Boot Camp Day 8: Liquidity Pt 1

Summary

In this trading boot camp video, the instructor discusses the crucial concept of liquidity and its role in market movements. He emphasizes understanding liquidity, which consists of resting orders like stop and limit orders, and explains how banks and institutions use liquidity to execute large orders and move the market. The focus of this session is on what liquidity is and why it is important, with detailed strategies on spotting and using liquidity to be covered in future sessions. The goal is to provide traders with a deeper understanding of market dynamics and improve their trading strategies.

Takeaways

• 📈 Liquidity is the central theme of this trading video, considered the most crucial aspect of the speaker's strategy.
• 💧 Liquidity refers to resting orders in the market, including stop orders and limit orders.
• 💵 These orders represent a pool of money at specific price points where traders enter or exit the market.
• 🏦 Major market movers like banks and institutions use liquidity to fill their massive orders and move the market.
• 🔍 The video focuses on understanding what liquidity is and why it is important, not on how to spot it or trade based on it.
• 🛠 The strategy emphasizes reasoning behind trades, unlike simpler methods like support and resistance.
• 📊 The speaker prefers trades based on understanding market movements rather than guessing or relying on basic technical patterns.
• 🌐 Digital exchanges simplify the process of filling orders, but the fundamental concept of buy and sell remains.
• 📈 Banks and institutions seek liquidity to fill their orders and drive the market in their desired direction.
• ⚠️ Traders should understand where liquidity is to align with market movers and avoid taking trades without proper confirmation.
• 🔄 Understanding liquidity helps in catching the tops and bottoms of market moves, leading to better trade entries and exits.

Q & A

What is the primary focus of the boot camp day 8 video?

The primary focus is on understanding liquidity and its importance in trading.

Why is liquidity considered important in the speaker's trading strategy?

Liquidity is important because it helps understand why price moves the way it does and provides reasoning behind trades, unlike support and resistance strategies.

What will the three parts of the liquidity series cover?

Part 1 covers what liquidity is and why it's used in the market, Part 2 will cover how to spot liquidity, and Part 3 will discuss how to take trades based on liquidity.

How does the speaker define liquidity?

Liquidity is defined as resting orders, which can be stop orders or limit orders that get activated when certain price targets are hit.

What role do banks and institutions play in market movements according to the speaker?

Banks and institutions are the primary market movers, and they seek out liquidity to fill their massive orders and move the market in their desired direction.

How do banks fill their large orders in the market?

Banks fill their large orders by seeking out liquidity, which involves finding price points where many market participants are entering or exiting, allowing the banks to execute their trades.

Why does the speaker prefer using liquidity over traditional support and resistance strategies?

The speaker prefers using liquidity because it provides a logical reason for price movements, whereas support and resistance are seen as more arbitrary and akin to guessing.

What is the purpose of understanding liquidity in trading?

Understanding liquidity helps traders align with the market movers' actions, ensuring they trade in the same direction as the banks and institutions that control market movements.

What is the speaker's strategy for confirming a market move after identifying liquidity?

The strategy involves waiting for a confirmation through a market structure shift, such as a break of structure, indicating a change in trend direction.

What does the speaker suggest traders do after identifying a liquidity area?

Traders should wait for a confirmation of a trend change and not immediately press buy or sell. This confirmation comes from observing a market structure shift after liquidity is taken out.

Outlines

00:00

📈 Introduction to Liquidity in Trading Strategies

The speaker introduces the eighth day of the boot camp, focusing on trading strategies, specifically liquidity. Emphasizing the importance of understanding liquidity, the speaker explains that this session will be divided into three parts to ensure a comprehensive understanding. The session will cover the basics of liquidity, its role in the market, and its significance in trading strategies. The speaker criticizes traditional support and resistance strategies, advocating for a more reasoned approach based on liquidity and market movements.

05:01

💡 Understanding Liquidity and Its Role in the Market

The concept of liquidity is introduced as resting orders, which can be stop orders or limit orders, representing a pool of money that gets activated at certain price points. The speaker explains that liquidity causes significant market movements as large orders are filled, cycling money through the market. The session aims to clarify why targeting liquidity areas is crucial, linking it to the actions of market movers like banks and institutions that seek liquidity to execute large orders and influence market direction.

