Equal High & Equal Low Liquidity - Bootcamp Ep.6

Okay. Hello and welcome to episode 6 of

the technical boot camp. Today we're

talking about equal high and equal low

liquidity. So this class is really going

to be an introduction to the concept of

liquidity. We have a few classes on this

topic to go through because it's quite

elaborate and there's a fair bit to talk

about, but we're starting here with the

theory behind liquidity in the market.

How to identify equal highs and equal

lows and then how to utilize those equal

highs and lows to take better trades in

the market. Now, we use these equal

highs and equal lows to filter

opportunities, avoid taking bad trades,

and also get better clarity around where

the market is likely to be drawn

towards. We're going to be deep on

theory in this class, talking about why

this all happens. Okay? I want you to

really understand this so that when we

get into the actual concepts like equal

highs and lows today and other types of

liquidity in the next few classes, you

fully understand it. So, anyways, with

that said, let's get into the class.

Hope you enjoy it. Sure you will. Let's

go. Okay, so liquidity. The next few

classes are going to be focused around

liquidity in its different forms. We're

starting in this first one with equal

highs and equal lows, which is the most

common form of liquidity that you will

see and use in the markets. It's the

easiest to identify. It's basically the

cornerstone of liquidity based trading.

Now before we get into what equal highs

and lows are and how they operate in the

market, we need to spend some time to

talk about the actual theory of

liquidity and what liquidity is, where

it forms, why it forms, and essentially

why it happens. Okay, so we're going to

do that with this diagram. Just imagine

this is a single leg of price action.

We've marked the high, we've marked the

low. And I'm going to explain to you now

what liquidity is. So liquidity in its

simplest form refers to orders or money.

Okay? So, it's buy orders, it's sell

orders, it's points where transactions

are likely to take place in the market.

Now, if we think about what drives the

market based on what we've been learning

throughout this boot camp, it's buying

and it's selling that creates price

appreciation and price depreciation. In

order for trades to take place,

therefore, in order for any price

movements to take place, there must be

buying and selling taking place. Okay?

You have to have buyers, you have to

have sellers transacting at different

price levels, and that is what creates

the upward and downward moves in the

market. Now by that right it is directly

orders that create the price. It's

orders that make markets move up and

markets move down. Now liquidity as

we've said is orders. It's areas in the

market pools in the market where there

are significant numbers of buying or

selling orders. Okay. And why this is

relevant and why this is important is

because when we identify an area that

has significant liquidity or a

significant pool of orders, we identify

number one, an area that price is likely

to be magnetized towards. Why? Because

it's the orders that will make the

market react. So until we hit a point of

significant orders, the market will just

naturally drift. And number two, because

when those orders are filled, these are

the points where the significant

reactions take place. Okay, so this is

where we start to see big moves coming

in instead of just small sideways

ranging moves. So liquidity is just

money. It's just orders that can be in

the form of stop-loss orders. Okay, if

you are looking at liquidity above this

high, for example, above here, you're

going to have stop losses. So think

about general retail trading education.

If you sell a resistance or you sell

from a high, where do you put the stop

loss? Well, general education suggests

you put it above the high. So we know

anyone selling inside of this range is

generally going to have their stop

losses over the high. Okay. We will also

have above there sell stops. So no buy

stops even. So buy stops are automatic

orders that trigger traders into buys if

a level is hit. Breakout traders use buy

stops because general retail education

suggests if a higher is broken, you

should look for a retest and buy the

retest to take the market higher. So we

have a lot of traders who use buy stops

at these levels to trigger them into a

buy automatically when a level like this

is hit. So this collection of buy stops

which is going to be in the thousands.

And this collection of stop losses which

again is going to be in the thousands

creates a massive amount of liquidity or

orders. And these orders act as a magnet

for price. Not simply because they are

going to pull price in but because there

just simply isn't enough significant

buying or selling taking place within

the range to create a dramatic move. So

the market could easily drift up here

and then eventually when it gets to this

point it will see a massive push of

liquidity because loads of new orders

are entering the market. And that's what

can create these dramatic movements.

Okay? Whether it's continuations or

whether it's reversals, it's why often

if you've ever been in the position

where you feel like your stop loss got

hunted, that's why it's taking place.

