ICT Mentorship Core Content - Month 05 - Defining Open Float Liquidity Pools

Summary

This video delves into the concept of institutional order flow and liquidity pools, focusing on the importance of identifying buy and sell stops through historical price analysis. By examining 60-day periods for high and low points, traders can predict price movements and pinpoint entry/exit opportunities. The strategy emphasizes tracking institutional order flow, using liquidity pools as indicators, and understanding the market’s direction to make informed trades. This approach can be applied to both short-term and long-term trading, with practical strategies to execute trades based on the daily chart without needing lower time frames.

Takeaways

• 😀 The market's movement is influenced by institutional overflow, and understanding where liquidity is located helps identify the direction of price action.
• 😀 If the market consistently takes out sell-side liquidity without reaching higher price levels, this signals a bearish market, and traders should focus on short positions.
• 😀 A price move to the lowest low in the last 60 days indicates the market is oversold, and traders may expect a bounce or a potential reversal after a deep discount.
• 😀 It's essential to understand the market's behavior on different timeframes, as higher timeframes give better clues about significant price shifts.
• 😀 The 120-day range is key for identifying institutional order flows, where buy and sell stops are likely placed, providing valuable insights into market sentiment.
• 😀 Traders should monitor the highest highs and lowest lows within 60-day, 40-day, and 20-day periods to track potential market shifts and price action.
• 😀 By focusing on the near-term buy stops (20-day range) and sell stops (60-day range), traders can anticipate the next moves in price with more accuracy.
• 😀 When price breaks out of the 60-day range, it can signal a significant price move, either continuing the trend or reversing it, depending on the direction of the break.
• 😀 The strategy advises executing trades based on daily charts rather than lower timeframes to capture major market moves without getting caught in noise.
• 😀 A consistent review of the highest highs and lowest lows within each time range helps identify the market's behavior and potential for range-bound or trending markets.

Q & A

What is the main concept behind analyzing market liquidity in trading?

The main concept is to understand where liquidity is concentrated, particularly on the buy and sell sides. When the market consistently takes out sell-side liquidity and rarely breaks through highs, it signals institutional overflow, which suggests a downward trend.

How can traders use market liquidity to inform their trading decisions?

Traders can use market liquidity by identifying where buy and sell stops are located, typically at the highest highs and lowest lows within a set range. By focusing on these areas, traders can anticipate price movements based on institutional behavior.

What does it mean when a market is deeply oversold, and how should traders respond?

When a market is deeply oversold, it indicates that the price has fallen significantly, possibly due to an extended bearish trend. Traders should be cautious of short-term price bounces but should maintain a focus on the long-term bearish trend until there is an obvious change in direction.

What time frame should traders focus on when using the 60-day range for analysis?

Traders should focus on the 60-day range to identify key price levels (highest high and lowest low), as this range helps to determine where significant buy and sell stops may exist, providing insights into the future direction of price movement.

Why is it important to track the 120-day revolving range?

Tracking the 120-day revolving range is important because it allows traders to continuously monitor and identify key support and resistance levels, helping to predict where buy and sell orders are likely to accumulate at institutional levels.

What are the three key ranges traders should monitor when analyzing price movement?

The three key ranges to monitor are: the near-term range (last 20 days), the short-term range (last 40 days), and the intermediate-term range (last 60 days). Each range helps identify where price action may shift and where buy or sell stops may be triggered.

What happens when the market breaks a key level in the 60-day range?

When the market breaks a key level within the 60-day range, it can lead to a significant price move, either upward or downward. Traders can anticipate these movements and adjust their strategies accordingly.

How does market behavior usually move, and what should traders expect?

Market behavior generally moves from range to range, not in one-directional, parabolic moves. Traders should expect price action to oscillate between these ranges, with major shifts occurring when these ranges are broken.

What is meant by 'institutional overflow' in market analysis?

Institutional overflow refers to a situation where institutional buying or selling pressure continuously dominates, often breaking through key support or resistance levels. This behavior can indicate a market that is moving in a strong trend, either upward or downward.

How can traders use daily charts to make decisions without focusing on lower time frames?

Traders can use daily charts to make trading decisions by focusing on the longer-term trend, monitoring price action, and identifying key levels of support and resistance. This allows them to make strategic decisions without needing to rely on short-term fluctuations.