This content introduces an advanced trading strategy focused on understanding and leveraging market liquidity, particularly around supply and demand zones, to avoid common pitfalls, increase win rates, and execute higher-probability trades.
Mind Map
Click to expand
Click to explore the full interactive mind map • Zoom, pan, and navigate
Liquidity forms in many areas in the
market and has a big bearing on whether
you're going to win or lose. One of the
areas liquidity forms is around supply
and demand zones. So, in this class, I'm
going to teach you an advanced liquidity
trading strategy to help you avoid
losses, improve your accuracy, get
higher win rates, and ultimately become
a better trader. If you're new to
liquidity, I'm going to explain it to
you now. If you're not new to liquidity,
use the chapters to skip ahead to the
start of the next chapter and we'll
start on the more advanced technique.
So, liquidity in a market refers to
orders. Orders generally in the form of
stop- losses and buy stops and sell
stops. There are two very common forms
of liquidity and two that we'll be using
in the more advanced method. These are
equal high, which is this one here, and
equal low liquidity, which simply refers
to support and resistance levels. and
then ascending and descending trend
lines. General retail education suggests
when you see a resistance level in a
market, you should look to sell that
resistance. Okay? So after the second
tap forms, anywhere from there on
becomes a good selling level. Now the
general idea there then is when you sell
your stop loss will go above the
resistance because the idea is the
market is likely to react from this
resistance level and trade down without
breaking above. So we know from this
there is going to be a lot of traders
with stop-loss orders above the equal
highs. So here we have stop- losses.
Now, as well as this, we have breakout
traders who will be looking for the
market to push up and break above a
resistance level and then use it on the
retest as a support to buy from. So, as
well as stop-loss orders being above the
high, we're going to have buy stop
orders, which are automatic buy orders.
Essentially, this creates more liquidity
and more orders above that level. Now,
if we think about what a stop-loss is in
the case of a sell trade, it is an order
to automatically buy back contracts for
more than you sold them for. Because a
short selling order, i.e. selling at
these levels, is simply where you sell
with an obligation to buy back later,
regardless of whether it's a higher or
lower price. So, stop losses in this
instance are actually buy orders. We
have a large amount of buy orders above
this level. Now in two formats in stop-
losses and in buy stops. Now if we have
a massive amount of buy orders above
this level. So that creates a lot of
buyside liquidity. What do we have as a
potential opportunity here? Well, let's
say you are an institutional trader, a
bank, a firm, or simply a large player
with massive amounts of money,
multi-million dollars, and you want to
place large orders. Now, if you think
about where we are in this point
underneath this resistance, if you want
to sell millions of dollars worth of a
contract, you will be left with a pretty
bad price. What will actually happen is
you'll sell some and your movement could
drive the market down because the amount
of money you're working with is so
large. So then your second execution may
be here, you may get a third execution
here, and so on. you're going to have a
bad average price because the selling
you're doing is actually driving the
market down, meaning you'll never be
able to get your full order on at this
good level. So, if you're expecting the
market to move lower and you want to
sell into that, what you can actually do
is wait for this liquidity to be hit and
this is going to open up lots of buy
orders. So, if there's not enough
selling pressure here, there may be
buying pressure enough to push us over
the high into this area where lots of
buying orders are going to be triggered.
When all of these buying orders in the
form of buy stops and selling stop
losses are triggered in this region,
there's going to be a massive influx all
at the same time of buying taking place.
And if you are a massive seller, you
have now a lot of liquidity to take on
the other side of the trade. If there
are now thousands of buy orders being
executed at the same time, you can
execute a massive amount of monies worth
of sell orders. And that leaves us with
this format which is what we call a
liquidity sweep or a false breakout. The
market pushes above and stops out anyone
who sold the resistance and it also
triggers in anyone who wanted to buy the
break retest and then the large player
can take the sell on the other side of
all of these buys which will drive the
market down. So it creates a scenario
where you end up losing before the
market moves in your favor. Now equal
lows work in exactly the same way. We
have buying taking place upon a support
floor. We have lots of stop losses
underneath. These stop- losses are
automatic sell orders. Basically, if
you've bought contracts on that
resistance, so basically, if you've
bought contracts on the support floor
around here, your stop loss will be set
to automatically sell those contracts
back for a loss if the market gets down
here so that you don't take a massive
loss. So, that creates lots of sell
liquidity. Okay. Now, we also have sell
stop orders, automatic orders that will
trigger sellers into trades if the
support breaks because they will
anticipate further downside movement.
