The narrative

A beginner opens a chart and looks for an entry signal. That’s the wrong way round. The first question isn’t where do I get in, but where is price trying to go.

The method has a name for that destination: the draw on liquidity, price’s pull toward liquidity. Until it’s identified, every setup in the world is worthless, because the same pattern plays out one way or the other depending on the overall direction.

Liquidity is resting orders. They aren’t spread out at random: they pile up where everyone is looking. Below an obvious low there are sell orders. Above an obvious high there are buy orders.

This flips a very common reflex. People are often taught that a double top is solid resistance that will push price back down. In this reading it’s the opposite: a double top is a clearly visible pool of orders, and so a likely destination.

The market doesn’t just move toward liquidity: it actively creates the conditions for orders to build up where it wants to go.

What matters is the sequence. A sweep on its own proves nothing; a break followed by a real move in the same direction is just a break. What gives the trap away is the quick return above the broken level, with no follow-through.

The trap describes a general tendency: the market sets traps. Inducement, by contrast, is a precise object with a fixed place in a sequence. It’s the most important concept in the course, and the most often misunderstood.

Many definitions simply say that an obvious level gets swept before the move starts. That’s too broad: put that way, you find inducement everywhere, so it’s useless. Here the definition is strict.

Everything rests on the order of the four steps: the zone, a first contact that stops short of the 50%, the sweep of that low, then the move away from the Protected Low. If one is missing, the sequence is incomplete, and an incomplete sequence isn’t a signal.

On the sell side, only the words change: the first contact leaves a high, its sweep creates the Protected High, and the stop goes above it. The example is drawn inside two nested zones, a 1-hour order block with a 15-minute order block inside it, because that’s how the sequence most often shows up.

This counter-example is the most useful thing in the chapter. The two diagrams start the same and exit the same, to the upside. The first took something before leaving, the second didn’t, and that’s all that separates them. Learning to see that difference is what this course is really about.

NQ isn’t read on its own. It has a neighbor, ES, the futures contract on the S&P 500, which almost always moves the same way. Almost: the moments they split apart are exactly the ones that matter.

That’s what the method calls an SMT: a divergence between two correlated markets. One sweeps a low, the other refuses to. The market is no longer consistent, and that inconsistency is information.

Not all liquidity does the same job, and that’s what will set your exit targets in chapter 04.

External liquidity is a destination: the previous day’s and week’s extremes. Internal liquidity is fuel: the small highs and lows price collects on the way, which make sensible exits when you’re trading against the trend.

The daily bias isn’t a mood. It follows from how price reacts after taking a significant level of liquidity on a higher timeframe.

The read comes in two steps, in this order:

• Which significant level was taken recently? Last week’s high, yesterday’s low, a session extreme.
• How did price react right after? If it turned sharply the other way, the level was swept and the draw is on the other side. If it kept going, the next liquidity in the same direction becomes the target.