HOW TO USE ICT's LRLR (LOW RESISTANCE LIQUIDITY)

Summary

In this video, the speaker explains the concept of Low Resistance Liquidity Run (LR) in trading, particularly within the ICT framework. They differentiate between high resistance and low resistance liquidity runs, emphasizing how low resistance runs result in fast, smooth price movements. Using a real-life example from NASDAQ, the speaker walks through how to identify such opportunities by observing trend line liquidity and inefficiencies in the market. With a clear step-by-step process, the video offers insights on executing trades based on these principles, aiming for high-reward setups with minimal drawdown.

Takeaways

• 😀 LR stands for Low Resistance Liquidity Run, a concept in ICT (Inner Circle Trader) methodology.
• 😀 A low resistance liquidity run refers to price movement with minimal resistance, often characterized by fast and smooth price action.
• 😀 High resistance liquidity runs are slow and marked by retracements, pullbacks, and difficulty in price movement.
• 😀 Trendline liquidity can be a target for low resistance liquidity runs, as price often moves fast to reach these targets.
• 😀 Identifying liquidity, such as equal highs or lows, can provide insights into where the market might target, allowing for better trading decisions.
• 😀 Traders use liquidity runs to frame their bias; for example, identifying a potential run of liquidity can inform whether to look for a long or short position.
• 😀 On a bullish market, like the NASDAQ during the described trade, the market showed signs of running sell-side liquidity.
• 😀 Fair Value Gaps (FVGs) are key levels for market participants; price often reacts to these inefficiencies, creating entry and exit opportunities for traders.
• 😀 The script emphasizes using first presented fair value gaps for entering trades, and using Fibonacci levels for stop loss placement.
• 😀 The strategy involves looking for inefficiencies in the market (such as unfilled gaps) and using those as entry points for low resistance liquidity runs.
• 😀 The trade described was based on recognizing market manipulation, liquidity pairing, and a retracement after a big move, leading to a profitable execution.

Q & A

What does LR stand for in the context of this video?

LR stands for Low Resistance Liquidity Run. It refers to a market movement where liquidity is targeted with minimal resistance, resulting in a smooth and fast price run.

What is the difference between a high resistance liquidity run and a low resistance liquidity run?

A high resistance liquidity run involves slow price movement with frequent retracements and pullbacks. In contrast, a low resistance liquidity run occurs smoothly and quickly, with little to no resistance, making it more desirable for traders.

How does the concept of liquidity play a role in the strategy discussed in the video?

Liquidity plays a crucial role in identifying targets and biases. The script highlights the importance of equal highs and lows (liquidity pools) that traders can target. Liquidity zones are where price is likely to move towards, and understanding these zones helps in making better trade decisions.

What does the term 'sellside liquidity' refer to?

Sellside liquidity refers to areas where there are equal lows in the market, indicating that many traders have placed sell orders there. These areas act as targets for price manipulation or liquidity runs, where the market might move to capture those orders.

How did the trader use low resistance liquidity runs in the NASDAQ example?

In the NASDAQ example, the trader noticed the market had been bullish for the entire week. The trader identified sellside liquidity in the form of equal lows and used this information to anticipate a retracement. By recognizing this liquidity, the trader was able to set a target for a short position.

What is the significance of the 'first presented fair value gap' mentioned in the video?

The first presented fair value gap refers to the initial gap in price that occurs when the market opens. The trader uses this gap to assess potential market direction, with the expectation that the price may revisit and fill this gap during the manipulation phase before moving toward the target.

What role does 'smart money' play in the trading strategy described?

Smart money refers to institutional or experienced traders who make calculated trades. In this video, 'smart money' is used to describe the market makers who sell to retail traders (buying at higher prices) and then buy back at lower prices, causing the market to move in their favor.

What is the meaning of 'order pairing' in this trading strategy?

Order pairing occurs when the market manipulates prices by matching sell orders (from smart money) with buy orders (from retail traders). This creates a market movement that drives prices toward liquidity zones, allowing traders to profit from the displacement caused by these paired orders.

How does the trader manage risk in this strategy?

The trader manages risk by placing a stop loss based on Fibonacci levels. The stop loss ensures that the market's retracement doesn't go too deep, beyond a level that would indicate a failure in the expected market movement.

What is the significance of the 10 a.m. open high in the video?

The 10 a.m. open high marks a key level for potential retracement in the market. The trader expected a retracement after this time, and used this as an entry point for a trade, aiming for a target near the low resistance liquidity run.