All language subtitles for nhyuè_i

Hey everybody. Welcome back to
the currency pros course. We've

got another installment today
and today we're going to be

talking about liquidity. So
what is liquidity? Well I have

the Currency Pros Ebook pulled
up here because I've already

explained it in detail here. So
I'm just going to go over a few

points. And then afterwards
we're going to head over to the

charts to go through a real
example of how we can use

liquidity in our trading. So
liquidity is basically well the

definite the actual definition
of liquidity is the

availability liquid assets to a
market or company. So in the

Forex market that basically
that basically means how much

money is available in the
market okay? So one important

thing I said here is that for
every buyer there is a seller

and for every winner there is a
loser. Okay? Now what does that

mean? It means that anytime
you're taking a trade and

you're losing it that's adding
liquidity to the market. Okay.

You're basically providing
money for the the whoever was

the winning trader on that side
of the trade right? So if you

lose a trade it's it's helping
somebody else make their money

right? You're adding liquidity
to the market. Now in order for

there to be constant
transactions and quick buying

and selling there has to be
liquidity in the market. So I

mentioned down here that the
currency market the Forex

market is the most liquid
market in the world because it

is most commonly traded right?
Whereas the stock market for

example is less liquid because
a great deal of investors are

holding positions for many
years decades at a time. Let me

let me dive into that briefly.
So I don't know how many of you

are familiar with the stock
market. Um it's not something I

trade but it's something I
invest in for long term

purposes. Um but when I first
got started on my trading

journey I did dive into stock
trading a little bit before I

was introduced to the Forex
market. And the problem with

trading stocks or at least
small cap stocks like very you

know less heard of stocks like
penny stocks stuff like that is

there's there's not much
liquidity. So if you're trying

to trade let's say you you buy
a bunch of shares of a company

and you change your mind or
you've made some profit and you

want to sell those shares in
the stock market well in any

market there has to be somebody
on the other end of that trade

if you're trying to sell your
shares there has to be someone

that's willing to buy your
shares of course we never meet

these people it doesn't work
like that it's not like a one

to one transaction but there
has to be enough liquidity in

the market okay so there has to
be enough buyers and sellers at

the same time transactions can
flow effortlessly between the

two. So often times in the
stock market if you're trying

to sell your shares sometimes
your your broker or your

trading platform won't actually
let you if there's not enough

volume being traded on that
company. Okay if not many

people are trading that company
you won't actually be able to

sell your shares until more
liquidity becomes available. So

with the with the Forex market
it's vastly different right?

Because it's the largest market
in the world trillions and

trillion of dollars traded
everyday. Um it's not exactly

something that investors buy
and hold long term. We don't

really see that in the forex
market. The forex market is

definitely more tuned towards
trading. Okay so it because of

that it's very liquid. We can
buy and sell instantaneously.

Literally in a in a in a
fraction of a second. Our

orders are are filled and
activated. Right? So it's it's

very different and it's good to
know the differences between

the two. So If you've traded
currencies before, you're most

likely familiar with the terms
stop hunts or fakeouts, okay?

This refers to a trader's
protective stop loss being hit

causing a realized loss and
shortly after the loss is

realized, price moves in the
direction of your initial bias.

