[Music]

how's it going everyone this video is

going to be about building a model based

off of internal and external liquidity

Concepts now if you don't know what

internal and external liquidity is

please go ahead and check out the video

linked in the top right before watching

this video for those of you that do we

will go ahead and hop into a PDF quickly

review and then talk about the model so

let's get started now the first thing

you need to understand is what is

internal liquidity internal liquidity is

just a fair value Gap now if you don't

know what a fair value Gap is we will

quickly review that but I also have a

video on that as well it is just a three

Candlestick pattern 1 2 3 in which the

wick of the first candle and the wick of

the third candle do not overlap showing

aggressive price action through this

area so you can see 1 2 3 these candles

do not overlap now the next thing to

understand is what is external liquidity

external liquidity is simply highs and

lows so you can see here we have a range

we have a swing High here we have a high

with a lower high on each side creating

a high so that is external liquidity

similarly down here we have a low with a

higher low on each side creating a swing

low so this is external liquidity or

sell-side liquidity and buy side

liquidity now the next thing we're going

to cover is the relation relationship

between the two but since price swept

and could not displace through this

external liquidity is likely to reach

back where internal liquidity now that

price reaches internal liquidity it's

respecting the fair value Gap and you

can see this closure here where do we

expect it to go external liquidity so

you can see price moves from external to

internal and back to external so now

let's take a look at the actual model so

this model is just going to use a higher

time frame level dropping down a time

frame I will look for internal or

external liquidity then on the lower

time frame I will look to make sure I'm

in a Kill Zone I have a stop raid a

market structure shift a fair value Gap

and then I will Target to R so for an

example of this when we swept this

external low and looking for price to

trade to internal then on the lower time

frame we get a market structure shift a

fair value Gap and targeting two are on

the way to this fair value Gap let's go

ahead and hop into to trading View and

go over a few examples of this so here

we are on NQ daily chart and you can see

that we took this low right here now

with this super aggressive close down

here I'm not expecting a retracement

right away so I'll let a few candles

form now if we're going to mark this out

we have a low with a higher low on each

side forming a swing

low now let's see what the next candle

does we get aggressive displacement up

violating this fair value Gap right here

so if I'm going to look for external to

internal I have a fair value Gap resting

right here right around discount of this

range here so using that as my drawn

liquidity or looking for price to draw

to this higher time frame level I'm

going to drop down to the hourly chart

so zooming in here you can see here we

have a candle where this Wick does not

overlap with this Wick so it is a fair

value Gap it is also the new day opening

Gap so having this marked out is our

fair value Gap let's see now that we

have internal liquidity if price reaches

into it during a Kill Zone can we frame

a

trade so here we are going through

London so now that price reached into

this fair value Gap if it is going to

continue to Trend higher and this is

going to form a swing low I'd anticipate

price going from internal to external

liquidity so now that we have our higher

time frame draw which is this daily fair

value Gap and then dropping down a time

frame we have a move from internal to

external liquidity let's drop down

another time frame and see if we can

find a setup so down here on the 5minute

chart you can see we reached down into

the hourly fair value Gap and we come

back up and shift Market structure here

so now I'm looking for the fair value

Gap and if you notice we have a fair

value Gap here as well as a fair value

Gap here so looking to take an entry I'm

going to take an entry on the start of

this fair value Gap but I want to allow

it to be able to trade down into this

fair value Gap I'll put my stop on this

fair value Gap candles low then I'll be

looking to Target 2 R which you can see

is just at these highs even though I

could Target 3.16 r with a total run to

the fair value Gap I'm just going to be

looking at 2 R and I could hold the

runners if want to so letting this play

out let's see what happens so there we

get tagged

in and we get a move higher towards

these highs completing the move from

internal liquidity to external liquidity

and skipping ahead you can see after

hitting RTP if I would have moved my

stop to break even on Runners they would

have been stopped out before reaching

the daily fair value Gap however if I

was just holding my whole position to

the Daily fair value Gap G keeping my

original stop it would have worked out

as well but for this model I'm just

focused on catching 2 R let's hop into

the next example so zooming back out to

the hourly chart you can see we have our

daily fair value gap which was just

targeted in the previous example so we

have an important daily level we just

swept an hourly high so external

liquidity and do we have internal

liquidity resting below well this fair

value Gap was mitigated on the previous

example we have a fair value gap down

here and that will act as our drawn

liquidity so I'm looking for price to

trade off this daily level and then use

the hourly external to internal to frame

a trade let's hop back down to the 5

minute chart to see how we could frame

something now down here on the 5-minute

chart you can see that we have price

Sweeping in this High here and then our

drawn liquidity is lower so we're

looking for price to displace below this

low to give us our shift and Market

structure and there we get displacement

below this low now the next step is to

look for a fair value Gap so here we

have a fair value Gap so if I'm going to

look to enter a position there where

would I want to have my stop well here

you can see most of this price action is

balanced above but in here it's a little

bit messy now I want to have my stop

over opposing candles let's see what

that would look like

but if it's a little messy let's go

ahead and zoom out a time frame so to

the 15 you can see here everything is

balanced you can see there's no fair

value gaps but we do have a little

inversion right here so ideally I'd want

to have my stop above that inversion

then look to Target 2

R going back to the 5 minute chart

another thing I could do is take a

position at the same spot have my stop

on the fair value Gap candles high and

then look to Target 2 R so let's see how

both of these work

out but here we get tagged in hit two r

on the first and two r on the second so

you can see either one of these would

have worked this is just a more

conservative stop loss than this one

here let's go ahead and let this play

out and see if we do reach that hourly

fair value

gap for this next example will also be

on NQ daily chart and so taking a look

