All right, folks, welcome back. This is the internal range liquidity and market structure shift lecture. Again, 15-minute time frame on the E-mini Nasdaq 100 futures contract for March delivery 2022.
And take your attention over here, okay? This old low and these relative equal highs. See that?
Old low, below that is sell stops. And relative equal highs, above that is buy stops. Now, you could have used this high here.
There's nothing inherently wrong about that, but whenever I see equal highs like this, my And if it's higher than a old high over here, I'm going to use that. So, that way there's a little bit of insight for you for your study journal. The sell-side liquidity, you can see that the market trades down, hits that, runs through it, then rallies all the way back up, clearing equal highs.
So, the buy stops have been taken here, okay? So, at both of these price points here and here, that's the I guess the point at which you'll look for anticipate a market structure shift. And you don't force it, okay?
I see a lot of people try to teach my concepts. They'll talk about market structure breaks or shifts, and we'll use that term interchangeably. But, for intraday, I want you to think about intraday market structure shifts because it's not necessarily a break in market structure that leads to prolonged multi-day movement, okay?
What do I mean by that? If you see market structure that's bearish and it's broken to the downside, intraday, that may just lead to an intraday price leg that may eventually see that high be taken out in the same day. So, that's why I'm using the term market structure shift, not market structure break.
For our conversation here on this mentorship, just know that when I'm going to lean on that term market structure break, it means a little bit more in context versus an intraday shift in market structure. Just means there's likely a downside draw or an outside draw intraday by saying the term shift. Okay, so there's a little bit of semantics there.
All right, so we have both of these areas here and here where there would be a likelihood of a market structure shift. Up here, we look for a fake run above here. So that fake run above, how do we know it's going to be a market structure shift that's bearish?
Now, keep this price level in mind. So it's essentially 14,600 and 14,820. We're just eyeballing it, okay?
Now, dropping all the way down into a 2-minute chart. This is that same particular day. Here's those relative equal highs and this run down here.
If you recall, 14,600 and around that 14,860 or so. If you look at this market structure without having the levels on your chart, it's easy to get lost. When we had this low formed, right before this low was formed, there's a swing high right there.
Now, in the first mentorship video I gave you, I mentioned that high-frequency trading algorithms will use market structure on a 3-minute, 2-minute, 1-minute chart many times sub 1-minute. That would be like 45-second, 30-second, 15-second intervals. If you look at this short-term high here right before this low formed, when this high is taken out right there on that candle, that's significant.
Only if this run down here has traded into sell stops right below an old low of some kind. It could be a a double bottom, it could be a single low, but it's got to be trading under some retail idea that would be viewed as support. Up here, the same thing.
When this run above these relative equal highs happens right there, you're anticipating a market structure shift. Let me go back to this for a second. We have this high on this candle, then we have the candle right after that here, highest one, and then the lower high of this candle here.
So that's a swing high. Very simple little pattern, but it means a lot when it's in the proper context. When this high is broken with this particular candle right there, that is significant only on the basis that we have taken liquidity out of the marketplace.
That's it. So, when it broke this short-term high, this is more meaningful. And then, the market will start to seek buy stops.
Okay? Or buy-side liquidity. That would rest above here.
Here. And here. So, here's those sell stops.
So, this little area here that's shaded in, that's a area where sell stops would be residing below that 14,600 level, okay? On that 15-minute timeframe. So, the market dove into that liquidity.
And you may or may not know that it's a buy. You don't need to. You anticipate a shift in market structure.
When the market rallies above, when does that happen? On this candle right here. See that little white bulb?
That's when you're thinking, "Okay, now I have a condition in the marketplace that I might see an opportunity intraday. Let's see if there's further evidence to that. " Short-term high is taken here.
We traded above it. It does not need to close above it. Okay?
Real important. Once that candle closes and this candle opens, you're going to monitor this candle. And you want to see, as soon as this candle closes, does it create that fair value gap?
If it creates a fair value gap, again, that's a candle with a high, one single pass up. Next candle has a low that doesn't completely overlap all this. That's a fair value gap.
Real simple. Okay? This candle is where you would look to potentially trade at the earliest because now there's a gap there.
The market trades down into that. Boom. Takes off.
See these down close candles? See that? That's all one continuous order block.
