Thread by @Tonyss_TA

The following thread will be on Liquidity Grabs, what they are, and how to avoid falling victim to them: ⬇️

Liquidity Grabs are performed by MM's or Market Makers to execute trades at the best possible price, to complete a partially filled order without sacrificing a less than favorable fill, or inflating the price of XYZ stock while trying to get filled.

Another term for this that you are probably familiar with is Stop Loss Hunting. MM's will move the price of XYZ in whichever direction they want, trying to create liquidity from triggering stop losses placed by retail traders.

By triggering these "Liquidity Pool" areas, they are not only getting their orders filled, but at a cheaper and better price than they would have otherwise. MM's are playing with millions and millions of $$ which forces them to create these Liquidity Grabs.

Now let's talk about how exactly we can avoid falling victim to these liquidity grabs because they can be extremely frustrating when you get faked out and lose money.

Let's now take a look at a real example of this on the $AAPL chart below. We can see at the highlighted area, the price was driven through Supply, and immediately slapped back down.

We can see that about an hour or so later, this same thing happens again as price is driven through our new Supply Zone and immediately slapped back down through.

Now let's say in both scenarios we were waiting for a break of Supply to go long. Each time we in fact did get a break of our Supply Zone, but we DID NOT get confirmation on our higher timeframe. The confirmation we are looking for is a candle close out of our zone.

By waiting for a candle close instead of a break of our zone, we are greatly reducing our chances to get stopped out or lose money and fall victim to a Liquidity Grab.

Another extremely important thing we can do is knowing where our key support or resistance zones are at ALL times. By acknowledging where these areas are on a chart, we can make sure to not add a hard stop right at these key levels.

We instead want to position our hard stops below or above these key levels to reduce our chances of getting stopped out just to watch the stock do exactly what we wanted.

Below are some really great videos on how you can avoid Liquidity Grabs or Stop Loss Hunting:

With everything regarding the Stock Market, the more screen time you put in the better you will get at avoiding Liquidity Grabs. Unfortunately, this is just another one of those things that we have to experience before we can adapt.

As always I really hope this thread helps. If you have any questions please do not be afraid to reach out. Turning notifications on will allow you to see thread as soon as they are posted.