How to Correctly *IDENTIFY* a Market Maker Model (MMXM) Off *LIQUIDITY* | IRL - ERL | ERL - IRL

Summary

This video explains how to identify market maker buy and sell models, focusing on spotting liquidity moves rather than patterns. The key concept is understanding the shift between internal and external liquidity, and how the market typically moves from one to the other. The video highlights the importance of waiting for price reactions during specific times, such as the New York Kill Zone, to make informed decisions. By using hindsight and analyzing liquidity levels, traders can identify potential market shifts and optimize their strategies for better trading outcomes.

Takeaways

• 😀 Understanding Market Maker Models: These models operate by moving from internal range liquidity to external range liquidity and vice versa. It's essential to recognize these liquidity shifts to spot buy or sell opportunities.
• 😀 Liquidity Basics: External liquidity refers to the highs or lows outside the current range, while internal liquidity is within the range. Identifying both helps in determining the market's direction.
• 😀 Timing Is Key: Market Maker models tend to expand during the New York Kill Zone, typically seen in the New York morning session, making it crucial to focus on this time frame for high-probability setups.
• 😀 Hindsight is Useful: In live time, waiting for the market's reaction to liquidity levels (internal or external) can offer a better sense of the market's next move rather than predicting it upfront.
• 😀 Avoid External-to-External Liquidity Moves: Market Maker models usually do not move directly from one external liquidity point to another. The movement generally involves a reversal back to internal liquidity before expanding to the next external liquidity.
• 😀 Use Fair Value Gaps as Liquidity: Fair value gaps (FVGs) also serve as liquidity points, which are critical to identifying potential price reactions or reversals.
• 😀 Market Reaction is Crucial: It's not about predicting price action but reacting to it. After reaching a liquidity level (internal or external), traders should wait to see if the market reverses or continues before taking action.
• 😀 External to Internal Liquidity: Once the market hits external liquidity, it often reverses to internal liquidity, providing potential short or long setups depending on the direction of the move.
• 😀 Use Structural Shifts to Confirm Moves: Market structure shifts or breaks are often used as confirmation for market direction after a liquidity level is reached. This confirms whether the market will continue its trend or reverse.
• 😀 Time and Price are Connected: The market typically waits for the right time (e.g., New York Kill Zone) to expand after hitting a liquidity level. Timing is critical for maximizing the effectiveness of a market maker model.

Q & A

What is external liquidity, and how is it identified in the market?

External liquidity refers to price levels that are outside the current trading range, such as previous highs or lows that have been reached beyond the current market range. These are the key points where the market may expand or reverse, and they can be identified by observing extreme highs and lows on the chart.

How is internal liquidity different from external liquidity?

Internal liquidity refers to price levels within the current market range, such as recent highs or lows that are inside the established range. These levels are crucial because they represent potential support or resistance zones within the range, whereas external liquidity marks the boundary outside of this range.

What is the significance of the New York Kill Zone in identifying Market Maker models?

The New York Kill Zone (NYK) is a critical timeframe during which market expansion typically occurs. Market Maker models, whether buy or sell, are more likely to form during this period, making it crucial for traders to monitor this time for potential setups.

How can hindsight be helpful when identifying Market Maker models?

Hindsight allows traders to see the market's reaction after it has moved to key liquidity levels. By observing how the market behaves after reaching these levels, traders can identify potential buy or sell models, confirming patterns that were not visible in real-time.

Why should traders wait for a reaction at liquidity levels before making a trade?

Waiting for a reaction at liquidity levels helps traders confirm whether the market will reject or continue past these levels. By observing this reaction, traders can avoid guessing and ensure that their decisions are based on confirmed market behavior.

What does it mean when the market moves from internal liquidity to external liquidity or vice versa?

When the market moves from internal liquidity to external liquidity, it signifies that the price is expanding from a known support/resistance zone to a more extreme level outside the current range. Conversely, when the market moves from external to internal liquidity, it is retracing back to a previous support or resistance level within the range.

What role does the time of day play in the accuracy of a Market Maker model?

The time of day, particularly the New York Kill Zone, significantly affects the accuracy of a Market Maker model. The market is more likely to expand during this period, making it the optimal time for identifying and acting on potential models. Trades outside of this time, such as during the Asia session, are generally less reliable.

How can a trader use a break of structure (BPR) to confirm a Market Maker model?

A break of structure (BPR) occurs when the market breaks through a previous high or low, indicating a shift in the market’s momentum. After confirming a reaction at key liquidity levels, traders can use a BPR to confirm that the market is likely to move toward the next liquidity level, thus validating the Market Maker model.

What is the importance of observing both internal and external liquidity in live trading?

Observing both internal and external liquidity allows traders to understand the market’s potential direction. Internal liquidity levels often serve as short-term support or resistance, while external liquidity levels represent more significant price targets. By identifying the relationship between these levels, traders can more effectively predict market movements.

Why should traders avoid predicting multiple price moves in advance when identifying Market Maker models?

Traders should focus on the current market leg rather than predicting multiple moves because the market can change direction unexpectedly. By reacting to real-time price action and liquidity levels, traders can make more accurate decisions without overcomplicating their analysis by guessing future movements.