Boot Camp Day 8: Liquidity Pt 1

Summary

In this episode of the Boot Camp series, TJR delves into one of the most crucial aspects of his trading strategy: liquidity. He emphasizes the significance of understanding liquidity in the market, explaining that it is essentially a pool of resting orders, including stop and limit orders. These orders are pivotal as they represent significant money flows that influence market movements. The session is intended as part one of a three-part series dedicated to exploring liquidity extensively, emphasizing its importance in understanding price movements driven by large market movers like banks and institutions. The episode aims to lay the groundwork for more advanced discussions on identifying and leveraging liquidity in trading strategies.

Highlights

• TJR kicks off the session by emphasizing the importance of liquidity in trading. 🎤
• The video is part one of a comprehensive exploration into liquidity, highlighting its market influence. 📚
• Liquidity consists of resting orders that drive market movements, such as stop and limit orders. 💡
• Institutions leverage liquidity to facilitate large trades, impacting market directions significantly. 📊
• Understanding liquidity equips traders to make informed decisions aligned with market movers. 🚀

Key Takeaways

• Liquidity is crucial in trading and represents resting orders in the market. 🔑
• Understanding liquidity helps identify why prices move, aligning with market trends. 📈
• Banks and institutions are major market movers, using liquidity for large trades. 💰
• Spotting and understanding liquidity allows traders to align with market movements. 🔍
• This session is part one of a three-part series, setting the stage for deeper insights. 🎓

Overview

In this engaging episode of Boot Camp, TJR introduces traders to the concept of liquidity, underscoring its critical role in market dynamics. Liquidity, in essence, represents pools of resting orders that dictate how prices move, serving as a vital compass in navigating through market changes. With a focus on why liquidity is used, TJR sets the foundation for a broader discussion across this multi-part series.

The concept of liquidity is demystified as TJR describes it as what's behind the scenes of market transactions. He explains how banks and institutions use liquidity, like stop and limit orders, to maneuver their significant trades, effectively steering market directions. This understanding allows traders to anticipate market movements and align their strategies accordingly.

As the first of three parts, this session emphasizes comprehension over action, encouraging traders to grasp not just what liquidity is, but why it's pivotal. With plans to delve into spotting liquidity and executing trades in future episodes, TJR ensures that viewers are well-prepared to deepen their trading acumen and strategy execution.

