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Smctrading

Mastering Liquidity in Trading: Unraveling the Power of SMC 🔥Liquidity is what moves the market. Liquidity and liquidity pools are created and targeted by the markets and a lack of understanding on this topic is the main reason why the trading mind fails even if the analyst mind is correct. Traders who have been victim to their stop losses being taken by a wick before price running in their favour are the perfect example of having the correct analytical mind but a weak trading one. Liquidity is unlike an order block or price inefficiency or anything else that can be physically identified on a chart. It is invisible, however, it is still possible to identify without the need of indicators or anything other than price action alone. Simply put, liquidity is money in the market. Typically, this money comes in the form of retail orders and stop losses. Knowing this allows us to understand that if the market targets liquidity, and liquidity comes in the form of retail stop losses, the market must be hunting and going against retail strategies. 🟢The first and most prominent of these retail strategies is the idea of support and resistance. On the chart we can see an example of what retail traders would refer to as a level of resistance. In doing this they would short price from this level expecting a move down. This creates a liquidity pool just above this ‘resistance level’ where the average retail trader would place their stop losses. This liquidity pool is now a target for the market. So instead of trading this move down, we wait for the liquidity grab and use the rest of this strategy to capitalise on the bearish move that we can expect. On the Chart is a demonstration of the market hunting liquidity before making its next move. Again this is where traders would be correct in terms of bias but incorrect in terms of trading. This is an example of what an informed chart looks like. Instead of highlighting support and resistance levels, we highlight equal lows and equal highs respectively. Equals are usually in the form of otherwise referred to double tops or double bottoms but can also be more than that. The key difference, however, is that we would anticipate the market hunting the liquidity above the equal highs and below the equal lows. Due to this, we avoid being a victim to the market stopping us out by a wick and falling in our direction. The second most prominent retail strategy or idea is the trend-line. Every time a trend-line formation is present within the market, we can now understand the amount of stop losses and, therefore, liquidity that would be sitting under this ‘trend-line’. Above is an example of the importance of recognising trend-line liquidity. Once the liquidity above the equal highs has been hunted, we need to establish the next liquidity pool in the market. Seeing a break above the ‘resistance level’ would be seen as a ‘bullish breakout’ by the average trader. However, we can identify that as a liquidity purge and higher high, in which case we can expect a higher low to be made - which would mean a bearish retracement. On top of this, we can see a build up of trend-line liquidity just above the discount end of the parent price range. This gives us an added confluence and confidence in the fact that we can expect lower prices with the liquidity underneath the trend-line as our first target. Above is an example of liquidity being grabbed on the bullish side (above the equal highs) sending the uninformed trader long based off of a ‘bullish breakout’, then hunting the liquidity on the bearish side (below the trend-line) and sending the uninformed trader short based off of the break of the trend-line. This is typical of the market - it shakes out impatient and uninformed traders on both sides of the market before making the actual move. Here is another examples of how trendline liquidity gets purged by the market. On the chart we can see a trend-line where many traders would be longing the market, unaware that they will be victims of a liquidity purge. Below we can see that liquidity purge below the trend-line which would send the average trader short. Using the rest of the strategy, we are able to understand that price will react from specific levels to go long Below we can see the completion of this market cycle with our levels being respected and the real bullish leg being made. 🔥🟠🔥🔥🟠🔥 BONUS CHEATSHEETS👇👇👇👇
Education
by algoat
2
Unlocking the Secrets of Price Inefficiency: Dive Deep into FVG👑Price inefficiencies are also known as imbalances, gaps or voids. Healthy price action moves in a zigzag fashion, making highs and lows in line with the directional bias at any given moment. When price isn’t trending we find it consolidates, in which case highs lows are still being made. However, we may also see price move in straight lines with huge volume and momentum. When this happens, price finds itself unable to deliver price in an efficient manner. For example, in a bullish environment, price may continue to make higher highs without providing higher lows at a discount price. When price moves with this much momentum, it leaves behind imbalances. 🟠An imbalance can be identified by open space in price action, where the wicks on either side of a candle do not match each other. On the left is an example of price inefficiency, since the wick high of candle 1 does not meet the wick low of candle 3, leading to an imbalance on candle 2. 🟠This is an example of healthy price action with no imbalances. This is because all candles have wicks on either side of them. Since wicks were bodies during live price action and are bodies on lower time frames, this shows that price was delivered efficiently to buyers and sellers in this area. Whereas the example above shows an imbalance on a bullish candle, which shows that price was only available to buyers in that imbalance and therefore is not efficient. 👉For price to be efficient, it needs to be delivered to buyers and sellers. This helps us understand that in our original bullish imbalance, price has to come back and fill that imbalance using bearish price action in order to make that price available to sellers. This re-balancing could take hours, days, weeks or years, but it is our job to understand that it must happen at some point. Inline with the rest of the strategy, we can use this knowledge to pick out the specific imbalances that will be filled and how we can capitalise on this. 🟠This is an example of the correctly identified imbalance and where we expect price to react from 🟠This is an example when is our level being met, it is at this point that we use the rest of the strategy and knowledge to capitalise on the move that is about to unfold with high risk:reward entries. 🟠This is the completion of this particular market cycle, with our level being respected and price giving us a nice bullish leg. 🔴Bearish Order Flow: 🟢Bullish Order Flow:
CAPITALCOM:US500Education
by algoat
USD/JPYOANDA:USDJPY - Very interesting here when we zoom out on the 4H - If we anticipate price action to continue upwards, we have price at the 4H BreakerBlock, which is right above the 50% fib. - Then drilling down to the 15m, we're looking for a structural break to the upside for an entry - If price continues to head down, this will invalidate the 15m entry long - I then need to look around the 4H 50-79% fib levels for another shot at going long, as this level does not break the recent HL on the 4H.
Long
by makerup