ICT Mentorship - December 2016, Module 2

Overview

• Focus on reinforcing liquidity concepts and price delivery.
• Key topics: external and internal range liquidity, order blocks, market maker models.

External Range Liquidity

• Definition: Buy-side liquidity above the range high; sell-side liquidity below the range low.
• Characteristics: Liquidity runs can be low resistance (desirable for traders) or high resistance.
• Objective: Traders should aim for low resistance conditions to ensure profitability.

Internal Range Liquidity

• Definition: Occurs when the current trading range remains, filling liquidity voids.
• Associated Risks:
  • Gap risk: market quickly reprices to a level with minimal trading.
  • Fair value gaps often fill in when a range remains.
• Examples: A long candle filling a gap represents internal range liquidity.

Liquidity Runs and Order Blocks

• Order Blocks: Areas within a trading range with potential buy/sell orders.
• Liquidity Pools: Located outside a range, potential for low resistance liquidity runs.
• Market Maker Models: Form within trading ranges using order blocks.

Practical Example and Analysis

• Chart Analysis: Examining old highs and lows to identify liquidity types.
• Price Movement: Understanding retracement levels and order block interactions.
• Example: Using past candles and wicks to predict future price movement.

Trading Strategy

• Internal vs. External Liquidity:
  • Internal: Within a defined range, less resistance.
  • External: Targets outside the range for liquidity pools.
• Buy/Sell Strategy:
  • Buy within the range, sell as price breaks out to external liquidity.
• Chart Timeframes: Use monthly and weekly charts to frame trade setups.

Identifying Low Resistance Liquidity Runs

• Objective: Look for low resistance conditions in line with monthly/weekly directional bias.
• Setup Indicators: Bullish order blocks, turtle soup patterns.
• Entry/Exit Points: Use internal range entries, external range exits.

Key Considerations

• Liquidity Runs: Classified into low resistance (preferred) and high resistance.
• Directional Bias:
  • Use higher timeframes for bias.
  • Align lower timeframe trades with higher timeframe direction.
• Trade Sizing: Consider pip targets relative to chart timeframes and setups.

Summary

• Monthly/Weekly Chart Focus: Essential for determining directional bias.
• Trade Execution: Aim for low resistance liquidity runs aligned with higher timeframe bias.
• Profit Objectives: Frame trades to achieve pip targets within higher timeframe ranges.

Conclusion

• Always analyze and align with higher timeframes for optimal trade setups.
• Seek low resistance liquidity conditions for profitable trading.