So, we now have lots of sell liquidity.
If you are a massive institutional
buyer, the market getting into this
region will trigger loads of liquidity
for you to take the other side of. So,
then your large buys can be executed
easier from down there and the market
will make its run to the upside. So, as
you can see, buying from support and
selling from resistance, what should be
a good way to trade actually has a large
flaw, and that's the fact that
institutional participants who actually
have the power to drive markets are not
executing at these levels and are more
likely to be executing above and below.
So, selling from equal highs and buying
from equal lows is generally never going
to be a good idea. Now, let's talk about
trend lines. These work in very much the
same way. The idea with trend lines is
after the first two taps of a trend line
have been created, any further taps from
there should be good for buying. So we
will have traders who are looking to buy
another retest of the trend line. Now
what do we have here? Well, again we get
this liquidity problem with lots of
buying taking place here. We have lots
of stop- losses underneath that area. We
also have traders who are looking for
break retest trades. So they will be
looking more so for the trend line to
break, pull back, retest and then sell
lower. So as well as having lots of
stop- losses here from the buyers, we
also have lots of sell stops here for
the breakout traders which creates a
large pool of liquidity again. So what
we'll generally see happening in the
market is instead of a clean test or
instead of a clean break retest, we will
often times come through the trend line,
sweep all of this liquidity and then
move higher, which ends up stopping out
the traders on the buy side and stopping
out the traders on the sell side. And
again, it happens because of all the
liquidity that larger players can take
the other side of. In a descending trend
line, it's the same. Any sellers looking
to sell a retest of a trend line here or
any breakout traders looking to buy upon
the break will have considerable number
of orders and liquidity in this area. So
if the market is able to get into this
area, we then often times see the market
just come back down like this creating a
false break and again stopping out the
buyers and the sellers. So that is the
basic liquidity that you need to
understand. Now we're going to move on
to the more advanced approach of these
inducements and the liquidity around
supply and demand. So while the concepts
of liquidity structure, supply and
demand imbalances all go together in the
form of price action or what some people
call smart money trading, we still need
to be aware of liquidity around areas of
supply and demand. So in this instance,
we're going to be looking at a supply
zone, which is a zone that we would look
to sell from once the market returns to
that level. Now, in this hypothetical
example, what we want to make sure we
are doing is considering factors of
liquidity like equal highs, equal lows,
and trend liquidity when we're looking
at our supply zones. So, if we were to
come into a supply zone and formulate
this kind of price action where we
create this equal high area, this double
top area, we realistically would not
want to sell from here. And the reason
is because although we are reacting from
the supply zone, we still have this
factor of liquidity and we still may be
looking at what we can call an
inducement where we could be drawn into
the market or lured into a sell before
the market takes out those highs. So
let's say we sold here and the market so
let's say we sold here and we were
expecting the market to continue running
down. The risk that we run here is that
we actually get a push up to take out
the equal highs that have been formed.
And the thing is this is quite a common
thing to occur. So when we create equal
highs like this or what we could see as
a double top or resistance inside of a
supply zone, it doesn't mean that we're
going to get that immediate drive away.
And what will commonly happen is we'll
actually drive up and take those highs
out before making the sell move. Which
means if you were selling beneath with a
stop above those highs, you would be
stopped out. Whereas realistically it
could be a movement like this that takes
place. Now, there's another way that
things can go slightly wrong here, and
that is if we have a couple of different
zones to work with, which will happen
quite often when you're looking at
supply and demand. So, we see above
here, there is an imbalance into a
supply zone. Now, if we go ahead and
trust this double top or resistance
that's formed here, even if, for
example, we reacted from it another time
and we started to see some serious
weakness kicking in, we still have the
liquidity problem. We still have this
area above which has a high likelihood
of being taken out. And as we've said,
sometimes it's going to come up and do
this. But what can also happen when we
create liquidity like this is the market
may extend through into the higher
supply. So, not only do we have to worry
about what's going on inside of the
existing supply, we also need to make
sure that we understand the larger
context and if there's any other areas
the market may reach to in order to
create the large meaningful move. So,
how exactly do we combat this then? How
do we make sure we're not getting
liquidated first of all inside of the
supply we're looking at and second of
all inside of even the larger context
where there could be other zones that
the market will be drawn to. Well,
there's an entry model that we can use
to get around this problem. I call it
standard confirmation. It's nothing new.