10:01

🔍 How Banks and Institutions Utilize Liquidity

The speaker delves deeper into the mechanisms through which banks and institutions use liquidity to move the market. By understanding liquidity sweeps and the filling of large orders, traders can align their strategies with market movements. The discussion emphasizes the need to wait for confirmations, such as a break of structure, before making trades, ensuring that traders move in the same direction as market movers. This approach contrasts with the simplistic methods of relying on support and resistance, providing a more nuanced understanding of market dynamics.

🛠 Practical Application and Upcoming Lessons on Liquidity

The speaker wraps up the session by summarizing the importance of understanding liquidity for making informed trades. Highlighting the strategy of catching market trends at their inception, the speaker promises to go more in-depth in the next sessions, focusing on identifying liquidity points and executing trades. The importance of watching the video multiple times to grasp the concept of liquidity is stressed, with the speaker encouraging viewers to prepare for the detailed lessons in the upcoming parts of the boot camp.

Keywords

💡Liquidity

Liquidity refers to the availability of liquid assets to a market or company. In the context of the video, liquidity is described as resting orders in the market that can be either stop orders or limit orders. These orders represent a pool of money that, when activated, causes significant market movements. The speaker emphasizes the importance of understanding liquidity to predict market directions and make informed trading decisions.

💡Resting Orders

Resting orders are orders placed in the market that are not yet executed. They include stop orders and limit orders, which are activated when the market reaches a certain price point. In the video, resting orders are highlighted as a crucial component of liquidity, which traders need to understand to anticipate market movements.

💡Stop Orders

Stop orders are a type of order to buy or sell a security once its price moves past a particular point, ensuring a higher probability of achieving a predetermined entry or exit price. The video mentions stop orders as part of liquidity, explaining that they are essential for understanding how and why prices move in the market.

💡Limit Orders

Limit orders are orders to buy or sell a security at a specific price or better. They are used to control the price at which a transaction is executed. The video explains that limit orders are a key part of liquidity because they represent points where large volumes of money can enter or exit the market, affecting price movements.

💡Market Movers

Market movers refer to entities, such as banks and institutions, that have the power to influence market prices significantly. The video discusses how these entities use liquidity to fill their large orders and move the market in their desired direction. Understanding their actions helps traders align their strategies accordingly.

💡Break of Structure

A break of structure occurs when the market breaks a significant support or resistance level, indicating a potential shift in trend. The video emphasizes that identifying a break of structure is crucial for confirming that liquidity has been taken out and that a new market direction is likely to follow.

💡Market Structure Shift

A market structure shift is a change in the trend or direction of the market, usually following a break of structure. The video points out that recognizing this shift is essential for confirming that the orders of market movers have been filled, signaling a new direction for the market.

💡Trend Shift

Trend shift refers to a change in the market trend, from bullish to bearish or vice versa. The video highlights the importance of spotting a trend shift after liquidity has been taken out to determine the market's new direction and make profitable trades.

💡Confluence

Confluence in trading refers to the combination of multiple strategies or indicators that point to the same market direction, increasing the probability of a successful trade. The video mentions confluence as a reason why the speaker trusts his strategy, as it provides multiple confirmations for taking trades.

💡Digitalized Trading

Digitalized trading involves using electronic systems to execute trades instantly, as opposed to the manual process of the past. The video explains how modern brokerages and exchanges facilitate quick and efficient order filling, making it easier for traders to buy and sell securities.

Highlights

Introduction to liquidity in trading and its importance.

Explanation of liquidity as resting orders in the market.

Definition of liquidity involving stop orders and limit orders.

Liquidity as a pool of money where price points trigger market actions.

Why traders should target areas of high liquidity.

The role of banks and institutions in seeking liquidity to move the market.

Digitalization of trading and how brokerages fill orders.

Discussion on the concept of B-booking a trader.

Understanding how banks get their massive orders filled through liquidity sweeps.

Importance of identifying where liquidity lies in the market.

Confirmation through break of structure indicating a trend shift.

The strategic advantage of understanding liquidity to align with market movers.

The necessity of waiting for market structure shifts before executing trades.

The significance of market structure shifts in validating trade decisions.

Summary and preparation for further detailed discussions on liquidity in the next sessions.

