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Liquidity and ManipulationCreated July 17, 2021 146 AM
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The markets need to generate liquidity in order to move, so if liquidity isn´t
already there, it will be created. So when new traders come in to forex and
learn about it for the first time, what they usually do is gonna be retail based
trading.
So support and resistance, chart patterns which are extremely popular in the
industry, and things of that nature.
So what some brokers do is they offer free education for their clients once we
start trading. Now this education will usually be retail methods support and
resistance.
So why is this?
Well its simple, they want to generate liquidity into the markets, because the
majority of traders are trading this way. So these retail methods are not
unknown to large banks, and people with large interests. Of course they are not
all this information is out there for free, for anyone to go and we know seach
up.
So if all this information is available for free don´t think its wise to assume that
these people with huge amounts of money, they are going to use it against the
majority of retail traders in order to manipulate the markets.
So when we dig deep into chart patterns like the double top, double bottom or
bull flag, bear flag, which we know retail traders absolutely love this patterns.
We need to understand they are all manipulated and they only they do work
but only when we really know what we are doing, and how we can trade around
the manipulation, because there is a few people who talk about math
psychology and as long as we know whats going on and the math psychology
behind this patterns, we can still trade them definitely.
So what trade is a tool is to sell at double tops, or buy at double bottoms.
Liquidity and Manipulation 1
, If we know this and large banks know this, what does that
really mean?
Well its means that theres is a lot of liquidity above or below this areas. So
there is a lot of luquidity above we know a double top or triple top, quadruple,
whatever. And there is liquidity below double bottoms.
So that is why we know double tops as EQHs and double bottoms as EQLs. We
expect price to be manipulated at and around this areas.
All we need to do is go back and look at the data, because its all there. So once
we see large moves up, sell size liquidity will usually need to be swept or
generated beforehand. That allow that move to actually we know impulsively
move.
Its basically fueled the move.
The same goes for when we large down moves by side liquidity will usually
need to swept or taken out prior.
So now we have gone through that, what we wanna go through is this little
pattern, and what we can see from this pattern is price was pushing up, which
looks like and ascending channel, price then we had this high, we pushed
Liquidity and Manipulation 2
, down, pulled back, pushed down, showing a little bit of a slow down in this
uptrend, and then price pushed down to this low.
So essentially we have a double bottom here, and price then pushes up to this
high, which is a double top.
Now a lot of people will be looking for sells from here, so if we know that. So
once we have a nice rejection from this double top and nice retrace, this looks
good for the majority of people, because price come up but we failed to break
above this DT or as we know a EQH.
We have got a nice retrace candle, which again retail love retrace candle,
because its showing potential move to the downside, and rejection from an
area.
So now that we have got a rejection from this DT, people are looking to sell
this, and when people are looking to sell at DT, where are their stop losses
going? Well they are going above the DT. But clearly they have going above the
DT.
Retail always put stops above DT or below DB, and then expect to move down.
So that is exactly why there is liquidity this areas. So that basically means that
a lot of stop losses are at this areas.
Liquidity and Manipulation 3
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