Full transcript
0:00In this video, I'm sharing my favorite way
0:01to play reversals on the market through
0:03liquidity sweeps, only this time we are
0:04talking about exactly how to trade them.
0:06So how to watch for them, what areas to
0:08watch, how to enter the market, where to
0:10set your stop loss, and also how to set
0:11your take profit.
0:12So there's a lot of videos out there
0:14talking about liquidity from a very high level.
0:16This one gets into how to profit from
0:18liquidity sweeps in the market as low as
0:20the 15-minute time frame.
0:21So if we haven't met yet, my name is Justin
0:23Bennett, Forex trader since 2007,
0:25full-time trader since 2011, and as always,
0:27all of this is my opinion only and not
0:29financially.
0:30So let's get into the charts here, looking
0:32at the one-hour timeframe.
0:33Now, I'm using this timeframe only to
0:35identify the trend here on the EUR/USD.
0:38So this occurred here recently.
0:40And if you're watching this video after
0:42this trend formed, you know this price
0:43action here.
0:44But this right here, you can see the market
0:46was clearly making lower highs and lower lows.
0:48Now, we had a couple of setups here
0:50that occurred recently, and we talked about
0:52these in Discord, actually called out both
0:54of these
0:55on the DXY, which is essentially the
0:57inverse of the EUR/USD, but you can see
0:58them both labeled right here.
1:00Now before we get into the actual setup,
1:02what I want to show you is that this market
1:04was clearly making lower highs and lower lows.
1:06And a couple of things occurred here.
1:07I want to show you how to look for these
1:09areas in the market where you're going to
1:11likely get a reversal.
1:12And also think about context on higher time
1:15frames.
1:15So for example, if you're trading these or
1:17any pattern on a 15 minute time frame,
1:19you want to use the one hour or four hour
1:21time frames to really identify
1:23the overall structure of the market and
1:25that context on those higher time frames.
1:26So in this case, again, lower highs and
1:28lower lows.
1:29And you can also see where I've talked
1:30about this before, I've made a separate video
1:32on what I like to call a distribution
1:34channel.
1:35Now, the point of this is not to nail highs
1:37and lows.
1:37We're not trying to use this as
1:39support and resistance here in the market.
1:42However, you can see that clearly
1:43this market did find a resistance up here
1:45at the upper band of this channel
1:47and support down here at the lower band.
1:49And you'll see this over and over again and
1:50that's because markets love symmetry
1:52and said differently, markets tend to
1:55revolve around
1:56a central point, okay? So if you imagine a
1:58midpoint
1:59through this trend, and this again happens
2:01over and over again in a market
2:02where you essentially get distribution to
2:04the buy side up here,
2:06you get distribution buy side here, buy
2:08side, sell side,
2:09sell side, and sell side.
2:11this is your mean within a trend,
2:13markets are mean reverting, right? So what
2:15that means is that when you get moves like
2:16this here, the market tends to snap back
2:18and oftentimes move in the opposite
2:20direction.
2:21Once again, up here, it snaps back to the
2:23mean, then we get the move down here toward
2:24the sell side,
2:25and it snaps back and it just repeats over
2:27and over again.
2:28So armed with this information, what we can
2:29do as soon as we get
2:31these first few highs up here,
2:33we know that this now is potentially the
2:36top of a distribution channel.
2:37Now obviously at this point
2:38back here, we do not have this lower band
2:41just yet.
2:42Okay, but that's kind of the first sign.
2:43Now, the other sign here is if we take this
2:46off, because we don't technically need this
2:48to find these areas.
2:49Because if you'll notice here, on this move
2:51lower, okay, so going back here to this
2:52first one,
2:53if you'll notice here from this high up
2:55here down here to the low,
2:56if we draw our fibs, you can see where the
2:58OTE lines up right here.
2:59So I made a video too
3:01on OTE, which is optimal trade entry,
3:03and that's the area between the 62% and 79%
3:06retracements.