Okay? Not simply as an attack on you as

a retail trader, but because the natural

market flow will allow markets to drift

towards areas where significant orders

are. And only when we hit a point with,

you know, thousands of orders at the

same level do we have the money

available to kind of transact in huge

numbers and create big moves. Okay. So

above swing highs, the liquidity will be

in the form of stop- losses and buy

stops. Below swing lows, liquidity will

be in the form of stop- losses and sell

stops. Okay. So there we have a

liquidity on the downside, liquidity on

the upside. And both of these, as you

can see, are simply just areas where

there are lots of orders situated. Now,

let's talk a little bit deeper as to

what each of these orders actually are.

Okay? Because this is a point that a lot

of people miss. I don't want you to

think of liquidity as just this mystical

thing. It's very simple. It's actually

very logical when you understand how it

actually operates. So, first off, let's

take a look down here at this kind of

liquidity pool. we could call it um this

area where the stop losses and sell

stops are sitting. If we think about

what this is, it's basically just a

price level, okay? And we have buyers in

here deciding that they're going to put

their stops under the swing low so that

if the market takes out that level,

they'll be taken out of the trade for a

small loss instead of getting themselves

into big trouble. Now we also know there

are sell stop traders. So breakout

traders who have decided they will put

their sell stop there anticipating that

if the market does break this level

they'll be triggered into a sell and

they can profit from the move down. All

right. So those are the two types of

traders that we have. But let's think

about what these orders actually are for

a moment. Cuz obviously yes they are

stop- losses and yes they are sell

stops. But this is actually just how the

order is triggered or the use of the

order. If we think about what these are

in their most raw form, these are sell

orders. They are orders that will

automatically sell contracts to the

market at this given price. Okay. So if

we think about the buyer who bought into

the market here, let's say this buyer

has paid 1.195, let's call it, that's

how much they've paid per unit. So at

this point 1.195 is the euro to US

dollar currency rate. If the market goes

up, they can sell each unit for 1.21,

for example, which is a nice profitable

move. But if the market goes down to

1.1915,

let's call it just under this swing low,

well then that is the price that they

would sell at automatically through

their stop loss. They would take a loss

on the contracts that they sell. So

they'll be selling them for less than

they bought them for. And that is where

the loss comes from. Okay? So all a

stop-loss actually is is just you

sending an alert to the broker that if

the market gets to this price, you want

to sell all of the contracts that you

have. Okay? So if we imagine there are

thousands of buyers in here which

generally in a given price move there

will be that means we have thousands of

buy orders which therefore means with

the stop losses down here we have

thousands of sell orders. Okay so

there's a significant amount of

essentially forced selling orders. It's

not people selling out of confidence.

It's people trying to escape a losing

trade. But every one of these stop

losses down here for any buys is simply

a sell order saying if we get to this

price level I will sell all my contracts

back for a loss for less than I paid for

them. Sell stops again these are more

confident sell orders but these again

are just sell orders. So basically down

here we have a massive collection of

people saying when price hits this level

we will all be selling in mass. Okay.

Now, this from what you may understand

of the markets should theoretically lead

the market to a massive downward move

because obviously we're adding in here

loads and loads of selling pressure.

Okay? And if we were to go the other

way, just to cover it really quickly,

you probably get the message now. The

stop losses here are buy orders. So,

people who have short sold contracts

inside of this price range, they

basically sell contracts now with an

obligation to buy them back later. It's

a form of trading, short selling. Now,

if they have their stop losses up here,

well, that simply means all they're

doing is sending an alert to the broker

to say, if the price gets up to here,

please buy back all of the contracts

that I've pre-sold for more than I sold

them for, therefore creating a loss.

Okay, but again, that just means all of

these up here are buy orders. Okay, this

is to buy back contracts for more than

you sold them for, and this is to sell

your contracts for less than you bought

them for. So all of these stop losses

result in a loss, but these ones up here

are buys and these ones down here are

sells. Okay? Again, of course, the buy

stops, they are more confident, but they

are still buy orders. So we have lots of

buy orders waiting up here and we have

lots of sell orders waiting down here.

Right? That's all that we have when we

really break it down. We have stop

losses and sell stops creating lots of

sell pressure, stop losses and buy stops

creating lots of buying pressure. All

right, so back to the initial story

then. If the market comes down to this

level and it hits this price point, we

should see a rapid acceleration of

selling pressure because there are so

many people selling at one point.