It's just a structural shift that we can
identify inside of this area or inside
of this area to validate our trades
better and have a higher probability of
winning. So, the standard confirmation
is a market that is going from higher
highs and higher lows such as this
movement up here, i.e. an uptrend very
much in the way that we're creating
higher highs and higher lows here and
then shifts down into a lower low where
we then look to sell from the lower
high. So our selling idea would kick in
here. Now what a standard confirmation
shows us is a clear change in control
from buying into selling in a market.
And it's this point here, this break
into a lower low which validates a
change in the trend. Then when we pull
back, we can quite safely sell on any
retracement to bring the market lower.
Now, if we take a look at what we've
seen in this example with the equal
highs, we actually don't have that here
because we haven't had a clear shift
from buying into selling. All we've done
is come up and create a level of
liquidity and then we've started some
movements down inside of the range, but
we don't have the clear change in
control ahead of us. We don't see that,
right? which means which means it's
likely before the execution is made that
we will see a push up and then we'll see
that change in control where the market
shifts into the lows like so. Now if the
market had come into this zone and
instead of creating equal highs had done
this well then this would have swept
liquidity over the swing high and showed
a meaningful change in the trend here
that we could have used to get into a
trade upon the pullback around here. So
our trade could look like this and it
would be very high probability because
what we've actually done is align the
smaller trend here. So this reversal
that's taking place inside of this area
with the larger trend which as we can
see is of course bearish. So we've
pretty much used the larger bearish
picture and then we've gone into the low
time frame structure and found a small
bearish picture here to execute into.
Right? So, at this point, we have high
and low time frame validation and
agreement, which allows us to take a
high probability trade. But when we're
looking at a market with equal highs,
we're not seeing that. We're actually
seeing a magnet price area that the
market is likely to be drawn towards.
And we're not seeing the clear control
shift yet. So, a movement like this
would be more ideal to then provide us
with the pullback sell opportunity
because that would validate a clear
change in trend and it would also mean
the liquidity is taken out. So if we
look at this with the other example of
where we may have multiple supply zones,
the reason this becomes so useful is
because if we created this equal high
liquidity here, rather than just having
to guess into a cell when we get up
here, we can actually wait for the
market to make its movement and confirm
that change in the trend. Now, often
times you're going to see something like
this taking place where this initially
looked like a really good place to sell
and it did create some form of small
downward move. But now, because of your
understanding of liquidity, you would
have avoided selling because you know
that we're under a high probability
point of liquidity that the market is
likely to be drawn into. Now, if instead
of then just selling once liquidity has
been taken, you wait for the standard
confirmation that we've just discussed,
you may see sometimes the market
completely fails to react from the
existing supply and instead moves on
towards another supply like this one
here. At that point, you can employ the
standard confirmation. And when you see
that change in the trend, that's going
to be your validating factor that allows
you to sell. in which case you would be
able to get a trade like this. Now,
because you've also waited for
confirmation of this reversal, it will
help you to avoid taking a loss here or
taking a loss here by just by just
blindly selling either beneath or even
above the equal highs. So this
confirmation pattern here, which is what
we use here to execute a trade like
this, is going to save you from a lot of
losses, and it's also going to help you
to validate the perfect zone to buy or
sell from and also lock in entries from
the highest probability points. So let's
go take a look at this in a real market.
Okay, so we're looking at Euro Swiss
Frank. We're on the 5minut time frame.
This concept works across all time
frames because it's supply and demand.
What we've got here is a market that has
just started moving to the upside. We've
seen a retest of this demand zone and
the market's now pushed up into this new
high. Now, we can begin explaining this
concept by simply looking at what's
already occurred. We had this drive to
the upside. If we wanted to continue
buying, there's actually already been
multiple areas of demand that we could
have potentially looked at for our
buying opportunities. There are really
three demand zones inside of this range.