3:07And this was also a nice high up here, nice
3:09external high because you can see internal
3:11high here.
3:12We swept that, given us an external high.
3:14We also had a BOS form through here.
3:16Okay, so breakup structure down here.
3:18This is our external high from external
3:20high to external low.
3:21You can see again, OTE lined up right here.
3:24Okay, so
3:24that's the very first component.
3:26Now let's take a look here at this price
3:29action.
3:30So I'm gonna go back here and turn on bar replay
3:33and we're gonna look at this here in real time.
3:35Okay, so
3:36turning on to the
3:3715 minute time frame.
3:38This is the time frame
3:40that I do like looking for these patterns.
3:42Now you could use the one hour time frame,
3:44you could use the five minute, the one
3:45minute,
3:46whatever you prefer.
3:47I have found a lot of success with the 15
3:48minute though.
3:49Okay, so looking here at this high, I'm
3:51gonna remove this here just so we can start clean.
3:54Okay, so right here, we know that the
3:55market is in OTE.
3:56That's the very first factor.
3:58Okay, now what you're gonna notice here
4:00is that we got
4:01a high up here, okay,
4:03and this right here is what we're looking for.
4:06So when you get this high that forms,
4:08notice how we wicked above, and remember,
4:09we are in OTE over here
4:11based on this high.
4:12So remember, this here on the 15 is what we
4:14just looked at on the hourly,
4:16and you can see this dark green area, this
4:17is where we're looking for a potential
4:19continuation
4:20of the downtrend.
4:21So that's the first thing, context is key.
4:24Now, looking here at, again, this high up here,
4:26you can see that we had the market wick
4:28above here.
4:29So this is what's key.
4:31So it's a three-step pattern.
4:32I made a video on this before, so it's the
4:34first step over here.
4:35The second step here is that wick above.
4:37And then the third step is gonna be to
4:40break the low,
4:41in this case,
4:42that triggered
4:43the sweep.
4:44So in this case here, we can clearly see
4:46that this right here is the low
4:48that triggered this sweep.
4:50So the moment that we get acceptance below
4:52here, which is just one close below,
4:54then we know we have a confirmed short
4:55opportunity here.
4:56Now, I want you to compare this to
4:58something like a change of character.
5:00So if you're looking for a change of
5:02character here, then technically you have
5:04to see the market get below here.
5:06Because this up here
5:08becomes your BOS,
5:10okay? And it's an internal BOS.
5:11I want to make that clear.
5:13but a BOS nonetheless, so you could
5:15technically call this a shift.
5:16Okay, and if we play this forward, you can see
5:18that we do get a break right there.
5:20So
5:21technically, again, this becomes more
5:23internal, okay, internal BOS and internal
5:25change of character.
5:27But again, it could be a shift in the
5:28market.
5:29Now, I want you to notice the difference
5:30here, though, in this pattern up here, this
5:32liquidity sweep that we got,
5:33off this high, stops formed up here,
5:35and we swept those and then had acceptance below.
5:38So in this case here, this was a rather
5:40large candle, so it's not that much of a
5:43difference, but you can see where this was
5:45confirmed
5:46before the change of character.
5:48So you can see the advantage here to using
5:50this versus just
5:51the traditional breakup structure, change
5:53of character,
5:54in this case here, where we had the BOS and
5:55the change of character down here.
5:57This right here does get you in the market
5:59sooner.
5:59And in my experience, this is a really,
6:01really reliable pattern.
6:03We've caught multiples of these in Discord
6:05here in the last few weeks.
6:07And so far, they are undefeated.
6:09Every single one that we've caught
6:10from an area that is
6:12significant on those higher timeframes has
6:14played out.
6:14Now, that's just the last couple of weeks.
6:16Obviously, they're not going to have a 100%
6:18hit rate.
6:18Nothing does out there.
6:20But you can see the advantage of using this
6:21right here. So
6:22let's talk now about how to actually trade this.