However, here's where this slightly

changes and this is where liquidity gets

interesting. So, if we have a huge

amount of forced selling taking place at

one point, this is actually the prime

positioning in the market to actually

take the other side of the trade if you

are a big market participant who wants

to do so. So, let's say you are an

institution. Okay, you're an

institutional trader and you want to get

into this market on the buy side. The

problem is if you are trading with

massive sums of money, hundreds of

millions of dollars, for example, that

you want to get into this market for

clients or for whoever it may be, well,

for every transaction, there needs to be

someone on the other side, right? If you

want to buy $100 million worth of an

asset, you need the equivalent $100

million worth of selling pressure on the

other side of your trade. And inside of

a range at a point of not significant

liquidity, there generally isn't going

to be that much liquidity available at

any given price level, which creates a

problem. So, let's say you're the

institutional trader and you start

buying here, but we're in the middle of

a range and there isn't any significant

open liquidity. You could place a buy

and a little bit of your position would

be opened here. But due to the supply

and demand nature, if you wanted to get

the full buy on, well, your buy would

indicate demand, which would drive the

price up. Then the next buy that you get

may be triggered in here. And then

whoever's holding the asset that you

want to buy from, well, they may charge

you more for the next amount. So your

next entry may be here. And by the time

you've got your entire position open,

your average price may end up being

somewhere around here. So your average

price on this position is significantly

worse than where your prime entry was

set up to be. Okay? With this, of

course, you have worse positioning, you

have less profit potential, and you've

got worse exposure, you've got bigger

risk, there's more downside that you can

potentially run through. So, if you're

an institutional trader, it really isn't

prime or optimal for you to get into

your trade at any random level. The

ideal place for these traders to get

into positions is, well, you probably

guessed it by now, a point where there

is significant opposing orders to the

trade that you want to execute. So if we

imagine there are a few thousand stop

losses and sell stops down at this low

which generally there will be at points

of liquidity. Well if the market just

naturally drifted into this price point

due to the fact that no one was adding

significant buying pressure right now

it's not an attack. It's just natural

market mechanics. If the market drifts

down into here suddenly when we enter

this range we have now got loads of

breakout traders selling contracts into

the market with the obligation to buy

them back later. And we have loads of

buyers being stopped out of their

trades, they are of course selling their

contracts back to the market. So whereas

when we were looking at the market by

here, there wasn't really much liquidity

or opposing traders to actually execute

the trade with, down here, there is a

massive amount of selling now taking

place. So if you take advantage of that

sell liquidity of those open selling

orders, well, you could get a huge

position on in this range without really

having any staggered positions. What

that would create is a situation where

the market trades down into the point of

liquidity and then has a sharp reaction,

a very quick and strong drive to the

upside. And now if you're that

institutional trader or collection, then

you get to get in here, perfect optimal

entry, perfect execution because of the

amount of sell orders coming from

thousands of retail traders and smaller

institutions and commercial banks. And

you could take the other side of those

trades and just get this primed entry

before the market rallies. And of

course, if you take up all of the sell

liquidity here by putting huge buys into

the market, well, now the selling

pressure has dried up. These people have

lost their trades, your buy trade just

injects a massive amount of demand,

absorbs all of these orders and creates

a rally in this direction with that new

demand and new strength coming in behind

the buys that you've placed, which of

course then leads to higher prices.

Right? So, this is how liquidity works

in the market. We have these areas where

orders are essentially predictable.

Okay, we know there's going to be lots

of stop losses. We know there's going to

be sell stops, buy stops around these

swing highs and swing lows. Now, by the

way, that's what these classes are all

about. Determining those different

points in the market where liquidity

pools will be. And then when the market

drifts into these regions, it becomes a

prime area for institutions, commercial

banks, trading firms, hedge funds to

acquire large amounts of these assets at

the prime point by taking the

conflicting side of everyone else's

trades. They absorb all of the selling

liquidity. Then does the market by

taking the buy side in massive numbers

and then the market rallies. Okay. And

for selling opportunities, of course, it

works exactly the same way. The market

comes up into a swing high. We take out

stop losses, sell stops, or it should be

buy stops here cuz we flipped the chart.

So many buy orders come into the market

at one point. You can absorb all of

those orders. Take the other side, place

huge sells, get a perfect prime entry

into the market up here. And then of

course with all of those buys absorbed

the selling pressure on this way down

will be incredibly strong allowing you

to take a fast strong move. All right.