What's it doing? It's inside that pool of liquidity, sell stops. Where's the open on that?
Series of down close candles, right here. That's the price level extending out in time. Boom.
So, inside this fair value gap, this opening price on the order block, that's your buy. Plus three pips or whatever for spread. And that's what you would use for a limit order.
Well, price starts to run where? Above the highs where buy stops would be here. Above this high here.
And above this high here. So, buy stops above here that was taken. This swing low forms once this candle closes.
So, this candle we're watching, does it go below that short-term low? It does. So, now we have a shift in market structure that is now bearish.
Only because we've taken buy stops. Fair value gap forms, the market rallies up into that, you go short there. What are you looking for?
Below here, sell stops. Below here, sell stops. Below here, sell stops.
And in this fair value gap here. So, if you are in a position that has multiple contracts, you can take partials below here. I probably wouldn't do it there, but below here, here.
And I know some of you are saying, "Why wouldn't you take them below there, ICT? " Well, if you're trying to get short here, that's not really that much movement. So, if you're going to take something off your trade below that low, why not just try to reach for that one?
And you could get it there. Right here. Okay?
And then below that low is nice as well. This is below the 50 level of this high and that low. Okay?
So, 50% level. That's what we're targeting. Now, this candle's low was the high end or first objective inside this gap.
So, that's your target. You're going to look for that. So, you're looking for low-hanging fruit, the easiest target to get to.
You're not trying to be perfect and you grow into eventually holding to see if it will fill in that gap. Okay? This fair value gap that was going down to this candle's high.
That's something that you strive for over time if you understand what I just showed you here. That's a very simple process of looking for, number one, liquidity, gauging what happens without having to know for certain cuz you don't know. You're not going to know until the market shows its hand.
This is it showing its hand. Now, let's go into a 1-minute chart and see how that looks. A little bit different, but still has the same characteristics.
Here's that same price structure just on a 1-minute chart. The same logic still there, right? Swing high taken after liquidity's been traded into this short-term high gets violated.
Right when this trades down in here, what's actually occurring? Okay, put this in your notes. High-frequency algorithms are hammering They're just throwing orders in.
Buy, buy, buy, buy, buy. That is not Okay, here's the important thing. That is not causing the market to go higher.
It's just volume that's coming in. The algorithms that deliver price, that offer price, that constantly offer you price in the marketplace that's what's beginning to spool and go higher, okay? And regardless of where you want to trade at, your limit orders, they may not get filled.
Where you're trying to buy with a market order you may think you're getting in at 14662 but by the time your order's executed and confirmed, you're in 14664. That's slippage. Okay, that's negative slippage.
If you were trying to buy at 14662 and it fills you at 14661, that's positive slippage. That's better than what you were expecting. So when price starts to rally all this is is a default to the algorithm constantly offering price at a higher price.
So, we're looking at the swing low here. Market breaks down, trades back back up into this back up in this fair value gap here and sells off. And there's another fair value gap right there.
Trades up as well. This is a 1-minute chart. So, it's giving you multiple points of execution that you can trade on and then dies.
See these two candles here? That's one consecutive bearish order block. The opening price extended out in time.
Why is this a good bearish order block? Cuz it has that gap. And it's taken liquidity.
And there's a market structure shift. There's your high frequency, high power, high probability bearish order block. What it is, it's a change in the state of delivery.
The market's being offered higher, higher, higher, higher in these two up close candles. How did this series of up close candles begin? With this candle's opening, right there.
That opening, once this candle trades below it, that changes the state of delivery. So, you go back to that point of reference, right there. And that's why it's sensitive.
The algorithm remembers that right there. Okay? That's all I'm going to give you on the free mentorship level.
But, that is your answer, okay? That is what an order block is. It is a change in the state of delivery.
Much in the same way, all of this movement down here, all these down close candles, the opening on that candle starts this series of delivery on the downside. When that opening price gets violated here, it changes its state of delivery. Now, it was offering sell side.
When it goes above that opening, now it's offering buy side. What will it be doing after that? It'll be looking for buy stops, buy stops, buy stops, because it's offering buy side liquidity.
Same thing here. Buy side is being offered until that opening price is violated right there. Then the change of state of delivery occurs.
Now, the market's going to be doing what? Offering sell side liquidity. What's that mean?
