[0:29]What is liquidity? Liquidity refers to the degree to which a market, asset or security, can be quickly bought or sold in the market without affecting the asset's price dramatically. When we look at price, it doesn't matter what time frame you're looking at, time is irrelevant for right now. The specifics about price action, as it relates to liquidity, we as price action traders, we're looking specifically for reference points where we can hone in on where there is a high probability of liquidity resting in the marketplace. Now, liquidity, as it relates to ICT concepts, it relates to buy orders and sell orders. It's as simple as that. When we had a swing in the marketplace, as we note here, and the market trades lower, our understanding is is there are someone that went short here. This position would be net positive or profitable, as the market moves lower. As the market turns around, if those same positions were still held, their open profits would be eroding, and at some point, at this point right here, they would be at a losing position. Our understanding is is if there's a short position, or traders that are bearish on the marketplace, if they have positioned a profitable trade here, and moved lower, their stop loss order would be resting right above this high or generally many times just right at that high. The market tends to find an interesting going back to where that large body of interest or what we call liquidity in the marketplace, it would be buy liquidity. As the market finds these lows down here, as the market rallies away, we are our understanding is that there's going to be buyers that have positions that are net positive or profitable as it trades higher. At some point, when the market starts to trade back down lower, back into the area in which the buy orders would have originated from, their open profits would be eroding until eventually, moving into this area here, they would be at a net loss position. So when we look at, when we look at price, the idea is we're not looking for specific patterns for the sake of patterns, we're looking at where existing orders would reside. So essentially, what you do is is you're targeting areas at which the market has already seen a willingness to go higher or lower, in this case, we see a swing high, and the market moves lower. We view that as a smart money trader or as a market maker perspective, we know that there's going to be buy stop or buy liquidity above that high. When we look at the lows, when the market moves away from these lows, we see that as sell liquidity. Identifying both of these positions on both sides of the marketplace, we're going to teach a concept called open float. While that's not going to be covered in this specific tutorial, or this month of training, it's important to understand that the beginning foundations to understanding liquidity, as it relates to buying and selling in the marketplace. Our first fundamental understanding is is that there's going to be liquidity above old highs and below old lows. When we understand that, we can see that they will eventually target these same levels, moving price just above a previous high, knocking out the liquidity that would be resting just above those highs in the form of buy stops. Below old lows, the market will seek liquidity for the sell side or the sell stops, taking his orders out. Understanding this premise, when we view price action, it removes all of the retail-minded perspective, but heavily leaning on indicator-based ideas. When we adopt these principles with study of price, it gives us the most truest purest view of how price is delivered. We have no confidence or direct relationship to our directional bias on price relative to anything except for price itself. If the market's moved from an old high, we know that there's going to be liquidity resting above that old high. If the market's moved from an old low, we know there's going to be resting liquidity below those lows, it's just that simple.
[5:40]Now, there's another concept when we understand liquidity. The market has a tendency to run out old highs and old lows. But it has a very difficult time to do that when the market has conditions like this. When the market moves higher, okay, generally we can see a move higher and then it moves lower here. Now, in the context of this entire move lower, there's a lot of peaks and troughs here, a lot of peaks and troughs. The idea is if this is an old high back here, for this high to be ran out, okay, or to seek the liquidity resting above that old high. If this is where the current market action is right now, or current price at market price, for it to get all the way up there, it has to encounter a lot of resistance in the form of old lows and old highs. So you have the old lows acting as standard resistance, then you have the old highs acting as buy stop liquidity. So even if the market's going to go up, if the market's going to seek the liquidity above this high, how do we know it's going to stop there? It could go another level higher for these buy stops, and it could reach for this level of buy stops, and then maybe this buy stop level here. In the direction, the run all these buy stops, it's got to go through a lot of resistance in the form of these old lows just to get back up to this old high. When the market presents these opportunities and again this is not specific to any time frame, it's universal. But when we see the market give this this very thick area of resistance, okay, there's a lot of price action that the market has to trade through to get back to an old high of significance. We view this as a high resistance liquidity run. The market's going to have a very hard time getting through all these previous lows and previous highs, just to run out the liquidity that would be resting above this old high. When we trade, we are not looking for these opportunities. While there are opportunities to trade with this in mind, in other later teachings, it's important to understand that this is the least probable trading condition to look for longs because you have so many levels of resistance and old highs to encounter before you get back to the old significant high. We understand that the market has been presenting lower lows and lower highs and somebody in this market is obviously would be being profitable. Those individuals with stops above this old high in the form of a fund, they're actually very highly defended because of this type of price action. So it's going to take a very uh, sharp economic market release, the data, uh, kind of like non-farm payroll or FOMC. That type of event will knock through all of these levels of resistance to run out that liquidity, but generally, without that type of influence or injection of volatility, these old highs generally are well defended.
