Beat the market with this liquidity 'FAKEOUT' strategy...

I don't really like the usual way of

trading support and resistance, but I do

really like this liquidity trading

strategy. So, in this video, we're going

to talk about support and resistance.

What I don't like about it, what I do

love about it, how I trade it, and how

you can use it to win. So, with that

said, let's get into it. So, the common

way to trade support and resistance is

much like what you see on the screen.

for a support. It's basically an

invisible line that price retests

multiple times. The idea is to buy from

that level expecting the market to go

higher. The same happens on the sell

side. You would sell a resistance level

expecting the market to go lower. Now,

the other way to trade them is with

break and retests, which is what we see

taking place here. In this instance, we

have a resistance, which has reacted

multiple times, and then the market

broke through with this push to the

upside. Buying the retest would be the

move that most people would make, which

essentially means you would buy once the

resistance was retested again as a

support and then you would anticipate

the market to move higher. Okay, the

same goes as well on the sell side. If a

support floor breaks, you would look to

sell the retest as a new resistance. But

there is one big problem with all of

this, which means it's quite low

probability that this stuff actually

works. The one big problem with standard

support and resistance trading is

something that we call liquidity. So I'm

going to run you through from start to

finish as to how this works and why this

makes support and resistance in my

opinion not one of the best concepts to

trade. But it does itself when we add

liquidity into the picture provide

opportunities for you to take some great

trades and build a solid strategy kind

of against the standard flow of support

and resistance. So in this example,

we're looking at a support. A support is

a line that is drawn on a chart where

multiple touches of the same price area

have been created. So after the first

two taps, this is one, this is two. The

idea will then to be buy the market when

it hits this level. So we will have

buyers stepping in at these areas

looking to take this market back higher.

So what we actually then end up with is

a large collection of buys in and around

this point. Now standard education

suggests if you buy a support floor, you

put your stop loss underneath the low.

So the area just beneath the support

here will have lots of stop- losses. Now

let's think about what stop losses

actually are for a moment. If you've

bought a market and you've placed a

stop-loss, your stop loss is a sell

order. You've placed a buy order here or

here. And your stop-loss is simply an

order that will automatically sell your

contracts back to the market for a loss

if the market gets lower into here. So

what we actually end up with in the form

of stop losses here is basically a bunch

of sell orders because the buy orders

have conflicting sell orders which are

stop- losses which will of course sell

contracts to the market in the case that

the market comes lower. This will limit

the losses of the buyers but it will

essentially create a large pool of

selling orders that haven't been tapped

into yet. Alongside the sell orders we

will have sell stops. So remember when

we looked at that break retest

opportunity just before this. Another

way that people trade is when the market

breaks they will expect the support to

act as a resistance and the market to go

the other way like this. Okay. So we

have two lots of traders. We have buyers

buying support from here hoping for this

move. They have sell orders in the form

of stop losses beneath the level. And we

have breakout traders who are looking

for a break retest and continuation

lower. they will have sell stops which

is an automatic order that will trigger

you into a sell trade when a level has

gone. So now we have lots of sell orders

in the form of sell stops and lots of

sell orders in the form of stop losses

basically creating a large pool of

orders. Now these orders are referred to

as liquidity. So down here we have a lot

of liquidity. Now markets move up and

down based on the buying and the selling

that's taking place inside of a market.

We have lots of buyers in certain

instances and when buying is stronger

than selling markets go up and we have

lots of selling and when selling is

stronger than buying the market goes

down. But what actually happens when we

reach into large areas of orders is

basically large market participants have

an opportunity to take the other side of

the trade. If we have a massive

collection of retail sell stops sell

orders here creating

liquidity that means that a conflicting

party let's say an institutional trading

firm who wants to buy this market in

mass well this is going to be their

opportunity to do so when the market

comes into here because all of these

sell orders will provide liquidity for

buyers to come in. If we think about

where we are right now, if you wanted to

buy multi-million dollar contracts, you

wanted to put a massive order on for,

let's just say, random example, $100

million, it's going to be hard to do

that without moving the market because,

as we just said, when there's more

buying than selling, markets go up. So,

if you tried to buy massive sums of

money, you're going to get a staggered

entry, just like what I've drawn on the

chart. Your buy is not going to be

filled at this level. some will be

filled here, more here, more here, and

more here, which is going to leave you

with a very bad average price. Now, if

you consider all of the sell liquidity

that's sitting in here, if you could

just allow the market to run into that

level, well, now you have so much

selling taking place that you could get

the majority of your large order on

pretty much immediately because you

would have lots of sellers offering

their units to you at one given level.

So if you wanted to buy a significant

amount, the best place to do it is here

where there's a mass amount of selling

taking place at exactly the same time.

