The seek for liquidity. An eternal stop-loss hunt.

J

JohnD

Active Member
So I've been studying with the help of ICT's material. I still haven't finished the Market Makers series, but I intend to do that this week.

I've thought up a notion that I think makes sense, but I'd like someone to tell me if it there's actually anything to it (I'm sure if it does, it's in some shape or form in the ICT material I have yet to view).

Price seeks liquidity, right? So by stepping into the institutional shoes one could arguably trace out a price path based on the most efficient route through liquidity (stop losses and orders).

In the attached image we can see the classic pattern that has completed just today in the fiber. I've marked all the long and short stops the pattern could generate as it went along, and deleted them as it busted them. In the end, only the ones that I've left in the image remain. They could be eliminated by the move I've delineated in the image, leaving just one potential "unclean" spot at the current price. It's like that game we played as kids in school trying to draw shapes without crossing the same spot twice with our pencils.

So, what do you think? Is this nonsense? Is it too obvious? In the 15 minute timeframe it looks like trying to find the nearest source of liquidity works quite well (better if in accordance with the larger timeframe direction).
 

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There's some logic to the intra-day action, but you can't see either the Bank's Order Book or the massive depth of market at the Institutional Level. They have reasons to drive the price much higher and much lower, depending on the context of what is going on. And they'll leave areas you expect to get run for months, at a time. The Liquidity they're normally after is rarely found on the M15 chart. Though they love to "shake off" retail traders.
 
This is also how I see what is happening. I just reviewed precision trading concepts 3 trading in the range, the L7 concept. It is how ICT explained it, you might want to review it. I suggest you use your existing chart and mark the order blocks that were targets from the stop runs. Then add MM buy sell model dealing ranges. You also need to look back to Jan / Feb, if not earlier. See how your hypothesis fits that information.

It is a lot to process, and it takes time, I still don't fully see or understand it all myself but it is making more and more sense.
 
I've watched the MM video where this is covered now and I feel a bit silly for making this thread... Study time!
 
someone pin this post. one of the best ive seen in a long time.

sqa said:
The Liquidity they're normally after is rarely found on the M15 chart.
Click to expand...

its found on every time frame. all day, every day... open your eyes... this is exactly why retailers dont get to participate in the game...

now for the question: how do you trade it?

qz2p3t.jpg


all those 30 tick stops on the breakout wiped out on the rebound... ouch!
 
as if by magic... still think bankers arent looking for liquidity on a m1/m5 TF? think again...

sphzb6.jpg


do 100 ticks, then do more...
 
jonnycab said:
as if by magic... still think bankers arent looking for liquidity on a m1/m5 TF? think again...

do 100 ticks, then do more...
Click to expand...

Big institutions (what ICT calls "smart money") certainly make a conscious effort in moving price towards liquidity pools. But I think at lower timeframes, the phenomenon is more "natural". Commercial operations around the world that require an exchange in currency will naturally steer towards better prices and price will go towards liquidity naturally, in an emergent manner.

Imagine a magnetic or a gravitational field, price being a charged particle or a mass point. It will fall following the gradient of the field (in this case it's not a magnetic or gravitational field, but a field of price and liquidity). This imaginary price particle (the ticker) will fall towards better prices (higher for selling, lower for buying), thus "seeking" liquidity. For example, to the eyes of a currency exchange operation in an airport looking for an order to pair itself with, a stop loss looks exactly like that (technically it is exactly that). And it will "hunt" it if it's the better price.

You can also think of water going down a mountain through the optimal path in terms of height.

This is of course my half-informed opinion, and I could be completely wrong. But it makes sense that deep pockets wouldn't bother with m1 charts and instead manipulate the price on a grander scale 1d, h4..., because they can, right?
 
jonnycab said:
i stand corrected... carry on...
Click to expand...

How so? As I said, it's just a theory. I have absolutely no proof as to what I explained. It's just the way I like to imagine it.
 
outthislife said:
Why does the "why" matter as to where price moves?
Click to expand...

One of the most powerful aspects of the way ICT teaches price action is that by understanding the why you have a much deeper connection to it and can, for example, adapt to the unexpected.

Otherwise you're blindly following a set of rules. If you don't understand the basis for those rules you can never adapt to anomalies. That's the problem with most technical analysis. They're esoteric.
 
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