6:25So in this case,
6:26you can see that we have this low right
6:28here, this close right here that confirms it, and
6:30then you have this high. Now,
6:31once you get this,
6:33the only thing that would really negate this
6:35is if we came up and took out this high.
6:37Now, with that said, though, when you are
6:39trading these,
6:40it doesn't mean that you have to set your
6:43stop-loss.
6:44So let's say if you entered here on the
6:46break, let's just say you have a rule
6:47that you enter as soon as you get
6:49acceptance.
6:49And I'm not saying that that's right or
6:51wrong, just as an example.
6:53If you were to set your stop loss up here,
6:55you can see that that would be about a 25
6:57pip stop.
6:58Now, again, you don't have to do that.
7:00This is extreme, in my opinion,
7:03because in my experience, what you tend to get
7:06is on this acceptance here,
7:08the market may come up and fill in this
7:10imbalance right here,
7:12but the chances of you coming up even into here
7:15are usually pretty slim with these.
7:17So you could technically have a little bit
7:19tighter
7:20of a stop loss.
7:21So something like this down here off of
7:23this high.
7:25Something like this just to get you in with
7:26about a 21-pip stop and entering here on
7:29the acceptance.
7:30Or if you're waiting for a retrace into
7:32this imbalance, then you'd set your limit
7:33order somewhere up here.
7:35But just for example purposes, if we just
7:37assume that we're gonna trade this as
7:39soon as the market accepts below,
7:41with a stop loss above
7:43this high up here, which is really setting
7:45our stop loss and hiding our stop loss
7:46above high right here.
7:48Not necessarily this one, but this high.
7:50Okay, just to kind of give us a little bit
7:51better risk-reward ratio.
7:52So from here, what we can do, in this case,
7:55because we have a downtrend,
7:57and because we have this recent low right
7:59down here,
8:00okay, this would be the most logical
8:01target.
8:03Even if we do that right there, you can see
8:04that that's about a 2.75R. A
8:08really nice R ratio.
8:09What that means is that your reward is
8:10going to be 2.75 times
8:13your risk.
8:13Now, of course, if you play around with
8:15this and you decide that
8:16something like this high over here is more
8:19acceptable for you, then that right there
8:21is going to give you a 3.7R.
8:22In other words, your reward is 3.7 times
8:24your risk.
8:25But either way, either when you go with
8:27more conservative up here or down here
8:29above the high, either way, you're still
8:31looking at a favorable risk-reward.
8:32It's still right around
8:34a 3R or three times your risk.
8:36So if we just drag this over here to
8:37account for
8:38any kind of time that's going to take for
8:40the market to get down here
8:41and play this forward, obviously we know
8:43this works out because we've seen it.
8:44But you can see here that if we move this
8:46over once again, play it forward,
8:48the market does take its time.
8:49This was also right around the holidays
8:50too, or close to the holidays. So
8:52the price action has been a little bit
8:54choppier than usual.
8:55But right there you can see that if we go
8:57back to an hourly timeframe, this was
8:59basically
9:00from the acceptance below here.
9:02So acceptance below over here to hitting
9:05our take profit,
9:06this was about 52 hours or so.
9:08just over 2 days.
9:10And again, that right there is a 2.8R, or
9:122.8 times your risk.
9:14So I mean, a really nice profit here,
9:16basically within about 48 hours.
9:17Okay, so that is the first one over there.
9:19From here, you can see that we get the move lower,
9:22the market comes back up,
9:23and from here, what you'll also notice is
9:25that from this high up here, which is our
9:27new external high, because remember
9:29that we do have a BOS now off of this low.
9:32Okay, so we have
9:33a BOS down here.
9:35That makes this up here our external high.
9:37Okay, and this was really nice too, because
9:39again, we have internal liquidity here.
9:40We swept it with this external high.
9:42So this high up here now from this high,
9:46okay, down here to the low, you can see
9:48that right here, this dark green area,
9:50once again, right there into the bottom
9:52portion of OTE.
