Showing posts with label External Range Liquidity. Show all posts
Showing posts with label External Range Liquidity. Show all posts

Monday, March 18, 2024

ICT Liquidity Runs | Michael J. Huddleston

As price action traders, we're looking specifically for reference points where there is a high probability of liquidity resting in the marketplace. Related to ICT concepts, liquidity relates to buy orders and sell orders. It's as simple as that.

Below old lows, the market will seek liquidity for the sell side or the sell stops, taking 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  truest and 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 is moving from an old high, we know that there is going to be liquidity resting above that old high. If the market is moving from an old low, we know there is going to be a rest liquidity below those lows. It is just that simple. 
 
LRLR = Low Resistance Liquidity Run
HRLR = High Resistance Liquidity Run

As a trader you want to be trading when there is LRLR conditions because during LRLR conditions price will cleanly deliver to your target a lot quicker than HRLR conditions. If you're in a trade a lot longer than expected it is most likely because you are in HRLR conditions.

A LRLR will have clean highs or lows and for this example it means there's a large pool of liquidity resting above the Clean Highs/EQHs. This is where retail traders are placing their stops and smart money will look to take out these stops.


Another way you can look at LRLR is if there are EQH/Ls & multiple highs/lows lined up in a row (Trendline Liquidity). This is what #TheStrat traders call Pivot Machine Gun (PMG). It's called PMG because the algorithm spools higher like a machine gun triggering stop losses to get taken out.
 


So in this example, after SSL got raided, you're looking to go long inside of the FVG within the BPR to target the EQH. This is LRLR conditions.
 


When you have EQH/L, any PD arrays in-between where price is currently at to the EQH/L will have a low probability of holding. Smart money will target the largest liquidity pool which will be the EQH/EQL so price will either go through the PD array, or consolidate at the PD array then continue in the direction of the EQH/L. Now we will look at an example of HRLR. Typically with HRLR conditions there will be a stop hunt (fu) on buyside or sellside liquidity. Once there's a stop hunt it will leave a Point of Interest (POI) / PD array which is typically an orderblock or fair value gap.
 


Because there's a stop hunt (fu) which leaves a POI, the POI will act as resistance which will make it a HRLR condition. So in this example, instead of going long at the lows to target the high formed from (fu), I'd rather wait for price to reject off the POI to look for shorts.
 

1st pic below is M15 timeframe, 2nd pic below is H1 timeframe. You will see a M15 fu raid on BSL which leaves an H1 bearish orderblock making it HRLR. After the fu raid price went lower and when it retraced back up it rejected the orderblock then started to take out internal SSL.
 
 
 
HRLR conditions can also happen when indices ( $ES $NQ $YM ) is not in sync with each other or when it's not in moving inversely to $DXY (dollar). $GU & $EU are supposed to move inversely w/ $DXY as well so if they're moving together it is HRLR conditions.


Reference:
 

ICT Draw on Liquidity | Darya Filipenka

Liquidity is the lifeblood of the markets. Liquidity is what allows anyone to buy or sell for a profit or a loss. It is what creates opportunity in the markets. While liquidity may not hold much significance for a retail trader, it is of paramount importance to big players who must carefully consider it in order to execute positions successfully. In an non-liquid market there are few buyers and sellers, and trades may take longer to complete, and prices can be more volatile. To help you better understand what liquidity is, I have drawn some simple diagram. It illustrates why we refer to certain levels as 'liquidity'. The point is not that the models themselves are liquidity, but that when a certain price model appears, liquidity is attracted at key levels and price points.


So what is the use of liquidity for us traders? Good question. Liquidity helps us determine where the price is likely to go next. You can learn to trade only using liquidity levels, it's not difficult, but the risks and potential profits will not be so attractive. In order to get a high-quality trading idea, using the liquidity, you need to apply the market structure on the Higher Time Frames, order blocks, and Premium/Discount zones. This helps to understand what kind of liquidity will attract the price and where we should enter into the trade and where we should exit.

How to identify the Draw on Liquidity (DOL)? As a day trader, the DOL can be PWH/PWL (Previous Week High/Low), PDH/L (Previous Day High/Low), or session High/Low from Asia, London, or New York paired with EQH/EQL (Equal Highs/Lows) with a Low Resistance Liquidity Run (LRLR) condition. EQH/EQL (Equal Highs/Lows) are large pools of liquidity so institutions will always draw towards those levels to take out retail.

How do I find the next Draw on Liquidity? First thing, price is always either re-balancing or taking liquidity. Price is going from Premium/Discount array to P/D array. Hence, you must annotate your P/D zones to know If price re-balanced or will re-balance, you must also annotate your liquidity and P/D arrays. To find the next draw on liquidity, you can follow a displacement, use the reaction on a P/D array.

External range liquidity refers to the buy side liquidity above the range high and sell side liquidity below the range low in the current trading range. It Is associated with liquidity runs that seek to pair orders with pending order liquidity, which is in the form of a liquidity pool. External range liquidity runs can be low resistance or high resistance in nature. As a trader, you want your trades to be In low resistance conditions, meaning you don't want any resistance in your path of profitability. While Internal Range Liquidity is the liquidity inside the defined range (External Range Liquidity), This could be In form of any institutional reference that we can use as entry such as order blocks, fair value gaps, volume imbalance, and more.
 

Monday, January 9, 2023

External & Internal Range Liquidity | Auction Process & Institutional Order Flow

External Range Liquidity is the liquidity that will be resting on previous highs and lows (these highs and lows are also used to define the range), this could be in the form of stops or pending orders. While Internal Range Liquidity is the liquidity inside the defined range (External Range Liquidity). This could be in form of any institutional reference that we can use as entry such as order blocks, fair value gaps, volume imbalance, and more.

HERE

The first thing to do to be able to identify external range liquidity and internal range liquidity is to define the range you will be working within, using swing highs and lows to mark the beginning and end of the range. Choose the recent trading range relative to your specific time frame when defining your range.

External Range Liquidity can act as a draw on liquidity based on order flow, meaning if we have external range liquidity on the previous low and the institutional order flow is bearish, price will be attracted or pulled towards our external range.
 
 
There are only three things price can do:
1. Breakout from a Range and Trend.
2. Breakout from a Range and Reverse (False Breakout or Stop Hunt).
3. Trading Range between Highs and Lows of sessions, days, weeks, months, quarters, years.
HERE
 
Crude Oil ranges to break:
Inside Session, Inside Day, Inside Week, Inside Month, Inside Quarter, Inside Year.
 
The Marker Makers Cyclic and Fractal Price Auction Process is mirrored in Price Action:
Expansion
is when Price moves quickly from a level of Equilibrium (50% of range).
Retracement is when Price moves back inside the recently created Price Range.
Market Makers look to reprice levels of imbalances that were not efficiently traded.
Reversal is when Price moves the opposite direction that current direction has taken it.
Market Makers have ran a level of Stops and a significant move should unfold in the new direction.
Liquidity Pools are just above an old Price High and just below an old Price Low.
Consolidation is when Price moves inside a clear trading range and shows no willingness to move
significantly higher or lower. Expect a new Expansion near term.
 
See also: