Time & Price Algorithmic Trading: Draw On Liquidity

Summary

In this lecture on the higher time frame trading protocol, the focus is on 'draw liquidity' and its role in market analysis. The process begins by identifying bullish order flow, followed by drawing liquidity, and analyzing how price reacts to these levels. The lecturer emphasizes the importance of identifying key reference points like previous week highs and lows, while incorporating time cycles and price cycles. Key concepts such as market maker buy models, price retracements, and volume imbalances are explained, offering insights into how traders can anticipate price movements and execute trades effectively. The lecture concludes by reinforcing the simplicity and practicality of this approach in trading.

Takeaways

• 📈 Order flow is the first priority in higher timeframe analysis because it determines whether the market is in a bullish or bearish environment.
• 🎯 Draw on liquidity refers to the price level the market is algorithmically moving toward, such as previous highs, lows, or fixed price levels.
• 🔁 In bullish order flow, expansions upward followed by retracements form repeating buy-side market maker models.
• 📍 A draw on liquidity must be present to validate continuation — without it, a move could be a reversal rather than a retracement.
• 🧭 Time-based liquidity targets include previous daily, weekly, and multi-week highs and lows, which the market consistently seeks.
• 📊 Price-based liquidity includes fixed ranges (e.g., 20,000–21,000) and midpoints that function as magnets for price movement.
• 🧩 PD arrays (like imbalances, order blocks, breakers) help map the stepping stones price will interact with before reaching the next liquidity level.
• ⚖️ Equilibrium acts as a balance point; price often seeks or reacts to it within ranges before continuing toward liquidity targets.
• 📉 Invalidation levels determine when the market's directional bias changes, signaling a shift in order flow and potential model reversal.
• 🚀 The market won’t move in a straight line toward liquidity—it cycles through expansion and retracement phases, creating multiple tradable models.
• 🧠 Multi-timeframe analysis strengthens narrative and helps distinguish between retracement and true reversal, offering clearer directional context.

Q & A

What is the first step in the higher time frame protocol?

The first step is to identify order flow, which helps determine the overall market direction, whether bullish or bearish, and guides the rest of the trading process.

Why is identifying order flow important in trading?

Identifying order flow is crucial because it tells you the general direction of the market. If order flow is bullish, for example, it helps in targeting higher prices as price expands, retraces, and then expands again.

How do you distinguish between a retracement and a reversal in the market?

You distinguish between a retracement and a reversal by observing whether the drawn liquidity has been reached. If liquidity hasn’t been reached, a retracement is more likely, but if liquidity has been reached, the probability of a reversal increases.

What is drawn liquidity and why is it important?

Drawn liquidity refers to key price levels, such as the previous week’s high or low, that are targets for price movements. It is important because it helps determine where price is likely to go and is used to frame trades based on the market’s order flow.

What is the role of a Point of Interest (POI) in the higher time frame protocol?

A Point of Interest (POI) is where price is expected to retrace before expanding again. The POI is essential in confirming the continuation of bullish or bearish order flow, but this concept is discussed in the next video.

How does one identify drawn liquidity using the previous week's range?

By looking at the previous week's high and low on the chart, you can define drawn liquidity. If the market is bullish, the target is the previous week's high, and if bearish, the target is the previous week’s low.

What are PD arrays, and how are they used in this strategy?

PD arrays are price-displacement arrays, which include things like order blocks and imbalances. These are used as potential points where price may retrace before continuing towards drawn liquidity. Arrays that form on the left side of the curve can act as support or resistance.

What are time cycles and how do they relate to drawn liquidity?

Time cycles are defined by the high and low of previous periods, such as the previous week or day. They help determine drawn liquidity levels, as price tends to respect these levels during its movements.

What is the significance of using fixed price ranges like 20,000 or 21,000 in this strategy?

Using fixed price ranges, like 20,000 or 21,000, helps to define key liquidity levels within a defined range. These price levels provide potential areas where price may react, and traders can use them to anticipate price expansion or retracement.

How does price action confirm the continuation of a bullish order flow?

Price action confirms a bullish order flow by displacing above previous resistance levels, such as imbalances or previous week highs, and retracing into support areas (like order blocks or imbalances), which then allows for further expansion towards drawn liquidity.