So that is how liquidity works. That is

how we operate with liquidity. And what

you're going to be learning through the

next classes is how to actually take

advantage of this. In this class we're

going to do that by talking through the

most basic form of liquidity equal highs

and equal lows. So we're going to go and

do that right now. All right. So, the

first type of liquidity that we're going

to be talking about in today's class is

equal highs and equal lows. And we're

going to start off by showing you a

diagram of how this works, why it

happens, and what it looks like. And

we're going to focus on equal highs for

this. All right? So, what we've got on

the chart here is basically an imaginary

price move, right? We've pushed to the

upside and then we've created what looks

like a resistance. So to support and

resistance traders or anyone who uses

these concepts, this would look like a

prime selling level. A resistance is

simply a level where we have price

touching the same essentially imaginary

line more than one time. Okay? And after

the second tap, every tap from there

onwards, you are looking to sell that

level. That's generally what resistance

is all about. Support of course is the

other way. You buy every tap after the

second tap of an imaginary level. Now,

resistance because it is so commonly

known and I know so many people are in

this kind of price action smart money

bubble on YouTube, but trust me, there

are still so many people trading these

basic concepts. You would not believe

it. Okay, not that we have God complex

over here. I know some people do, but

basically just because people on YouTube

use price action and SMC based stuff

does not mean that it's the only thing

people are using, right? There is a

massive amount of people trading with

what we can classify as basic retail,

support, resistance, trend lines, all

that stuff. All of it is prone to

liquidity and all of it creates these

predictable conditions for us. Okay. So

with a resistance being a level that

tens or hundreds of thousands of traders

are using as their selling entries, we

know there is going to be a massive

amount of selling taking place somewhere

in this range. Because of this kind of

spread out selling, we know that there

is going to be a significant number of

stop-loss orders above the high because

that's what general education suggests

to do. So we already have lots of stop

losses up here and we know of course

from what we just explained there will

be breakout traders who are looking for

a breakout to continue buying. So there

will be buy stop orders up here as well.

So this resistance which is indicated by

simply the market creating equal highs

in a market 1 2 3 creates of course the

equal high liquidity we've been talking

about and also creates an area where

there's a massive amount of buy orders

sitting up here. All right. So, we've

gathered this much information so far

simply by seeing a resistance level or

an area of equal highs. Now, with what

we now know about liquidity, how it's

utilized by large market participants,

well, we see that this liquidity number

one can act as a magnet for price simply

because the liquidity and orders taking

place inside of this range won't be big

enough to suppress a natural drift up to

this level. And number two, as well as

acting as a magnet, can act as a

significant reversal point because once

those equal highs are swept, we will see

all of these buy orders released into

the market. And large participants can

take the other side of those trades in

the form of sell positions. They can

absorb all of the buys by selling

massive amounts of contract into the

market against the buy positions that

get opened. All right? So essentially

they help the new buyers, the people

getting stopped out and entering

breakout trades to fulfill their orders

by selling huge amounts of contracts to

them. This then allows them to be short

on a market without obligation to buy

back contracts later. And this massive

influx of new selling pressure as well

as the absorption of all the buying

pressure drives the market down into a

new low. So that is how equal highs work

in a market. Now, I don't know how far

along your trading journey you are, but

I'm sure at some point you've had these

situations where you've set up what

looks like a perfect trade and then the

market has just about taken you out of

the market before running perfectly

towards your target. Okay, people see

these as stop hunts, liquidations,

that's what people call them. Stop loss

hunts is a reasonable name. It's not

hunting your stop loss to be malicious,

but it does feel that way when you know

you've gotten into a trade and then the

market's come through, perfectly pierced

your stop, and then run all the way to

your target without you. It's a horrible

feeling, but it generally happens

because of this liquidity. And when you

understand it, you can then tailor your

trades to essentially be looking to get

in here. Okay? Now, there are ways to do

this. We'll talk about it a little bit

later, but this is what we're trying to

do with this new liquidity lesson,

right? We are looking to position our

trades in line with the sweeps we see

rather than being the liquidity for the

big players by getting in too soon.

Okay. So, a simple rule while we're here

would simply be never sell below equal

highs. If you are sitting in an area

like this, this or this or anywhere down

here and there are equal highs or a

resistance level live in the market

above you, do not get into a trade until

that level has been swept. When you see

the sweep, then is the time to be

looking at getting into shorts somewhere

around here because you can then

piggyback the high momentum, high

liquidity, high pressure movements to

the downside. All right. Now, for the

case of equal lows, it is yes going to

be exactly the same. So, if we just flip

this upside down, in this case, we would

have sell orders

because this is a support floor and

these would be classified as equal lows.

