Intraday trading opportunities using liquidity gaps
Liquidity gaps (price spikes) occur on the charts all the time and it doesn't matter what time frame you're looking at as you will find them everywhere.
Now, not all liquidity gaps fill but depending on the market environment you're in, you can use these liquidity gaps to your favour to help discern where the market could go next sometimes with higher probability.
What you have when you see a sharp spike in price are inefficient moves created in a direction where there is usually thinner liquidity present which is the reason for such a sharp drive in the first place, so when price starts to slow down after the move and show signs of weakness we can look for any topping or bottoming structures/patterns that may lead to price starting to fill the gap back to the original point where price took off from.
As price starts to move back to the original position there is increased probability for price to fill the original drive higher or lower as there is not a lot of volume/transactions present in the price action to halt the move coming back towards the origin with great effect.
Also, If price does fill back to the origin then there is a good chance that we could also see a bounce at this level again as this is where most of the order flow ignited the original spike higher/lower and additional volume could be present to help protect the original move.
As you can see from the chart, we have shown 2 intraday moves on AUDUSD to show this natural movement in price that occurs very frequently both in a long and short example.
Now, not all liquidity gaps fill but depending on the market environment you're in, you can use these liquidity gaps to your favour to help discern where the market could go next sometimes with higher probability.
What you have when you see a sharp spike in price are inefficient moves created in a direction where there is usually thinner liquidity present which is the reason for such a sharp drive in the first place, so when price starts to slow down after the move and show signs of weakness we can look for any topping or bottoming structures/patterns that may lead to price starting to fill the gap back to the original point where price took off from.
As price starts to move back to the original position there is increased probability for price to fill the original drive higher or lower as there is not a lot of volume/transactions present in the price action to halt the move coming back towards the origin with great effect.
Also, If price does fill back to the origin then there is a good chance that we could also see a bounce at this level again as this is where most of the order flow ignited the original spike higher/lower and additional volume could be present to help protect the original move.
As you can see from the chart, we have shown 2 intraday moves on AUDUSD to show this natural movement in price that occurs very frequently both in a long and short example.