ICT FOR DUMMIES | LIQUIDITY PT. 1 EP. 4

ICT for Dummies Ep. 4 explains liquidity as the fuel for price moves, showing how buy-side and sell-side liquidity rest at swing highs and lows where retail stops cluster.

Key Takeaways

Liquidity (resting stop orders at swing highs and lows) is the fuel that drives price moves.
Focus on the highs and lows created by price, not candle colors, when identifying swing points.
Buy-side liquidity is above swing highs; sell-side liquidity is below swing lows.
Price often sweeps obvious liquidity levels before making the real move, which is why retail stops get hit.
Marking the most obvious swing highs and lows helps identify where liquidity is resting.

What the video covers

Liquidity is presented as the foundation of ICT concepts, building on the previous video's lesson that candle bodies and wicks tell different stories.
The market moves in two ways: to seek liquidity and to rebalance the range (rebalancing is deferred to the next video).
Liquidity rests at swing highs and swing lows, which are formed by a three-candle pattern of lower highs/higher lows.
Candle colors do not define swing highs or lows; the actual highs and lows created by the price sequence are what matter.
Buy-side liquidity sits above swing highs where short traders place stop losses; sell-side liquidity sits below swing lows where long traders place stops.
Retail traders' stop-loss clusters act as a magnet, and market makers 'sweep' this liquidity to fill their orders before moving price in the intended direction.
Breakout traders are often stopped out at the opposite liquidity pool, with smart money benefiting from their stops.
The video walks through a sequence of alternating swing highs and lows, showing how each new level becomes a new buy-side or sell-side liquidity target.
Understanding liquidity helps traders avoid being unnecessarily stopped out and recognize when price is hunting stops.
The lesson is framed as a foundation for later ICT material, with the advice to mark obvious swing highs and lows as liquidity levels.

Chapters

What is buy-side liquidity according to this video?

Buy-side liquidity is the cluster of buy stop orders resting above swing highs, typically placed by traders who are short. Market makers target it to fill their orders before moving price.

Do candle colors matter when identifying swing highs and lows?

No. The video stresses that candle colors do not matter; what counts are the highs and lows created by the sequence of candles forming the swing points.

Why do retail traders get stopped out according to the lesson?

Retail traders commonly place stop losses at obvious swing highs or lows, creating liquidity pools. Smart money moves price to sweep those stops, then moves in the intended direction.

Full Transcript — Download SRT & Markdown

Speaker A

what is going on guys, welcome to ICT for dummies episode 4. Today we're going to be going over liquidity, which is essentially the foundation of ICT concepts. We hinted a little bit at this with the previous video on market structure. We showed you how the bodies and the wicks tell two very different stories, and we're going to elaborate on this today with liquidity.

Speaker A

structure we showed you how the bodies and the Wicks tell two very different stories and we're going to elaborate on this today with liquidity so the market moves in two ways it moves to seek liquidity and it also moves to rebalance

Speaker A

The market moves in two ways. It moves to seek liquidity, and it also moves to rebalance the range. We'll talk about rebalancing the range in the next video, but for this video we're going to be talking about liquidity. Liquidity is essentially fuel for the next move. The market makers, the big money, when they need to fill their orders, they need to grab this cash that is resting in the market to then move price the way that they want to. And where is this cash lying? You may ask. Well, it's going to be resting in swing highs and swing lows.

Speaker A

they need to fill their orders they need to grab this cash that is resting in the market to then move price and the way that they want to and where is this cash that is lying you may ask well it's

Speaker A

This candle formation is a three-candle pattern. So a swing high is a lower high, a high, and then another lower high. And a swing low is a higher low, a low, and then a higher low.

Speaker A

higher low a low and then a higher low I also see a lot of beginner Traders getting messed up thinking that the actual color of the candle matters when we are creating a swing high and we are creating a swing low for example here

Speaker A

I also see a lot of beginner traders getting messed up thinking that the actual color of the candle matters when we are creating a swing high and a swing low. For example, here when we have two green candles and then one red candle, these colors don't matter, right? This can be a red candle, this can be a red candle, like bearish, bearish, bullish. These candles here, these can be two green candles, this can be a red candle. The colors do not matter. What you should be focusing on is the lows and the highs that are created to make these swing lows and swing highs.

