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.

Outlines

00:00

📈 Understanding Liquidity in ICT Trading

This paragraph introduces the concept of ICT (Institutional Capital Trading) and the importance of understanding liquidity in trading. The speaker emphasizes that recognizing the manipulation of traders by algorithms is crucial, but without proper knowledge of which liquidity to trade from or target, traders risk becoming part of the market's liquidity themselves. The speaker shares their personal struggle with ICT and introduces a strategy that helped them secure significant funding. The focus is on identifying high-probability liquidity pools and entry models, using chart examples to illustrate the points. The importance of following the strategy precisely is stressed, and the concept of a 'liquidity sweep' is introduced as a key to successful ICT trading.

05:02

🕒 Timing and Identification of Liquidity for Trading

The speaker discusses the importance of timing in trading liquidity, focusing on specific hours during the New York session for indices and suggesting equivalent times for other markets. The strategy involves identifying 'kill zones' or times of high available equity. The paragraph explains how to identify liquidity on the 15-minute or 1-hour chart, with a current focus on the 1-hour chart. The concept of 'displacement' is introduced as a mechanical way to determine if stops are being bought up, using the NASDAQ as an example. The speaker provides a step-by-step guide on how to identify bullish and bearish biases based on daily chart patterns and how to confirm these biases with candlestick formations, particularly during the 'Kill Zone' hours.

10:02

📊 Entry Models and Confirmation Strategies in ICT Trading

In this paragraph, the speaker elaborates on the entry models used in ICT trading, emphasizing the importance of confirming that stops are being bought up before entering a trade. The speaker shares a personal trade example, demonstrating the application of the strategy during specific market hours. The focus is on identifying failed displacements and targeting the structure that caused the move, using candlestick patterns as confirmation signals. The speaker also explains how to adjust entry strategies based on risk-to-reward ratios and market structure, advocating for simplicity and consistency in applying the strategy. The paragraph concludes with an invitation for viewers to share their experiences and a reminder of the importance of understanding liquidity to avoid becoming part of it.

Keywords

💡ICT Concepts

ICT Concepts likely refers to 'Insider Circle Trading' or a similar proprietary trading concept, which is a method of trading that aims to understand and predict market movements by analyzing market structures and behaviors. In the video, the speaker discusses how understanding ICT Concepts can change the way one perceives market dynamics, particularly in terms of how algorithms manipulate traders and the importance of recognizing liquidity.

💡Liquidity

Liquidity in trading refers to the ease with which an asset can be bought or sold without affecting its price. In the context of the video, the speaker emphasizes the importance of identifying the correct liquidity pools to trade from and target, as this is crucial for successful trading strategies. The script discusses how to become 'one with the algorithm' by understanding and trading in sync with the market's liquidity movements.

💡Algorithm

An algorithm in trading is a set of rules or instructions that dictate when and how to enter or exit trades. The video script suggests that understanding how these algorithms work is key to predicting market movements and manipulating liquidity. The speaker shares insights on how to align trading strategies with what the algorithm might be doing, such as seeking out stops to enter the market.

💡Displacement

Displacement in the context of the video refers to a significant price movement that indicates the market's direction. The speaker explains that displacement is key to high-probability trading setups and is used to confirm whether the market is likely to continue in a particular direction. For example, a 'displacement up' in the daily chart is expected to lead to a continuation of the bullish trend.

💡Market Makers

Market makers are entities that facilitate the trading of securities by providing buyers and sellers with counterparties. In the video, the concept of thinking like a market maker is introduced to emphasize the importance of understanding the motivations and actions of these entities in the market. The speaker suggests that successful traders need to align their strategies with the market makers' approach to liquidity and price movements.

💡Bias

In trading, bias refers to a trader's inclination towards a particular market direction, either bullish or bearish. The video script discusses establishing a bullish bias based on daily chart analysis and using this bias to inform trading decisions, such as which liquidity to trade from and target.

💡Entry Model

An entry model in trading is a strategy or set of criteria that determines the optimal time to enter a trade. The speaker in the video shares an 'exact entry model' that they used to achieve significant funding, emphasizing the importance of following this model precisely to ensure the strategy's effectiveness.

💡Stop Rates

Stop rates in the video refer to specific times when the market is expected to have high liquidity, making it an opportune time for trading. The speaker mentions particular times, such as between 8:30 and 10 a.m. New York time for indices, as periods to look for stop rates, indicating when to be particularly active in trading.

