Study Notes: ICT Core Content – Liquidity Runs

These are my study notes from ICT Mentorship Core Content – Month 1 – Liquidity Runs. I’m documenting them for personal review and to share my trading journey.

Original ICT video: https://www.youtube.com/watch?v=22XkhpJR5eA

If you’re new to trading, you’ve probably heard terms like “liquidity” thrown around. But what does it actually mean? And more importantly, how can understanding liquidity help you become a better trader?

Let me break this down in simple terms that anyone can understand.

What is Liquidity?

Think of liquidity like this: it’s how easy it is to buy or sell something without changing its price too much. In trading, liquidity refers to all the buy and sell orders waiting in the market.

Here’s the key insight that most beginners miss: professional traders (the “smart money”) know exactly where these orders are hiding, and they target them.

The Two Types of Hidden Orders

When you look at any price chart, there are invisible orders sitting at specific levels:

Buy Stop Orders – These sit just above old highs. Why? Because when the market was at that high before, some traders went short (bet the price would fall). If the market goes back up to that level, they’ll need to buy to close their losing positions.

Sell Stop Orders – These sit just below old lows. When the market was at that low before, some traders went long (bet the price would rise). If the market drops back to that level, they’ll need to sell to cut their losses.

Smart money traders know this. They deliberately push price to these levels to “run the stops” – forcing all those hidden orders to trigger at once.

The Secret: Not All Liquidity Runs Are Equal

Here’s where it gets interesting. There are two types of liquidity runs, and understanding the difference will transform your trading:

High Resistance Liquidity Runs (Avoid These!)

Imagine the market is trying to reach an old high, but there’s a mess of price action in between – lots of ups and downs, multiple highs and lows that price has to fight through.

This is like trying to walk through a crowded room. You’ll face resistance at every step. The market will struggle to reach that target because there are so many obstacles in the way.

Trading Rule: Avoid these setups. They’re low probability and high stress.

Low Resistance Liquidity Runs (Trade These!)

Now imagine the market moves away from a level in one smooth, strong direction with very little back-and-forth movement. When it decides to return to take out stops, it’s like walking through an empty hallway – nothing in the way to slow it down.

Trading Rule: These are your golden opportunities. The market will slice through these levels like a hot knife through butter.

How to Spot Low Resistance Setups

Here’s a simple way to identify these high-probability trades:

1. Look for clean, one-way price movement – The market should move away from a level quickly without much hesitation
2. Minimal retracements – Very little back-and-forth movement in the opposite direction
3. Clear levels – The highs and lows should be obvious, not messy or overlapping
4. Fresh territory – The area between the current price and the target should be relatively clean of previous price action

A Simple Trading Framework

For Buying (Long Trades):

• Find an old high that price moved away from cleanly
• Wait for price to break above a short-term high (this confirms the direction)
• Look for small pullbacks to enter
• Target the buy stops sitting above the old high

For Selling (Short Trades):

• Find an old low that price moved away from cleanly
• Wait for price to break below a short-term low (this confirms the direction)
• Look for small bounces to enter
• Target the sell stops sitting below the old low

Why This Works

This isn’t some complicated theory – it’s based on human psychology and market structure. When traders get trapped in losing positions, they have to exit. Smart money knows where these exits are clustered and deliberately targets them.

You’re essentially following the same playbook as professional traders and market makers. Instead of fighting against the smart money, you’re joining them.

The Bottom Line

Trading doesn’t have to be complicated. By understanding where liquidity sits and how easily the market can reach it, you can:

• Pick higher probability trades
• Avoid frustrating, choppy markets
• Trade in the same direction as the professionals
• Experience less stress and better results

Remember: the market always seeks liquidity. Your job is to identify when that journey will be easy (low resistance) versus difficult (high resistance), then position yourself accordingly.

Start looking at your charts through this lens. Where are the old highs and lows? How clean was the movement away from them? Is the path back clear or cluttered?

Master this one concept, and you’ll have a significant edge over traders who are still trying to predict market direction with indicators and patterns.

The market isn’t random – it’s designed to hunt stops. Once you understand this game, you can play it too.

Disclaimer: Trading involves substantial risk and is not suitable for all investors. Past performance does not guarantee future results. This content is for educational purposes only and should not be considered financial advice. Always consult with a qualified financial advisor before making trading decisions.