Speaker A

candle the colors do not matter what you should be focusing on is the lows and the highs that are created to make these swing lows and to make the swing highs okay so what does buy side liquidity and

Speaker A

So what does buy-side liquidity and sell-side liquidity actually mean? We have to understand first the psychology of traders. Let's say you want to take a short position, right? You're betting that the market is going to move down. In this scenario, where are 90% of traders putting their stop losses? Well, you're most likely going to put it at that recent swing high. This is referred to as buy-side liquidity. If you are in a short position, you put your stop loss at this high, so you have sold contracts here, and then you need to buy them back to actually get out of that position. So there is a lot of cash resting here. What is big money going to do to enter into the market? Well, they're going to take all that cash, and then they're going to move towards the direction they want it to go.

Speaker A

putting their stop losses well you're most likely going to put it at that recent swing high right so this is referred to as buy side liquidity if you are in a short position you put your stop loss at this high so you have sold

Speaker A

Versus here, when you have swing lows resting here: if you are in a long position, where are 90% of traders putting their stop losses? They're going to be putting it at that swing low. What's resting here is sell stops. You have sell-side liquidity here, because if you're in a buy position, you then need to sell those orders to get out. This is just a huge pool of liquidity and a huge pool of cash for the market makers and big money to step in and take, and then move higher.

Speaker A

well they're going to take all that cash and then they're going to move towards the direction they want it to go versus here when you have swing lows resting here if you are in a long position where are 90% of Traders putting their stop

Speaker A

These newly initiated swing highs and lows are going to serve as stop losses for retail traders, which is going to act as a magnet for price to trade back into and grab that liquidity before the real move is actually initiated. The reason liquidity, and this lesson in general, is so important is because it's going to help you understand how to avoid being liquidity, how to avoid being stopped out unnecessarily.

Speaker A

out and this is just a huge pool of liquidity and a huge pool of cash for the market makers and for big money to then step in and take this to then move higher so these newly initiated swing

Speaker A

All right, guys, think about it this way. You want to go buy some drip, but you've got no money. But your homie, he's always leaving cash at his crib just laying around, $100 bills on his nightstand. So what do you do? Obviously you can't go buy clothes if you've got no money, so you hit a lick on this kid, take all that cash. Cash grab, liquidity sweep, and then you go buy all the drip. There's cash that's resting, and it needs to be taken if you want to get dripped up.

Speaker A

this lesson in general is so important is because it's going to help you understand how to avoid being liquidity how to avoid being stopped out unnecessarily all right guys think about it this way you want to go buy some drip

Speaker A

Okay, guys, so start getting in the habit of marking out those obvious swing highs and swing lows, which are going to serve as sell-side liquidity and buy-side liquidity. If you're looking at the charts, you can clearly see that here we have sell-side liquidity, and then at the swing high we have buy-side liquidity. As you can see here, we make our new swing low, and this is going to serve as our sell-side liquidity. Then we deliver higher, we take out this buy-side liquidity, and we create our new buy-side liquidity. This is our new swing high. Then what happens? We deliver lower and we create a swing low here. We generate a new level of sell-side liquidity, and this is going to be our new swing low. Then price delivers higher and starts delivering lower. This becomes our new buy-side level, so this is going to be our buy-side liquidity. Price delivers lower and creates this new swing low, our new sell-side liquidity. Then we create another swing high, which is going to be our new buy-side liquidity once again.

Speaker A

all that cash cash grab liquidity sweep and then you go buy all the drip there's cash that's resting and it needs to be taken if you want to get dripped up okay guys so start getting in the habit of

Speaker A

As you can see now, there's a sequence of buy-side and sell-side being generated. We had this sell-side, we had this buy-side, we created a new swing low, sell-side, new swing high, buy-side, new swing low, sell-side, new swing high, buy-side, new swing low, sell-side, new swing high, buy-side. Then this move runs through all of this liquidity, comes down all the way back to this first level, and now this becomes our new sell-side liquidity. Finally, you can see that price runs through all this liquidity and takes out all these buy-side levels, and this is our new swing low and this is our new swing high right here.

Speaker A

the swing High we have buy side liquidity so as you can see here we make our new swing low this is going to serve as our sell-side liquidity and then we deliver higher we take out this buy side

Speaker A

So from this range, guys, just mark out the most obvious swing highs and swing lows that you see. The most obvious in this scenario is going to be this high here and then this low here. This is sell-side liquidity here, this is buy-side liquidity here. These liquidity levels should be sticking out like a sore thumb, guys. They should be easy to spot, and the more you practice spotting these liquidity pools, the easier it's going to get. Also, when you're starting out, like Blake said, focus on the major liquidity pools. You don't want to just mark out every single high and low you see and then cram up your charts with unnecessary information. This is going to end up putting you into analysis paralysis and you're going to get more confused than you have to be. Keep your charts clean, guys.

