Internal & External Liquidity (Daily Bias) - ICT Concepts

Summary

The video explains the relationship between internal and external range liquidity in financial markets. It defines internal range liquidity as fair value gaps and external range liquidity as old swing highs and lows. After reaching external liquidity, price tends to seek internal liquidity. Then after hitting internal liquidity, it goes back to external liquidity. Examples across timeframes illustrate this, showing how identifying this relationship provides bias and trade ideas. Whether long-term directional outlook or short-term entries, internal and external liquidity work together in the market's cycle between balancing value and reaching for extremes.

Takeaways

• 😀 Defines internal range liquidity as fair value gaps and external range liquidity as swing highs/lows
• 😯 Price moves from external to internal liquidity and back in cycles
• 📈 Taking external liquidity leads to seeking internal liquidity next
• 📉 Taking internal liquidity leads to seeking external liquidity next
• 🔼 Use higher timeframes to establish bias between internal and external liquidity
• ⬇️ Drop down timeframes to find precise entries based on established bias
• 👀 The relationship works on any timeframe - intraday, daily, weekly etc.
• 🎯 Can use it to anticipate where price is likely headed next
• 🖥️ Useful for framing overall market direction and finding trades
• 💡 Simple but powerful concept for technical analysis

Q & A

What is internal range liquidity?

Internal range liquidity refers to a fair value gap in price.

What is external range liquidity?

External range liquidity refers to a swing high or swing low, which represents buy side or sell side liquidity.

What is the relationship between internal and external range liquidity?

The market moves from external to internal liquidity, filling fair value gaps, and then from internal to external liquidity, reaching for old highs or lows.

How can identifying this liquidity relationship help with trading?

It provides a bias or narrative to anticipate future price movement. After hitting external liquidity, expect price to fill internal liquidity gaps. After filling gaps, expect price to reach for further external liquidity.

What time frames can this liquidity relationship be applied to?

It can be applied to any time frame, from the weekly chart down to the 1 minute chart.

What is an example of using this relationship for top down analysis?

You can identify internal and external liquidity on higher time frames like weekly or daily to set overall bias, then drop down to lower frames like 4 hour or 1 hour to find exact entries.

What types of entries can you find using this relationship?

You can find order block entries after price moves from external to internal liquidity. You can also find breakout entries when price moves from internal to external liquidity.

How exact does the liquidity flow need to be?

It does not need to be perfect. For example, sometimes price will not retest after reaching external liquidity before continuing its trend.

Can this relationship be used to identify intraday swing highs and lows?

Yes, on lower time frames you can identify smaller swings between internal and external liquidity to find intraday support and resistance levels.

What other trading concepts relate to this internal/external liquidity relationship?

Market maker manipulation between liquidity levels is very similar. Understanding volume spread analysis (VSA) and order flow can also help trade these liquidity moves.