AUDUSD - Institutional Liquidity - Understand the Why

FX:AUDUSD   Australian Dollar / U.S. Dollar
Imagine understanding how to execute with precision?
Imagine understanding the Why behind the markets....

Liquidity, Footprints, Level ll which is all considered within the framework of 'smart money concepts'

December is traditionally known for the lack of liquidity and reduced volume in turn which causes increased volatility . Traditionally many including myself trade less throughout December and I tend to wrap my trading up around The second week of the month to spend time with my family, friends and loved ones. As we all know from an institutional stand point the seasonal holiday tends to be the month many take off to do the same but other than the above do you ever wonder why? ...... Bonus Month. PnL on institutions books are calculated for the year end and of course subjective to performance the portfolio manager & team are paid in accordance with the 'Net ROI (Factoring in either the hurdle rate or the watermark)

Now the above is somewhat irrelevant but it's important to understand the Why..... So lets now take a look at understanding the Why behind this AUD/USD Short on 28th December 2020 at 08:44am shortly after the London/European open, But, first here are the performance metrics and values;

Percentage ROI: +15.87%
Initial Risk: 1% (factoring in RT Commissions)
Stop Loss: 3 Pips
Drawdown: 0.9 Pips
Trade Duration: 7 Hours (Trade hit TP2 @ 15:46 UK GMT )


So lets take a look at the trade Breakdown

Weekly Timeframe:
The Weekly going back to 2001 has since been in a bullish uptrend, creating Higher Highs & Higher Lows until 2014 after it printed a Lower Low and failed to purge liquidity and create a Higher High. Price continued to create Lower Highs and Lowers Lows, Building Liquidity on it's way down. In March 2016 we Broke Major structure to the downside and printing a new structurally significant Low, Taking Liquidity. to allow for a Push to the upside, lifting offers, seeking the Institutional level & footprint which was yet to be 'Mitigated' from May / June 2018.

Daily Chart:
Price as we can see on the Daily timeframe is extremely efficient within the market structure & sub-structure. Building & Creating Liquidity to be targeted / purged and swept !

On December 21st 2020 we gapped down with intent and momentum creating multiple Breaks of structure to the downside, then correctively over the next 6 days moved back up to not only fill gap liquidity but tap into the Order Block left, Seen clearly..... Which was the beginning of our short trade ......

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