BTC - Analyzing Order Blocks to Predict Liquidations / Stop Hunt
Hello all,
I’d like to provide a visual representation of a method we can use to understand and predict stop hunts / liquidation moves on bitcoin - these mysterious and hard to capture phenomenon we all experience at seemingly random times.
Here I show blocks of orders - which I separate if we have a candle retracement overlapping the block. We can see this mass chain of red order blocks on my chart. What these are - are long position stop losses.
To understand the significance of these orders let’s break down the mechanics of these orders.
Long stop losses are:
1) Limit sell orders
2) Orders that don’t automatically fill if price is above the sell price (unlike limit sells)
3) Leveraged orders - using traders liquidity with a leveraged multiplier to increase position size
When dealing with “leveraged” order sizes - we can also leverage / multiply the speed, power, and velocity of chart movement as these orders are filled.
If we can assume an average leverage usage of 20x - We can speculate a price movement of 20x speed, power, and velocity.
With this information - we can look at bitcoin on the large time frames - in this case the multi-day. Identifying chart patterns, we can estimate the timing of movements by dividing the suspected speed of these moves by approximately 20. This allows us to speculate these very fast moves on bitcoin, which are essentially as simple as this description:
What are stop hunts and liquidations?
1) The result of retail traders stop loss orders being triggered and creating automatic chain reactions of order fulfillment
2) Order blocks being filled and triggered at multiplied speed and power
3) Not forced manipulation - but a natural occurrence of the consequence of a futures dominated market and large order gaps left intact on the chart
Looking back at bitcoin we can see this phenomenon happen time and time again.
1) Consolidation / long steady movements accumulating stop loss orders
2) A fast and large candle in the opposite direction as these stop loss orders are triggered and executed
Additionally we can understand the benefits of these pheonomons to the exchanges and market makers.
Liquidations return your entire trading position to these for profit companies - so there is a clearly defined benefit to executing these moves to the platforms we trade on. Further more - creating automatic movements that generate high speed and velocity triggers an error known as slippage - price moves so fast that it doesn’t allow adequate time for the stop loss order to execute before the liquidation of a leveraged trade is triggered first - resulting in liquidation with a stop loss in place.
HOPE THATS HELPFUL AND GOD BLESS
I’d like to provide a visual representation of a method we can use to understand and predict stop hunts / liquidation moves on bitcoin - these mysterious and hard to capture phenomenon we all experience at seemingly random times.
Here I show blocks of orders - which I separate if we have a candle retracement overlapping the block. We can see this mass chain of red order blocks on my chart. What these are - are long position stop losses.
To understand the significance of these orders let’s break down the mechanics of these orders.
Long stop losses are:
1) Limit sell orders
2) Orders that don’t automatically fill if price is above the sell price (unlike limit sells)
3) Leveraged orders - using traders liquidity with a leveraged multiplier to increase position size
When dealing with “leveraged” order sizes - we can also leverage / multiply the speed, power, and velocity of chart movement as these orders are filled.
If we can assume an average leverage usage of 20x - We can speculate a price movement of 20x speed, power, and velocity.
With this information - we can look at bitcoin on the large time frames - in this case the multi-day. Identifying chart patterns, we can estimate the timing of movements by dividing the suspected speed of these moves by approximately 20. This allows us to speculate these very fast moves on bitcoin, which are essentially as simple as this description:
What are stop hunts and liquidations?
1) The result of retail traders stop loss orders being triggered and creating automatic chain reactions of order fulfillment
2) Order blocks being filled and triggered at multiplied speed and power
3) Not forced manipulation - but a natural occurrence of the consequence of a futures dominated market and large order gaps left intact on the chart
Looking back at bitcoin we can see this phenomenon happen time and time again.
1) Consolidation / long steady movements accumulating stop loss orders
2) A fast and large candle in the opposite direction as these stop loss orders are triggered and executed
Additionally we can understand the benefits of these pheonomons to the exchanges and market makers.
Liquidations return your entire trading position to these for profit companies - so there is a clearly defined benefit to executing these moves to the platforms we trade on. Further more - creating automatic movements that generate high speed and velocity triggers an error known as slippage - price moves so fast that it doesn’t allow adequate time for the stop loss order to execute before the liquidation of a leveraged trade is triggered first - resulting in liquidation with a stop loss in place.
HOPE THATS HELPFUL AND GOD BLESS