High Resistance vs Low Resistance Liquidity - ICT Concepts

Summary

Highlights

• Differentiating between low and high resistance liquidity is key to trading. 🔑
• A failure swing happens when a price high or low is not surpassed before reversal. 🔄
• Low resistance liquidity is simply a failure swing with resting liquidity. 💧
• High resistance liquidity involves sweeping resting liquidity before a price reversal. 🧹
• Integrating these theories can refine trading strategies around market structures. 📊

Key Takeaways

• Low resistance liquidity spots are prime targets in trading strategies. 🎯
• High resistance liquidity zones are perfect for stop losses. 🚫
• Failure swings are crucial in identifying liquidity positions. 🔄
• Using charts to spot low and high resistance liquidity enhances trading bias. 📈
• Understanding order blocks can optimize entry and exits in trades. 💹

Overview

Chapters

• 00:00 - 01:30: Introduction to Low and High Resistance Liquidity This chapter introduces the concepts of low resistance liquidity and high resistance liquidity. It begins by indicating that understanding these concepts is essential for interpreting financial charts. Before diving into practical examples through charts, the chapter stresses the importance of understanding the term 'failure swing.' The unresolved explanation of what a 'failure swing' is suggests it is a foundational concept that distinguishes between the two types of liquidity. Overall, this chapter sets the stage for a deeper exploration of liquidity resistance in the context of financial markets.
• 01:30 - 02:30: Explaining Low Resistance Liquidity The chapter titled 'Explaining Low Resistance Liquidity' covers the concept of low resistance liquidity, characterized as a failure swing in trading. The discussion includes examples where a swing high is followed by a lower high before reversal, with the initial high unswept. Similarly, a low is followed by a higher low without the initial low being swept prior to reversal. The chapter explains the positioning of liquidity above highs and lows and how it affects trading movements.
• 02:30 - 03:30: Explaining High Resistance Liquidity The chapter 'Explaining High Resistance Liquidity' discusses the concept of high resistance liquidity, contrasting it with low resistance liquidity. High resistance liquidity occurs when there is a sweep of liquidity before a reversal in market trends. This means that a higher high is reached before a market reversal when the market reaches a high, and a lower low occurs before a reversal when the market reaches a low. The process effectively clears out existing liquidity positions before a new direction is established.
• 03:30 - 05:30: Combining Low and High Resistance Liquidity in Trading In this chapter, the concept of combining high and low resistance liquidity in trading is discussed. High resistance liquidity acts as a safeguard or stop loss, while low resistance liquidity serves as a target. This strategy is visually represented in a diagram where a pattern of highs and lows is illustrated, demonstrating how traders can effectively manage their positions by aligning these liquidity types on their chart. The chapter emphasizes the strategic placement of stop losses and targets to optimize trading performance.
• 05:30 - 11:30: Trading Examples on High and Low Resistance Liquidity The chapter titled 'Trading Examples on High and Low Resistance Liquidity' explains market structure shifts and how they can be used to identify trading opportunities. It begins by discussing the concept of high resistance liquidity, evidenced by a change in the state of delivery. The narrative suggests looking for entries in fair value gaps or order blocks, highlighting a failure to make a new high after a previous low, followed by sweeping the low. The discussion also identifies a pattern with a high and lower high, signaling low resistance liquidity. Finally, the chapter transitions to practical examples using TradingView to illustrate these concepts in action.
• 11:30 - 12:30: Order Blocks and Propulsion Blocks in Trading In this chapter, the concept of 'Order Blocks' and 'Propulsion Blocks' in trading is explored through practical examples. The narrator examines price action, identifying a series of highs and a higher timeframe 'failure swing.' They also discuss the significance of 'equal lows' leading into a price gap, suggesting a potential change in the market's delivery state.
• 12:30 - 13:00: Conclusion In this final chapter, we explore the dynamics of market movements as price actions develop with failure swings. The narrative begins with the price sweeping low points to create high resistance liquidity. Subsequently, the market trades into a zone of previous failure swings, taking out certain highs but leaving equal highs untouched from an earlier peak. This is indicative of a retracement pattern, followed by another expansion move. The chapter transitions into a second example, aiming to elucidate the behaviors and patterns associated with market price actions.

