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Liquidity and Structure

Quoting LeongPuiy
I am here for learning and willing to open mind to listen other opinion and view. I am not looking for feed spoon. i rather listen and learn about trading basic and extra information, then hope someone give live trade and follow.
You ask about Liquidity - which has nothing to do with Volume data like T721 mentioned.
However volume data shows us what Liquidity mattered just recently - that's your liquidity areas I believe you are chasing.

Here is a S&P M5 Chart from a couple days back that shows what volume actually executed. It therefore allows a trader to know later where the REAL liquidity actually was moments after execution.

You can see that large volume creates fat candles which are worthwhile trading setups by themselves (I trade them all night long on extremely short time frames).
I hope you notice these pullbacks to lows often occur for no real reason, as you can see there was no liquidity at the end of the move.
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Trading thin liquidity at the boundary of the charts
Quoting RickM
{quote} You ask about Liquidity - which has nothing to do with Volume data like T721 mentioned. However volume data shows us what Liquidity mattered just recently - that's your liquidity areas I believe you are chasing. Here is a S&P M5 Chart from a couple days back that shows what volume actually executed. It therefore allows a trader to know later where the REAL liquidity actually was moments after execution. You can see that large volume creates fat candles which are worthwhile trading setups by themselves (I trade them all night long on extremely...
If you can give more examples, i really appreciate.
will try to understand what you mean and study it.
sry, i still new to this “ liquidity thing”,
what i mark and learn is just simply from internet, and i still doing my observations and backtest.
Training.
SMC
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Trade at good levels or no trade at all!
Quoting LeongPuiy
1h or 15m OB, 185x just got sweep from ytd FF and LO high {image}
15 m some action 30+ pips and now touched 1H OB, drop or retest upside
Training.
in my opinion before any execution of trade entry, the following has to be considered first:

1. trend (htf)
2. level (htf)

watch the ltf price action around the level you have chosen in the direction of trend.
if it does not work out, most likely the level that one has chosen is not a strong key level.

Quoting Inthebox
sr flip {image}
ITB - Seeking Orderliness amongst 'Randomness'
why not the participants first show a chart with a level (whether it turn out to be a key level or not, will know later)
instead of focusing on entry like most of us do (of which each individual will most likely differ from each other).
then at least the rest can monitor and form some opinions from the picked level.
ITB - Seeking Orderliness amongst 'Randomness'
Quoting Inthebox
why not the participants first show a chart with a level (whether it turn out to be a key level or not, will know later) instead of focusing on entry like most of us do (of which each individual will most likely differ from each other). then at least the rest can monitor and form some opinions from the picked level.
The early you mention that lvl, for me price still hold, 30m to 4h tf still reject n closed below it.
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Training.
Quoting LeongPuiy
{quote} The early you mention that lvl, for me price still hold, 30m to 4h tf still reject n closed below it. {image}
i picked the 18nov low as the level.
ITB - Seeking Orderliness amongst 'Randomness'
Quoting Fardeen1209
{quote} Do we have order book for currency spot market.? I thought it is available only for futures!
No we don't. So we can't say where liquidity sits using the data we have. That's exactly I'm talking about. Forex is just a copy-paste of real market. The mirror with no real data. So if you want to get the data you must get it somewhere. Or you can dream that HH, LH, or any other line on the chart = liquidity. It is not.
You must have orderbook data at least. The first step. In fact you must also calculate trades to understand where stops are. And you must see real orderflow. We don't have that data on forex, so better to get it from CME for example. Then you will see where liquidity sits. All other tries like drawing lines are just a waste of time. It will works like broken clocks - show correct time twice a day only.

Ok guys. Let me give you one example.

For example you see HH. So what? Why you think there are liquidity? It was. And there are no more. Why it must be there? How it can be? For example HH was 10% back.So you think some people leave their money there? Why? For what? We are trading now. Not in the past. What was in the past was in the past. All we can "predict" is that there were stops left there. Yes. But how much liquidity was left as stops? How we can calculate it using drawing tools? It is really hard job to figure that out. And the percentage o failure is very high. Now imagine what winrate you will get if you will use not a math and algos but colored lines. I think it will be not a winrate, it will be 100% loserait in this case.
Observer effect
Quoting ryuryu
For example you see HH. So what? Why you think there are liquidity? It was. And there are no more. Why it must be there? How it can be? For example HH was 10% back.So you think some people leave their money there? Why? For what? We are trading now. Not in the past. What was in the past was in the past. All we can "predict" is that there were stops left there. Yes. But how much liquidity was left as stops? How we can calculate it using drawing tools? It is really hard job to figure that out. And the percentage o failure is very high. Now imagine...
1. all those stops can be removed or moved... just fake stops to create traps..

2. all of sudden somebody can put money (limit orders or market orders) on the table from his pocket... or remove money... at any time..

Do you think all big players enter only with limit orders? or is it forbidden for institutionals to mix and sometimes use market orders too?
Quoting joyny
{quote} 1. all those stops can be removed or moved... just fake stops to create traps?
How stops can be removed? Stop is for position. If average leverage is 10 of 100, then at 10% distance there will be liquidation price for that orders.
What are fake stops? Didn't get it. May be you mean stop limit orders? But they are limit orders, they just not fill or kill type or immediate or cancel, they will just act like market orders, but anyway the difference is only in the behaviour not in main logic.

