Episode 2: Low Resistance vs. High Resistance Liquidity - ICT Concepts

Summary

This video explores key concepts in liquidity runs, focusing on Low Resistance Liquidity Runs (LRLR) and High Resistance Liquidity Runs (HRLR). The narrator explains how price movements behave in each scenario, with LRLR cutting through liquidity quickly while HRLR faces resistance. Various examples, including failure swings and turtle soups, demonstrate how price interacts with liquidity and resistance levels. Key patterns like three drives and the importance of breakpoints and liquidity engineering are also highlighted. The video provides insights on how traders can identify and utilize these liquidity dynamics in their strategies.

Takeaways

• 😀 Low Resistance Liquidity Run (LRLR) is when price easily breaks through resistance levels due to the absence of significant opposition.
• 😀 High Resistance Liquidity Run (HRLR) occurs when price struggles to move through resistance levels due to significant opposing price action and breaker blocks.
• 😀 In an LRLR, failure swings occur, and once these levels are taken out, price moves quickly through them.
• 😀 A turtle soup formation at a high creates a high resistance liquidity run, where price faces difficulty in breaking the resistance, requiring more effort to push through.
• 😀 Failure swings in price action, especially around key levels, indicate a low resistance liquidity run when price breaks through these levels easily.
• 😀 High resistance liquidity runs are often engineered through the formation of breaker blocks, making it hard for price to return to lower levels after breaking these key levels.
• 😀 Breaker blocks represent key price areas that act as resistance, and price needs to overcome them to continue its movement.
• 😀 When price breaks through a high resistance liquidity run, it clears multiple breaker blocks and becomes easier to move through these levels afterward.
• 😀 Three drives patterns are used to engineer liquidity by creating repeated movements up and down, setting up a low resistance liquidity run once the final drive is achieved.
• 😀 Equal highs in the market are often targeted by the price, as retail traders see them as resistance, and these are prime areas for liquidity runs.
• 😀 A high resistance liquidity run can eventually shift into a low resistance liquidity run once liquidity is cleared, and the price can then move through previously difficult areas quickly.

Q & A

What is a Low Resistance Liquidity Run (LRLR)?

A Low Resistance Liquidity Run (LRLR) is a market condition where price moves through support levels or previous lows very easily, like cutting through butter. This typically happens when there are multiple failure swings that are eventually taken out, and the price moves quickly in one direction once it's ready.

What defines a High Resistance Liquidity Run (HRLR)?

A High Resistance Liquidity Run (HRLR) occurs when price faces difficulty moving through resistance levels or previous highs. It often involves 'turtle souping' at the high and is accompanied by Breaker Blocks, which make it harder for the price to continue in the opposing direction.

What is meant by 'turtle souping' in the context of liquidity runs?

'Turtle souping' refers to the market’s ability to fake out or trick traders by breaking highs or lows temporarily. It is a strategy that can help identify when a price is ready to reverse, often marking a point of high resistance or liquidity run.

How do failure swings relate to Low Resistance Liquidity Runs?

Failure swings are price movements where a swing high or low fails to hold, often signaling a shift in market sentiment. When multiple failure swings form, it indicates a low resistance liquidity run, where the market is likely to push through these levels quickly once it's ready.

What is the significance of Breaker Blocks in a High Resistance Liquidity Run?

Breaker Blocks are areas where price has previously reversed and formed strong resistance. They act as barriers for further movement in the opposite direction, contributing to the difficulty of a High Resistance Liquidity Run, making it harder for price to continue upwards or downwards.

How does a three drives pattern relate to liquidity runs?

A three drives pattern consists of three price pushes: two moves in one direction and a final push in the opposite direction, often marking a point where liquidity is engineered. This pattern helps create both Low Resistance Liquidity Runs and High Resistance Liquidity Runs by manipulating liquidity around key price levels.

Why does price cut through failure swings like butter during a Low Resistance Liquidity Run?

Price cuts through failure swings easily during a Low Resistance Liquidity Run because these levels do not hold, indicating weak support. Once the market is ready, it moves quickly through these levels, often targeting lower liquidity levels beneath these points.

What role do Breaker Blocks play in preventing price from moving easily during a High Resistance Liquidity Run?

Breaker Blocks, typically formed by previous price reversals or strong resistance, create barriers for price movement. In a High Resistance Liquidity Run, these blocks make it difficult for price to move past them, as they represent areas where price has historically failed to break through.

What happens when a Low Resistance Liquidity Run encounters a High Resistance Liquidity Run?

When a Low Resistance Liquidity Run encounters a High Resistance Liquidity Run, price often experiences difficulty breaking through resistance due to the accumulated liquidity and Breaker Blocks. The market may engineer liquidity for a reversal before moving to the target draw of liquidity.

How do equal highs contribute to liquidity runs in the market?

Equal highs represent price levels where many retail traders place stop-loss orders, thinking it's a resistance level. These equal highs create liquidity pools, and once the market is ready, it can run through these levels, triggering stop-losses and pushing price higher, often as part of a Low Resistance Liquidity Run.