EURUSD - Liquidity Trap
I see a potential Liquidity Trap above this high on EU.
There's going to be a lot of stops above this high as It's a fair swing point and as we know retail traders love having their stops above/below swing points.
If we can fail to close above this level I will short to the FTA highlighted by the horizontal line.
"Why are you certain there will be a reaction here?" - you might ask.
Well if short traders have their stops above this high, as price squeezes and stops them out they will have to buy their way out of the order which provides a mass of buy orders or liquidity to the institutional players who need that liquidity to get their full positions in the market. They will then enter short to squeeze out any long traders who have traded the breakout or predicted the change in trend.
And that's why we're in and out of these trades and will only trade to the FTA because you often find once price hits the FTA it can go either way.
There's going to be a lot of stops above this high as It's a fair swing point and as we know retail traders love having their stops above/below swing points.
If we can fail to close above this level I will short to the FTA highlighted by the horizontal line.
"Why are you certain there will be a reaction here?" - you might ask.
Well if short traders have their stops above this high, as price squeezes and stops them out they will have to buy their way out of the order which provides a mass of buy orders or liquidity to the institutional players who need that liquidity to get their full positions in the market. They will then enter short to squeeze out any long traders who have traded the breakout or predicted the change in trend.
And that's why we're in and out of these trades and will only trade to the FTA because you often find once price hits the FTA it can go either way.
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.