PA Academy

Liquidity Concepts
by Victorious 5
 OVERVIEW
1. What is liquidity

2. Sellside / Buyside Liquidity

3. (Relatively) Equal Highs and Lows

4. Market Structure

5. Market Structure Break / Break of Structure

6. Internal Structure

7. Fair Value Gap

8. Order Block

9. Breaker

10. Market Range

11. Volume Profile

12. Naked Points of Control

13. Abbreviations
 WHAT IS LIQUIDITY?

Liquidity = limit orders (SL, TP, entry) left on the market at levels of supply and demand

- Price is usually attracted to liquidity

- Markets wants to unlock (take, sweep) liquidity in order to move towards new levels of supply and demand

- Price is moved mostly by larger players in the market, they are targeting liquidity pools in order to move the market in their desired direction

- Best analogy: market taking liquidity to increase its volatility = snake eating the apple to get bigger

- Liquidity lies at different levels in the market, we are trying to predict where and put entries or TPs there because price is attracted to that
 SELLSIDE / BUYSIDE LIQUIDITY (SSL / BSL)
SSL = where Sell orders lay (Stop Loss orders from Longs)
BSL = where Buy orders lay (Stop Loss orders from Shorts)

Referring to the previous slide, these are 2 types of liquidity that market will seek to sweep.

This type of liquidity acts like a magnet to the price, marking good TP levels:
SSL = good TP for Shorts
BSL = good TP for Longs

Depending on the scenario, they can be good entry levels too, as price can reverse after sweeping a liquidity level:
SSL = possible entry for Longs
BSL = possible entry for Shorts
(RELATIVELY) EQUAL HIGHS & LOWS
EQH = more highs (relatively) at the same level
EQL = more lows (relatively) at the same level

More lows at the same or relatively the same level = more SL from traders who long

More SL from traders who long = bigger SSL = stronger attraction for the price to sweep that level

It is dangerous to put your long SL at this level, rather use it as TP for a short or potential long entry

Relatively equal lows are valid only if each one is higher than the other (a lower one sweeps SSL)

More highs at the same or relatively the same level = more SL from traders who short

More SL from traders who short = bigger BSL = stronger attraction for the price to sweep that level

It is dangerous to put your short SL at this level, rather use it as TP for a long or potential short entry

Relatively equal highs are valid only if each one is lower than the other (a higher one sweeps BSL)
 MARKET STRUCTURE

Bullish Bearish Ranging

 MARKET STRUCTURE BREAK (MSB) / BREAK OF STRUCTURE (BoS)
1. Continuation MSB / BoS 2. Reversal MSB / BoS

Higher chance of continuation of the trend Higher chance of reversal of the trend

Bullish Bearish Bullish Bearish

INTERNAL STRUCTURE

Not to be confused with an MSB!

No HH or HL was broken, so no MSB

For bearish MSBs, always look for a LL

For bullish MSBs, always look for a HH
 FAIR VALUE GAP (FVG)
FVG = 3 candle setup, where the middle candle has a gap left between the wicks of the neighboring candles

This usually happens when price moves too fast through a level, leaving inefficiencies behind.
FVG
FVG eq These inefficiencies come in the form of unfilled orders, which means there is liquidity left there.

This means that price will be attracted to these FVGs and will often mitigate them.

Once an FVG has been mitigated, price might reverse as the liquidity has been taken.

People consider an FVG mitigated at different levels: 50% mitigation or full fill (FF – 100%).

I consider an FVG mitigated at 50% mitigation, but sometimes I use FF too.

That is why the FVG eq (equilibrium, 50%) is an important level, used as entry or TP.

Mitigated FVG

Example: Indicator: anche’s FVG indicator

 ORDER BLOCK (OB)
+ OB = last bearish candle (or candle group) before a big move up
- OB = last bullish candle (or candle group) before a big move down

Buy orders were left unfilled in that area before the big move up.

When price retraces to that area, buy orders will be filled, driving the price up.

That’s why a bullish OB will act like a support area for the price, until it is mitigated.

