DISCLAIMER

Everything here are my notes from my trading blog. I am not a financial advisor. This is not financial advice. The content is provided for
informational purposes only. To make the best decision that meets your needs please do your own research. All investments carry some
form of risk. Nothing is guaranteed. Please do not invest money you can not afford to lose.
LIQUIDITY
What you need to know about Liquidity?

Liquidity: In technical terms Liquidity refers to the degree which market can be quickly
bought or sold without affecting the asset’s price.
Liquidity will be above old lows & highs, that’s where the “Smart Money” will be targeting –
knocking out the liquidity that was resting below these old lows, then seek liquidity above
old highs.
Simple example of price running the Buy-Side Liquidity
before heading lower.

Price expanded to the higher to take out buy stops, why? Because they (the
Informed Money), will want to sell at a higher price, take the Liquidity and cover
their long positions that they opened to run the price higher.
So, they aim at the Liquidity Pool (in this example BSLQ), they open long
positions to push the price higher into the BS Liquidity Pool, then use that
Liquidity to cover Long positions, and open Short positions at a higher price.
High resistance Liquidity

When we see market making higher highs & higher lows after already running the sell-
side liquidity, we can’t reasonably expect for price to drop all the way down below the
main low to take those stops out. There will be a lot of resistance like:
Bullish orderblocks (unless all of them are already very clearly mitigated and it’s a
“Trendline Phantom in the making), then doesn’t matter how much liquidity there is
below these main lows.
It’s a “high resistance liquidity run”, so in other words, the more time price spent around
that area actually making clear, one-sided moves, running sell-side liquidity, etc., the
more unlikely that price will drop to the main old low despite the level of liquidity resting
there.
Low resistance Liquidity

What retail sees as a “double bottom” area as strong support, what we see is all
the sell stops resting below (retail stop losses) – that’s our target and a magnet
where the price will be drawn to.

All the double, triple tops & bottoms, consolidations that are slowly going lower
or higher – that’s our target, that’s what we want to see. We’re not going to trade
away from these types of lows/highs, we’re going to trade directly into it.

Low resistance liquidity run is when aggressive acceleration happens leaving

liquidity void – that’s when everything that builds up to fill it is considered as low
resistance until price reaches the opposing array’s, so if a big drop happened, and
price starts building longs to fill it – it’s a low resistance run until price reaches
first bearish array like a bearish breaker, orderblock, and so on.
Run on Liquidity before retracing

When we know what the Higher TF orderflow is we wait for retracements

to ride the direction towards the Higher TF draw on Liquidity. It‘s
important to pay attention not only where the price pulls back but also
what it does before pulling back, so there‘re two scenarios:

1. Price will run Liquidity, give a break of structure and then pull back
2. Or after a strong expansion price will not run any Liquidity, and just
slowly start to form (in this case) higher highs, higher lows

So, when price runs Liquidity before retracing – usually it will pull back
deeper + the retracement will take longer AND when price does not run
Liquidity before retracing, that‘s when it‘s more likely that the pull back
won‘t last long, price will reach the first strong opposing level, and
attack the Higher TF target + the low that price left before pulling back.
BAIT AND SLAM

Whenever you see price not showing any directional one-sided moves, when the
momentum is low and price is either forming double, triple bottoms or price
forms a low then a small higher high & higher low close to it, then another one –
it’s like the markets are laying cheese below it – that’s what we target, that’s
what we focus on while retail traders try to trade away from it!
It’s a smart idea to build a totally separate folder just for Liquidity.
Do your analysis, explain to yourself what you think happened there save &
collect screenshots like that, it will help you to understand where the price is
drawn to, which areas act like “magnet”.
What to do when you have Liquidity on both sides, how to
know which side the market is going to choose?

When that’s the case, we focus on the underlying higher time-frame bias. Very
important rule to remember is that higher time-frames are like a “parent” figure
to the lower ones, meaning that if the 1H orderflow is bullish but there’s a 5min
consolidation that is building buy-side liquidity above and sell-side liquidity below
there’s a big chance that both sides will get swept, however, the overall direction
will stay bullish.

To sum up, if we have a clear Daily target that is higher, the 1H orderflow is
bullish, and 5min time-frame is stuck in a range (example on the right) – price
will sweep both sides but keep on going higher until the Daily target is reached
and or 1H bullish orderflow & structure is broken.
Where do we look for liquidity despite, clean lows, equal
lows, consolidations, etc.?

