This will change your trading forever: how to spot liquidity!
Bitcoin has definitely been on a roll lately, but I know that a lot of you are secretly thinking about "where is the reversal"?
Liquidity is a concept that escapes a lot of people, but the reality is that liquidity is much simpler than most people think. Liquidity is simply this: What price is seeking.
I used have a hard time understanding the concept of liquidity, until one day I realized that liquidity is simply where the majority of the orders are. So how can we find liquidity?...
If you've been at the trading game for any decent amount of time, you will immediately be able to define two well known sources of liquidity: High/Lows and trendlines. So understanding this, we know that liquidity seeks a point where we will likely have at least the confluence of a trendline and a high or a low before reversing.
But let's be real here, it's not just highs/lows and trendlines, because the market is dynamic...
So what else can we use as an addition to liquidity confluence?
INDICATORS....
Indicators are the life blood of retail traders which is exactly why there is liquidity tied into them, even a lot of advanced traders use indicators in some parts of their trading. After doing a ton of research on the indicator topic, I realized that for the most part, every indicator out there is reliant on one of two things:
Moving Averages
Volume
So we now understand that 4 things supply liquidity to the markets:
Highs / Lows
Trendlines
Moving averages
Volume
The combination of these 4 factors are what makes price reverse...... That's it. That's the magic.
In the current chart for Bitcoin we can put together the precise factors of liquidity confluences.
We have a trendline, a daily high, VWAP and volume profile all indicating around the same area. The trick in finding liquidity reversal points is to have all of them lined up in the general vicinity, and wait for price to take out the furthest liquidity target. Which in this case is around the volume profile gap that is sitting right above the daily high at a little above $40,000...
Congratulations. You've just found the reversal point of Bitcoin...
Liquidity is a concept that escapes a lot of people, but the reality is that liquidity is much simpler than most people think. Liquidity is simply this: What price is seeking.
I used have a hard time understanding the concept of liquidity, until one day I realized that liquidity is simply where the majority of the orders are. So how can we find liquidity?...
If you've been at the trading game for any decent amount of time, you will immediately be able to define two well known sources of liquidity: High/Lows and trendlines. So understanding this, we know that liquidity seeks a point where we will likely have at least the confluence of a trendline and a high or a low before reversing.
But let's be real here, it's not just highs/lows and trendlines, because the market is dynamic...
So what else can we use as an addition to liquidity confluence?
INDICATORS....
Indicators are the life blood of retail traders which is exactly why there is liquidity tied into them, even a lot of advanced traders use indicators in some parts of their trading. After doing a ton of research on the indicator topic, I realized that for the most part, every indicator out there is reliant on one of two things:
Moving Averages
Volume
So we now understand that 4 things supply liquidity to the markets:
Highs / Lows
Trendlines
Moving averages
Volume
The combination of these 4 factors are what makes price reverse...... That's it. That's the magic.
In the current chart for Bitcoin we can put together the precise factors of liquidity confluences.
We have a trendline, a daily high, VWAP and volume profile all indicating around the same area. The trick in finding liquidity reversal points is to have all of them lined up in the general vicinity, and wait for price to take out the furthest liquidity target. Which in this case is around the volume profile gap that is sitting right above the daily high at a little above $40,000...
Congratulations. You've just found the reversal point of Bitcoin...