There's this one here, this one here,
and then this low at the extreme. This
has an efficient range previous to it,
meaning there's no more imbalance. So,
this would be the final zone. Now, if we
think about what we've said, we are
basically looking to choose the right
demand zone and avoid getting
liquidated. So, what we would do here is
not buy the first zone. We didn't get
any confirmation from this point and
there is still imbalance beneath. As you
can see, the market then went on to
liquidate that low.
We would also not have bought the second
zone because as we see when the market
came into this level there was no
confirmation provided and there is still
again imbalance below meaning there is
possibility for the market to come into
this zone. Now you can see after hitting
this zone we've actually seen that shift
in the trend. So if we mark up the trend
we have the high the low lower high
lower low high lower low. That is our
trending move so far. Which means this
high just here where I have the BOS
marked is where the structure would need
to break in order to validate a change
in the trend. Now we see after creating
this price action, we've had our
confirmation. We've had our break into a
new high, which means we can now start
looking for buying opportunities by
simply using demand to then place our
buy limit. Now, that is of course entry
number one. That is the bigger setup and
we'd expect the market to pull back
before leading off into new highs. Okay.
But what we're going to do now is look
at a kind of opportunity inside of an
opportunity. We're going to isolate the
price action to this existing move here.
If we break this down to a lower time
frame, we're seeing pretty much the same
thing again. We've seen a bearish market
shifting into new highs, which creates a
bullish market. And now we have to work
out where to buy from. So we have in
this range a demand zone just here
indecision before a large push away. And
we have this demand zone down here which
is again indecision before a large push
away. Okay. So I'm going to clear these
ones off for now just to keep things
simple and focused on the existing price
action. To note we have a imbalance into
this area of demand and we also have
imbalance into the area of demand above
as well. So how would we pick which of
these zones to buy from? Well, due to
that inducement theory we just
discussed, we would number one want to
see if we get confirmation inside of
these areas. If we get a confirmation in
here, then we may potentially be able to
lead through into new buys. However, we
still have got liquidity imbalance
beneath which would lead us into the
lower zone. So, by looking at this
immediately, we would consider the most
probable outcome is going to be that the
market sweeps this level. The reason
this is important is because if you
start placing buy limits here with your
stop loss underneath the zone, you're
opening your yourself up to the
inducement theory and you're opening
yourself up to being stopped out on a
trade that is in theory correct. You've
got the market direction right. You know
buying is the right move, but you're
buying in a place where you can easily
lose before the market follows through
with its opportunity. So what we would
want to see would be confirmations
inside of one of these zones with a
clear focus as our primary zone on this
lower area which is going to be the kind
of zone beneath inducement. Okay. So
scaling the market forward we see we get
a push down into the first zone. What we
would realistically want to see from
here then would have been a break above
this high. So if we'd come into there
and we'd started to push higher we could
potentially trust that zone. we'd say,
okay, maybe it's not inducement because
we are pushing back at the highs and
creating a bullish shift in this smaller
trend. And the smaller trend for
reference here is going to be this is
our high. This is our low. This is our
lower high. This is our lower low. So,
if the market had broken up, that would
have created what we need to see for a
buying opportunity. However, as you can
see, the market didn't do that. It did
what it usually does, and it pushed
through to fill the imbalance and trade
towards this lower zone. Now, if we want
to be safe that this market isn't just
going to sink all the way down lower, we
can use the entry model that we just
previously discussed to make sure we are
taking a confirmed trade. So, if we
allow this market to scale forward a
little bit more, you can see what we've
actually done here up to this point is
now start to make some changes in the
trend. We had this high. We came down.
We created new lows. We've hit this
demand. And then inside of some of the
refined price action, so 5m minute price
action, we've broke a structure point
just here. The market's pulled back and
pushed higher once again. Now this has
pushed us into what we call an efficient
range. There is no imbalance around
here. So we can happily look to buy this
market given that we've seen a break of
structure there on the lower time frames
and we've also seen the market take out
these highs. Now, ideally, we would want
to see a closure above this level for
the most high confidence trade, but in
this instance, we have everything we
really need to see. We've seen a demand
zone retest, break of the internal
structure, and we've also seen the
market show willingness to go higher
here with no supply zone to cap price.