Transcripts

what's good Maine welcome to boot camp

day number eight I think

um and today we're back with another

trading video no no discipline uh just

charts okay

um and today

whoa we're going to get into

really the probably the largest topic

and the most important topic of my

strategy really which is liquidity so

with that being said there I think this

is going to make we're going to make

this three parts okay today and this is

just so you guys can fully understand

this [ __ ]

um because I really want to make sure

that you guys completely understand this

okay

um so we are going to start off with

today just going over what liquidity is

and why we want to use it in the market

okay that's it just what it is why we

want to use it how it makes the markets

move and that is it we're not going to

talk about how to spot it we're not

going to talk about

any of that okay we're not going to talk

about how to take a trade off of that

that will be in Parts two and three okay

today we just need to understand why we

are using it okay and that's that's this

is why I really love the strategy that I

use because there's reasoning behind the

trades that we're taking instead of you

know like support and resistance like oh

it bounced off a floor so I'm going to

buy and put money at risk that makes no

sense to me whatsoever that like you're

you're that's like guessing for being

honest right like oh a floor and it

broke through the floor and now it is on

this and now it's re-testing it as a

ceiling come on guys like we want to

know actually why price is reacting and

why price is moving the way that it is

so that's what we're going to focus on

throughout this entire boot camp so you

guys can actually understand why price

is moving the way that it is and then

also right so we can have a better

understanding of the strategy that we're

using right and that's very important

when when doing this type of stuff so

not much that's going to be put on the

chart today mainly just going to be me

talking to you mainly going to be me

saying hey this is why we use liquidity

this is what it is and this is why it

moves the market so with that being said

let's get into it so

what is liquidity and why do we want to

use it so essentially liquidity is what

I would like to call resting orders and

there's there's multiple different

orders that we can consider liquidity as

it can be stop orders meaning getting

people out of a trade it can also be

limit orders like

um a a buy limit or a sell limit okay

meaning when these these price targets

get hit it's activating something okay

it's either taking you out of the market

or it's entering you into the market

okay that's that's pretty much what

liquidity is right it's a pool it's a

pool of money right and when it's a

price point where when that price point

gets achieved people are going to be

entering the market and exiting the

market meaning there's a lot of

liquidity there's a lot of money getting

cycled through the market during this

point in time okay so

with that being said all right

why would we want to Target these areas

okay also I feel bad for my Gardener

because Boogie doesn't have um

I don't have uh [ __ ] I don't have um

damn I feel hella bad I don't have I

don't have dog bags for them yet and bro

has to like pick up all of Boogie [ __ ]

and he just walked past me

anyways let's keep talking okay so right

that's what liquidity is why why is that

it's so important to us well with that

in mind

right

and then also understanding that Banks

hedge funds or not hedge funds Banks

institutions okay these these Market

Movers right the people that are

actually causing the market to move they

have these massive orders okay

so think about it right think about a

stock exchange when I buy one share of

Apple that means somebody is selling me

one share of Apple we don't see it but

back in the day right people used to say

I would like one share of Apple and then

someone would have to sell that to him

okay send them the paperwork so he boom

I have a share of Apple stock okay but

now with brokerages and exchanges they

pretty much simplify this process and

make it way easier okay because now it's

all digitalized you can press a button

and instantly get filled your order gets

filled right it's all through the it's

all through the exchange it's all

through the brokerage however it's still

the same concept so if we want to place

a buy order we need someone to sell it

back to us luckily since we're in this

digital age when we just want one share

of Apple it's pretty [ __ ] easy for

The Brokerage or the exchange to be like

oh yeah we found somebody else who's

selling their Apple stock right the [ __ ]

