Stop Loss Hunt, Liquidity Sweep, Market Manipulation - all of these are fancy names of a highly frequent act performed by big sharks of the market to target the retailers.
- "Oh, do you think they care about my 0.01 lot size?"
Individually, not.
In big volumes, yes.
Textbook chart patterns that are so prominent to us are all subject to going through a liquidation phase. Hence, let's look at some graphical examples that will also be supported by real-market instances:
1) "Head&Shoulders" liquidation
Upon forming a right shoulder and showing initial bearish moves, market participants tend to execute short positions and place their Stop Loss order above the freshly formed shoulder. In that case, there is a high probability that the price will get driven towards the Stop Loss pool, grab liquidity, then continue impulsing in the pre-determined destination.
A live-market example: EUR/GBP Daily Timeframe (period: 28/06/2023 - 16/08/2023)
2) Double Top liquidation
Similar to the previous point, upon forming two tops/heads/reversal points, the price shows some bearish moves and invites sellers to take action before we witness the price impulse towards the upside and grab liquidity where masses have set their Stop Loss levels before resuming its bearish moves
A live-market example: USD/CHF Weekly Timeframe (period: 09/05/2022 - 07/11/2022)
3) Parallel Channel liquidation
Trading within two boundaries of a parallel channel, oftentimes, we may witness how wick spikes are printed and liquidity is grabbed.
A live-market example: USD/CHF Weekly Timeframe (period: 16/01/2023 - 21/08/2023)
4) Ranging Market liquidation
Being stuck in a sideways-moving liquidation box, it is commonly evident how the price triggers the sea of retail Stop Loss orders to both sides of the rectangle with a sole purpose of taking out early entrants before moving in the pre-orchestrated destination.
A live-market example: USD/CHF 8H Timeframe (period: 16/06/2023 - 10/07/2023)
To put all in a nutshell, be careful in order to not fall into the Liquidity Aquarium.
- "Oh, do you think they care about my 0.01 lot size?"
Individually, not.
In big volumes, yes.
Textbook chart patterns that are so prominent to us are all subject to going through a liquidation phase. Hence, let's look at some graphical examples that will also be supported by real-market instances:
1) "Head&Shoulders" liquidation
Upon forming a right shoulder and showing initial bearish moves, market participants tend to execute short positions and place their Stop Loss order above the freshly formed shoulder. In that case, there is a high probability that the price will get driven towards the Stop Loss pool, grab liquidity, then continue impulsing in the pre-determined destination.
A live-market example: EUR/GBP Daily Timeframe (period: 28/06/2023 - 16/08/2023)
2) Double Top liquidation
Similar to the previous point, upon forming two tops/heads/reversal points, the price shows some bearish moves and invites sellers to take action before we witness the price impulse towards the upside and grab liquidity where masses have set their Stop Loss levels before resuming its bearish moves
A live-market example: USD/CHF Weekly Timeframe (period: 09/05/2022 - 07/11/2022)
3) Parallel Channel liquidation
Trading within two boundaries of a parallel channel, oftentimes, we may witness how wick spikes are printed and liquidity is grabbed.
A live-market example: USD/CHF Weekly Timeframe (period: 16/01/2023 - 21/08/2023)
4) Ranging Market liquidation
Being stuck in a sideways-moving liquidation box, it is commonly evident how the price triggers the sea of retail Stop Loss orders to both sides of the rectangle with a sole purpose of taking out early entrants before moving in the pre-orchestrated destination.
A live-market example: USD/CHF 8H Timeframe (period: 16/06/2023 - 10/07/2023)
To put all in a nutshell, be careful in order to not fall into the Liquidity Aquarium.