- Highs & Lows of Asia Session: 08:00 PM to 00:00 AM NY time

- Highs & Lows of London Session: 02:00 AM to 05:00 AM NY time
- Highs & Lows of NY Session: 07:00 AM to 10:00 AM NY time
- Intra-day Highs & Lows before Equity Opening: 09:30 AM NY time
Price needs to sweep Liquidity before every strong move
that’s directional & momentum driven.

Before every one-sided, strong move the “Informed Money” will grab the liquidity
that’s resting above the highs or below the lows (where retail traders place their
stop losses) to be able to open large positions.
We use this to our advantage by letting price run those Liquidity Pools into one of
the levels like a bearish Orderblock (example on the right).
Notice how aggressively price moves away from that area, that’s the clearest &
most obvious sign that the “Smart Money” is involved – price has to run the stops
and quickly move away from that area.
IMPORTANT: when price runs a liquidity pool we want to see a strong expansion to
the opposite direction right away, if price is not in a rush to leave the liquidity
pool that’s the first sign that price is NOT ready to go. Informed money will hold
the price there till there’s enough liquidity swept to take off.
LIQUIDITY MATRIX

To find price exits firstly we must understand the Liquidity Matrix (define the price
range before the setup forms).
What’s the dealing range high & the dealing range low? – this is how we define a
PREMIUM Side of the range and the DISCOUNT side of the range.

If the Market is in the Premium – we expect a Sell Program to occur, we want to

find the counter levels, opposing Premium/Discount Array’s (PDA’s) to cover our
position, and vice versa when the market is in the Discount – we expect a Buy
Program to occur, we want to find counter levels, opposing PDA’s to cover our
position.

Main levels we use as exits: Liquidity, FVG, Equilibrium of the range, BISI/SIBI
midpoint (CE), opposing breakers, orderblocks.
Internal Liquidity & External Liquidity

In simple terms – everything that’s happening inside the current dealing range
is “Internal Liquidity”, and everything that’s happening outside the current
dealing range is “External Liquidity”.
Imagine this – you have a dealing range, you bought in the Discount area, price
starts expanding higher, reaches Premium side of the range, you take partials
when price trades into a Premium FVG, and then you see price completely
breakout above the main (highest) premium level – that’s where price enters
the External Liquidity area (example on the right).
Market Maker Trap - Trendline Phantom

When the price is making higher highs & higher lows, and you can
connect all of them using a “Trendline” which in the retail world
should act as “Support” that’s when you have to instantly think
about all the Liquidity that is resting below it as the retail traders
are going long and placing their stop losses below that “Support”,
so Liquidity Pool builds up very quickly below that trendline - the
informed money will want to attack. Uninformed money provides
liquidity for the market makers.

So, two scenarios will happen from there – if it’s a let’s say
5/15min trendline but the 1H, 4H orderflow is bullish, the market
makers will drag the price lower, sweep all the retail stops, and
aggressively push higher. Another scenario – as the retail crowd
have no understanding about the Premium/Discount Liquidity
Matrix, retail traders will keep on buying in the Premium area, and
they’re not aware that price reached a strong Premium Array,
level like a bearish –OB, and then from the price is just going to
collapse on them and reverse completely.
Institutional Order Flow

When we’re looking at the institutional order flow, you have to think like a market
maker – where is the maximum level of Liquidity in relationship with where the
markets traded from and where it’s at right now.

Scenario on the right: market created this huge imbalance by going down really fast,
then they filled it by coming back + reached and rejected the bearish orderblock.
So from there where’s the biggest amount of liquidity resting?

Right below the equal lows.

Institutional Levels (Big Figures)

Institutional levels & big figures are another draw on liquidity. Usually we line it up
with a few other confluence factors like Premium/Discount arrays, Fibonacci
extension levels, external liquidity, and so on.

The levels you need to pay attention to are the big figures that end with: 0 / 2 / 6 / 8.
Price will always gravitate towards these levels. Few totally different examples
using these numbers: 1.00; 1.0200; 0.9600; 2.800.
When you see a big figure like let’s say 1.200 – if price is trending up/down towards it,
draw a 4 x 10 pip boxes up/down using the drawing tools, then line it up with all the
other confluence factors - these are your exit points.
Price in most cases won’t go more than 40 pips above/below the big figure without
retracing back into the newly created range.