Quoting joyny
2. all of sudden somebody can put money (limit orders or market orders) on the table from his pocket... or remove money... at any time..
Wait. Let's talk separately about limit and market order. Market order -> position creation or stop triggered -> limit orders filled (removed from the orderbook). Limit orders are "wishes". They are to create entry or for take profits. They can be removed or moved for sure.

Quoting joyny
Do you think all big players enter only with limit orders? or is it forbidden for institutionals to mix and sometimes use market orders too?
I don't know. It depends on what big player want to do and what it doing. For example bp (big player) want to close the position. Or it want to stop the price. Then it can use limit orders for that to create the walls. Or it want to push the price higher/lower. Then it will use market orders to trigger the stops to get free fuel and to push the price to desiered level.
Observer effect
  • Post #32
  • Quote
  • Edited 8:48am Nov 22, 2022 8:30am | Edited 8:48am
Quoting ryuryu
{quote} No we don't. So we can't say where liquidity sits using the data we have. That's exactly I'm talking about. Forex is just a copy-paste of real market. The mirror with no real data. So if you want to get the data you must get it somewhere. Or you can dream that HH, LH, or any other line on the chart = liquidity. It is not. You must have orderbook data at least. The first step. In fact you must also calculate trades to understand where stops are. And you must see real orderflow. We don't have that data on forex, so better to get it from CME...
I partially agreed with your point.
Indeed without the real data flow, it is very hard to pick which liquidity level(zone) to hold. . Be it is smart money concept, liquidity, support resistance level, indicators or algos (especially the last two which depends on past prices- lagging indicators), nothing can predict which level will hold until the order book been closed for the particular timefame or the japanese candlestick failed to close above/below resistance/support respectively. Thats why risk and money management are the main character in this game, to keep you in the play. Since trading is a marathon not a sprint!

Many tried to short/longs from yesterday's, prior Week's/months') H/L, or Swing highs/lows which work but not all the time.
or try to short/ long because adr say this, atr say that, or some MA or EMA crossed or something.
Everything is calculated using past information, even algos, cause no way someone wouldcreated an algo that can exactly predict the future price will try to sell his sh*t for $200 per month.
For eg; if I was the developer, I'd be like Screww your $200 subscription, imma print my money by always having my foot one step in the future. Even Blackrock, and Citibank would fail against me, I would be the Mansa Musa of 2022.


Now regarding the why someone would leave their money on the market?

My view is it is all psychological! suppose 10 trader buy $100m Pound at $1.2 each (depicted by a big green engulf candle- in fact in the real world nobody knows how much was bought or sell at a particular level- be it is $800m or $8bn: no one knows) and thought it would go to $1.7 in the next 6 months. After 2 weeks, price went to $1.3, but on week 3 opening some real bad sh*t happens (fundamentally), and price went straight to $1.0 and expect it would go visit $0.7 in the next 2 months. Now 2 of them will close and accept the loss. The other 8 will wait and let price again at $1.2 so they get out at break-even which creates a massive selling pressure at $1.2. This is a simple hypothetical example behind the scene of a previously strong support that broke at $1.2 and now become a strong Resistance.

Well you see it is no longer a drawing line, it is the psychology behind the line. Nobody knows which level to hold. Everything here is based on probability and psychology! Thats why Risk and Money management is the star in this industry!
If you want 100% sure strategy, then IMHO you choose the wrong profession. Try to do some physics and send your CV to NASA or SpaceX!

Regards,
Fardeen.
Trade at good levels or no trade at all!
  • Post #33
  • Quote
  • Edited 9:22am Nov 22, 2022 9:12am | Edited 9:22am
Quoting Fardeen1209
it is the psychology behind the line
I think there are no psychology under that. It is money.

Try to look at this all at another angel. You have 12 mil$, and you want to have some profit. What would you do?
And you know that there will be "red news" thing.
So what? Why price moves so hard? Because 90% traders are off. They are not playing. They afraid red news.
That's why the movements are so wide. Because there are no liquidity on the market at the moment. So it is much easier for you, the big player to push the price to the desired level. Why? Because it is cheap. You have to buy out or sell out less to get more distance you want.
If in average each percent cost you 100$ for example when red news occur it will cost you 100$ too, but you will push the price to 2%, not to 1%. So you will have more profits with less money you have to send to the market.

Remember one thing: market orders move the market. Only. There no other power that moves the market.

