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The video tutorial explains the concept of liquidity using the analogy of selling a thousand iPhones. It emphasizes that a seller must go to where buyers are located in order to sell their products effectively, highlighting that this area represents liquidity—where money is present for transactions. As asset prices rise, they reach these liquidity zones where sellers can offload their units. The tutorial aims to teach viewers how to identify areas of liquidity on charts, allowing them to make profitable trades and avoid getting trapped in unfavorable positions. This understanding of liquidity is crucial for successful trading.