Core Month 04 04 Liquidity Pools - newsqlguru/ict-index GitHub Wiki

ICT Mentorship Core Content - Month 04 - Liquidity Pools

Key Terms

  • Liquidity Pool (LP)
  • Open Interest (OI)

Content

  • When to anticipate raids.

  • Liquidity is the "Open Interest" of buyers and sellers in the market and can be further defined by those entities at or near specific price levels.

  • Pools of Liquidity

  • Buyers (buy stops (Uninformed traders (retail)))

  • Sellers (selling above spot (Smart Money)) we are selling to buyers.

  • Market Price (Spot Price) (Reactive traders)

  • Buyers (buying below spot (Smart Money)) we are buying from sellers.

  • Sellers (sell stops (Uninformed traders (retail)))

  • This requires discipline.

  • SM sells at a premium and buys at a discount.

  • We are trading on pull backs.

  • If the market is bearish

  • We sell at old highs, selling to shorts that are underwater or to breakout traders that are going long.

  • We buy at old lows, we are buying from longs underwater or breakout traders that are going short.

  • Above old/highs lows are pools of liquidity.

  • We role play, we look at charts and say if I were short/long where would my protective stops be?

  • This gives us a good read on liquidity.

  • We trade on old high/lows and anticipate the market to trade into POIs in the opposite direction.

  • Trick is to know what the HTF direction, bias, is.

  • If bullish we wait for an old low to enter.

  • If bearish we wait for an old high to enter.

  • We target old POIs of opposite trend.

  • Run on Bullish Liquidity Pool

  • Definition

    • The low that is Under the current market price action will typically have tailed Sell stops under it on Long Traders. Or Sell Stops for Traders who wish to Trade a Breakout Lower in Price for a short Position.

  • Validation

    • When the low is Violated or Price moves below the recent Low, the sell stops become Market Orders to Sell At Market, typically paired with Smart Money Buyers.

  • Entry Techniques

    • When underlying is Bullish. Before Price trades Under the recent Low, place a Buy Limit Orders just below or at the recent low. You are buying the Sell Stops like a Bank Trader or any other "Smart Money " entity would.

  • Exit at old highs or other points of interest.

  • Defining Risk

    • The Low you are Buying Under, can see a swing of 10 to 20 pips in most cases. A 30 to 50 pip stop is ideal if your entry is under the Low and not above it, fearing a missed entry.

  • Run on Bearish Liquidity Pool

  • Definition

    • The high that is Under the current market price action will typically have tailed Buy stops under it on Short Traders. Or Buy limits for Traders who wish to Trade a Breakout Lower in Price for a Long Position.

  • Validation

    • When the high is Violated or Price moves above the recent high, the buy stops become Market Orders to buy At Market, typically paired with Smart Money Buyers.

  • Entry Techniques

    • When underlying is Bearish. Before Price trades Above the recent High, place a Sell Limit Order just above or at the recent high. You are Selling the Buy Stops like a Bank Trader or any other "Smart Money " entity would.

  • Defining Risk

    • The High you are Buying Above, can see a swing of 10 to 20 pips in most cases. A 30 to 50 pip stop is ideal if your entry is above the High and not above it, fearing a missed entry.

  • If price moves 30-50 pips above/below old high/lows the price is likely to continue in direction of the trend.

Notes

  • Find 10 occurrences in past price action and log them in your trade journal.
  • Extra credit if found on multiple time frames.