Speaker A

swing low and then price delivers higher and starts delivering lower this becomes our new buy side level so this is going to be our buy side liquidity price delivers lower and creates this new swing low is our new sell side liquidity

Speaker A

All right, we're now going to be talking about liquidity sweeps and what that actually means. I'm sure you guys have heard this term used a lot by a lot of smart money concepts traders and ICT traders. What this refers to is when big money and the market makers are grabbing sell stops or grabbing these buy stops that we have marked out, to then move the market in their direction. We have to think about it this way: 90% of retail traders fail in the market. What do 90% of retail traders trade? They either trade support and resistance, so they trade very objectively. They see this move getting made, a really big uptrend here, so they think, well, if we come down and retest this low, we should do the same exact move since we just had that move. This is called support. They'll see this as a big support level, and they'll go long here thinking that the same move is going to happen and push up higher. And where will they put their stop losses? At that low. So they trade in a really objective way, and you end up seeing these stop losses get run before price actually wants to make its move.

Speaker A

we created a new swing low sell side new swing High buy side new swing low sell side new swing High buy side new swing low sell side new swing High buy side and then this move runs through all of

Speaker A

There's also another way retail traders often trade, and this is using breakouts. What this breakout looks like is they'll think, okay, if we break below this low, we should continue trading lower. They'll put a short position here, and where are their buy stops going to be resting? At that swing high we had. This is our buy-side liquidity level, and then they will get stopped out of their position, and smart money and the market makers end u

Speaker A

swing low and this is our new swing high right here so from this range guys just Mark out the most obvious swing highs and swing lows that you see the most obvious in this scenario is going to be

Speaker A

this High here and then this low here this is sell side liquidity here this is buy side liquidity here these liquidity levels should be sticking out like a sore thumb guys right they should be easy to spot and the more you practice

Speaker A

spotting these liquidity pools the easier it's going to get also when you're starting out like Blake said focus on these major liquidity pool right you don't want to just Mark out every single high and low you see and

Speaker A

then cram up your charts with unnecessary information this is going to end up putting you into analysis paralysis and you're going to get more confused than you have to be keep your charts clean guys all right so we're now

Speaker A

going to be talking about liquidity sweeps and what that actually means I'm sure you guys have heard this term used a lot by a lot of smart money Concepts Traders and ICT Traders what this refers to is when big money in the market

Speaker A

makers are grabbing sell stops or grabbing these buy stops that we have marked out to then move them Market in their Direction so we have to think about it this way 90% of retail Traders fail in the market what do 90% of retail

Speaker A

Traders trade so they either trade support and resistance so they trade very objectively in the sense that okay they see this move getting made right we have a really big uptrend here so they think well if we come down and retest

Speaker A

this low we should do the same exact move since you know we just had that move so this is called support so they'll see this as a big support level and so they'll see this big support level and they'll go long here thinking

Speaker A

that this same move is going to happen and will push up higher and where will they'll put their stop losses well at that low so they think about trading in a really objective way and you end up seeing that these stop losses end up

Speaker A

getting ran before price actually wants to make its move now there's also another way that retail Traders often trade and this is using breakouts so what this breakout looks like is they'll think okay if we break below this low

Speaker A

then we should continue trading lower and they'll put a short position here and where are their buy stops going to be rested well at that swing high that we had right this is our buy side liquidity level and then they will get

Speaker A

stopped out of their position and smart money and the market makers end up winning in the end so to really simplify that whole analysis just understand that when one person is getting out of the market another person is getting put

Speaker A

into the market because not only are people looking to get long here off that support level and then getting stopped out but what this liquidity sweep is is essentially doing is also putting people in orders so they're also filling orders

Speaker A

and getting people into short positions and generating even more liquidity at these buy side levels and this is why I love IC Concepts so much because there's always this narrative behind every single trade that I'm taking right I'm

Speaker A

not just marking out random support levels and random resistance levels like there's a reasoning for every single trade that I'm taking and this is I think absolutely necessary when you're first learning to actually understand how the market is truly moving the thing

Speaker A

with ICT Concepts is that you actually understand why you're taking a win or why you're taking a loss every single time you'll understand why price is going to the next Target as you get better at understanding liquidity you'll

Speaker A

get better at determining the overall Narrative of price this is why liquidity is so essential to ICT Concepts because it is how the market moves right guys the market moves in two ways to either seek liquidity or rebalance ranges we'll

Speaker A

get into the whole ranges thing in the next video but eventually you'll see after this whole series that everything ties together and plays off of each other one way or another and that's why ICT is so effective because not only

Speaker A

does it make sense technically but it makes sense logically as well and if you feel lost right now don't worry we're going to keep showing you some more examples to help you get the understanding of it we'll even give you

