Boot Camp Day 10: Liquidity Pt. 2

Summary

This boot camp video delves into the concept of liquidity in trading, explaining its importance and how it affects market movements. The instructor discusses how banks and institutions utilize liquidity to fill orders and influence market direction. Traders often place buy and sell orders around trend highs and lows, creating liquidity that can be exploited by market movers. The video provides practical examples on various timeframes, emphasizing the prevalence of liquidity sweeps across different markets. Viewers are encouraged to identify these patterns as homework, highlighting the significance of understanding liquidity for successful trading.

Takeaways

• 📈 The script is a continuation of a trading boot camp, focusing on 'liquidity' and its importance in the market.
• 💡 Liquidity is crucial for order fulfillment and market movement, as it allows banks and institutions to execute their orders effectively.
• 🔄 Retail traders often place buy and sell orders at trend highs and lows, creating liquidity that can be utilized by larger market players.
• 📊 The concept of 'liquidity sweeps' is introduced, which occurs when a high or low is taken out, causing a significant market reaction.
• 📉 In an uptrend, taking out a high can lead to a sell-off, while in a downtrend, taking out a low can lead to a rally, as stop losses are triggered.
• 🤔 The difficulty of trading is highlighted, suggesting that success often comes from experience rather than the trading method itself.
• 📚 Understanding liquidity and its effects on the market is presented as a foundational skill for traders to grasp.
• 🌐 The script emphasizes that liquidity sweeps can be observed across all time frames, from daily to monthly.
• 🔍 The homework assigned is to identify five liquidity sweeps on three different time frames, encouraging hands-on practice to recognize these patterns.
• 🚀 The presenter expresses confidence in the effectiveness of understanding liquidity for successful trading, suggesting it's a universal market behavior.
• 💪 The importance of discipline and motivation in learning and applying trading concepts is underscored, as the boot camp progresses.

Q & A

What is the main topic of the video script?

The main topic of the video script is understanding and identifying liquidity in the financial markets and how it affects trading.

Why is liquidity important in trading?

Liquidity is important in trading because it's where orders get filled, and it's crucial for banks and institutions to move the market in a desired direction.

What does the speaker mean by 'liquidity part two'?

The speaker refers to 'liquidity part two' as a continuation of the discussion on liquidity, focusing on how to spot it in the market and its significance in trading.

What is the relationship between trends and liquidity?

Trends and liquidity are related because traders often place buy and sell orders around trend highs and lows, which creates liquidity that can be exploited by larger market players.

What is a 'stop loss order' in the context of the script?

A 'stop loss order' is a type of order placed by traders to exit a position at a specified price to limit potential losses, which contributes to market liquidity.

How do retail traders typically react to a new high in a trend?

Retail traders typically react to a new high in a trend by placing buy orders, often with pending orders called 'buy stops' just above the high, hoping the trend will continue.

What is the purpose of placing a 'buy stop' order above a high in an uptrend?

The purpose of placing a 'buy stop' order above a high in an uptrend is to enter a long position if the price continues to rise, following the trend.

Why might a trader place a sell stop order below a low in a downtrend?

A trader might place a sell stop order below a low in a downtrend to exit a long position or enter a short position if the price continues to fall, anticipating the trend will persist.

What does the speaker mean by 'sweep' in the context of liquidity?

In the context of liquidity, 'sweep' refers to the action of banks and institutions taking out stop orders, which creates a sudden price movement and provides an opportunity to fill their orders.

What is the speaker's homework assignment for the viewers?

The speaker's homework assignment is for viewers to open their charts and find five different liquidity sweeps on three different time frames to practice identifying these market movements.

How does the speaker suggest that viewers will benefit from understanding liquidity?

The speaker suggests that understanding liquidity will help viewers spot high-probability trading opportunities and make more informed trading decisions.

Outlines

00:00

📈 Understanding Liquidity and Market Dynamics

The speaker begins by introducing the topic of liquidity in trading, specifically on day 10 of a boot camp. They explain the importance of liquidity for order fulfillment and market movement, particularly how banks and institutions rely on it to execute large orders and influence market direction. The discussion highlights the concept of retail traders using trend analysis to place buy and sell orders, which inadvertently creates opportunities for larger players to exploit the market. The speaker emphasizes the difficulty of trading due to common retail strategies and suggests that success often comes from experience rather than the strategy itself.

