Internal & External Liquidity (Daily Bias) - ICT Concepts

Introduction

This tutorial will guide you through the concepts of internal and external liquidity in trading, as discussed in the video "Internal & External Liquidity (Daily Bias) - ICT Concepts" by TTrades. Understanding these concepts is crucial for making informed trading decisions and managing market risks effectively.

Step 1: Understanding Internal Liquidity

• Definition: Internal liquidity refers to the liquidity present within a trading instrument or market. It is influenced by the participants actively trading that instrument.
• Key Aspects:
  • Look for the volume of trades; higher volume often indicates better internal liquidity.
  • Monitor the bid-ask spread; narrower spreads suggest higher internal liquidity.

Step 2: Understanding External Liquidity

• Definition: External liquidity involves the broader market conditions and external factors that can affect the liquidity of a trading instrument.
• Key Aspects:
  • Keep an eye on economic news releases, as they can impact external liquidity.
  • Analyze market sentiment and trends that could influence liquidity levels.

Step 3: Using Internal and External Liquidity in Trading

• Practical Application:
  • Combine internal and external liquidity analysis to form a complete picture of market conditions.
  • Use internal liquidity to identify entry and exit points while considering external factors for timing.

Step 4: Examples of Internal and External Liquidity

1. Example 1: Observe a currency pair with high trading volume. This indicates strong internal liquidity, making it a suitable candidate for day trading.
2. Example 2: Perform a top-down analysis. Start from the macroeconomic level (external liquidity) and drill down to specific instruments (internal liquidity).
3. Example 3: Analyze a stock before an earnings report. The anticipation can influence both internal and external liquidity.
4. Example 4: Compare different trading sessions. Liquidity can vary significantly between sessions (e.g., London vs. New York).

Conclusion

Understanding the dynamics of internal and external liquidity is essential for effective trading. By analyzing both aspects, you can enhance your trading strategy and make more informed decisions. Consider practicing these concepts in your trades, and monitor how they affect your overall trading performance. For further learning, explore related mentorship opportunities and resources provided in the video description.