So, it's exactly the same, but it's on

the buy side. It's the bottom of a

downtrend. It's where people are looking

to buy. They see exhaustion. They think

the market's going to go up. They get in

at these levels, but then the market

sweeps those stop losses and then out

the back of those stop-loss orders

builds enough buying pressure to drive

the opposite way. Okay, so that's how

equal highs and equal lows work. And

obviously, that's what we want to do is

join them at the prime point instead of

getting in prematurely and getting

killed by these sweeps. So, let's jump

over to a real chart and take a look at

what this can look like in the market.

Just one quick note, what you're

learning here about technicals in the

boot camp is necessary, but technicals

alone are not sufficient to get you

where you want to go. See, most traders

don't get stuck because of what they see

on the charts. They get stuck because of

the habits, risk behavior,

decision-making under pressure, and

self-sabotage patterns that simply don't

show up in technical analysis. It's

things behind the scenes. Now, I've made

a super quick 15-minute class, which I

think breaks all of these down in a way

you probably haven't seen before and can

truly transform the way that you trade.

So head to the link in the description

after this class, not now. Click the top

link and watch that class. Okay? And

with that said, let's get back to the

boot camp. All right. So if we're

looking at this chart and we're

interested in buying, just for example

sake, I'm not going to go into big

picture context. We would not want to

buy from what some people will

traditionally see as a good buying point

of this support floor. Okay? Now, the

reason we don't want to focus on support

is pretty clear by this point. What we

do underneath the support floor is

create liquidity. So many traders are

going to see this line. They'll see this

tap and this tap and they will

anticipate that the next time the market

taps this level, it should lead into

further buys because it's created two

reactions already. But the truth is that

doesn't really make much logical sense

other than obviously the basic education

of imaginary line creates reaction. But

when we think about what the imaginary

line actually does, it creates

liquidity. Okay, we've got sell stops

and we've got stop losses beneath this

level. With those in place, we

understand that a likely outcome rather

than reacting on the level is to take

the level out, trade beneath that point,

and then create a rally to the upside

from there. Okay. Now, if we look to the

upside, we've got these two, this is

what I classify as relative equal highs.

So, they are not quite direct, but they

do work in the same way. above this

swing high and these relative equal

highs, we will create liquidity as well.

So this is going to be in the form of

buy stops and stop losses. Okay, so what

we could do if we were to get up to this

point is identify the market for

potential reversals and then trade

towards the low because this is going to

act as liquidity, a magnet, a target for

price, right? these equal lows and if

the market traded beneath then we could

look for a sweep and for the market to

trade towards the high because as well

this is going to act as a magnet for

price too. All right, so we're not

always going to be confined between two

levels. We won't always have equal lows

and equal highs at the same point. But

drawing the point home, what we're

looking for when we see these equal

highs and equal lows is number one,

these will act as a magnet for price. So

whichever one gets hit first is likely

to lead into the other as a target. And

number two, of course, they create good

entry points when they are swept. So we

could look at this kind of

conditionally. If we sweep the low, we

look for buys towards the high. If we

sweep the high, we look for sells

towards the low. Okay? Because there's

that magnet liquidity either side. Now,

in examples where we don't have equal

highs and equal lows either side of a

range, we would simply just use bigger

picture market context. Okay? So if we

created equal lows like this for example

and we had our demand zone or something

here well we could look for a pullback

trade through the equal lows and then

trade higher because the overall trend

is bullish. So in most cases we'll be

using big picture context but in some

cases where we have clear liquidity

ranges with equal highs and equal lows

around the range. These become very

simple ways for us to trade from one

point to the other. All right. So here

we would see people buying in to

visualize what most people are looking

at here. They will see that reaction.

they'll be buying the market stops

beneath the low especially with what

people see as an engulfing pattern. This

is a pretty basic confirmation pattern

that people use. So that would be a

pretty shorefire trade that a lot of

people will be taking from this point.

