Why You Don't Understand ICT Liquidity | Strategy + Entry Model

Summary

This video script delves into the intricacies of ICT Concepts for trading, emphasizing the importance of understanding liquidity and how algorithms manipulate traders. The speaker shares personal struggles and a high-probability strategy for identifying and trading with the right liquidity pools, using chart examples. The strategy involves recognizing displacement, timing trades during specific hours, and confirming entry models with candlestick patterns, aiming to align with the market makers' actions for consistent success.

Takeaways

• 🚀 The speaker emphasizes the importance of understanding ICT (Information and Communication Technology) concepts in trading and how they can alter one's perception of market dynamics.
• 🔄 Learning to identify and utilize liquidity correctly is crucial for successful trading, as failing to do so can lead to losses.
• 🤖 To be a successful ICT trader, one must think like an algorithm or market maker, seeking out and understanding stop levels and liquidity.
• 📈 The concept of 'displacement' is central to high-probability trading setups, indicating when the market is likely to continue in a particular direction.
• 🕒 Timing is critical when trading liquidity; specific hours during trading sessions are identified as optimal for targeting liquidity.
• 📊 The speaker shares a personal strategy for identifying liquidity to trade from and target, which includes analyzing daily charts for bullish or bearish bias.
• 📉 Displacement is identified by observing price action and structure; if price fails to break above or below a certain level, it indicates potential stop raids.
• 📝 The speaker provides a practical example of how to apply this strategy using chart examples, including how to identify and trade off of failed displacements.
• 📍 Entry confirmation involves looking for specific candlestick patterns and time frames that confirm stops are being bought up by the market.
• 🎯 Risk management is highlighted by setting stops at liquidity rate lows and targeting exits based on the identified structure and daily bias.
• 💡 The strategy shared is meant to be consistently applied, as it has been transformative for the speaker's own trading approach and can potentially benefit others.

Q & A

What is the main focus of the video script?

The video script focuses on teaching viewers how to identify and trade with the right liquidity in the context of ICT (Informed and Controlled Trading), and how to avoid common pitfalls that can lead to losses.

What does the speaker mean by 'you will never be able to unsee the markets the way that you see them now'?

The speaker implies that after learning the concepts of ICT, the viewer's perspective on market dynamics will be fundamentally changed, and they will be able to perceive market operations in a new light.

What is the significance of understanding liquidity in trading according to the script?

Understanding liquidity is crucial because it helps traders to identify the right entry and exit points in the market, and to avoid becoming part of the liquidity themselves, which can lead to getting stopped out.

What is a 'liquidity sweep' as mentioned in the script?

A 'liquidity sweep' refers to a situation where the market, or the algorithm, seeks out and buys up stops, which can be a key indicator for traders to identify high-probability trading opportunities.

Why is 'displacement' an important concept in high-probability setups according to the script?

Displacement is important because it can confirm the market's direction and the intentions of the algorithm or market makers. A significant price movement beyond a certain level (displacement) can indicate that the market is likely to continue in that direction.

What is the speaker's trick to identify displacement in a mechanical way?

The speaker suggests looking at the daily chart for a bullish or bearish impulse range and identifying recent displacements. A large push above a high or below a low in the daily chart can indicate the market's direction and the buying or selling pressure.

Why is timing crucial when trading liquidity?

Timing is crucial because the algorithm is more likely to seek out liquidity when there is a high amount of it available, typically during specific trading sessions or 'kill zones', such as between 8:30 and 10 a.m. in the New York session.

How does the speaker suggest identifying the correct liquidity to trade from and target?

The speaker suggests establishing a bullish or bearish bias based on the daily chart, identifying areas of liquidity on the one-hour chart, and then confirming the chosen liquidity with candlestick patterns and time frame analysis.

What is the significance of the 'breaker block' in the entry model described by the speaker?

The 'breaker block' is a candlestick pattern that confirms the buying up of stops and provides a high-probability entry point. It involves a candle with a higher low than the liquidity rate candle, followed by a candle that does not break the first candle's low.

How does the speaker use the concept of 'displacement' to determine the target for a trade?

The speaker uses the concept of displacement to identify highs that have failed to cause a downward movement (displacement). These highs become the targets for trades, as they indicate potential areas of resistance that the market is unlikely to surpass.

What is the importance of maintaining a daily bias in the trading strategy described?

Maintaining a daily bias is important because it provides a broader context for trading decisions. It helps traders to align their trades with the overall market direction, as indicated by the daily chart, and to avoid counter-trend trades that may be less likely to succeed.