Liquidity Trading Strategy: (Types of liquidity and what to do with them)


You found liquidity. Now here is what yo do with it. In this chart price action I have marked out where previous types of liquidity existed.
At the left you can see there was an uptrend but this uptrend had no factors showing LOW liquidity. Only strong high liquidity. Using the rules below you can mark out liquidity levels and what to expect when price returns to these levels later on.

No indicator can do this for you. This is simple price action structure.
You can implement these rules into marking levels in your price patterns / shapes, if you like using those as well.

Welcome to the coffee shop everybody this is your host and Baristo Eric, and I'm here today to let you guys know about the difference between high liquidity and low liquidity pivots and when I say pivots I mean price levels in the market. I want you to keep in mind that this trick works on all time frames it doesn't matter what time frame you're looking at but it certainly works best if you're comparing the high time frame to the low time frame that you're trading on.

This is a price action trick and strategy that you do not need an indicator for. Which means you can never get this wrong as you long as you follow these rules but the minute you try using an indicator for this you're going to miss out on some important details.

Now obviously there's a few rules that you need to follow when you're looking for high liquidity or low liquidity pivots and in the image above you should be able to see it but in the text below I'll give you my breakdown of the 123 rule that you can really follow to understand what you're looking for.

Here's a few rules to follow:
1. Bullish candles make high pivots
2. Bearish candles make low pivots
3.the length of the Wick of the candle is the trigger to tell you what you're looking for.

You cannot find low or high liquidity in a market during the trend. You can only see it after the trend has finished and you are either currently ranging or you are in the alternate trend meaning you were in a downtrend and now you're in an uptrend or a sideways market. You want to look for these liquidity types in the previous trend but using the strategy in this video you can also find high and low liquidity in arranging markets simply by looking at the ranging market that previously took place.

The trick to finding liquidity in the market goes like this:
Finding Sell Liquidity (Resistance) in previous market moves.
If you were in a downtrend and now it has completed you can look backwards at that downtrend and find all the bullish candles that will reflect the rules you were looking for.
Look at the downtrend and find the bullish candles.
You want the bullish candles that had swing highs and their upper Wick is longer than their lower Wick.

If the previous market was an uptrend you simply wanna do the opposite:
and previously up trending market you wanna find all the bearish candles and those bearish candles need to have a swing low Wick plus the Wick on the bottom must be longer than the Wick on top. These will reflect your SUPPORT levels (Buy Liquidity)

One of the questions often asked is what do you do with these levels once you find them.

Once you find low liquidity levels you wanna mark them this way you can treat them as plausible breakout areas meaning that with low liquidity in these areas price will reach those areas later on and price will continue to move through them because there are very few participants trying to buy or sell in a low liquidity area.

High liquidity area however simply means there is a lot of volume lot of activity and when price reaches back to these levels that price will either stall or reverse at these levels.
High liquidity areas also mean that these are banks and institutions trading at these levels so price can pull away from it retest and then come back to it for a very large move initiated by that same level.

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Tuesday, 25 June 2024

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