Understanding Market Liquidity and Trading

Knowing where price is gonna go, that's your number one goal because everything else outside of that is gonna get you in trouble. Order blocks, fair value gaps, all those things. If you don't have the direction right, and that doesn't mean bias.

It means where's the next draw on liquidity? Because you can trade without a bias. They asked, is it important to have a bias to trade intraday or must you have a intraday bias to trade or can I trade

just internal intraday liquidity? Once you understand what you're looking for and the aspects of time of day and when certain macros come in, and, and again, a macro

is knowing where the market's likely to draw to next with liquidity and the time. So you have to, you have to know really what you're looking for, for liquidity and who's been making money right now. That's essentially what the macros do. They roll against who's in the money right now.

That's, that's what their, their function is. You wanna be mindful of certain things that I'm talking about in the daily range, the weekly range, and how these intermarket relationships tie together at certain times of the day. It will make perfect sense to you, and you'll anticipate these things

happening in the market. You'll un- you'll know exactly what is going to most likely occur at that interval right now. In a 20-minute span, you know that there's gonna be a setup forming. You could set your watch to it. You can sleep in and say, "Okay,

I don't care about anything else. I'm gonna go right in there. I'm gonna trade based on what I see within that 20-minute window." If you look at the range from here to where we are right now, half of that is right in here, thereabouts. So if we looked at this high down to the

new week opening gap high, that's also about halfway, which would be what? Like a measuring gap. I taught you what a measuring gap is now. Inception of the move here, terminus halfway right in here. Where's the gap? Right there. What kind of gaps are gonna be?

Measuring gap. Measuring gaps don't fill, just like breakaway gaps don't fill. But what happens if you do get a measuring gap and it happens to trade up and fill in? Doesn't matter. I'll still treat it the same way.

How do you know when a measuring gap forms? I just taught it to you. You have to know where the beginning of a move happens, which I explained to you here. Where is it drawing to? Well, you have a couple things you gotta look for. I told you the 39.85 level was the fair value gap, and we have to see how we trade there.

Well, it traded down into the 39.85, then consolidated, broke lower, traded to the low of the opening range gap low, rallied a little bit, consolidation leading to what? This is when your classic continuation patterns work.

This is a bear flag. But I also teach when those flags are fake and you can fade them where other traders would be caught offside. That's what's in my core content. So we've traded into buy-side. We went into three premium arrays on dollar.

We took out three lows on ES, which is-- Well, we've not take out three lows. We, we made three lower lows. We had this low, this low, which was lower than that one, and then we had this low here. This low falls short of the new week

opening gap low. At the same time, we made low, lower, lower low. The dollar index has made its run up into three premium arrays. Okay, so we went through three premium arrays and we took out one, two, three lower

lows and look at the price reaction here. So if you have three elements of liquidity tapped into and you're seeing a low form at a logical level, which was what? Consequent encroachment. Then we have the lower low. The body's respecting consequent

encroachment. The market drops again, taking out that low here and with dollar index trading into three premium arrays. What's likely to occur? There you go. Retracement. What time is it likely to occur?

Going into the three o'clock hour, you have what? This macro unfolding here. What's it reaching back up into? Opening range gap and right in here, remember I was earlier referring to this area here where it could, it could trade up into that and then go lower and it was permissible?

That liquidity right now is where all trailed stop losses are. This one has already been taken out, but it's also here now. So nothing's a surprise, okay? Time elements and how many times we go into a area of liquidity if it's not a run on stops, like as I was mentioning with the dollar index.

Let me just show you the dollar index. All right, so here's that high here I mentioned earlier, the 445 high. We traded through that here. This is that void where there's no trading at all. It has one little tick in here. Okay, that's a void.

That's a real absolute actual liquidity void. There's no trading in there except for that one print there. This in here and then the high here. So when we were down here, I said we were gonna gravitate

to here and then if it goes higher, it can go up into this void and then this high. We rallied up, cleared all three of them and at the same time, ES trades down into the old low here, new week gap-- new week opening gap rather high, consequent encroachment, failed to go to the low. What level

is this? Remember when I was teaching you about inefficiencies? Yes, the 50% is consequent encroachment, but you also have two other gradients, 75% and 25%. So it went down to 25 plus a tick or two to allow that print to be there because there's a difference

between bid and ask, and then we had this rally back up. What did it reach up into? What is this? Sibi trades up into consequent encroachment of the wick, hits it,

complete repricing back up into all of this. What was inefficient here? Buy-side. Why? Because it's a down closed candle. It's large to the downside, so it's not offering what efficiently? Buy-side. How does it offer buy-side efficiently?

Price has to go back up through this high to that low offering movement to the upside. That's repricing over top of sell-side delivery, but it's inefficient in the form of buy-side. So remember that bank-- uh, not bank, but that, uh, paint roller analogy I use where you put paint on the roller, put it on the wall?

As soon as you put the roller on the wall, the paint distribution is very thick. It's ample But as you roll it more and more, it starts to create these little pockets of where paint didn't make its way to the wall, and you have to roll back over top of that. The same thing's happening here. It goes down, but in that movement down, there's gonna be small little pockets of

inefficiency that you don't see. What, how does that... What does it look like? Well, if we do this. All right, what time frame are we on right now? We're on a 15-minute time frame. So we're gonna drop down to a five. We can see that range here. We're gonna drop down into a one minute.

Inside of that range here, all of this in here, what do you see? In this movement here, what do you see in terms of inefficiency? Remember, that shaded area is a big down closed candle. So it's a fair value gap, SIBI, S-I-B-I, sell side

imbalance, buy side inefficiency. So what is it missing? Efficient delivery for buy side. So inside of this shaded area, I want you to look real close. Where are the inefficiencies? Here, here, here, and a volume imbalance right there.

So if we take this level here, there's your volume imbalance, high right there. Market trades up into it. It has to do what? It has to go a little bit past it for what? Efficient delivery, because there's a difference between the

bid and the ask. So to get that price, it's gotta go one tick at least above it, right? Well, you're getting that there. Trade's there, and then we came off, back off of

it. So inside of these inefficiencies, you have to drill down into the smaller timeframes. And in fact, I'm not gonna do it here, but if you have the benefit of using the 15 and five-second timeframes, you can actually look at this even better, like a microscope zooming in. You're zooming into that, and you're gonna target the actual

inefficiencies of how far these price runs can pull, pull back up into it. What's occurring at three o'clock that causes this? Like, wh- why does that happen? The bond market's closing. So the bond market's closing has this impact on equities. Sometimes it creates continuation,

sometimes it creates a reversal, sometimes it creates a retracement and then continuation. You have to know what you're looking for, where you are in the grand

scheme of things in the higher timeframe chart, and what is still left to be taken in terms of liquidity or trade to in an efficiency