Chapters

• 00:00 - 00:30: Introduction to Boot Camp Day 8 The chapter introduces Boot Camp Day 8, focusing on trading strategies. It emphasizes the importance of liquidity in trading, stating it as the largest and most crucial aspect of the strategy discussed. The speaker appears enthusiastic and ready to dive into this complex topic, hinting at a detailed exploration.
• 00:30 - 01:00: Overview of Liquidity This chapter serves as an introductory overview of liquidity in the market. It sets the stage for a deeper dive into the topic, structured in three parts to ensure comprehensive understanding. The focus is on defining liquidity, exploring its significance, and explaining its role in shaping market dynamics.
• 01:00 - 02:00: Importance of Understanding Liquidity Chapter Title: Importance of Understanding Liquidity In this chapter, the focus is on understanding why liquidity is used in trading strategies, rather than the mechanics of identifying or executing trades based on liquidity movements. The emphasis is on the rationale behind using liquidity as a fundamental aspect of the trading strategy, which differentiates it from other technical analysis tools like support and resistance. The discussion of how to spot and trade based on liquidity will be covered in subsequent parts.
• 02:00 - 03:00: Defining Liquidity The speaker criticizes the unpredictable and speculative nature of trading based on arbitrary indicators like 'floors' and 'ceilings' in the market. They emphasize the need to understand the underlying reasons for price movements in the market. This understanding will be the focus of the boot camp, aiming to provide participants with real insights into price behavior.
• 03:00 - 04:00: Market Dynamics and Liquidity The chapter titled 'Market Dynamics and Liquidity' focuses on explaining the importance of understanding liquidity in market strategies. The speaker mentions that the session will mainly involve a discussion rather than chart analysis. The aim is to clarify what liquidity is, why it is used, and how it influences market movements, emphasizing its crucial role in strategizing within market dynamics.
• 04:00 - 05:00: Role of Institutions in Liquidity The chapter titled 'Role of Institutions in Liquidity' discusses different types of orders that contribute to liquidity in the financial market. It explains the concept of resting orders, which are orders that are set to execute at a specific price level. These include stop orders, which help in getting traders out of a trade, and limit orders, such as buy limit or sell limit orders, that activate when certain price targets are met. These orders either bring a trader into or take them out of the market, essentially representing a pool of liquidity.
• 05:00 - 06:00: Liquidity in the Modern Trading The chapter discusses the concept of liquidity in modern trading, explaining it as a pool of money at specific price points where heavy market activity occurs. This activity involves people entering and exiting the market, thereby cycling a lot of money through the market at those times. The discussion touches upon the strategic importance of targeting these liquidity areas. The transcript briefly shifts in tone with an informal aside about feeling bad for the speaker's gardener due to a personal anecdote involving someone named Boogie.
• 06:00 - 07:00: Banks and Market Movers Seeking Liquidity The chapter 'Banks and Market Movers Seeking Liquidity' discusses the importance of liquidity in the financial market. It highlights how banks and other financial institutions, referred to as 'Market Movers,' prioritize liquidity. Despite some unrelated introductory content, the focus remains on explaining why liquidity is crucial for these entities and how it impacts their operations.
• 07:00 - 08:00: Understanding Trade Execution with Liquidity The chapter explains the concept of trade execution with a focus on liquidity. It highlights how massive orders can influence market movement, using the example of buying a share of Apple. Historically, buying stock involved a more manual process, including paperwork, but with modern brokerages and exchanges, this process has become more streamlined and efficient.
• 08:00 - 09:30: Confirmation of Trends and Structure Shift This chapter discusses the modern digital transformation in trading, emphasizing the seamless and instant nature of executing orders through exchanges and brokerages due to technological advancements. It highlights the importance of having a seller whenever a buy order is placed and the ease with which brokerages find sellers in the digital age. The discussion points towards the digital age's ability to instantly match buy and sell orders, particularly through the use of digital platforms and offshore brokerages.
• 09:30 - 11:00: Application of Liquidity Concepts in Trading In this chapter titled 'Application of Liquidity Concepts in Trading', the transcript discusses the concept of 'booking a trader' and what it means in the context of trading. The speaker explains that when a trader places a buy order, the broker fills the order by essentially taking a sell position, assuming the trader might lose. This is based on the notion that a large percentage of trades fail. The concept of exchange is also touched upon, as it is essential for the fulfillment of orders in the trading process.
• 11:00 - 12:00: Conclusion and Next Steps In this chapter titled 'Conclusion and Next Steps', the focus is on discussing how large financial institutions like banks and major market influencers manage to execute their substantial orders in the market. The method explained involves liquidity sweeps, which essentially means absorbing existing liquidity at different price points, enabling these institutions to fulfill their large buying or selling requirements. This process is further explored by understanding specific price points and learning to identify them effectively.

