1. Where is the liquidity?
2. Liquidity withdrawal
3. The peak and the bottom
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1. Where is the liquidity?
Liquidity is concentrated around order areas and breaker areas, where institutional orders gather.
Order areas define supply and demand areas.
Breaker areas indicate a change in control, highlighting liquidity accumulation areas.
1.1 Where is the liquidity?
Order areas are price areas where institutions place large orders.
These areas often cause strong price reactions, and can indicate major support or resistance levels.
It forms when a strong move occurs after a period of consolidation.
1.2 Where is the liquidity?
This is considered a bullish breaker.
In the area surrounded by a circle, you can see the price.
1.3 Where is the liquidity?
A high-probability bullish order area acts as support, pushing prices upward.
However, if it fails, it turns into a bearish breaker.
It starts to resist price movement and pushes it downward.
2. Liquidity withdrawal
Liquidity withdrawal occurs when the price temporarily moves beyond a key level, such as a previous peak or bottom, to trigger stop-loss orders.
This lures traders into wrong positions hoping for a breakout, before the price reverses in the opposite direction.
2.1 Liquidity withdrawal
A change in market structure occurs when the price decisively breaks and holds above a previous peak or bottom.
This indicates that the current trend has changed, and the underlying supply and demand dynamics have reversed.
2.2 Liquidity withdrawal
After a strong price move, the unfilled fair value gap (FVG) represents a gap between the previous fair value and the new price.
2.3 Liquidity withdrawal
Has the order flow reached an institutional level?
Has the price withdrawn liquidity?
Has the price caused a change in market structure (CSD)?
Has the price caused a change in market structure?
If the answer is yes, it indicates that a high-probability order area may have formed.
2.4 Liquidity withdrawal
For a bullish order area, traders can enter aggressively by placing a buy stop order at the top of the bearish candles.
That is in anticipation of forming an order area.
2.5 Liquidity withdrawal
The less aggressive approach is to wait until the price breaks above the bearish candle peaks.
Then a buy limit order is placed at the top of the bearish candles with the expectation that the price will return to test the peak before continuing to rise.
3. The peak and the bottom
Peak area: price above fair value (above VAH or bearish order area), is viewed as high.
- Ideal for entering sell positions.
Bottom area: price below fair value (below VAL or bullish order area), is viewed as low.
- Ideal for entering buy positions.
3.1 The peak and the bottom
The price forms HH/HL structure.
After retracing to the last HL, the blue area indicates a bottom area (below value) where the red area of interest (POI) provides a buying opportunity.
The gray area (peak area) above value is considered high for buying; where the red areas of interest there are weak.
3.2 The peak and the bottom
In the picture on the left, the price bounces back to the bottom area, representing a buying opportunity.
On the chart to the right, the peak/bottom area was incorrectly identified in the bearish market correction.
3.3 The peak and the bottom (premium and discounted price)
The price oscillates between the bottom and top areas.
Strategic entry is executed in the bottom area.
While securing partial profits at 20% and 30% as the price moves towards the peak area.
Finally, this is an explanation of 'liquidity'
1. Where is the liquidity?
2. Liquidity withdrawal
3. The peak and the bottom
I hope this is useful for you.
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