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what is liquidity liquidity refers to
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the degree to which a market or asset or
00:00:34
security can be quickly bought or sold
00:00:36
in the market without affecting the
00:00:37
assets price
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dramatically
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when we look at price
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it doesn't matter what time frame you're
00:00:45
looking at
00:00:46
time
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is irrelevant for right now
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the
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specifics about price action
00:00:53
as it relates to liquidity
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we as price action traders we're looking
00:00:57
specifically for reference points where
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we can hone in on where there is a high
00:01:03
probability of liquidity resting in the
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marketplace now liquidity
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as it relates to ict concepts it relates
00:01:12
to buy orders and sell orders
00:01:15
it's as simple as that
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when we have a swing in the marketplace
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as we note here
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and the market trades lower
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our understanding is there is someone
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that went short here
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this position would be net positive or
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profitable
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as the market moves lower
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as the market turns around if those same
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positions were still held
00:01:41
their open profits would be eroding and
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at some point at this point right here
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they would be at a losing position
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our understanding is if there's a short
00:01:52
position or traders that are bearish on
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the marketplace if they have positioned
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a profitable trade here
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and moved lower
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their stop loss order would be resting
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right above this high
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or generally many times just rate at
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that high
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the market tends to find an interest in
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going back to where that
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large
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body of interest
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or what we call liquidity in the
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marketplace
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it would be by
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liquidities
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as the market finds these lows down here
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as the market rallies away we are our
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understanding is that there's going to
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be buyers that have positions that are
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net positive or profitable
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as it trades higher
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at some point when the market starts to
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trade back down lower
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back into the area in which the
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buy orders would have
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originated from
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their open profits would be eroding
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until eventually
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moving into this area here
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it would be at a net loss position
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so when we look at when we look at price
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the idea is
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we're not looking for
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specific patterns for the sake of
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patterns we're looking at where
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existing orders will reside
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so
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essentially what you do is you're
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targeting areas at which the market has
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already seen a willingness to go higher
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or lower in this case we see a
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swing high and the market moves lower
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we view that
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as a smart money trader or as a market
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maker perspective we know that there's
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going to be buy stop or buy liquidity
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above that high
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when we look at the lows when the market
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moves away from these lows
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we see that as cell liquidity
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identifying both of these positions on
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both sides of the marketplace we're
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going to teach a concept called open
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float
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while that's not going to be covered in
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this specific tutorial or this month of
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training
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it's important to understand that the
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beginning foundations to understanding
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liquidity as it relates to
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buying and selling in the marketplace
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our first fundamental understanding is
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is that there's going to be liquidity
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above old highs and below old lows
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when we understand that we can see that
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they will eventually
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target these same levels
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moving price just above the previous
