🟥COMPLETE ICT BEGINNERS COURSE (EPISODE #3)

Summary

In this video, the concept of liquidity is explored, emphasizing its importance in trading. Liquidity refers to the ease of buying or selling assets without affecting their price, and it forms the foundation of ICT's trading strategy. ICT students target liquidity pools—areas where large orders are placed—such as buy-side and sell-side liquidity. By recognizing relative equal highs and lows, traders can predict price movements and structure their trades accordingly. The video highlights the difference between traditional support and resistance levels and ICT's approach to liquidity, offering a roadmap for successful market participation.

Takeaways

• 😀 Liquidity refers to how quickly an asset can be bought or sold without affecting its price, and it is essential for market operations.
• 😀 Participants in the market, whether buying or selling, are considered liquidity providers. This includes traders themselves.
• 😀 ICT (Inner Circle Trader) focuses on targeting liquidity in the market, in contrast to traditional methods of trading which focus on support and resistance.
• 😀 There are two types of liquidity: buy side liquidity (buy stops or buy limits) and sell side liquidity (sell stops or sell limits).
• 😀 Buy side liquidity is found above the current price, and sell side liquidity is found below it. This is important for understanding market dynamics.
• 😀 Liquidity pools are created by relative equal highs and lows in the market, which are the most common formations to identify for liquidity targeting.
• 😀 ICT’s approach is contrary to mainstream trading strategies, which typically assume price won’t break through resistance or support levels.
• 😀 Liquidity can be used as a roadmap, guiding traders to specific price levels, and can also act as an entry point or confirmation for trades.
• 😀 Relative equal highs and lows in the market represent liquidity pools. Price often moves to take out these liquidity pools, triggering buy or sell stops.
• 😀 The use of liquidity pools allows ICT traders to identify potential market reversals and profit from taking out liquidity created by other market participants.
• 😀 In ICT’s strategy, targeting liquidity pools, such as relative equal highs or lows, helps traders anticipate price movements and improve their market entries.

Q & A

What is liquidity in the context of trading?

Liquidity refers to the degree to which a market asset or security can be quickly bought or sold without significantly affecting its price. It is the foundation of how the market operates and is essential for market participants, including traders like you.

What is meant by 'buy-side liquidity'?

Buy-side liquidity, also known as buy stops or buy limits, refers to the liquidity generated by market participants who have orders placed above the current market price. These orders may be buy stops or buy limits resting above the price, and they create a liquidity pool that price may target.

How does ICT differ from mainstream trading strategies?

ICT (Inner Circle Trader) focuses on targeting liquidity, which is the opposite of many mainstream strategies. While others rely on concepts like support and resistance, ICT teaches that liquidity pools, such as equal highs and lows, are more important to target in order to generate profit.

What are sell-side liquidity and how is it formed?

Sell-side liquidity, also known as sell stops or sell limits, is generated by market participants who have orders placed below the current price. These orders may be sell stops or sell limits resting beneath the price, forming a liquidity pool that price may target in a downtrend.

What are liquidity pools, and how do they appear in the market?

Liquidity pools are areas in the market where large amounts of orders are concentrated. They often appear as relative equal highs (buy-side liquidity) or relative equal lows (sell-side liquidity), indicating that traders have placed stop orders at those levels. These pools serve as targets for price action.

How does ICT use liquidity as a roadmap for trading?

ICT uses liquidity as a roadmap or destination by targeting specific liquidity pools. For example, if price is expected to rise, ICT traders aim to target buy-side liquidity (buy stops). Conversely, in a downtrend, sell-side liquidity (sell stops) is targeted. This approach helps guide trade decisions.

How can liquidity be used as an entry pattern in trading?

Liquidity can be used as an entry pattern by observing when price moves above or below certain liquidity pools, such as relative equal highs or lows. This movement can serve as a confirmation to enter a trade, often signaling a continuation or reversal in price.

What are 'relative equal highs' and 'relative equal lows'?

Relative equal highs are price levels where multiple highs are similar or identical, indicating buy-side liquidity. Similarly, relative equal lows are price levels where multiple lows are similar, indicating sell-side liquidity. These levels act as liquidity pools that can be targeted by traders.

What role does liquidity play in price reversals?

Liquidity plays a crucial role in potential price reversals. When price reaches a liquidity pool, such as relative equal highs or lows, it may reverse to take out the liquidity, leading to either a continuation or reversal in the market. Traders use these patterns to predict price movements.

How do ICT students trade using liquidity compared to traditional traders?

ICT students trade by targeting liquidity pools, such as equal highs or lows, whereas traditional traders often use support and resistance levels. ICT traders anticipate that price will move to take out these liquidity pools, using them as targets for entry and exit points.