05:01

🔍 Spotting Liquidity and Trading Opportunities

In this section, the speaker delves deeper into how to identify liquidity in the market by observing price movements around trend highs and lows. They discuss the behavior of retail traders who place stop-loss and buy-stop orders, which can be triggered en masse, creating liquidity for larger entities to take advantage of. The speaker illustrates how understanding these dynamics can help traders anticipate market reversals and catch significant price movements. Examples are provided on various time frames, emphasizing the universality of these patterns across different scales.

10:02

📊 Liquidity Sweeps and Market Structure Breaks

The speaker continues by explaining the concept of liquidity sweeps, which occur when price movements trigger a cascade of order executions, leading to a rapid change in market direction. They provide examples of how these sweeps can be identified on charts across different time frames, from daily to monthly. The importance of recognizing these patterns is stressed as a key to successful trading, as they can signal the beginning or end of significant market trends. The speaker assigns homework to the audience to practice identifying these liquidity sweeps on their own charts.

15:02

🚀 Embracing Liquidity for Trading Success

In the final paragraph, the speaker wraps up the discussion by emphasizing the significance of liquidity in trading and how understanding it can lead to success. They encourage the audience to practice spotting liquidity sweeps on various time frames and pairs, assuring them that these patterns are ubiquitous in the market. The speaker also reflects on the progress of the boot camp, appreciating the dedication of the audience and expressing a desire to see them continue learning and growing as traders.

Keywords

💡Liquidity

Liquidity in the context of the video refers to the amount of trading activity in the market that allows for the easy execution of orders without causing significant price movements. It is a crucial concept because it helps traders understand where the market's orders are being filled and how banks and institutions can influence market direction. The video emphasizes the importance of liquidity in spotting potential market movements and taking advantage of them.

💡Market Direction

Market Direction is the overall trend or path that the price of an asset is taking in the market. In the video, the speaker discusses how banks and institutions use liquidity to push the market in a desired direction, often to the downside, by taking advantage of stop losses and buy stops placed by retail traders.

💡Stop Loss Orders

Stop loss orders are a type of order used in trading to limit potential losses by automatically selling an asset when it reaches a certain price. In the video, the concept is used to illustrate how traders exit the market when their trades are no longer valid, thus contributing to market liquidity and providing opportunities for market makers to fill their orders.

💡Buy Stops

Buy stops are pending orders placed above the current market price, which get triggered when the price rises to that level. In the video, the speaker explains how buy stops contribute to liquidity by creating buying pressure when a certain price level is breached, which can be used by market participants to influence price movements.

💡Trend

A trend in trading refers to the general direction in which prices are moving. The video discusses how trends are characterized by higher highs and lows in an uptrend and lower highs and lows in a downtrend. Understanding trends is essential for identifying liquidity opportunities and potential market reversals.

💡Retail Traders

Retail traders are individual investors who trade for their own account, as opposed to institutional traders who trade on behalf of larger entities. The video script highlights how retail traders' behavior, such as placing stop loss and buy stop orders, contributes to market liquidity and can be exploited by more sophisticated market participants.

💡Liquidity Sweep

A liquidity sweep, as mentioned in the video, is a trading strategy that takes advantage of the market's liquidity by identifying and trading off significant price levels where stop losses and buy stops are clustered. The speaker provides examples of how these sweeps can be spotted on different time frames and how they can lead to significant market movements.

💡Order Block

An order block in the video refers to a price area where a high concentration of orders, such as stop losses and buy stops, are placed. When a significant price level is breached, it can trigger a cascade of orders within this block, leading to a rapid price movement and creating a liquidity sweep.

💡Time Frames

Time frames in trading refer to the intervals on a price chart, such as daily, hourly, or minute-based charts. The video emphasizes that liquidity sweeps and the associated trading opportunities can be identified across various time frames, from the monthly down to the minute level.

💡Homework

In the context of the video, 'homework' is a task assigned by the speaker for viewers to practice identifying liquidity sweeps on different time frames and trading pairs. This exercise is meant to reinforce the concepts discussed in the video and to help viewers develop the skill of spotting these opportunities in the market.

