ICT & SMC Critical Module

Lesson 09: Liquidity - How Market Hunts Stop Losses

1) Higher High Liquidity

When market runs to grab Higher High Liquidity, it means the market is on the buy side. That means the market is in an uptrend. What happens here is that the market breaks the Higher High that was formed with a candle wick. That means instead of breaking the HH with a candle body, a candle wick goes past the HH and comes back.

• Traders look at HH and place their trade SLs there.
• Then the market runs to hit those SLs.
• That's not a real movement - it's a fake movement that hits SLs and then the market runs properly.

2) Higher Low Liquidity

When market runs to grab Higher Low Liquidity, it means the market is on the buy side. That means the market is in an uptrend. What happens here is that the market breaks the Higher Low that was formed with a candle wick.

• Traders look at HL and place their trade SLs there.
• Then the market runs to hit those SLs.
• That's a fake movement that hits SLs and then the market runs properly.

3) Lower High Liquidity

When market runs to grab Lower High Liquidity, it means the market is on the down side. That means the market is in a sell trend. What happens here is that the market breaks the Lower High that was formed with a candle wick.

• Traders look at LH and place their trade SLs there.
• Then the market runs to hit those SLs.
• That's a fake movement that hits SLs and then the market runs properly.

4) Lower Low Liquidity

When market runs to grab Lower Low Liquidity, it means the market is on the down side. That means the market is in a sell trend. What happens here is that the market breaks the Lower Low that was formed with a candle wick.

• Traders look at LL and place their trade SLs there.
• Then the market runs to hit those SLs.
• That's a fake movement that hits SLs and then the market runs properly.

5) Support & Resistance Liquidity

Support and resistance is something everyone learns first when trading. But many people are not aware of liquidity at these support and resistance levels.

• Support: Horizontal lines drawn below the current market position.
• Resistance: Horizontal lines drawn above the current market position.
• As Zones: We draw them as zones instead of lines. This makes it easier for analysis and entries.
• Role Reversal: If support breaks and market goes down, we call that zone a resistance zone next time. If resistance breaks and market goes up, we call that zone a support zone.
• Liquidity Grab: The market runs to grab liquidity at support and resistance zones. Then it breaks these zones and continues to move.

6) Trendline Liquidity

We draw a trend line after 3 points touch it. But normally we can draw trendline after 2 points touch. We draw these trend lines on the side where the market is running.

• Market respects trendlines: There are many times when the market runs along the trendline.
• Liquidity Grab: When market runs to grab liquidity at these trendlines, it means breaking these trend lines and continuing its movement.
• Up Trend: A market in uptrend runs downward to grab liquidity (below the trendline).
• Down Trend: A market in downtrend runs upward to grab liquidity (above the trendline).
• After Grab: Mostly the market runs like this to grab liquidity. Sometimes after grabbing liquidity, it comes back to the trend.

Downtrend Trendline Drawing

Uptrend - Liquidity Grab Below Trendline

මේ පහතින් මම දාලා තියෙන image එකේ තියෙන්නේ up trend එකක තියෙන market එකක් කොහොමද liquidity ගන්න පහලට යන්නෙ කියලා.

Downtrend - Liquidity Grab Above Trendline

මේ පහතින් මම දාලා තියෙන image එකේ තියෙන්නේ down trend එකක යන market එකක් කොහොමද liquidity ගන්න උඩට යන්නෙ කියලා.

බොහෝ දුරට market එක liquidity අරගන්න මෙහෙම run වෙනවා. සමහර වෙලාවට liquidity අරගෙන ආපහු trend එකට එනවා.

7) Candle High & Low Liquidity

Every candle has a High and a Low. It also has an Open and a Close. Here when we talk about candle liquidity, especially the candles that go to grab liquidity are Monthly, Weekly, and Daily candles.

• Important Timeframes: Other timeframe candles also have liquidity, but we mostly use the three candles I mentioned above to look for liquidity.
• Example: Previous candle's low is broken with just a wick going down, grabs liquidity, and then the market buys again.
• Lower Timeframe View: The market runs in the same range. But at some places it comes down and goes back up. That's how we see the daily candle's wick grabbing liquidity when we look at a smaller timeframe.

Daily Candle Liquidity - Detailed Explanation

මේ තියෙන්නේ daily candle එකක liquidity අරගෙන තියෙන විදිය. මෙතනදි කලින් candle එකේ low එක break කරලා wick එකක් විතරක් පහලට හදලා liquidity අරගෙන ආපහු market එක buy වෙලා තියෙනවා.

මේ තියෙන්නේ ඒ daily candles දෙක පොඩි timeframe එකකට දැම්මට පස්සේ අපිට බලාගන්න පුළුවන් වෙන විදිය. ඔයාලට පේනවා ඇති එකම range එකක market එක run වෙලා තියෙනවා. ඒත් සමහර තැන්වලින් පහලට ඇවිල්ලා ආපහු උඩට ගිහින් තියෙනවා. ඒ තමයි daily candle එකේ wick එකෙන් liquidity ගත්ත විදිය අපිට පොඩි timeframe එකකින් පේන විදිය.