Complete Liquidity Course (Step By Step)

Summary

This video script explores the dynamics of price movements in trading, focusing on the concept of liquidity zones and how price fluctuates between internal and external levels. It covers the importance of understanding price structure, breakpoints, and how liquidity is absorbed or targeted during trends. Key topics include identifying rejection points, using tools like FIB for precise entry, and mapping out potential target zones based on clean traffic and order blocks. The approach emphasizes observing price behavior at different scales to anticipate both reversals and continuation patterns.

Takeaways

• 😀 Price movement is not linear, and it involves fluctuations between internal and external liquidity levels.
• 😀 Price often breaks structure, retraces to gather internal liquidity, and then targets external liquidity to continue its trend.
• 😀 Internal liquidity refers to price action within the current range, while external liquidity targets higher or lower price points beyond the current range.
• 😀 After price breaks structure, it forms sweeps to collect liquidity before moving to the next level of price action.
• 😀 Traders should focus on identifying clean traffic, where price moves freely without major resistance or rejection from previous price levels.
• 😀 Fibonacci retracement levels and order blocks are useful tools for identifying potential reversal points and price targets.
• 😀 Rejections at key levels such as order blocks can indicate a reversal, but once price absorbs these levels, it often continues its trend towards the next liquidity zone.
• 😀 The process of price absorption occurs when price reaches a liquidity zone and fills that pool by taking out stop losses and triggering pending orders.
• 😀 Price does not always move straight to a target; it often retraces to revisit previous price action before continuing its direction.
• 😀 Monitoring price behavior at each swing high and low helps traders predict the next potential move, either towards internal liquidity or external liquidity.
• 😀 It is crucial to adjust expectations based on price action and avoid assuming price will always behave in a predictable pattern.

Q & A

What is the main concept of price movement in the script?

Price movement is not linear. It moves in cycles, breaking structures, pulling back to internal levels to grab liquidity, and then breaking external liquidity levels. The pattern involves price seeking internal or external liquidity before moving forward or reversing.

What does liquidity mean in the context of this trading strategy?

Liquidity refers to areas in the market where there are significant buy or sell orders. Price often seeks liquidity at these points, either internally within a range or externally at key levels, and moves towards these zones to fulfill orders.

How does the concept of internal and external liquidity affect price action?

Price moves from internal liquidity (within a range) to external liquidity (at higher or lower levels). Internal liquidity represents smaller, shorter-term price movements, while external liquidity involves larger moves, often seen at significant support or resistance levels.

What is meant by 'clean traffic' in the script?

'Clean traffic' refers to price movement that has no significant rejections or disruptions. When price moves smoothly through a range without encountering resistance, it is considered to have clean traffic, indicating a more predictable movement toward the next liquidity zone.

Why is it important to identify rejection points in price action?

Rejection points indicate areas where price fails to move beyond a certain level, signaling that market participants are unwilling to push price higher or lower. These points help traders identify possible reversal zones or areas where price may consolidate.

What role do order blocks play in the strategy described?

Order blocks are areas where significant buy or sell orders have previously been placed, often causing price to reverse or stall. In this strategy, price targets these order blocks as they are seen as key levels where liquidity might be absorbed.

How does Fibonacci retracement help in this trading strategy?

Fibonacci retracement is used to identify potential reversal levels based on the key Fibonacci ratios. By mapping out these levels, traders can determine where price might pull back or continue in the direction of the trend, helping to identify entry and exit points.

What is the significance of a 'sweep' in the price movement process?

A sweep occurs when price breaks through an internal liquidity level to capture external liquidity. This often results in price moving through a range quickly, reaching a target level before potentially reversing or continuing the trend.

How do traders use macro and micro market structures in this strategy?

Traders use macro structures (large-scale price movements) to identify the overall trend and potential target levels. Micro structures (smaller-scale movements) help pinpoint specific entry points or areas where price is likely to reverse or continue based on liquidity patterns.

What is the difference between targeting internal liquidity and external liquidity?

Targeting internal liquidity means seeking price levels within an existing range, typically aiming for smaller, shorter-term price moves. External liquidity refers to targeting price levels outside of the current range, often involving larger price movements and more significant trends.