Notes
- Liquidity pools:
- Buy-side liquidity - It is located above old highs and relatively equal highs (double tops).
- Sell-side liquidity - It is located below old lows and relatively equal lows (double bottoms).
- Markets are manipulated with a rule-based structure.
- When liquidity is purged, the market often reverts to the opposite liquidity pool.
- The concept of a three-day range look back helps to identify daily highs and lows to determine significant liquidity pools.
- Even though the purge phase may take more than one day, Michael still counts the first daily candle that removed liquidity as a day one candle.
- Michael uses the term liquidity engineering to describe a situation in which an algorithm creates new highs and lows to build liquidity.
- Understanding market manipulation and liquidity can dramatically improve trading decisions.
Liquidity Purge & Revert Example - USDCAD Daily Chart
Liquidity Purge & Revert Example - USDCAD Hourly Chart
Liquidity Purge & Revert Example - First USDCAD Buying Opportunity
Liquidity Purge & Revert Example - Second USDCAD Buying Opportunity
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