at the last few days of price action

what do you see so if just marking out

previous days highs and lows you can see

that Thursday here swept Wednesday's

high and then Friday reversed closing

below the opening price here and you can

see how these previous day lows are all

lined up here and that is low resistance

liquidity so looking for a point of

Interest the two spots that I look for

like this is the opening

price as well as the mean threshold of

this up close candle now just in terms

of premium and discount of the range it

makes more sense to look at the mean

threshold here so dropping down to the

hourly I want to see when we enter a

Kill Zone or reach the point of

interest you can see as this fair value

Gap is holding it doesn't seem like the

opening price is going to push us lower

so we're likely to reach a little bit

further up towards the main threshold of

this you can see we're into London now

do we form a

high nope we do not we just kind of

consolidate and then as we enter to New

York we do reach up into the mean

threshold so this point of Interest now

if you notice on the hourly chart it is

a little bit messy here right so what

can we do can move up a time frame to

the 4our and this cleans it up a little

you can see we have a fair value Gap

right here or internal liquidity and

what do we have resting below these

previous day lows so that is our low

resistance liquidity or our

Target so now dropping back down to the

5 minute chart let's see if we can find

a sweep and an entry on a fair value

Gap so here we are we get a little sweep

of this 830 high and then we displace

lower creating quite a large fair value

Gap so getting our shift and structure

here so with our sweep here in our shift

inst structure we have a very aggressive

displacement down now ideally I don't

want to see this met with displacement

back up because if we have expansion

into expansion it's likely to go higher

so I can either look to take an entry

either at a premium of this range or at

the consequent encroachment of this fair

value Gap or I can let it start to trade

away before I enter in this case we're

going to just take an entry at the

consequent encroachment with my stop on

this high and then looking to Target to

R there we are let's see how this works

out and there we we go we hit 2 R

zooming back out let's go see if we run

these lows which was our draw on

liquidity and we do go run those lows so

if I was to leave Runners it would have

worked out however I'm just interested

in catching two r with this model now in

this next example I realized that not

everyone can look to trade intraday so

we're going to go over a higher time

frame example if you remember from my

important liquidity levels videos

previous candles High and low are

important liquidity levels so you can

see here previous month's low is an

important liquidity level from here I'll

drop down to the daily chart so here on

the daily chart you can see we took

previous month's low before making a

move higher creating equal lows these

equal lows are then ran out and so what

do we notice on the daily chart here

well we also have this kind of megaphone

pattern here which I'll talk about in a

future video but we have external

liquidity looking for where internal

liquidity and another thing you can

notice is this is sitting right around

discount of this range so with that idea

in mind we'll drop down to the hourly

chart and look for a shift in structure

and then a fair value Gap entry so if

we're looking for a shift in structure

we have the down move here I want to see

a market structure shift here and then a

fair value Gap entry

so here we get a market structure shift

and what do we have right here a fair

value

Gap so looking to take an entry there my

stop on this low and then looking to

Target to R which puts us right at these

highs resting right below the fair value

Gap let's see how this works

out takes a little bit of draw down here

and there we go we go and hit our TP so

this is a great example of moving time

frames around if I can't trade intraday

on The Daily hour and 5 minute chart I

can move that up to the monthly daily

and then hourly chart to get an entry

for either a swing trade or just a

larger time frame where I don't have to

watch intraday movement so here we are

with another example on the higher time

frames and what do we notice right here

we have internal liquidity or a higher

time frame level on the weekly chart so

I'm anticipating this to go internal

liquidity to external liquidity or reach

from this fair value Gap to this high

now dropping down to the 4H hour chart

from the weekly chart what do I want to

look for here well I could just use this

as my entry time frame and look for a

shift in Market structure and a fair

value Gap to then go higher but I can

also wait for internal to external on

the 4H hour chart and then drop down

lower for an entry let's see if we get

that so here there's actually a few ways

we could trade this but we reach this

external liquidity now we have internal

liquidity so I would anticipate price

dropping down into this internal

liquidity but since it is against my

higher time frame bias I would rather

not trade this retracement wait for the

retracement to occur and then trade the

expansion out of this so let's see what

the next candle does here we do get that

moved down now that we're internal

looking for external let's drop down to

the 15-minute chart looking for this

move from the fair value Gap to this

high so now that we're down here on the

15minute chart you can see we have that

internal 4-Hour fair value Gap reaching

for the external High I'm anticipating

this to be a market maker buy model do

we have a shift in Market structure we

do

so now from here I'm looking for a

retracement to a fair value gap which we

do have right here now let's see how

this plays out we actually make another

fair value Gap right here why would I

prefer this one well it's just closer to

a discount of this range as well as

lining up with the bodies of this

breaker block here now if I'm looking to

trade this I want my stop on the low or

below the down close candles here and

then I'll be looking to have my Target

at 2 R now this is a little bit over

this high but that is fine because we

are trading with the higher time frame

order flow let's see how this works

out here we do get tagged

in and there we go finally hit RTP there

now if we zoom out here you can see why

it's easier to trade with the higher

time frame order flow a retracement I

was just talking about earlier if I

didn't reach my 2 r it would have came

and stopped me back out but here I'm

anticipating price to reach for this

high so even if I was to let runners go

can get a very high R trade let's see

what

happens and there we go we continue

higher I hope you found this video and

model helpful I did give a few examples

of higher time frame setups as well as

intraday setups now I personally prefer

a daily hour and 5 minute setups as it

aligns with the formation of the daily

candle but I also dropped a few higher

time frame setups as I've been asked in

the comment sections to do so now I hope

you have a great rest of your day and

I'll see you guys next time have a good

one