now or right what some of these offshore

brokerages do they'll they'll pretty

much trade against you okay that's

that's what be booking a Trader means

and we won't get too deep into this but

essentially you you if you press buy the

broker is pretty much taking a sell

order by assuming um but so they're

they're filling the order for you and

pretty much assuming that you are going

to lose the trade because 98 of trade is

fail but anyways once we understand that

there there's an exchange right and we

have to exchange these in order for our

orders to be filled

now going back to these these Banks and

the Market Movers how are they going to

get their massive orders filled right

how are they going to get those massive

orders filled

when right like how are they going to

get a bunch of people willing to sell to

them when they want to pre or willing to

sell when they want to press Buy

through liquidity sweeps through taking

out liquidity right so back to the first

thing that we were talking about there's

certain price points and we'll

understand when where to spot them and

when later okay in two days okay

um not tomorrow but in the day after

okay we will understand how to spot this

on the chart okay right now I just want

you guys to understand this okay so

the these Banks they are seeking

liquidity so that they can move the

market in the direction that they want

to yes they are the people that move the

market no matter what right but how are

they able to fill those orders by

seeking out liquidity so that they have

so many people exiting the market

entering the opposite direction of them

so those orders can get filled so they

can move the market in the direction

that they want to

does that make sense

right and then now why are we taking

trades off of it and why is it that

important to us well obviously we want

to be going in the same direction that

the market is going and who moves the

market the [ __ ] Banks okay so the

banks

they're moving the markets where they

want it to go what are they always doing

they're seeking liquidity so they can

push Market in whatever Direction they

want so wouldn't it be smart for us to

understand where liquidity is and then

understand once liquidity gets taken out

and then we get a confirmation which we

will talk about

um in two days a confirmation which

can't which we can already talk about a

break of structure right a confirmation

of a market structure shift right

because we talked about that right when

when we see a break of structure that

means okay Trends have shifted

there's a change in Direction within the

market and that is the confirmation that

okay liquidity has been swept and orders

have been filled causing the market to

change direction and that is what causes

your trades to hit take profit not know

oh it bounced off of a floor not oh it

hit its head on the ceiling that's

that's like a [ __ ] story time bro

that's like little kid [ __ ] okay we

don't want to do that also part of me my

[ __ ] gardeners are going crazy so

I'll try and wrap this up pretty quick

or let me actually close this

see if that works not really but anyways

that's why we want to understand where

that is so we can get in at the

beginning of the move right we

understand okay liquidity liquidity was

taken out we see a trend shift a trend

change

it's right it's ready to go we know

where Market wants to go right and

that's what we're trying to see we're

trying to figure out where those resting

orders are we're trying to see Market

push to that price point we're trying to

see then a shift in direction of Market

structure and guys if we don't see a

shift in direction if we don't see

anything perfect hands off we're not

doing anything right it's easy to say

okay there's liquidity here there's

liquidity here there's liquidity here

and if if price gets to it you're not

immediately pressing by you're not

immediately pressing sell right we need

more confirmation and and again this is

why I love my strategy so much damn

they're they're ear raping I'm sorry

guys

um this is why I love my strategy so

much because we're able to take these

types of Trades with with confidence and

and it and [ __ ] Confluence with the

market and and understanding that okay

liquidity was taken out and now we see a

TR a trend shift a break of structure a

market structure shift

like that's confirmation that the

Market's gonna go you know like the

orders have been filled and we and we

see the orders getting filled and we

know the orders have been filled due to

that market structure shift does that

does that make sense and do you guys

understand why we want to understand

where liquidity lies in the market now

because that's where price that's where

price or the Market Movers the banks are

seeking they're seeking that liquidity

so they can move price in whatever

Direction they want because when it hits

those prices when they can fill their

orders that's when they can execute and

that's when we execute as well we're not

damn I'm really sorry I'll wrap this up

soon

um that's that's we're not executing

right when they execute we got to wait a

little bit right because we don't know

exactly when that when they press that

button but we can get a still a

incredibly good entry

okay like literally catching the tops

and the bottoms of moves if you notice

pretty much every single one of my

trades it's not already in a trend it's

at the top or the bottom of a trend okay

we catch the full move every single time

okay

because damn bro speak dude because

we're we're thinking the same as the

Market Movers okay we're we're

understanding that their orders have

been filled okay

damn and we're also understanding and

knowing that okay their orders have been

filled we see a market structure shift

and it's ready to go okay so that is

liquidity explained all right I'm going

to cut this a little bit short because

we got the gardeners going on we'll go

more in depth about how to spot this how

to know what price points these got

these are at okay tomorrow or not

tomorrow in two days for

liquidity part two and then we'll also

talk about how to execute and how to

understand even more about liquidity in

part three okay so with that being said

hopefully you guys took some notes from

this for your homework today I don't

have much homework for you guys for this

to be honest this is just

dude I'm so sorry this is just a

learning this is just something to learn

from okay this is what I just want you

to watch this video three or four times

fully understand the concept of

liquidity and that's all you need okay

I'll catch you guys tomorrow in the next

video peace out jizz