So, a lot of people call this a
stop hunt. Um it's not exactly

what it is. As I explain down
here, where is it? So, the

market is based on algorithms,
right? That's how the market

moves. There's not a single
person sitting in a chair at a

trading desk saying, oh I bet
there's lot of stop losses up

here. Let's hunt those stop
losses. Let's let's stop all

these people out and then go in
the direction. It's not exactly

like that. Um it's algorithm
and it's literally programmed

to do these things okay because
the majority of traders as I

said here 95% of retail traders
are using these methods such as

you know double tops, double
bottoms, head and shoulders,

flags, wedges, pennants,
etcetera. All those typical

price action patterns that you
hear about constantly. Um and

that I used to trade too. If
the majority of retail traders

are using those methods then of
course institutional money is

going to be caught up with
those methods right if there's

exist existing algorithms
they're going to be

reprogrammed or fine tuned to
accommodate for these. So

whenever there's these typical
retail patterns in the market

you'll often see these stop
hunts or fakeouts or liquidity

grabs right? Um it's just the
algorithms way of purging

liquidity adding liquidity to
the market right? Or sorry

purge resting stop losses in
the market and adding liquidity

to the market right? It just it
helps everything out with the

market. It helps the flow it
allows institutional money to

place bigger orders because in
order for them to place you

know hundreds of million
dollars worth of orders. There

has to be enough liquidity in
the market. So there has to

constantly be be be losers and
winners right? So it's

literally how the algorithm is
programmed. It hunts the it

technically does hunt the stop
losses but it's not for the

reason that most people think
it is right? Now often times

traders have the correct
directional bias right? If they

if they're educated with
technical analysis you know

it's not hard to spot a trend.
It's not hard to spot whether

we're we should be buying or
selling. So often times the

direction is correct yet price
will grab liquidity from both

buyers and sellers right before
the true directional move takes

place. Now in the next section
of this Ebook which I strongly

recommend you guys check out if
you haven't already. Um I

actually go over a a chart
example as well where both

sellers and buyers were kind of
screwed over in this scenario

before price took its actual
direction, right? I'm not

going to go over that in detail
right now because we're

going to go over an actual live
chart example on trading view

but definitely check that out
because both buyers and sellers

can be affected before the move
actually takes place and that's

why it's really important that
when we're approaching a trade,

we say to ourselves, okay,
where can liquidity, where is

the majority of liquidity right
now. Where would price be drawn

to purge before taking its
actual directional bias, right?

So where was I here? Where was
I? Yeah so like I said often

times traders have the correct
directional bias yet price will

grab liquidity from both buyers
and sellers right before the

true directional move takes
place. Now trading your eyes to

spot where liquidity may be
sitting in the market is

important when adding
confluence to your trade.

Similar similarly to what we
learned about with market

imbalance. Okay. Now we do not
trade these methods similar to

the imbalance right? We do not
trade solely off of these

methods. We simply use them as
evidence when building a case

around a potential trade setup.
Alright. It's simple. So these

this is not the entry criteria.
Imbalance and liquidity. That's

not the entry criteria
criteria. But there are certain

boxes that should be checked
before we enter a trade based

on the refined supply and
demand that we've located and

the market structure that's
been broken. Uh so just to

clarify our entries are based
off market structure and

refined supply and demand
levels. Um but checking the

boxes off things like imbalance
and liquidity and a few other

things as well. Uh that can
really help us to have the best

possible outcomes with our
trades resulting in a higher

win rate and overall success
okay so now that we've gone

over this I'd like to dive into
the chart example I have here

so this is Euro USC on the 15
minute time frame and what we

can see here is that we've got
clear bullish momentum to the

upside so we're looking for
buys we've broken multiple

structural points whether
they're substructure or you

know actual proper structure
regardless Um we have bullish

order flow to the upside. We've
broken structure multiple times

so we are looking for buys. Now
right off the bat we have a

refined demand zone right here.
Very clear as day. Broke minor

substructure. But overall it
led to this entire move which

broke all of this structure
right? So there's a few

different places that somebody
might target for a long

position here okay this
technically right here is the

extreme this is a demand zone
but it's the extreme of this

bullish leg now some people
also might be targeting this

little cell candle here because
it broke minor structure here

could also target that little
candle there that was

technically responsible for
this break so there's a few

different places that can be
targeted I'm looking more so

towards the extreme and there's
a few reasons for that and it

has to relate to liquidity okay
so basically although there is

three levels here that can be
targeted it's highly likely

that these two levels will be
used as inducement okay now

what is the term inducement
mean I'm sure you've all heard

it thrown around a bunch of
times but what does it actually

mean it's basically a trap okay
inducement is basically a trap

so people who aren't very
educated about this strategy

about supply and demand trading
they can target any one of

these and once the once price
starts heading towards them

they'll feel more confident in
taking their orders hoping that

it's going to go long from
there but inducement is

basically they're being trapped
into these moves right they're

being induced into these early
buys when the actual move may

occur at the extreme okay so as
I said it's a it's a bit of a

trap inducement is a trap so
whenever there's multiple

stages of entry points here we
can actually look at these

levels as potential liquidity
because we know that there's

going to be a lot of buyers
around these levels there's

going to be people trying to
get in on the move early at

these levels and so it's very
possible that if the market

needs to you know gather
liquidity gather fuel before

it's true move we can identify
that these these possible entry

points will be used as
inducement to add liquidity to

the market okay Let's play
Price Forward and see exactly

what happens.

Do we get a reaction from
there?

Okay so as you can see if you
were to were to place an order

here you know let's say even if
you targeted the equilibrium

but then made your stop loss
cover this low over here this

wick low you would have been
tapped into the trade had about

1. 5 R floating, let's say you
were targeting something higher

now at first glance this looks
like a successful trade right

you'd probably be feeling
pretty confident but one thing

to consider as well is that if
you go to the higher time frame

these two levels look very
insignificant right? We're on

the one hour time frame now.
When you when you jump up a

time frame you start to realize
where the actual important

value area is which is the
extreme down here. The first

zone that was targeted. So
these other levels look very

insignificant. So if you're
stuck on the low time frames

that can be an issue. And it
can trick you into getting into

the wrong trades. Right? But as
I said at first glance this

looks quite healthy. Now let's
play it forward and see what

happens. Again so healthy but
then eventually it gets stopped

out right? So that's a loss
right there. So at that point

you're probably a little
frustrated. You know maybe you

took a break even. Maybe it
wasn't even a loss. Maybe

around here you secured profit
and moving it to break even

which is fine if you're an
aggressive trader. Um but then

you may be targeting this
level. Because you still trust

in your analysis. You still
trust that the bias is correct.

