demand order block or let's say price is inducing right here reacting from our 50 just the react from the premium and come down and this would be the stop hunt so here we have our discount level then here we have our fair price and here we have our premium and again for everybody asking me about these settings there's nothing special about these settings it's 0 25 50 75 100 it's Fibonacci broken into four segments it's a Fibonacci tool that's for you on trading view on metatrader it's easy to find so price Force the range so we put our ranges we put our Fibonacci on our range so now what are we looking for we have our institutional candle which is in our discount area like you guys know we always buying discount and sell it premium price comes down reacts with the fair price once twice three times what happened as price is reacting here liquidity is being built so when price drives to our point of Interest that's in our discount area all right so we'll come here take out the stops Force the hunt and react from this level and this is this this example right here is this example without the Fibonacci and adding more context so here we have our institutional candle liquidity was built via 50 inducement this will be our inducement that's again happening during our fair price price comes down takes up the stops which takes up the stops right here and reacts bullish reacts from wood from our order block so let's go over another example so again why did we place the range here because as you guys know I covered ranges multiple times and this is our low and this is our significant High right prior to this range this was the previous high and this was the low like we know internal external liquidity always go back to my old videos for reference right so as you can see prior prior to this movement price already reacted from our fair price so price came back down and reacted again what forming the inducement so liquidity is being built right here around this entire area liquidity is being built so we're waiting for spikes to come down where to our discount level so as you can see here price reacted from this institutional Kindle what I would be waiting for if I'm trading inducements I would wait for an order block that's in the discount area just because of the lower lower risk parameters right but in this case probably still induced forced to stop hunt and reacted off this institutional candle which is which is still close to Discount area but it's not ideal ideally you would always want your order block to be in your discount area if you're buying or premium if you're selling let's go over another example well here we have a mid quality setup and why is it mid quality it's not because the stop hunt reacted from this area and it dropped down a little bit and eventually it failed it's not because of none of these things it's not even the because this is hindsight the fact that it only reacted a little bit right here and then continued going up this reaction is still valid to a certain extent but it's not the highest quality um inducement trade why because when you pull out your Fibonacci level you go to your high and you go to your low as you can see it did react from our what premium level it did but look at the inducement the inducement should have been here or maybe a little bit higher than our fair price it should have been around our fair price but this look this inducement was closer to the premium level than the fair price than the 50 it was closer to the premium level so the fact that it was closer to the premium level it makes the setup a bit weaker and that's why you only had a small reaction just for price to litter continue why because as we as we know there's so there's cell orders here so orders here soldiers here so the fact the price got close to them a lot of these orders end up being used already so by the time price does come to use this area four more cells there's not enough power to fully drag price down this is what would make uh invalid inducement setup this will make actually the worst in said we shouldn't even call it an inducement set up right so let's say your point of interest is in premium so let's say you have an Institutional candle right here you have an order block right here and you're waiting for price to get there so let's say price drags down you're waiting for price to come back and revisit that level if the inducement starts happening around the premium level that's no longer an inducement that's a reaction from our institutional candle so at this point if price drops down and comes back again it's more than likely to continue bullish right so and and what's the reason for that we know that there's orders in this Scandal and and like we like we know institutions sell in premium and buying discounts so they already sold here the orders that were here already got used to drug price a little bit down so if price comes back up here this is no longer an inducement liquidity bill because why because it reacted from our premium level there wouldn't be enough orders for price to take more orders here and then continue down this would be done because the orders got used for this tiny move get it let's go over this one more time again we have our candle right here price drops down and we want what price to visit our point of Interest right our point of interest is this candle price goes up and starts reacting like this around our premium area where our point of interest is if price revisits this year one more time even if let's say let's say this institutional candle is somewhere here it's in a deeper level of the premium level the fact that it touched the premium range there is no longer any orders in this candle because this candle responsible for this whole area so if price starts acting in a fake inducement manner if price comes up here it will continue up nine nine times out of ten so be careful like like I told you guys earlier the best inducement is when it happens in fair price the medium quality would be when it happens not not super far from the fair price but not super far from the premium either and the worst kind which is invalid would be when it happens in the premium area and likewise vice versa you don't want to you don't want to have an Institutional candle here and for price to come up here come up here and thinking if it's going to come back down here one more time it's going to use this liquidity this is a no but if price comes back to this level one more time it's more than likely to continue lower so why did this order block fail why did this order block fail easy if you pull out your FIB you get your levels high to low look at where the inducement is look at where the inducement is the inducement was where in our premium level and like we said most of our inducement should be in our fair price the fact that this inducement is in the premium level there's no more orders here so even if price does eventually come back to your order blog this is invalid there wouldn't be enough orders in this order block to sustain a reaction and drop price lower why because this was already used price already came to the premium area and dropped all the way down the move the move from this order block the mood that any cell orders that were in this order block were already used in this reaction right here so a majority of the time from the inducement you can find out if the your point of interest is gonna work or not last time before we end this lesson focus on mostly if not only trading the highest quality of inducement setups and this right here is the highest quality why is it the highest quality because if you pull your range the last significant low that's surrounded by a lower uh a low and another low and then the last significant High you pulled the range and what do you see here what makes this an ideal inducement setup one your order block which is right here it's located in our discount area and yes it's not all the way in the discount area but majority of it is and ideally you would want it inside of the area somewhere the deeper the better but a lot of times it doesn't really drag that deep because if it if it passes let's say the 25 percent of the discount area it's more than likely to you lose the trade-in price will continue bearish so here you have an order block that's located in the discount area you have your inducement right here and where did your inducement occur in the fair price it didn't happen here it didn't happen here it didn't happen close to the discount area it happened in our in or around the fair price so as you can see the inducement occurred in the 50 one second so now what you're waiting for is for price to take this liquidity right so come down here take this liquidity Force the stop on use your order block this in your discounted area and continue bullish at least take out so what happened price reacted from your level right here it did not leave the range price reacted from your what discount area what was located in your discount area your point of interest and price went back to premium and like I taught previously from discount premium premium to Discount and looseman is always win and fair price yeah guys make sure you like share comment subscribe everything and drop in the comment what do you guys want me to cover next I'm gonna try and continue this two two videos a week thing it's getting really difficult to produce quality content twice a week but I'll keep on trying as long as you guys to give me ideas thank you