ICT Mentorship - Module 2: Liquidity Concepts and Price Delivery

Overview

• Focus on reinforcing liquidity concepts and price delivery in trading.
• Discusses external and internal range liquidity and their impact on trading strategies.

Key Concepts

External Range Liquidity

• Definition: Buy side liquidity above the range high and sell side liquidity below the range low in a trading range.
• Liquidity Runs: Seek to pair orders with pending order liquidity in a liquidity pool.
  • Types: Low resistance or high resistance.
  • Goal for Traders: Aim for trades in low resistance conditions for profitability.

Internal Range Liquidity

• Definition: When the current trading range is likely to remain, liquidity voids fill in.
• Associated Risks: Gap risk
  • Market reprices quickly to levels with little/no previous trading.
  • Fair value gaps attribute to gap risk.

Order Blocks and Market Maker Models

• Order Blocks: Populated with new buys/sells inside trading ranges.
• Market Maker Models: Form within trading ranges and utilize both external and internal range liquidity.

Practical Application

Analyzing Liquidity

• Old Highs and Equilibrium: Price sweeping above an old high is external liquidity.
• Retracement: After clearing an old high, look for logical retracement areas.
  • Example: A large up candle and its wick as a retracement zone.
• Trading Ranges: Define range from latest low to high and anticipate liquidity runs through these ranges.

Utilizing Charts

• Monthly and Weekly Charts: Provide framework for understanding larger trends and target liquidity areas.
• Daily and Lower Timeframes: Used to spot setups within the context of higher timeframe analysis.
• Fair Value Gaps: Price likely to fill gaps where market movements have left voids, often seen on monthly charts.

Framing Trades

• Low Resistance Liquidity Runs: Trades in sync with higher timeframe direction, minimal resistance.
• High Resistance Liquidity Runs: Opposite, trades that face significant barriers.
• Order Block Strategy: Enter within internal range liquidity and exit at external range liquidity points.

Strategies for Trading

Timeframes

• Higher Timeframes: Monthly and weekly charts for directional bias.
• Lower Timeframes: Daily, 4-hour, 1-hour charts for entry/exit points based on order blocks and liquidity runs.

Identifying Liquidity Runs

• Low Resistance Runs: Look for price movements that easily overcome previous highs or lows without much resistance.
• Setup Frequency: Aim for consistency, such as one solid setup per week aligning with higher timeframe direction.

Trade Execution

• Liquidity Voids and Order Flow: Align entries with voids and expected market direction.
• Profit Targets: Utilize external range liquidity points as profit objectives.

Summary

• Use higher timeframe analysis to guide lower timeframe trading decisions.
• Focus on identifying low resistance liquidity runs for higher probability trades.
• Consistent application of order block and liquidity concepts aids in achieving successful trading outcomes.
• Aim for trades that align with overall market direction as indicated by monthly and weekly charts for optimal results.