Highlights

Introduction to liquidity and its importance in the market on Day 10 of the boot camp.

Liquidity is where orders are filled and where banks move the market direction.

Market requires an exchange of orders going in opposite directions to fill large orders.

Retail traders often place buy stops above highs in an uptrend, expecting the trend to continue.

Stop loss orders are also placed above highs, which can lead to market exits if invalidated.

Highs being taken out can create liquidity for banks and institutions to change market direction.

In a downtrend, lows being taken out can trigger sell stops and continue the trend.

Market movements are not accidental; they are driven by the need to fill orders and create liquidity.

Liquidity sweeps can be identified on various time frames, from daily to monthly.

Examples of liquidity sweeps are shown on the S&P 500 chart on the daily time frame.

Liquidity sweeps are a common occurrence across all time frames.

Homework assignment: Identify five liquidity sweeps on three different time frames.

Liquidity sweeps are a key concept that, once understood, can significantly impact trading strategies.

The difficulty of grasping liquidity concepts is acknowledged, but its usefulness in trading is emphasized.

The speaker's personal trading success and the success of others are attributed to understanding liquidity.

The market's movement is inherently linked to the flow of orders and the creation of liquidity.

Encouragement for participants to stay disciplined and continue learning in the boot camp.

The speaker's commitment to teaching and the positive reception from the audience are highlighted.

Transcripts

yo what's good welcome to boot camp day

[ __ ]

10 I think right

yeah I think day 10.