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high
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knocking out the liquidity that would be
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resting just above those highs in the
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form of buy stops
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the low old lows the market will seek
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liquidity for the sell side or the cell
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stops
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taking those orders out
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understanding this premise when we view
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price action
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it removes all of the retail minded
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perspective but heavily leaning on
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indicator based ideas
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when we adopt these principles with
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study of price it gives us the most
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truest
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purest view
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of how price is
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we have no
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confidence or
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direct relationship to our directional
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bias on price relative to anything
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except for price itself
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if the market's moving from an old high
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we know that there's going to be
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liquidity resting above that old high if
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the market's moved from an old low we
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know there's going to be resting
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liquidity below those lows it's just
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that simple
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now there's another concept when we
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understand liquidity
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the market has a tendency to run out old
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highs and old lows
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but it has a very difficult time to do
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that when the market has conditions like
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this
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when the market moves higher
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okay generally we can see a move higher
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and then it moves lower here now in the
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context of this entire move lower
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there's a lot of peaks and troughs here
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a lot of peaks and troughs
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the idea is if this is an old high back
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here
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for this high to be ran out okay or to
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seek the liquidity resting above that
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old high
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if this is where the current market
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action is right now or current price at
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market price
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for it to get all the way up there it
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has to encounter a lot of resistance in
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the form of old lows
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and old highs
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so you have
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the old lows acting as standard
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resistance
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then you have
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the old highs
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acting as
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buy stop liquidity so even if the
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market's going to go up
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if the market's going to seek the
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liquidity above this high
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how do we know it's going to stop there
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it could go another level higher for
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these buy stops
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and it could reach for this level of buy
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stops and then maybe this buy stop level
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here
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in
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the direction to run all these buy stops
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it's got to go through a lot of
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resistance in the form of these old lows
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just to get back up to this old high
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when the market presents these
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opportunities and again this is not
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specific to any time frame it's
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universal
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but when we see the market give this
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this very
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thick
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area of resistance okay it's a lot of
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price action that the market has to
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trade through to get back to an old high
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of significance
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we view this as a high resistance
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liquidity run
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the market's going to have a very hard
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time getting through all these previous
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lows and previous highs just to run out
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the liquidity that will be resting above
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this old high
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when we trade
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we are not looking for these
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opportunities
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while there are opportunities to trade
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with this in mind
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in other later teachings it's important