If we think about these buyers, we have

some buying here, some here, some here,

some here, some here, some here. It's

all kind of staggered. But if the market

drives through to here, every single

stop loss of all of these traders and

every single sell stop of the breakout

traders looking to go the other way,

it's all going to be hit in one go,

which provides that mass liquidity that

you could use on the conflicting side of

your trade to get yourself into a large

position. So, what we rarely see or what

we see less often is just clean moves

from support leading into new price

levels. We also rarely see clean break

retest trades. Most of the time the

market is not going to act in either of

these ways. What usually will happen

from an area of support or resistance is

something like this, which is you get

into a trade, it feels like a great

position, you think everything is going

to work just fine for you, and then the

next thing you know, the market stops

you out and then moves very quickly in

the direction that you wanted to go. And

now you're sitting here scratching your

head thinking, "How on earth did this

happen? I prepped a trade. It was all

perfect and then the market seems to

have stopped me out on purpose before

running to my target. Well, this I've

just explained to you. It's because of

the liquidity. Your stop loss is where

major orders are being allocated in the

opposite direction to your to the way

that you're now expecting it to go and

in the same direction as your initial

position was hoping to move in. So this

is why if you trade support and

resistance, you'll have noticed your

trades getting stopped out before moving

perfectly towards your targets. It's

frustrating, but understanding this

liquidity and understanding why it

happens as I'm explaining to you now is

very, very valuable because what if we

were able to actually join this move

around here after the liquidation had

taken place? Well, the good news is we

can do that. we can basically piggyback

the moves of institutional participants,

avoid the trap, and avoid getting

stopped out and join a little bit later

just as the big move is beginning. Now,

we're going to go to a real chart and

I'll show you how we put this into

action in reality. So, for this example,

we're going to look at the sell side of

a market. We're looking at it the other

way round to the example we just showed,

but everything is the same. So, what we

can see here looking at this market at

first glance is a resistance. Okay, we

have 1 2 3 4 five drives into the same

price level. So this creates a

resistance which most traders will see

as an opportunity to sell. What we have

here is lots of people stepping in and

selling here, selling here, selling here

and here. This resistance therefore

creates lots of liquidity above, meaning

sellers that have sold into the market

here have stop losses in this area.

These stop- losses are buy orders. When

you short sell a market, you are selling

a contract with a promise or the

obligation to buy it back later. That

essentially means that if the market

gets into this range, there's going to

be a lot of buy orders waiting for

someone to take the other side if they

want to. The other way of trading this,

as we've covered, is going to be through

break retests. So as well as the buy

orders in the form of stop losses, we

have buy stops which are orders that

will automatically trigger a buy if the

market pushes through this level. So now

we have buy stop liquidity and we have

buy order liquidity. So essentially what

we have in here is a whole lot of

liquidity. Okay. Now if we understand

there's liquidity above, we therefore

understand the likely scenario is going

to be the market will reach through into

this level. Ideally, no institutional

selling essentially will take place

under that level, which therefore will

naturally drive the market higher

because there isn't significant selling

pressure. And when we reach this area,

we could see institutional money coming

in in the form of sell orders taking the

other side of all of the buy stops and

buy orders in the form of stop- losses

that are triggered at the same time. So,

if we were looking for a significant

drive down, for simplicity's sake, we'll

target this low. If we were looking for

a drive down from here, the wise move

would be not to sell from this

resistance, but instead to wait for this

resistance to break and then look for an

opportunity to sell from up there. Now,

there's two ways that we can do this.

I'm going to show you both in the format

of this trade. So, if we let the market

step forward here, we see the

liquidation takes place. Everyone who

sold in this price region here has been

stopped out of this trade for a loss.

The majority of stop losses will be up

here. They're now out. They've lost. The

other thing is the buy stop traders who

are now stepping into the market are

very soon going to lose as well because

we see significant selling inflow which

actually brings the market back down.

Now, the first way that you can benefit

from this style of trade is with a more

aggressive entry. And a more aggressive

entry will actually zoom in on the price

action in and around this area to look

for a short opportunity to take the

market lower all the way from up here.

So, this would be your first way to get

into a trade. Now, this example, we're

looking at the 4hour time frame. We're

going to scale down to the 1 hour and 30

minute for this execution, but this

works across all time frames. Okay? Now,

if we step down to the 1 hour time frame

and take a look at the structure that's

been created up in this high and let's

remove some of this to keep it neat. We

now understand if there is a likely area

for reversal, it's going to be in this

area that we've just discussed. Right?

So, let's take a look at the market

structure, which we do this by looking

at highs and lows. We have a high, a

higher low, and a higher high. This is

only a very slight higher high, but this

high is pushed higher than the previous

one, which tells us that this movement

just here is the high of the move. And

then the significant structural low of

the move would be this level here. So

what we now have from a market structure

perspective is a sweep of the high and

then a push, break, and close underneath

the previous low, which is this low just

here. Now, this break of structure

indicates to us that this market is now

ready to move from highs into lows and

indicates the start of a new trend. What

we would then look to do is identify a

supply zone. For me, that's the last

candle before the impulse. So, the

supply zone I would work with here would

be this gray candle. I'm going to pull

it across a little bit just to cover the

wick. Basically, we're doing that just

for safety's purposes. The supply zone I

would look at would be this area here.