High Resistance vs Low Resistance Liquidity - ICT Concepts Transcription

• 00:00 - 00:30 [Music] how's it going everyone this video is going to be over the differences between low resistance liquidity and high resistance liquidity let's hop into the PDF before we go into the charts for some examples so to understand the differences between High Resistance and low resistance liquidity you have to understand what a failure swing is so what a failure swing is is when we have
• 00:30 - 01:00 a swing high and then we make a lower high relative to that before reversing so this High never got swept before the reversal and similarly over here we make a low with a higher low this low was never swept prior to the reversal so now what is low resistance liquidity well low resistance liquidity is just a failure swing so how I like to picture it is we have liquidity resting above highs and lows so as we trade away we
• 01:00 - 01:30 then generate more highs and lows and thus more liquidity so what is high resistance liquidity well High Resistance liquidity is the opposite of low resistance liquidity it is where we first sweep that liquidity before the reversal you can see here we have a high we make a higher high before reversing we have a low we make a lower low before reversing and then what this does is wipes out the liquidity resting right here and right here here so now the
• 01:30 - 02:00 liquidity is resting Above This high and low and that is what creates high resistance liquidity so now how do I actually use high resistance liquidity and low resistance liquidity together we'll simply put I want to be targeting low resistance liquidity and having high resistance liquidity for my stop loss or on my side of the curve so in this diagram here you can see we have a high with a lower high next to it that is our low resistance liquidity and we just swept out a low here so if we get Market
• 02:00 - 02:30 structure shift and start to trade away this is high resistance liquidity so here we get the market structure shift or the change in the state of delivery now here I could look for an entry on the fair value Gap or the order block or if you notice here we could not make a new high after making a low and so what happens is we sweep this low and what else do you notice we have a high with a lower high or more low resistance liquidity and then the move finishes here let's hop into trading view for
• 02:30 - 03:00 some examples so here we are in our first example and if you take a look at this price action what do you notice well for me the first thing that stands out are all these highs resting above here you can see we have a bunch of highs lined up and if we look to the left this High here never took out this high so we have a higher time frame failure swing there and if you look down here we just took out these equal lows into this Gap so if we're going to change the state of delivery I'd like to
• 03:00 - 03:30 see price go from this low to take out these failure swings let's see what happens and there we go so you can see price swept this low over here making high resistance liquidity and then we trade to these failure swings you can see we do take out this High here but we end up leaving equal highs from this previous high and then we retrace to get another expansion so here we are in the second example and if you take a look at
• 03:30 - 04:00 the last 3 days of price action here what do you notice well if you notice we have all these lows or previous days lows which have not been taken out so you can see that that is low resistance liquidity on a lower time frame as they are making failure swings we look at the high end of this what do we see well we see that this second day here took out this first day's High let's drop down to the hourly chart to see what this looks like so down here on the hourly chart
• 04:00 - 04:30 you can see we actually have another low resting right here but what do you see well we took out this side of the range creating High Resistance liquidity and we have failure swings resting below so let's see what happens and there we go we retrace into the range before dropping and taking out all this low resistance liquidity so a lot of times what I like to do on the daily chart is just see where do we have failures swings and where do we have
• 04:30 - 05:00 high resistance liquidity and that can add to my bias let's take a look at NQ daily chart here to see what we have well we are trading within a range and if you see we have a high and a low and then we have a failure swing so let's see what happens but here you can see we take out this flow so that has the possibility of becoming High Resistance liquidity but as we play this ahead one more day you can see
• 05:00 - 05:30 now we get the sweep and the closure back inside the range so here is our high resistance liquidity and what do we have on the highs failure swings so if I have high resistance liquidity on the lows and failure swings on the highs I can use this to add to my bias for long setups so there we go we run the high all right well let's take a look at another example here we have a high and here we have a low so let's see