So if there was a clear imbalance supply
here and we'd wicked into it, we could
say, okay, that is probably not going to
be the trade we want to take simply
because there's possibility for this to
then reverse on us because maybe supply
is going to maintain strength and push
us lower. But because we don't have that
and we've pushed into what we call an
efficient range, which is basically an
area where there is no imbalance
anywhere at all in this range now, we've
essentially opened doors to moving
higher because there's no point of
resistance that should cap price. So, we
can look at the next obvious demand. I
mean, this one here, we do have this
little wick that pushes out of it. But
what do we still have? This is very
important to me. We still have a clear
imbalance. Okay? And an imbalance like
this is very likely to be filled before
we start moving into new highs. So, with
this demand zone still having imbalance,
I'd be happy to use this for my buying
opportunity. And we look beneath. There
is no imbalance down here. There is no
area of demand down here. This again is
an efficient range. So this here is the
last inefficiency or the last imbalance
left inside of this price move. So our
trade could go here with a buy limit.
Stop could go under the zone and then
our target could go up towards
the new highs that we want to target for
this trade. Let's just push it towards
this supply zone here. We can of course
extend this out into larger swing
trades. So we'll actually leave it like
that. Yeah. Right. So let's break this
down real quick then. Number one, the
first thing we did was on these higher
time frame perspective, we identified
demand zone here. We didn't buy that
because there was no confirmation. We
identified a demand zone here. We also
didn't buy this one again because there
was no confirmation given. And then the
extreme demand, which is basically the
last demand zone that exists. As you can
see, there's no more demand zones before
this down to around this level. I've
actually accounted for just the smaller
candle above as well, but we didn't have
to do that. That's just because I like
to make sure I've got the full range
covered. We see that this was retested
and then following the retest, this push
up here created a breaking structure
which validates buys are likely to come
into the market. Then we went down and
took an isolated look at some lower time
frame price action. We can do this
completely separately. This could be two
trades because realistically with the
retest we've just had here, we could
have just placed a buy limit, right? But
I'm trying to show you this across kind
of multiple uh time frames or bigger
picture and smaller picture view. So
again, we had the same push. We had a
push which broke us into new highs. That
creates a bullish leg of movement here.
We want to buy from this range. We have
one two demand zones to choose from. We
do not get confirmation from the first
one and we're understanding there is
imbalance still left which could lead
the market into the next one. And then
when the market had reached into the
next one, we looked at the break of
structure, the push into an efficient
range again. And now we can confidently
choose this demand zone as the one to
buy from. And we've avoided a loss by
not buying here. We've played it safe by
waiting for the confirmation. And now
we're getting into basically the safest
possible trade. Okay, now we get a pullback,
pullback,
fill the demand zone, and then we get a
drive to the upside. And this market is
taking its time, but we've now pretty
much created a new bullish trend, right?
We saw a drive up. We've pulled back
down. We found footing around here. Had
we taken the profits at that supply
zone, we'd be out already for around a
three-hour trade. But given it the time
it needed, it's actually taken a bit
longer, but still follows through with
that movement of taking us into new
highs and providing an opportunity there
for a good trade. So that is the concept
of using that entry model to avoid the
inducement theory and make sure you
don't get stopped out of trades that can
be easily won. These are the results I
got from trading these concepts last
year and here are some wins from the
past week from my students so you know
to listen to me. This is a free course.
There's a link in the description to
this. It's going to show you how to
build systems, simplify trading, improve
your trades, and ultimately find
success. So, if you want to do that,
100% free. I think you'll enjoy it and
you know that I can provide you some
value because it's working for myself
and many other people as well. If you
don't want to do that, watch this video
next. Thank you for watching and I'll
Click on any text or timestamp to jump to that moment in the video
Share:
Most transcripts ready in under 5 seconds
One-Click Copy125+ LanguagesSearch ContentJump to Timestamps
Paste YouTube URL
Enter any YouTube video link to get the full transcript
Transcript Extraction Form
Most transcripts ready in under 5 seconds
Get Our Chrome Extension
Get transcripts instantly without leaving YouTube. Install our Chrome extension for one-click access to any video's transcript directly on the watch page.