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to understand that this is the least
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probable
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trading condition to look for longs
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because you have so many levels of
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resistance and old
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highs to encounter before you get back
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to the old significant high
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we understand that the market has been
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presenting lower lows and lower highs
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and
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somebody in this market is obviously
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would be
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being profitable
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those individuals with stops above this
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old high in the form of a fund they're
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actually very highly defended because of
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this type of price action so it's going
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to take a very
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sharp
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economic
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market release the data kind of like
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non-farm payroll or fomc that type of
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event will knock through all of these
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levels of resistance to run out that
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liquidity but generally without that
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type of influence or injection of
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volatility
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these old highs generally are well
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defended
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obviously the opposite can be said when
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we see the market make a
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low of some kind it could be a take a
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long time really to form this
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but the old low would obviously have
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sell stops below it or sell liquidity
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and as the market makes higher highs and
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higher lows if we're seeing price action
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right here we can't reasonably expect
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the market to just drop straight down
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and make a run on the sell stops below
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this low without encountering first all
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of these
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higher lows
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and higher highs as the market went
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higher
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so to get through each one of these
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highs
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okay there's going to be a lot of
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resistance to just run down out
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the stops that would be resting below
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this low
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again just like we just mentioned with
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the high resistance liquidity run
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for
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old highs the same is true here for high
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resistance liquidity runs on an old low
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it's going to be very difficult for
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price to reach down through all of this
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price action and
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the more time it's spent in this area
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again the more unlikely it is to make a
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market move all the way down to this old
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low
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despite the fact that there may be
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really high levels of liquidity resting
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below that whole low without the
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evidence of a significant market driver
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coming into play with like an fomc
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interest rate announcement or non-farm
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payroll
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or something that would be completely
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unexpected in the marketplace black swan
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event something like that that's
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generally the only type of thing you see
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that will cut through this type of price
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action to get to the sell side of the
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liquidity here
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so for shorts we avoid these types of
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occurrences
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there are opportunities that we'll learn
00:10:44
with trading with this profile or this
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market condition
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for high resistance liquidity runs but
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for now we want to understand that this
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is the element of price action that we
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want to trade very less
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frequent in
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now obviously
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there's going to be times when the
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market really provides us
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an opportunistic time to take action in
00:11:13
the market and trade with price action
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and have
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very little resistance in our trades and
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obviously that comes by way of trading
00:11:21
in low resistance liquidity runs
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a low resistance liquidity run would be
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in the form of something similar to this
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now the east
