I blew a lot of challenge accounts before I realized this brutal truth: You’ll make less money over time trading against the trend.
This is where understanding orderflow comes in. Finish this thread and orderflow will stop you from taking low probability trades against the trend.
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Picture this: You’re already several bucks away from passing that first challenge account.
You saw this reversal thinking it’s a very clear short. You drop down to your timeframe aligned entry, then boom. -1R. You then clinch your fist and trade some more. Emotions high. “No way, this has to turn.” You see another short. Trade it. Boom. Another -1R.
You keep repeating the same mistake until you blow your challenge account which should’ve been a funded account.
All because you were aggressively shorting… while the bigger picture was quietly bullish the whole time.
This is where Orderflow comes in.
To put it simply, Orderflow IS the trend. It’s that flow of orders indicating bullishness or bearishness in the market. We can view this visually with Fair Value Gaps (FVGs)
In bullish orderflow: Premium arrays (resistance) are being disrespected while Discount arrays (support) are being respected
In bearish orderflow: Premium arrays (resistance) are being respected while Discount arrays (support) are being disrespected
We can view respect/disrespect via candle stick logic (CSL)
So, next time, before thinking of shorting that fair value gap, look at the overall trend first.
This is LITERALLY the reason why the market moves the way it does.
If you dont know what and where liquidity is, you are the liquidity.
Read till the end of this thread to learn how to avoid getting stop hunted and instead trade like Smart Money
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First, You Must Understand What Liquidity Is…
Simply put, liquidity is created by all the buy and sell orders in the market.
Every single market participant places orders, and together, creates liquidity.
For any trade to happen, there must be a buyer for every seller, and a seller for every buyer.
Not All Markets Have Good Liquidity
Markets that are smooth, with lots of traders and clear price action typically means that it has high liquidity. An example of this is major Forex pairs like EUR/USD and stock indices like ES & NQ.
Opposite to this is low liquidity wherein the markets that are choppy, with sudden jumps and gaps because only a few people are trading them. Think of exotic Forex pairs like USD/MXN or tiny penny stocks.
You want to focus on high liquidity markets because this avoids massive spreads, manipulation, and slippage. Simply put: BAD PRICE ACTION.
Simply put its a three candle pattern where the middle candle has an area where the wicks of the candles before and after it do not overlap.
This leaves behind a visible gap, a sign that one side of the market, either buyers or sellers, pushed price quickly and aggressively, leaving behind an imbalance.
The Market Is All About Efficiency
FVGs create an inefficiency in the market…
There are two types of FVGs:
1. Buyside Imbalance Sellside Inefficiency (BISI) - there’s an imbalance on the buyside because price is moving higher, leaving price inefficient in sellside. 2. Sellside Imbalance Buyside Inefficiency (SIBI) - there’s an imbalance on the sellside because price is moving lower, leaving price inefficient in buyside.
Don’t be confused. Remember that FVGs = Imbalances = Inefficiencies.