[9:59]Obviously, uh there's going to be times when the market really provides us a opportunistic time to take action in the market and trade with price action and have very little resistance in our trades.
[11:20]And obviously, that comes by way of trading in low resistance liquidity runs. A low resistance liquidity run would be in the form of something similar to this. Now, these crude depictions, while they are rather elementary in the way that they're being shown here, the concept is very easy to see in price action as we'll look at when we get done looking at the actual crude diagrams I've shared here. If we see the market come off of an old high, okay, and it comes down rather quickly. If there is a very sharp or one-way type direction, very little uh retracements of any kind. When we see this, okay, once that market breaks below an old low, from that point at which it breaks the old low, until it gets through a short-term high, in other words, the market comes down, makes a low here, starts to trade off, comes down, makes a higher low. Once it starts running through, if we get a market breakthrough this short-term high, this run here begins its climb back up into the range that's created by this low being broken. So to be defined by this level here, all the way down to this high, once it's broken. This area of if of price action is deemed low resistance. Now, every time that a new short-term high is formed before this low is retraded to or retested as resistance, every time there's a new short-term high, what's going to form above that short-term high? It's going to have buy stop liquidity, so buy-side liquidity is going to be above these old highs. If we get a buy signal after a retracement, we know that there's going to be very little resistance for that move to go higher, running out the buy stops just above these short-term highs. As we get closer to coming out of into hitting this low that's been violated here, we now then we start encountering high resistance liquidity runs. So the probabilities fall off precipitously once we get back to the area at which the range is defined in terms of low resistance, then it becomes a high resistance liquidity run.
[14:35]Anything higher than uh this price point here, becomes a high resistance liquidity run.
[14:51]Much like everything else I've always taught, everything I teach one-sided, obviously is easily communicated by using the uh reverse of it or just turning it upside down. This is a sell side of the marketplace, low resistance liquidity run. Uh we have a consolidation in here, the market expands, goes into expansion. It breaks above a short-term high, so at the moment this short-term high is broken here, market structure is bullish, and then we go into a real quick run up. The market will create a high, start to break down and once the market starts trading below an old low, the market will have a very easy time trading back down into the point at which the short-term high was broken on the upside. So all this one-way direction price action, where all of it looks this one sided for buys only, very little retracements, this is the easiest time to trade in the marketplace right in here. It's defined by the short-term high that's broken on the upside here, that's where you would begin your point at which it's deemed a low resistance liquidity run. So you're focusing primarily on selling short. Every retracement is going to find very little resistance going lower to run out the previous low. There's going to be what resting below these lows? Sell stop liquidity. So the market goes lower, breaks below this short-term low here, expands, has a small little retracement, what's going to be forming below this short-term low? Bottom chasers, folks that want to be long, but we understand that the market has broken an old high here. It had real quick sudden price action, very little retracements, so we have very little resistance on the downside, getting back to that point at which market structure broke. So between this point here, and where the market breaks down this low here, this is the easiest area to trade in price action because you have very little resistance allowing price to just cut through all that. But you're waiting for a short-term low to form and every time a short-term low forms, there's going to be sell stop liquidity resting below those lows. Okay, so let's take a look at more examples of a high resistance liquidity run and a low resistance liquidity run. And what makes those uh two types of liquidity runs different. We have an old high back here, noted here, and the market starts to move lower, and we showed this example of price action here with this old high, violating this old high here, selling off these old lows being violated here. And the market starts to rally up, notice there was very little resistance in the marketplace where this high eventually traded lower, taking out the liquidity resting below these lows here. This run from this high, taking out these lows is referred to as a low resistance liquidity run. Because we have a longer-term high to the left of us, and the market has shown a willingness to take out a low, and then we came back above, cleared out a stop above the high. Retraced, had an unwillingness to go above this up candle here, so institutional order flow, as you'll learn more about throughout this entire mentorship, moves back to bearish and expands to the