Speaker A

some homework at the end so you can look over on your own and just get better at analyzing this whole thing but right the general consensus is that swing Highs are going to serve as buy side liquidity swing lows are going to

Speaker A

serve as sell-side liquidity the reason we're teaching you how to identify this liquidity is because if you can learn to identify where that liquidity lies then you'll also be able to identify when it is Tak taken and when it is the right

Speaker A

time to enter a trade but for now just focus on learning how to identify liquidity all right guys so looking at this chart take a few minutes here pause the video and Mark out your significant swing highs that you see and your

Speaker A

significant swing lows so this is going to be your major buy side levels and your major cell side levels that you're seeing right now on this chart and we're going to give you guys some background music while you're doing this swing High

Speaker A

swing low liquidity take it then we go swing High swing low liquidity we take it we [Music] go side okay so here we have your major buy side liquidity and then your major sell side liquidity so look at what has been

Speaker A

taken and then also we have sell side liquidity resting here in the form of Swing Low sell side liquidity here sells side liquidity resting here and also sells side liquidity resting here we also then have buy side liquidity

Speaker A

resting here resting here and then this buy side liquidity to the left of us has been taken so this buy side level here here and here and if you're wondering why it has been quote unquote taken it's because price already traded above these

Speaker A

levels meaning therefore that liquidity has been taken and these three buy side levels that haven't been taken is going to be the liquidity that is still valid and where stop losses are going to be placed so once again here you have you

Speaker A

have your two major liquidity levels your buy side up here and your sell side right here and then you have the sell side liquidity right here and this buy side liquidity right here this has already been taken so watch as I play

Speaker A

out price now and it Targets this buy side liquidity up here which is going to be holding a bunch of buy stops right for anyone who's in a short anyone who's in a short is stopped out right here

Speaker A

because this is where all the stop losses are resting for shorts and then we go ahead and trade towards that sell side liquidity bang and after all of these sell stops are ran and these retail Traders are taken out of the

Speaker A

market and once the market makers have grabbed all of that cash and grabbed all of that liquidity they then move price towards the direction that they want it to and they target this buy side liquidity here and also these swing

Speaker A

highs that are put into the market here so guys as we wrap up this video on liquidity I decided to show you a four-part illustration which summarizes exactly what we had taught you so if you look all the way on the left here the

Speaker A

first thing that happens is a swing high is created That Swing High becomes a buy side liquidity right if people are going to be shorting their Market where are the buy stops going to be sitting at the swing high at this buy side liquidity

Speaker A

remember those are interchangeable words buy side liquidity swing High then what happens this buy side liquidity is traded away from people are shorting and their buy stops are resting right here why is it called buy stops because they're shorting the market and so if

Speaker A

they get stopped out in the case where you're trading Futures your contracts are being bought back then third step in the process of buy side liquidity being traded away from sell-side liquidity is created and after the sell-side liquidity is created price goes ahead

Speaker A

and takes out the buy side liquidity so now we are stopping out all the people who were shorting the market where buy stops are resting at this swing high and finally price trades now to the next liquidity which is going to be you know

Speaker A

that sells side liquidity we had created or any other liquidity that is resting further down in the market so break it down into four parts guys first identify where these swing highs and swing lows are created once you find that notice

Speaker A

how price will typically trade away from this level which ends up resulting in a manipulation move for 90% of retail Traders then that level is traded back into those retail Traders are stopped out and then the real move is initiated

Speaker A

the whole reason that ICT Concepts is so important and that liquidity is so important is because it one serves as a foundation but two is going to help you avoid void being liquidity right you need to understand liquidity to avoid

Speaker A

ending up as liquidity that being said this practically concludes our ICT for dummies episode quid we teach you how to make money s s then liquidity get and now for your homework after that lovely song on liquidity we're going to give you two

Speaker A

assignments first being identify simply buy side and sell-side liquidity levels on the chart and then also identify liquidity sweeps so first find out where these swing highs and swing lows are being created and then when price goes ahead and takes them and try to start

Speaker A

noticing how price reacts off of these liquidity levels we're going to get way more into liquidity with more videos it's actually going to be three parts of liquidity so this is liquidity part one you're going to have liquidity part two

Speaker A

and liquidity part three CU there is a lot to talk about but for now let's keep it simple this is your homework fellow that being said that's it l y don't know if I spell that right but it's time for you to learn

Speaker A

ni with me he thanks guys

Topics:ICTliquiditybuy-side liquiditysell-side liquidityswing highswing lowstop loss huntingliquidity sweepmarket structuresmart money

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