One more thing to think about. Moving average calculates close prices from the past. It has nothing inside to calculate liquidity. Same as candles. Candles are also indicator. It just draw you open, close, high, low. It also has no data to tell you where liquidity is. Same about lines on the chart. Lines are lines. They can't say where liquidity is. To check it you have to make tons of calculations first.
Observer effect
Quoting ryuryu
{quote} I think there are no psychology under that. It is money. Try to look at this all at another angel. You have 12 mil$, and you want to have some profit. What would you do? And you know that there will be "red news" thing. So what? Why price moves so hard? Because 90% traders are off. They are not playing. They afraid red news. That's why the movements are so wide. Because there are no liquidity on the market at the moment. So it is much easier for you, the big player to push the price to the desired level. Why? Because it is cheap. You have...
Yup liquidity varies inversely with volatility. But since we dont have live order flow, we do have candlestick which shows the same thing but in big picture without showing the amount of orders flowing in the market.
That why the market makers will always be 10 steps ahead of us. They have the order flow and they worked on tick chart and make/lose thousand of dollars on pipettes movement. A failed to close at certain psychological level simply depicts the expected direction is being respected by those who have access to the order flow.
Trade at good levels or no trade at all!
Quoting ryuryu
{quote} Remember one thing: market orders move the market. Only. There no other power that moves the market.
I'm not sure what you mean by this. Market orders once executed can move the markets if they cause a supply and demand imbalance. Limit orders once executed can move the markets if they cause a supply and demand imbalance. If there is a large limit order placed capable of moving the markets once triggered, when it gets triggered it can move the markets.

Liquidity can be indicated by the volume of trades since volume and liquidity are correlated though they are not he same thing. Volume of trades pending(limit orders)at bid and ask prices serve as liquidity.
Quoting sharingan9
{quote} I'm not sure what you mean by this. Market orders once executed can move the markets if they cause a supply and demand imbalance. Limit orders once executed can move the markets if they cause a supply and demand imbalance. If there is a large limit order placed capable of moving the markets once triggered, when it gets triggered it can move the markets. Liquidity can be indicated by the volume of trades since volume and liquidity are correlated though they are not he same thing. Volume of trades pending(limit orders)at bid and ask prices...
No. Total mess. You are wrong about limit orders and about liquidity.
Market orders need liquidity. Liquidity are limit orders. Once market order executed it need to be filled with nearest limit order.
Same for stops. Stops are market orders. But they are hidden. There are no data about stops in the orderbook, only about limit orders.
Once stop triggered it start to act exactly like market order (it is market order always) and it fill itself using nearest limit orders (that's why stop cascades work so good for big player giving them "free" money).
Limit orders are "wishes". I wish to buy at, I wish to sell at. We can call it liquidity. But it is not guaranteed liquidity where stops are 100% guarantee of liquidity (think about it).
Limit order can't move the market. It can stop it.
Volume = the past. Volume = buy and sell trades. Imbalance = difference between buy and sells. Volume has nothing in common with limit orders. They are market orders (both market orders and market stops).
Liquidity = the wall of limit orders ahead. It can't be indicated by volume of trades, because volume is the past already.
Candles = indicator (like MA, RSI and any other).
Etc etc
Observer effect
If you guys spent more time tradng and less time showing each other who is smarter you might actually make money.
Quoting ryuryu
{quote} No. Total mess. You are wrong about limit orders and about liquidity. Market orders need liquidity. Liquidity are limit orders. Once market order executed it need to be filled with nearest limit order. Same for stops. Stops are market orders. But they are hidden. There are no data about stops in the orderbook, only about limit orders. Once stop triggered it start to act exactly like market order (it is market order always) and it fill itself using nearest limit orders (that's why stop cascades work so good for big player giving them "free"...
Ok respectfully I will just show you documentation showing that what I said was correct so I can make it clear for any readers.

I stated that Liquidity can be indicated by the volume of trades since volume and liquidity are correlated though they are not he same thing. Here is proof:

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Also as I mentioned trades that have been executed serve as an indication of liquidity(but volume is not liquidity). Volume of trades pending(limit orders)at bid and ask prices serve as liquidity. Limit orders are liquidity. There are marketable limit orders, and non-marketable(also known as non-immediately executed) limit orders. Marketable limit orders work execute immediately, just like market orders. Limit orders are liquidity. Marketable limit orders(which work like market orders) are liquidity and non-immediately executed limit orders are also liquidity. non-immediately executed limit orders move the market when they are executed but they guard you from slippage. This is information straight from the BIS(Bank of International Settlements). Proof here:

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Quoting Rgo
If you guys spent more time trading and less time showing each other who is smarter you might actually make money.
Not everyone is a day trader. I'm already in trades which are already fully managed and I'd love to compare stats with you. Unless you have a winrate of 100% for a quarter, don't bother. You probably trade price and lose money. I trade value and win. If price is king, value is God.
Quoting Fardeen1209
{quote} Yup liquidity varies inversely with volatility. But since we dont have live order flow, we do have candlestick which shows the same thing but in big picture without showing the amount of orders flowing in the market. That why the market makers will always be 10 steps ahead of us. They have the order flow and they worked on tick chart and make/lose thousand of dollars on pipettes movement. A failed to close at certain psychological level simply depicts the expected direction is being respected by those who have access to the order flow.
Market makers spend the 80% of market making facilitating trades through agency meaning risk off. 20 percent of the time they take the other side of the trade and they hedge so they make sure they dont lose when they are risk on. Market makers are not what you need to be worried about.
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