This of course with the stop loss

beneath the low creates a massive amount

of liquidity which is then likely to be

taken out. Okay. So if we see what

happens next, we get a push beneath

pushing to those sell stops and stop

losses. And can you see here to

highlight what we've been talking about

how aggressive this movement is now? So

as we push towards those sell stops and

those stop losses, we have a pretty

explosive move down. Right? This of

course is an influx of a significant

amount of selling pressure being pushed

into the market by stop- losses being

triggered and breakout traders

triggering additional sells. And then

that absorption that we've been talking

about where the sell orders are getting

absorbed by buys. We see here these two

large wicks. We see here this additional

large wick and we see this point with a

very large candle body which has closed

higher than the previous. This is the

absorption we talk about. All of the

selling pressure that entered the market

around this point has been pushed back

upon by buyers and we've driven up to

this point very quickly. Now, this is

where we lead into an actual tradable

opportunity. So, if we look at some of

the internal structure, okay, at this

point, we've got these kind of equal

highs. Again, look at these highs and

these highs. Essentially, we're looking

for the market to break up into the

range. Okay, so we'll keep these in mind

given the context. We have this

liquidity equal high is going to act as

a target for price. We see here when the

market breaks up, pushes through these

internal highs, pushes over these next

highs as well. Well, this is the first

kind of point where you're going to see

each of those concepts that we've talked

about in the boot camp so far coming

together. Okay, so here we see a demand

zone. Ahead of the demand zone, we see

an imbalance and then we have a break of

structure here. So, we're seeing

structure shifting. Okay, this is

internal structure, but it's good for a

rangebased trade like this, liquidity

based trade. And then we have, of

course, the market structure is up,

imbalance is open, demand is open,

liquidity's been swept, liquidity target

on the upside. So you could look at a

trade like this, buying from this demand

zone with a stop loss under the zone cuz

it's efficient, and a target up into the

high, right? So that's kind of how you

would build a trade out of the

information we've got here. Now, if we

just play this market forward, you'll

see we get a tap in, the market trades

into that demand. We no longer have

imbalance. We still have maintained

bullish structure and we still have this

very clear kind of magnet price target.

And as you see, we get a rally straight

up into that point. Okay. Now, when we

hit this high, we didn't create

reactions and reverse to the downside,

but that is because, and I won't go into

it too much, this is actually a bullish

structure on the higher time frame,

right? So, this was coming from a point

of interest. Uh therefore, in a bigger

picture, if we considered all context,

this could have been used to take the

market further. But I wanted to just

show you this confined range opportunity

that we get between swing highs and

swing lows that create equal low and

equal high liquidity. So that's an

example of first of all avoiding bad

trades by not buying off of the support

and second of all identifying that

absorption that structural shift and

catching good opportunities once the

market has reversed in your favor with

very clear targets in this case being

the equal highs. So that is a full

rundown of how this equal high and equal

low liquidity looks in real time. So

here is another example where equal high

and equal low liquidity comes in. But at

this time in the context of a clean

trending market. All right. So what

we've got going on here is a

downtrending market. We would ideally in

this situation be looking for a

continuation. So we want to sell from a

supply zone to continue the overall

downward direction of the trend. Now,

some traders may look at near-term

supplies, such as before they were

filled, an area like this supply, or as

of currently, maybe an area like this

supply, right? Given that we've just

pushed into a new low, some traders

would look at these opportunities to

sell this market down thinking this will

be the continuation point. However, if

we just simply look at the highs here,

we can see we've got these one, two

equal highs. Okay, so with the liquidity

up here, we've got a pretty good idea

that the market is likely to take out

these highs because these will be a

resistance and above resistance, we will

have liquidity. That liquidity is

significant amounts of buy orders. So if

we have any institutional participants

who want to sell, we are likely to see

the market naturally drive up towards

this point before we see this kind of

flipped absorbed into sell orders, which

would then take the market lower. And

this is where those stop-loss hunts come

in where people get stopped out trading

from support resistance just before the

market makes the pure movement. Now,

here is an example where we compare

equal high liquidity with the other

factors that we've looked at in the boot

camp. So, obviously, first things first,

we've got this downtrend. Okay, so we

have a structure. Second of all, we have

some imbalance above the equal high

liquidity. And third of all, we have

what we can classify as the extreme

supply zone. So, we had a supply here,

but it was filled by that wick there.

Then we created this supply before the

imbalance and this one hasn't yet been

filled. So this is a viable supply zone

for us to look to sell from. Now when we

see the equal high liquidity, we can use

that to filter out this zone as a bad

zone, a zone that we wouldn't want to

trade from because although it is a

supply zone and it does have imbalance,

it's not one we're going to be

interested in given that it's sitting

underneath a point of massive liquidity.