downside. Expands down to the downside to run out these stops below these lows. The market rallies up again, and fails to get above this swing high. This run higher is a high resistance liquidity run. The fact that it's going to have very difficult time getting above this high is because we've already priced in a longer-term high, an intermediate-term high, and this high is going to have a very hard time struggling to get through this high at all. It's going to have very difficult time getting through it, so this rally up if we were buying long here, we know that there's going to be a high probability that this is not going to be ran out, the high is going to be intact, it's going to be defended. And the higher high over here will be defended, so when price goes back up into this high, this actually becomes a low resistance liquidity run to see price come all the way back down and take out this low here. The fact that we keep this old high in place, and every low that forms has very little resistance as each time it moves through, it's like a hot knife through butter, very little resistance down. Every time a low is formed, price goes through those lows. This equal lows here, price trades through those, this short-term low here, price trades through it. So the the bias is bearish. So you want to be focusing primarily on a market rally to take out short-term lows, or immediate-term lows. The difference between that is every rally is going to be viewed as a high resistance liquidity run. It's going to have very difficult time getting above the previous highs. Sometimes it will happen, but generally you're going to find that it's going to have a very difficult time doing that. But because that's built into price action, having a high resistance liquidity run here, it turns into a low resistance liquidity run for you to you to see a move below the short-term lows. Every short-term low is an opportunity to seek liquidity, or the market to expand down after a retracement up to take out the stops that rest below the marketplace at every old low. Every single low that you see in price, once we identify where the market is, in terms of high resistance or low resistance liquidity, we can find old lows to the left, market respects it here, comes back, but then now we have a lot of liquidity resting below this low here and this low here, and the market runs right through it. Small little retracement, there's more liquidity below this low here, so it's going to expand down through it.
[21:21]The same thing is seen when the market finds a low in the market. The market creates a a small little consolidation, makes a long-term low, rallies up, retraces, moves into consolidation, rallies through again. So now we have a lot of price action here, so this old low is going to be well defended. The fact that we have a retracement going lower each time, every time the market retraces, that's going to be in the form of a high resistance liquidity run. It's going to find very stiff resistance with violating old lows. The old lows are going to be actually defended and you're going to see buying coming in the marketplace. Your focus is going to be primarily on the highs, every short-term high is going to have very easy runs through them. That forms a low resistance liquidity run. The resistance levels are going to be very weak. The support or lows are going to be very strong because the market's going to be capitalizing only on the buy side, just the reverse of what we saw over here on the sell side, everything's going to be supporting bearish prices. So every retracement higher sets up another price leg to go lower, aiming for the lows to be violated. We've changed the tide here and we made an old low, so every time the market retraces lower, that sets up new buying opportunities to take out the short-term highs or immediate-term highs above the marketplace. Because what's going to be resting above those highs? Buy stops. And you want to be buying low and selling to willing buyers above the current market action. And that's what the market makers do. So every time the market trades down, it's actually just a new low resistance liquidity run to to make a run above an old high and it makes it very easy to find trades this way. Market trades down, the small little retracement, this old high will be easily ran out, low resistance liquidity run. The market trades back and it has a retracement. Very little resistance to get back up to this old high, it runs cleanly through that. Another retracement here, the liquidity is going to be resting above this old high.
[23:45]And eventually the market trades through those lows as well. Okay, so there's many elements to the things I've taught in this month's teaching, looking for clean highs, where the levels are just too clean. Um when the market shows those types of levels, it's going to be very uh opportunistic for you to build the idea that there's going to be buy stops above that. So any little retracement sets the tone for another drive through that and the market continues to find ease of getting back through old highs. At some point, you're going to look at price action and it's going to be very crystal clear that the more price action there is around a specific level or a high or a low, that is indicating a level is being defended on an institutional price model. So you're going to see very easy trading when you trade away from that level.