um so you guys know that uh last day

that we talked about trading we were

talking about liquidity just kind of

what it is and why we would want to use

it in the market so this is liquidity

part two okay

um and this is just going to be how to

spot it in the market and where it lies

within the market and then finally right

I want to take it like one step at a

time so you guys can like have time to

process and like understand what's going

on

um and then after all that goes down

then

um we will be able to get into how we

can actually take trades off of it and

then if that doesn't make sense don't

worry because we will have way more time

to discuss strategy and actually

executing on trades once we start

learning more things okay so today we're

going to just talk about where it lies

and then pairing that with you know

why we want to know where it's at and

also understanding it and then from

there like it should be kind of

self-explanatory as to how to take the

trades but we'll still discuss that

um in two days so

right let's do a quick little overview

of what we talked about why we want to

use liquidity

um number one that's where orders are

going to be filled right

um that's where the banks are going to

be moving the market that's where

they're going to be able to fill their

orders and actually push Market in

whatever Direction they would like to

okay and then again how do they get

these orders to be filled they have to

have people exiting the market and then

they also have to have people going in

the opposite direction of them right

just like we said two days ago it's an

exchange if they need to fill millions

of orders they need millions of orders

to be going in the opposite direction so

that leads us into today's video talking

about where liquidity lies so where are

all those people going to be going in

the opposite direction of the banks and

institutions okay where and who is

stupid enough to do this where is it

happening when is it happening all that

good stuff okay so

let's just talk about

right Basics remember when we talked

about Trends how do Trends move

higher highs higher lows lower highs

lower lows so it's safe to assume

that Traders

like retail Traders will see oh hi

higher higher high higher low higher

high higher low they see that it's

trending right and they know that the

trend is continuing

when the high gets pushed above right

confirming that there's going to be a

higher high right so what most retail

Traders do oops

what most retail Traders will do

is they see oh higher high higher low oh

they see that the high gets pushed above

that either have buy stops which is

literally just pending orders right

above the high so

right the price point would be like

right above here and when that gets hit

boom order gets executed they get filled

okay and they're assuming that price is

going to continue in that Trend okay now

on the contrary there's also stop loss

orders right above these highs as well

right because there's there's people

that are trying to short this down move

which isn't necessarily smart right you

want to trade with the trend which is

what the people that are buying up here

are trying to do but there's also people

who are shorting within here right and

if we know right same same thought

process right when people are shorting

they know that their idea will be

invalidated if if price pushes Above

This high right so they would be exiting

the market if this price points get

price point gets hit okay hopefully

you're starting to understand and see

where I'm what I'm trying to get at with

this is that when this High gets gets

hit when this High gets pushed above

people are getting out of the market and

people are getting into the market which

is essentially creating liquidity for a

potential for the potential for these

Banks and institutions to fill their

orders to change Market Direction and

you're probably saying well tjr if if

price pushes above a high and people get

stopped out and then also people are

buying that means nobody won

exactly they literally liquidated all of

those people and they will they aren't

right because right when it pushes above

people buy right people are get buying

and then boom gets taken out there and

their stop loss is right under here

right the people that got stopped out

they get stopped out by a couple Pips

and then boom Market moves in their

favor

that's why trading is so difficult

because lots of people are trading like

these retail or like just these these

basic ways to trade and that's I mean

some people are successful with it but I

genuinely think that they're successful

because of their experience in the

market rather than the way that they're

actually trading

um and that's why I really like playing

off of liquidity

um and and understanding that so right

we know that there are going to be

stop losses above highs we also know

that there's going to be buy stops above

highs so that means boom when these

highs get taken out in an uptrend

right there's going to be people going

long there's also going to be stop

losses above there right so when that

happens right that gives the banks and

hedge in in these institutions the

opportunity to fill their orders and

then send Market in whatever Direction

they want which is usually to the

downside now let's talk about it in the

other direction right in a downtrend

it's the same thing just vice versa okay

when lows get taken out in a downtrend

people are going to have sell stops

right they're going to have sell limits

sell stops down here right because they

know when a low gets taken out odds are

the trend will continue okay

so right and we talked about during our

Trend session or a trend video Trends

don't last forever right so that's why

when we use liquidity we're able to

catch the top of a downtrend or the

bottom of an uptrend because we are

literally getting into the market

hold up

I got my friends talking outside so I

gotta mute them out but we are literally

getting into the market

um at the beginning of a trend and

that's why we're able to catch these big

moves okay

so when we see that happening okay we

take note of it okay so we know that

underneath lows there's going to be cell

soft and then again on the contrary the

people that are trying to catch a Buy on

this like mini little move up their stop

loss is going to be underneath the low

so right when that low gets taken out

okay in a downtrend people are getting

liquidated people are also going going

short taking cell positions here and

then that gives Market the opportunity

to fill orders within here Order block

we'll talk about that later right

right this whole thing would be

essentially an order block I don't want

to get you guys confused but right this

this move down here is what causes the

liquidation and then allows Market to

fill those orders okay so let's go into

the chart and actually show examples of

this now and it's very very easy

literally jumps off the page look

okay uptrend what's this High boom sweep

downtrend

okay we're not gonna get too analytical

with it and guys this happens on every

single time frame okay right uptrend

sweep of the highs collapse

okay this happens on every single time

frame every single time frame ready

let's go to the Daily let's go on the S

P there's great examples of this on the

s p 500.