9:53So again, perfect, right? We came right
9:55here into this area.
9:56So the moment that happens,
9:58then we know that we are looking for a
10:00potential reversal.
10:01And what do we have right here?
10:03So if we go back here
10:04and once again, drop down to the 15 minute
10:07timeframe, I'm gonna get rid of this
10:08just so that it's nice and clean and see
10:10what we get.
10:11Now there's our first high.
10:12So if we draw a
10:13level off here, we know the stops are
10:15building above here.
10:17And let's just see what we get.
10:18Now the moment that we get that wick above,
10:20I am immediately looking for a close below
10:24the low that triggered it.
10:25So that right there.
10:27is going to be this low right here.
10:28They're pretty much equal lows through here,
10:30but in this case, if this low was a little
10:32bit lower,
10:33then this is the one that I would use
10:34because this is the low
10:36that triggered the liquidity sweep.
10:38Very, very important.
10:39From this low down here, drag my level over.
10:42The moment that we get a close below this,
10:44I know that we have acceptance.
10:46Moving forward here, let's see what we get.
10:48You can see right there, too, that this
10:49level is protected.
10:50Buyers are trying to step in
10:52and defend this.
10:53Okay, so right there, you can see that we
10:54do get the close below right here on this
10:56candle.
10:57Now, again, following our rules, right, the
10:59moment that we get the close below,
11:00we are going to enter.
11:02Okay, so very, very simple.
11:04Now, in this case, we did get a retest of this,
11:06but we're just going to follow our rules
11:08and say we're entering here
11:09with a stop loss.
11:10In this case, I would be putting it above here.
11:12However, the one thing you've got to be
11:13careful of
11:14in this case is you do have a little bit of
11:17a fair value gap up here above the high.
11:19Okay, so you've got to be a little bit
11:20careful there with this.
11:22So in this case, you might have to go a
11:24little bit higher with this, like up here.
11:26However, in that case too, if your minimum
11:28is a 3R, which mine is,
11:30meaning that your reward has to be three
11:31times your risk,
11:32the issue with that is that down here to
11:33the lows, you can see it's about a 2.38.
11:36So that's kind of the issue there as well.
11:38So if you're going to get a 3R, you'd kind
11:40of have to go here.
11:41You'd kind of have to go above this high
11:42over here,
11:43which would give you about a 3.5.
11:45But you'd have to understand too that if
11:47you were to do that, you'd
11:48have to understand that there is a chance
11:50that you get stopped out up here.
11:52Now, even if the market were to move up
11:54here, I want to be clear,
11:55even if the market were to move up here and
11:57take out this high,
11:58it doesn't necessarily mean that this is
12:00negated.
12:00It doesn't invalidate this setup, because
12:02we've already had acceptance below
12:04this low back here that triggered the
12:06liquidity sweep.
12:06So this is very similar to something like a
12:08change of character, where even if we have
12:10a move up here in this area, it doesn't
12:11necessarily negate this pattern.
12:13So you've got a couple options here.
12:15You either put it above the high, knowing
12:16that you could get stopped out.
12:17However, that gives you about a 3.7R,
12:19or you go a little bit higher up and you're
12:21looking at maybe a 2.5R or so.
12:24So if we did something like this here, just
12:26to be a little bit more conservative and
12:28move this over in case it does take some
12:29time again
12:30and play this forward, let's see what we
12:32get here from the euro.
12:33So right there we move around, we're
12:34chopping around a little bit, and right
12:36there we get a little bit of a wick into here,
12:38but no big deal.
12:38All we're doing here is just taking out
12:40some of the liquidity that formed
12:41above these recent highs.
12:42So moving this over because it is taking a
12:44bit of time.
12:46So playing this forward, I'm going to move
12:47it over again.
12:48Again, this was around the holidays, so
12:49keep that in mind that the market doesn't
12:51always take this long to play out.
