How To Find The Draw On Liquidity - ICT Concepts

Summary

In this video, the focus is on how to identify liquidity draws for ICT traders, examining price movements across various timeframes. The key idea is to assess where price is delivering from (buy-side or sell-side liquidity) and where it's headed, utilizing concepts like fair value gaps, market structure shifts, and institutional order flow. By understanding these elements, traders can pinpoint where smart money might be entering and exiting the market. The video also emphasizes how to apply this knowledge in real-time, offering both bearish and bullish examples, with an invitation for viewers to join a community for further learning.

Takeaways

• 😀 Identify where price is delivering from, either from buy-side or sell-side liquidity, as this gives insight into potential market movements.
• 😀 Analyze the current market structure on different timeframes to assess where price is and how it might behave next.
• 😀 Understand the concept of 'order flow,' which helps determine whether the market is in a buy or sell program.
• 😀 In a bearish market, watch for price respecting bearish PD arrays (like fair value gaps and breaker blocks) to confirm order flow.
• 😀 Look for displacement above or below liquidity zones to gauge the strength of a price move, particularly in higher timeframes.
• 😀 Use lower timeframes to assess the finer details of price action, including market structure shifts and gaps that indicate where price may move.
• 😀 Price often revisits liquidity zones like old lows or highs to stop out retail traders, creating opportunities for smart money to buy or sell.
• 😀 A fair value gap combined with a market structure shift signals the potential for a trend reversal or continuation, providing trading setups.
• 😀 When price moves to an internal liquidity zone, assess the higher timeframe trend before deciding whether to go long or short.
• 😀 Smart money requires liquidity to execute large trades, meaning they need retail traders to enter positions, creating liquidity pools above or below key levels.
• 😀 To predict where price is heading, combine multiple timeframes, liquidity zones, and market structure insights to identify the draw on liquidity.

Q & A

What is the first step in finding the draw on liquidity?

The first step is to determine where price is delivering from, whether it is from buy-side liquidity or sell-side liquidity.

How can you identify where price is delivering from?

You can identify where price is delivering from by analyzing the current price action and looking at old highs and lows. If price is below old lows, it may be delivering from sell-side liquidity, and if price is above old highs, it may be delivering from buy-side liquidity.

What does 'smart money's footprints' refer to in the context of price action?

'Smart money's footprints' refers to the price movements that indicate the actions of institutional traders. For example, when price moves away from old lows or highs, it suggests that smart money may have bought or sold from retail traders, generating liquidity.

What is a 'sell program' and how is it identified on a chart?

A 'sell program' refers to institutional order flow that is bearish. It can be identified on a chart by looking for resistance at up-close candles and observing price respecting bearish PD arrays, like a bearish fair value gap or breaker block.

Why is it important to consider the higher time frames when analyzing price action?

Considering higher time frames is important because they provide a broader view of institutional order flow. They help establish the overall trend or bias, which in turn influences the probability of trades on lower time frames.

What role does internal range liquidity play in price action analysis?

Internal range liquidity is liquidity that exists within a specific range, as opposed to external range liquidity which is outside that range. Price may target internal range liquidity before moving towards larger targets, such as external buy-side or sell-side liquidity.

What is a 'market structure shift' and why is it significant?

A market structure shift refers to a change in the prevailing trend or order flow. It is significant because it often indicates a potential reversal or continuation of price movement, and can be used as a signal to enter or exit trades.

What is a 'bearish fair value gap' and how is it used in analysis?

A bearish fair value gap is a price imbalance where the price fails to fill in a certain area, leaving a gap between the close of one candle and the open of the next. It is used to identify potential resistance zones where price may reverse.

What does the concept of 'engineering liquidity' mean?

'Engineering liquidity' refers to the process of creating liquidity zones by price action. This happens when price moves in a way that attracts retail traders to place stop-losses or take profits at certain levels, creating liquidity that smart money can target.

How can you predict the direction of price movement using liquidity analysis?

By identifying where price is delivering from (buy-side or sell-side liquidity), where it is currently, and where it is likely to deliver to, you can predict the direction of price movement. For example, if price is delivering from buy-side liquidity and there's a market structure shift, it may head toward sell-side liquidity to balance the market.