🛑Why Does the Price Always Follow Your Stops? 🧐
📢Many traders have noticed: as soon as your stop-loss is hit, the price immediately turns in your favor! This is not a coincidence. This is the “Golden Rule” of price movement, and it explains how impulses are formed in the market.
🔑 Golden Rule of Liquidity
The market moves where there is liquidity. And the most liquidity is always concentrated in clusters of traders' protective orders (stop-losses):
🐻📉 Correction/Decline = Taking Out Long Stops
Mechanism: The price drops to the zone where buyers' SL (stop-losses) are located. These SL turn into market sell orders. A sharp influx of sales pushes the price even lower, creating a “wick candle” and giving large players a profitable opportunity to take a long position.
Essence: Take out buyers' SL, then go up.
🐂📈 Growth/Impulse = Taking Out Short Stops
Mechanism: The price breaks through the level where sellers' SL (shorts) are located. These SL turn into market buy orders (to close the short). This triggers a short squeeze, creating a powerful impulse for further growth.
Essence: Take out sellers' SL, then go down (after redistribution).