Which to be fair it is. Again
let's say you target the

equilibrium. Stop loss. Stop
loss below all of these wicks.

And again you're targeting
somewhere up here. So you get

tapped into the trade. Let's
play it forward and see what

happens. Floating in profit.
Floating in profit still.

What's going to happen?

Okay so taken out for another
loss. So although you were

floating in profit you know
both of these levels were used

as liquidity grabs some might
say or inducement. Okay so what

that means is you were induced
into an early position right?

You're the analysis was
correct. This is a bullish leg.

You want to have a continuation
trade right? You want to get

into buys here. But these two
levels were used as inducement.

You took a loss on each of them
which in turn adds liquidity to

the market. And you more
confluence that if price

mitigates this zone right here
then momentum is really

going to kick in and things are
going to really take off okay

so these two levels were used
as inducement

Now that those two levels are
out of the way, let's set an

order for here. Stop loss
covering the wick. Target

somewhere up here. I don't
know. That's not the point of

this video. Gonna drag this
over.

Let's play price forward.

So at this point here you'd
probably be pretty frustrated

right? Because your stop loss
on this second trade was just

just hit. And then it takes off
into what would have been like

you know four R or something
within that trade right? So

that that would be frustrating
to see.

Now look at that.

Let's just clean this up a
little bit. Let's move it over.

Massive massive momentum kicked
into the market and the reason

being price gathered enough
fuel to take off in that in

that manner right so we use
these first two levels as

inducement adding liquidity to
the market from all the traders

that took losses in these
levels and then the extreme

right the point of origin for
the actual move which you can

see clear on the one hour time
frame Right? This extreme

demand level here was actually
responsible for this break of

structure.

Okay? This was the point of
origin for that break of

structure. These other two
levels were very minor and

subjective. Okay? So that was
used to add liquidity to the

market. And as I said once
liquidity was purged from both

of these levels and added to
the market price mitigated

almost perfectly the
equilibrium of this refined

demand zone and as soon as it
mitigated just just taken the

amount of momentum that kicked
into the market compare those

full body candles with all of
these very small indecisional

candles that that was previous
right as soon as price

mitigated this level we took
off with huge momentum huge

momentum so these are where the
real trading opportunities are

okay although if you're an
aggressive trader you could

technically secure profits
around these levels when you're

maybe like 22- 3R into your
trade you could secure some

profit and move your stop loss
to break even so technically

you could profit from these if
you're an aggressive if you

have an aggressive way of
managing your trades but it's

just not ideal these are not
the ideal positions the the

positions you want to be in as
I'm sure you've all experienced

at some point are the ones
where as soon as it triggers

your entry it just takes off to
the moon right or if you're it

you know melts to the ground.
Those are the positions you

want to be in. You don't
want to be in these trades

where it's just just messing
around forever. That is

extremely frustrating. Um so
it's just a good example that

when you are approaching a
trade you have to say to

yourself okay where can where
is liquidity sitting? Do I

want to be part of the
liquidity purge? Or do I

want to get in after the market
has gathered all the fuel that

it's that it needs for the
actual move? Well The second

option is where you want to be,
right? You want to get in on

the higher probability trade.
So, as I said, you have to

address where liquidity is
sitting in the market. Now,

after going through that
example, there's one more form

of liquidity that I'd like to
show you because it refers back

to what I what was mentioned in
the Ebook where most traders

are trading double tops, double
bottoms, head and shoulders,

flags, wedges, etcetera. So,
there's a good example right

here okay in this area here so
most traders would look at this

as resistance okay prices
trading higher trading higher

but then it kind of meets a
ceiling here okay we keep

tapping into that level over
and over again and so most

traders would look at that as
resistance or even a triple

triple top quadruple top
whatever at this point here it

would have been a double top so
you know that there's within

this entire range here there's
people trying to go short okay

with their stop loss is just
above. And targeting recent

lows because they're looking at
this as a double top or

resistance and they're thinking
that the market's going to go

short from here, okay? So, it's
a bunch of traders. Let me just

copy this a bunch of times just
to show you how how much this

is really happening, right?
Like there's traders all over

the world that are being taught
these techniques which I used

to trade as well. So, I can't
even I can't even condemn them

that much. These are things
that I used to do before I

learned more about liquidity
and smart money concepts and

refined supply and demand. It
was an absolute game changer

for me because I used to be on
the wrong side of trades just

like this, okay? So, people are
looking at this as resistance,

significant resistance because
we've now tapped it like four

times, right? So, you can only
imagine how many people are

trying to short the market from
here, right?