what's this right here this is on the

daily time frame guys we have highs

right here boom push up takes out

liquidity big sell-off

what's this right here we have highs

right here boom Market pushes up big

sell-off let's do it so far so easy man

it's very it's very very easy and it's

like you're going to be able to see this

on every single time frame it so that's

that's also what your homework is going

to be

is literally just finding these

these situations where a high or low

a high or a low in whatever Trend it's

in gets taken out

and then price rallies look okay ready

wanna see wanna see something crazy

look at this low low

you're probably saying oh no no it's

just going down wait a second go to the

monthly

sweep

look what did he got taken out if we go

to the yearly time frame

that is a massive liquidity sweep right

what's Market probably going to do

probably going to reverse and that also

coincides with the with the US dollar

being extremely weak right now

it's it's it's actually amazing how

these markets move and how these markets

work ready and and again I don't want to

get too deep into strategy but

this doesn't only happen on on these

high time frames it happens on literally

every single time frame ever okay so if

we if we go on to like

find where Market opens or let's

actually do it on like uh

gu

let's find

um

let's find like

um

okay this is this is Asian session okay

I don't want to get too deep into this

because this is again we just want to

talk about liquidity and be able to spot

it within the market but as we can see

right we have a mini downtrend right we

break structure to the downside take out

these lows rally we break structure back

to the upside price pushes higher okay

like it like we could we could find this

type of [ __ ] on on the 15 minute

as well okay and in in when you guys get

good at it when you guys get good at

like spotting this it should be like

super super easy to see and understand

where this happens right it should just

jump off the page boom sweep fall

boom

sweep fall

let's try and find something to the

upside

and the way and the reason why I love

this is literally

boom

sweep rally

like when you guys start to see this

stuff like it it literally jumps off the

page sweep rally and that and then what

does it do to the upside

sweep fall it's how the market moves you

guys the market is unable to actually

move in the direction that it wants to

without taking out liquidity to fill the

orders okay this is why I love the way

that I trade because

it it literally makes sense you are not

playing off of a floor getting bounced

off of or you're or it's touching the

ceiling so it's going to go down no

we're actually understanding why the

market is moving and when it wants to

move in whatever Direction

like this is literally going to be your

homework I I don't really have much else

to say on this video besides open up

your chart and literally just go on okay

yeah sure we can we can literally just

call it right here

open up your chart this is going to be

your homework okay open up your chart go

on three different time frames and find

five different liquidity sweeps on three

different time frames okay that's all

you need to do okay do it on whatever

time frames you want daily four hour one

hour one minute five minute 15 minute

because you will see these happen time

in and time out bro like look

sweep push it's not accidental and it

and it's funny because like you could

you could say like oh

like you're just cherry picking like it

it's all over bro trust me when you guys

do your homework you will see that this

[ __ ] is everywhere

like it's very very apparent and it's

super super easy to see you can even put

it on the weekly bro

fall

what happened right here

what rap happened right here on the

monthly time frame

oh there's a monthly low sweep what

happened breaker structure the upside on

the weekly rally

it's not accidental and it happens on

every single [ __ ] time frame and

guess what guess where we're at right

now

on the monthly time frame add a big high

this candle is yet to close Okay this

candle is yet to close it has 28 more

days my guess

oh yeah

oh yeah we got some liquidity and the

and in just having some knowledge about

the US market and the US economy in

general

I wouldn't be surprised if we do whoop

just down into the [ __ ] pits Okay so

that being said now we know how to spot

liquidity we understand what it is and

then in two days we'll get into how we

can like take a trade okay I don't want

you good guys to be like I know

liquidity here I'm gonna take trades

because it's not just liquidity you need

to know a lot more than just liquidity

and break of structure to be able to to

be able to form an actual bias and be

able to take a a actual high probability

trade but this is going to get you guys

to the point where you guys can start

spotting this on the chart and there's a

reason why we introduce this concept

first because it's the hardest one to

grasp

and okay and it's the hardest one to

grasp but it's the most useful one to

understand okay so once you can

understand liquidity in the market it's

wraps bro it is literally wraps it is

raps okay so with that being said your

homework choose three different times

three different time frames five five

examples on three different time frames

okay choose whatever pair you want right

it can be gold g g j g u s p doesn't

matter you will find liquidity sweeps no

matter what no matter what I guarantee

you without a doubt in my mind and if

you can't you're doing something wrong

because this isn't even like a come back

to me and let me know if you can't it's

like you are literally doing something

wrong if you can't spot this because

this is how I make money this is how

thousands of other Traders make money

right this is what this is how I ICT

literally came up with this [ __ ] like it

it works and it is in the market and it

is how the market [ __ ] moves it's uh

like it is how the market moves and and

I don't care what you say it's it's

nothing else this is how orders flow

this is how the ship moves and you can

see it on the chart so that's your

homework all right quick little day

today all right get your homework done

if anything you know keep going a little

bit harder right make sure your

motivation is up we got a new week ahead

of us more things to learn more things

to strive for all right let's keep it up

and for the people that have stayed with

me this far right we're already past

week one so now it's really just the

disciplined ones staying in here I know

it's hard to keep up with a video every

single day but hopefully you guys have

been able to do it

um I appreciate you guys I got friends

out in the pool and here I am making a

YouTube video for you guys so hopefully

you guys can appreciate uh the time that

I'm putting in for you

um it really does mean a lot um I've

been seeing numbers go up and and I love

to see it

um I love to see you guys learning and I

love to see you guys posting on like

Tick Tock adding me on Tick Tock adding

me on Instagram love to see it makes me

very happy showing me that I'm making an

impact on your guys life so with that

being said I'll see you guys tomorrow

peace out