It's going to start going lower and attacking the sell stops, all the sell side liquidity. It's offering it to the marketplace. That's what's happening.
That's what the algorithm is doing. But, the market goes down to that 50% level because it's going down to what I I teach you? What did I say in the first video?
It's going down from a premium market. Relative to this low and this high, 50% is here. That's equilibrium.
So, it's going to go down to a discount. And that's that gap right in here. It doesn't look like a gap so much here, but if we go back up one more time, that's that single opening right there.
On a 2-minute chart, but then on a 1-minute chart, it's two candles that make that up. But, you're going to have to do is go through a progression of going from the 3-minute, 2-minute, and 1-minute chart, and you'll get your market structure and your areas of where it wants to look for an imbalance or old low or old high, and it's just makes it easy. And here's the lipstick on it on the one minute chart.
Swing high, is it broken? Market structure is now bullish. Rallies.
Taking buy stops, taking buy stops, taking buy stops. This right here, these highs right here is just staying below that low. It's building up more interest that this is what?
Resistance. That is engineering liquidity. That way, when this runs above it, those individuals that know what you're learning today, they know that that's a pool of liquidity for buyers coming in at a high price.
Why is that useful? Because smart money that bought down here or here or here or here or here, that's where they sell to high seeking buyers. Real nice delivery here as well, filling that fair value gap, changing the state of delivery.
Now it's offering sell side. What's that mean? It's going to match up sell stops.
It's going to keep going below old lows and into an imbalance until we get down to a discount. So, with that, I want you to think about how this is useful. Number one, you're looking at London highs and lows, a session for London open.
Okay, for instance, like 2:00 in the morning to 5:00 in the morning New York time. Every Every time I tell you this, always set it with New York local time. 2:00 to 5:00 in the morning.
That's your London session. What's the highs and lows of that session? Okay?
Uh that's important because the market's going to probably sweep above those highs or sweep below those lows and create situations like this, okay? And the New York session is 7:00 in the morning to 10:00 in the morning New York local time. Okay, what's the session high and low for that?
And do the same thing for Asia, okay? 7:00 p. m.
to 9:00 p. m. And that's it.
Those are the three times of the day that I'm looking for specific key highs and key lows and any intraday high and low forming right before the equities open at 9:30. Pretty easy, right? The hours of operation again are generally between 8:30 in the morning to 11:00, but it can be extended all the way to New York lunch noon.
I do not tend to take trades after noon local time New York. Uh that hour is usually very problematic and it's just it's better not to even look for any kind of setups. Wait until 1:00, preferably really 1:30 to 4:00, then you got the afternoon trend.
Typically, you'll see between 2:00 and 3:00 there's a setup that usually forms in the afternoon trend or setup in that period of the time of the day. That will also offer opportunities, but that's outside the scope of what I'm going to be teaching in this mentorship. All right, so we talked about internal range liquidity, and internal range liquidity is looking for short-term lows or short-term highs inside a price leg that we're retracing back into.
Okay, that's all it means. Internal range liquidity is a short-term higher low with stops above or below it or an imbalance in that same range of price action. And I taught you market structure shifts, showed you exactly all of what's necessary.
That is all that you require, and the skill set of identifying pools of liquidity, that is going to be something you learn rather quickly just by going through old data and looking at the times of the day I gave you in this lecture. All right, your homework is you're going to go through your E-mini futures intraday charts. You're going to be looking for stop hunts that lead to market structure shifts intraday.
You're going to log your examples with your own annotations for your study journal. So, what I showed with the break in the market going higher and lower above old highs or lower below an old low, that's running for stops, that's a stop hunt, then you're looking for that signature for the market structure shift on the 3, 2, and or 1-minute charts. Okay, if you look for that between 8:30 in the morning to noon New York local time in the E-mini markets or if you're watching the micro markets, the same logic exists, okay?
But, you're going to start going back from today and go back as far as the data will allow you. And you annotate your 15-minute time frame for your buy side liquidity pool and your sell side liquidity pools, and then going down into the 3-minute, 2-minute, 1-minute chart. So, for every individual day that you're logging and you're back testing, back testing is just dressing your chart up like I'm showing you here, and then studying it, not just do it till I count done.
Really go in to see how price moved and how it delivered.