So, what we could do if we were looking

for a trade here is wait for these highs

to be swept and use this near-term

supply zone as our actual execution

point where we would place our order

because if the market can reach into

there, that would be the point where it

starts to absorb the sell orders and

also of course collect new supply from

that premium price level. Right? So, a

trade that you could look at from here

would be like this. Selling supply after

liquidity has been taken and trading the

market down to make a new low because of

course we're currently in a downtrend.

So playing this forward to see how it

goes. We come into that first zone. As

you can see, we immediately take that

out. We see that influx of buying as all

these buy orders are triggered into the

market. And then as soon as price hits a

clear point of kind of premium price, we

see a pretty quick selloff back to the

downside, which creates the new low in

the trend. All right, so that's what

your setup would look like. Now, of

course, this one didn't work in the

traditional sense of immediately sweep

reversing. What it did do though is

actually combine factors that we've

discussed how we're always looking at

market psychology. Now you may think

well this didn't work because it didn't

immediately reverse from the equal

highs. But if we think about the buyer

seller psychology here this is a point

where significant buying is injected

into the market right so it makes sense

that the market runs up because no one

executes just here knowing that the

premium price is just above. And when we

come into that premium price zone, the

supply zone, we then see the influx of

selling pressure as people absorb those

buying orders and flip them into

significant shorts. Right? So because

that supply zone is there, it's more of

a core point for the market to trade

into. So sellers allow the buying to

take place for a short while and then

the orders go on in mass at this clear

premium price point. From there, we see

short selling commence and a very very

very quick drive down because at this

point there's really no resistance from

buyers. Okay, we've swept liquidity.

These people are out. Buyers are no

longer interested in getting into a

market that is sinking this fast when we

see a massive influx of money injected

into the market on the short side from

this premium price level. So, we did two

things with this. First of all, we

identified this clear supply, the best

supply to sell from. And number two,

using the liquidity, we filtered out

taking a trade from a bad zone. It's a

bad zone because, as we said towards the

start of the video, never sell below

equal highs, never buy above equal lows.

That is a classic rule. And because we

saw these equal highs, it stopped us

from getting in at this zone, which of

course would have got us destroyed.

Instead, we managed to get in from this

zone. And that's where the best trade is

going to come from. Okay. So, to quickly

recap everything we've learned in this

class, equal highs and equal lows

formulate in the markets under the guise

of what a lot of people see as support

and resistance levels. Now, we derive

from these levels, which is a point

where 1, 2, three, or more highs at the

same point or lows at the same point

have been created. We don't look at them

in the standard support and resistance

sense, but we look at them as areas

where significant buying and selling

order pockets are going to be created.

Price moves towards orders. It moves

towards money and then it reacts from

the points where the most significant

amount of orders are. So when we see a

point of liquidity like this, we know

the market will naturally be drawn to

it. And then when we see the market

drive into it, we will often times see

absorption of the orders and a reversal

the other way as institutional or large

market participants execute huge counter

trades against the liquidity that's just

been opened up. Essentially here we

force loads of buy orders into the

market and this allows someone to take

the other side and run the market down

with uninterrupted force. Equal highs

and equal lows can be used first of all

for filtering out bad zones. So avoiding

taking trades from zones like this and

as well as that taking the best trades

by looking at the points of kind of

premium or discount price around points

of absorption or just trading directly

from sweeps using structure as we did in

the previous example. When you

understand this, a whole new world opens

up in trading. A phrase you'll probably

hear or you may have already heard

before is if you don't see the

liquidity, you will be the liquidity.

And hopefully now you understand how

true that is because if you are not

understanding this concept and you're

not utilizing it in your trading, well,

you're going to be the person getting

snapped up in the fake zones like this

and getting caught in those traps. Now,

you've watched this class, you don't

have to. So, the next few classes are

going to be focused on liquidity as well

in different formats. You'll use those

ones a little bit less, but they are

incredibly valuable to know and

understand. And with that, I look

forward to seeing you in the next

episode. In the meantime, head to the

link in the description and watch that

15-minute trading diagnosis class.

That's going to change the way that you

operate behind the scenes, the things

that you can't fix with the chart. So

definitely check that out and I'll see

you in the next boot camp