A +OB is mitigated if price breaks below it and doesn’t react, as all buy orders would have been filled.

Sell orders were left unfilled in that area before the big move down.

When price retraces to that area, sell orders will be filled, driving the price down.

That’s why a bearish OB will act like a resistance area for the price, until it is mitigated.

A -OB is mitigated if price breaks above it and doesn’t react, as all sell orders would have been filled.

OBs are good entries, because price will react from them.

OBs should also be taken into consideration when setting TP:

Don’t put your TP below a +OB or above a –OB as price could react of them before your TP
 BREAKER
+ Breaker = - OB that was mitigated on the first touch, offering no reaction
- Breaker = + OB that was mitigated on the first touch, offering no reaction
Last bearish candle before big move up: Bullish OB with buy orders.

People long the OB, but price goes through it, offering no reaction

Sell orders left unfilled because of the fast move down through the OB.

People who longed the OB are now underwater and will likely close at BE if we return there.

Price returns to the breaker, filling the sell orders, driving the price down (acting as resistance).

Last bullish candle before big move down: Bearish OB with sell orders.

People short the OB, price goes through it, offering no reaction.

Buy orders left unfilled because of the fast move up through the OB.

People who shorted the OB are now underwater and will likely close at BE if we return there.

Price returns to the breaker, filling the buy orders, driving the price up (acting as support).

A Breaker is mitigated when price moves through it, as all buy / sell orders would have been filled

They can be used as entries the same ways as OB, and to keep in mind when setting your TP.
 MARKET RANGE
Usually after a trending move, price will range between 2 swing points

Important Range levels:

range high - shorts are favored
range low - longs are favored
range eq (50%) - no trades are favored

Usual Price Action in a Range:

range lows / highs get swept with a return inside the range (1, 2, 3)
range lows / highs get broken, with a retest of the range from outside the range, failing to re-enter of the range (4)

Markets trend 30% of the time and range 70% of the time, so knowing when and how to trade a range is an important skill to have.
 VOLUME PROFILE (VP)
Shows how much volume was traded at each price level

Important VP levels: Types of VP:

Value Area (VA) = where 68% of the volume was traded Periodic VP: VP of a certain period (hour, day, week)

Value Area High (VAH) – shorts area favored

Value Area Low (VAL) – longs are favored Indicator:

Point of Control (POC) = level with the most volume traded

High Volume Node (HVN) = other levels with lots of volume traded

Fixed Range VP: VP of a certain market structure

(range / impulse / price leg / other structures)

Free Tool:
 NAKED POINTS OF CONTROL (nPOC)
Level where price was traded with the highest volume in a certain range
After price exited the range, it never returned to the POC of that range, leaving it naked

Highest volume traded at a certain price means buyers and sellers agreed that that is a fair price for the asset.

That is why it usually acts as a magnet for the price, buyers or sellers need tend to seek equilibrium.

If price exits a range (periodic range or market range), the nPOC will act as a strong magnet to the price.

Daily nPOCs (d nPOC) are usually good targets for price to return to in the following days, making them a good TP level.

Market Range nPOC: Daily Range nPOC:

