ICT Mentorship Core Content – Month 1: How Do Liquidity Runs Work?

TL;DR

A liquidity run occurs when price targets orders resting above old highs or below old lows. In ICT Mentorship Core Content Month 1, these areas are identified as buy-stop and sell-stop liquidity, while runs through many intervening highs and lows are classified as high resistance. Read on to distinguish high- and low-resistance conditions and understand which opportunities the lesson considers more favorable.

Transcript

what is liquidity liquidity refers to the degree to which a market or asset or security can be quickly bought or sold in the market without affecting the assets 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 ... Read More

Key Insights

• Liquidity is the ability to buy or sell an asset quickly without impacting its price significantly.
• Price action traders focus on reference points with high liquidity in the market.
• Liquidity runs occur when the market targets liquidity above old highs or below old lows.
• High resistance liquidity runs face significant resistance from old lows and highs.
• Low resistance liquidity runs occur in price expansions with minimal retracements.
• Market conditions like economic releases can break through high resistance liquidity runs.
• Old highs and lows act as indicators for potential liquidity resting points.
• Traders should focus on low resistance liquidity runs for easier trading opportunities.

Questions & Answers

Q: What is a liquidity run in ICT trading?

A liquidity run occurs when the market moves toward orders resting around an old high or old low. Price may move above a previous high to take buy stops or below a previous low to take sell stops.

Q: What does liquidity mean in trading?

Liquidity is the degree to which a market, asset, or security can be bought or sold quickly without dramatically affecting its price. In the ICT concepts discussed here, liquidity refers to buy orders and sell orders.

Q: Where does liquidity rest around old highs and old lows?

Buy-stop liquidity generally rests above an old high, where traders holding short positions may place stop-loss orders. Sell-stop liquidity rests below old lows associated with buyers whose profitable positions would deteriorate as price falls.

Q: How do traders identify potential liquidity targets?

Traders examine where the market previously showed a willingness to move higher or lower. Swing highs and swing lows become reference points because existing buy or sell orders are likely to reside around them.

Q: What is a high-resistance liquidity run?

A high-resistance liquidity run requires price to trade through a thick area containing many previous highs and lows before reaching its target. Those intervening levels create obstacles, making the run difficult and less probable.

Q: Why are long trades in high-resistance liquidity runs less favorable?

Price must overcome numerous old lows acting as resistance and old highs containing buy-stop liquidity. The lesson describes this as the least probable condition for looking for long trades because so many resistance levels stand between current price and the targeted old high.

Q: What is a low-resistance liquidity run?

A low-resistance liquidity run occurs during price expansion with minimal resistance or retracement. With fewer intervening barriers, price has an easier path toward liquidity above an old high or below an old low.

Q: Does the liquidity-run concept depend on a specific time frame?

No. The lesson states that the concept is universal and not specific to any time frame, so traders can examine liquidity reference points across different charts.

Summary & Key Takeaways

• Liquidity is crucial for traders as it allows them to enter and exit positions without significantly affecting asset prices. By understanding liquidity runs, traders can better predict market movements. High resistance liquidity runs face obstacles from previous highs and lows, making them less favorable for trades.

• Low resistance liquidity runs offer easier trading opportunities as they occur during price expansions with minimal resistance. Traders should identify these runs to capitalize on market movements with fewer barriers. The market often targets liquidity above old highs or below old lows, providing potential entry and exit points.

• Economic events can influence liquidity runs by breaking through high resistance levels. Traders should be aware of these events to adjust their strategies accordingly. Understanding the dynamics of liquidity runs helps traders align with institutional order flow and improve their trading outcomes.