Boot Camp Day 8: Liquidity Pt 1 Transcription

• 00:00 - 00:30 what's good Maine welcome to boot camp day number eight I think um and today we're back with another trading video no no discipline uh just charts okay um and today whoa we're going to get into really the probably the largest topic and the most important topic of my strategy really which is liquidity so with that being said there I think this
• 00:30 - 01:00 is going to make we're going to make this three parts okay today and this is just so you guys can fully understand this [ __ ] um because I really want to make sure that you guys completely understand this okay um so we are going to start off with today just going over what liquidity is and why we want to use it in the market okay that's it just what it is why we want to use it how it makes the markets
• 01:00 - 01:30 move and that is it we're not going to talk about how to spot it we're not going to talk about any of that okay we're not going to talk about how to take a trade off of that that will be in Parts two and three okay today we just need to understand why we are using it okay and that's that's this is why I really love the strategy that I use because there's reasoning behind the trades that we're taking instead of you know like support and resistance like oh it bounced off a floor so I'm going to
• 01:30 - 02:00 buy and put money at risk that makes no sense to me whatsoever that like you're you're that's like guessing for being honest right like oh a floor and it broke through the floor and now it is on this and now it's re-testing it as a ceiling come on guys like we want to know actually why price is reacting and why price is moving the way that it is so that's what we're going to focus on throughout this entire boot camp so you guys can actually understand why price is moving the way that it is and then
• 02:00 - 02:30 also right so we can have a better understanding of the strategy that we're using right and that's very important when when doing this type of stuff so not much that's going to be put on the chart today mainly just going to be me talking to you mainly going to be me saying hey this is why we use liquidity this is what it is and this is why it moves the market so with that being said let's get into it so what is liquidity and why do we want to use it so essentially liquidity is what
• 02:30 - 03:00 I would like to call resting orders and there's there's multiple different orders that we can consider liquidity as it can be stop orders meaning getting people out of a trade it can also be limit orders like um a a buy limit or a sell limit okay meaning when these these price targets get hit it's activating something okay it's either taking you out of the market or it's entering you into the market okay that's that's pretty much what liquidity is right it's a pool it's a
• 03:00 - 03:30 pool of money right and when it's a price point where when that price point gets achieved people are going to be entering the market and exiting the market meaning there's a lot of liquidity there's a lot of money getting cycled through the market during this point in time okay so with that being said all right why would we want to Target these areas okay also I feel bad for my Gardener because Boogie doesn't have um I don't have uh [ __ ] I don't have um
• 03:30 - 04:00 damn I feel hella bad I don't have I don't have dog bags for them yet and bro has to like pick up all of Boogie [ __ ] and he just walked past me anyways let's keep talking okay so right that's what liquidity is why why is that it's so important to us well with that in mind right and then also understanding that Banks hedge funds or not hedge funds Banks institutions okay these these Market Movers right the people that are
• 04:00 - 04:30 actually causing the market to move they have these massive orders okay so think about it right think about a stock exchange when I buy one share of Apple that means somebody is selling me one share of Apple we don't see it but back in the day right people used to say I would like one share of Apple and then someone would have to sell that to him okay send them the paperwork so he boom I have a share of Apple stock okay but now with brokerages and exchanges they pretty much simplify this process and make it way easier okay because now it's
• 04:30 - 05:00 all digitalized you can press a button and instantly get filled your order gets filled right it's all through the it's all through the exchange it's all through the brokerage however it's still the same concept so if we want to place a buy order we need someone to sell it back to us luckily since we're in this digital age when we just want one share of Apple it's pretty [ __ ] easy for The Brokerage or the exchange to be like oh yeah we found somebody else who's selling their Apple stock right the [ __ ] now or right what some of these offshore brokerages do they'll they'll pretty
• 05:00 - 05:30 much trade against you okay that's that's what be booking a Trader means and we won't get too deep into this but essentially you you if you press buy the broker is pretty much taking a sell order by assuming um but so they're they're filling the order for you and pretty much assuming that you are going to lose the trade because 98 of trade is fail but anyways once we understand that there there's an exchange right and we have to exchange these in order for our orders to be filled
• 05:30 - 06:00 now going back to these these Banks and the Market Movers how are they going to get their massive orders filled right how are they going to get those massive orders filled when right like how are they going to get a bunch of people willing to sell to them when they want to pre or willing to sell when they want to press Buy through liquidity sweeps through taking out liquidity right so back to the first thing that we were talking about there's certain price points and we'll understand when where to spot them and
