How I Formed My Trading Strategy Using LRLR

Summary

In this video, the trader shares key strategies for successful trading, focusing on low and high resistance liquidity runs. He explains how to identify failure swings, liquidity runs, and their importance in creating a framework for trades. The video emphasizes the necessity of understanding market bias, high-timeframe perspectives, and psychological factors for effective trading. By providing detailed examples, the trader teaches viewers how to apply these concepts in real-time market conditions. Key takeaways include targeting low resistance liquidity runs and using stop-loss strategies to optimize profits while avoiding trading against high resistance runs.

Takeaways

• 😀 A bias and framework are essential before executing any trade, with a higher time frame perspective being crucial.
• 😀 Low resistance liquidity runs occur when a swing low fails to break a previous swing low, indicating a potential buying opportunity.
• 😀 High resistance liquidity runs occur when a swing high breaks a previous swing low, signaling potential market reversal.
• 😀 Never trade against a high resistance liquidity run. Always target low resistance liquidity runs for higher probabilities of success.
• 😀 Targeting low resistance liquidity runs offers an opportunity to capture liquidity resting above market structures.
• 😀 High resistance liquidity runs should align with the side of the market you're trading, while low resistance should be opposite.
• 😀 After confirming a change of character at a higher time frame PD array, expect further moves toward liquidity areas.
• 😀 A high resistance liquidity run is typically not followed by retracements, but understanding its characteristics can signal a change in direction.
• 😀 Low resistance liquidity runs allow for smoother market movement across opposing structures, often forming during a bearish trend.
• 😀 Understanding the market's bias and where liquidity is targeted gives a clearer direction for trading decisions, including using tools like order blocks and fair value gaps.

Q & A

What is the main concept discussed in this video?

The video focuses on the concepts of low resistance and high resistance liquidity runs in trading. It explains how these concepts can be used to frame trades and provides rules and strategies for identifying setups in the market.

What is a low resistance liquidity run?

A low resistance liquidity run, also known as a failure swing, occurs when a swing low fails to take out a previous swing low, or when a swing high fails to take out a previous swing high. It represents an easy movement in price that doesn't face significant resistance.

How does a high resistance liquidity run differ from a low resistance liquidity run?

A high resistance liquidity run occurs when a swing high sweeps a previous swing low or when a swing low sweeps a previous swing low, continuing in the respective order flow. In contrast, a low resistance liquidity run is characterized by less resistance and a more straightforward price movement.

What are the main rules for trading based on low and high resistance liquidity runs?

The rules are: 1) Never trade against a high resistance liquidity run. 2) Target low resistance liquidity runs since there is liquidity above them. 3) Set stop loss at break-even once the low resistance liquidity run has been taken.

Why is it important to have a bias and framework before making a trade?

Having a bias and framework is crucial because it provides a higher time frame perspective and helps guide your decision-making. A bias ensures you are aligned with the overall market direction, reducing the likelihood of poor trade decisions based on short-term movements.

What is the role of higher time frame PDAs (price delivery arrays) in this strategy?

Higher time frame PDAs, such as fair value gaps, order blocks, or breaker blocks, serve as key reference points. When the price reaches these areas, they provide context for potential reversals or continuations, allowing traders to make informed decisions based on the market's overall direction.

What is a 'change of character' in the context of this strategy?

A 'change of character' refers to a shift in market behavior, such as a trend reversal or break in structure. This change is important because it marks the point where a trader can begin looking for trades in the opposite direction or adjust their trading bias.

How can traders use liquidity runs to frame their trades?

Traders can frame trades by identifying low resistance liquidity runs on the opposite side of the market they are trading. These liquidity runs can indicate potential price targets. By targeting these liquidity areas, traders can align their trades with the market’s likely direction.

What does the market typically do after a high resistance liquidity run?

After a high resistance liquidity run, the market often does not retrace but continues toward the liquidity targets. Traders can use this information to predict the likelihood of a continued movement in the direction of the high resistance liquidity run.

Why is understanding psychology important in trading, even with technical knowledge?

Understanding psychology is critical because it helps traders manage emotions and avoid common pitfalls, such as overtrading or impulsive decision-making. Even with strong technical knowledge, psychological factors can still lead to losses if not properly managed.