💡Kill Zones

A 'kill zone' in the context of the video is a term used to describe periods of high available equity, or times when the market is particularly volatile and conducive to trading. The speaker advises looking for stop rates during these times to capitalize on market opportunities.

💡Breaker Block

A breaker block in the video refers to a specific price pattern or event that confirms the buying up of stops and indicates a potential entry point for a trade. The speaker uses this term to illustrate how to identify high-probability entry points based on market structure and price action.

💡Risk to Reward

Risk to reward is a fundamental concept in trading that compares the potential loss on a trade to the potential gain. The video script mentions setting stops at the liquidity rate low and looking for a favorable risk to reward ratio, such as 2.5 to 1, to ensure that the trade is worth taking.

Highlights

Understanding ICT Concepts changes the perception of market dynamics and the role of algorithms in manipulating traders.

The importance of identifying the correct liquidity to trade from and target in order to avoid being stopped out.

The presenter's personal experience with ICT, highlighting the difficulty of seeing liquidity and the risk of becoming part of it.

Introduction of a strategy involving the use of displacement and liquidity to achieve high probability trading setups.

The concept of being 'one with the algorithm' to understand and predict market movements effectively.

Explanation of how to incorporate liquidity into trading strategies through the use of displacement.

The method to identify displacement in a mechanical way to determine if stops are being bought up or if the market will continue.

The significance of daily chart analysis in establishing a bullish or bearish bias for trading.

Identifying buy and sell side liquidity on the one-hour chart after establishing a bullish bias from the daily chart.

The timing aspect of trading liquidity, focusing on specific time frames for high available equity.

Confirmation techniques for trading setups using candlestick patterns and time frame analysis.

The importance of patience and holding bias, even when faced with market movements that may seem counterintuitive.

Entering trades based on the breaker block pattern within a dealing range for optimal risk-to-reward.

Real-life application of the strategy with an example trade taken by the presenter, demonstrating its practicality.

The strategy's ability to consistently provide high hit rates with a good risk-to-reward ratio over time.

Encouragement for viewers to test the strategy on their charts and share their experiences.

The presenter's commitment to community growth and responsiveness to feedback and questions on social media.

Final emphasis on the importance of seeing liquidity to avoid becoming part of it in trading.