12:53In this case here, though, it is.
12:54So here we go, right there.
12:56Our targets hit.
12:56Now, in this case, once again, if we move
12:58over here, let's take a look at the hourly
13:00and see how long this took.
13:02Okay, so from
13:03the
13:04drop lower, from the confirmation below,
13:06that acceptance,
13:07You see over here to our target, we're
13:08looking at about 68, 69 hours. Okay?
13:11So again, less than three days.
13:13Less than three days to achieve
13:15a 2.5R.
13:16Now, if you had moved your stop loss down
13:18to this high back here, again, it would
13:20have been over 3R, meaning that your reward
13:22was more than three times your risk.
13:23But 2 examples right there.
13:25And again,
13:25in Discord, we recently just last week
13:27caught four of these
13:29on the charts and every single one of them
13:30turned into a profit.
13:31And it wasn't even these two, actually.
13:32It was four other different ones.
13:34Now, I do want to show you something here
13:35before we finish up is if I go back here
13:38to
13:39this one.
13:40So what I want to show you
13:41is I want to show you something on the
13:44one minute time frame. So
13:45the reason that this pattern works.
13:48is because, and for some of you, this might
13:50be an aha moment, it might blow your mind
13:53here a little bit.
13:53If we look at the one minute timeframe and
13:55just play this forward, it's gonna take
13:56some time to play out.
13:57But right here, you can see that on the one
13:59minute,
13:59this right here wasn't a wick above.
14:02Instead, we got acceptance above.
14:04We actually closed above here.
14:05So
14:06that's a little bit
14:07different on the one minute timeframe.
14:09And then from here, we come down
14:12and we test this level, we bounce around a
14:13little bit, find support there, we actually
14:15closed below a little bit earlier.
14:17But the point that I want to make here is
14:18that the reason that this setup works
14:21is because it is very, very similar to a
14:24change of character.
14:25In fact, it kind of is one.
14:27So a liquidity sweep on something like the
14:2915 here, where you can see that we get the high
14:31and we get a wick above,
14:33on the 15,
14:34it looks like this.
14:35On the one-minute timeframe, or sometimes
14:37even the five-minute timeframe,
14:38you actually get acceptance above here,
14:40in which case it's more of a change of
14:42character.
14:42So this just goes back to the notion
14:44that it's not just a matter of
14:47Drawing a bunch of lines on a chart
14:48and entering into the market,
14:50it's about looking for the intent of the
14:52market, looking at what the market is
14:53actually doing under the surface.
14:55And all it's doing here is engineering
14:56liquidity above this high
14:58and then taking that liquidity
15:00and then reversing.
15:01So what's happening here is large sellers
15:03are piling in up here,
15:05and that's exactly what this acceptance
15:06above the high is,
15:08and then the confirmation is this.
15:10So it doesn't necessarily matter
15:13that you're closing above here on the
15:14one-minute timeframe or you're wicking
15:15above on the 15-minute timeframe.
15:17Again, the intent
15:18is there regardless of the timeframe.
15:20And so it's not just about this level, it's
15:23about what is the market actually doing here.
15:25It's showing you that large sellers might
15:27be piling in,
15:28this down here confirms it.
15:30And you'll see this pattern over and over again,
15:32but again, context matters.
15:34Notice that if we go back to the hourly
15:35timeframe, neither of these patterns
15:38occurred in isolation.
15:39We were not trading these in isolation.
15:42They were not trading in a silo.
15:43We had a downtrend intact.
15:45Both of these occurred with an OTE of
15:47external highs and lows.
15:49All right, so I hope this video has helped.
15:50If it has, be sure to keep it locked in here.
15:51Subscribe to the channel
15:52and check out the video right here too,
15:54because this is gonna show you how to
15:56identify premium and discount in that OTE
15:58area so that you can be much more patient
16:00when you're waiting for those trades.
16:02Until next time, trade wallet there.