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
A thread🧵
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.
If you're not following this process, you’re entering the trading week blind
It is literally what I implement every week to get the high-probability trades that I’m taking.
Finish this thread and you’ll master the simple weekly trading process.
A thread🧵
The economic news calendar is your roadmap.
It shows you what day during the week will likely provide volatility to trade with.
You see, news is what injects volatility into the market. Volatility = energy
Price is highest probability to trade when there is ENERGY in the markets.
This is when we see price in a hurry to get to its draws and not chop/consolidate.
We want to be EXTRA cautious on days without red folder news since assets have an increased chance of consolidating during those days.
We also wanna be cautious the day before NFP, CPI, and FOMC. Price typically likes to be held in a range as it awaits the main volatility injector for the week.
Lack of news = Lack of energy
We want to avoid trading bank holidays as the volatility simply isn’t there.
Below you’ll see the effect of bank holidays to the price action. We had USD bank holiday on Monday and see what the effect of it in major pairs.
So, to be aware of this: Go to forexfactory.com/calendar and ask yourself: “Where are the high impact news events laid out for this week? Which assets are they on? Is there Big 3 news events? Is there a bank holiday?”
Give me 5 minutes and I’ll simplify your understanding of price action…
The only concepts you need to know in order to find bias are orderflow and candlestick logic.
At the end of this thread, you’ll have everything you need to read and trade any asset effectively.
A thread🧵
Orderflow and Candlestick Logic
These two concepts give you both the direction and the confirmation.
In a bullish orderflow leg, once bullish PD arrays are respected, then there’s a higher chance of price going higher.
In a bearish orderflow leg, once bearish PD arrays are respected, then there’s a higher chance of price going lower.
It’s that simple.
Everything you should know about Orderflow
Orderflow gives you the direction and targets through price legs.
Price legs are formed by swing highs/lows and fair value gaps.
Again, on a bullish orderflow, bullish PD arrays are respected and the opposite for bearish orderflow.
TIP: the best orderflow (price) legs comes from previous orderflow legs.
Lastly, I mainly trade once price retraces to the HTF FVG then we target the swing high/low based on the current orderflow. No orderflow (consolidation) = No trade.