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crude depictions while they are rather
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elementary in the way that they're being
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shown here the concept is very easy to
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see in price action as we'll look at
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when we get done looking at the actual
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crude diagrams i've shared here
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if we see the market come off the old
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high okay and it comes down rather
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quickly
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if there is
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a very sharp or
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one-way type direction very little
00:11:58
retracements of any kind when we see
00:12:00
this okay once that market breaks below
00:12:05
an old low
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from that point at which it breaks the
00:12:09
old low
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until
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it gets
00:12:12
through
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a short term high in other words the
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market comes down makes a low here
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starts to trade off comes down makes a
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higher low
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once it starts running through if we get
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a market break through
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this short-term high
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this run here begins its climb back up
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into the range that's created by this
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low being broken so it's being defined
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by this
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level here all the way down
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to this high
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once it's broken
00:12:44
this area of price action is deemed
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low resistance
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now every time that a new short-term
00:12:54
high is formed
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before
00:12:57
this low is retreated to or retested as
00:13:00
resistance every time there's a new
00:13:02
short-term high
00:13:04
what's going to form above that short
00:13:05
term high
00:13:07
it's going to have by
00:13:09
stop liquidity so buy side liquidity is
00:13:12
going to be above these old highs if we
00:13:14
get a buy signal
00:13:16
after a retracement
00:13:18
we know that there's going to be very
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little resistance
00:13:21
for that move to go higher running out
00:13:24
the buy stops just above
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these short-term highs as we get closer
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to coming up into hitting this load
00:13:31
that's been violated here
00:13:34
then we start encountering
00:13:36
high resistance liquidity runs
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so the probabilities fall off
00:13:40
precipitously once we get back to the
00:13:42
area which the range
00:13:45
is defined in terms of low resistance
00:13:48
then it becomes a high resistance
00:13:50
liquidity run
00:13:52
to make any higher highs or run on
00:13:54
higher highs it becomes a lot more
00:13:56
resistance to do that because we move
00:13:58
back into an area where the market has
00:14:00
moved in a range
00:14:01
this
00:14:03
expansion
00:14:04
okay
00:14:06
that's the easiest part of trading when
00:14:07
we can trade inside that range so every
00:14:10
time we create another short term high
00:14:12
in here if we get a buy signal
00:14:14
that buy signal will have very little
00:14:17
resistance to get through the old high
00:14:19
that it retraced from
00:14:21
and you continuously look for those
00:14:23
until you fill in
00:14:25
that break on this old low
00:14:28
once it gets back to this old low over
00:14:30
here the market goes into what is
00:14:32
referred to as a high resistance
00:14:33
liquidity run anything higher than
00:14:36
this price point here
00:14:38
becomes a high resistance liquidity run
00:14:50
much like everything else i've always
00:14:52
taught everything i teach one-sided
00:14:54
obviously is easily communicated by
00:14:56
using the
00:14:57
reverse of it or just turning it upside
00:14:59
down
00:15:00
this is a
00:15:01
sell side of the marketplace low
00:15:04
resistance liquidity run
00:15:06
we have a consolidation in here the
00:15:08
market expands goes into expansion
00:15:11
it breaks above a short-term high so at
00:15:14
the moment the short-term high is broken
00:15:15
here market structure is bullish and
00:15:17
then we go into a real quick run-up the
00:15:20
market will create a high
00:15:21
start to break down and once the market
00:15:23
starts trading below an old low
00:15:26
the market will have a
00:15:28
very easy time trading back down into
00:15:31
the point which the short-term high was
00:15:33
broken on the upside so all this one-way
00:15:36
direction price action where all of it
00:15:39
looks this one-sided for buys only very
00:15:41
little retracements this is the easiest
00:15:44
time to trade in the marketplace right
00:15:45
in here
00:15:46
it's defined by the short-term high
00:15:49
that's broken on the upside here that's
00:15:51
where you would begin your point which
00:15:53
it's deemed a low resistance liquidity
00:15:55
run so you're focusing primarily on
00:15:57
selling short
00:15:58
every retracement is going to find very
00:16:01
little resistance going lower
00:16:04
to run out the previous low
00:16:06
there's going to be what resting below
00:16:08
these lows
00:16:09
sell stop liquidity
00:16:12
so the market goes lower breaks below
00:16:15
this short term low here expands has a
00:16:18
small little retracement what's going to
00:16:19
be forming below this short-term low
00:16:22
bottom chasers folks that want to be
00:16:24
long
00:16:25
but we understand that the market has
00:16:26
broken an old
00:16:28
high here and had real quick sudden
00:16:30
price action very little retracements so
00:16:33
we have very little resistance on the
00:16:35
downside getting back to that point at
00:16:37
which market structure broke so between
00:16:39
this point here
00:16:41
and where the market breaks down this
00:16:43
low here this is the easiest area to
00:16:46
trade
00:16:47
in price action because you have very
00:16:49
little resistance allowing price to just
00:16:52
cut through all that
00:16:53
but you're waiting for a short term load
00:16:56
form and every time a short term low
00:16:57
forms there's going to be cell stop
00:16:59
liquidity resting below those lows
00:17:03
okay so let's take a look at more
00:17:05
examples of a high resistance liquidity
00:17:07
run and a low resistance liquidity run
00:17:10
and what makes those
00:17:12
uh two types of liquidity runs different
00:17:15
we have an old high back here noted here
00:17:20
and the market starts to move lower and
00:17:22
we showed this example of price action
00:17:24
here with this old high violating this
00:17:26
old high here
00:17:28
selling off these old lows being
00:17:29
violated here and the market starts to
00:17:31
rally up
00:17:33
notice there was very little resistance
00:17:35
in the marketplace where this high
00:17:38
eventually traded lower taking out the
00:17:40