Abbreviations and definitions
SL = stop loss (where you exit an order with a loss because your idea was invalidated, to minimize bigger losses)
TP = take profit (where you exit an order with a profit, because the liquidity you were targeting was swept)
SSL = sell-side liquidity (where sell orders lie, usually SL of people who long)
BSL = buy-side liquidity (where buy orders lie, usually SL of people to short)
EQH = equal highs (more highs at the same level, more BSL)
EQL = equal lows (more lows at the same level, more SSL)
HH = higher high (indicative of a bullish market structure)
HL = higher low (indicative of a bullish market structure)
LH = lower high (indicative of a bearish market structure)
LL = lower low (indicative of a bearish market structure)
MSB = market structure break (market breaks a previous high or low)
+ r-MSB = bullish reversal MSB (higher high after the lowest low, market structure has high chances of becoming bullish)
- r-MSB = bearish reversal MSB (lower low after the highest high, market structure has high chances of becoming bearish)
+ c-MSB = bullish continuation MSB (higher high after highest high, market structure has high chances of staying bullish)
- c-MSB = bearish continuation MSB (lower low after lowest low, market structure has high chances of staying bearish)
FVG = fair value gap (3 candle setup where price inefficiencies lay, acts as magnet to the price because of the imbalances)
EQ = equilibrium (50%, middle)
FF = full fill (100%)
+ OB = bullish order block (last bearish candle before move up, will likely act as a support if price returns to it)
- OB = bearish order block (last bullish candle before move down, will likely act as a resistance if price returns to it)
VP = volume profile (periodic – PVP or fixed range – FRVP, showing how much volume was traded at each level)
VA = value area (where 68% of the volume was traded)
VAH = value area high
VAL = value area low
POC = point of control (level where most of the price was traded)
nPOC = naked POC (POC that is left untapped after exiting the range, will act as a magnet to the price in the future)
Special Thanks
At first, I did not intend to make this PDF public, but exclusive to the paid Discord groups I am active in. However, I remembered that
once (not even half a year ago) I was new to this space myself. I was avoiding any paid content, as there is already so much free content
to learn from. Without the free learning content I received, I would have never been in the place I am now, so I am simply giving back to
you what was offered to me at the beginning of my journey. In this way I want to thank Mindset_BTC, as his courses where the one
where I learned all this concepts from. For a deeper, more eloquent and better explained outlook an all these concepts please check out
his courses and then return to this PDF as a recap or easier way to quickly remind yourself of them.

On another note, simply learning these concepts is not enough. Risk management is the first ladder of your journey (read my or anyone’s
risk management threads or courses), the second ladder is learning these basic concepts, and the third and final ladder (for now at least)
is how you use these concepts. The best advice for this has come from my dear friend Follis, whose streams taught me how to use these
concepts, then him inviting me to Chroma was the biggest jump for me in terms of actually learning how to use what I knew. “Surround
yourself with people better than you, that’s the best advice I can give you”, he said, and Chroma was exactly that. I will forever be
grateful to him for that.

Once you start trading using these concepts it is very, very important to journal every trade you do, be transparent with yourself and
acknowledge your mistakes. By using these concepts wrong you learn how to use them in the right confluences and circumstances. The
person that inspired me to track and analyze every single trade I take was JONZi, I admired him from the beginning for doing that. Then
slowly he became one of the closest friends of mine in this space, consistently talking with him about our setups was another huge factor
in improving my trading. He’s not only a great trader, but a great person too. I aspire to be where he is right now, and by the time I am
there he will be even greater in everything he does.

Also, big thanks to Menno, together with whom I created PA Academy, our discord server where I apply and explain these concepts
more in depth.

Lastly, I want to thank every one of you for reading this, for wanting more from your life, for putting in the time to learn something new. If
you keep yourself on the right track in this beautiful journey of trading, you won’t be disappointed.
Useful Links

All these links are also hyperlinks if you click on the images in Page 1 and on the colored names in Page 16.

My twitter Page: https://twitter.com/victorious__5

Twitter Pages of the people I mentioned in the Special Thanks page:

Follis: https://twitter.com/follis_
JONZi: https://twitter.com/jonzitrades
(These 2 also helped me with proofreading this PDF so a big thank you to them again for this and for being my closest mentors and friends)
Mindset_BTC: https://twitter.com/Mindset_BTC
Menno_Crypto: https://twitter.com/Menno_Crypto

Discord Servers I am active in:

Chroma Trading: https://twitter.com/Chroma_Trading
PA Academy: https://twitter.com/PA__Academy

Sign up for Bybit: https://partner.bybit.com/b/victorious_5

For any questions feel free to DM me on Twitter, I will answer to all of you, but I can’t promise it will be fast as people in the discord
communities have “priority”. I don’t want to call it priority because I want to help all people equally, but that is the faster and easier way
to reach me.

Thanks again for reading this and hopefully it is useful to you :)