• 05:30 - 06:00 okay we just took out this high and what do we have on the low failure swings so ideally this high does not get taken before running this low so letting this play out we get some consolidation but that is what happens now what do you see well now we have a high here with a lower high and we just swept out this side of the range in an uptrend
• 06:00 - 06:30 so if this is going to be high resistance liquidity where would we want to see price trade to these previous highs and there we go and another little add-on here if you see how price took out this previous day's low before we moving higher to these highs this is creating High Resistance liquidity on a lower time frame so here we are with our next example go ahead and pause the video and take a moment to mark it up but what do you see right here well the
• 06:30 - 07:00 first thing that catches my eyes are these highs up here you can see we just have a bunch of failure swings right so I'll just go ahead and Mark that out like so and that is acting as a draw on liquidity now if we're going to be targeting this High I want to see a sweep or high resistance liquidity well what do we see right here we sweep this low creating High Resistance liquidity and another important note this is an
• 07:00 - 07:30 important low as it is previous day low so now I'd anticipate this low to hold and trade away to this high so let's see what happens and there we go so you can see by just understanding the low resistance liquidity and high resistance liquidity an idea was framed now out on the daily chart you can also see this low resistance liquidity as these previous days highs or the last three days highs were lined up like so and how this day
• 07:30 - 08:00 took previous day low before coming in and closing and where does it close above 50% of this Wick but then I can anticipate the next day to trade higher to these highs and into this fair value Gap so once again in this next example where is the high resistance liquidity and where is the low resistance liquidity so you can see we purged this High creating High Resistance liquidity and ideally I'd like to see price trade down down to this low resistance
• 08:00 - 08:30 liquidity now since es formed an smt here and is weaker we're going to hop into that chart for the rest of this example so here we are in es you can see this is the smt at the high where NQ created the high resistance liquidity and where is the low resistance liquidity you can see we have this really obvious series of lows resting right here right above a fair value Gap with an order block why is this an order
• 08:30 - 09:00 block well it wretch into an important level then price closed above creating an order block you can see we have low resistance liquidity right above an order block let's see what happens and there we go we run all these low resistance lows into the order block you can see the mean threshold of this creates a reaction and where do we go well if you take a look at these highs now we have a series of lower highs all stacked up we just swept out all these
• 09:00 - 09:30 lows where is Price likely to go well to these highs let's see and there we go so here we are in our last and final example and if you notice we just took out our previous day low so as we zoom in here what do we have on the high well we have a swing high with a lower swing High to the right of it or failure swings so let's see if we get a reaction off of this level we do and we get a closure over
• 09:30 - 10:00 this series of down Clos candles here validating it as an order block now just in terms of discount in premium doesn't really make sense to look for an entry off this order block here so then I will use the mean threshold or I can just wait for a second entry so let's see so the mean threshold does hold and then we validate another order block so marking out the main threshold of that as well let's see here we create a low I could look
• 10:00 - 10:30 for that so if you notice we swept out this low here what else do we have resting well we have failure swings here so this looks pretty much just like the diagram from the PDF but what do we have here well the down Clos candle into the important level or sweeping right here once I get a close of that validates it as an order block and so there we get an order block formation but look to take my entry right here my stop on the high
• 10:30 - 11:00 resistance liquidity and then looking to take off at the highs so let's see how this works out and there we go we get a run higher to the take profit so just a little thing with order blocks here you can see once we close over the series of down Clos candles here mean threshold is respected here we close over creating this propulsion block which the mean threshold is continuously respected but why would I not expect this low to hold
• 11:00 - 11:30 or wouldn't really trust it and want my invalidation here unless I get a sweep creating High Resistance liquidity well price never came and closed over this level right so I'm not using that as a valid low for invalidation once we sweep it then we form another order block off of this propulsion block and the mean threshold of that should be respected which it is and then it continues higher now I hope you found this video helpful if you did please consider liking and subscribing and I'll see you guys next time have a
• 11:30 - 12:00 good one