liquidity resting below these lows here
00:17:43
this run from this
00:17:44
high taking out these lows
00:17:47
is referred to as a low resistance
00:17:50
liquidity run because we have a
00:17:53
longer term high to the left of us and
00:17:56
the market has shown a willingness to
00:17:57
take out a low and then we came back
00:18:00
above cleared out a stop above the high
00:18:05
retraced
00:18:06
had an unwillingness to go above this up
00:18:09
candle here
00:18:10
so institutional order flow as you'll
00:18:12
learn more about throughout this entire
00:18:13
mentorship
00:18:15
moves back to bearish and expands to the
00:18:17
downside
00:18:20
expands down to the downside
00:18:22
to run out these stops below these lows
00:18:26
the market rallies up again
00:18:29
and fails to get above this swing high
00:18:33
this run higher
00:18:35
is a
00:18:36
high resistance liquidity run
00:18:40
the fact that it's going to have very
00:18:42
difficult time getting above this high
00:18:44
is because we've already priced in a
00:18:45
longer term high
00:18:47
the intermediate term high
00:18:49
and this high is going to have a very
00:18:50
hard time struggling to get through this
00:18:53
height
00:18:54
it's going to have very difficult time
00:18:55
getting through it so this rally up if
00:18:57
we were buying long here we know that
00:18:59
there's going to be a high probability
00:19:01
that this is not going to be running out
00:19:03
the high is going to be in intact it's
00:19:05
going to be defended and the higher high
00:19:08
over here will be defended
00:19:10
so when price goes back up into this
00:19:12
high
00:19:13
this actually becomes a low resistance
00:19:16
liquidity run to see price come all the
00:19:18
way back down to take out this low here
00:19:22
the fact that we keep this old high
00:19:24
in place
00:19:25
and every low
00:19:27
that forms has very
00:19:29
little resistance as each time it moves
00:19:32
through it's like a hot knife through
00:19:34
butter very little resistance down every
00:19:37
time a low is formed price goes through
00:19:40
those lows this equal lows here price
00:19:42
trades through those this short term low
00:19:44
here price trades through it these short
00:19:46
term lows here price trades through it
00:19:48
so the the bias is
00:19:51
bearish
00:19:52
so you want to be focusing primarily on
00:19:54
a market rally
00:19:56
to take out
00:19:58
short term lows
00:20:00
or intermediate term lows
00:20:02
the difference between that is every
00:20:05
rally is going to be viewed as a high
00:20:06
resistance liquidity run it's going to
00:20:08
have very difficult time getting above
00:20:10
the previous highs sometimes it will
00:20:12
happen but generally you're going to
00:20:13
find that it's going to have a very
00:20:14
difficult time doing that
00:20:16
but because that's built into price
00:20:19
action having a high resistance
00:20:20
liquidity run here it turns into a
00:20:24
low resistance liquidity run for
00:20:27
you to see a move below the short-term
00:20:30
lows every short-term low is an
00:20:32
opportunity to seek liquidity or the
00:20:34
market to expand down
00:20:36
after a retracement up to take out the
00:20:39
stops that rest below the marketplace at
00:20:41
every old low
00:20:43
every single blow
00:20:45
that you see in price
00:20:46
once we identify where the market is
00:20:49
in terms of high resistance or low
00:20:50
resistance liquidity
00:20:53
we can find old lows to the left market
00:20:55
respects it here comes back but then now
00:20:58
we have a lot of liquidity resting below
00:20:59
this low here and this low here and the
00:21:02
market runs right through it
00:21:04
small little retracement there's more
00:21:06
liquidity below this low here so it's
00:21:08
going to expand down through it
00:21:10
we have old lows back here so the
00:21:12
market's going to do what it's going to
00:21:13
retrace a little bit and then do what
00:21:15
expand down to take out those
00:21:18
stops below this old lower here
00:21:21
the same thing is seen when the market
00:21:23
finds a
00:21:26
low in the market the market
00:21:28
creates a
00:21:29
smaller consolidation makes it a
00:21:30
long-term low
00:21:32
rallies up
00:21:33
retraces
00:21:35
moves into consolidation rallies through
00:21:37
again so now we have a lot of price
00:21:39
action here so this old low is going to
00:21:42
be well defended
00:21:44
the fact that we have a retracement
00:21:46
going lower each time every time the
00:21:48
market retraces that's going to be in
00:21:50
the form of a high resistance liquidity
00:21:53
run
00:21:54
it's going to find very stiff resistance
00:21:57
with
00:21:58
violating old lows
00:22:00
the old lows are going to be actually
00:22:02
defended and you're going to see
00:22:05
buying coming in the marketplace your
00:22:07
focus is going to be primarily on the
00:22:09
highs every short-term high is going to
00:22:11
have very easy
00:22:13
runs through them that forms a low
00:22:16
resistance liquidity run
00:22:18
the resistance levels are going to be
00:22:20
very
00:22:21
weak
00:22:22
the support or lows are going to be very
00:22:25
strong
00:22:26
because the market's going to be
00:22:27
capitalizing only on the buy side
00:22:30
just the reverse of what we saw over
00:22:31
here on the sell side everything's going
00:22:33
to be supporting bearish prices so every
00:22:36
retracement higher sets up another price
00:22:38
leg to go lower aiming for the lows to
00:22:40
be violated
00:22:41
we've changed the tide here and we made
00:22:44
an old low so every time the market
00:22:46
retraces lower that sets up new buying
00:22:48
opportunities to take out the short-term
00:22:50
highs or immune term highs above the
00:22:52
marketplace because what's going to be
00:22:54
resting above those highs
00:22:56
buy stops and you want to be buying low
00:22:59
and selling to willing buyers above the
00:23:01
current market action and that's what
00:23:03
the market makers do so every time the
00:23:05
market trades down it's actually just a
00:23:08
new low resistance liquidity run to make
00:23:11
a run above an old high and it makes it
00:23:14
very easy to find trades this way market
00:23:16
trades down smaller retracement its old
00:23:18
high will be easily ran out low
00:23:20
resistance liquidity run market trades
00:23:23
back
00:23:23
and has a retracement
00:23:26
very little resistance to get back up to
00:23:28
this old high it runs cleanly through
00:23:30
that
00:23:31
another retracement here the liquid is
00:23:33
going to be resting above this old high
00:23:37
and eventually the market expands
00:23:38
through it as well
00:23:40
[Music]
00:23:45
and eventually the market trades
00:23:47
through those lows as well okay so
00:23:49
there's many elements to the things i've
00:23:50
thought in this month's teaching looking
00:23:53
for clean highs where the levels are
00:23:55
just too clean
00:23:57
when the market shows those types of
00:23:59
levels it's going to be very
00:24:01
opportunistic for you to build the idea
00:24:04
that there's going to be buy stops above
00:24:05
that so any little retracement sets the
00:24:07
tone for another drive through that
00:24:09
and the market continues to find an ease
00:24:12
of getting back through
00:24:13
old highs
00:24:15
at some
00:24:16
point
00:24:18
you're going to look at price action and
00:24:20
it's going to be very
00:24:21
crystal clear
00:24:22
that
00:24:23
the more price action there is around a
00:24:26
specific level or a high or a low
00:24:29
that is indicating a levels being
00:24:31
defended
00:24:33
on an institutional price
00:24:35
model
00:24:35
so you're going to see very
00:24:37
easy trading when you trade away from
00:24:40
that level
00:24:41
and by doing that you're going to be
00:24:42
getting yourself in sync with the
00:24:44
institutional order flow then your
00:24:46
trades will find very low resistance in
00:24:49
the form of profitable exits
00:24:51
and very little draw down