Okay. But I do want to cover the wick

because any stop loss I place here would

go above that wick just to be safe. Now

with this break of structure having

taken place, the markets pulled back to

this area of supply. So we would then

look to sell at that supply with a stop

loss above the high and then our target

could go down into wherever our natural

initial target was. In this instance,

that's going to be down at this low

1.9115, which is just this next demand

zone that I'm looking at for this

example. So, that is execution number

one. That is the first way that you

would look to get into one of these

liquidity sweep trades. Notice how

instead of selling resistance, we've

actually waited for resistance to break

and then found an opportunity inside of

market structure, which simply refers to

the high and low structure of price.

Right? We've looked for this entry model

here and we've sold into that expecting

the market to now make its downturn

because we've seen with this large

selling candle and the break in the

structure that the sellers are indeed

taking the opportunity here to sell in

mass. So this is opportunity one. Now if

we allow this market to run forward,

you'll see we get a large drive to the

downside which is very very good. But

we've only really come down towards the

lows of the range. We've only come down

to the point of which sellers were able

to get to previously multiple times. So

the sellers here managed to bring the

market down towards around this point

and the sellers here did it as well with

this drive down. So we're looking for a

more significant move which provides the

second opportunity which is the more

high probability or the higher time

frame more conservative opportunity.

Now, if we take a look back on the 4hour

time frame, which is where we initially

found this trading opportunity, we'll

leave opportunity one on for now, but

we're going to then focus on the higher

time frame structure as if we never had

a position. Now, we can look at this in

the same way from the structural

perspective. We have a high, a higher

low, a higher high. Now, the market's

broken and closed with these gray

candles underneath the higher low. So,

what we can actually do at this point is

look for a pullback to create a lower

high and then sell into a lower low. The

supply zone being the last candle before

the impulse. Well, that's for me going

to be here's the impulse. Here's the

last candle before the impulse. So,

we're going to use this as our supply

zone for this higher time frame

position. We would then place our

selling order on this zone, a stop loss

above the zone, and our target can go

down into the initial target we were

looking for the market to reach into.

Now we would see the market pulling back

to that level as a selling opportunity.

And as you can see, if we'd sold into

the market at this level, we would then

get our slow run down towards the

target, filling the position profitably.

So now we have two opportunities that

have resulted in a profitable outcome

for selling at this level. The first is

the larger reward, but it's also larger

risk. We're joining just as we get the

first indications that this could be a

liquidation or a liquidity sweep. The

second is more conservative. It's a lot

safer. We've seen a break of the range

now. We've seen confirmed validation

that sellers are taking this market

lower. So, this one is higher

probability. You're going to lose less

trades by taking this one. But, it's

only returned around 50% of the total

profit that the more aggressive position

would have given you. So, this one is

higher risk, higher reward. This one is

lower risk, but lower reward as well.

Regardless though, both situations

present to you number one, the problem

with support and resistance, and that's

the fact that there's liquidity above

these areas or in the case of a buying

opportunity, below these areas that is

likely to be taken out. And number two,

as well as showing you the problem with

resistance and support. It shows you how

we can take advantage of the weakness of

everyone who's selling here to number

one capture an aggressive highreward

trade from here once we start to get

that market reversal or following on

from that take this more conservative

approach. Once we see validation of

shorts and once we see the lows of the

range where the liquidity was created

broken we then get to sell here and take

it down to the more significant target.

So you'll notice even though we did get

some movement on the sell side in these

movements down, we were pretty confined

and we never managed to go and hit a

lower target or a more significant price

range. That only occurred after the

liquidity had been taken. This happens

because the significant selling coming

from institutional participants is

happening here, not here. So if you're

the person selling here, you are likely

going to create liquidity for the big

players who sell here and they will stop

you out. and then enjoy the profits that

are made on the run down as you sit and

lose and get angry because you got

stopped out before the trade worked in

your favor. But you don't need that to

happen ever again as long as you follow

this liquidity trading strategy. So

instead of selling from here expecting

the market to go down or instead of

buying from here expecting a break

retest to work out, wait to see if you

get a break in the structure after

liquidity has been swept. And if you do,

you can look to sell from here. And if

you want to play it even safer, wait for

that market to break down past the lows

of the liquidity range. And when the

market pulls back, you can take a

position like this one. Now, if you want

to build this into a system that got me

results like this last year and gets my

students results like this almost every

single week, then head over to the top

link in the description and you will see

my free course, seven steps to

profitable trades. In here, I'm going to

help you to build systems, simplify

trading, improve your trades, and become

a better trader. So, the link is at the

top of the description for that. That's

going to change the game. It's 100%

free. And if you don't want to do that,

then just check out this video next,

which leads on from the concepts we've

discussed