Transcripts

so you've discovered ICT Concepts and

you will never be able to unsee the

markets the way that you see them now

you've learned how the algorithm

manipulates Traders and turns them into

liquidity but you still can't even

figure out which liquidity you need to

trade from and which liquidity you need

to Target and you keep getting stopped

out trying to trade these Concepts that

if you don't understand them are going

to hurt you more than help you and I

totally get it whenever I first traded

ICT I almost gave up because I just got

to the point where I could not see the

liquidity and you guys know that if you

can't see the liquidity then you will

become the liquidity so in this video

I'm not only going to show you which

liquidity you should be using to trade

and which you should Target but I'm

going to show you the exact entry model

that I used in order to get funded with

over three hundred thousand dollars

we're going to go over each key element

to make sure you're picking the highest

probability liquidity pools and then the

exact entry models all with chart

examples so make sure to pay attention

to every part because this strategy only

works if you follow it to a T and do

exactly as I say so enough of the Chit

Chat let's go ahead and get into it in

this video we're going to go over from

start to finish how you can identify the

correct liquidity to trade from and the

correct liquidity to Target and then not

only that we're going to go over how to

select liquidity but we're going to also

go over the exact entry models that I

use to trade liquidity rates but before

we go over this you have to understand

what a liquidity sweep is and why we're

looking for them so the goal of being a

successful ICT Trader is to be one with

the algorithm if the algorithm is

seeking out stops to enter the market so

should you and no trade setup should

ever ever neglect liquidity so how do we

properly incorporate liquidity into our

trading and the answer for that is very

very simple displacement if you have

traded ICT for any amount of time you're

going to understand that displacement

key to all high probability setups

because again if we are trying to be one

with the algorithm or one with the

market makers and we say we have a

consolidation and let's say we're

looking for buys that we're going to

look for sell stops we're going to look

for our liquidity down below now if

price pushes Down Under This level the

idea and the reason that we would look

to buy these stops is if price was

bullish so if price is bullish and the

massive forces at play in the market are

buying what do you want to see out of

this range you want to see a

displacement a big push in order for you

to confirm that the algorithm or the

market makers are buying up these stops

what is a trick that I use to identify

displacement in a very mechanical way

because a lot of people have trouble

with displacement because one man's idea

of displacement is different than the

next now I want you to pay very close

attention because I'm going to share

with you guys the most simple easy way

to determine if stops are being bought

up or if the market is going to continue

so pay very close attention let's look

at this range down here on the NASDAQ so

the first thing you want to do before

you even look for any kind of liquidity

is look on the daily chart we are

looking at the daily chart here and we

have a bullish impulse range and I want

you to look left and look at all this

massive structure just look at the most

recent displacement so if we can look at

this and identify that price has dug

down into a discount right here and into

a daily fair value Gap then we're going

to be long biased so when we're talking

about displacement if we get a big push

above a high we expect the market to

continue that's the expectation of the

market so if we have a displacement up

in the daily we're going to be looking

at the market in the sense that we want

to be buying discount and targeting

external equipment now of course we

don't have to get into a trade and

Target the entire range but that gives

us our bias so now we've identified that

and we have identified that the daily is

displacing up we want to look at the one

hour and identify recent areas of

liquidity after we establish our bullish

bias in the daily we want to identify

areas of liquidity so right here we have

buy side liquidity and down here below

we have these relatively equal lows so

we have sell side liquidity so if we're

bullish and we want to be one with the

algorithm because every successful

Trader has to be one with the algorithm

you have to think like a market maker if

we're bullish we want to look to buy

sell side liquid that gives us our bias

of where to look now how are we going to

confirm that because of course every

single low doesn't always get bought up

whenever we are bullish a lot of times

lows get rated and even then nothing

happens so how do we know which ones to

trade from and the answer to that is

very very simple and that is time

because timing is everything with

trading liquidity now again going back

to thinking like the algorithm if the

algorithm's seeking out liquidity do you

think it's going to seek it out when

there is a lot of liquidity available or

when there isn't liquidity available the

answer is very obvious it's going to

seek it out when the highest amounts of

liquidity are available so we're looking

at the NASDAQ here when we are trading

any anything that we trade in the New

York session like indices we are looking

for stop rates between 8 30 and 10 a.m

New York time now for those of you who

do not trade indices if you're trading

London look for stop rates between 2 am

and 5 AM anything else don't even pay

attention to these are just simply times

of high available Equity AKA kill zones

whenever we're looking at pools of

liquidity we want to identify them on

the 15 minute or the one hour we're

currently on the one hour chart so we're

looking for Southside liquidity because

we are bullish we've built our bullish

based off the daily structure so we know

what liquidity we're looking at very

simple strategy on what liquidity to

Target if we fail to displace Beyond

structure so if we look right here we

failed to displace Beyond this structure

we're going to look for the structure

that sent us there in this example we

have a low right here so this low failed

to displace above this area so it didn't

do its job it's targeted right very

simple so it's kind of like the opposite

of the daily chart when we looked at the

daily chart you know this this load did

its job it displaced with its high so

we're not going to look for this low

we're going to look for continuation I

want you to test this on your charts

anytime that we have a wick like this

and we fail to displace you target the

structure that sent you there or anytime

we fail to meet liquidity so for example

here we came down made a low we failed

to even break this low much less

displace above it so then that gives us

a bearish drawn liquidity you can do

this in the daily chart to find drawn

liquidity it's very very simple and it's

going to change the way you trade if you

go back and test this and see how

