My 87% accuracy Draw on Liquidity process

Summary

In this video, the creator shares an 85% accurate liquidity strategy that helps traders identify high-probability liquidity draws. The strategy emphasizes narrowing down target levels to key price points like session highs, lows, and unfilled gaps. By setting clear conditions (e.g., if this, then that) and measuring order flow relationships with fair value gaps and highs/lows, traders can enhance their entries and avoid random trades. The focus is on drawing liquidity correctly, ensuring better trade accuracy and higher probabilities of success, although knowing the draw doesn’t guarantee winning trades.

Takeaways

• 😀 Stop targeting random liquidity draws on low timeframes like the 1-minute chart.
• 😀 Narrow down your liquidity targets to significant levels such as previous day high/low, session highs/lows, and unfilled gaps.
• 😀 Only trade liquidity draws that are extremely obvious and should not surprise you if they break.
• 😀 Set conditions for each trade using 'if this, then that' logic to guide your entries and exits.
• 😀 Use a 'magnet' concept for your trades, where price comes close to the liquidity draw, retraces, and then gives you an entry with a protected stop-loss.
• 😀 Measure order flow through relationships between internal and external highs/lows, as well as bullish and bearish fair value gaps.
• 😀 Pay attention to the behavior of bullish and bearish gaps after tapping or rejecting liquidity draws.
• 😀 Respect bearish fair value gaps and internal highs when trading in a downtrend; inversely, respect bullish fair value gaps and sweep internal lows in an uptrend.
• 😀 When reversing, look for fair value gaps to flip and previous highs/lows to act as support or resistance.
• 😀 Being correct about the liquidity draw does not guarantee a winning trade; market behavior and price movement can still lead to losses.
• 😀 Focus on high-probability liquidity draws based on prominent structural levels, and continually assess market sentiment for the best trades.

Q & A

What is the main focus of the liquidity strategy presented in the video?

The main focus is on drawing liquidity with 85% accuracy by identifying high-probability liquidity draws, setting conditions for trades, and measuring order flow via relationships between highs, lows, and fair value gaps.

What is meant by 'high-probability draws' in this strategy?

'High-probability draws' refer to specific liquidity levels, such as previous day highs/lows, session highs/lows, unfilled gaps, and equal highs/lows, which have a higher chance of being hit by price movements.

Why is it important to avoid 'random highs' on a one-minute chart?

Random highs on a one-minute chart are unreliable for drawing liquidity because they do not meet the criteria for high-probability draws, leading to inaccurate predictions and increased risk of loss.

What role do conditions play in the liquidity strategy?

Conditions are crucial in the strategy as they help define what should happen if a specific level is reached. For example, if a gap is respected, a trader would look for confirmation to enter a trade in the direction of the high-probability draw.

What is a 'magnet' in the context of this strategy?

A 'magnet' is a concept where price is attracted to a liquidity draw as it approaches, signaling a higher probability of reaching that level. The magnet becomes active when the price gets closer to the targeted draw.

How does measuring order flow help confirm a trade?

Measuring order flow helps confirm a trade by analyzing how price reacts to key levels, like fair value gaps and internal/external highs and lows. If price respects or sweeps these levels, it validates the trade's potential.

What is the significance of fair value gaps in the strategy?

Fair value gaps are important because they indicate areas where price is likely to react. Bullish gaps are expected to be respected in bullish conditions, while bearish gaps should be respected in bearish conditions, guiding trade decisions.

What does it mean to 'invert a fair value gap'?

To 'invert a fair value gap' means that price moves in the opposite direction of the gap’s usual behavior. For example, in a bearish market, a bullish fair value gap would be invalidated, signaling a potential shift in trend.

What is the process for confirming a reversal in price action?

To confirm a reversal, the strategy looks for the disrespect of bearish fair value gaps and the respect of bullish gaps. Additionally, previous highs should be respected as new support once price trades above them.

What does the speaker mean by 'measuring relationships between internal and external highs and lows'?

Measuring relationships between internal and external highs and lows helps assess how price is behaving in relation to these levels. Internal highs refer to smaller price movements within a range, while external highs represent more significant price levels.