• 06:00 - 06:30 when later okay in two days okay um not tomorrow but in the day after okay we will understand how to spot this on the chart okay right now I just want you guys to understand this okay so the these Banks they are seeking liquidity so that they can move the market in the direction that they want to yes they are the people that move the market no matter what right but how are they able to fill those orders by seeking out liquidity so that they have
• 06:30 - 07:00 so many people exiting the market entering the opposite direction of them so those orders can get filled so they can move the market in the direction that they want to does that make sense right and then now why are we taking trades off of it and why is it that important to us well obviously we want to be going in the same direction that the market is going and who moves the market the [ __ ] Banks okay so the banks they're moving the markets where they want it to go what are they always doing they're seeking liquidity so they can push Market in whatever Direction they
• 07:00 - 07:30 want so wouldn't it be smart for us to understand where liquidity is and then understand once liquidity gets taken out and then we get a confirmation which we will talk about um in two days a confirmation which can't which we can already talk about a break of structure right a confirmation of a market structure shift right because we talked about that right when when we see a break of structure that means okay Trends have shifted there's a change in Direction within the market and that is the confirmation that
• 07:30 - 08:00 okay liquidity has been swept and orders have been filled causing the market to change direction and that is what causes your trades to hit take profit not know oh it bounced off of a floor not oh it hit its head on the ceiling that's that's like a [ __ ] story time bro that's like little kid [ __ ] okay we don't want to do that also part of me my [ __ ] gardeners are going crazy so I'll try and wrap this up pretty quick or let me actually close this
• 08:00 - 08:30 see if that works not really but anyways that's why we want to understand where that is so we can get in at the beginning of the move right we understand okay liquidity liquidity was taken out we see a trend shift a trend change it's right it's ready to go we know where Market wants to go right and that's what we're trying to see we're trying to figure out where those resting orders are we're trying to see Market
• 08:30 - 09:00 push to that price point we're trying to see then a shift in direction of Market structure and guys if we don't see a shift in direction if we don't see anything perfect hands off we're not doing anything right it's easy to say okay there's liquidity here there's liquidity here there's liquidity here and if if price gets to it you're not immediately pressing by you're not immediately pressing sell right we need more confirmation and and again this is why I love my strategy so much damn
• 09:00 - 09:30 they're they're ear raping I'm sorry guys um this is why I love my strategy so much because we're able to take these types of Trades with with confidence and and it and [ __ ] Confluence with the market and and understanding that okay liquidity was taken out and now we see a TR a trend shift a break of structure a market structure shift like that's confirmation that the Market's gonna go you know like the orders have been filled and we and we see the orders getting filled and we
• 09:30 - 10:00 know the orders have been filled due to that market structure shift does that does that make sense and do you guys understand why we want to understand where liquidity lies in the market now because that's where price that's where price or the Market Movers the banks are seeking they're seeking that liquidity so they can move price in whatever Direction they want because when it hits those prices when they can fill their orders that's when they can execute and that's when we execute as well we're not damn I'm really sorry I'll wrap this up
• 10:00 - 10:30 soon um that's that's we're not executing right when they execute we got to wait a little bit right because we don't know exactly when that when they press that button but we can get a still a incredibly good entry okay like literally catching the tops and the bottoms of moves if you notice pretty much every single one of my trades it's not already in a trend it's at the top or the bottom of a trend okay we catch the full move every single time okay because damn bro speak dude because
• 10:30 - 11:00 we're we're thinking the same as the Market Movers okay we're we're understanding that their orders have been filled okay damn and we're also understanding and knowing that okay their orders have been filled we see a market structure shift and it's ready to go okay so that is liquidity explained all right I'm going to cut this a little bit short because we got the gardeners going on we'll go more in depth about how to spot this how
• 11:00 - 11:30 to know what price points these got these are at okay tomorrow or not tomorrow in two days for liquidity part two and then we'll also talk about how to execute and how to understand even more about liquidity in part three okay so with that being said hopefully you guys took some notes from this for your homework today I don't have much homework for you guys for this to be honest this is just dude I'm so sorry this is just a learning this is just something to learn from okay this is what I just want you
• 11:30 - 12:00 to watch this video three or four times fully understand the concept of liquidity and that's all you need okay I'll catch you guys tomorrow in the next video peace out jizz