So whenever I see things like
this on my chart I have a

template saved LQ for liquidity
and it's just a little dollar

sign okay that indicates to me
that there's a lot of money

resting at this level here okay
because we know how many people

are trying to go short right an
abundance of people are trying

to short the market right now
and so that means there's stop

loss orders just above these
levels okay so what does price

do Well, it would have been
into profit for most of those

short traders for a short
period of time and then it

gathers some momentum and
sweeps that liquidity, okay?

Right here is the liquidity
sweep. So again, let me just

place a short position there
just to Help everybody

visualize this. Let's say you
have a stop loss just above

those highs. You're targeting
the lows for a short point of

time you would have been in
profit maybe like two to 3R in

profit and then all of a sudden
price reverses stops you out

just to go short from that
point on right so this is what

I'm saying it's all about
liquidity we the market kind of

screwed over sellers here by
sweeping their liquidity and

then all the buyers that were
trying to get in early here

their liquidity was added to
the market as well right small

profit here when they entered
but then stop them out again

small profit stop them out
right until we the real area of

interest and took off from
there okay so these are very

very important lessons guys
because these are the things

you have to consider every
single time you're entering a

trade okay so now that this
liquidity has been cleared all

the liquidity from these two
levels has been cleared that

gives price all the all the
fuel it needs to really take

off which we can see happened
exactly right here okay these

are the types of moves that
we're looking for Now again I

mentioned this in earlier on in
the video but one way to avoid

getting in early on these moves
and being part of the liquidity

purge is to just move up a time
frame okay if you're trading on

the 1 minute time frame just
permanently that's a very silly

thing to do you have to be
aware of the higher time frame

bias the direction in the
market you have to be aware of

the higher time frame points of
interest and you know if you

were just on the on one higher
time frame the one hour instead

of the 15-minute you would have
realized that this was the

actual point of interest and
everything above it was just a

very very minor part of the
overall bullish break of

structure okay but this was the
true point of origin so even if

you just focus on that focus on
the extreme focus on the point

of origin of course it's good
to be aware of recent price

action in these moves but you
have to understand that if

you're going to trade from
those those smaller time frame

areas those smaller time frame
demand areas there they are

valid right? Like this is
demand. There are demand

there's demand right here and
demand right here. Those are

still valid levels but you have
to be aware that there's extra

risk there. So either develop a
plan to aggressively manage

your trades. So moving your
stop loss to break even and

taking partials or using less
risk overall. So maybe 0. 5% of

your capital instead of the
full one one to 2% whatever you

you like to do. So those are
few things to consider right?

But overall it's Best to just
be aware of this. So every time

you every time you approach a
trade just think to yourself

where is liquidity sitting
okay? We have possible areas of

inducement but this is the
extreme so this is the more

highly probable trade and yeah
that's how you have to address

it. Okay so if you guys if you
guys ever need a a refresher on

this just come back to this
video or check out the e-book.

This is a very in-depth
description of what liquidity

is and how we can be aware of
it. And we even have a detailed

chart example of what to look
out for and how to not be part

of the liquidity purge but to
get in after the liquidity has

been purged. One little quote
that I've I've heard a bunch of

times that I like to keep fresh
in my mind is that our entries

are most people's stop losses,
okay? It's a it's a funny

little quote that I've heard
and it really stuck with me. My

entry is your stop loss, okay?
If you really think about what

that means, after 9five percent
of the retail traders are

stopped out in the market,
we're aware of them potentially

being stopped out right with
our strategy we're aware that

liquidity has to be purged and
we assess that before we enter

a trade so as soon as all these
people are getting stopped out

we're entering okay now imagine
you imagine you bought from

these levels you were trying to
go long on this pair from these

levels how angry would you be
if you got stopped out two

times in a row just to see
price do this shortly after and

let's say after first two
losses you were feeling less

confident in the strategy so
you maybe stayed out of this

third area okay you didn't want
to take three losses in a row

because you were so damaged by
the first two emotionally right

and then you watch this huge
move happen here you would have

been pissed you would have
slammed your laptop shut and

walked away like it I've been
there it's a very frustrating

feeling to watch Price take off
in the direction that you

predicted it would but it takes
off without you that's because

you were part of the liquidity
you were part of the purge

rather than getting in
afterwards. So again my your

stop loss is my entry. Okay?
Remember that. You don't

want to be part of that. You
want to be you want to be on

the good side of that right? So
don't let this be you. You

want to get in after liquidity
has been purged. Okay? So I

hope you guys have enjoyed this
video. Let me know if you have

any questions. You can reach
out to me anytime. And I'll see

you guys on the next one.