consistent it is we've identified that

we're looking for sell side liquidity we

want to make sure that we wait for a

certain candle formation fast forward in

time a little bit look at that we failed

to displace under this level right the

market pushed down failed to displace

under the Equal lows and we started

push-ups so now this is where you elong

right you you would Target this level in

this level right wrong now why is it

wrong I want you to pay attention to

what we just talked about the time this

is not during the New York Killzone so

we're not paying attention to this that

does not mean that we're not still

bullish but it does mean we are not

going to trade off this we're going to

wait for the market to open and come

into our Kill Zone and now this is where

a lot of people get scared you see that

big push and you want to shift bearish

don't do that hold your bias and wait

for the confirmation let's go ahead and

get into our entry model confirmations

whenever we are you know confirming are

these stops being bought up how you know

how do we confirm that we are failing to

displace you can use just the time frame

you're on to confirm our draw on

liquidity once we get this pattern right

here we have one candle right here that

has a higher low than the liquidity rate

candle the liquidity rate candle and

then the next candle not breaking this

candle's low that in itself is

confirming that these stops are being

bought up now of course you want to add

time and our daily bias into the picture

to get a high probability setup but but

this is your confirmation on the higher

time frame so once we have that we are

then going to look for an entry based

off of this if we have good enough risk

to reward and we'll look at this example

you can see that you know you always

want to set your stops at the liquidity

rate low if possible and we have a high

there now one to one is not the best

risk to reward at this point instead of

trying to use the candle formation

confirmation so at this time we're going

to want to hop into the lower time

frames and get our entry there now again

we see this happened during the times

that I mentioned it happened right after

the 9 30 open so we see that we failed

to displace under that liquidity and we

are now looking to buy whenever we see a

move like this we're going to be

confirming the lower time frames with a

market structure shift so we see a high

put in here sends us down under the low

and then we come up and take that high

with displacement right that's going to

give us this dealing range right here

and we're going to look for a breaker

block within that range so I want to

share with you guys that I did actually

take this trade most of the time you're

learning stuff on YouTube these guys are

total and they're not even

trading they're just looking back and

finding Perfect examples and I know that

can be really frustrating to you guys

because people always have the the

biggest best trade but I want to make

sure that you guys know that I'm

actually trading these These are actual

setups that me and the team caught and

you are going to catch setups like this

after you learn this strategy so you see

the time April 6th 10 47 a.m right this

candle was a 10 45 candle we entered

didn't get a perfect entry I didn't get

to enter right on the breaker that's

okay it took me a second to see the

setup I thought we were gonna maybe

travel lower but I realized it was a

breaker so then I alerted the team to

get into the trade and we target out

that buy side liquidity above now why

did we target so high why don't we

target here or here and again it goes

back to displacement this High failed to

displace under a low we failed to

displace here which wasn't our entry

pattern so we didn't take a trade but

still that high is to be targeted this

High also failed to displace under that

low we could have looked at this high as

well now that would be the more low

hanging fruit and I was very confident

that we're going to go up higher because

the daily bias was bullish our

displacement strategy is telling us that

this structure is our drawn liquidity so

you can see that it's not as complicated

as you may think now the way that I like

to enter these is Target the weak

structure on the one hour the 15 minute

that you've that failed to cause a

displacement and you're going to enter

on the breaker block that gave you the

raid down into it now this is on the

five minute time frame you don't

necessarily need to go the one minute to

get good wrist reward you see this is

2.5 to 1. 2.5 to 1 over time with a high

hit rate will make you a rich man let's

see how this trade played out um again

it's hindsight now but you guys saw that

we did take the trade 2.5 to 1 in less

than an hour and this is a very simple

strategy you can use this over and over

and over and over again I use it nearly

every single trade that I take now if

I'm not using a for the exact entry

model I'm going to use the same theory

for our daily bias oh again if we fail

to displace under structure see how we

failed this place there what does that

give us a draw in liquidity the most

recent high so anytime you see this

three candle pattern when you're trying

to form daily bias or or if you're

trying to form daily bias maybe look for

this to happen that gives you a drawn

liquidity so if we look here what

happened here we failed to close under

this low so then we look for the highs

now we need to go back and leave in the

comments let me know how this works for

you I'm very interested to see how many

of you guys are able to implement this

because it's so simple it's it's much

better than trying to watch ICT all day

and never get an explanation on what

liquidity you should use and this this

strategy completely revolutionized the

way that I trade I mean it it was one of

the biggest breaking points for me as an

ICT Trader and what the biggest takeaway

that you can have from this video is to

think as if you were the algorithm seek

out stops understand what structure is

not causing displacements and what

structure is because again if we are

market makers and we're buying up here

we're going to cause a big push out now

if you're just looking at the market

like this and it barely makes a big push

up that is likely a stop raid ignore my

awful drawing it's trading View's fault

but you guys get the picture if this

video helped you understand what

liquidity to look for please let me know

in the comments it makes me really

motivated to see when people are doing

great I know that a lot of you guys are

killing it using the stuff that I've

taught you in these videos and it makes

me really happy to see that so please

let me know in the comments also like

And subscribe I hate to be that guy but

it helps the channel grow a ton and the

content I'm going to be putting out for

you guys is going to continue evolving

we're going to continue growing together

as a community and if you have any

questions you guys know that I'm very

responsive on Twitter in the comments

any social media I will answer it just

might take me a day or two and most

importantly remember if you cannot see

the liquidity then you are the liquidity